Marketing plan memo + power points main points
txs584
COM5111Week5SemB2019-20-C.pdf
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COM5111
Product Policy
Week 5 SemB 2019-20
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Learning Objectives
1. What are the characteristics of products, and how do marketers classify product?
2. How can companies differentiate products?
3. Why is product design important, and what are the different approaches taken?
4. How can a company build and manage its product mix and product lines?
5. How can marketers best manage luxury brands?
6. What environmental issues must marketers consider in their product strategies?
7. How can companies combine products to create strong co-brands or ingredient brands?
8. How can companies use packaging, labeling, warranties, and guarantees as marketing tools?
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Components Of The Market Offering Marketing planning begins with formulating an offering to meet target customers’ needs or wants
customer will judge the offering
on three basic elements
Slide 15 & 16 Slide 17
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Product Characteristics and Classifications
• Product – 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
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Characteristics of Winning Products
A unique superior product—
a differentiated product that delivers unique benefits and a compelling value proposition to the customer or user—
is the number one driver of new-product profitability
Source: Robert G. Cooper, Winning at New Products: Creating Value through Innovation (New York: Basic Books, 2011), p. 32.
How about your individual assignment?
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Unique and superior products tend to have the followings in common
1. are superior to competitors’ products in terms of meeting users’ needs
2. solve a problem the customer has with a competitive product
3. feature good value for the money and excellent price and performance characteristics
4. provide excellent product quality, according to customers’ way of defining quality
5. offer features easily perceived as useful by the customer
6. offer benefits that are highly visible to the customer
Source: Robert G. Cooper, Winning at New Products: Creating Value through Innovation (New York: Basic Books, 2011), p. 33.
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Product Levels: The Customer-Value Hierarchy • The Five Product Levels
The service or benefit
the customer
is really buying
e.g. rest & sleep
The marketer must
turn the core benefit
into a basic product
e.g. bed, bathroom …
A set of attributes
and conditions
buyers normally expect
e.g. clean bed …
Exceeds customer
Expectations e.g.
brand position is here
Encompasses all the possible
augmentations and
transformations
the product or offering
might undergo in the future
e.g. new ways to satisfy and dis
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Product Classifications
Durability
Tangibility
Use
Each type has an appropriate
marketing-mix strategy
consumer or industrial
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Durability and Tangibility
Nondurable goods
Durable goods
Services
one or a few uses, e.g. beer and shampoo.
Available in many locations, a small markup, and
advertise heavily to induce trial and build preference.
survive many uses, e.g. refrigerators and clothing.
More personal selling and service, command a higher
margin, and require more seller guarantees
intangible, inseparable, variable, and perishable
products => more quality control, supplier credibility,
and adaptability.
E.g. haircuts, legal advice, and appliance repairs
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Consumer-Goods Classification
Convenience
Unsought
Shopping
Specialty
Purchases frequently, immediately, and with minimal effort. E.g. soft drinks, soaps,
and newspapers. Staples goods: purchase on a regular basis, e.g. Heinz ketchup. Impulse
goods: without any planning or search effort, like candy bars and magazines. Emergency
goods are purchased when a need is urgent—umbrellas during a rainstorm.
Compares on suitability, quality, price, and style. E.g. furniture and clothing.
Homogeneous: similar in quality but different enough in price to justify shopping
comparisons.
Heterogeneous: differ in product features and services that may be more important than
price.
Specialty: unique characteristics or brand identification for which enough buyers
are willing to make a special purchasing effort. E.g. cars and audio-video components.
Unsought: does not know about or normally think of buying, such
as smoke detectors.
Other classic examples are life insurance, cemetery plots, and
gravestones.
Use Shopping habits
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Industrial-Goods Classification:
Materials and parts
Capital items
Supplies and
business services
In terms of their relative cost and the way they enter the production process
Use
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Materials and parts
Industrial-Goods Classification
raw materials manufactured materials and parts
farm products
(wheat, cotton,
livestock, fruits,
and vegetables)
natural products
(fish, lumber, crude
petroleum, iron
ore).
component
materials (iron,
yarn, cement,
wires)
component parts
(small motors,
tires, castings)
key purchase factors:
price and supplier reliability
enter the manufacturer’s product completely
Use
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Capital items
Industrial-Goods Classification
long-lasting goods that facilitate developing or managing the finished product
Installations Equipment
Buildings (factories, offices) and heavy equipment
(generators, drill presses, mainframe computers,
elevators)
Portable factory equipment and tools (hand
tools, lift trucks) and office equipment (desktop
computers, desks)
These types of equipment don’t become part of a finished product
Use
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Supplies and
business services
Industrial-Goods Classification
Short-term goods and services that facilitate developing or managing the finished product
Supplies (MRO goods):
1. maintenance and repair items (paint, nails, brooms)
2. operating supplies (lubricants, coal, writing paper, pencils)
Business services:
1. maintenance and repair services (window cleaning, copier repair)
2. business advisory services (legal, management consulting, advertising)
Use
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Product Differentiation
• Form – size, shape, or physical structure of a product
• Features – varying features that supplement their basic function
• Performance quality – low, average, high, or superior (at which the product’s primary characteristics operate)
• Conformance quality – High conformance quality; all produced units are identical and meet promised specifications
• Durability – operating life under natural or stressful conditions, is a valued attribute
• Reliability – probability that a product will not malfunction or fail within a specified time period
• Reparability – ease of fixing a product when it malfunctions or fails
• Style – product’s look and feel to the buyer and creates distinctiveness that is hard to copy
• Customization – customized products (what a person wants—and doesn’t want—and deliver)
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Services Differentiation
Main service differentiators:
✓Ordering ease
✓ Delivery
✓ Installation
✓ Customer training
✓ Customer consulting
✓ Maintenance and repair
✓ Returns
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Design
• Design
– The totality of
features that affect
the way a product
looks, feels, and
functions to a
consumer
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Design
✓ Is emotionally powerful
✓ Transmits brand meaning/positioning
✓ Is important with durable goods
✓ Makes brand experiences rewarding
✓ Can transform an entire enterprise
✓ Facilitates manufacturing/distribution
✓ Can take on various approaches
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THE PRODUCT HIERARCHY
The product
hierarchy stretches
from basic needs to
particular items that
satisfy those needs
Six levels
Need family
Product family
Product class
Product line
Product type
Item
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THE PRODUCT HIERARCHY Using life insurance as an example:
1. Need family—The core need that underlies the existence of a product family. Example: security
2. Product family—All the product classes that can satisfy a core need with reasonable effectiveness. Example: savings and income
3. Product class—A group of products within the product family recognized as having a certain functional coherence, also known as a product category. Example: financial instruments
4. 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 given price ranges
– A product line may consist of different brands, a single family brand, or an individual brand that has been line
extended Example: life insurance
5. Product type—A group of items within a product line that share one of several possible forms of the product Example: term life insurance
6. Item (also called stock-keeping unit or product variant)—A distinct unit within a brand or product line distinguishable by size, price, appearance, or some other attribute Example: Prudential renewable term life insurance
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Product Systems and Mixes
• Product system
– A group of diverse but related items that function in a compatible manner
• Product mix (product assortment)
– The set of all products and items for sale
– Various product lines
– Width
– Length
– Depth
– Consistency - how closely related the various product lines are in end use, production requirements, distribution channels, or some other way
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Product Width And Length For Procter & Gamble Products
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To Expand The Number Of Product Lines: Three Ways (1/2)
1. Undertaking a business whose profit stream will probably correlate negatively with the profit stream of existing businesses—thereby reducing the overall risk of the enterprise
– For example, a beverage company developing a strong position in the
water market helps offset risk of decline in the soda market if hydration
habits move heavily to water
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To Expand The Number Of Product Lines: Three Ways (2/2)
2. Leveraging a key asset of the company that underlies the current product offerings
– For example, Procter & Gamble (P&G) has a wide variety of products across four sectors
that the company claims “share common technologies”: beauty, hair, and personal care;
baby, feminine, and family care; health and grooming; and fabric and home care
– Because many of these products also share the same distribution system, P&G is able to
leverage its established retailer relationships to market and sell its products
3. Tapping into complementary-in-use products and thus enabling the firm to be a “total solution supplier.”
– For example, Procter & Gamble explained the acquisition of the Gillette Company and its
Oral-B toothbrush line by noting that the union of Oral-B and Crest placed P&G oral care
as the market leader and the only major oral care company with a breadth of products
across every category: toothpaste, toothbrushes, whitening, rinse, denture care, and floss
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Product line length
• Line stretching
– Down-market stretch
– Up-market stretch
– Two-way stretch
• Line filling
• Line modernization
• Line featuring
• Line pruning
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Options for Product Line Length
1. A downward stretch of the line, adding a lower-priced item still capable of satisfying the needs of some applications
2. An upward stretch of the product line, adding an item at a higher price and performance level, able to meet the performance requirements of more demanding applications
3. A product line fill, inserting an item of a price and performance level that fills a gap between two existing items
– Motives: reaching for incremental profits,, trying to become the leading full-line
company, …
27Adapted from “Extend Profits, Not Product Lines” by John A. Quelch and David Kenny, Harvard Business Review, September/October 1994.
Product Line Depth Considerations
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Product Line Analysis
• Sales and profits to meet different customer requirements and lower production costs
carefully monitored
and protected dropping
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Product Line Analysis
• Market profile and image positioned against competitors’ lines
This product map shows which competitors’ items are competing against company X’s items.
Another benefit of product mapping is that it identifies market segments.
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Product Mix Pricing
• The firm searches for a set of prices that maximizes profits on the total mix
Product line
pricing
Optional-
feature
pricing
Captive-
product
pricing
Two-part
pricing
By-product
pricing
Product-
bundling
pricing
develop product lines rather
than single products
so they introduce price steps
optional products with their main
products
require the use of ancillary
or captive products
be priced on their value
Pure bundling - as a
bundle.
In mixed bundling, both
individually and in
bundles
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Product Life Cycle
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Product Life Cycle Introduction • Marketing expenditures are high as awareness and knowledge of product features must be established in the target market
• Trial may be hard to induce if customers are satisfied with current options
• Distribution must be built up
Growth • With awareness and trial achieved, the product’s performance is the dominant driver of sales
• Success may induce the entry of new competitors and require promotional spending to defend against those competitors
Maturity • All feasible market segments have been reached and distribution channels built up
• For nondurables, sales come from replenishment only, as household penetration has leveled off
• For durables, population and income growth can be key drivers
Decline • The rate of decline may still be a function of marketing efforts. A focus on hard-core loyal, who will make an effort
to buy even at high prices and limited distribution, may be a profit opportunity
• The discipline to phase out weak products is critical, however, lest the company and distribution channels become overwhelmed
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Lessons From Product Life Cycles
• Products (market offerings) have a limited life
• Sales pass through distinct stages, each posing different challenges, opportunities and problems to the seller
• Profits rise and fall at different stages of the product life cycle
• Products require different marketing, financial, manufacturing, purchasing and human resource strategies at each stage
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Strategies To Sustain Rapid Market Growth
• Improve product quality and add new product features and improved styling
• Add new models, accessory items and personalising options
• Enter new market segments
• Increase its distribution coverage and enters new distribution channels
• Shift from product-awareness advertising to product-preference advertising
• Lower prices to attract the next layer of price-sensitive buyers
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Strategies To Increase Sales Volumes
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Luxury brands
The common denominators:
– Quality
– Uniqueness
A winning formula:
– Craftsmanship
– Heritage
– Authenticity
– History
Design is often an important aspect
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Guidelines for Marketing Luxury Brands
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Environmental Issues
• Environmental issues are also playing an increasingly important role in product design and manufacturing
– changing the manufacture of their products
or the ingredients that go into them
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Co-Branding
• Two or more well-known brands are combined into a joint product or marketed together in some fashion
✓ Same-company
✓ Joint-venture
✓ Multiple-sponsor
✓ Retail
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INGREDIENT BRANDING
• Co-branding that creates brand equity for parts that are necessarily contained within other branded products
ingredient brands can provide differentiation and important signals of quality
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Packaging
• All the activities of designing and producing the container for a product
Used as a marketing tool
• Self-service: (attract attention, describe the product’s features, create consumer confidence, and make a favorable overall impression)
• Consumer affluence: (for the convenience, appearance, dependability, and prestige for better …)
• Company and brand image: (instant recognition, billboard effect)
• Innovation opportunity: (make their products more convenient and easier to use)
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Packaging
Packaging objectives
• Identify the brand
• Convey descriptive and persuasive information
• Facilitate product transportation and protection
• Assist at-home storage
• Aid product consumption
To achieve these objectives listed
here and satisfy consumers’
desires:
marketers must choose the
functional and aesthetic
components of packaging correctly’
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The Color Wheel of Branding and Packaging
Color is a particularly important aspect of packaging and carries different meanings
in different cultures and market segments
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Labeling, Warranties, and Guarantees
• Labeling
– Identifies, grades, describes, and promotes the product
• Warranties
– Formal statements of expected product performance by the
manufacturer
• Guarantees
– Promise of general or complete satisfaction
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BACK
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REFERENCES
Cooper, R.G. (2011). Winning at New Products: Creating Value through
Innovation. New York: Basic Books.
Dolan, R. J. (2019). Marketing Reading: Product Policy. Harvard Business
School.
Elberse, A. (2006). Principles of Product Policy – Module Note. Harvard
Business School.
Kotler, P. & Keller, K. L.(2016). A Framework for Marketing Management
(5th ed.). Boston : Pearson. Back to LO
