Executive Business Management Program [EBMP]

Reading Notes for Applications of Marketing

Product Strategy
At the heart of a great brand is a great product. Product is a key element in the market offering. Market
leaders generally offer products and services of superior quality. Marketing planning begins with
formulation an offering to meet target customers’ needs or wants. The customer will judge the
offering by three basic elements: product features and quality, services mix and quality, and price.
Product Characteristics and Classifications

A product is anything that can be offered to a market to satisfy a want or need.

A) Products that are marketed include:

1) Physical goods.
2) Services.
3) Experiences.
4) Events.
5) Persons.
6) Places.
7) Properties.
8) Organizations.
9) Information.
10) Ideas.

Product Levels: The Customer Value Hierarchy

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

A) The fundamental level is the core benefit: The service or benefit the customer is really buying. Marketers
must see themselves as benefit providers.
B) At the second level, the marketer has to turn the core benefit into a basic product.
C) At the third level, the marketer prepares an expected product, a set of attributes and conditions buyers
normally expect when they purchase this product.
D) At the fourth level, the marketer prepares an augmented product that exceeds customer expectations.
1) Differentiation arises on the basis of product augmentation. Product augmentation also leads
the marketer to look at the total consumption system: the way the user performs the tasks of getting
and using products and related services.
2) Some things should be noted about product-augmentation strategy:
a. First, each augmentation adds costs.
b. Second, augmented benefits soon become expected benefits and necessary points-of-parity.
c. Third, as companies raise the price of their augmented product, some competitors offer a “stripped-
down” version at a much lower price.

1
 E) At the fifth level stands the potential product that encompasses all the possible augmentations and
transformations the product or offering might undergo in the future.
1) Here is where companies search for new ways to satisfy customers and distinguish its individual offer.

Review and understand Key Definitions here: core benefit, basic product, expected product,
augmented product, total consumption system, and potential product

Product Classifications
Marketers have traditionally classified products on the basis of characteristics: durability, tangibility,
and use. Each product type has an appropriate marketing-mix strategy.

Durability and Tangibility

• Products can be classified into three groups, according to durability and tangibility:
A) Nondurable goods: tangible consumed in one or a few uses.
B) Durable goods: tangible that normally survives many uses. Durable goods require more personal selling and
service, command a higher margin, and require more seller guarantees.
C) Services: intangible, inseparable, variable, and perishable products that require more quality control,
supplier credibility, and adaptability.

Consumer-Goods Classification
• The vast array of goods consumers buy can be classified on the basis of shopping habits.
A) The consumer usually purchases convenience goods frequently, immediately, and with a minimum of effort.
B) Shopping goods are goods that the consumer, in the process of selection and purchase, characteristically
compares on such basis as suitability, quality, price, and style.
1) Homogeneous shopping goods are similar in quality but different enough on price to adjust
shopping comparisons.
2) Heterogeneous shopping goods differ in product features and services that may be more important than
price.
3) Specialty goods have unique characteristics or brand identification for which a sufficient number of
buyers are willing to make a special purchasing effort.
4) Unsought goods are those that the consumer does not know about or does not normally think of
buying. The classic examples of known but unsought goods are life insurance and cemetery plots.
Review Key Definitions here: convenience goods, shopping goods, homogeneous shopping
goods, heterogeneous shopping goods, specialty goods, and unsought goods

Industrial-Goods Classification
• An Industrial good can be classified in terms of how it enters the production process and
its relative costliness. We can distinguish three groups of industrial goods: materials and
parts, capital items, and suppliers and business services.

A) Materials and parts.

1) These are goods enter the manufacturer’s product completely. They fall into two major groups:
a. Raw materials include:
(i) Farm products—commodity characteristics.

2
 (ii) Natural products—are in limited supply.
b. Manufactured materials and parts fall into two
categories: (i) Component materials.
(ii) Component parts.
B) Capital items are long-lasting goods that facilitate developing or managing the finished product. They include:
1) Installations.
2) Equipment.
C) Supplies and business services are short-term goods and services that facilitate developing or managing the
finished product. Supplies are two kinds:
1) Maintenance and repair items (including business advisory services such as, legal, consulting, and
advertising).
2) Operating supplies.

DIFFERENTIATION
To be branded, products must be differentiated. Physical products vary in potential for
differentiation.

A) Marketers are always looking for new dimensions of differentiation.

Product Differentiation
A) Form: Many products can be differentiated in form—the size, shape, or physical structure of a
product. B) Features: Most products can be offered with varying features that supplement its basic
function.

1) A company can identify and select appropriate features by surveying buyers and then calculating
customer value versus company cost for each feature.
2) Each company must decide whether to offer feature customization at a higher cost or a few standard
packages at a lower cost.
C) Performance quality: Most products are established at one of four performance levels: low, average, high, or
superior.
1) Performance quality is the level at which the product’s primary characteristics operate.
2) The manufacturer must design a performance level appropriate to the target market and
competitors’
performance levels.
3) A company must mange performance quality through time.
a. Quality is becoming an increasingly important parameter for differentiation as companies adopt a
value model and provide higher quality for less money.
D) Conformance quality: Buyers expect products to have a high conformance quality that is the degree to which
all the produced units are identical and meet the promised specifications.
1) the problem with low conformance quality is that the product will disappoint some buyers.
E) Durability: A measure of the product’s expected operating life under natural or stressful conditions

1) Durability is a valued attribute for certain products.

2) Buyers will generally pay more for products that have a reputation for being long lasting.
F) Reliability: Buyers normally will pay a premium for more reliable products. Reliability is a measure of the
probability that a product will not malfunction or fail within a specified time period
G) Style: Describes the product’s look and feel to the3 buyer.
1) Style has the advantage of creating distinctiveness that is difficult to copy.

4
 2) Strong style does not always mean high performance.

Review Key Definitions here: form, features, performance quality, conformance quality,
durability, reliability, and style

Design: The Integrative Force

As competition intensifies, design offers a potent way to differentiate and position a company’s
products and services. Design is the totality of features that affect how a product looks and functions
in terms of customer requirements.

A) To the company, a well-designed product is one that is easy to manufacture and distribute.
B) To the customer, a well-designed product is one that is pleasant to look at and easy to open, install, use,
repair, and dispose of.
Services Differentiation
When the physical product cannot easily be differentiated, the key to competitive success may lie in
adding valued services and improving quality. The main service differentiators are ordering ease,
delivery, installation, customer training, customer consulting, and maintenance and repair.

Ordering Ease
A) Ordering ease refers to how easy it is for the customer to place an order with the company.

Delivery
A) Delivery refers to how well the product or service is delivered to the customer. It includes speed,
accuracy, and care attending the delivery process.

Installation
A) Installation refers to the work done to make a product operational in its planned location.
B) Differentiating at this point in the consumption chain is particularly important for companies with
complex products—ease of installation becomes a true selling point.

Customer Training
A) Customer training refers to training the customer’s employees to use the vendor’s equipment properly and
efficiently.
Customer Consulting
A) Customer consulting refers to data, information systems, and advice services that the seller offers to buyers.
Maintenance and Repair
A) Maintenance and repair describes the service program for helping customers keep purchased products in good working
order.

PRODUCT AND BRAND RELATIONSHIPS

The Brand Hierarchy

The product hierarchy stretches from basic needs to particular items that satisfy those needs. We can
identify six levels of the product hierarchy.

A) Need family.
B) Product family.
C) Product class.
D) Product line.
5
 E) Product type.
F) Item, also called stockkeeping unit (SKU) or product variant.
Product Systems and Mixes

A product system is a group of diverse but related items that function in a compatible manner.

A) A product mix (also called a product assortment) is a set of all products and items a particular seller offers for
sale. A product mix consists of various product lines.
B) A company’s product mix has a certain width, length, depth, and consistency.
C) The depth of a product mix refers to how many different product lines the company carries.
1) The length of a product mix refers to the total number of items in the mix.
a. We can also talk about the average length of a line. This is obtained by dividing the total length by
the number of lines.
2) The width of a product mix refers to how many variants are offered of each product in the line.
3) The consistency of the product mix refers to how closely related the various product lines are in end use,
production requirements, distribution channels, or some other way.

Product-Line Analysis
A) In offering a product line, companies normally develop a basic platform and modules that can be
added to meet different customer requirements.
B) Product-line managers need to know the sales and profits of each item in their line in order to
determine which items to build, maintain, harvest, or divest.
Market Profile
The product-line manager must review how the line is positioned against competitors’ lines.
A) The product map shows which competitors’ items are competing against company X’s items.
B) The map also reveals possible locations for new items.
C) Another benefit of product mapping is that it identifies market segments.
D) Product-line analysis provides information for two key decision areas—product-line length and
product- mix pricing.
Product-Line Length
A) Company objectives influence product-line length.
B) One objective is to create a product line to induce upselling.
C) A different objective is to create a product line that facilitates cross selling.
D) Still another objective is to create a product line that protects against economic ups and
downs. E) Product lines tend to lengthen over time.
F) A company lengthens its product line in two ways: by line stretching and line filling.
Line Stretching
A) Line stretching occurs when a company lengthens its product line beyond its current range.
B) Down-market stretch is when a company positioned in the middle market may want to introduce a lower-
priced line.
1) Moving down-market carries risk.
C) Up-market stretchcompanies may wish to enter the high end of the market for:
1) More growth.
2) Higher margins.

6
 3) Simply to position themselves as a full-line manufacturer.

D) Two-way stretch is where companies serving the middle market might decide to stretch the line in both
directions.
Line Filling
A product line can also be lengthened by adding more items within the present range. There are several motives for
line filling:
1) Reaching for incremental profits.
2) Trying to satisfy dealers who complain about lost sales because of missing items in the line.
3) Trying to utilize excess capacity.
4) Trying to be the leading full-line company.
5) Trying to plug holes to keep out competitors.
a. Line filling is overdone if it results in self-cannibalization and customer
confusion. b. The company needs to differentiate each item in the consumer’s
mind.
c. Each item should possess a just-noticeable difference.
d. The company should also check that the proposed item meets a market need and is not being added
simply to satisfy an internal need.

Line Modernization, Featuring, and Pruning

Product lines need to be modernized. In rapidly changing product markets, modernization
is continuous.
A) Companies plan improvement to encourage customer migration to higher-valued, higher-priced
items. B) The product-line manager typically select one or a few items in the line to feature.
C) Product-line mangers must periodically review the line for deadwood that is depressing profits.
PACKAGING, LABELING, WARRANTIES, AND GUARANTEES
Most physical products have to be packaged and labeled. Many marketers have called packaging a
fifth P. Most marketers, however, treat packaging and labeling as an element of product strategy.

Packaging
We define packaging as all the activities of designing and producing the container for a product.

A) Packages might include up to three levels of material:

1) Primary package.
2) Secondary package.
3) Shipping package.
B) Well-designed packages can create convenience and promotional
value. C) We must include packaging as a styling weapon.
D) The package is the buyer’s first encounter with the product and is capable of turning the buyer on or off.
E) Various factors have contributed to the growing use of packaging as a marketing tool:
1) Self-service.
2) Consumer affluence.
3) Company and brand image.
4) Innovation opportunity.
F) Developing an effective package requires a number
7
of decisions.
1) From the perspective of both the firm and consumers, packaging must achieve a number of objectives:

8
 a. Identify the brand.
b. Convey descriptive and persuasive
information. c. Facilitate product transportation
and protection. d. Assist at-home storage.
e. Aid product consumption.
G) To achieve the marketing objectives for the brand and satisfy the desires of consumers, the aesthetic and
functional components of packing must be chosen correctly.
1) Aesthetic considerations relate to a package’s:
a. Size and
shape. b.
Material.
c. Color.
d. Text.
e. Graphics.
2) Functionally, structural design is crucial.
H) The various packaging elements must be
harmonized. I) After packaging is designed, it must
be tested.
1) Engineering tests are conducted to ensure that the package stands up under normal conditions.
2) Visual tests are used to ensure that the script is legible and the colors harmonious.
3) Dealer tests are performed to ensure that dealers find the packages attractive and easy to handle.
4) Consumer tests ensure favorable consumer response.
Labeling
A) Sellers must label products.
B) Labels perform several functions:
C) The label identifies the product or
brand. D) The label might also grade the
product. E) The label might describe the
product.
F) Finally, the label might promote the product through attractive
graphics. G) Labels eventually become outmoded and need freshening
up.
H) Companies with labels that have become icons need to tread very carefully when initiating a redesign.
I) The Fair Packaging and Labeling Act of 1967, sets mandatory labeling requirements, and allows federal
agencies to set packaging regulations in specific industries.
J) The Food and Drug Administration (FDA) sets other labeling
requirements. K) Consumerists have lobbied for additional labeling laws
to require:
1) Open dating.
2) Unit pricing.
3) Grade labeling.
4) Percentage labeling.

Warranties and Guarantees

Warranties are formal statements of expected product performance by the manufacturer. Warranties,
whether expressed or implied are legally enforceable.

A) Many sellers offer either general guarantees or specific

9
guarantees. B) Guarantees reduce the buyer’s perceived risk.
C) Guarantees are most effective in two situations:
1) Where the company or the product is not well-known.
2) Where the product’s quality is superior to the competition.

1
0