LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. What are the characteristics of products, and how do marketers classify products?
2. How can companies differentiate products?
3. Why is product design important, and what are the different approaches taken?
4. How can marketers best manage luxury brands?
5. What environmental issues must marketers consider in their product strategies?
6. How can a company build and manage its product mix and product lines?
7. How can companies combine products to create strong co-brands or ingredient
brands?
8. How can companies use packaging, labeling, warranties, and guarantees as marketing
tools?
CHAPTER SUMMARY
1. Product is the first and most important element of the marketing mix. Product strategy
calls for making coordinated decisions on product mixes, product lines, brands, and
packaging and labeling.
2. In planning its market offering, the marketer needs to think through the five levels of
the product: the core benefit, the basic product, the expected product, the augmented
product, and the potential product, which encompasses all the augmentations and
transformations the product might ultimately undergo.
3. Products can be nondurable goods, durable goods, or services. In the consumer-goods
category are convenience goods (staples, impulse goods, emergency goods), shopping
goods (homogeneous and heterogeneous), specialty goods, and unsought goods. The
industrial-goods category has three subcategories: materials and parts (raw materials
and manufactured materials and parts), capital items (installations and equipment),
and supplies and business services (operating supplies, maintenance and repair items,
maintenance and repair services, and business advisory services).
4. Brands can be differentiated on the basis of product form, features, performance,
conformance, durability, reliability, repairability, style, customization, and design, as
well as such service dimensions as ordering ease, delivery, installation, customer
training, customer consulting, and maintenance and repair.
5. Design is the totality of features that affect how a product looks, feels, and functions.
A well-designed product offers functional and aesthetic benefits to consumers and can
be an important source of differentiation.
6. Luxury brands command price premiums and often have a strong lifestyle component.
They can require some special considerations in how they are sold.
C H A P T E
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3
SETTING PRODUCT
STRATEGY
7. Products and their packaging must be designed to reduce adverse environmental
impact as much as possible.
8. Most companies sell more than one product. A product mix can be classified
according to width, length, depth, and consistency. These four dimensions are the tools
for developing the company’s marketing strategy and deciding which product lines to
grow, maintain, harvest, and divest. To analyze a product line and decide how many
resources to invest in it, product line managers need to look at sales and profits and
market profile.
9. A company can change the product component of its marketing mix by lengthening its
product via line stretching (down-market, up-market, or both) or line filling, by
modernizing its products, by featuring certain products, and by pruning its products to
eliminate the least profitable.
10. Brands are often sold or marketed jointly with other brands. Ingredient brands and
co-brands can add value, assuming they have equity and are perceived as fitting
appropriately.
11. Physical products must be packaged and labeled. Well-designed packages can create
convenience value for customers and promotional value for producers. Warranties and
guarantees can offer further assurance to consumers.
OPENING THOUGHT
Students will be familiar with the “idea” of a tangible product—the physical
manifestation—a cell phone or a pair of favorite jeans or shoes. However, students may
have trouble understanding the “totality” of the product physically demonstrated—the
core benefit, the basic product, expected product, augmented, and potential product. The
instructor is encouraged to use the class period to allow the students to try to uncover or
explore these additional components of the “product” concept so that the students will
begin to understand these dimensions better.
Students should have no problems understanding the concepts of durability and
reliability, nor should they have problems with brands differentiation or product line
depth and breadth. Perhaps, the most challenging concept of the chapter is the concept of
line stretching, and/or line filling. Be sure to differentiate between up market and down
market stretching. Again, the instructor is encouraged to use examples from
manufacturers’ and/or personal experience to communicate these concepts successfully.
Finally, the labeling of a product includes both advertising copy and governmental
regulations. This will be new material for many students.
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. At this point for the semester-long project, students should have set their group
project’s product or service strategy. Instructors are to evaluate their submissions on
the product (or services) features, quality, and price and the other considerations of
“product” found in this chapter.
2. In planning its market offering, the marketer needs to address five product levels:
core benefit, basic product, expected product, augmented product, and potential
product. Students should select a firm within an industry and through research
(Internet and other formats) outline the firm’s five product levels for its products. In
their research, students should be challenged to discover the firm’s perception of the
customer’s value hierarchy and total consumption system.
3. Sonic Smartphone Marketing Plan: Decisions about products are critical elements of
any marketing plan. During the planning process, marketers must consider issues
related to product mix and product lines. Product marketers distinguish five levels of
product, each adding more customer value: core benefit, basic, expected, augmented,
and potential. In assessing product strategy:
How would you define the core benefit for Sonic 1000?
How would you define the augmented product for Sonic 2000, the second product
to be launched by Sonic next year?
Write your answers to the questions in a written marketing plan or enter it in the Product
Offering and Marketing Mix sections of Marketing Plan Pro.
ASSIGNMENTS
Convenience items and capital good items can be seen as two ends of the “product
continuum.” Convenience items are purchased frequently, immediately, and with
minimum effort. Capital goods are those items that last a long period of time and are
purchased infrequently by consumers. Students should select a convenience good and a
capital good of their choice and compare and contrast the consumers’ value hierarchy and
users total consumption system for each item using the concepts presented in this chapter.
Assign the following readings to students: Robert Bordley, “Determining the Appropriate
Depth and Breadth of a Firm’s Product Portfolio,” Journal of Marketing Research, 40
(February), 2003, pp. 39-53 or Peter Boatwright and Joseph C. Nunes, “Reducing
Assortment: An Attribute-Based Approach,” Journal of Marketing, 65 (July), 2001, pp.
50-63. After reading each article, students should submit a paper summarizing their
findings and illustrating the concepts exposed in these papers to the material covered in
this chapter.
When the physical product cannot easily be differentiated, the key to competitive success
may lie in adding valued services and improving their quality. Examples of adding value
in the service component of a product include computers, education, and pizzas. Each
student is to select a product in which they think that the additional value present lies in
the service and quality components. Students should be prepared to defend their
selections using the material presented in this chapter.
In the Marketing Memo entitled, Making Ingredient Branding Work, the authors list four
requirements for success in ingredient branding. As a group, students should collect
examples of ingredient branding currently present in the marketplace (supermarkets,
hotels/motels, automobile companies, and causal dining establishments are good places to
start) and examine these examples versus the four requirements stated in the memo.
Students should be able to defend their positions in comparing these products to the
statements in the Marketing Memo.
Product differentiation is essential to the branding process. In choosing to differentiate a
product, a marketer has the choice of form, features, performance quality, conformance
quality, durability, reliability, repairability, and style. Collect examples of currently
produced products that have been differentiated and branded for each of these design
parameters.
END-OF-CHAPTER SUPPORT
MARKETING DEBATE—With Products, Is It Form or Function?
The “form versus function” debate applies in many arenas, including marketing. Some
marketers believe that product performance is the end all and be all. Other marketers maintain
that the looks, feel, and other design elements of products are what really make the difference.
Take a position: Product performance is the key to brand success versus product aesthetics are
the key to brand success.
Suggested Response
Pro: Consumers buy products to satisfy a need. A consumer uses products and decides on a
product based upon their own consumption system—the way the product is by the consumer
(getting the product, using the product, and disposing of the product). Additionally, the
customer value hierarchy (core benefit, basic product, expected product, augmented product,
and potential product) enters into the decision-making process for a consumer. Therefore, a
product must perform to an acceptable level according to the consumer’s perception of
benefits in their customer value hierarchy. A low price, low function product, like a disposable
razor must at least perform the task to which it was created. A more expensive product, an
electric razor, must meet the function to which it was created, although these functions are at a
higher level than the disposable razor. If either product does not perform to the consumer’s
basic product definition then the product will be discarded and not re-purchased.
Con: Products have unique characteristics and specific brand identifications that meet
consumers’ needs that are not related to functionability. Such needs as status,
self-actualization, and style appeal to a wide audience. For example, most automobiles will
perform the task of taking a person from point A to point B. However, it is the design of the
automobile (specific make/type: i.e., sports car, luxury car) that appeals to the buyer. For many
consumers style plays a more important role, for some, the only role in their buying decision.
A well-designed, aesthetically differentiated product can also be a point-of-difference in the
marketplace aiding consumer acceptance through its ease of use, durability, reliability, or
packaging. A well-designed product can be a competitive advantage for smaller firms.
Whatever, the design, however, the product must at least meet the consumers’ definition of a
basic product. Once that definition is met, a design that differentiates the product can be a
powerful marketing asset.
MARKETING DISCUSSION – Product and Service Differentiation
Consider the many means of differentiating products and services. Which ones have the most
impact on your choices? Why? Can you think of certain brands that excel on a number of
these means of differentiation?
Student answers will differ according to the product/services chosen. However, student
answers should encompass the following distinctions:
Products differentiation includes:
Form
Features
Performance quality
Conformance quality
Durability
Reliability
Repairability
Style
Services differentiation includes:
Ordering ease
Delivery installation
Customer training
Customer consulting
Maintenance and repair
Student selections will vary, but often include Apple, Samsung, and other high involvement
technological goods. Services may include companies like Amazon.com, Zappos, and
Enterprise Rent-A-Car.
DETAILED CHAPTER OUTLINE
Opening vignette: At the heart of a great brand is a great product. To achieve market
leadership, firms must offer products and services of superior quality that provide
unsurpassed customer value. Lexus formulated an offering to meet target customers’
needs or wants. The customer will judge the offering on three basic elements: product
features and quality, service mix and quality, and price, which must be meshed into a
competitively attractive market offering.
I. Product Characteristics and Classifications: A product is anything that can be
offered to a market to satisfy a want or need, including physical goods, services,
experiences, events, persons, places, properties, organizations, information, and
ideas.
A. Product Levels: The 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 must 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. In developed countries, brand positioning
and competition take place at this level.
e. At the fifth level stands the potential product, which encompasses all the
possible augmentations and transformations the product or offering might
undergo in the future.
f. Differentiation arises and competition increasingly occurs on the basis of
product augmentation.
g. Each augmentation adds cost, however, and augmented benefits soon
become expected benefits and necessary points-of-parity in the category
B. Product Classifications
a. Durability and Tangibility: Products fall into three groups according to
durability and tangibility:
i. Nondurable goods are tangible goods normally consumed in one or
a few uses, such as beer and shampoo. Because these goods are
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.
ii. Durable goods are tangible goods that normally survive many uses.
They normally require more personal selling and service,
command a higher margin, and require more seller guarantees.
iii. Services are intangible, inseparable, variable, and perishable
products that normally require more quality control, supplier
credibility, and adaptability.
b. Consumer-Goods Classification
i. Convenience goods are purchased frequently, immediately, and
with minimal effort.
ii. Shopping goods are those the consumer characteristically
compares on such bases as suitability, quality, price, and style.
iii. Specialty goods have unique characteristics or brand identification
for which enough buyers are willing to make a special purchasing
effort.
iv. Unsought goods are those the consumer does not know about or
normally think of buying. Unsought goods require advertising and
personal-selling support.
c. Industrial-Goods Classification
i. Materials and parts are goods that enter the manufacturer’s product
completely.
1. Raw materials in turn fall into two major groups: farm
products and natural products
2. Manufactured materials and parts fall into two categories:
component materials and component parts.
ii. Capital items are long-lasting goods that facilitate developing or
managing the finished product.
1. They fall into two groups: installations and equipment.
2. Installations consist of buildings and heavy equipment.
3. Equipment includes portable factory equipment and tools
and office equipment.
iii. Supplies and business services are short-term goods and services
that facilitate developing or managing the finished product.
1. Supplies are of two kinds: maintenance and repair items
and operating supplies.
2. Business services include maintenance and repair services
and business advisory services.
II. Differentiation
A. To be branded, products must be differentiated.
a. Differentiated products can create significant competitive advantages.
b. Means for differentiation include form, features, performance quality,
conformance quality, durability, reliability, repairability and style.
c. Design has become an increasingly important differentiator, and we
discuss it separately later in the chapter.
B. Product Differentiation
a. Form: the size, shape, or physical structure of a product.
b. Features: a company can identify and select appropriate new features by
surveying recent buyers and then calculating customer value versus
company cost for each potential feature and should avoid feature fatigue.
c. Performance Quality: Performance level is the level at which the product’s
primary characteristics operate: low, average, high, or superior.
d. Conformance Quality: the degree to which all produced units are identical
and meet promised specifications.
e. Durability: a measure of the product’s expected operating life under
natural or stressful conditions, is a valued attribute for vehicles, kitchen
appliances, and other durable goods.
f. Reliability: a measure of the probability that a product will not
malfunction or fail within a specified time period, and high reliability can
garner a price premium.
g. Repairability: ease of fixing a product when it malfunctions or fails.
h. Style: the product’s look and feel to the buyer and creates distinctiveness
that is hard to copy.
i. Customization: customized products and marketing allow firms to be
highly relevant and differentiating by finding out exactly what a person
wants—and doesn’t want—and delivering on that.