1. Product and Services Strategy
PRINCIPLES OF MARKETING
Eighth Edition
Philip Kotler and Gary Armstrong
Chapter 8
Product and Services Strategy

2. What is a Product?
Anything that can be offered to a market for attention, acquisition, use or consumption.
Satisfies a want or a need.
Includes:
Physical Products
Services
Persons
Places
Organizations
Ideas
Combinations of the above

3. Levels of Product Core Benefit or Service Augmented Product
Product Levels
This CTR corresponds to Figure 8-1 on p. 239 and relates to the material on pp
Levels of Product
Installation
Packaging
Features
Brand
Name
Product
A product is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Products can be physical objects, services, persons, places, organizations, and ideas.
Product Levels
Core Product. This concept refers to the use-benefit, problem-solving service that the consumer is really buying when purchasing a product.
Actual Product. The actual product is the tangible product or intangible service that serves as the medium for receiving core product benefits. Five characteristics:
Quality Level refers to product performance.
Features include combinations of product attributes.
Design consists of aesthetic or ergonomic aspects of the product.
Brand Name may help consumers position and identify the product.
Packaging serves to both protect the product and to promote it to consumers.
Augmented Product. The augmented consists of the measures taken to help the consumer put the actual product to sustained use. Measures can include installation, delivery & credit, warranties, and after sale service.
Delivery
& Credit
After-
Sale
Service
Core
Benefit or
Service
Quality
Level
Design
Warranty
Actual
Product
Core
Product

4. Product Classifications Consumer Products
Consumer Product Classifications
This CTR corresponds to Table 8-1 on p. 240 and relates to the material on pp
Product Classifications Consumer Products
Convenience Products
Buy frequently & immediately
Low priced
Many purchase locations
Includes:
Staple goods
Impulse goods
Emergency goods
Shopping Products
Buy less frequently
Gather product information
Fewer purchase locations
Compare for:
Suitability & Quality
Price & Style
Consumer Goods
Consumer products are those bought by final consumers for personal consumption. Marketers typically classify these products based on how consumer go about buying them. Classifications include:
Convenience Products. These products are purchased frequently with a minimum of comparison and buying effort. Convenience products may be further divided:
Staples. Staples are products that consumers buy on a regular basis.
Impulse Products. Impulse products are purchased “on the spur of the moment” and without much, if any, prior consideration.
Emergency Products. Emergency products are purchased to fill an urgent and immediate need. These products are prompted by some unexpected external event like a flood or heavy snow fall.
Shopping Products. These products are compared on such bases as suitability, quality, price, and style. Shopping products may be further distinguished homogeneous and heterogeneous shopping products. Price negotiation is more common for homogeneous shopping products.
Specialty Products. These products have unique characteristics or identification with buyers and are generally specifically sought by the consumer.
Unsought Products. These products may be unknown to the buyer or not normally considered for purchase. Unsought goods require special marketing effort.
Specialty Products
Special purchase efforts
Unique characteristics
Brand identification
Few purchase locations
Unsought Products
New innovations
Products consumers don’t
want to think about
Require much advertising &
personal selling

5. Product Classifications Industrial Products
Industrial Product Classifications
This CTR relates to the discussion on pp. 241.
Materials
and
Parts
Industrial Product Classifications
Industrial Products are those purchased for further processing or for use in conducting a business. Three groups of industrial products include:
Materials & Parts. These products enter the manufacturer's product in production. They include:
Raw Materials. These include farm products (wheat, vegetables, fruit, livestock) and natural products (fish, lumber, oil, mineral ores).
Manufactured Materials and Parts. Manufactured materials, such as steel, are used with further refinement or processing to become part of a product. For example, sheet metal is used to make car bodies. Component parts are complete products in themselves, such as machine-tooled cogs, that are used as is within the finished product.
Capital Items. Capital items indirectly contribute to production by aiding the buyer’s operations but do not end up in the resulting products themselves. Categories include:
Installations. These consist of buildings and fixed equipment.
Accessories. These include portable equipment and office equipment.
Supplies & Services. do not enter into production at all. Supplies include operating supplies and repair and maintenance items. Business services are often offered under contract to do the actual repair and maintenance. Many equipment manufacturers include repair and maintenance agreements in combination with installations.
Capital
Items
Supplies
and
Services

6. Product Classifications Other Marketable Entities
Marketed to create, maintain, or change the attitudes or behavior toward the following:
Organizations - Profit (businesses) and nonprofit (schools and churches).
Person - Political and sports figures, entertainers, doctors and lawyers.
Place - Business sites and tourism.
Social - Reduce smoking, clean air, conservation.

7. Individual Product Decisions
Product Attributes
Branding
Individual Product Decisions
This CTR corresponds to Figure 8-2 on p. 244 and relates to the material on pp
Instructor’s Note: The CTR provides an overview on each of the decision areas. Each area is covered in more detail on subsequent CTRs.
Individual Product Decisions
Packaging
Labeling
Product Attribute Decisions
Product Quality. Product quality stands for the ability of a product to perform its functions. Quality includes the attributes of overall durability, reliability, precision, ease of operations, and quality consistency -- the ability to maintain the targeted level of quality in delivering benefits to consumers. The importance of quality has lead to widespread adoption of Demings Total Quality Management, first by the Japanese and now increasingly by U.S. firms.
Product Features. The number and combination of product features offered consumers are assessed in terms of customer value versus company cost. Consumers seek value and need-satisfaction. Features irrelevant to consumers are undesirable. Also, additional features cost money to produce and higher quality features are more costly still. Product feature decisions must be carefully tied to consumer needs and consumer perceptions of received, affordable value.
Product Design. Product design combines attention to style (appearance) with enhanced performance. Style alone may attract attention but not improve performance.
Discussion Note: You may wish to discuss how style may adversely affect perceptions of product performance. Good styling may inadvertently lead to higher performance expectations on the part of the interested consumer. For this reason, product attribute decisions incorporating a marketing perspective should focus on product design over style alone.
Product Support Services

8. Product Attribute Decisions
This CTR relates to the material on pp
Product Attribute Decisions
Features
Quality
Product Attribute Decisions
Product Quality. Product quality stands for the ability of a product to perform its functions. Quality includes the attributes of overall durability, reliability, precision, ease of operations, and quality consistency -- the ability to maintain the targeted level of quality in delivering benefits to consumers. The importance of quality has lead to widespread adoption of Demings Total Quality Management.
Product Features. The number and combination of product features offered consumers are assessed in terms of customer value versus company cost. Consumers seek value and need-satisfaction. Features irrelevant to consumers are undesirable. Also, additional features cost money to produce and higher quality features are more costly still. Product feature decisions must be carefully tied to consumer needs and consumer perceptions of received, affordable value.
Product Design. Product design combines attention to style (appearance) with enhanced performance. Style alone may attract attention but not improve performance.
Discussion Note: You may wish to discuss how style may adversely affect perceptions of product performance. Good styling may inadvertently lead to higher performance expectations on the part of the interested consumer. For this reason, product attribute decisions incorporating a marketing perspective should focus on product design over style alone.
Design

9. Brands Consistency Quality & Value Attributes Identification
This CTR relates to the material on pp
Consistency
Quality & Value
Attributes
Identification
Advantages of
Brand Names
Brand
Equity
Brands
A brand is 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 those of competitors. Powerful brands names have consumer franchise -- they command consumer loyalty.
Levels of Brand Meaning
Attributes. A brand elicits certain product attributes in the minds of consumers. The company may use one or more of these attributes in its advertising to reinforce these perceptions in the consumer.
Benefits. Consumers buy benefits, not attributes. A key aspect of a successful marketing program is linking attribute perceptions to tangible product benefits. The benefits may produce objective need-satisfiers, such as increased safety, or psychological benefits, such as enhanced self-esteem. But in both cases, the actual benefit must be available in the product.
Values. Brands communicate information about the buyer’s values. The benefits of the brand indicate that these things are important to the consumer who chooses them. Some consumers, especially those of luxury goods, often select a particular brand in part because of what it communicates to others about the owners values.
Personality. Brands project a personality. People personify brands and products. Psychologists have pointed out that we tend to be attracted to those like us, those we aspire to be like, and those we want others to view us as being like. Brands can help people, almost literally, become the type of person the want to be.
Brand Equity
Brands are used to create awareness, build preference, and ultimately, to command loyalty among consumers. Companies with strong brands often attempt to build brand portfolios by acquiring brands with strong brand equity from other companies.
Association
Loyalty
Credibility
Awareness

10. Major Brand Decisions Brand Name Selection Brand Sponsor
Protection
Major Branding Decisions
This CTR corresponds to Figure 8-3 on p. 247 and relates to the material on pp
Major Brand Decisions
Brand Sponsor
Manufacturer’s Brand
Private Brand
Licensed Brand
Co-branding
Major Branding Decisions
Brand Decision. At this stage, the company must decide whether or not to place a brand name on its product. Brands usually command higher profit margins than non-brands.
Brand Name Selection. Desirable qualities for a brand name include:
1. It should suggest something about the product’s benefits.
2. It should be easy to pronounce and remember.
3. It should be distinctive.
4. It should translate easily into foreign languages.
5. It should be eligible for registration and legal protection.
Brand Sponsor. Who sponsors the brand must also be decided. Manufacturer's or National brands are owned by the producer. Private brands are created and owned by a reseller. Mixed-brand strategies combine both approaches.
Brand Strategy. This decision area consists of at least four choices, covered in greater detail on the following CTR.
Brand Strategy
Line Extensions
Brand Extensions
Multibrands
New Brands

11. Brand Strategy Product Category Line Brand Extension Extension
This CTR corresponds to Figure 8-4 on p. 251 and relates to the discussion on pp
Line
Extension
Brand
Extension
Product Category
Existing
New
Brand Strategy
Companies may implement at least four brand-name strategies, including:
Line Extension. This strategy occurs when a company introduces additional items in a given product category under the same brand name. The vast majority of new product introductions are line extensions.
Brand Extension. This strategy seeks to extend existing brand qualities to launch new products or modified products in a new category.
Multibrand. This strategy develops two or more products in the same product category. P & G pioneered multibranding.
New Brands. Here a company creates a new brand name when it enters a new product category for which none of the company’s current brand names are appropriate.
Multibrands
New
Brands
Existing
Brand Name
New

12. Brand Strategy Line Extension Brand Extension Multibrands New Brands
Existing brand names extended to new forms, sizes, and flavors of an existing product category.
Brand Extension
Existing brand names extended to new product categories.
Multibrands
New brand names introduced in the same product category.
New Brands
New brand names in new product categories.

13. Packaging Sales Tasks Competitive Advantages Product Safety Packaging
Packaging Decisions
This CTR relates to the material on pp
Packaging
Sales
Tasks
Competitive
Advantages
Product
Safety
Packaging Concept
The packaging concept states what the package should be or do for the product in support of marketing objectives. Packaging includes the activities of designing and producing the container or wrapper for a product. The package includes the immediate container (that holds the product for use), a secondary package that is discarded prior to use, and a shipping package necessary for storage and shipping.
Discussion Note: Both environmentalists and consumer groups have complained about unnecessary packaging. Environmentalists point out the ecological costs of more packages to throw away. Many firms now recycle packages to reduce wastes and save money. Consumer groups, such as Consumer’s Union (publisher of Consumer Reports), express concern that unnecessary packaging costs consumers more.
Labeling Decisions
Labels perform several functions. Labels identify, describe, and promote the product. Also, labels must meet the demands of legal regulations.
Identifies. Especially in support of brand strategies, labels distinguish the product from others.
Describes. Labels can provide information about contents, production, freshness, and instructions on safe and effective use.
Promotes. Use of color and graphics can stimulate and arouse consumer attention for the product.
Legal Regulation
Mis-use of labels has lead to regulation on product claims, the addition of unit prices, open dating, and nutritional labeling for processed foods. Including all required information is necessary to ward off governmental investigations.
Packaging
Labeling
Identifies
Promotes
Describes

14. Product - Support Services
Companies should design its support services to profitably meet the needs of target customers.
How?
Step 1. Survey customers to determine satisfaction with current services and any desired new services.
Step 2. Assess costs of providing desired services.
Step 3. Develop a package of services to delight customers and yield profits.

15. Product Line Decisions
This CTR relates to the material on pp
Product Line Length
Number of Items in the Product Line
Product Line Decisions
Product Line Length. This refers to the number of products in the line. The line is too short if adding items increases profits; too long if dropping items increases profits. Company objectives of full-line offerings may decrease strict profit criterion on length.
Product Line Stretching. This occurs when a company lengths is product line beyond its current range. Downward stretch offers items to lower end of the market. Upward stretch introduces items to high end of market. Two-way stretch extends the line both upward and downward.
Product Line Filling. This adds items within the existing product range of the line.
Stretching
Lengthen beyond current range
Filling
Lengthen within current range
Downward
Upward

16. Product Mix Decisions Consistency
This CTR relates to the material on pp
Width - number of different product lines
Length - total number of items
within the lines
Product Mix -
all the product
lines offered
Product Mix Decisions
Mix Width. This refers to how many product lines the company carries.
Mix Length. This refers to the total number of products the company carries.
Mix Depth. This refers to how many versions are offered of each product in the line.
Mix Consistency. This refers to how closely related the various product lines are in end use, production requirements, distribution channels, or other ways.
Consistency
Depth - number of versions of each product

17. Characteristics of Services
Intangibility
Inseparability
Can’t be seen, tasted, felt, heard,
or smelled before purchase.
Can’t be separated from service
providers.
Quality depends on who provides
them and when, where and how.
Can’t be stored for later sale or use.
Variability
Perishability

18. Internal Service Quality
The Service-Quality Chain
Health Service
Profits and Growth
Satisfied and
Productive Service
Employees
Satisfied and Loyal
Customers
Greater Service
Value

19. Marketing Strategies for Service Firms
Managing Service Differentiation
Develop offer, delivery and image with competitive advantages.
Managing Service Quality
Empower employees
Become “Customer obsessed”
Develop high service quality standards
Watch service performance closely
Managing Service Productivity
Train current or new employees
Increase quantity by decreasing quality
Utilize technology