Setting Product Strategy

Transcription

1 Setting Product Strategy

2 Discussion Questions 1. What are the characteristics of a product, and how do marketers classify products? 2. How can companies differentiate products? 3. Why is product design important and what factors affect a good design? 4. How can a company build and manage its product mix and product lines?

3 Discussion Questions 5. How can companies combine products to create strong co-brands or ingredient brands? 6. How can companies use packaging, labeling, warranties, and guarantees as marketing tools?

4 Marketing Planning Needs Wants Marketing planning begins by formulating an offering to meet the needs and wants of the target customers.

5 Components of the Market Offering As shown in Figure the customer will judge the offe i g s: p odu t featu es a d ualit, services mix and quality, and price.

6 Product Characteristics/Classifications Persons Experiences Events Properties Organizations Information Ideas Goods Services Places

7 A product is anything that can be marketed to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.

8 Five Product Levels Figure shows the five levels of a product. Each of these will be illustrated in more depth on the next slide.

9 Product Levels Core Benefit (Rest and sleep) Basic Product (Bed, bathroom, towels) Expected Product (Clean bed, fresh towels) Augmented Product (Free Internet; free breakfast) Potential Product (Future augmentations) Customer-value Hierarchy

10 Products are comprised of 5 levels. Each level adds more customer value. Here are the product levels using a hotel as an example. Core benefit: service or benefit the customer is really buying. Basic product: marketers turn core benefit into a basic product at this level. Expected product: attributes and conditions buyers expect when they purchase this product. Competition takes place at this level in developing countries. Augmented product: : attributes and conditions exceed customer expectations. Competition takes place at this level in developed countries. Potential product: various augmentations that could be incorporated in the future. Here is where companies search for new ways to satisfy customers and distinguish their offering.

11 Product Classifications Durability and Tangibility Nondurable goods Durable goods Durability, tangibility, and use (consumer or industrial). Services

12 Product Classifications Staples Impulse goods Emergency goods Consumer-Goods Specialty goods Convenience goods Shopping goods Unsought goods

13 Consumers purchase convenience goods frequently, immediately, and with minimal effort. Consumers compare shopping goods based on suitability, quality, price, and style. Consumer make special purchasing effort to buy specialty goods due to their unique characteristics or brand identification. Consumer does not normally know or buy unsought goods. As such these goods require advertising and personal-selling support.

14 Product Classifications Materials and Parts Manufactured materials Raw materials Supplies and business Services Industrial-Goods Capital Items Installations Equipment

15 Materials and parts a e goods that e te the completely. a ufa tu e s p odu t Capital items are long-lasting goods that facilitate developing or managing the finished product. Supplies and business services are short-term goods and services that facilitate developing or managing the finished product.

16 Product and Services Differentiation For a product to be branded it must be differentiated from competitors.

17 Product Differentiation Form Features Customization Durability Performance Conformance Reliability Repairability Products can be differentiated in many ways including: Form, features, customization, performance quality, conformance quality, durability, reliability, repairability, and style. Style

18 Services Differentiation Customer Consulting Delivery & Returns Ordering Ease Training Installation Maintenance & Repair

19 The main service differentiators are ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair. The key to competitive success may lie in adding valued services and improving product quality.

20 Design Functional Benefits Aesthetic Benefits Design is the totality of features that affect how a product looks, feels, and functions to a consumer. Design is often an important aspect of luxury products.

21 Product and Brand Relationships Product Hierarchy Product Systems/Mixes Product Line Analysis Product Line Length Product Mix Pricing Co-Branding

22 The product hierarchy stretches from basic needs to particular items that satisfy those needs. A product system is a group of diverse but related items that function in a compatible manner. A product mix is the set of all products and items a particular seller offers for sale. Product line analysis: companies develop a basic platform and modules of a product line that can be added to meet different customer requirements and lower production costs. Managers need to know the sales and profits of each item in their line to determine hi h ite s to uild, ai tai, ha est, o di est, as ell as ea h p odu t li e s a ket profile. Product line length is influenced by company objectives and tend to lengthen over time. In product-mix pricing, the firm searches for a set of prices that maximizes profits on the total mix. In Co-branding: two or more well known brands are combined into a joint product or marketed together in some fashion.

23 Product Hierarchy Need Family Product Family Product Class Product Line Product Type Item The product hierarchy stretches from basic needs to particular items that satisfy those needs. E.g., life insurance.

24 Product Systems and Mixes Width Product System Consistency Product Mix Depth Length

25 A product system is a group of diverse but related items that function in a compatible manner. A product mix is the set of all products and items a particular seller offers for sale. A o pa s p odu t i has a e tai idth, le gth, depth, a d o siste. These concepts are illustrated in Table for selected Procter & Gamble consumer products.

26 Proctor & Gamble Product Mix Product Mix Width Product Line Length Detergents Toothpaste Bar Soap Disposable Paper Diapers Products Ivory Snow Gleem Ivory Pampers Charmin Dreft Crest Camay Luvs Puffs Tide Zest Cheer Safeguard Dash Oil of Olay Bold Gain Era Bounty

27 Product Line Analysis Sales and Profit Market Profile

28 In conducting product line analysis managers must examine each product in terms of how it contributes to overall sales and profits. Products that are responsible for a large percentage of sales and profits must be carefully monitored and protected. Products that deliver on a small percentage may be candidates for being dropped, unless strong growth potential is possible. Next figure highlights A product line manager must examine how the line is positioned against competitors. One tool that a age s a e plo is a p odu t ap, hi h sho s o petito s ite s i elatio to fi s ite s. This also allo s fo ide tif i g a ket seg e ts. Product line analysis is helpful in two key decision areas product line length and product mix pricing.

29 Product-Item Contributions highlights the sales and profits of a 5-item product line. Item 1 accounts for 50% of total sales and 30% of total profits.

30 Product Map Figure shows the location of the various product line items of company X and four competitors, A, B, C, D. Competitor A sells two product items in the extra-high weight class ranging from medium to low finish quality. The product map shows which o petito s ite s a e o peti g agai st o pa X s ite s.

31 Product Line Length Up-market stretch Line stretching Line modernization, featuring, and pruning Two-way stretch Down-market stretch Line filling

32 Line stretching company lengthens its product line beyond its current range. Line filling company lengthens its product line by adding more items within the present range. Line modernization, featuring, and pruning Companies continuous modernize product lines to encourage customer migration to higher-valued, higher-priced items; boost demand for certain product lines by featuring them; and optimize their brand portfolios by focusing on core brand growth and concentrating resources on the biggest and most established brands.

33 Product Mix Pricing Product line pricing Captive-product pricing Optional-feature pricing Two-part pricing By-product pricing Product-bundling pricing

34 In product-mix pricing, the firm searches for a set of prices that maximizes profits on the total mix. Product line pricing develop product lines rather than single products and introduce price steps. Optional-feature pricing offer optional products, features, and services with their main product. Captive-product pricing price the main products low and set high markups on the aftermarket products. Two-part pricing consists of a fixed fee plus a variable usage fee. By-product pricing charge low price for the main products and earn income on the by-products. Product-bundling pricing offer goods as a bundles and charges less for the bundle than if the items were purchased separately.

35 Co-Branding and Ingredient Branding Co-Branding Same-company Joint venture Multi-sponsor Retail co-branding Ingredient Branding

36 Co-branding - Brand bundling or Dual branding Same-company- When brands owned by the same company are used together. Example, General Mills launched a Trix branded Yoplait yogurt. Joint venture co-branding Where brands owned by different companies are combined. Example, American Airlines and Citibank launching the Citibank AAdvantage credit card. Multi-sponsor An alliance between three or more partners. Retail co-branding Where two retail establishments use the same location to optimize space and profits. Pizza Hut, KFC, and Taco Bell often share the same retail space. Ingredient branding is a special case of co-branding and involves the linking of one brand with a othe. KC Maste pie e a e ue sau e as o i ed ith La s potato hips is a e a ple.

37 Packaging and Labeling Packaging Objectives Brand identification Persuade Protection At-home storage Aid consumption Labeling Objectives Identify Grade Describe Promote

38 The package is the customers first encounter with the product and a good package draws the customer in, encouraging product choice. Packaging also influences customers when they go to open and use the product at home. Distinctive packaging, Altoids i ts a d A solut odka se e as a i po ta t pa t of a a d s e uit. Labeling FDA requires that labels on all processed foods contain nutritional information. Warranties and guarantees A warranty is a formal statement of expected product performance, and are legally enforceable. Guarantees help reduce a buyers perceive risk by suggesting that the product is high quality and that the manufacturer is dependable.