Setting Product Strategy
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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 Anything
that can be offered to a market to satisfy a want or need.
Components of the Market Offering
Product Levels: The Customer Value Hierarchy In
planning 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 goods
Services
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
Capital items
Supplies/ 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 Performance Conformance Durability Reliability Reparability Style Design
Ordering ease Delivery Installation Customer training Customer consulting Maintenance
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-line
pricing 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
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 Anything
that can be offered to a market to satisfy a want or need.
Components of the Market Offering
Product Levels: The Customer Value Hierarchy In
planning 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 goods
Services
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
Capital items
Supplies/ 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 Performance Conformance Durability Reliability Reparability Style Design
Ordering ease Delivery Installation Customer training Customer consulting Maintenance
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-line
pricing 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
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