Chapter 12 Setting Product Strategy. Objectives Identify the various characteristics of products. ...
-
date post
21-Dec-2015 -
Category
Documents
-
view
220 -
download
2
Transcript of Chapter 12 Setting Product Strategy. Objectives Identify the various characteristics of products. ...
Objectives
Identify the various characteristics of products. Learn how companies build and manage product lines and mixes. Understand how companies make better brand decisions. Comprehend how packaging and labeling can be used as marketing tools. Warranties & guarantees can offer further assurance to consumers.
Product is a key element in the market offering. Is the first and the most important element of the
marketing mix. Product strategy calls for making coordinated
decisions on product mixes, product lines, product brands, packaging and labeling.
Who should ultimately design the product? The customer of course.The customer will Judge the offering by three basic elements:
Product features and quality. Services mix and quality. Price.
What is a Product?
GoodsPlaces
Events
A Product can be Services
Experiences
Persons
Information
Properties
Ideas
Organizations
According to Kotler there are 5 levels
According to Kotler there are 5 levels
Core benefit
Basic Product
Expected product
Augmented product
Potential Product
The Product and Product MixThe Product and Product Mix
The customer value hierarchyThe customer value hierarchy::
Core benefitThe service or benefit the customer is really buying.
Basic productThe marketer has to turn the core benefit into basic product .
Expected productA set of attributes and conditions buyers normally expect when they purchase the products.
Augmented product The product exceeds customer expectation.
Potential productAll possible augmentations and transformations the product or offering might undergo in the future.
Quality Packing
Feature
Style
Brand
NameCore
BenefitDelivery
AndCredit
Installation
After sale services
Warranty
Core benefit
Actual product
Augmented product
According to Armestrock There are 3 levels
According to Armestrock There are 3 levels
The Product Levels
Product Classification
1 .Durability and tangibility
Nondurable goods Tangible Rapidly consumed in one or a few uses. Example: Milk - Soap
Durable goods Tangible
Lasts a long time Example: Oven – electronics
Services Intangible Example: Appliance repairs, Transportation Services
2 .Consumer Goods Classifications
Convenience goods
Shopping goods
Specialty goods
Unsought goods
Classified by shopping habitsClassified by shopping habits
2 .Consumer Goods Classifications
Consumer Goods
Convenience goods Shopping goods Specialty goods Unsought goods
Staples Goods
Impulse Goods
Emergency Goods
HomogeneousGoods
HeterogeneousGoods
2 .Consumer Goods Classification
2.1 Convenience goods:
Staples Goods: Goods consumers purchase on a regular basis (Toothpast).
Impulse Goods:Purchased without any planning or search efforts (Magazines).
Emergency Goods:Are purchased when a need is urgent (umbrellas during a rainstorm).
2 .Consumer Goods Classification
2.2 Shopping goods:
The bases are the suitability quality, price and style
Homogeneous shopping goods:
Are similar quality but different enough in price to justify shopping comparisons.
Heterogeneous shopping goods:
Offer in product features & services that maybe more important than price.
Shopping GoodsConvenience Goods
Limit DistributionConvenience Distribution
High PriceReasonable Price
Low life cycleHigh life cycle
Needs planning or search efforts
Purchased without planning or search efforts
Selective distribution policyIntensive distribution policy
ComparativeComparative Between Convenience & Shopping GoodsBetween Convenience & Shopping Goods
3 .Industrial goods Classifications
Are goods that enter the manufactures product completely
3.1 Materials and parts
Farm products ( Wheat, Cotton, Fruits …) Natural products (Fish, Crude petroleum …) Component materials (Iron, cement, wires…)
Component parts ( Small motors, tires …)
3.2 Capital items Installations (Factories, offices)
Equipment (drill presses, personal computer, elevators).
3.3 Supplies and business services Maintenance and repair (paint, window cleaning, copier repair…) Advisory services (Legal, management consulting, advertising)
Industrial goods classification
Industrial Goods
Material & partsCapital Items
Supplies & business services
Farm materials
Natural products
Installations
Equipment
Maintenance & repair
Advisory services
Component materials
Component parts
Form
Feature
Performance quality
Durability
Many products can be differentiated in form (Size, shape, physical structure of a product.
The company should consider how many people want each feature, how much it would take to introduce each feature, and think of feature bundles or packages.
Most products are established at one of four performance levels: Low, average, high or superior.
A measure of the product's expected operating life under natural or stressful conditions, is a valued attribute for certain products.
Reliability
Style
Conformance Quality
Repairability
Measure of the probability that a product will not fail within a specified time period.
Describe the product's look and feel to the buyer.
Is the degree to which all the produced units are identical and meet the promised specifications
Is a measure of the ease of fixing a product when it malfunction or fails.
Services Differentiation:
Ordering ease: refers to how easy it is for the customer to place an order with the company.
Delivery: to how well the product or service is delivered to the customer.
Installation: refers to the work done to make a product operational in its planned location .
Services Differentiation:
Customer training: refers to training the customer’s employees to use the vendor’s equipment properly and
efficiently.
Customer consulting: refers to data, information systems, and advice services that the seller offers to
buyers.
Maintenance & repair: describes the service program for helping customers keep purchased products in
good working order.
The Product Hierarchy:Need familyThe core need that underlies the existence of a product family (Security).
Product familyAll the product classes that can satisfy a core need with reasonable effectiveness (Saving, income)
Product classA group of products within the product family recognized as having a certain functional coherence (financial instruments)
Product lineA group of products within a product class that are closely related because they perform a similar function.
Product typeA group of items within a product line that share one of several possible forms of the product.
Item.A distinct unit within a brand or product line distinguishable by size, price, appearance or some other attribute.
Product mix
Product mix dimensions::Product mix dimensions::
The Width: Number of product lines.
The Length: Total number of items in mix.
The Depth: How many variants are offered of each product in the line.
Consistency: Degree to which product lines are related.
(Production requirements, distribution channels)
The set of all products and items that a particular seller offers for sale.
A Product mix consists of various product lines.A Product mix consists of various product lines.
Product mix
Product Line 4
Product Line 3
Product Line 2
Product Line 1
SweetsSnakesSoft Drinks
Coffee
MarsPizza InTangNescafe
kinderBurgerCoca ColaBream
TwixKentuckyMerandaSanca
The Width
The
Depth
Width = 4
Depth L1 = 3
Length = 12
Product-Line Decisions
Product-Line Analysis
Product line managers need to know the sales and profit itemssales and profit items in their lines in order to determine which items to built, maintain, harvest and divest.
Product-Line Analysis
Product-Item Contributions to a Product Line's Total Sales and Profits
0
10
20
30
40
50
60
1 2 3 4
Product Item
Perc
en
tag
e C
on
trib
uti
on
to S
ale
s a
nd
Pro
fit
Sales
Profits
Market Profile
Product line managers need to look at market profilemarket profile..
The manager must review how the line is positioned against competitor’s lines.
The product map is useful for designing product line marketing strategy & identifies market segments.
Product Line Length
A company lengthen its product line in two ways:1 .Line stretching: involves the question of whether a
particular line should be extended:
Down market: it introduces a lower priced line for any three reasons:
1- The company may notice strong growth opportunities in the down market.2- To tie up lower end competitors who might other wise try to move up market.3- The middle market is declining.
• - Upward stretch: Enter the high end of market for more growth , higher margins.
• -The two way stretch: The line in both direction
•2 -Line filling: A product line can be lengthened by adding more items within the present rang like reaching for incremental profits, trying to satisfy dealers,
• -Line modernizations: whether the line needs a new look.
•In rapidly changing product markets , modernization is continuous.
•A major issue is timing improvements , so they do not appear too early ( damaging sales of the current line ) or too late ( after the competition has established a strong
reputation for more advanced equipment) .
Product mix pricing
There are six situation involving product mix pricing:
1 (Product line pricing:
Companies normally develop product lines rather than single products and introduce price steps.
2 (Optional feature pricing:
Many companies offer optional products, features and service a long with their main product.
3 (Captive product pricing:
Some products require the use of ancillary or captive products.
4 (Two part pricing product:
Service firms often engage in two-part pricing consisting ofaffixed fee plus variable usage fee.
5 (By-product pricing:
The production of certain goods-meats, petroleum products often results in by-products.
6 (Product bundling:Sellers often bundle products and features.
Mixed Bundling
The seller offers goods both individually and in bundles.
When offering a mixed bundle, the seller normally charges less for the bundle than if the items were purchased separately.
Brand Decision
The AMA definition of a brand:
“A name, term, sign, symbol, or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate
them from the competition”.
Brand Decisions
Brands can convey six levels of meaning:
AttributesA brand bring to mind certain attributes.
BenefitsAttributes must be translated in to functional & emotional benefits
ValuesThe brand say something about the product (Mercedes-Safety)
CultureIt may represent a certain culture (Mercedes- German)
PersonalityIt project a certain personality
UserIt suggests the kind of consumer who buys or use the product.
Brand Decision
Companies need to develop brand policies for the individual product items in their lines.
-They must decide whether to brand at all , whether to use family or individual brand names, whether to extend the brand name to new products , and whether to create multiple brands.
Brand DecisionBrand Decision
In developing marketing strategy for individual product, the seller has to confront the branding decision.
Branding is a major issue in product strategy.
Developing branded product requires a great deal of long term investment spending especially for advertising, promotion, and packaging.
Companies need to develop brand polices for individual product items in their lines.
Co-Branding & Ingredient BrandingCo-Branding & Ingredient Branding
Co-BrandingCo-Branding::
It called dual branding or brand bundling, in which two or more well known existing brands are combined into a joint product or marketed together in some fashion.
Integrated Branding:
Is a special case of co-branding.
It involves creating brand equity for materials, components or parts that are necessarily contained within other branded products.
Packaging and Labeling
Packaging:
Is all the activities of designing and producing the container for a product.
Packaging includes: The primary package
The secondary package
The shipping package
Packaging has become as marketing tool, well designed packages can create convenience & promotional value.
•The factors that help in increasing using packaging as a marketing tool:
1 -Self service: The package must perform many of the sales tasks: attract attention, describe the product features, create consumer confidence and make a favorable impression.
2 -Consumer affluence: Consumers are willing to pay a little more per the convenience appearance, dependability and prestige of better packages.
3 -company and brand Image: Packages contribute to instant recognition of the company or brand.
4 -Innovation opportunity: Innovative packaging can bring large benefits to consumes and profits to producers.( easy to carry , easy to open , easy to pour and close).
Developing an effective package:
Determine the packaging concept
Determine key package elements
Testing:
Engineering tests
Visual tests
Dealer tests
Consumer tests
Engineering Tests:Conducted to ensure that the package stand up under Conducted to ensure that the package stand up under normal conditionsnormal conditions..
Visual Tests:To ensure that the scrip is legible & the colors harmoniousTo ensure that the scrip is legible & the colors harmonious..
Dealer tests:To ensure that dealers find the packages attractive & easy To ensure that dealers find the packages attractive & easy to handleto handle..
Customer tests:To ensure favorable consumer responseTo ensure favorable consumer response..
After Packaging is designed it must be testedAfter Packaging is designed it must be tested
The label may be a simple tag attached to the product or an elaborately designed graphic that is part of the package.
Labeling functions:
Identifies the product or brand
May identify product grade
May describe the product
May promote the product
Legal restrictions impact packaging for Legal restrictions impact packaging for many productsmany products..
Warranties & guaranteesWarranties & guarantees
Warranties:are formal statements of expected product performance by the manufacturer.
Guarantees are most effective in two situations:
The company or the product is not well know. The product's quality is superior to the
competition.