Chapter 8
1. Tesla’s Model 3 Example
• Launch: In March 2016, Tesla revealed the Model 3, an eco-friendly mass-market car aimed at
disrupting the auto industry.
• Customer Appeal: The Model 3’s appeal came from limited competition and its relatively low
price.
• Market Success: By 2018, it became the best-selling luxury vehicle in the U.S., proving that
electric cars could achieve widespread success.
2. Product Differentiation
• Core Functionality: Products must meet core customer needs to create value.
• Features: Products can be enhanced with additional features. Companies should survey
customers and assess the cost-benefit of adding features.
• Performance Quality: How well the product performs its primary function. Higher quality can
differentiate brands, especially as companies focus on offering better value.
3. Attributes of Product Differentiation
• Conformance Quality: Products must meet promised specifications consistently.
• Durability: The expected lifespan of the product under normal or stressful conditions.
• Reliability: The probability that the product will function without malfunctioning during a
specified period.
• Form: Products can be differentiated based on size, shape, or physical structure.
• Style: The appearance and feel of a product can create distinction that is difficult for competitors
to copy.
• Customization: Offering products tailored to individual preferences adds strategic value.
4. Product Design
• Design: Affects how consumers perceive a product’s look, feel, and function. Good design
balances aesthetics and functionality to appeal to both rational and emotional customer needs.
• Power of Design:
o Brand differentiation: Design can help a product stand out in a crowded market.
o Consumer perception: Design can enhance the customer’s experience.
o Emotional connection: Great design creates emotional connections with consumers.
• Examples of Design:
o Whirlpool: Used design thinking to create the KitchenAid Architect line.
o Bang & Olufsen (B&O): Known for its innovative, instinct-driven design philosophy.
5. Product Line Analysis and Management
• Product line management involves assessing each item’s sales, profits, market profile, and
customer appeal.
• Product Line Modernization: Products need continuous improvement to stay competitive. This
can be done gradually or all at once, depending on market dynamics.
• Product Line Length:
o Up-Selling: Encouraging customers to buy more expensive versions of a product.
o Cross-Selling: Offering complementary products (e.g., printers and computers from
Hewlett-Packard).
o Economic Protection: Offering products at different price points to hedge against
economic fluctuations.
6. Product Line Lengthening
• Line Stretching:
o Down-Market Stretch: Introducing lower-priced products to reach more customers.
o Up-Market Stretch: Entering the high-end market to boost margins and brand prestige.
o Two-Way Stretch: Stretching the product line both up and down to cover all market
segments.
• Line Filling: Adding more products within the existing range to boost profits, satisfy dealers, and
address customer demand for variety.
7. Product Packaging and Labeling
• Packaging: Packaging is the consumer’s first interaction with a product and plays a crucial role in
attracting attention, providing information, and differentiating the brand.
o Packaging can act as a "five-second commercial."
o Unique packaging adds to brand equity (e.g., Absolut vodka, Kiwi shoe polish).
• Key Factors in Packaging:
o Self-Service: Packaging must catch consumers’ attention in busy retail environments.
o Consumer Affluence: Wealthier consumers often appreciate well-designed packaging
that adds convenience or prestige.
o Brand Image: Packaging contributes to instant brand recognition.
o Innovation: Innovative packaging can improve usability and boost profits.
8. Effective Packaging Objectives
• Brand Identification: Packaging must clearly identify the brand.
• Descriptive and Persuasive Information: It should communicate essential details about the
product.
• Protection and Transportation: Packaging needs to safeguard the product during transport and
storage.
• Aiding Consumption: Packaging should make it easier for consumers to use the product.
9. Aesthetic Considerations in Packaging
• Size, shape, materials, and colors are important elements of packaging design. Colors can evoke
different emotions:
o Red: Energy, passion.
o Yellow: Happiness, warmth.
o Blue: Trust, dependability.
o Black: Strength, balance.
• Packaging Testing: Packaging designs should undergo tests for engineering, visual appeal, dealer
feedback, and consumer response to ensure they are effective.
10. Product Guarantees and Warranties
• Guarantees and warranties help reduce buyer risk and create confidence in the product. These
tools are important for building trust and loyalty with consumers.
