Setting Product Strategy

Setting Product
Strategy
Learning Objectives
 What are the characteristics of products
and how can they be classified?
 How can companies differentiate
products?
 How can a company build and manage its
product mix and product lines?
 How can companies combine products to
create strong co-brands or ingredient
brands?
 How can companies use packaging,
labeling, warranties, and guarantees as
Product functionality is the
key to brand success
versus
Product design is the key to
brand success
Product
 Anythingthat can be offered to a
market to satisfy a want or need.
Components of the Market
Offering
Product Levels: The Customer
Value Hierarchy
 Inplanning its market offering,
marketers needs to address 5
product levels. Each level adds more
customer value, and the five
constitute a customer value
hierarchy.
Five Product Levels
Five Product Levels
1. Core Benefit-the fundamental need or want that
consumers satisfy by consuming the product or
service.
2. Generic Product-a version of the product containing
only those attributes or characteristics absolutely
necessary for it to function.
3. Expected Product-the set of attributes or
characteristics that buyers normally expect and agree
to when they purchase a product.
4. Augmented Product-inclusion of additional features,
benefits, attributes or related services that serve to
differentiate the product from its competitors.
5. Potential Product-all the augmentations and
transformations a product might undergo in the future.
Kotler noted that much competition
takes place at the Augmented
Product level rather than at the Core
Benefit level or, as Levitt put it: 'New
competition is not between what
companies produce in their factories,
but between what they add to their
factory output in the form of
packaging, services, advertising,
customer advice, financing, delivery
arrangements, warehousing, and
other things that people value.'
Product Classification
Schemes
Durability
Tangibility
Use
Durability and Tangibility
Nondurable
goods
Durable
Services
goods
Consumer Goods
Classification
Convenience Shopping
Specialty Unsought
Consumer Goods
Classification
 convenience products: low price, low
risk, consumer is not prepared to shop
around, widely available in a variety of
retail stores
 shopping products: consumer will want
to compare quality and price, risk and
price are higher, available in selected
retail outlets
 specialty products: consumer has strong
brand preferences, risk is high, prepared
to seek out exclusive retail outlets
Industrial Goods
Classification
Materials and parts
Supplies/
Capital items
business services
Classifying Business
Products
 raw materials: unprocessed, become
part of other manufactured products
 manufactured parts and materials:
processed products that become part of
other products
 installations: major buildings and
equipment
 accessory equipment: used in
operations, include computers, desks,
tools
 operating supplies: low value, used by
most firms, convenience products for
Product Service
DifferentiationDifferentiation
 Product form
 Features  Ordering ease
 Performance  Delivery
 Conformance  Installation
 Durability  Customer training
 Reliability  Customer
 Reparability consulting
 Style
 Maintenance
 Design
Design Differentiation
The Product Hierarchy
Item
Product type
Product line
Product class
Product family
Need family
Product Hierarchy
need - core need
product family - all products satisfying a core
need
product class - functional coherence within
family
product line - closely related within a class
{same customers, outlets,
prices}
product type - different forms of same product
brand - one manufacturer’s offering
item - one unit within a brand
1.Need family. Information exchange.
Communications.
2. Product family. Devices for
electronic information exchange.
Wireless information devices.
3. Product category (class). GSM
devices.
4. Product line. GSM Smartphones.
5. Product type. GSM Smartphones
with Symbian OS.
6. Brand. Nokia.
7. Item. Nokia N70.
Product Systems and
Mixes
 Product system
(group of diverse
but related items
that function in a
compatible
manner)
 Product mix
 Depth
 Length
 Width
 Consistency
Product Mix
Width
number of product lines
Length
Total number of items in a mix
depth
number of items in a line (how many variants)
consistency
similarity of product lines in terms of production and
marketing
Product Mix – Breadth and
Depth
Product Line Analysis
 Sales and profit
 Market profile- How the line is
positioned against competitors’ lines.
- The product map shows which
competitors’
items are competing against company’s
items.
- It identifies market segments
Product-Item Contributions to a
Product Line’s Total Sales and
Profits
Product-line length
 Line stretching
 Line filling
 Line modernisation, featuring and
pruning
Line Stretching
Down-Market Stretch
Up-Market Stretch
Two-Way Stretch
Line Filling
Product-Mix Pricing
 Product-linepricing
 Optional-feature pricing
 Captive-product pricing
 Two-part pricing
 By-product pricing
 Product-bundling pricing
Packaging: The 5th P
All the activities of designing and producing

the container for a product.
Packaging has been
influenced by…
Self-service
Consumer affluence
Company/brand image
Innovation opportunity
Innovations in Packaging
 PACKAGING IS THE EXPRESSION
OF THE SOUL OF EVERY
PRODUCT.
Peter Brabeck Nestlé CEO
What is innovation?
What is innovation

Anything which creates or improve
profitable business
Functions of Labels
Identifies
Grades
Describes
Promotes
Warranties and Guarantees
 Assurance to consumers

Setting Product Strategy

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Setting Product

Materials and parts

All the activities of designing and producing

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