“The aim of marketing is to
know and understand the
customer so well the product
or service fits him and sells
itself.”
– Peter Drucker
Chapter 6
Setting
Product Strategy
Learning Outcomes
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 marketers best manage luxury brands?
5. What environmental issues must marketers consider in their
product strategies?
6. How can a company build and manage its product mix and
product lines?
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
Components of The Market Offering
Product Levels
Product Classifications
(i) Durability
(ii) Tangibility
(iii) Use
(consumer or industrial)
(i), (ii) Durability and Tangibility
Nondurable goods
Durable goods
Services
(iii) Use
(a) Consumer-Goods Classification
Convenience
Shopping
Specialty
Unsought
(b) Industrial-Goods Classification
Materials and parts
Capital items
Supplies and
business services
Product Differentiation
• Form • Reliability
• Features • Reparability
• Performance quality • Style
• Conformance quality • Customization
• Durability
“Most American vodkas seem Russian”.
Stolichnaya, the Russian vodka brand
Services Differentiation
Ordering ease
Delivery
Installation
Customer training
Customer consulting
Maintenance and repair
Returns
The Product Hierarchy
6. Item
5. Product
type
4. Product
line
3. Product
class
2. Product
family
1. Need
family
Product Line and Mix Decisions
Product Systems and Mixes
• Product system
• Product mix/assortment
– Width
– Length
– Depth
– Consistency
Honda Product Mix
Product Mix Width
Product Line Length
Product Line Analysis
• Sales and profits
Product Line Analysis
• Market profile and image
Product line length
• Line stretching
– Down-market stretch
– Up-market stretch
– Two-way stretch
• Line filling
• Line modernization
• Line featuring
• Line pruning
Business Standard, Mumbai, 1 October 2019
Product Mix Pricing
• The firm searches for a set of prices that maximizes
profits on the total mix
Optional-
Product line
feature
pricing
pricing
Product- Captive-
bundling product
pricing pricing
By-product Two-part
pricing pricing
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
Business Standard, Mumbai, 24 September 2019
Business Standard, Mumbai, 24 September 2019
Ingredient branding
• Co-branding that creates brand equity for parts
that are necessarily contained within other
branded products
Business Standard, Mumbai, 24 September 2019
Packaging
Packaging
• All the activities of designing and producing
the container for a product
Used as a marketing tool Packaging objectives
•Self-service •Identify the brand
•Consumer affluence •Convey descriptive and
•Company and brand image persuasive information
•Innovation opportunity •Facilitate product
transportation and
protection
•Assist at-home storage
•Aid product consumption
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
Product life-cycle and Marketing Implications
Product life-cycle marketing strategies
• A company’s positioning and differentiation
strategy must change as its product, market, and
competitors change over the PLC
(i) Introduction Stage
• Pioneering advantages
– Recall of brand name
– Establishes product class attributes
– Captures more uses in middle of market
• Pioneering drawbacks
– Imitators can surpass innovators
– Once leadership is lost, it’s rarely regained
Long-Range Product Market Expansion Strategy
(ii) Growth Stage
• To sustain rapid market share growth now:
– Improve product quality and add new features
– Add new models and flanker products
– Enter new market segments
– Increase distribution coverage and enter new
distribution channels
– Shift from awareness and trial communications to
preference and loyalty communications
– Lower prices to attract the next layer of price-sensitive
buyers
(iii) Maturity Stage
Market modification
Product modification
Marketing program
modification
Market Modification
(iv) Decline Stage
• Eliminating Weak Products
• Harvesting and Divesting
New Product Development
New-Product Options
• Buy other companies
• Buy patents from other companies
• Buy a license or franchise from another company
• New-to-the-world items
• Improvine existing products
New-Product Development Process
(i) Generating Ideas
• Interacting with
employees
• Interacting with
outsiders
• Studying competitors
• Adopting creativity
techniques
Ways to draw new ideas from customers
Observe customers using product
Ask customers about product problems
Ask customers about dream products
Use customer advisory board
Use Web sites
Form brand community of enthusiasts
Challenge customers to improve product
Adopting creativity techniques
Attribute Forced
listing relationships
Mind Morphological
mapping analysis
Reverse-
New contexts assumption
analysis
Forces Fighting New Ideas
(ii) Using Idea Screening
Using Idea Screening
• The company can monitor and revise its estimate of
the product’s overall probability of success, using the
following formula:
(iii) Concept development
– Figure 15.3(a): product-
positioning map
– Figure 15.3(b): brand-
positioning map
• Concept testing responses
Communicability &
Perceived value
believability
Need level Purchase intention
User targets, purchase
Gap level
occasions & frequency
(iv) Marketing strategy development
1. Target market’s size, structure, & behavior; the
planned brand positioning; the sales, market
share & profit goals in first few years
2. Planned price, distribution strategy, and
marketing budget for the first year
3. Long-run sales & profit goals and marketing-
mix strategy over time
(v) Business analysis
– Estimating total sales
– Figure 15.6: Product Life-
Cycle Sales for Three Types of
Products
• Estimating costs and profits
(vi) Product development
– Physical prototypes
– Customer tests: alpha &
beta testing
(vii) Market testing
– Consumer-goods market
testing
– Business-goods market
testing
Methods of Consumer-Goods Market Testing
Sales-wave research
Simulated test marketing
Controlled test marketing
Test markets
(viii) Commercialization
– Where (Geographic Strategy)
– To Whom (Target-Market Prospects)
– How (Introductory Market Strategy)
– When (Timing)
First entry
Parallel entry
Late entry
The Consumer-Adoption Process
• Adoption
– An individual’s decision to become a regular
user of a product
Stages in the Adoption Process
Awareness
Interest
Evaluation
Trial
Adoption
Factors Influencing the Adoption Process
(i) Readiness to try new products and personal influence
(ii) Organizations’ readiness to adopt innovations
(iii) Characteristics of the innovation
Relative advantage
Compatibility
Complexity
Divisibility
Communicability
Diffusion process
