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 factors affect a good design?
4. How can a company build and manage its product mix and product lines?
5. How can companies combine products to create strong co-brands or ingredient
brands?
6. 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
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
4. Brands can be differentiated on the basis of a number of different product or service
dimensions: product form, features, performance, conformance, durability, reliability,
5. Design is the totality of features that affect how a product looks, feels, and functions. A
C H A P T E R
12
SETTING PRODUCT
STRATEGY
6. 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
7. A company can change the product component of its marketing mix by lengthening its
8. Brands are often sold or marketed jointly with other brands. Ingredient brands and co-
9. Physical products have to be packaged and labeled. Well-designed packages can create
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.
Perhaps, the most challenging concept of the chapter is the concept of line stretching,
and/or line filling. Again, the instructor is encouraged to use examples from
manufacturers’ and/or personal experience to communicate these concepts successfully.
Chapter-by–Chapter Instructional Material
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. At this point for the semester-long project, students should have set their group
2. In planning its market offering, the marketer needs to address five product levels:
core benefit, basic product, expected product, augmented product, and potential
3. Sonic PDA 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:
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.
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.
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 functionality is the key to brand success versus product design is the
key to brand success.
Suggested Response
Chapter-by–Chapter Instructional Material
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.
MARKETING DISCUSSION
Consider the diverse means of differentiating products and services. Which ones have the
most impact on your choices? Why?
Student answers will differ according to the product/services chosen. However, student
answers should encompass the following distinctions:
Products differentiation includes:
• Form
• Features
Services differentiation includes:
• Ordering ease
Marketing Excellence: CATERPILLAR
1) What were some of the key steps that led to Caterpillar’s becoming the industry
leader in earth-moving machinery?
Suggested Answer: In terms of the concept of “product,” Caterpillar has re-invented its
2) Discuss Caterpillar’s future. What should it do next with its product line? Where
is the future growth for this company?
Suggested Answer: Student’s answers will vary but good students will cite material from
Marketing Excellence: TOYOTA
1) Toyota has built a huge manufacturing company that can produce millions of cars
each year for a wide variety of consumers. Why was it able to grow so much
bigger than any other auto manufacturer?
Suggested Answer: Toyota has built a huge manufacturing company that can produce
millions of cars each year for a wide variety of consumers and has products for different
2) Has Toyota done the right thing by manufacturing a car brand for everyone? Why
or why not?
Suggested Answer: Student answers will vary but one opinion is that yes, Toyota has
3) No doubt Toyota will feel the impact of its massive recall for a long time. Did
Toyota grow too quickly as Toyota suggested? What should the company do over the
next year, 5 years, or 10 years? How can growing companies avoid quality problems in
the future?
Suggested Answer: Student’s answers will vary but to be consistent with this chapter’s
Chapter-by–Chapter Instructional Material
DETAILED CHAPTER OUTLINE
At the heart of a great brand is a great product. Product is a key element in the market offering.
To achieve market leadership, firms must offer products and services of superior quality that
provide unsurpassed customer value.
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
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.
1) Here is where companies search for new ways to satisfy customers and distinguish
its individual offer.
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.
a. First, each augmentation adds costs.
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.
Consumer-Goods Classification
The vast array of goods consumers buy can be classified on the basis of shopping habits.
A) Convenience goods are purchased frequently, immediately, and with a minimum of
effort.
1) Staples
2) Impulse goods
3) Emergency goods
Chapter-by–Chapter Instructional Material
Industrial-Goods Classification
We classify industrial goods in terms of their relative cost and how they enter the
production process: materials and parts, capital items, and supplies and business services.
A) Materials and parts
1) These are goods that enter the manufacturer’s product completely. They fall into
two major groups:
a. Raw materials include:
1. Farm products—commodity characteristics.
b. Manufactured materials and parts fall into two categories:
1. Component materials.
B) Capital items are long-lasting goods that facilitate developing or managing the
finished product. They include:
1) Installations.
C) Supplies and business services are short-term goods and services that facilitate
developing or managing the finished product. There are two kinds of supplies:
1) Maintenance and repair items (including business advisory services such as legal,
consulting, and advertising).
PRODUCT DIFFERENTIATION
To be branded, products must be differentiated. Physical products vary in potential for
differentiation.
A) Here the seller faces an abundance of differentiation possibilities, including form,
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.
C) Customization: marketers can differentiate products by making them customized to an
individual.
1) Mass customization is the ability of a company to meet each customer’s
1) Performance quality is the level at which the product’s primary characteristics
operate.
E) Conformance Quality: Buyers expect products to have a high conformance quality—
the degree to which all the product units are identical and meet the promised
specifications.
F) Durability: A measure of the product’s expected operating life under natural or
stressful conditions.
Chapter-by–Chapter Instructional Material
1) Style creates distinctiveness that is hard to copy.
2) Strong style does not always mean high performance.
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.
1) Ordering Ease: Ordering ease refers to how easy it is for the customer to place an order
with the company.
2) Delivery: refers to how well the product or service is brought to the customer.
DESIGN
A) As competition intensifies, design offers a potent way to differentiate and position a
company’s products and services.
B) Design is the totality of features that affect how a product looks and functions in terms
of customer requirements.
F) Design can shift consumer perceptions to make brand experiences more rewarding.
G) Design should penetrate all aspects of the marketing program so that all design aspects
work together.
H) Given the creative nature of design, it’s no surprise that there isn’t one widely adopted
approach. Some firms employ formal, structured processes.
I) Design thinking is a very data-driven approach with three phases: observation,
PRODUCT AND BRAND RELATIONSHIPS
Each product can be related to other products to ensure that a firm is offering and
marketing the optimal set of products.
The Product 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
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 consists of various product lines.
B) A company’s product mix has a certain width, length, depth, and consistency.
Chapter-by–Chapter Instructional Material
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.
Sales and Profits
Every company’s product portfolio contains products with different margins.
A) A company can classify its products into four types that yield different gross margins,
depending on sales volume and promotion.
1) Core products
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.
Product-Line Length
A) Company objectives influence product-line length.
Line Stretching
A) Line stretching occurs when a company lengthens its product line beyond its current
range.
Down-market stretch
A) Is when a company positioned in the middle market may want to introduce a lower-
priced line for any of three reasons:
A company faces a number of choices in deciding to move a brand down-market:
A) Use the parent name on all offerings
Moving down-market carries risk.
Up-Market stretch
Companies may wish to enter the high end of the market for:
1) More growth
2) Higher margins
Line Filling
A) 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.
Chapter-by–Chapter Instructional Material
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.
Product-Mix Pricing
A) Marketers must modify their price-setting logic when the product is part of a product
mix.
We can distinguish six situations involving product-mix pricing:
A) Product-line pricing
1) Companies normally develop product lines rather than single
products and introduce price steps.
B) Optional-feature pricing
1) Many companies offer optional products, features, and services along with their
main product.
2) Pricing is a sticky problem, because companies must decide which items to
include in the standard price and which to offer as options.
C) Captive–product pricing
1) The production of certain goods often results in by-products. If the by–products
have value to a customer group, they should be priced on their value.
F) Product-bundling pricing
1) Sellers often bundle product and features.
2) Pure bundling occurs when a firm only offers its products as a bundle (tied-in
sales).
Co-Branding and Ingredient Branding
Products are often combined with products from other companies in various ways.
A) Co–branding is also called dual branding or brand bundling.
1) Is in which two or more well-known existing brands are combined into a joint
product and/or marketed together in some fashion.
B) One form of co-branding is same-company co-branding.
1) Co–branding can also reduce the cost of product introduction because two well-
known images are combined, accelerating potential adoption.
H) The potential disadvantages of co-branding are:
a. The risks and lack of control from becoming aligned with another brand in the
minds of consumers.
b. Consumer expectations about the level of involvement and commitment with
co-brands are likely to be high, so unsatisfactory performance could have
negative repercussions for the brands involved.
Chapter-by–Chapter Instructional Material
a. The most important requirement is that there is a logical fit between the two
brands to maximize the advantages of each while minimizing disadvantages.
Ingredient Branding
Ingredient branding is a special case of co-branding. It creates brand equity for materials,
components, or parts that are necessarily contained within other branded products.
A) An interesting take on ingredient branding is “self–branding” in which companies
advertise and even trademark their own branded ingredients.
What are the requirements for successful ingredient branding?
1. Consumers must believe the ingredient matters to the performance and success of
the end product. Ideally, this intrinsic value is easily seen or experienced.
2. Consumers must be convinced that not all ingredient brands are the same and that
the ingredient is superior.
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
A) Packaging includes all the activities of designing and producing the container for
a product.
D) Packaging also affects consumers’ later product experiences when they go to open
the package and use the product at home.
E) Various factors have contributed to the growing use of packaging as a marketing
tool:
1) Self-service
2) Consumer affluence
F) To achieve these objectives and satisfy consumers’ desires, marketers
must choose the aesthetic and functional components of packaging
correctly.
G) Aesthetic considerations relate to a package’s size and shape, material,
color, text, and graphics.
I) After packaging is designed, it must be tested.
1) Engineering tests are conducted to ensure that the package stands up under normal
conditions.
Labeling
The label can be a simple attached tag or an elaborately designed graphic that is part of
the package. It might carry a great deal of information, or only the brand name. Even if
the seller prefers a simple label, the law may require more.
A) Sellers must label products
B) Labels perform several functions:
1) The label identifies the product or brand
Chapter-by–Chapter Instructional Material
E) The Fair Packaging and Labeling Act of 1967, set mandatory labeling requirements,
and allows federal agencies to set packaging regulations in specific industries.
Warranties and Guarantees
All sellers are legally responsible for fulfilling a buyer’s normal or reasonable
expectations.
Warranties are formal statements of expected product performance by the manufacturer.
Warranties, whether expressed or implied are legally enforceable.
2) Where the product’s quality is superior to the competition.