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Chapterhapter 122Setting Product Strategyet ting Product Strategy

1) Product Charactersitics & Classifications (1/7) 26-2

The Product

Anything that can be offered to a market to

satisfy a want or need.


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The Product

ProductProduct

Physical goodsPhysical goods

ServicesServices

ExperiencesExperiences

EventsEvents

PersonsPersons

PlacesPlaces

PropertiesProperties

OrganizationsOrganizations

InformationInformation

IdeasIdeas

Componentsof the Market Offering


Product Leve ls: The Customer Value Hierarchy

Core benefitCore benefit (Hotel; Rest & Sleep)(Hotel; Rest & Sleep)

Basic productBasic product (Hotel Room with bed,(Hotel Room with bed,bathroom, towels, desk, dresser and closet)bathroom, towels, desk, dresser and closet)

Expected productExpected product (Hotel guests expect(Hotel guests expectclean bed, fresh towels, working and quietness)clean bed, fresh towels, working and quietness)

Augmented productAugmented product(May be(May be

overwhelmed if a guest found fresh flower in hisoverwhelmed if a guest found fresh flower in hisroom af ter returning from shopping)room af ter returning from shopping)

Potential product:Potential product: all the possibleall the possibleaugmentation the product might undergo in theaugmentation the product might undergo in the

future (Fastest internet in cell phone for Newsfuture (Fastest internet in cell phone for News

Viewing)Viewing)

Consumption System:Consumption System: the way the user performsthe way the user performs

the tasks of getting and using products and relatedthe tasks of getting and using products and related

services. (Important for Product Augmentation)services. (Important for Product Augmentation)

Five Product Levels


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Durability and TangibilityDurability and Tangibility

Nondurable goodsNondurable goods (Soap; Consumed quickly and purchased(Soap; Consumed quickly and purchasedfrequently.mark up should be low and advertise to induce trial)frequently.mark up should be low and advertise to induce trial)

Durable goodsDurable goods (Refrigerators, clothing that needs more personal(Refrigerators, clothing that needs more personalselling and higher margin and guarantee)selling and higher margin and guarantee)

ServicesServices (Intangible; require more quality control, credib ility and(Intangible; require more quality control, credib ility andadaptability)adaptability)

ConsumerConsumer--Goods Classification:Goods Classification:

Convenience goodsConvenience goods

Staples:Staples: Regular basis; rice, toothpaste.etc.Regular basis; rice, toothpaste.etc.

Impulse goods:Impulse goods: Without planning; Candy, MagazineWithout planning; Candy, Magazine

Emergency goods:Emergency goods: Need is urgent; UmbrellaNeed is urgent; Umbrella

Product Classifications



ConsumerConsumer--Goods Classification:Goods Classification:

Shopping goodsShopping goods (In the process o f selection and purchase,(In the process o f selection and purchase,characteristically compares on quality, price and style)furniture, clothing,characteristically compares on quality, price and style)furniture, clothing,

used car.and major appli anceused car.and major appli ance

HomogeneousHomogeneous

shopping goods:shopping goods: Simi lar in quality and different enough in priceSimi lar in quality and different enough in price

HeterogeneousHeterogeneousshopping goods:shopping goods: Product features and services are more important thatProduct features and services are more important thatpriceprice

Specialty goods:Specialty goods: (Special chara cteristics o r brand for which buyers are(Special chara cteristics o r brand for which buyers arewilling to make a special purchasing effort).Car, Photographic equipmentwilling to make a special purchasing effort).Car, Photographic equipment

Unsought goods:Unsought goods: Does not know or does not normall y think ofDoes not know or does not normall y think ofbuying.Lif e Insurance, grave, .advertising and personal selling is requiredbuying.Lif e Insurance, grave, .advertising and personal selling is required

to sell them.to sell them.


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Product Classifications IndustrialIndustrial--Goods ClassificationGoods Classification

Materials and parts:Materials and parts: Raw materialsMfg MaterialsRaw materialsMfg Materials

Farm products: Wheat, RiceFarm products: Wheat, Rice

Natural products: Fish, Crude PetroleumNatural products: Fish, Crude Petroleum

Component materials: Cement, wireComponent materials: Cement, wire

Component parts: Small motor, tires, castingsComponent parts: Small motor, tires, castings

Capital items:Capital items: Facilitate developing or managing finished product.Facilitate developing or managing finished product.

Installations: Buildings, heavy equipmentsInstallations: Buildings, heavy equipments

Equipment: Hand tool, office equipment (Computer and desk)Equipment: Hand tool, office equipment (Computer and desk)



Supplies & business servicesSupplies & business services (Short(Short--term goods and service thatterm goods and service thatfacilitate developing the finished products)facilitate developing the finished products)

Maintenance & repair itemsMaintenance & repair items (Paint, nails and brooms)(Paint, nails and brooms)

Operating suppliesOperating supplies (lubricants, coal, writing paper, pencil)(lubricants, coal, writing paper, pencil)

Maintenance & repair servicesMaintenance & repair services (window cleaning & repairing(window cleaning & repairingservice)service)

Business advisory ServicesBusiness advisory Services (Legal and management consulting)(Legal and management consulting)


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2) Differentiation (1/4) 26-9

Product Differentiation

Product formProduct form (size/ shape/ physical structure)(size/ shape/ physical structure)

FeaturesFeatures

CustomizationCustomization

PerformancePerformance

ConformanceConformance ((is the degree to which all the produced units are identical &is the degree to which all the produced units are identical &meet the promis ed specificationsmeet the promis ed specifications) Apple iPhone 4 and Toyota) Apple iPhone 4 and Toyota

DurabilityDurability

ReliabilityReliability

RepairabilityRepairability

StyleStyle((products look & feel to the buyerproducts look & feel to the buyer))

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26-11

Sachet (pronunciation saSH )


Design: The Integrative Force

Design is the totality of features that affect how aproduct looks and functions in terms of customer

requirements.

Certain countries are winning on design:

Italian design in apparel and furniture.

Scandinavian design for functionality, aesthetics,

and environmental consciousness.

Braun, a German division of Gillette, has elevateddesign to a high art in its electric shavers,

coffeemakers, hair dryers, and food processors.


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Service Differentiation

Ordering easeOrdering ease

DeliveryDelivery

InstallationInstallation

Customer trainingCustomer training

Customer consultingCustomer consulting

Maintenance and repairMaintenance and repair

ReturnsReturns


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3) Product and Brand Relationships (1/10) 26-15

Product hierarchy

Need familyNeed family (Hunger)(Hunger)

Product familyProduct family (Food)(Food)

Product classProduct class (Cereal Food)(Cereal Food)

Product lineProduct line (Rice, Flakes)(Rice, Flakes)

Product typeProduct type (Flavored(Flavoredrice)rice)

ItemItem (Pran Chinigura(Pran Chinigura

Rice )/StockkeepingRice )/StockkeepingUnit/Product VariantUnit/Product Variant


Product System and Mixes

Product System:Product System: A p roduct system is a group of diverse but relatedA p roduct system is a group of diverse but related

items that function in a compatible manner. Example: PalmOneitems that function in a compatible manner. Example: PalmOne

smartphone product lines includes headsets, cameras, keyboards,smartphone product lines includes headsets, cameras, keyboards,

presentation projectors, epresentation projectors, e--books, MP3 p layers, and voice recorders.books, MP3 players, and voice recorders.

Product mix (Product Assortment/ Product Portfolio):Product mix (Product Assortment/ Product Portfolio): Set of allSet of all

products and items a particular seller offers for saleproducts and items a particular seller offers for sale Product mix has a certain:Product mix has a certain:

Width/BreadthWidth/Breadth (Different product lines the company carries)(Different product lines the company carries)

LengthLength (Length of line)(Length of line)

DepthDepth (Variants are offered of each product in the line, Tide comes(Variants are offered of each product in the line, Tide comeswith mountain spring and regular)with mountain spring and regular)

Consistency (Consistency (P&G product lines are consistent and consumer goodsP&G product lines are consistent and consumer goodsare going through same distribution channel)are going through same distribution channel)

R1


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R1 RANA, 11/22/2009


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Product Line

A Product Line is a group of products thatA Product Line is a group of products that

are closely related becauseare closely related because

they perform a similar function,they perform a similar function,

are sold to the same customer groups,are sold to the same customer groups, marketed through the same channels,marketed through the same channels,

make up a particular price range.make up a particular price range.

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Table : Product-Mix Width and Product-Line Length for Unilever

PRODUCTPRODUCT--

LINELINELENGTHLENGTH

ProductProduct--Mix WidthMix Width

DetergentsDetergents ToothpasteToothpaste

DisposableDisposable

Bar SoapBar Soap HaircareHai rcare BeverageBeverage

WheelWheel

BarBar

PowerPower

Surf excellSurf excell

Close UpClose Up

(Gel)(Gel)

PepsodentPepsodent

(Fluoride)(Fluoride)

PepsodentPepsodentPowerPower

LuxLux

DoveDove

LifebuoyLifebuoy

SusilkSusilk

DoveDove

ClearClear

TaazaTaaza

LiptonLipton


ProductProduct--Line analysisLine analysis

Sales and Profits needs to analyzeSales and Profits needs to analyze

Four types of Product classes:Four types of Product classes:

Core productCore product (Produces high sales volume and low(Produces high sales volume and lowmargin)margin)

Staples (Basic Ingredient):Staples (Basic Ingredient): CPU, Large Memories, (lowCPU, Large Memories, (lowvolume, no promotion and high margin)volume, no promotion and high margin)

Specialties:Specialties: Low sales volume but high promotion;Low sales volume but high promotion;Installation may needed.Special SoftwareInstallation may needed.Special Software

Convenience items:Convenience items: Sell high volume but less promotionSell high volume but less promotionand higher margin; Monitor, printers and softwareand higher margin; Monitor, printers and software


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Market profileMarket profile

Product Map for a

Paper-Product Line

Product-Line analysis


ProductProduct--Line LengthLine Length

Line StretchingLine Stretching

Downmarket StretchDownmarket Stretch

The company may notice strong growth opportunities as massThe company may notice strong growth opportunities as mass

retailers attract a growing number of shoppers with valueretailers attract a growing number of shoppers with value--priceprice

goodsgoods

The company may wish to tie up lowerThe company may wish to tie up lower--end competitors, ifend competitors, if

attacked by lower end competitors.attacked by lower end competitors.

The company may find that the middle market is stagnating orThe company may find that the middle market is stagnating or

decliningdeclining

Upmarket Stretch:Upmarket Stretch: High end market f or more growth, higherHigh end market f or more growth, highermargin or to position full l ine mfg.margin or to position full l ine mfg.

TwoTwo--Way Stretch:Way Stretch: Middle market company may try to stretchMiddle market company may try to stretchtheir line in both directionstheir line in both directions


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Line FillingLine Filling

JustJust--noticeable differencenoticeable difference

Line Modernization, featuring, & pruningLine Modernization, featuring, & pruning (Microsoft(MicrosoftSmartphone Kin)Smartphone Kin)

Product-Line Length


ProductProduct--line pricing:line pricing: Price for low quality, average and highPrice for low quality, average and highquality itemsquality items

Optional feature pricing:Optional feature pricing: Optional products and associatedOptional products and associatedprice. Fog light for car, extended warrantyprice. Fog light for car, extended warranty

CaptiveCaptive--Product Pricing:Product Pricing: Camera and Film; Printer and InkCamera and Film; Printer and Ink

Two Part Pricing:Two Part Pricing: Fixed plus variable. Telephone billFixed plus variable. Telephone bill

ByBy--Product Pricing:Product Pricing: Petroleum processingand pricingPetroleum processingand pricing

Product Bundle Pricing:Product Bundle Pricing: Bundle price should be cheaper thanBundle price should be cheaper thanlose one.Shampoo and conditioner bundlelose one.Shampoo and conditioner bundle

Product-Mix Pricing


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CoCo--Branding and Ingredient BrandingBranding and Ingredient Branding CoCo--Branding/Dual Branding:Branding/Dual Branding: Product are oftenProduct are often

combined with products from other companies in variouscombined with products from other companies in variousways.ways.

Same company coSame company co--branding:branding: Amul Milk and ButterAmul Milk and Butter

Joint venture coJoint venture co--branding:branding: Citi Bank Visa Card; Jamuna &Citi Bank Visa Card; Jamuna &Bashundhara.Bashundhara.

Multiple Sponsor CoMultiple Sponsor Co--branding:branding: Citibank/AmericanCitibank/AmericanAirlines/Visa credit card partnershipAirlines/Visa credit card partnership

Retail CoRetail Co--branding:branding: Pizza + PepsiPizza + Pepsi

Ingredient Branding:Ingredient Branding: Special case of coSpecial case of co--branding. Intelbranding. Inteland IBM.and IBM.

4) Packaging, Labeling, Warranties & Guarantees (1/4) 26-26

Packaging and LabelingPackaging and Labeling

PackagingPackaging

PackagePackage

Primary Package (Cologne comes in a bottle)Primary Package (Cologne comes in a bottle)

Secondary Package (Cardboard box )Secondary Package (Cardboard box )

Shipping Package (Contains 10 box in one big pack)Shipping Package (Contains 10 box in one big pack) Factors which have contributed to the growing use ofFactors which have contributed to the growing use of

packaging as a marketing toolpackaging as a marketing tool

SelfSelf--Service (books for example)Service (books for example)

Consumer affluence (better package means dependability andConsumer affluence (better package means dependability and

prestige)prestige)

Company and brand image (company or brand)Company and brand image (company or brand)

Innovation opportunity (easy to open or easy to carry)Innovation opportunity (easy to open or easy to carry)

Packaging, Labeling, Warranties & Guarantees


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Tetra Pak - Aseptic Pack


LabelingLabeling

FunctionsFunctions

Identification (identify the product or brand)Identification (identify the product or brand)

Grading (grade of the product)Grading (grade of the product)

Description (describe)Description (describe)

Promote (through attractive graphics)Promote (through attractive graphics)

Warranties and GuaranteesWarranties and Guarantees

Products underProducts under warrantywarranty can be returned to thecan be returned to the

manufactured or designated repair center for repair,manufactured or designated repair center for repair,

replacement or refund.replacement or refund.

GuaranteeGuarantee reduces buyers perceived risk. Money backreduces buyers perceived risk. Money back

guarantee if not satisfied which is suitable for newguarantee if not satisfied which is suitable for new

products.products.

Packaging, Labeling, Warranties & Guarantees


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Packaging, Labeling, Warranties & GuaranteesPackaging, Labeling, Warranties & Guarantees

According to the 19According to the 19775 Moss Magnuson Act, warranty and5 Moss Magnuson Act, warranty andguarantee are the same thing.guarantee are the same thing.

A guarantee is a document to protect consumer rights. It is aA guarantee is a document to protect consumer rights. It is apromise by a seller with a buyer for complete replacement of thepromise by a seller with a buyer for complete replacement of theitem/ article or product; usually guarantee is valid for a fixeditem/ article or product; usually guarantee is valid for a fixedperiod of time. It has a legal status, even if we do not pay for or itperiod of time. It has a legal status, even if we do not pay for or itwas offered free of cost by a seller.was offered free of cost by a seller.

Warranty is also a document that protects consumer rights. It isWarranty is also a document that protects consumer rights. It ismore or less like insurance policy for that we have to pay certainmore or less like insurance policy for that we have to pay certainamount to come into legal contract. So on the basis of this legalamount to come into legal contract. So on the basis of this legalbond the company can be taken to court if it does not bound whatbond the company can be taken to court if it does not bound whathas been agreed in the warranty document. Warranty covers onlyhas been agreed in the warranty document. Warranty covers only

repair of the article.repair of the article. Guarantee is more in manufacture, Warranty is more inGuarantee is more in manufacture, Warranty is more in

distribution and reselling parts; for example, a companydistribution and reselling parts; for example, a companymanufacture a scooter is liable for manufacture guarantee,manufacture a scooter is liable for manufacture guarantee, on theon theother hand, some importer or distributor resell the products willother hand, some importer or distributor resell the products willuse warrantyuse warranty

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Ch#12 Prdct [Compatibility Mode]