SETTING PRODUCT STRATEGY

Chapter # 12

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1.What are the Characteristics of
products and how do marketers
classify products?
PRODUCT Anything that can be
offered to a market to satisfy a want or
need.

Products that are marketed include

physical goods, services, experiences,
events, persons, places, properties,
organizations, information and ideas.
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PRODUCT LEVELS:
THE CUSTOMER-VALUE HIERARCHY

In planning its market offerings, the

marketer needs to address Five Product
levels. Each level adds more customer
value and the five constitute a
Customer Value Hierarchy.

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5 PRODUCT LEVELS

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5 PRODUCT LEVELS
Core Benefit – The fundamental level is
the core benefit; the service or benefit the customer is
really buying while purchasing any physical goods or
services.
This is basically the principal benefit of that particular
product. And it may vary depending on the nature of
product.
Example: A hotel guest is buying “secure and
comfortable rest and sleep” from a hotel room.

Marketers must see themselves as benefit providers.

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5 PRODUCT LEVELS

 Basic Product – the marketer must

turn the core benefit into a basic product.

Example: Thus a hotel room includes a bed, bathroom,

towels, desk, dresser and closet.

Customers will look for the Packaging, Brand Name,

Quality, Features and Styling for any product.

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5 PRODUCT LEVELS

Expected Product the –

marketer prepares an expected product, a set
of attributes and conditions buyers normally
expect when they purchase this product.
-The expectation of customer depends on the
nature and price of product.

Example: Hotel guests expect a clean bed, fresh

towels, working lamps and a relative degree of quiet.

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5 PRODUCT LEVELS

 Augmented Product – the

marketer prepares an augmented product that
exceeds customer expectations.

Example: Offering music system (entertainment

services), gym facilities and special menus in food for the
guests of a hotel.

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5 PRODUCT LEVELS
 Potential Product- which
encompasses all the possible augmentations and
transformations the product or offering might
undergo in the future.

Example: Hotel management can offer completely

customized internal room arrangement and supporting
facilities to the customers based on their individual
preferences.

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PRODUCT CLASSIFICATIONS
We can classify products mainly by two ways;
 Durability and Tangibility:
- Non-durable Goods
- Durable Goods
- Services
 Categories of Product:
- Consumer Goods
- Industrial Goods

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PRODUCT CLASSIFICATIONS
 Durability and Tangibility:
- Non-durable Goods
Are tangible goods normally consumed in one or a
few use, such as Soft Drinks, Biscuits and Soaps.
 Because these goods are purchased
frequently, the appropriate strategy is to make the
goods available in many locations, charge only a
small markup and advertise heavily to induce trial
and build preference.

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PRODUCT CLASSIFICATIONS
 Durability and Tangibility:
- Durable Goods
Are the tangible goods that normally survive many uses
and consumer not purchase these product often.

Example: Clothing, Home appliances and Electronics

items etc.
 Durable goods normally require more personal selling
and customization, command a higher margin and
demand more quality, seller guarantee and after sales
service.

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PRODUCT CLASSIFICATIONS
 Durability and Tangibility:
- Services
Services is a form of product that consists of activities,
benefits or experiences offered for sale that are
essentially intangible.
- E.g. Hotel, Hospital and Banking service etc.

Characteristics of Service

Intangibility Inseparability
Variability Perishability
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 PRODUCT CLASSIFICATIONS
Characteristics of Service
Intangibility refers to the fact that services cannot
be seen, tasted, felt, heard, or smelled before they
are purchased and used.
- E. g. Services of Hospitals, Air lines, Hotel and
Restaurants etc.

Inseparability refers to the fact that services

cannot be separated from their providers.
- E. g. Services from Doctors, Lawyers or any other
Consultants etc.

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PRODUCT CLASSIFICATIONS
Characteristics of Service
Variability refers to the fact that service quality
depends on who provides it as well as when,
where, and how it is provided.
- E. g. Because of different person, place & time
services may vary from a same organization.

Perishability refers to the fact that services

cannot be stored for later sale or use.
- E. g. When a concert or any cultural event is finished,
organizer can not sale the empty seats.

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Consumer Goods
Classifications
Consumer Goods are offered to the
market for personal consumption of the ultimate
customers and they are classified based on how
consumer buys them (buyer’s attitude).

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Consumer Goods
Classifications
 Convenience Goods – the consumer
usually purchases convenience goods frequently,
immediately and with a minimum effort. They consumer
spend less time in buying. Give support in day to day life.

Example: Soft Drinks, Tobacco Products, Soaps and Newspapers

Staples: Consumers purchase on a regular basis.
Eg. Toothpaste, Ketchups, Potato Chips, etc.
Impulse: Purchase without any planning or search effort
Eg. Chocolate Bars, Magazines
Emergency: Purchase when a need is urgent---
Eg. Umbrellas, First Aid (Oral Saline,
Pain Killer), Raincoat

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Consumer Goods
Classifications
 Shopping Goods – goods that consumer in
the process of selection and purchase, characteristically
compares on such bases as suitability, quality, price and
style. Consumers do not buy regularly and they spend time
to choose in buying. The products may be of high priced
than the convenience goods.
Example: Furniture, Clothing, Camera, Mobile Phones,
Computers and Electrical Appliances.

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Consumer Goods
Classifications
 Speciality Goods – have unique
characteristics or brand identification for which a sufficient
number of buyers are willing to make a special purchasing
effort. It can also be referred as Life Changing Products or
egoistic products. The price charged to this type of
products are higher than the other types. Marketers sell
their products through selective outlets or distributors.
Example: Special Medical Facilities, Designer Clothes,
Property, Land, Specific Brand and Type of Cars, etc.

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Consumer Goods
Classifications
Unsought Goods – those that the
consumers does not know about or does not normally
think of buying. Consumers does not usually buy this type
of products until and unless it is required.
Example: Life Insurance, Encyclopedias,
Blood Donations, Smoke Detectors, etc.
 Unsought goods required huge advertising and personal
selling to draw the attention of the target customers.

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Industrial Goods Classifications

Industrial Goods can be classified in

terms of their relative cost and how they enter
the production process: materials and parts,
capital items and supplies and business
services.

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Industrial Goods Classifications
Materials and Parts are goods that
enter the manufacturer’s product completely. They fall
into two classes: raw materials and manufactured
materials and parts.
 Raw Materials fall into two major groups:
 Farm Products: Wheat, Cotton, Livestock, Fruits and
Vegetables, etc.
 Natural Products: Fish, Lumber, Crude Petroleum,
Iron Ore, etc.

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Industrial Goods Classifications
Materials and Parts
 Farm Products: Are supplied by many producers,
who turn them over to marketing intermediaries, who
provide assembly, grading, storage, transportation
and selling services.
 Natural Products: Are limited in supply. They usually
have great bulk and low unit value and must be
moved from producer to user. Fewer and larger
producers often market them directly to industrial
users.

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Industrial Goods Classifications
Materials and Parts
 Manufactured Materials and Parts fall into two major
groups:
 Component Materials: Iron, Yarn, Cement, Wires
Component Materials are usually fabricated further – iron
is made into steel and yarn is woven into cloth.
 Component Parts: Small Motors, Tires, etc.
Component Parts enter the finished product with no further
change in form, as when small motors are put into
vacuum cleaners, tires are put on automobiles.
Most Manufactured Materials and Parts are sold directly
to industrial users. Price and Service are major
marketing considerations and branding and
advertisement tend to be less important.

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Industrial Goods Classifications
Capital Items are long lasting goods that
facilitate developing or managing the finished product.
 Capital Items include two major groups:
 Installations: consist of buildings (factories, offices)
 Heavy Equipment: consists of generators, drill
presses, mainframe computers, elevators, etc.

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Industrial Goods Classifications
Capital Items
 Capital Items
 Equipments: includes portable factory equipment
and tools (hand tools, lift trucks) and office equipment
(personal computers, desks). These types of
equipment don’t become part of the finished product.
They have a shorter life of installations but a longer
life than operating supplies.

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Industrial Goods Classifications

Supplies and Business

Services are short-term goods that
facilitate developing or managing the finished
product. Supplies are two types;
 Maintenance and Repair Items: such as paints,
nails, brooms, etc.
 Operating Supplies: Lubricants, Writing Papers,
Pencils or any other kind of Stationeries.
Business Services include maintenance
and repair services (maintenance of air
conditioners, repair of photocopying machines)
and business advisory services (legal,
management consulting, advertising, etc.)
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2. PRODUCT DIFFERENTIATION
Product Form
Features
Customization
Performance Quality
Conformance Quality
Durability
Reliability
Reparability
Style

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PRODUCT DIFFERENTIATION
 Product Form
Many products can be differentiated in form- the size, shape,
color or physical structure of a product.
 Features
Most products can be offered with varying features that
supplements their basic function.
 Customization
Marketers can differentiate products by making them
customized to an individual.
 Performance Quality
Is the level at which the product’s primary characteristics
operate.
 Conformance Quality
Buyers expect products to have a high conformance quality
which is the degree to which all the produced units are identical
and meet the promised specifications.
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PRODUCT DIFFERENTIATION
 Durability
A measure of the product’s expected operating life
under natural or stressful conditions, is a valued
attribute for certain products.
 Reliability
A measure of the probability that a product will not
malfunction or fail within a specified time period.
 Reparability
A measure of the ease of fixing a product when it
malfunctions or fails.
 Style
Describes the product’s look and feel to the buyer.

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3. How can a Company build and manage its
product mix and product lines?
Product and Brand Relationships
Product Systems and Mixes
 Product System
A group of diverse but related items that function in
a compatible manner.

apple
imac ipod iphone ipad
computer
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Product and Brand
Relationships
Product Systems and Mixes
 Product Mix
Is the set of all product and items a
particular seller offers for sale. A product
mix consists of various product lines.

Home Appliances

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Product and Brand
Relationships
Product Line Analysis

Product Line is a group of products that

are closely related because they function in a
similar manner, are sold to the same customer
groups, are marketed through the same types of
outlets, or fall within given price ranges.
 Nokia produces several line of telecom products,
Unilever offers consumer products.

A companies product mix can be described as:

• Width, Length, Depth and Consistency

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Product and Brand
Relationships
Product Mix Decisions
Product Mix Width is the number of different
product lines the company carries.
- E.g. Unilever Bangladesh Limited; they have different
lines of products like Personal Wash, Laundry, Skin
Care, Hair Care, Oral Care, Deodorants, Color
Cosmetics, Tea and Water Purifier lines of product in
the Bangladesh Market.

Product Mix Length is the total number of items

the company carries within its product lines.
- E.g. Under Personal Wash line; Unilever includes lot of
products like Lux, Lifebuoy, Dove, etc.
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Product and Brand
Relationships
Product Mix Decisions
Product Line Depth is the number of versions offered
of each product in the line.
- E.g. Different colors, features, sizes and flavors of
Lux, Sunsilk, etc. brands of Unilever.
Lux comes in four variants (exotic flower petals and
jojoba oil, almond oil and milk cream, fruit extracts and
honey in milk cream, and sandal saffron in milk cream)
and in two sizes, then it has a depth of eight.

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Product and Brand
Relationships
Product Mix Decisions
Consistency refers to how closely the various product
lines are related in end use, production requirements,
distribution channels or some other way.
- E.g. Unilever’s product (consumer) lines are more
consistent than Square Group (diversified).

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Product and Service Decisions
Product Mix, Product Line, Products and Brands of
Unilever Bangladesh
Brands Products Product Line Product Mix

Tea Blend
Combination of
the 20 brands is
the mix of
Unilever,
Food Bangladesh
Water
Purifier

Soup

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Product and Service Decisions
Product Mix, Product Line, Products and Brands of
Unilever Bangladesh
Brands Products Product Line Product Mix

Dish
Washing
Combination of
the 20 brands is
the mix of
Unilever,
Detergent & Home Care Bangladesh
Laundry

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Product and Service Decisions
Product Mix, Product Line, Products and Brands of
Unilever Bangladesh
Brands Products Product Line Product Mix

Personal Combination of
Wash the 20 brands is
the mix of
Unilever,
Personal Bangladesh
Care
Oral Care

Hair Care
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Product and Service Decisions
Product Mix, Product Line, Products and Brands of
Unilever Bangladesh
Brands Products Product Line Product Mix

Skin Care Combination of

the 20 brands is
the mix of
Unilever,
Personal Bangladesh
Care
Deodorants

Color
Cosmetics
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4. How can companies combine products to create strong co-brands or
ingredient brands? OR
What is brand? How can companies make brand strategy decisions?

Branding Strategy: Building Strong Brands

Brand
According to The American Marketing Association defines “Brand” as
a Name, Term, Sign, Symbol or Design or a combination of
them, intended to identify the goods or services of one seller or
group of sellers and to differentiate them from those of
competitors.

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Branding Strategy: Building Strong
Brands
Brand represents the consumer’s perceptions
and feelings about a product and its
performance. It is the company’s promise
to deliver a specific set of features,
benefits, services, and experiences
consistently to the buyers.

Brand Equity is the positive differential effect

that knowing the brand name has on
customer response to the product or
service
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Branding Strategy: Building Strong
Brands
The Major Brand Strategy Decisions involve:

Brand Name
Brand Positioning
Selection
Attributes
Selection
Benefits
Protection
Beliefs and Values

Brand Development Brand Sponsorship

Line Extensions Manufacturer’s Brand

Brand Extensions Private Brand
Multi-brands Licensing
New Brands Co-branding
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Branding Strategy: Building Strong
Brands

Brand Positioning

A brand can be positioned in the minds of the

consumers’ by;

• Maintaining proper attributes

• Offering desired benefits
• Using strong beliefs and values (image)
• Continuous communication

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 Branding Strategy: Building Strong
Brands
Brand Name Selection
A good name can add greatly to a product’s success.

- Desirable qualities for a brand name selection:

• The brand name should be distinctive (Unique). Eg. Lexus, YAHOO!
• It should suggest about the product’s benefits and qualities.
E.g. Fair & Lovely, Fair & Handsome from Unilever, Pure from ACI.
• It should be easy to pronounce, recognize and remember.
E.g.- Coca Cola, Toyota, iPod, Tide
• It should be extendable. E.g. Radhuni from Square, Amazon.com
• The name should translate into Foreign Languages.
• It should be capable of registration and legal protection.

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Branding Strategy: Building Strong
Brands
Brand Sponsorship
A manufacturer has four options to sponsor the
brand name of any product or services.

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Branding Strategy: Building Strong
Brands
Brand Sponsorship
Manufacturer’s Brand
Branding done by the manufacturer, under its own
brand name.

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Branding Strategy: Building Strong
Brands
Brand Sponsorship
Private Brand (Store Brand or Distributor’s Brand)
The retailer can manufacture goods under its own label,
re-brand private label goods, or outsource
manufacture of store-brand items to multiple third
parties - often the same manufacturers that produce
brand-labeled goods.

RANGS TELEVISION

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Branding Strategy: Building Strong
Brands
Brand Sponsorship
Licensed Brand
Some companies license names or symbols
previously created by other manufactures.

Transcom Group

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Branding Strategy: Building Strong
Brands
Brand Sponsorship
Co-Brand
Co-branding occurs when two established
brand names of different companies are
used on the same product.

Using

bKash recently made an

agreement with Meena bazar
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Branding Strategy: Building Strong
Brands
Brand Development Strategies
Product Category
Existing New

Existing Line Brand

Extensions Extensions
Brand Name

New Multi-brands New Brands

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Branding Strategy: Building Strong
Brands
Brand Development Strategies
Line Extensions occur when a company
extends existing brand names to new forms,
colors, sizes, ingredients, or flavors of an
existing product category.

Lux Aqua Lux Strawberry & Lux Peach &

Sparkle Cream Cream

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 Branding Strategy: Building Strong
Brands Brand Development Strategies
Line Extensions

Lifebuoy Total Lifebuoy Care Lifebuoy Nature Lifebuoy Deofresh

Black Shine Anti-Dandruff Soft &Smooth Damage Repair Hairfall Hairfall Hairfall Solution Damage
Solution Solution Treatment Repair
Conditioner Leave-On53
Branding Strategy: Building Strong
Brands Brand Development Strategies
Brand Extensions extend a existing brand name to a
new or modified product in a new category.

Pepsodent Toothpaste Pepsodent Toothpowder Pepsodent Toothbrush

Lifebuoy Soap Lifebuoy Handwash

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Branding Strategy: Building Strong
Brands
Brand Development Strategies

Multi-brands are additional brands in the same

category. Company is offering same products or
services to the existing market but in a new name.
Multi-branding offers a way to establish different
features and appeal to different buying motives.
It allows a company to lock up more reseller shelf
space.

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Branding Strategy: Building Strong
Brands Brand Development Strategies
Multi-brands

Procter & Gamble

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Branding Strategy: Building Strong
Brands
Brand Development Strategies
New Brands are used when existing brands
are inappropriate for new products in new
product categories or markets. The products
are new to the market.

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5. What is Price? What are the New Product Pricing
and Product Mix Pricing?

PRICING

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PRICING
What is Price?
Price is the amount of money charged for a
product or service. It is the sum of all the
values that consumers give up in order to gain
the benefits of having or using a product or
service.

Price is the only element in the marketing mix

that produces revenue; all other elements
represent costs.

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New Product Pricing
StrategiesPricing Strategies
Market Skimming Pricing is a strategy
with high initial prices to “skim” revenue
layers from the market.
Example: Grameenphone – Prepaid, Nokia
Characteristics for charging skimming price:
• Product quality and image must support the price.
• Buyers must want the product at the price.
• Competitors should not be able to enter the market
easily.

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New Product Pricing Strategies
Pricing Strategies
Market Penetration Pricing sets a low
initial price in order to penetrate the market
quickly and deeply to attract a large number of
buyers quickly to gain market share.
Example: Banglalink, Teletalk, etc.
Characteristics for charging Penetration Price:
• Price sensitive market.
• Inverse relationship of production and distribution cost
to sales growth.
• Low prices must keep competition out of the market

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Product Mix Pricing Strategies
Pricing Strategies
Product Line Pricing refers setting the price steps
between various products in a product line based on
cost differences between the products, customer
evaluation of different features and competitors’ price.
E.g. Different Price range for Lux & Dove soap and
Sunsilk & Clear shampoo of Unilever. Nokia charges
differently for their different models of cellular mobile
set, Grameen Phone charges different prices for
different category of SIM cards .

Optional Product Pricing involves pricing of

optional or accessory products that are sold with the
main product. (Segmented pricing)
E.g. Ice maker with the refrigerator, Speaker with PC.
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Product Mix Pricing Strategies
Pricing Strategies
Captive Product Pricing involves pricing of
products that must be used along with the
main product.
- Sometimes companies sells the main product
at a lower cost and but make money by
selling the additional logistics.
E.g. Replacement blade cartridge of Gillette
Mach 3 razors, printer cartridge of Lexmark,
Cameras with lenses.

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Product Mix Pricing Strategies
Pricing Strategies
Two-part Pricing refers pricing of the
products keeping two parts in the price. It
consists of a fixed fee plus a variable usage
fee.
- The fixed fee should be low enough to
encourage purchase of the product and the
profit can be made on the usage fees.
E. g. Telephone and electricity providers
charge such types of price to their customers.

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Product Mix Pricing Strategies
Pricing Strategies
By-product Pricing refers pricing of
products with little or no value to the
manufacturer and produced as a result of
producing the main product.
- Producers will seek little or no profit other than the
cost to cover storage and delivery.
E.g. Cut pieces of Garments and wastes papers
of publisher houses. Chemicals and petroleum
products often have by-products.

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Product Mix Pricing Strategies
Pricing Strategies
Product Bundle Pricing
Sellers often bundle products and features.
Pure Bundling – occurs when a firm offers its products only as a
bundle.
Example: Tour Packages offered by many tour operators in
South Asia charge prices that include travel costs,
sightseeing costs and stay-and-food expenses for a 7-or-14
day tour to “exotic” locations in foreign countries.
Mixed Bundling – the seller offers goods both individually and
in bundles. When offering a mixed bundle, the seller
normally charge less for the bindle than if the items were
purchased separately.
Example: Food purchased from KFC such as Combo 1.
Tickets for all the matches of a Cricket
Tournament.
Tickets for all the rides of a Theme Park example
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Fantasy Kingdom.
END OF CHAPTER # 12

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