windell de vera ch. 12

www.windelldevera.blogspot.com

TOP 10 LEARNING CONCEPTS

Ch. 12: Setting Product Strategy

Windell de Vera

May 11, 2012

1. Know the Five Product Levels2. Distinguish the Product

Classification Schemes3. Compare the Consumer and

Industrial Goods Classification4. Understand Product

Differentiation5. Learn Service Differentiation

Outline: Top 10 Concepts of Product Strategy

To Market the Products Effectively:

6. Consider Product Hierarchy7. Deal with the Product

Systems and Mixes8. Use the Product Line Analysis 9. Master the Product-Mix

Pricing10. Emphasize Packaging

Concept 1:

Know the Five Product Levels

Core benefit

Basic product

Expected product

Augmented product

Potential product

Reference: Philip Kotler, Marketing Management, 13th edition

Concept 1:

Core benefit: It is the fundamental level. It is the benefit the customer is really buying.

Core benefit

Basic product

Expected product

Augmented product

Potential product

e.g. A customer buys a cell phone in order to communicate.

Concept 1:

The marketer has to turn the core benefit into the basic product.

Core benefit

Basic product

Expected product

Augmented product

Potential product

e.g. A marketer sells a cell phone can be used to communicate with others.

Concept 1:

Expected product is a set of attributes and conditions buyers normally expect when they purchase this product.

Core benefit

Basic product

Expected product

Augmented product

Potential product

e.g. A customer buys a cell phone that can be used for call and text.

Concept 1:

Augmented product is a product that exceeds customer expectations.

Core benefit

Basic product

Expected product

Augmented product

Potential product

e.g. The cell phone also features camera, radio and internet.

Concept 1:

Potential product encompasses all the possible augmentations and transformations the product or offering might undergo in the future.

Core benefit

Basic product

Expected product

Augmented product

Potential product

e.g. A holographic cell phone that features the images in 3D and runs at 4G.

Concept 2:

Distinguish the Product Classification Schemes

Durability

Tangibility

Use

Concept 2:

Non-durable goods are tangible normally consumed in one or a few uses.

Durability

Tangibility

Use

The appropriate strategy is to make it available in many locations, charge a small markup and advertise heavily to induce trial.

Concept 2:

Durable goods are tangible goods that survive many uses.

Durability

Tangibility

Use

These normally require more personal selling and service, command a higher margin, and require more seller guarantees.

Concept 3:

Compare the Consumer and Industrial Goods Classification

Consumer Goods Classification

Convenience

Shopping

Specialty

Unsought

Concept 3:

Consumer Goods Classification are classified according to consumer shopping habits.

Convenience

Shopping

Specialty

Unsought

Concept 3:

Convenience goods are usually purchased frequently, immediately, and with little effort.

Convenience

Shopping

Specialty

Unsought

Concept 3:

Shopping goods are goods that the customer, in the process of selection and purchase, compares on the basis of suitability, quality, price and style.

Convenience

Shopping

Specialty

Unsought

Concept 3:

Specialty goods are goods with unique characteristics or brand identification for which consumers spend exceptional buying effort.

Convenience

Shopping

Specialty

Unsought

Concept 3:

Unsought goods are those products or services that consumers are not readily aware of or do not normally consider buying..

Convenience

Shopping

Specialty

Unsought

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Concept 3:

Industrial goods are those products used in the production of other goods.

Industrial Goods Classification

Materials and Parts

Capital Items

Supplies/business services

Concept 3:

Raw material products include farm products and natural products, manufactured materials and parts include component materials and component parts.

Materials and Parts

Capital Items

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Concept 3:

Capital items: installations and equipments.

Materials and Parts

Capital Items

Concept 3:

Supplies include maintenance and repair items and operating supplies. Business services include maintenance and repair services and business advisor services.

Materials and Parts

Capital Items

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Differentiation5. Learn the Service Differentiation

Concept 4:

Understand Product Differentiation

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

Concept 4:

Form: The size, shape, or physical structure of a product.

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

Concept 4:Features: Most products can be offered with varying features that supplement its basic function.

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

Concept 4:Customization: It refers to the tailoring of the campaign according to the needs of an individual or groups of individuals.

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

Concept 4:Performance: It is the level at which product’s primary characteristics operates.

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

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Concept 4:Conformance: It is the degree to which all the produced units are identical and meet the promised specifications.

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

Concept 4:Durability: A measure of the product’s expected operating life under natural conditions, is a valued attribute for certain products.

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

Concept 4:Reliability: A measure of the probability that a product will not malfunction or fail within a specified time period.

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

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Concept 4:Repairability: It is a measure of the ease of fixing a product when it malfunctions or fails.

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

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Concept 4:Style: It described the product’s look and feel to the buyer.

Product Form

Features

Customization

Performance

Conformance

Durability

Reliability

Repairability

Style

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Concept 5:

Learn Service Differentiation

Ordering ease Delive

ry

Installation

Customer training

Customer consulting

Maintenance and repair

Returns

Concept 5:Ordering ease: It refers to how easy it is for the customer to place an order with company.

Ordering ease

Delivery

Installation

Customer

training

Customer consultin

g

Returns

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Concept 5:Delivery: It refers to how well the product or service is delivered to the customer.

Ordering ease

Delivery

Installation

Customer

training

Customer consultin

g

Returns

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Concept 5:Installation: It refers to the work done to make a product operation in its planned location.

Ordering ease

Delivery

Installation

Customer

training

Customer consultin

g

Returns

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Concept 5:Customer training: It refers to training the customer’s employees to use the vendor’s equipment properly and efficiently.

Ordering ease

Delivery

Installation

Customer

training

Customer consultin

g

Returns

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Concept 5:Customer consulting: It refers to data, information systems, and advice services that the seller offers to buyers.

Ordering ease

Delivery

Installation

Customer

training

Customer consultin

g

Returns

Concept 5:Maintenance and repair: It describes the service program for helping the customers keep purchased products in good working order.

Ordering ease

Delivery

Installation

Customer

training

Customer consultin

g

Returns

Concept 5:Returns: Sold merchandise returned by customers for refund.

Ordering ease

Delivery

Installation

Customer

training

Customer consultin

g

Returns

Concept 6:

Consider Product Hierarchy

Item

Product Type

Product line

Product class

Product family

Need family

Concept 6:Need family – the basic need underlying the existence of a product family.

Item

Product Type

Product line

Product class

Product family

Need family

Concept 6:Product family – all the product classes that can satisfy a basic need effectively.

Item

Product Type

Product line

Product class

Product family

Need family

Concept 6:Product class – a group of products within a product family.

Item

Product Type

Product line

Product class

Product family

Need family

Concept 6:Product line – a group of products within a product class.

Item

Product Type

Product line

Product class

Product family

Need family

Concept 6:Product type – a group of items within a product line that function in a similar manner.

Item

Product Type

Product line

Product class

Product family

Need family

Concept 6:Item – a unit within a product line which is distinguished by size, price, orsome other characteristic of element.

Item

Product Type

Product line

Product class

Product family

Need family

Concept 7:

Deal with the Product Systems and Mixes

Product system

Product mix

Product

assortmen

t

Depth

Length

Width

Consistency

Concept 7:A product system is a group of diverse but related items that function in a compatible manner.

Product system

Product mix

Product

assortmen

t

Depth

Length

Width

Consistency

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Concept 7: A product mix is the sell of all products and items a particular seller offers for sale.

Product system

Product mix

Product

assortmen

t

Depth

Length

Width

Consistency

http://images.search.yahoo.com/images/view;_ylt=A0PDoX6DL6tPpxcAJu6JzbkF;_ylu=X3oDMTBlMTQ4cGxyBHNlYwNzcgRzbGsDaW1n?back=http%3A%2F%2Fimages.search.yahoo.com%2Fsearch%2Fimages%3Fp%3Dcell%2Bphones%2Bin%2Bclip%2Bart%26n%3D30%26ei%3Dutf-8%26fr%3Dyfp-t-701%26tab%3Dorganic%26ri%3D89&w=426&h=470&imgurl=image.shutterstock.com%2Fdisplay_pic_with_logo%2F56041%2F56041%2C1137525126%2C26%2Fstock-vector-communication-icons-cell-phones-894047.jpg&rurl=http%3A%2F%2Fwww.shutterstock.com%2Fpic-894047%2Fstock-vector-communication-icons-cell-phones.html&size=48.3+KB&name=Communication+Icons%3A+Cell+Phones+2+Stock+Vector+894047+%3A+Shutterstock&p=cell+phones+in+clip+art&oid=c31f3910cbc9f37af545e6e36fd19c6a&fr2=&fr=yfp-t-701&tt=Communication%2BIcons%253A%2BCell%2BPhones%2B2%2BStock%2BVector%2B894047%2B%253A%2BShutterstock&b=61&ni=72&no=89&ts=&tab=organic&sigr=12o8nenl7&sigb=13jujt7cm&sigi=13ur5hbmk&.crumb=epTdL.GMVkq

Concept 7: A company’s product assortment has a certain width, length, depth, and consistency.

Product system

Product mix

Product

assortmen

t

Depth

Length

Width

Consistency

http://images.search.yahoo.com/images/view;_ylt=A0PDoQwxMKtPFWsAYfuJzbkF;_ylu=X3oDMTBlMTQ4cGxyBHNlYwNzcgRzbGsDaW1n?back=http%3A%2F%2Fimages.search.yahoo.com%2Fsearch%2Fimages%3Fp%3Dcell%2Bphones%2Bin%2Bclip%2Bart%26n%3D30%26ei%3Dutf-8%26fr%3Dyfp-t-701%26tab%3Dorganic%26ri%3D121&w=450&h=450&imgurl=www.imageenvision.com%2F450%2F26652-clip-art-graphic-of-a-gray-cell-phone-cartoon-character-looking-through-a-magnifying-glass-by-toons4biz.jpg&rurl=http%3A%2F%2Fwww.imageenvision.com%2Fclipart%2F26652-clip-art-graphic-of-a-gray-cell-phone-cartoon-character-looking-through-a-magnifying-glass-by-toons4biz&size=156.1+KB&name=26652+Clip+Art+Graphic+of+a+Gray+Cell+Phone+Cartoon+Character+Looking+...&p=cell+phones+in+clip+art&oid=6a88ca80096ff395369bd43f284d03cc&fr2=&fr=yfp-t-701&tt=26652%2BClip%2BArt%2BGraphic%2Bof%2Ba%2BGray%2BCell%2BPhone%2BCartoon%2BCharacter%2BLooking%2B...&b=121&ni=72&no=121&ts=&tab=organic&sigr=14ib8ksk3&sigb=13k9te34e&sigi=14b44sm2f&.crumb=epTdL.GMVkq

Concept 7:The depth of a product mix refers to how many variants are offered of each product in the line.

Product system

Product mix

Product

assortmen

t

Depth

Length

Width

Consistency

Concept 7: The length of a product mix refers to the total number of items in the mix.

Product system

Product mix

Product

assortmen

t

Depth

Length

Width

Consistency

http://images.search.yahoo.com/images/view;_ylt=A0PDoX3jL6tPLX4A.imJzbkF;_ylu=X3oDMTBlMTQ4cGxyBHNlYwNzcgRzbGsDaW1n?back=http%3A%2F%2Fimages.search.yahoo.com%2Fsearch%2Fimages%3Fp%3Dcell%2Bphones%2Bin%2Bclip%2Bart%26n%3D30%26ei%3Dutf-8%26fr%3Dyfp-t-701%26tab%3Dorganic%26ri%3D109&w=490&h=534&imgurl=www.bloggingpro.com%2Fwp-content%2Fuploads%2F2010%2F03%2Fcellphoneclipart.gif&rurl=http%3A%2F%2Fwww.bloggingpro.com%2Farchives%2F2010%2F03%2F25%2Fthe-art-of-mobile-blogging-how-to-blog-from-any-cell-phone%2F&size=14.1+KB&name=The+Art+Of+Mobile+Blogging+%28How+To+Blog+From+Any+Cell+Phone+...&p=cell+phones+in+clip+art&oid=a6ca983fb1811ae7511e847793785d5f&fr2=&fr=yfp-t-701&tt=The%2BArt%2BOf%2BMobile%2BBlogging%2B%2528How%2BTo%2BBlog%2BFrom%2BAny%2BCell%2BPhone%2B...&b=91&ni=72&no=109&ts=&tab=organic&sigr=13auv76tu&sigb=13kv10onr&sigi=123lfqddf&.crumb=epTdL.GMVkq

Concept 7: The width of a product mix refers to how many different product lines the company carries.

Product system

Product mix

Product

assortmen

t

Depth

Length

Width

Consistency

Concept 7: The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

Product system

Product mix

Product

assortmen

t

Depth

Length

Width

Consistency

Concept 8:

Use the Product Line Analysis

Core product

Staples

Specialties

Convenience items

Concept 8:

Core product is the basic product.

Core product

Staples

Specialties

Convenience items

Concept 8:

Staples are items with lower salesvolume but not promoted.

Core product

Staples

Specialties

Convenience items

Concept 8:

Specialties are items with lowersales volume but highlypromoted.

Core product

Staples

Specialties

Convenience items

Concept 8:

Convenience items are peripheral items.

Core product

Staples

Specialties

Convenience items

Concept 9:

Master the Product-Mix Pricing

Product –line pricing

Optional-feature pricing

Captive-product pricing

Two-part pricing

By-product pricing

Product-bundling pricing

Concept 9:

Product–line pricing is setting price steps between product line items.

Product –line

pricingOptional-feature pricing

Two-part pricing

By-product pricing

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Concept 9:

Optional-feature pricing is pricing optional or accessory products sold with the main product.

Product –line

Two-part pricing

By-product pricing

Concept 9:

Captive-product pricing is pricing products that must be used with the main product.

Product –line

Two-part pricing

By-product pricing

Concept 9:

Two-part pricing is a strategy in which price is broken into a fixed fee plus a variable usage rate.

Product –line

Two-part pricing

By-product pricing

http://images.search.yahoo.com/images/view;_ylt=A0PDoS3lM6tPonwAwleJzbkF;_ylu=X3oDMTBlMTQ4cGxyBHNlYwNzcgRzbGsDaW1n?back=http%3A%2F%2Fimages.search.yahoo.com%2Fsearch%2Fimages%3Fp%3Dprices%2Bof%2Bcell%2Bphones%2Bin%2Bclip%2Bart%26n%3D30%26ei%3Dutf-8%26y%3DSearch%26fr%3Dyfp-t-701%26tab%3Dorganic%26ri%3D27&w=1080&h=1024&imgurl=transparent.clipartof.com%2FRoyalty-Free-Vector-Clip-Art-Illustration-Of-A-Cell-Phone-Character-Making-A-Payment-10241059109.jpg&rurl=http%3A%2F%2Fwww.clipartof.com%2Fportfolio%2Fanyvector%2Fillustration%2Fcell-phone-character-making-a-payment-1059109.html&size=161.5+KB&name=Royalty-Free+Vector+Clip+Art+Illustration+of+a+Cell+Phone+Character+...&p=prices+of+cell+phones+in+clip+art&oid=e810f218c6ad04c0d7c92a64013391d8&fr2=&fr=yfp-t-701&tt=Royalty-Free%2BVector%2BClip%2BArt%2BIllustration%2Bof%2Ba%2BCell%2BPhone%2BCharacter%2B...&b=0&ni=72&no=27&ts=&tab=organic&sigr=13cnam1f2&sigb=146evbr19&sigi=13uf4fm9k&.crumb=epTdL.GMVkq

Concept 9:

By-product pricing is pricing low-value by-products to get rid of them.

Product –line

Two-part pricing

By-product pricing

Concept 9:

Product-bundle pricing is pricing bundles of products sold together.

Product –line

Two-part pricing

By-product pricing

Concept 10:

Emphasize Packaging

Self-service

Consumer affluence

Company/brand image

Innovation opportunit

y

Concept 10: Self-Service – customers would know about the product even without any person present.

Self-service

Consumer affluence

Company/brand image

y

Concept 10: Consumer affluence – customers are willing to pay for better packages.

Self-service

Consumer affluence

Company/brand image

y

Concept 10: Company/brand image – contributes to instant recognition.

Self-service

Consumer affluence

Company/brand image

y

Concept 10: Innovation opportunity – innovative packaging helps improve sales.

Self-service

Consumer affluence

Company/brand image

y

Summary: Top 10 Concepts of Product Strategy

TOP 10 LEARNING CONCEPTS

Ch. 12: Setting Product Strategy

Windell de Vera

May 11, 2012

windell de vera ch. 12

product hierarchy

product systems

product strategy windell

d product potentialand

product line analysis

productmix pricing

philip kotler

marketing management

Business

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