Chapter – 11Setting Product Strategy

ProductCharacteristics and Classifications

Product Levels:The Customer-Value Hierarchy

FIVE PRODUCT LEVELS

Product Classification

Classification of products by marketers, on the basis of :

Durability And Tangibility

Consumer-Goods Classification

Industrial-Goods Classification

Non-durable Goods

Tangible goods consumed frequently

Durable Goods

Tangible goods that survive many uses

Services

Intangible, inseparableVariable & perishable

Durability And Tangibility

ConvenienceGoods

Purchased frequently and with

minimal effort

ShoppingGoods

Compared on bases as price,quality & style.

Specialty Goods

Having unique features &brand value

UnsoughtGoods

Unaware or hardly thinks ofbuying these.

Consumer-Goods Classification

Industrial-Goods Classification

Materials& Parts

CapitalItems

Supplies& Business

Services

Raw

Materials

Mfg.

Materials Installation EquipmentRepair &

Maintenan

ce

Operating

Supplies

1.Materials & Parts: Goods that enter the manufacturer’s product completely.

2. Capital Items: Long-lasting goods that facilitate developing or managing the finished product.

3.Supplies and Business Services Short-term goods and services that facilitate developing or managing the finished product.

ProductAnd Services Differentiation

Product Differentiation

FORM

Size, shape or physical structure of a product helps in differentiating it from others.

FEATURES

Most products can be offered with varying features that supplement their basic function.

CUSTOMIZATION

Companies have increased their ability to individualize market offerings, messages and media.

PERFORMANCE QUALITY

The level at which the product’s primary characteristics operate.

DURABILITY

A measure of the product’s expected operating life under natural or stressful conditions.

CONFORMANCE QUALITY

The degree to which all the produced units are identical and meet promised specifications.

RELIABILITY

Measure of the probability that a product will not malfunction or fail within a specified time period.

REPAIRABILITY

Measures the ease of fixing a product when it malfunctions or fails.

STYLE

Describes the product’s look and feel to the buyer. It creates distinctiveness that is hard to copy.

ServicesDifferentiation

ORDERING EASE

Refers to how easy it is for the customer to place an order with the company.

DELIVERY

Refers to how well the product or service is brought to the customer. Includes speed , accuracy and care throughout the process.

INSTALLATION

Refers to the work done to make a product operational in its planned location.

CUSTOMER TRAINING

Helps the employee’s customers use the vendor’s equipment properly and efficiently.

CUSTOMER CONSULTING

Includes data , information systems and advice services the seller offers to buyers in firms like IBM .

RETURNS

It is an un-avoidable reality of doing business these days, especially with online purchases.

MAINTENANCE AND REPAIR

Help customers keep purchased products in the good working order.

Design

Design is the totality of features that affect how a product looks , feels and functions to a customer.

IMPORTANCE OF DESIGN IN MARKETING

For a company, a well-designed product is easy to manufacture and distribute.

To the customer, a well-designed product is pleasant to look at and easy to install , use and repair.

Customers are willing to pay $204 more for a well-designed high-end laptop !!!

Design can shift consumer perceptions to make brand experiences more rewarding.

Well-designed features can help differentiate a product from others in the market.

Each Design should reflect

Bold Simplicity

Real Authenticity

“Familiar yet Surprising ” Nature

DESIGN THINKING

Requires intensive ethnographic studies of consumers

Involves creative brainstorming sessions

Requires collaborative teamwork to bring ideas to reality.

Product And Brand Relationship

PRODUCT LINE

A group of products manufactured by a company that are closely related because they perform functions in a compatible manner, sold to same customer group or fall within a price range.

PRODUCT MIX

The complete set of all products and items a particular company offers for sale.

Managing Product Mix

Consistency

Depth

Length

Width

Width : No. of different product lines the company carries.

Depth : The number of variants offered of each product in a product line.

Product Mix Width

Prod

uct M

ix D

epth

Length : The total number of items in a company’s product mix.

Consistency : This describes how closely related the various products lines are.

Product Line Analysis

Managing ‘Sales & Profits’ of each item in company’s line helps in determining which items to build, maintain , harvest or divest.

Product line managers must review how the line is positioned against competitor’s line to enhance ‘Market Profile’.

Inferencesfrom

Product LineAnalysis

ProductMix

Pricing

ProductLine

Length

LineStretchi

ng

Line Filling

Product Line Length

‘Line Stretching’ refers to lengthening the product line beyond its current range (whether up, down or both markets) to attract buyers from all the segments

‘Line Filling’ means adding more items within the present range to ensure tight grip in the market and keep out the competitors.

ProductMix

Pricing

Product Line Pricing

Optional-Feature Pricing

Captive-Product Pricing

Two-Part Pricing

By-Product Pricing

Product-Bundling Pricing

Co-Branding And Ingredient Branding

CO-BRANDINGTwo or more well-known brands are combined into a joint product or marketed together in the same fashion. Also known as ‘Dual Branding’ or ‘Brand Bundling.’

COMPANY CO-BRANDING

Gillette India promotes its Gillette Mach 3 Turbo shaving system and Gillette Shaving Gel together.

JOINT-VENTURE CO-BRANDING

The Nike + IPod Sport kit turned out to be a huge hit, when famous brands Apple and Nike decided to collaborate.

RETAIL CO-BRANDING

‘Coke Studio’ is a great example, produced by the Coca-Cola Company along with Viacom India, which has been popular throughout the country, receiving critical acclaim .

Characteristics of Co-Branding

1. Generate greater sales from existing market.

2.Open opportunities for new consumers and channels.

3. Reduce the cost of product introduction.

4. Loss of control

5. Risk of Brand Equity Dilution

6. Higher expectations may result in unsatisfactory performance that could have negative impact on both brands.

INGREDIENT BRANDING

A special case of co-branding, where a company creates brand equity for components that are contained within the other branded products.

‘Intel inside’ forced the major PC manufactures like IBM, Dell etc. to purchase their chips from Intel at a premium price.

It must have a distinctive logo which must signal that the host product contains the ingredient.

It should make the customers believe that ingredient matters to the performance and success of the end product.

Packaging, Labeling, Warranties And Guarantees

PACKAGING

It include all the activities of designing and producing the container for a product.

Often known as fifth ’P’ of the marketing mix.

PackagingAs MarketingTool

They can act as “five-second commercials” and attract customer attention during self-service purchases.

Convenience , appearance , dependability and prestige of better packaging can help in convincing customers to spend more.

Packages contribute to the instant recognition of the company or brand.

Unique or Innovative packaging can bring huge benefits to customers and profits to producers.

PackagingObjectives

Identify the brand

Convey descriptive information

Facilitate product protection

Assist at-home storage

Aid product consumption

Visual , dealer and consumer tests ensure that the packaging stands up under normal conditions.

LABELING

Label is a simply attached tag or an elaborately designed graphic that is part of the package.

A LABEL CAN

Help to identify the brand.

Grade the product

A LABEL CAN

Describe the product.

Promote the product through graphics.

Warranties

A warranty is a formal statements of expected product performance by the manufacturer.

Guarantees

A Guarantee is an assurance that the product is of high quality and dependability.

Extended warranties and specific guarantees can increase customer confidence and reliability on the product !!!

Created by Niharika Gujela, Delhi Technological University, during an internship by Prof. Sameer Mathur, IIM Lucknow.

www.IIMInternship.com