2. AT THE HEART OF A GREAT BRAND IS PRODUCT.
RODUCT IS A KEY ELEMENT IN THE MARKET OFFERIN
MARKET LEADERS GENERALLY OFFER PRODUCTS &
SERVICES OF SUPERIOR QUALITY
3. Marketing planning begins with…
FORMULATING AN OFFERING TO MEET TARGET CUSTOMER’S NEEDS
OR WANTS. THE CUSTOMER WILL JUDGE THE OFFERING BY
THREE BASIC ELEMENTS: PRODUCT FEATURES & QUALITY,
SERVICE MIX & QUALITY, & PRICE
Value-based priced
Attractiveness
of the market
offering
Product Services
features mix &
& quality quality
5. 1. Product characteristics &
classification
Many people think that a product is a tangible
offering, but a product can be more than that. A
product is anything that can be offered to a market
to satisfy a need or a want. Products that are
marketed include physical goods, services,
experiences, events, persons, places, properties,
organizations, information, & ideas
A. Product levels: the customer value hierarchy
B. Product classifications
6. A. Product levels: the customer
value hierarchy
5 product levels:
1. Core benefit: service or benefit consumer is really buying
2. Basic product: marketer turns core benefit into
3. Expected product: a set of attributes & conditions buyers normally
expect when they purchase his product
4. Augmented product: that exceeds customers expectations:
Differentiation arises on basis of product augmentation; it also leads to
marketer looking at user’s total consumption system: the way the
user performs the tasks of getting & using products & related services
Product augmentation:
1. Each augmentation adds to costs
2. Augmented benefit soon become expected benefits & necessary
points-of-parity
5. Potential product: encompasses all the possible augmentations &
transformations product or offering might undergo in the future:
Here is where companies search for new ways to satisfy customers &
distinguish their offer
8. Durability & tangibility
Non-durable goods: tangible goods normally consumed in
one or a few uses, like beer & soap:
Because these goods are consumed quickly & purchased
frequently, the appropriate strategy is to make them available in
many locations, charge only small markup, & advertise heavily to
induce trial & build preference
Durable goods: tangible goods that normaly survive many
uses: refrigerators, machine tools, & clothing
Normally require more personal selling & service, command a
higher margin, & require more seller guarantees
Services: intangible, inseparable, variable, & perishable
products.
As a result, they normally require more quality control, supplier
credibility, & adaptability; examples include haircuts, legal advice, &
appliance repairs
9. Consumer goods classification
Convenience goods: purchased frequently, immediately, &
with a minimum of effort:
Convenience goods can be further divided:
Staples are goods purchased on a regular basis: Maggii
sauces, Colgate toothpaste
Impulse goods are purchased without any planning or search
effort: Candy, ice cream
Emergency goods purchased when need is urgent: umbrellas
during rainstorm, car batteries when car breaks down due to
battery failure
Shopping goods: in the process of selection & purchase,
characteristically compares on such bases as suitability,
quality, price, & style: furniture, clothing, used cars, major
appliances
Shopping goods can be further divided:
Homogenous shopping goods are similar in quality but different
enough in price to justify shopping comparisons
Heterogeneous shopping goods differ in product features &
services that may be more important than price. Seller carries a
wide assortment to satisfy individual tastes & must have well-
trained salespeople to inform & advice customers
10. Specialty goods: has unique characteristics or brand
identification for which a sufficient number of buyers are
willing to make special purchasing effort; cars, men’s suit.
Mercedes is a specialty good because interested buyers will
travel far to buy one
Do not involve making comparisons; buyers spend time only to reach
dealers carrying the wanted products
Dealers do not need convenient locations, although they must let
prospective buyers know the locations
Unsought goods: consumer does not know about or does
not normally think of buying, like smoke detectors:
Require advertising & personal-selling effort
11. Industrial goods classification
Classified in terms of how they enter the
production process & their relative costliness into
3 groups of industrial goods:
1. Materials & parts
2. Capital items
3. Supplies & business services
12. Materials & parts
Materials & parts are goods that enter the
manufacturer’s product completely. They fall into
2 classes:
1. Raw materials: fall into 2 major groups:
Farm products: supplied by many producers, who turn them
over to market intermediaries, who provide assembly,
grading, storage, transportation, & selling services.
Their perishable & seasonal nature leads to special marketing
practices.
Their commodity character results in little advertising &
promotions, with some exceptions
Natural products: limited in supply, usually have great bulk &
low unit value & must be moved from producer to user;
fewer & larger producers often market them directly industrial
users
long-term supply contracts are common; price & delivery
reliability are the major factors influencing the selection of
supplier,
homogeneity of natural materials limiting the amount of demand
creating activities
13. 2. Manufactured materials & parts: fall
into 2 categories:
Component materials (iron, cement, wires):
usually fabricated further – pig iron into steel,
yarn woven into cloth.
Standardized nature of component materials
usually means that price reliability are key purchase
factors
Component parts (small motors, tyres,
castings):enter the finished product with no
further change in form, as when small motors
are put into vacuum cleaners, tyres are put
into automobiles.
Most manufactured materials & parts are sold
directly to industrial users.
Price & service are major marketing considerations,
& branding & advertising tend to be less important
14. Capital items
Long-lasting goods that facilitate development or
managing the finished product
They include 2 groups:
1. Installation: consist of building & heavy equipment:
Constitute major purchases, usually bought directly from
producer, with typical sale preceded by a long negotiation
period
Producers sales force include technical personnel
Producers have to be willing to design to specifications & to
supply post sale specifications
Advertising much less important than personal selling
1. Equipment: comprises portable factory equipment & tools & office
equipment; they don’t become part of finished product, shorter life
than installations longer than operating supplies
Although some sell directly, normally routed through
intermediaries, markets being geographically dispersed,
buyers numerous, & orders small
Quality, feature, price, & service are major considerations
Sales force tend to be more important than advertising,
although latter can be used effectively
15. Supplies & business services
Short-term goods & services that facilitate
developing or managing the finished product
Supplies are of 2 kinds, going under the name
MRO goods:
1. Maintenance & repair items (paint, nail, brooms): usually
supplied under contract by small parties or manufaturers
of original equipment
2. Operating supplies (lubricants, coal, writing paper):
equivalent of convenience goods, usually purchased with
minimum effort on straight re-buy basis
Normally marketed thru’ intermediaries
Price & service important considerations, standardisation
17. A. Product differentiation
Form: size, shape, or physical structure of a product.
Features: a company can identify & select appropriate new
features by surveying recent buyers & then calculating customer
value versus company cost for each potential feature
Co. should also know how many people want each feature,
how lofg it would take to introduce each potential feature,
whether competitors could copy it
Also think in terms of feature bundles or packages
Auto companies often manufacture cars at several “trim
levels”: reduces inventory costs
Each co. should decide whether to offer feature customization
at higher cost or a few standard packages at a lower cost
Performance quality: 4 levels- low, average, high or superior
Performance quality is the level at which product’s primary
characteristics operate: cos
Manufacturers must design aperformance level appropriate to
the target market & competitor’s performance levels
Co. should also manage performance quality over time;
continuous improvement can produce high returns & market
share
Lowering quality in an attempt to cut costs often has dire
consequences. E.g. how Shiltz beer, no.2 beer in US in 1960s
& 1970s lost out
18. Conformance quality: degree to which all the units are identical &
meet promised specifications – buyers expect this to be high;
problem with low conformance is that it would disappoint some
buyers
Durability: measure of product’s expected life under natural or
stressful conditions, is a valued attribute for certain products;
buyers will generally pay more for vehicles & kitchen appliances
that have a reputation for being long lasting
Rule is subject to some qualifications: extra price should not be
excessive; product should not be subject to rapid technological
obsolescence, as with computers, video cameras
Reliability: probability that a product will not malfunction or fail
within specified time period, consumers willing to pay a premium
Repairability: measure of ease of fixing when it malfunctions or
fails. Ideal if users could users could fix themselves with little cost
Style: product’s look & feel to the buyer
Style has the advantage of creating distinctiveness that is
difficult to copy
On the negative side, does not always mean high performance
19. B. Design: the integrative force
As competition intensifies, design offers a potent way to differentiate &
position a company’s products & services: it is the totality of features that
effect how a product looks & functions in terms of customer requirements
Design is particularly important in making & marketing retail services,
apparel, packaged goods, & durable equipment- all these are design
parameters, co. has to figure out how much to invest in form, feature
development, durability, reliability, repairability, & style
To a co., a well designed product is easy to manufacture & distribute
To a customer, a well-designed product is pleasant to look at & easy to
open, use repair, & dispose off
The argument for good design are particularly compelling for smaller
consumer-product companies & star-ups that don’t have big budgets
Certain countries are winning on design: Italian design in apparel &
furniture; Scandinavian design for functionality, aesthetics, &
environmental consciousness
Cos. design department enjoys equal status with engineering &
manufacturing
20. C. Services differentiation
When physical product cannot easily be
differentiated, the key to competitive success
may lie in adding services & improving their
quality.
The main differentiators are:
Ordering ease
Installation
Customer training
Maintenance & repair
22. A. The product hierarchy
Stretches from basic needs to particular items that satisfy
those needs (using life insurance)
Need family: core need that underlies the existence of a product family;
e.g. security
Product family: all product classes that can satisfy the core need with
reasonable effectiveness; e.g. savings & income
Product class: a group of products within the product family recognized
as having a certain functional coherence, also known as product
category; e.g. financial instruments
Product line: a group of products within a product class that are closely
related because they perform a similar function, are sold to the same
customer groups, are marketed through the same outlets or channels,
or fall within price ranges
A product line may be composed of different brands or a single family
brand or individual brand that has been line extended; e.g. life insurance
Product type: a group of items within a product line that share one of
the several possible forms of the product; e.g. term life insurance
Item (a.k.a. SKU or product variant): a distinct unit within a brand or
product line distinguishable by size, price, appearance, or some other
attribute; e.g. Prudential renewable term life insurance
23. B. Product systems & mixes
A product system is a group of diverse but related
items that function in a compatible manner (camera,
film, developer,..)
A product mix (a.k.a. product assortment) is a
set of all products & items a particular seller offers
for sale (items offered by Shoppers’ Stop)
A company’s product mix has certain:
Width
Depth
consistency
24. Table 1: Product-mix width & product-line length
for P&G (including date of introduction)
Product-mix width
Detergents Toothpaste Bar soap Disposable
diapers
Paper
products
PRODUCT
LINE
LENGTH
Ivory
snow(1930)
Dreft
(1933)
Cheer
(1950)
Dash
(1954)
Bold (1965)
Gain
Gleem
(1952)
Crest
(1955)
Ivory
(1879)
Camay
(1926)
Zest (1952)
Safeguard
(1963)
Oil of Olay
(1993)
Pampers
(1961)
Lovs
(1976)
Charmin
(1928)
Puffs (1960)
Bounty
(1965)
25. Breadth of a product mix refers to how many different product
lines the company carries (5 in P&G example)
Depth of a product mix refers to total number of items in the mix
( 20 in the P&G example). Can also consider average length of
line (20/5=4)
Width of a product mix refers to how many variants are offered
of each product in the line (e.g. Tide has a depth of 8 as it offers
8 distinct variants: 2 scents, 2 formulations, 2 additives)
Consistency of product mix refers to how closely related
product lines are in end use, production requirements,
distribution channels,.. P&G products are consistent in so far as
they are consumer goods that go through the same distribution
channels, less consistent in so far as they perform different
functions for the buyer
These 4 product mix dimensions permit the company to expand
its business in 4 ways:
1. Can add new product lines, widening product mix
2. Lengthen each product line,
3. Add more product variants to each product & deepen its
product mix
4. Pursue more product-line consistency
26. C. Product-line analysis
Sales & profits: every company’s product portfolio contains products with
different margins
A company can classify its products into 4 types that yield different
gross margins, depending on sales volume & promotion. To illustrate
with P.C.s:
Core product: basic computers that produce high sales volume &
are heavily promoted but with low margins because they are
viewed as undifferentiated commodities
Staples: items with lower sales volume & no promotion, such as
faster CPUs or bigger memories; these yield somewhat higher
margin
Specialties: items with lower sales volume but which might be
highly promoted, such as digital movie making equipment
Convenience items: peripheral items that sell in high volume but
receive less promotion, such as computer monitors, printers,
upscale video or sound cards
Main point is that companies should recognize that these items differ in
their potential for being priced higher or advertised more as ways to
increase their sales , margins, or both
27. Market profile: the product-line manager must
know how the line is positioned against
competitor’s lines
Product-line analysis provides information for two
key decision areas:
Product–line length
Product-mix pricing
28. D. Product-line length
Company objectives influence product-line length.
One objective is to create a product line to induce
up-selling
Product lines tend to lengthen over time
A company lengthens its product line in two ways:
1. Line stretching
2. Line filling
Line modernization, features, & pruning: a
continuous process to cope with changing product-
markets
29. 1. Line stretching
Down-market stretch: a company positioned in the middle may want
to introduce a lower-priced line for any of 3 reasons:
1. May notice strong growth opportunities as mass market retailers
attract growing number of shoppers who want value-priced good
2. Wish to tie up lower-end competitors who might otherwise try to
move up-market (low-end competitor if moving up often
counterattacked by entering low-end market)
3. May find middle market stagnating or declining
Moving down-market carries risks
Up-market stretch: companies may wish to enter the high end of the
market for more growth, higher margins, or simply to position
themselves as full-line manufacturers:
Many markets have spawned surprising upscale segments:
Starbucks in coffee, Haagen-Dazs in ice cream; Japanese auto
makers introduced upscale automobile: Toyota’s Lexus, Honda’s
Acura. They invented entirely new names rather than using or
including their own names
Other companies have included their own name in moving up-
market: Extra Strength Tylenol
Two-way stretch: companies serving the middle market might decide
to stretch their line in both directions
30. 2. Line filling
A product line can be lengthened by adding more products
within the present range
Several motives for line filling:
Reaching for incremental profits
Trying to satisfy dealers who complain about loss sales,
because of missing items
Trying to utilize excess capacity
Trying to be leading full-line company
Trying to plug holes to keep competitors out
Line filling is overdone if it results in self-cannibalization &
customer confusion
Each item should possess just-noticeable difference
31. E. Product-mix pricing
Price-setting logic must be modified when the product is part
of the product mix: here firm searches for a set of prices that
maximizes profits on the total mix.
Pricing is difficult because the various products have demand
& cost interrelationships & are subject to different degrees of
competition
Can distinguish 6 situations involving product-mix pricing:
1. Product-line pricing: companies normally develop product
lines rather than single products & introduce price steps;
often with well established price points for products
2. Optional feature pricing: optional products, features, &
services offered with main product, e.g. auto mobiles
32. 3. Captive-product pricing: manufacturers of razors, cameras often price them low &
set high markups for razor blades, & film
There is danger of pricing the captive product too high in the aftermarket, can lead to
piroting
4. Two-part pricing: fixed fee plus variable usage fee, e.g. telephone users. Fixed
fee should be low enough to induce purchase of the service, profit can be made
on the usage fees
5. By-product pricing; if by-products have value to a customer group, they should be
priced on their value; it allows competitive leverage for the main product
6. Product-bundling pricing: pure bundling occurs when a firm only offers its
products as a bundle
In mixed bundling seller offers goods both iboth individually & in
bundles. Seller normally charges less for the bundle than if the items
were purchased separately
3 suggested guidelins for correctly implementing bundling strategy:
1. Don’t promote individual products in a package as frequently & cheaply as
a bundle; bundle price should be much lower than the sum of the
individual products, otherwise consumer will not perceive its
attractiveness
2. Limit promotions to a single item in the mix if still want to promote
individual products; alternatively promote products one after
another, not simultaneously, to avoid conflicting promotions
3. If deciding to give rebates on individual products, it must be
absolute exception done with discretion, otherwise danger of
bundle losing value
34. Co-branding
Two or more well known existing-brands are combined into a joint
product and/or marketed together in some fashion:
Same-company co-branding
Joint venture co-branding
Multi-sponsor co-branding
Retail co-branding
Main advantage of co-branding is that product may be convincingly
positioned by virtue of multiple brands involved:
Can generate greater sales from existing target markets as well
as open additional opportunities with new consumers & channels
Can reduce cost of product introduction – 2 well known images –
accelerating potential adoption
Valuable means to, learn about consumers & how other
companies approach them
Potential disadvantages of co-branding are the risks & lack of control
from becoming aligned with another brand in the minds of
consumers:
Consumer expectations about level of involvement & commitment
with co-brands likely to be high, so unsatisfactory performance
could have negative repercussions for brands involved
If other brand has entered into a number of co-branding
arrangements, there may be a risk that overexposure will dilute
the transfer of any association; may also result in lack of focus on
existing brands
35. A necessary condition for co-branding success is that the two brands
separately have brand equity – adequate brand awareness & brand
image:
Most important requirement logical fit between two brands such that
combined brand or marketing activity maximizes advantages of the
individual brands while minimizing disadvantages
Research studies show consumers more apt to perceive brands
favourably if two brands are complementary rather than similar
Besides these strategic considerations, co-branding ventures must
be entered into & executed carefully:
There must be right kind if values capabilities & goals, in addition to an
appropriate balance of brand equity
Must be detailed plans to legalize contracts, make financial
arrangements, & coordinate marketing programmes
Brand alliances require a number of decisions:
What capabilities you do not have? What resource constraints are you
faced with? What growth goals or revenue needs do you have?
In assessing qa joint branding opportunity, a number of questions need
to be asked :
Is it a profitable business venture? How does it help to maintain or
strengthen brand equity? Is there any possible risk of dilution of brand
equity? Does it offer any intrinsic advantages?
36. Ingredient branding
Involves creating brand equity for materials, components, or
parts that are necessarily contained within other branded
products
Interesting type of branding is “self branding” in which
companies advertise & even trademark their own brand
ingredients
Ingredient brands attempt to create awareness & preference
for their product such that consumers will not buy a “host”
product that does not contain the ingredient brands
Many manufacturers make components or materials that enter
into final products, but whose individual identity generally gets
lost:
Intel has succeeded in building a separate identity
As a result , major PC manufacturers - IBM, Dell, Compaq – purchase
at a premium price
37. 4. Packaging, labeling, warrantees, &
guarantees
A. Packaging
B. Labeling
C. Warrantees & guarantees
38. A. Packaging
Includes all the activities of designing & producing the container for a product.
Package might include up to 3 levels of material: primary package, secondary
package & shipping package
Various factors contributing to the growing use of packaging as a marketing tool:
Self-service: an increasing number of products are sold on a self-service basis,:
Given that 53% of all purchases made on impulse, effective package must perform many of the
sales tasks: attract attention, describe the products features, create consumer confidence, & make
favourable overall impression
Consumer affluence: consumers are willing to pay a little more for convenience,
appearance, dependability, & prestige of better packages
Company brand image; contribute to instant recognition of company or brand
Innovation opportunity: can bring large benefits to consumers & profits to producers
Developing an effective package requires a number of decisions. From the perspective
of both the firm & consumers, packaging must achieve a number of objectives:
1. Identify the brand
2. Convey descriptive & persuasive information
3. Facilitate product transportation & protection
4. Assist at-home storage, &
5. Aid product consumption
39. B. Labeling
1. Identifies product or brand
2. Might describe the product
3. Might promote the product through attractive
graphics
40. C. Warrantees & guarantees
All sellers are legally responsible for fulfilling a
buyer’s normal or reasonable expectations:
Many sellers offer either general ghuarantee or
specific guarantee
Guarantee’s reduce buyers perceived risk
Guarantees are most effective in two situations:
1. When company or product is not well known
2. When product’s quality is superior top competitors
