Setting Product

Strategy
 Learning Objectives
 What are the characteristics of products
and how can they be classified?
 How can companies differentiate
products?
 How can a company build and manage its
product mix and product lines?
 How can companies combine products to
create strong co-brands or ingredient
brands?
 How can companies use packaging,
labeling, warranties, and guarantees as
Product functionality is the
key to brand success
versus
Product design is the key to
brand success
 Product
 Anythingthat can be offered to a
market to satisfy a want or need.
Components of the Market
Offering
 Product Levels: The Customer
Value Hierarchy
 Inplanning its market offering,
marketers needs to address 5
product levels. Each level adds more
customer value, and the five
constitute a customer value
hierarchy.
Five Product Levels
 Five Product Levels
1. Core Benefit-the fundamental need or want that
consumers satisfy by consuming the product or
service.
2. Generic Product-a version of the product containing
only those attributes or characteristics absolutely
necessary for it to function.
3. Expected Product-the set of attributes or
characteristics that buyers normally expect and agree
to when they purchase a product.
4. Augmented Product-inclusion of additional features,
benefits, attributes or related services that serve to
differentiate the product from its competitors.
5. Potential Product-all the augmentations and
transformations a product might undergo in the future.
Kotler noted that much competition
takes place at the Augmented
Product level rather than at the Core
Benefit level or, as Levitt put it: 'New
competition is not between what
companies produce in their factories,
but between what they add to their
factory output in the form of
packaging, services, advertising,
customer advice, financing, delivery
arrangements, warehousing, and
other things that people value.'
Product Classification
Schemes

Durability

Tangibility

Use
Durability and Tangibility

Nondurable
goods

Durable
Services
goods
 Consumer Goods
Classification

Convenience Shopping

Specialty Unsought
 Consumer Goods
Classification
 convenience products: low price, low
risk, consumer is not prepared to shop
around, widely available in a variety of
retail stores
 shopping products: consumer will want
to compare quality and price, risk and
price are higher, available in selected
retail outlets
 specialty products: consumer has strong
brand preferences, risk is high, prepared
to seek out exclusive retail outlets
 Industrial Goods
Classification

Materials and parts

Supplies/
Capital items
business services
 Classifying Business
Products 
 raw materials: unprocessed, become
part of other manufactured products
 manufactured parts and materials:
processed products that become part of
other products
 installations: major buildings and
equipment
 accessory equipment: used in
operations, include computers, desks,
tools
 operating supplies: low value, used by
most firms, convenience products for
 Product Service
DifferentiationDifferentiation
 Product form
 Features  Ordering ease
 Performance  Delivery
 Conformance  Installation
 Durability  Customer training
 Reliability  Customer
 Reparability consulting
 Style
 Maintenance
 Design
Design Differentiation
The Product Hierarchy

Item
Product type
Product line
Product class
Product family
Need family
 Product Hierarchy
need - core need
product family - all products satisfying a core
need
product class - functional coherence within
family
product line - closely related within a class
{same customers, outlets,
prices}
product type - different forms of same product
brand - one manufacturer’s offering
item - one unit within a brand
1.Need family. Information exchange.
Communications.
2. Product family. Devices for
electronic information exchange.
Wireless information devices.
3. Product category (class). GSM
devices.
4. Product line. GSM Smartphones.
5. Product type. GSM Smartphones
with Symbian OS.
6. Brand. Nokia.
7. Item. Nokia N70.
Product Systems and
Mixes
 Product system
(group of diverse
but related items
that function in a
compatible
manner)
 Product mix
 Depth
 Length
 Width
 Consistency
 Product Mix

Width
number of product lines

Length
Total number of items in a mix

depth
number of items in a line (how many variants)

consistency
similarity of product lines in terms of production and
marketing
Product Mix – Breadth and
Depth
 Product Line Analysis
 Sales and profit
 Market profile- How the line is
positioned against competitors’ lines.
- The product map shows which
competitors’
items are competing against company’s
items.
- It identifies market segments
Product-Item Contributions to a
Product Line’s Total Sales and
Profits
 Product-line length
 Line stretching
 Line filling
 Line modernisation, featuring and
pruning
 Line Stretching

Down-Market Stretch

Up-Market Stretch

Two-Way Stretch
Line Filling
 Product-Mix Pricing
 Product-linepricing
 Optional-feature pricing
 Captive-product pricing
 Two-part pricing
 By-product pricing
 Product-bundling pricing
Packaging: The 5th P

All the activities of designing and producing

the container for a product.
Packaging has been
influenced by…
Self-service

Consumer affluence

Company/brand image

Innovation opportunity
 Innovations in Packaging
 PACKAGING IS THE EXPRESSION
OF THE SOUL OF EVERY
PRODUCT.
Peter Brabeck Nestlé CEO
What is innovation?
 What is innovation

Anything which creates or improve
profitable business
Functions of Labels

Identifies

Grades

Describes

Promotes
Warranties and Guarantees

 Assurance to consumers