EMB 520: Ch 12 setting product strategy 14e

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12Setting Product Strategy
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7-2What is a Product?
•A product is anything that can be offered to a market to satisfy a want or need
−More than just tangible objects
−A key element in the overall market offering
−Examples include physical goods, services, experiences, events, persons, places, properties, organizations, information, ideas, etc.
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What is a Service?
•A service is an activity, benefit, or satisfaction offered for sale that is intangible and does not result in the ownership of anything
−A form of product
−Examples include banking, hotel, airline travel, etc.
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Figure 12.1 Components of the Market Offering
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•An experience is what buying the product or service will do for the customer
−As products and services have become more commoditized, marketers are creating CV through creating and managing customer experiences with their brands or company
−Starbucks does not sell just coffee, it sells “The Starbucks Experience”
−A place for conversation and a sense of community
What is Experience?
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7-6KrispyKremeA Krispy Kreme isn’t just a doughnut, but a truly sweet experience.

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•Products are tangible, services intangible and, experiences memorable
•Products and services are external but experiences are personal that take place in the minds of individual consumers
Product, Service and Experience
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Five Levels of Product
Each level adds more CV and the 5 constitute a CV hierarchy
7-9Product Classifications
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•Marketers classify products on the basis of durability, tangibility and use
−Each type has an appropriate marketing-mix strategy
•On the basis of use, marketers classify products into two categories:
−Consumer Goods
−Industrial Goods
7-10Homogeneous Shopping ProductsHomogeneous ProductsHeterogeneous Shopping ProductsHeterogeneous ProductsShopping Products
Homogeneous
Heterogeneous
Shopping ProductsSpecialty Convenience ProductsImpulseImpulse
Emergency
Staples
StaplesConvenience ProductsConvenience ProductsSpecialty Products
New UnsoughtRegular Unsought
Unsought Products
Consumer Goods Classification
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Industrial Goods Classification
Supplies and Services
Operating supplies, repair,
and maintenance items
Materials and Parts
Raw materials, manufactured
materials, and parts
partsCapital ItemsProducts that aid inbuyer’s production or operationsCapital operationsCopyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-11
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Product and Services Differentiation
•To be branded, products must be differentiated
−Little differentiation vs. high differentiation
−Example: Chicken Vs Automobile
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Product Differentiation
•Product form
•Features
•Customization
•Performance
•Conformance
•Durability
•Reliability
•Repairability
•Style
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Service Differentiation
•Ordering ease
•Delivery
•Installation
•Customer training
•Customer consulting
•Maintenance and repair
•Returns
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Design
•Design is the totality of features that affect how a product looks, feels, and functions to a consumer.
−A way to differentiate and position a company’s offerings
−It offers functional and aesthetic benefits and appeals to both our rational and emotional sides.
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Product Line
Length
Product Line
Analysis
Product and Brand RelationshipsProduct-MixPricingProduct-MixPricing
Co-Branding &
Ingredient
Branding
Product Systems
and Mixes
MixesThe Product HierarchyThe HierarchyCopyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-16
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The Product Hierarchy
Need family
Product familyProduct classProduct line
Product type
Item
The core need that underlies the existence of a product family
All the product classes that can satisfy a core need
Group of products within the product family recognized as having a certain functional coherence
Group of products within a product class closely related
Group of items within a product line A distinct unit within a brand or product line
Security
Savings & income
Financial instrumentsLife insurance
Term life insurance
Term life insurance with premium price
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Product Systems and Mixes
•Product systemis a group of diverse but related items that function in a compatible manner
•Product mixis a set of all products and items a seller offers for sale
•Widthof a product mix refers to how many different product lines a company carries
•Lengthof a product mix refers to the total number of items in the mix
•Depthof a product mix refers to how many variants are offered of each product in the line
•Consistencyof the product mix refers to how closely related various product lines are related in some way
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•Product line is a group of products within a product class that are closely related because they
−function in a similar way
−are sold to the same customer groups through the same channels, or
−fall within given price ranges
Product Line Analysis
•Product-line managers need to know the salesandprofits of each item in their line to determine which items to build, maintain, harvest, or divest
•Also understand each product line’s market profile (how the line is positioned against competitors’ lines)
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7-20Fig:12.3-Product-Item Contributions to a Product Line’s Total Sales and ProfitsCopyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-20
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Figure 12.4 Product Map for a Paperboard-Product LineCopyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-21
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•Product-line length is the number of items in the product line
•Product line length is influenced by:
−Company objectives (like up-selling, cross- selling or protecting against economic ups and downs)
−Excess manufacturing capacity
−Pressures from sales force/distributors for a complete product-line
Product Line Length
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•It occurs when a company lengthens its product line beyond its current range
Line Stretching
DownMarket Stretch
Down-Market StretchUp-Market StretchTwo-Way Stretch
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7-24Example: Two-Way StretchMarriott added the Renaissance Hotels line to serve the upper end of the market and the TownePlace Suites line to serve the moderate and lower ends. Copyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-24

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•Adding more items within the present range of the line
•The objectives are:
−Reaching for incremental profits
−Satisfying dealers
−Using excess capacity
−Plugging holes to fend off competitors
Line Filling
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7-26Example: Line Filling
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•Line modernization encourages customer to migrate to higher-valued, higher-priced items
•Featuring can boost demand
•Reviewing the line for deadwood that depresses profits
Line Modernization, Featuring, and PruningCopyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-27
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Example: Line Extension Video of Marriott
Click the picture above to play video
As Marriott’s product extension grew in popularity, it extended the product further. Copyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-28
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Product-Mix Pricing
•In product-mix pricing, the firm searches for a set of prices that maximizes profits on the total mix
−Product-mix pricing is difficult
Because the various products have demand and cost interrelationships and are subject to different degrees of competition
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Product-Mix Pricing
•Product-line (various price levels based on differences in cost, customer evaluation, competitors’ prices)
•Optional-feature (pricing optional products, features, and services (problem): sunroof, theft protection)
•Captive-product (require the use of ancillary products (high price & counterfeiting): razor blades, films)
•Two-part (fixed fee plus variable usage fee: telephone service)
•By-product (production of certain goods often results in by-products (keeping low price): meat and fat in sausage)
•Product-bundling (offer products only in a bundle (pure and mixed bundling): tour packages)
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Example: Product Line PricingCopyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-31
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Example: Two-Part PricingCopyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-32
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Co-branding
•Co-brandingis combining a company’s products with the products from other companies in various ways
•Known as dual branding or brand bundling
−Same-company co-branding
oGeneral Mills advertises Trixcereal and Yoplait yogurt
−Joint-venture co-branding(Suzuki-Maruti)
−Multiple-sponsor co-branding
oTaligent-a technological alliance of Apple, IBM, and Motorola
−Retail co-branding
o2 retailers use the same location to optimize space/profits
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Ingredient Branding
•Ingredient brandingis creating brand equity for materials, components, or parts that are necessarily contained within other branded products
−A special case of co-branding Copyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-34
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What is the Fifth P?
Packaging, sometimes called the 5thP, is all the activities of designing and producing the container for a product.
•Developing a good package involves:
−Packaging concept
−Package elements
−Product safety
−Environmental concerns
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7-36Innovative Packaging
Dutch Boy recently came up with a long overdue innovation—paint in plastic containers with twist-off caps.
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Factors Contributing to the Emphasis on Packaging
•Self-service
•Consumer affluence
•Company/brand image
•Innovation opportunity
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Packaging Objectives
•Identify the brand
•Convey descriptive and persuasive information
•Facilitate product transportation and protection
•Assist at-home storage
•Aid product consumption
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•After packaging is designed, it is tested
−Engineering test-ensures that the package stands up under normal conditions
−Visual test-ensures that the script is legible and the color is harmonious
−Dealer test-ensures that dealers find package attractive and easy to handle
−Consumer test-ensures favorable consumer response
Packaging Tests
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7-40Labels
Identifies
GradesDescribesPromotes
Printed information appearing on or with the package.
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7-41Innovative LabelingInnovative labeling can help promote a product. Copyright © 2013Pearson Education, Inc. Publishing as Prentice Hall 12-41
NOT FOR EXAMINATIONNOT EXAMINATION
7-42Warranties and Guarantees
•Warranties are a formal statement of expected product performance by the manufacturer, while guarantees are informal statement
−Warranties are Legally enforceable
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