Setting Product Strategy Marketing Management, 13 th ed 12

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12-2 Chapter Questions What are the characteristics of products and how do marketers classify products? How can companies differentiate products? How can a company build and manage its product mix and product lines?

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12-3 Chapter Questions (cont.) How can companies combine products to create strong co-brands or ingredient brands? How can companies use packaging, labeling, warranties, and guarantees as marketing tools?

12-4 At the heart of a great brand is a great product

12-5 What is a Product? A product is anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12-6 Five Product Levels Core benefit —service or benefit (e.g., hotel guest is buying “rest and sleep”) Basic product —turn core benefit into basic product (e.g., hotel room includes a bed, bathroom, towels, desk, dresser, and closet) Expected product – set of attributes and conditions buyers normally expect (e.g., clean bed, fresh towels, working lamps) Augmented product—exceeds customer expectations (e.g., free health spar) Potential product—all the possible augmentations and transformations (e.g., free internet connections and use)

 Two broad classes consumer products business products  Classes help in planning marketing mix needed  Based on how the customer views the product how consumers think about and shop for products how business/organizational buyers think about products and how they'll be used Product Classes

Product Classes Help Plan Marketing Strategy Consumer ProductsBusiness Products

Goods and/or Services Are the Product (Exhibit 9-2)

Differences in Goods and Services Devoted to erasing stereotypes

Differences in Goods and Services Tangibility When produced relative to when consumed Balancing supply and demand Contact with customer by producer of product Where produced (storing and transporting ) Differences

12-12 Product Classification Schemes Durability Use Tangibility

12-13 Durability and Tangibility Nondurable goods Services Durable goods

Homogeneous Shopping Products Heterogeneous Shopping Products Shopping Products Homogeneous Shopping Products Heterogeneous Shopping Products Shopping Products Specialty Products Convenience Products Impulse Products Emergency Products Staples New Unsought Products Regular Unsought Products Unsought Products Convenience Products Impulse Products Emergency Products Specialty Products Staples Consumer Goods Classification

Industrial Goods Classification MRO Supplies Supplies for Maintenance, Repair, and Operating MRO Supplies Supplies for Maintenance, Repair, and Operating Component Parts & Materials processed expense items that become part of a finished product Raw Materials unprocessed expense items that become a physical part of a physical good Raw Materials unprocessed expense items that become a physical part of a physical good Accessories short-lived capital items—tools & production equipment Installations important capital items Installations important capital items Professional Services specialized services to support a firm’s operations--consulting services Professional Services specialized services to support a firm’s operations--consulting services Business Product Classes Business Product Classes

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Product Differentiation Product form—size, shape, or physical structure Features—supplement basic functions Customization–individual versus mass Performance—level at which the product’s primary characteristics operate Conformance—degree to which all the produced units are identical and meet the promised specifications Durability—product’s operating life Reliability—probability that a product will not malfunction or fail Repairability—the ease of fixing a product when it malfunction or fails Style—product’s look and feel to the buyer.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Service Differentiation Ordering ease—how easy to place an order Delivery—how well (e.g., speed, accuracy, and care) product or service is brought to the customer Installation—work done to make a product operational Customer training—training the customer’s employees to operate the vendor’s equipment properly and efficiently Customer consulting—data, information, systems, and advice that the seller offers to buyers Maintenance and repair—service programs for helping customers keep purchased products in good working order Returns

12-18 Dunkin’ Donuts’ Differentiation

12-19 Design Differentiation

12-20 Maintenance and Repair

12-21 Product Systems and Mixes Product system—group of diverse but related items (e.g., Palm One handheld and Smartphone product lines come with attachable— headsets, cameras, keyboards, etc.) Product mix or assortment— various product lines (e.g., GE’s consumer Appliance Division— refrigerators, stoves, washing machines, etc.) Depth—variants of each product (e.g., tide comes in two scents) Length—total number of items in the mix (e.g., PG—Detergents (Ivory, tide, etc); Toothpaste (Gleem, Crest); Bar soap (Camay, Zest, etc); Disposable Diapers (Pampers, Luvs) ; Paper Products (Charmin, Bounty) Width—number of different product lines (PG—Detergents, Toothpaste, Bar Soap, Disposable Diapers, Paper Products) Consistency—how closely related various product lines are in some way (e.g., consumer goods that go through the same distribution channel.

12-22 Product Line Analysis Convenience Items (peripheral items; e.g., carrying cases and accessories) Core product (basic products; e.g., laptop computers) Staples (items with lower sales volume but not promoted; e.g., CPU, bigger memories) Specialties (items with lower sales volume but highly promoted; e.g., digital moviemaking equipment)

12-23 Line Stretching Down-Market Stretch Up-Market Stretch Two-Way Stretch

12-24 Line Filling

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Product-Mix Pricing Product-line pricing (various levels: $200, $400, and $600) Optional-feature pricing (sunroof, theft protection) Captive-product pricing (require the use of ancillary products: razors, films) Two-part pricing (fixed fee plus variable usage fee: telephone service) By-product pricing (production of certain goods often result in by-products; meat and fat in sausage) Product-bundling pricing—offer products only in a bundle: product plus service

12-26 Product Line Pricing

12-27 Two-Part Pricing

12-28 Co-branding

12-29 Ingredient Branding

12-30 What is the Fifth P? Packaging, sometimes called the 5 th P, is all the activities of designing and producing the container for a product.

12-31 Factors Contributing to the Emphasis on Packaging Self-service Consumer affluence Company/brand image Innovation opportunity

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Packaging Objectives Identify the brand Convey descriptive and persuasive information Facilitate product transportation and protection Assist at-home storage Aid product consumption

12-33 Functions of Labels Identifies Grades Describes Promotes

12-34 Innovations in Packaging

12-35 Warranties and Guarantees

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Study Question 1 Marketers have traditionally classified products on the basis of three characteristics: ________, tangibility, and use. A.customer value hierarchy B.Expected C.Augmented D.durability E.none of the above

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Study Question 2 The consumer usually purchases ________ frequently, immediately, and with a minimum of effort. A.specialty goods B.shopping goods C.“must haves” goods D.personal goods E.convenience goods

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Study Question 3 ________ are similar in quality but different enough in price to justify shopping comparisons. A.Emergency goods B.Homogeneous shopping goods C.Heterogeneous shopping goods D.Specialty goods E.Impulse goods

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Study Question 4 Industrial goods can be classified as ________, capital items, or suppliers and business services based on their costliness and how they enter the production process. A.service components B.Subassemblies C.pieces and parts D.specialty goods E.materials and parts

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Study Question 5 Capital items are long-lasting goods that facilitate developing or managing the finished product. They include two groups: installations and ________. A.natural products B.component materials C.operating supplies D.Equipment E.none of the above