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Chapter 6 – Product and Brand Strategy

DO NOT READ unless noted

Page 87, Marketing insight 6-1

Page 90-91, Marketing insight 6-2
Page 92, Marketing insight 6-3
Page 94, paragraph 1 read only sentence 1; para 2 read only sentences 1-3; para 3
Page 94, Marketing insight 6-4
Page 95 Marketing insight 6-5
Page 101-103, under the heading “Organizing for Product Management”, all
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Basic Issues in Product Management

Product/Service Definition
The sum of the physical, psychological, physiological, and sociological satisfactions the buyer obtains
from the purchase, ownership and consumption of the product/service.

Three Views of a Product

Tangible Product / Intangible Service (a.k.a. Basic or Expected) – Physical entity or service offered
(Product Features)

Extended Product (a.k.a. Augmented) – Tangible product along with whole cluster of services that
accompany it (Product Features).

Generic Product (a.k.a. Core) – Essential benefits the buyer expects to receive from the product
(Product Benefits).

Whole Product = benefits + features

Marketing myopia – Managers who view their company’s product too narrowly, by overemphasizing
the physical object itself (i.e. the features).
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Product Classification

Two basic criteria for product classification

• End use or market
• Degree of processing or physical transformation

1. Agricultural products and raw materials - Grown or extracted from the land or the sea

• Fairly homogeneous
• Sold in large volume, and low value per unit

2. Organizational goods – Purchased by firms for the purpose of producing other goods

• Raw materials and semi-finished goods

• Major and minor equipment
• Parts needed to complete other finished goods
• Supplies or items used to operate the business

3. Consumer goods

a. Convenience goods – Purchased frequently with minimum effort.

 Includes items such as food and impulse goods

b. Shopping goods – Purchased after some time and energy are spent on comparing alternative.
 Includes items such as appliances

c. Specialty goods – Are unique in some way so the consumer will make some effort to obtain
them.
 Includes items such as wedding rings

Product Involvement – How important a particular product or product class is to you.

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Organizational Market Characteristics

• A primary purchasing motive for organizational goods is profit

• Organizational markets are concentrated geographically as in the case of steel, auto or shoes

Can be categorized into:

• Vertical market – Limited number of buyers. It is narrow and deep

• Horizontal market – Goods are purchased by all types of firms in many different industries

Product Quality and Value

Quality – Defined as the degree of excellence or superiority that an organization’s product possesses.

• Total-quality management (TQM)

• ISO 9000 quality systems of standards

Value – Defines as what the customer gets in exchange for what the customer gives (get/give)

• Customers perception of value based on:

 Degree the product meets expected specifications
 Price
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Product Line

Product line planning revolves around the question of how many product variants should be included

Varying products offered for three reasons:

1. Potential customers rarely agree on a single set of specifications.

2. Customers prefer variety.

3. Dynamics of competition (i.e. reasons 1 and 2) lead to multiproduct lines. Further market
segmentation

Issues:
1. Will total profits decrease

i. Cannibalization

2. Will product quality suffer.

Product Mix

• Full set of products offered for sale by an organization.

• May consist of several product lines, or groups of products sharing common characteristics,
distribution channels, customers, or uses

Product mix described by:

• Width – Number of product lines handled by organization

• Depth – Average number of products in each line

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Branding

A brand identifies one seller’s good or service as distinct from competitors

• Name, term, design, symbol, or any other feature

Trademark – Legal term for brand

Factors that increase strength of brand include

• Product quality
• Consistent advertising and marketing communication
• Distribution intensity
• Brand personality

Elements of Brand Equity

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Branding

Line extension – Brand name used to facilitate entry into a new market segment.

Note: This is also sometimes referred to as Product Extension. However note that a product
extension with the same brand is a “line extension” but with a different brand would be
“multibranding”.

Multibranding – Different brand names assigned to each product.

Note: when this occurs within the same product class these are often referred to as Flanker
brands. When this occurs in a new product class/market it is also referred to as New
Product/Brand Strategy.

Brand extension – Current brand name used to enter a completely different product class.

Franchise extension or Family branding – Corporate name attached to a product to enter a new
market segment or a new product class.

Dual branding / Joint branding / Co-branding – Integration of two or more “equally” branded
products.
Versus
Ingredient branding – One product brand is “a part of” another product brand.

Private-label brands – Retail firms producing or marketing their products.

Multi-Branding Strategy (vs. line extensions, brand extensions, or family branding)

Advantages

 Firm can distance products from other offerings it markets

 Image of one product is not associated with other products the company markets
 Products can be targeted at specific market segments
 If the product fails, the effect on other products is minimized

Disadvantages

 No consumer brand awareness due to different names

 Significant money spent on familiarizing new brands

Packaging (See textbook Marketing Insight 6-6)

• Differentiates relatively homogeneous products

• Contributes to creating new attributes of value in a brand
• Creates salability within a target market
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Product Life Cycle

Introduction – High costs, low or no profit

Growth – Increased profits, positively correlated with sales

Maturity – Profits do not keep pace with sales due to high competition

Decline – Seller must decide whether to

 Drop the product

 Alter the product
 Seek new uses for the product
 Seek new markets
 Continue with more of the same
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Product Life Cycle – Limitations

 Accuracy regarding the length/life of the product in different stages of the cycle can’t be
predicted

 Misjudging when a stage is ending, and implementing an inappropriate strategy

 Variations in life cycle exists

 Fashion – These are accepted and popular product styles

 Fads – Products which experience high but brief popularity

Marketing Strategy Implications of the Product Life Cycle

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Product Adoption And Diffusion

Diffusion – Spread of the product through the population is known as the diffusion of innovation

Adopter Life Cycle

Innovators
This group is receptive to new ideas and less sensitive to risk. These people usually have a more
specific interest in the product.

Early adopters
This group is more “integrated” with the larger community and therefore are viewed as opinion
leaders. This groups approval becomes very important for attracting the early majority.

Chasm

Early majority
This group is more conservative and will only try new products (i.e. take risks) if they have
some assurance that the product will work.

Late majority
This group is very cautious and will only adopt new products when it becomes economically or
socially necessary.

Laggards
This group does not like to change and will avoid if at all possible. This group will often adopt a
product after it has already been replaced by a new product.
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Product Audit

A marketing management technique whereby the company’s current product offerings are reviewed to
ascertain whether each product should be:

a. continued as is,
b. deleted
c. improved or modified (changed in some way)

b. Deletions

Deletion decisions are difficult because of the potential impact on customers and the firm

Considerations in the deletion decision include:

 Sales trends – Have sales moved over time? What has happened to market share?

 Profit contribution – What has been the profit contribution of the product to the company?

 Product life cycle – Has the product reached a level of maturity?

 Customer migration patterns – If the product is deleted, will customers switch to another
product marketed by our firm?

c. Product Improvement

Another important objective of the audit is to ascertain whether to alter the product in some way or
leave things the way they are

 Attributes – Refer mainly to product features, design, package and so forth

 Marketing dimensions – Refer to features like pricing, promotion strategy and distribution
channels

Product Improvement Advantages

 Boosting product quality

 Developing more user-friendly products
 Improving customer order processing activities
 Shortening delivery lead times

Benchmarking – Continuous process of measuring products, services, and practices against those of the
toughest competitors or companies renowned as leaders
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Advantages of Rejuvenating a Product