Jalal M.

Mohamed 39439777 1 MKT660 1st Semester 2009/10 MKT 660 CHAPTER 12 : SETTING PRODUCT STRATEGY In this chapter we will address the following questions 1. What are the characteristics of products, and how do marketers classify products? The Customer-Value Hierarchy Product Levels Definitions Service or benefit the customer is really buying. Core Benefits Basic Products Expected Products Augmented Products Potential Products
Hotel Guest buying rest and sleep Turning the core benefits into basic product. Hotel room include a bed, bathroom, towels, desk, dresser, and closet. Set of attributes and conditions buyers normally expect when they purchase the product. Hotel guests expect a clean bed, fresh towels, and a relative degree of quite. Marketer prepares what exceeds customer expectations. Brand positioning and competition take place on this level. It encompasses all the possible augmentations and transformations the product or offering might undergo in the future. Here where companies search for new ways to satisfy customers and distinguish their offering.

Product Types Durability and Tangibility

Product Classification Definitions

Marketers classify products into three groups according to durability and tangibility: a) Nondurable goods: tangible goods normally consumed in one or a few users. Available, low markup, advertise heavily. b) Durable goods: tangible goods normally survive many uses. Personal selling, higher margin, guarantees required. c) Services: intangible, inseparable, variable, and perishable products. High quality control, supplier creditability, adaptability. Classify the vast array of goods consumers buy on the basis of shopping habits: a) Convenience goods: consumer usually purchases them frequently, immediately, and with minimum efforts. Staples goods (Heinze, Crest tooth paste), Impulse goods (Candy bars, magazines), Emergency goods (umbrellas, boots, shovels). b) Shopping goods: goods that the consumers characteristically compares on such bases as suitability, quality, price, and style. Homogeneous shopping goods (similar in quality but noticeable different in price). Heterogeneous shopping goods (difference in features and services that is more important than price). c) Specialty goods: unique characteristics or brand identification for which a sufficient number of buyer are willing to make a special purchasing efforts. d) Unsought goods: are those the consumer does not know about or does not normally thing of buying it. It requires advertising and personal-selling support. Life insurance, smoke detector. Classified in terms of their relative costs and how they enter the production process: a) Materials and parts: goods that enter the manufacturers product completely. We do have two classes for that: 1) Raw Materials: farm products and natural products. 2) Manufactured Materials: component materials and component parts. b) Capital Items: long-lasting goods that facilitate developing or managing the finished products. 1) Installation. 2) Equipment. c) Supplies and Business Services: short-term goods and services that facilitate developing or managing the finished products.

Consumer-Goods Classification

Industrial-Goods Classification

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2. How can companies differentiate products? PRODUCT DIFFERNTIATION Size, shape, or physical structure of the product. Form Calculating customer value versus company costs Features Customization Performance Quality Conformance Quality Durability Reliability Reparability Style
Features like bundles and packages. Differentiate product by making them customized to an individual. Mass customization: the ability of a company to meet each customers requirements. The level at which the products primary characteristics operate. The degree which all the produced units are identical and meet the promised specifications. Measure of a products expected operating life under natural or stressful conditions Measure the probability that a product will not malfunction or fail within specified time. Measure of the ease of fixing a product when it malfunctions or fails. Products look and feel to the buyers.

3. How can a company build and manage its product mix and product lines? Company can build and manage its product mix and product lines by managing the width, length, depth, and consistency of the product mix from one part. From the other hand, company needs to know the sales and profits of each item in their line and which item to build, maintain, harvest, or divest. It also needs to know each product lines market profile. Product Mix How many different product lines the company carries. Width Total number of items in the mix. Length Depth Consistency Sales and Profits
We can obtain the average length of each line too. How many variants are offered of each product in the line. Refer to how closely related the various product lines are in end use, production requirement, distribution channels, or some other way.

Product-Line Analysis
A company can classify its product into four types that yield different margins, depending on sales volume and promotions: a) Core Products: basic laptop computers. High sales volume, heavily promoted, low margin, undifferentiated commodities. b) Staples: Faster CPU and larger memories. Lower sales volume, no promotions, higher margin. c) Specialties: digital moviemaking. Lower sales volume, highly promoted, generate income for services. d) Convenience Items: accessories and carrying cases. High sales volume, less promotions, higher margins. Company must review how the line is positioned against competitors lines. Product Map: it shows which competitors items are competing against company Xs items. one of the benefits product mapping is that it indentifies market segments.

Market Profile

Product Line Length

Companies seeking high market share and market growth will generally carry longer product line. Companies that emphasize high profitability will carry shorter lines consisting of carefully chosen items. Companies lengthens its product line in two ways : Line Stretching and line filing. Line Stretching: occurs when company lengthen its product line beyond its current range. Company positioned in the middle market may want to introduce lower-price line for any of the three Down-Market Stretch reasons mentioned below: a) Notice a strong growth opportunities. b) Wish to tie up lower-end competitors. c) Company may find that middle market is stagnating or declining.

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From brand name perspective, company can use either one of the below three options a) Use the parent brand name. b) Using sub-brand name. c) Using different name.

Companies are doing so because they want to: a) Achieve higher growth. b) Realize higher margins c) Positioning themselves as full-line manufacturers. Line Filing: firm can lengthen its product line by adding more items within the present range. Motivations of doing so are: a) Reaching for incremental profits. b) Trying to satisfy dealers who complain about lost sales because missing items in the line. c) Utilize access capacity. d) Trying to be leading full-line company. e) Trying to plug holes to keep out competitors.

Up-Market Stretch

Line Modernization, Featuring, and pruning(reducing, cutting back).

4. How can companies combine products to create strong co-brands or ingredient brands? There are four ways for companies to combine products and create a strong co-brands: a) Same-company co-branding b) Joint-venture co-branding c) Multiple-sponsor co-branding d) Retail co-branding For ingredient brands, as it is special case of co-branding. It creates brand equity for materials, components, or parts that are necessary contained within other bounded products. 5. How can companies use packaging, labeling, warranties, and guarantees as marketing tools? a) Packaging: factors contributed in using packaging as a marketing tools as follows a. Self-service: effective package must perform many of the sales part: attract attention, describe the product features, create consumer confidence, and make favorable overall impression. b. Consumer affluence: it means consumers are willing to pay a little more for the convenience, appearance, dependability, and prestige of better packages. c. Company and brand image: packages contribute to instant recognition of the company or brand. d. Innovation opportunity: such thing can bring large benefits to consumers and profit to producers. b) Labeling: labeling perform several functions: a. Identifies: product or brand. b. Grade: as grading the product from A to C. c. Describe: as who made it, where and when it was made, what it contains, how to be used, and how to use it safely. d. Promote: it can promote the product through attractive graphics. c) Warranties and Guarantees: sellers are legally responsible for fulfilling a buyers normal or responsible expectations. a. Warranties: formal statement of expected product performance by the manufacturer. b. Guarantees: it can reduce the buyers perceived risk. They suggest that the product is of high quality and that the company and its service performance are dependable.

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