Product strategy

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Product strategy

  1. 1. SETTING PRODUCT STRATEGY Farlah Angela S. Sevilla Ateneo Graduate School of Business 05.08.10 www.farlahsevilla.blogspot.com
  2. 2. SETTING PRODUCT STRATEGY <ul><li>Product Characteristics and Classifications </li></ul><ul><ul><li>Product Levels: customer- value hierarchy </li></ul></ul><ul><ul><li>Product Classifications </li></ul></ul><ul><li>Differentiation </li></ul><ul><ul><li>Product Differentiation </li></ul></ul><ul><ul><li>Services Differentiation </li></ul></ul>www.farlahsevilla.blogspot.com
  3. 3. SETTING PRODUCT STRATEGY <ul><li>Product and Brand Relationships </li></ul><ul><ul><li>Product Systems and Mixes </li></ul></ul><ul><ul><li>Product line analysis </li></ul></ul><ul><ul><li>Product- line length </li></ul></ul><ul><ul><li>Product mix pricing </li></ul></ul><ul><li>Packaging </li></ul>www.farlahsevilla.blogspot.com
  4. 4. Components of Market Offering www.farlahsevilla.blogspot.com
  5. 5. What is a product? <ul><li>Anything that can be offered to a market to satisfy a want or need, including: </li></ul><ul><li>Physical goods, Services </li></ul><ul><li>Experiences, Events </li></ul><ul><li>Persons, places, properties </li></ul><ul><li>Organizations, information and ideas </li></ul>www.farlahsevilla.blogspot.com
  6. 6. In planning market offering, address 5 product levels: customer- value hierarchy www.farlahsevilla.blogspot.com
  7. 7. In planning market offering, address 5 product levels: customer- value hierarchy www.farlahsevilla.blogspot.com
  8. 8. In planning market offering, address 5 product levels: customer- value hierarchy www.farlahsevilla.blogspot.com
  9. 9. In planning market offering, address 5 product levels: customer- value hierarchy www.farlahsevilla.blogspot.com
  10. 10. In planning market offering, address 5 product levels: customer- value hierarchy www.farlahsevilla.blogspot.com
  11. 11. PRODUCT CLASSIFICATION SCHEME DURABILITY TANGIBILITY USE www.farlahsevilla.blogspot.com
  12. 12. DURABILITY AND TANGIBILITY NONDURABLE GOODS Available, small mark up, advertise heavily DURABLE GOODS More personal selling, higher margin, more seller guarantees SERVICES More quality control, supplier credibility, adaptability Tangible, consumed in one or few uses Tangible, survive many uses Intangible, inseparable, variable, perishable www.farlahsevilla.blogspot.com
  13. 13. CONSUMER GOODS CLASSIFICATION www.farlahsevilla.blogspot.com
  14. 14. INDUSTRIAL GOODS CLASSIFICATION www.farlahsevilla.blogspot.com
  15. 15. To be branded, products must be differentiated <ul><li>Product form- size, shape or physical structure of a product </li></ul><ul><li>Features- </li></ul><ul><ul><li>supplement basic function </li></ul></ul><ul><ul><li>avoid “feature fatigue” </li></ul></ul><ul><ul><li>Customer value versus company cost </li></ul></ul>www.farlahsevilla.blogspot.com
  16. 16. To be branded, products must be differentiated <ul><li>Customization- products are customized to an individual </li></ul>www.farlahsevilla.blogspot.com
  17. 17. To be branded, products must be differentiated <ul><li>Performance quality </li></ul><ul><ul><li>level at which product’s characteristics operate </li></ul></ul><ul><ul><li>Quality, adopt value model </li></ul></ul><ul><ul><li>Appropriate to target market and competitor’s performance level </li></ul></ul>www.farlahsevilla.blogspot.com
  18. 18. To be branded, products must be differentiated <ul><li>Conformance quality- degree to which all units are identical and meet the promised specifications </li></ul>www.farlahsevilla.blogspot.com
  19. 19. To be branded, products must be differentiated <ul><li>Durability </li></ul><ul><ul><li>product’s expected operating life under natural or stressful condition </li></ul></ul><ul><ul><li>Customers pay more for durable products </li></ul></ul><ul><ul><li>Extra price must not be excessive </li></ul></ul>www.farlahsevilla.blogspot.com
  20. 20. To be branded, products must be differentiated <ul><li>Reliability </li></ul><ul><ul><li>Measure of the probability that the product will not malfunction or fail within a specified period of time </li></ul></ul>www.farlahsevilla.blogspot.com
  21. 21. To be branded, products must be differentiated <ul><li>Repairability </li></ul><ul><ul><li>ease of fixing a product when it malfunctions or fails </li></ul></ul><ul><ul><li>Ideal if users could fix the product themselves, with little or no cost </li></ul></ul>www.farlahsevilla.blogspot.com
  22. 22. To be branded, products must be differentiated <ul><li>Style- describes the product’s look and feel to the buyer </li></ul>www.farlahsevilla.blogspot.com
  23. 23. What can differentiate Services? <ul><li>Ordering ease- how easy for customer to place an order </li></ul>www.farlahsevilla.blogspot.com
  24. 24. What can differentiate Services? <ul><li>Delivery </li></ul><ul><ul><li>how well product is brought to customer </li></ul></ul><ul><ul><li>includes speed, accuracy and care </li></ul></ul>www.farlahsevilla.blogspot.com
  25. 25. What can differentiate Services? <ul><li>Installation </li></ul><ul><ul><li>work done to make a product operational in its planned location </li></ul></ul><ul><ul><li>Important for companies with complex products </li></ul></ul>www.farlahsevilla.blogspot.com
  26. 26. What can differentiate Services? <ul><li>Customer training </li></ul><ul><ul><li>Training the customer’s employees to use the vendor’s equipment properly and efficiently </li></ul></ul>www.farlahsevilla.blogspot.com
  27. 27. What can differentiate Services? <ul><li>Customer consulting- data, information systems, advice services that the seller offers to buyers </li></ul>www.farlahsevilla.blogspot.com
  28. 28. What can differentiate Services? <ul><li>Maintenance and repair </li></ul><ul><ul><li>service program for helping customers keep purchased products in good working order </li></ul></ul><ul><li>Returns </li></ul><ul><ul><li>unavoidable reality of doing business, especially with online purchases </li></ul></ul>www.farlahsevilla.blogspot.com
  29. 29. Product Systems and Mixes <ul><li>Product sytem- group of diverse but related items that function in a compatible manner </li></ul><ul><li>Product mix or product assortment- set of all products and items a particular seller offers for sale </li></ul>www.farlahsevilla.blogspot.com
  30. 30. A product mix has the ff: <ul><li>Width- how many product lines the company carries </li></ul>www.farlahsevilla.blogspot.com
  31. 31. A product mix has the ff: <ul><li>Length- total number of items in the product mix </li></ul>www.farlahsevilla.blogspot.com
  32. 32. A product mix has the ff: <ul><li>Depth- how many variants are in each product </li></ul>www.farlahsevilla.blogspot.com
  33. 33. A product mix has the ff: <ul><li>Consistency </li></ul><ul><ul><li>how closely related the various product lines are in end use, production requirements, distribution channels </li></ul></ul>www.farlahsevilla.blogspot.com
  34. 34. Product- Item contributions to a Product Line’s Total sales and profit www.farlahsevilla.blogspot.com
  35. 35. Product line analysis www.farlahsevilla.blogspot.com
  36. 36. Line Stretching Two- way stretch www.farlahsevilla.blogspot.com
  37. 37. Six situations calling for product- mix pricing <ul><li>Product- line pricing </li></ul><ul><ul><li>Product lines rather than single products </li></ul></ul><ul><ul><li>Introduce price steps </li></ul></ul><ul><ul><li>Seller’s task: establish perceived quality differences that justify the price difference </li></ul></ul><ul><ul><li>E.g. men’s suit at three price levels </li></ul></ul>www.farlahsevilla.blogspot.com
  38. 38. Six situations calling for product- mix pricing <ul><li>Optional- feature pricing </li></ul><ul><ul><li>Optional products, features, services along with main product </li></ul></ul><ul><ul><li>Pricing is a sticky problem. </li></ul></ul><ul><ul><li>E.g. economy model of auto companies, restaurants with low food price but high liquor price </li></ul></ul>www.farlahsevilla.blogspot.com
  39. 39. Six situations calling for product- mix pricing <ul><li>Captive-product pricing </li></ul><ul><ul><li>Products that require use of ancillary products </li></ul></ul><ul><ul><li>E.g. cellular phones with lock- in period, ID makers/ printers using ink and PVC cards </li></ul></ul>www.farlahsevilla.blogspot.com
  40. 40. Six situations calling for product- mix pricing <ul><li>Two- part pricing </li></ul><ul><ul><li>Fixed fee plus variable usage fee </li></ul></ul><ul><ul><li>E.g. telephone postpaid plans </li></ul></ul><ul><ul><li>Fixed fee should be low enough, profit from usage fee </li></ul></ul>www.farlahsevilla.blogspot.com
  41. 41. Six situations calling for product- mix pricing <ul><li>By- product pricing </li></ul><ul><ul><li>If the by- products have value to a customer group, they should be priced on their value. </li></ul></ul><ul><ul><li>E.g sugar refinery which sells by- products of its sugar canes </li></ul></ul>www.farlahsevilla.blogspot.com
  42. 42. Six situations calling for product- mix pricing <ul><li>Product- bundling pricing </li></ul><ul><ul><li>Pure bundling- product is offer only as a bundle </li></ul></ul><ul><ul><li>“ tied- in sales” </li></ul></ul><ul><ul><li>E.g. actor and other talents in a film company </li></ul></ul><ul><ul><li>Mixed bundling- less cost than if sold separately </li></ul></ul>www.farlahsevilla.blogspot.com
  43. 43. Packaging <ul><li>All the activities of designing and producing the container for a product. </li></ul><ul><li>The fifth “P” </li></ul><ul><li>An element of product strategy </li></ul><ul><li>Buyer’s first encounter with the product </li></ul>www.farlahsevilla.blogspot.com
  44. 44. Factors that contributed to use of packaging as marketing tool <ul><li>Self- service </li></ul><ul><ul><li>50- 70% of all purchases are sold on a self- service basis </li></ul></ul><ul><ul><li>Package should: attract attention, describe the product’s features, create consumer confidence, make favorable overall impression </li></ul></ul>www.farlahsevilla.blogspot.com
  45. 45. Factors that contributed to use of packaging as marketing tool <ul><li>Consumer affluence- rising consumer affluence means more willingness to pay for convenience, appearance, dependability and prestige of better packages </li></ul>www.farlahsevilla.blogspot.com
  46. 46. Factors that contributed to use of packaging as marketing tool <ul><li>Company and brand image </li></ul><ul><ul><li>instant recognition of company brand </li></ul></ul><ul><ul><li>Create visible billboard effect </li></ul></ul>www.farlahsevilla.blogspot.com
  47. 47. Factors that contributed to use of packaging as marketing tool <ul><li>Innovation opportunity </li></ul><ul><ul><li>Unique materials and features that could benefit consumers and increase profit of producers </li></ul></ul>www.farlahsevilla.blogspot.com
  48. 48. Packaging objective <ul><li>Identify the brand </li></ul><ul><li>Convey descriptive and persuasive information </li></ul><ul><li>Facilitate product transportation and protection </li></ul><ul><li>Assist at- home storage </li></ul><ul><li>Aid product consumption </li></ul>www.farlahsevilla.blogspot.com
  49. 49. SETTING PRODUCT STRATEGY <ul><li>Product Characteristics and Classifications </li></ul><ul><ul><li>Product Levels: customer- value hierarchy </li></ul></ul><ul><ul><li>Product Classifications </li></ul></ul><ul><li>Differentiation </li></ul><ul><ul><li>Product Differentiation </li></ul></ul><ul><ul><li>Services Differentiation </li></ul></ul>www.farlahsevilla.blogspot.com
  50. 50. SETTING PRODUCT STRATEGY <ul><li>Product and Brand Relationships </li></ul><ul><ul><li>Product Systems and Mixes </li></ul></ul><ul><ul><li>Product line analysis </li></ul></ul><ul><ul><li>Product- line length </li></ul></ul><ul><ul><li>Product mix pricing </li></ul></ul><ul><li>Packaging </li></ul>www.farlahsevilla.blogspot.com
  51. 51. SETTING PRODUCT STRATEGY Farlah Angela S. Sevilla Ateneo Graduate School of Business 05.08.10 farlahsevilla.blogspot.com www.farlahsevilla.blogspot.com

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