CHAPTER VI MANAGING PRODUCTS, PRODUCT LINES AND BRANDS

Prepared by: Mulugeta G/Medhin

(Strictly for limited circulation at AAUCC)
Learning Objectives
Upon completion of this chapter a student will be able to:
 Define product
 Describe the major classifications of products and their marketing implications
 Explain product mix decisions
 Explain the basic concepts of branding, packaging, and labeling.

6.1 What is a Product?

A product is a solution to customers’ problems. It is anything that can be offered to the market for attention,
acquisition, use, or consumption and that might satisfy a want or need. It includes physical objects, services,
persons, places, organizations, ideas or mixes of these entities.

A product is a combination of the physical characteristic as well as the way people think and feel about it. A
product is at times defined as a bundle of potential utility. This emphasizes that products are capable of
releasing some “benefits” to the purchaser. Remember that a consumer is more interested in the benefits he
gets from the product rather than the product characteristics in a physical sense.

An automobile, no doubt supplies transportation but can also be a symbol of social status and economic
achievement. The higher the price of the automobile, the more it is likely to symbolize this psychological
aspect. A product therefore may be regarded from the marketing viewpoint as a bundle of "benefits" which are
being offered to the consumer. The job of a product planning, therefore, consists of planning benefits to be
released during the use of the product. In a very narrow sense, a product is a set of tangible physical attributes
assembled in an identifiable form.

Any change in the physical feature (design, color, size, packaging), however minor it may be, creates another
product. Each such change provides the seller with an opportunity to use a new set of appeals to reach what
essentially may be a new market.

The broader definition is as follows: A product is a set of tangible and in tangible attributes, including
packaging, color, price, manufacturer’s prestige, retailer’s prestige, and manufacturer’s and retailer’s services,
which the buyer may accept as offering want satisfaction. The key idea in this definition is that the consumers
are buying more than a set of physical attributes. Fundamentally, they are buying want satisfaction. Thus, a
wise firm sells product benefits rather than just products.

6.2 Five Levels of a Product

In planning its market offering, the marketer needs to think through five levels of the product. Each level adds
more customer value, and the five constitute a customer value hierarchy.

1. The Core Product - The most fundamental level is the core benefit: the fundamental service or
benefit that the customer is really buying. A hotel guest is buying “rest & sleep”, the purchaser of a
drill is buying “holes.” Marketers must see themselves as benefit providers.
2. The Actual Product - At the second level the marketer has to turn the core benefit into a basic
product. Thus a hotel room includes a bed, bathroom, towels, desk, dresser, and closet. The actual
product may have as many as five characteristics that combine to deliver core product benefits. They
are:
 Quality level
 Features
 Design
 A brand name
 Packaging
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 3. Expected Product - At the third level, the market prepares an expected product, a set of attributes and
conditions that buyers normally expect and agree to when they purchase this product. For example,
hotel guests expect a clean bed, fresh towels, working lamps, and a relative degree of quiet.
4. The Augmented Product - At the fourth level, the marketer prepares an augmented product that
meets the customers’ desires beyond their expectations. The augmented product includes any
additional consumer services and benefits built around the core and actual product. A hotel can
augment its product by including fresh flowers, fine dining and room service, and so on. Product
augmentation leads the marketer to look at the buyer’s total consumption system: the way a purchaser
of a product performs the total task of whatever it is that he or she is trying to accomplish when using
the product.
5. Potential Product - At the fifth level stands the potential product, which encompasses all the
augmentations and transformations that the product might ultimately undergo in the future. While the
augmented product describes what is included in the product today, the potential product points to its
possible evolution. Here is where companies search aggressively for new ways to satisfy customers
and distinguish their offer.
6.3 Product Hierarchy
Each product is related to certain other products. The product hierarchy stretches from basic needs to particular
items that satisfy those needs.
1. Need family: The core need that underlies the existence of a product family.
Eg. Security.
2. Product family: the entire product class that can satisfy a core need with reasonable effectiveness.
Eg. Savings and income.
3. Product class: A group of products within the product family recognized as having certain functional
coherence. Eg. Financial instruments or insurance.
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 channels, or
fall within given price ranges. Eg. Life insurance.
5. Product type: A group of items within a product line that share one of possible forms of the product.
Eg. Term life
6. Brand: The name, associated with one ore more items on the product line, that is used to identify the
source or character of the item(s). Eg. EIC – term insurance
7. Item (also called stock keeping unit or product variant): A distinct unit within a brand or product
line that is distinguishable by size, price, appearance, or some other attribute.
6.4 Product Classifications
Marketers have traditionally classified products on the basis of varying product characteristics durability,
tangibility, and use (consumer or industrial)
Durability & tangibility
Products can be classified into three groups according to their durability and tangibility.
 Non-durable goods: are tangible goods that normally are consumed in one or a few uses. E.g. Bear,
soap, salt . . . . And purchased frequently. The appropriate strategy is to make them available in many
locations, charge only a small markup, and advertise heavily to induce trial and build preference.
 Durable goods: are tangible goods that normally survive many uses.
Eg. Refrigerators, machine tools, & clothing. Durable goods normally require more personal selling
and service, command a higher margin, and require more seller guarantees.
 Services: are intangible, inseparable, variable and perishable. As a result they normally require more
quality control, supplier credibility, and adaptability.
Eg. Haircut, repair.
Products may be further divided into two, namely:
1) Consumer Products
2) Industrial products
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 1) Consumer Products
The American marketing association defined consumer goods as ‘Goods destined for use by ultimate
consumers or house holds and in such form that they could be used without commercial processing’.
Consumer goods are products intended for use by ultimate consumers for non-business purpose.
2) Industrial Products
The American Marketing Association defined industrial products as ‘Goods which are destined to be
sold primarily for use in producing other goods or rendering services as contrasted with goods
destined to be sold primarily to the ultimate consumer.’ These goods include equipment (installed and
accessory), component parts, repair and operating supplies and raw materials and fabricating
materials. Industrial goods are products intended to be sold primarily for use in producing other goods
or for rendering services in a business.

The fundamental basis for distinguishing between the two groups is the ultimate use for which the product is
intended in its present form. Cornflakes to household consumption are classified as consumer goods.
Cornflakes sold to restaurants and other institution, however, are classed as industrial goods.

Classification of Consumer Product’s

The range of consumer goods is too broad for a single class. Consequently, consumer products are further
classified as:
1. Convenience goods
2. Shopping goods and
3. Specialty goods.
4. Unsought goods.
It is important to note that this subdivision is based on consumer buying habits rather than on types of
products. Especially the two criteria used as bases for classifying consumer products are:-

1) The degree to which consumers are aware of the exact nature of the product before they start on their
shopping trips, and
2) The satisfaction received from comparing products, weighed against the time and effort required for
this task.
1. Convenience goods:
Consumer products are those bought by final consumers for personal consumption. Convenience products are
consumer products and services that the consumer usually buys frequently, immediately, and with a minimum
of comparison and buying effort. The significant characteristics of convenience goods are that:
a) the consumer has complete knowledge of the particular product wanted before going out to buy it, and
b) the product is purchased with a minimum of effort.
Normally, the gain resulting from shopping around to compare price and quality is not considered worth the
extra time and effort required. A consumer is required to accept any of the several substitutes and thus will buy
the one that is most accessible. For most buyers, this subclass of goods includes groceries, tobacco products,
candy, drug sundries such as toothpaste, and staple hardware items such as light bulbs and batteries.

Convenience goods can further be classified into:

i) Staples – are convenience goods that consumers buy on regular basis. Examples include
soaps, tooth paste, etc.
ii) Impulse goods – are convenience goods that are purchased without any planning or
search effort. Examples include candy bars, magazines, etc.
iii) Emergency goods – are purchased when a need is urgent – umbrella during a rainstorm.
Marketing Considerations
a) A convenience good must be readily accessible when the consumer demand arises, so the
manufacturer must secure wide distribution. But, since most retail stores sell only a small volume

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 of the manufacturer’s out put, it is not economical to sell directly to all retail outlets. Instead, the
producer relies on whole sellers to reach part of the retail market.

b) The promotional strategies of both the manufacturer and the retailer are involved here. Retailers
typically carry several brands of a convenience item, so they are not able to promote any single
brand. They are not interested in doing much advertising of these articles because many other
stores carry them, and any advertising by one retailer may help its competitors. As a result,
virtually the entire advertising burden is shifted to the manufacturer.
2. Shopping Goods
Shopping goods are products for which customers usually wish to compare quality, price and style in several
stores before purchasing. A key-identifying characteristic is that consumers lack full knowledge about
shopping goods before embarking upon the shopping trip. Thus, on the trip, they must assess the relative
suitability of alterative products before they make the purchase. This search continues only as long as the
customer believes that the gain from comparing products offsets the additional time and effort required. In
general shopping goods cost more and are purchased less frequently than convenience goods. Examples of
shopping goods include women’s apparel, furniture and used cars, jewelry, and to some extent men’s ready-to-
wear and shoes.
Marketing considerations:-
The buying habits with shopping goods affect the distribution and promotional strategy of both manufacturers
and middlemen.
a) Manufacturers of shopping goods require fewer retail outlets because consumers are willing to
look around a bit for what they want. To increase the convenience of comparison-shopping
manufactures try to place their products in stores located near other stores carrying competing
items.
b) Manufactures usually work closely with retailers in the marketing of shopping goods. Since
manufacturers use fewer retail out lets, they are more dependent upon those they select. Retail
stores typically buy shopping goods in large quantities. Thus, distribution direct from
manufacturer to retailer is common.
c) Finally, store names are often more important to buyers of shopping goods than manufacturers’
names. This is true particularly for items such as wearing apparel, where the average customer
does not know or care who made the product.

3. Specialty goods
Specialty goods are those products for which consumers have a strong brand preference and are willing to
expend special time and effort in purchasing them. Specialty goods are goods with unique characteristics or
brand identification for which a sufficient number of buyers are willing to make a special purchase effort. In
the case of specialty goods, as with convenience goods but unlike shopping goods, the buyer has complete
knowledge of the particular product wanted before going on the buying trip. Examples of products
usually classified as specialty goods include expensive men’s ready-to-wear, fancy groceries, health food,
automobiles and certain home appliances.
The distinctive features of specialty goods are:
a) Buyers do not normally compare specialty products; instead, they only invest the time to reach the
outlet that carries the goods.
b) The buyer will accept only a specific brand.

Marketing Considerations
a) Since consumers insist on a particular brand and are willing to expend considerable effort to find
it, manufacturers can afford to use fewer outlets. Ordinarily, the manufacturer deals directly with
these retailers.
b) The retailers are extremely important, particularly if the manufacture uses only one in each area
and, where the franchise to handle the product is a valuable one, the retailer may be come quite

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 dependent up on the producer. Thus. They are interdependent; the success of one is closely tied to
the success of the other.
c) Because brand is important and because only a few outlets are used, both the manufacture and
the retailer advertise the product extensively. Often, the manufacturer pays some portion of the
retailer’s advertising costs, and the retailer’s name frequently appears in the manufacturer’s
advertisements.

No Characteristics Convenience Shopping Specialty

Time and effort devoted by consumer Very little Considerable Extensive /

1. to shopping Cannot generalize.
Consumer may go to distant
store & spend much time and
effort
2. Time spent planning the purchase Very little Considerable Considerable
3. How soon want is satisfied after sales. Immediately Relatively long Relatively long time
time
4. Are price & quality compared No Yes No
5. Price Low High High
6. Frequency of Purchase Usually Infrequent Infrequent
frequent
7. Importance Unimportant Often very Cannot generalize
Important

Marketing Consideration

1. Length of Channel Long Short Short to very short

2. Importance of retailer Any single store is Important Very important
relatively unimportant
3. Number of outlets As many as possible Few Few, often only one in
a market.
4. Stock turn over high Lower Lower
5. Gross margin Low high high
6. Responsibility for advertising Manufacturer’s Retailer’s Joint responsibility
7. Brand or store name Brand name Store name Both
important
8. Importance of packaging Very important Less important Less important
4. Unsought Goods – are goods that consumers are unaware of or do not normally think of buying.
Consumers usually think of buying these items through aggressive promotions or when they encounter events.
A person who encounters a car accident or destruction of a villa by fire may think of buying insurance.
Examples of unsought goods include insurance, fire extinguisher, fire sprinklers, blood donations,
encyclopedia, etc.
6.5 Product Mix
A product mix (or product assortment) is the set of all products and items that a particular seller offers for sale
to buyers. A company’s product mix has a certain width, length, depth, and consistency. These
concepts are illustrated in the following table for selected Proctor and Gamble consumer products.
Detergents Toothpaste Bar Soap Paper Tissue
Ivory snow Gleen Ivory Charmin
Dreft Crest Kirks Puffs
Tide Lava Banner
Cheer Camay Summit
Oxydol Zest
Dash Safeguard
Bold Coast
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Gain Oil of Olay
Era

a) The width of a product mix refers to how many different product lines the company carries. The
above table shows a product width of four lines.
b) The length of a product mix refers to the total number of items in the mix. In the above table the
length of the product mix is twenty three.
c) The depth of a product mix refers to how many variants are offered of each product in the line.

6.6 Product – Line Length

Product line managers are concerned with length. A product line is too short if profits can be increased by
adding items and the line is too long if profits can be increased by dropping items. Companies’ objectives
influence product – line length. Companies seeking high market share and market growth will carry longer
lines. Companies that emphasize high profitability will carry shorter lines consisting of carefully chosen items.
Product lines tend to lengthen over time. A company lengthens its product line in two ways by:
1. Line stretching
2. Line filling

1. Line Stretching

Every company’s product line covers a certain part of the total possible range. For example, BMW
automobiles are located in the upper price range of the automobile market. Line stretching occurs when a
company lengthens its product line beyond its current price range. Line stretching may take three forms.
i. Down-market stretch
ii. Up-market stretch
iii. Two-way stretch

i. Down-Market Stretch
A company positioned in the middle market may want to introduce a lower price line for any of three reasons:
1. The company may notice strong growth opportunities in the down-market as mass retailers attract a
growing number of shoppers who want value-priced goods.
2. The company may wish to tie up lower-end competitors who might otherwise try to move up-market.
If the company has been attacked by a low-end competitor, it often decides to counter attack by
entering the low end of the market.
3. The company may find that the middle market is stagnating or declining.

ii. Up-Market Stretch

Companies may wish to enter the right end of the market for more growth, higher margin, or simply to
position themselves as full-line manufacturers. Many markets have spawned surprising upscale segments. The
leading Japanese auto companies have each introduced an upscale automobile: Toyota launched Lexus; Nissan
launched Infinity; and Honda launched Accura.

iii. Two - Way Stretch

Companies serving the middle market might decide to stretch their line in both directions.

2. Line Filling

A product line can also be lengthened by adding more items within the present range. There are several
motives for line filling:
a) reaching for incremental profits,
b) trying to satisfy dealers who complain about lost sales because of missing items in the line,
c) trying to utilize excess capacity, trying to utilize excess capacity,
d) trying to be the leading full-line company, and
e) trying to plug holes to keep out competitors.
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Line filling is overdone if it results in self-cannibalization and customer confusion. The company needs to
differentiate each item in the consumer’s mind. Each item should possess a just-noticeable difference.
According to Weber’s law, customers are more attuned to relative than to absolute difference. The company
should make sure that new-product items have a noticeable difference.

6.7 Branding
A brand is a name, sign, symbol, or design, or a combination of these that identifies the maker or seller of a
product of service. Branding has become so strong that hardly anything goes unbranded. Brand names help
buyers to identify products that might benefit them. In addition, they tell the buyer something about quality
and insure the quality will remain constant. Brand also helps the seller. The brand name makes it easier for the
seller to process protection for unique product features that might be copied. Branding promotes loyalty and
helps in segmenting markets.

Brand equity is the value of a brand, based on the extent to which it has high brand loyalty, name awareness,
perceived quality, strong brand associations, and other assets such as patents, trademarks, and channel
relationships. Power brand names command strong consumer preference. Perhaps the most distinctive skill of
professional marketers is their ability to create, maintain, protect, and enhance brands. Measuring the actual
equity of a brand name is difficult. However, the advantages of having it include:
a) High consumer awareness and loyalty.
b) Easier to launch brand extensions because of high brand credibility.
c) A good defense against fierce price competition.
d) It is believed to be the company’s most enduring asset.
e) It is believed to be the company’s most enduring asset.
Selecting a brand name is an important step. The brand name should be carefully chosen since a good name
can add greatly to a product’s success. Desirable utilities of a good brand name include:
1. It should suggest something about the products benefits and qualities
2. It should be easy to pronounce.
3. It should be easy to distinctive.
4. It should translate easily into foreign languages.
5. It should be capable of registration and legal protection. Once chosen, the brand name must
be protected.
A manufacturer has four branding options:

1.) A manufacturer’s brand (or national brand) is a brand created and owned by the producer of
a product or service. It is also known as corporate brand where the name of the product
follows the name of the company manufacturing the product. Examples include IBM and
Sony.
2.) A private brand – is a brand created and owned by a reseller of a product or service. It a
middleman, distributor, or store brand.
3.) A licensed brand - A company sells its output under another brand name Examples include
Coca Cola, Pepsi, Hilton, Sheraton etc.
4.) Co-branding – it occurs when two companies go together and manufacture one product like
the Sony Erickson cellular phone.

6.8 Packaging
Packaging decisions are the third set of decisions that must be made about individual products. Packaging is
the activity of designing and producing the container or wrapper for a product. Protection of the product and
promotion are the two major purposes of packaging. The package may include:
1.) the primary package (what the product is in – a tube full of toothpaste);
2.) the secondary package (the box the tube came in);
3.) the shipping package (a card box case)

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Traditionally, packaging decisions were based on cost and production factors. Packaging now has promotional
value. To enhance this aspect of the package, the marketer should:
a) Establish a packaging concept.
b) Specific elements of the package.
c) Tie together elements to support the positioning and marketing strategy.

6.9 Labeling

Labeling is also part of packaging and consists of printed information appearing on or with the package.
Labeling performs several functions:
a) It identifies the product or brand.
b) It might grade the product.
c) It might describe the several things about the product.
d) It might promote the product through attractive graphics.