setting product strategy. objectives identify the product and the various characteristics of...
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Setting Product Setting Product StrategyStrategy
ObjectivesIdentify the product and the various characteristics of products.Level 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 product is any thing that can be offered to market to satisfy a want or a need.
Type Of 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
•Levels of Product and Services
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.
ExampleCORE BENEFITHEALTHY FOOD
BASIC PRODUCTFRUITS & VEGETABLES
EXPECTED PRODUCTFRESH FRUITS & VEGGIES, JUICES, CANNED GOODS
AUGMENTED PRODUCTVEGGIES PREPARED WITH DIPS, FRUITS IN BASKETS
POTENTIAL PRODUCTNEW WAYS TO SATISFY CUSTOMERS
Product Classification
1 .Durability and Tangibility.
2 .Consumer Goods.
3 .Industrial Goods.
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- RefrigeratorsClothes
Services Intangible Example: Appliance repairs, Transportation Services
2 .Consumer Goods ClassificationsConsumer products are products and services for personal consumption
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: are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort
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: are consumer products and services that the customer compares carefully on 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
2.3 Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort
• Medical services• Designer clothes• Buyers normally don’t compare specialty
products, they invest only the time needed to reach dealers carrying the wanted products
2.4 Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying
• Life insurance• Funeral services• Blood donations• Unsought products require a lot of
advertising, personal selling, and other marketing efforts
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
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)
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 Decision
Product mix consists of all the products and items that a particular seller offers for sale• Width• Length• Depth• Consistency
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 is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges
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.
Market Profile
Product Map for a Paper-product Line
Product Line Length
Product line length is the number of items in the product lineA 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).
• - Line pruning : How to delete and remove weaker items from the line,
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.
Product DifferentiationProduct Differentiation
Product Differentiation :
It is the process of distinguishing a product or service from others, to make it more attractive to a particular
target market.
Product Differentiation
FormMany products can be differentiated in form (Size, shape, physical structure of a product ).
Feature
Performance
Quality
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.
Product DifferentiationProduct Differentiation
Durability
Reliability
Style
A measure of the product's expected operating life under natural or stressful conditions, is a valued
attribute for certain products .
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 .
Product DifferentiationProduct Differentiation
Conformance Quality
Repair ability
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 DifferentiationServices Differentiation
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 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.
Brand DecisionBrand Decision
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 DecisionBrand Decision
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)
Brand DecisionBrand Decision
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 DecisionBrand 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-Branding:Co-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
After Packaging is designed it must be testedAfter Packaging is designed it must be testedEngineering Tests:Engineering Tests:ConducConducted to ensure that the package stand up under ted to ensure that the package stand up under normal conditions.normal conditions.
Visual Tests:Visual Tests:To ensure that the script is legible & the colors To ensure that the script is legible & the colors harmonious.harmonious.
Dealer tests:Dealer tests:To ensure that dealers find the packages attractive & To ensure that dealers find the packages attractive & easy to handleeasy to handle..
Customer tests:Customer tests:To ensure favorable consumer response.To ensure favorable consumer response.
The label may be a simple tag attached to the product or an elaborately designed graphic that is part of the package.
Labeling functions:Labeling functions: Identifies the product or brandIdentifies the product or brand
May identify product gradeMay identify product grade
May describe the productMay describe the product
May promote the productMay promote the product
Legal restrictions impact packaging for Legal restrictions impact packaging for many products.many products.
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.
Warranties and GuarantiesWarranties and Guaranties
Guaranties :Guaranties :
Reduce the buyer perceived risk. Suggest that the product is of high quality. Company and its service performance are
dependable. Enables the company to charge a higher
price than a competitor who is not offering an equivalent guarantee.
Product Life-Cycle Strategies
• Product Life Cycle
The product life cycle begins when the company finds and
develops a new product idea. During product development, the
company accumulates increasing investment costs. After the
company launches the product, sales pass through an
introductory period, then through a period of strong growth,
followed by maturity and eventual decline. Meanwhile profits go
from negative to positive, peak in the growth or mature sales
stages, and then decline.
Claims of Product Life Cycles
• Products have a limited life
• Product sales pass through distinct stages each
with different challenges and opportunities
• Profits rise and fall at different stages
• Products require different strategies in each life
cycle stage
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The Product Life Cycle Concept is Based on Four Premises:
Products have a limited life
Product sales pass throughdistinct stages, each withdifferent marketingimplications
Profits from a product vary at different stagesin the life cycle
Products require different strategies at differentlife cycle stages
Product Life-Cycle Stage
1.Introduction: A period of slow sales growth as the product is introduced in the market, profit nonexistent because of the heavy expenses of product introduction.
2.Growth: A period of rapid market acceptance & substantial profit improvement .
3.Matiurity: A slowdown in sales growth because the product has achieved acceptance by most potential buyers, profit stabilize or decline because of increased
competition .
4.Decline: Sales show a downward drift & profit erode .
10-64
Product Life Cycle
10-65
PLC Stages and Characteristics
10-66
Introduction Stage of the PLCIntroduction Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Low sales Low sales
High cost per customerHigh cost per customer
NegativeNegative
Create product awareness and trialCreate product awareness
and trial
Offer a basic productOffer a basic product
Use cost-plus Use cost-plus
DistributionDistribution Build selective distributionBuild selective distribution
promotionpromotion Build product awareness among early adopters and dealersBuild product awareness among early adopters and dealers
10-67
Growth Stage of the PLCGrowth Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Rapidly rising sales Rapidly rising sales
Average cost per customerAverage cost per customer
Rising profitsRising profits
Maximize market shareMaximize market share
Offer product extensions, service, warrantyOffer product extensions, service, warranty
Price to penetrate marketPrice to penetrate market
DistributionDistribution Build intensive distributionBuild intensive distribution
promotionpromotion Build awareness and interest in the mass marketBuild awareness and interest in the mass market
10-68
Strategies for Sustaining Rapid Market Growth
• Improve product quality, add new features, and improve styling
• Add new models and flanker products• Enter new market segments• Increase distribution coverage• Shift from product-awareness advertising to
product-preference advertising• Lower prices to attract the next layer of price-
sensitive buyers
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Maturity Stage of the PLCMaturity Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Peak salesPeak sales
Low cost per customerLow cost per customer
High profitsHigh profits
Maximize profit while defending market share
Maximize profit while defending market share
Diversify brand and modelsDiversify brand and models
Price to match or best competitorsPrice to match or best competitors
DistributionDistribution Build more intensive distributionBuild more intensive distribution
promotionpromotion Stress brand differences and benefitsStress brand differences and benefits
10-70
Maturity Stage: Strategies
Marketers can extend the life of the brand by the following methods:
Market modification: converting nonusers & entering new market segments.
Product modification: quality and features improvements.
Marketing-mix modification: Price, distribution, advertising, sales promotion, services.
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Ways to Increase Sales Volume
• Convert nonusers• Enter new market segments• Attract competitors’ customers• Have consumers use the product on more
occasions• Have consumers use more of the product
on each occasion• Have consumers use the product in new
ways
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Decline Stage of the PLCDecline Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Declining salesDeclining sales
Low cost per customerLow cost per customer
Declining profitsDeclining profits
Reduce expenditure and milk the brandReduce expenditure and milk the brand
Phase out weak itemsPhase out weak items
Cut priceCut price
DistributionDistribution Go selective: phase out unprofitable outletsGo selective: phase out unprofitable outlets
promotionpromotion Reduce to level needed to retain hard-core loyal customers
Reduce to level needed to retain hard-core loyal customers
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Product in Decline
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Decline Stage: Strategies
• Increasing the firm's investment ( to dominate the market or strengthen its competitive position.)
• Maintaining the firm’s investment level until the uncertainties about the industry are resolved.
• Decreasing the firm’s investment level selectivity, by dropping unprofitable customers, while simultaneously strengthening the firm’s investment in lucrative niches.
• Harvesting the firm’s investment to recover cash quickly.
• Divesting the business quickly by disposing of its assets as advantageously as possible.