Marketing Chapter - Level of Product

1. THE PRODUCT
• Products are almost always combinations
of the tangible and intangible. The entire
package is sometimes referred to as the
augmented product.
• The mix of tangibles and intangibles in
the augmented product varies from one
product or service to another.

2. THE PRODUCT
• Product is a key element in the market
offering. Marketing mix planning begins
with formulating 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 appropriateness.

3. COMPONENTS OF THE MARKET
OFFERING
Value based pricing
Attractiveness of the
market offering
Product features and
quality
Services mix and
quality

4. PRODUCT LEVELS
• In planning its market offering, the
marketer needs to think through five
levels of the product.
• Each level adds more customer value,
and the five constitute a customer value
hierarchy.
( Contd…. )

5. FIVE LEVELS OF THE PRODUCT
(5) Potential
Product
(1) Core
Product
(2) Basic
Product
(4) Augmented
Product
(3) Expected
Product

6. FIVE LEVELS OF THE PRODUCT
• (1) Core Product / Core Benefit : The
fundamental service or benefit that the
customer is really buying.
• (2) Basic Product : At the same level, the
marketer has to turn the core benefit into
a basic product.
• (3) Expected Product : A set of attributes
and conditions buyers normally expect
when they purchase this product.

7. FIVE LEVELS OF THE PRODUCT
• (4) Augmented Product : The marketer
prepares an augmented product that
exceeds customer expectations.
• Today’s competition essentially takes
place at the product-augmentation level.
( In less developed countries, competition
takes place mostly at the expected
product level ).
( Contd.….. )

8. FIVE LEVELS OF THE PRODUCT
( Augmented Product )
• According to Levitt : The new
competition is not between what
companies produce in their factories, but
between what they add to their factory
output in the form of packaging, services,
advertising, customer advice, financing,
delivery arrangements, warehousing, and
other things that people value.

9. FIVE LEVELS OF THE PRODUCT
Some things should be noted about
product-augmentation strategy :
• First, each augmentation adds cost. The
marketer has to ask whether customers
will pay enough to cover the extra cost.
• Second, augmented benefits soon become
expected benefits. For gaining
competitive advantage one will have to
search for still other features and
benefits.

10. FIVE LEVELS OF THE PRODUCT
( product-augmentation strategy )
• Third, as companies raise the price of
their augmented product, some
competitors can offer a “ Stripped-down
” version at a much lower price. Thus
alongside the growth of fine products we
see the emergence of lower-cost products
for the clients who simply want the basic
product.

11. FIVE LEVELS OF THE PRODUCT
• (5) Potential Product : encompasses all the
possible augmentations and transformations
the product might undergo in the future.
Companies search for new ways to satisfy
customers and distinguish their offer.
• ( Successful Companies add benefits to their
offering that not only satisfy customers but also
surprise and delight them. ) “ The best way to
hold customers is to constantly figure out how to
give them more for less. ”

12. PRODUCT DIFFERENTIATION
The challenge before the product
marketers is to create relevant and
distinctive product differentiation. The
product differentiation may be based on :
• Physical Differences ( eg., features,
performance, conformance, durability,
reliability, design, style, packaging )
• Availability Differences ( eg., available
from stores or orderable by phone, mail,
fax, internet )

13. PRODUCT DIFFERENTIATION
• Service Differences ( eg., delivery,
installation, training, consulting,
maintenance, repair )
• Price Differences ( eg., very high price,
medium price, low price, very low price )
• Image Differences ( eg., symbols,
atmosphere, events, media )

14. CHALLENGES FOR PRODUCT
INNOVATORS
Any successful differentiation will tend to
draw imitators. The innovator faces
three choices :
• Lower the price to protect market share
and accept lower profits.
• Maintain the price and lose some market
share and profits.
• Find a new basis to differentiate the
product and maintain current price.

15. PRODUCT CLASSIFICATION
ON THE BASIS OF PRODUCT
CHARACTERISTICS :DURABILITY,
TANGIBILITY AND USE (consumer or
industrial )
(1) NON-DURABLE
(2) DURABLE
(3) SERVICES
( CONTD . )

16. (1)
NON-DURABLES
• These are tangible goods normally
consumed in one or few uses. Because
these goods are consumed quickly and
purchased frequently, the appropriate
strategy is to make them available at
many locations, charge only a small
mark up and advertise heavily to induce
trial and build preference.

17. (2) DURABLES
• These are tangible goods that normally
survive many uses. Normally require
more personal selling and service,
command a higher margin, and require
more seller guarantees.

18. (3) SERVICES
These are intangible,
inseperable,
variable and
perishable products.
Normally require more quality control,
superior credibility, and adaptability.

19. PRODUCT CLASSIFICATION
ON THE BASIS OF CUSTOMER
SHOPPING HABITS :
(1) CONVENIENCE GOODS
(2) SHOPPING GOODS
(3) SPECIALITY GOODS
(4) UNSOUGHT GOODS

20. (1) CONVENIENCE GOODS
• are goods that the customer usually
purchases frequently, immediately, and
with a minimum of efforts.
• (A) Staples: Consumers purchase on a
regular basis.
• (B) Impulse Goods: are purchased
without any planning or search efforts.
• (C) Emergency Goods: are purchased
when a need is urgent.

21. (2) SHOPPING GOODS
• are goods that the customer , in the process
of selection and purchase, characteristically
compares on such basis as suitability,
quality, price and style.
• (A) Homogeneous Shopping Goods: are
similar in quality but different enough in
price to justify shopping comparisons.
• (B) Heterogeneous Shopping Goods: differ in
product features and services that may be
more important than price.

22. (3) SPECIALITY GOODS
• are goods with unique characteristics or
brand identification for which buyer is
willing to make a special purchasing
effort.

23. (4) UNSOUGHT GOODS
• are goods the consumer does not know
about or does not normally think of
buying. These goods require advertising
and personal selling support.

24. PRODUCT STRATEGY
• Calls for coordinated decisions on :
• (1) Product Mix
• (2) Product Line
• (3) Individual Product
• (4) Service Product

25. PRODUCT MIX
• A product mix (also called product
assortment) is the set of all products and
items that a particular seller offers for
sale.
• A total group of products that an
organization markets.
• A company’s product mix has a certain
width, length, depth and consistency.

26. DIMENSIONS OF PRODUCT MIX
• The width of company’s (say HLL’s)
product mix refers to how many different
product lines the company carries, such
as bathing soap, detergents, shampoos,
toothpaste, food products.

27. DIMENSIONS OF PRODUCT MIX
• The length of a company’s product mix
refers to the total number of items in its
product mix. Thus in each of the product
line HLL has a number of product items.
Eg., in the product line of bathing soaps,
HLL has several product items like Lux,
Liril, Lifebuoy, Pears.

28. DIMENSIONS OF PRODUCT MIX
• The depth of a company’s product mix
refers to how many variants are offered
of each product in the line. Thus if close
up toothpaste comes in three
formulations and in three sizes, Close up
has a depth of nine (3x3). The average
depth of HLL product mix can be
calculated by averaging the number of
variants within the brand groups.

29. DIMENSIONS OF PRODUCT MIX
• 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. HLL’s product lines are
consistent insofar as they are consumer
goods that go through the same
distribution channels.

30. DIMENSIONS OF PRODUCT MIX
• These four dimensions of the product mix
provide the handles for defining the company’s
product strategy. The company can expand its
business in four ways.
• 1. The Co. can add new product lines, thus
widening its product mix.
• 2. The Co. can lengthen each product line.
• 3. The Co. can add more product variants to
each product and deepen its product mix.
• 4. The Co. can pursue more product-line
consistency or less, depending upon whether it
wants to acquire a strong reputation in a single
field or participate in several fields.

31. PRODUCT LINE
• A product line is a group of products that
are closely related, because they perform
a similar function, are sold to the same
customer groups, are marketed through
the same channels or fall within the given
price ranges.
• The product mix may be composed of
several product lines.

32. PRODUCT LINE ANALYSIS
• 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. They
also need to understand each product’s
market profile, i.e. how their product line
is positioned against competitors’
product lines (The Product Map).

33. PRODUCT PORTFOLIO
MANAGEMENT
• Product Line Length :
. Downward Line Stretching
. Upward Line Stretching
. Two Way Stretching
High
Price
New
Present
Product
Present
New
Product
Low
Low
Quality
New
Present
New
High
(Downward)
(Upward)
(Two Way)

34. PRODUCT PORTFOLIO
MANAGEMENT
• Filling in the Product Line ( adding more
items within the present range of line )
• Product Line Modernization
• Product Line Featuring
• Product Line Pruning

35. INDIVIDUAL PRODUCT DECISIONS
• Product Attribute Decisions
• Brand Decisions
• Brand Positioning
• Packaging and Labeling

36. DEFINITION OF BRAND
• American Management Association
defines brand as follows :
“ A brand is a name, term, sign, symbol,
or design, or a combination of them,
intended to identify the goods and
services of one seller or group of sellers
and to differentiate them from those of
competitors. ”

37. THE MEANING OF BRAND
• The brand is not a product but it gives the
product meaning and defines its identity
in both time and space.
• Brands are a direct consequence of the
strategy of market segmentation and
product differentiation.
• Companies want to stamp their mark on
different sectors and set their imprint on
their products.

38. BUILDING THE BRAND
• “The art of marketing is the art of brand
building. When something is not a brand,
it will probably viewed as a commodity.
Then price is what counts. When price is
the only thing that counts, the only
winner is the low-cost producer.”
.
( Philip Kotler )

39. BRAND NAME DECISIONS
• Individual Names
• Blanket Family Names
• Separate Family Names for all products
• Company Trade name combined with
individual product names.

40. BRAND NAME
• It should suggest something about the
product’s benefits.
• It should suggest something about
product qualities.
• It should be easy to pronounce, recognize
and remember.
• It should be distinctive.
• It should not carry poor meanings in
other countries and languages.

41. BRAND IDENTITY AND ASSOCIATION
• A brand identity or association is
anything that is directly or indirectly
linked in memory to a brand. The most
common association is that of product
attributes or customer benefits.
• A brand’s associations are assets that can
differentiate, provide reasons to buy, instil
confidence and trust, affect feelings
towards a product and the use experience,
and provide the basis for brand extension.

42. BENEFITS OF BRAND AWARENESS
• First, awareness provides the brand with
a sense of familiarity, and people like the
familiar.
• Second, name awareness can be a signal
of presence, commitment, and substance.
The logic is that if a name is recognized,
there must be a reason.
• Third, the salience of a brand will
determine if it is recalled at a key time in
the purchasing process.

43. BRAND LOYALTY
• First, brand loyalty reduces the marketing costs
of doing business, since existing customers are
relatively easier to hold.
• Second, brand loyalty represents a substantial
barrier to competitors. Excessive resources are
required when entering a market in which
existing customers must be enticed away from an
established brand that they are loyal to.
• Third, Brand loyalty provides trade leverage.
• Fourth, a relatively large, satisfied customer base
provides an image of a brand as an accepted,
successful, and enduring product.
• Finally, brand loyalty provides the time to
respond to competitive moves.

44. DEFINITION OF BRAND EQUITY
• Brand equity is a set of assets and
liabilities linked to a brand’s name and
symbol that add to or substract from the
value provided by a producer or service to
a firm and / or that firm’s customers.
• Brand equity generates value to the
customer that can emerge either as a price
premium or enhanced brand loyalty.

45. BRAND EQUITY
Brand
Awareness
Perceived
Quality
Brand
Equity
Brand
Identity
Brand
Loyalty
( Powerful brands have high brand
equity, higher brand loyalty.)

46. TOOLS FOR BUILDING BRAND
• Advertising
• Sponsorship of games and events
• Social Causes
• Public Facilities
• Founder’s personality

47. BRAND STRATEGY DECISIONS
• Line Extensions
• Brand Extensions
• Multibrands
• New brands
• Co-brands

48. BRAND STRATEGY DECISIONS
Product Category
Existing
Existing
Brand
Name
New
Line
Extension
Multibrands
New
Brand
Extension
New Brand
Names

49. LINE EXTENSION
• Line extension occurs when a company
introduces additional items in the same product
category under the same brand name, usually
with new flavours, forms, colours, added
ingredients, package sizes and so on.
• Line extensions generally have a higher chance
of survival than new products.
• On the down side extensions may lead to the
brand name losing its specific meanings; Ries
and Trout call this “ Line Extension Trap .”

50. BRAND EXTENSION
• Brand Extension occurs when a company
decides to use an existing brand name to
launch a product in the new category.
• Brand Extension offers a number of
advantages.
-Instant recognition and earlier acceptance
-Saves considerable advertisement costs

51. BRAND EXTENSION
• Brand Extension also involves risks.
- The new product might disappoint
buyers and damage their respect for
company’s other products.
- The brand name may loose its special
positioning in the consumer’s mind
through over extension - a phenomenon
called “ brand dilution .”

52. MULTI BRANDS
• A company will often introduce additional
brands in the same product category.
- One of the motives for multibranding is
to establish different features and/or
appeal to different buying motives.
- It also enables the company to lock up
more distributor shelf space and protest
its major brand by setting up flanker
brands.

53. NEW BRANDS
• When a company launches products in a
new category, it may find that none of its
current brand names are appropriate.
• When the present brand image is not
likely to help the new product, companies
are better off creating new brand names.

54. CO-BRANDS
• Co-branding occurs when two different
companies pair their respective brands in
a collaborative marketing effort.
• Each brand sponsor expects that other
brand name will strengthen brand
preference or purchase intention.

55. PRODUCT LIFE CYCLE
• The Product Life Cycle ( PLC ) is an
important concept in marketing that
provides insights into a product’s
competitive dynamics.
• To fully understand the concepts of PLC ,
one should first understand its parent
concept, the demand and technology life
cycles.

56. DEMAND / TECHNOLOGY
LIFE CYCLE
• Marketing thinking should not begin
with a product or even a product class,
but rather with a need.
• The product exists as one solution among
many to meet a need.
• A need is satisfied by some technology.
• Each new technology normally satisfies
the need in a superior way and it shows a
demand-technology life cycle.
• The PLC portrays distinct stages in the
sales history of a product.

57. DEMAND-TECHNOLOGY-PRODUCT
LIFE CYCLES
Sales
Time

58. STAGES IN THE PRODUCT LIFE
CYCLE
Sales
&
Profits
Time
Introduction
Growth
Maturity
Decline

59. STAGES IN THE PRODUCT LIFE
CYCLE
• By identifying the stage that a product is in, or may be
headed toward, companies can formulate better
marketing plans.
• Products require different marketing, financial,
manufacturing, purchasing and personnel strategies in
each stage of their life cycle.
• Marketers must pursue appropriate marketing
strategies in each stage of PLC.
• Today, in order to succeed, it is absolutely essential to
constantly improve products to increase the value
offered to customers, ( V = B/P ).
• The success of competitors is based on creating value
for the customer by differentiating their product,
( Competitive Differential ).

60. EXTENDING THE PRODUCT LIFE
CYCLE
Sales
Time
•( When the sales of a product starts declining
marketers may choose suitable strategy for
further growth of product /business/enterprise.)

61. PRODUCT LIFE CYCLE
Reasons for change in behavior of PLC :
• --Changes in the consumer needs and
preferences
• --Advancing Technology
• --Competition, Government Policies etc.
• --Changes in number of potential buyers
Stages in PLC :
Introduction, Growth, Maturity, And Decline.

62. MARKETING STRATEGIES IN THE
INTRODUCTION STAGE
Promotion
High
High
Price
Low
Low
Rapid
Skimming
Strategy
Rapid
Penetration
Strategy
Slow
Skimming
Strategy
Slow
Strategy

63. MARKETING STRATEGIES IN THE
GROWTH STAGE
• It improves product quality and adds new
product features and improved styling.
• It adds new models and flanker products (i.e.,
products of different sizes, flavors, and so forth
that protect the main product ).
• It enters new market segments.
• It increases its distribution coverage and enters
new distribution channels.
• It lowers prices to attract the next layer of pricesensitive buyers.
• It shifts from product-awareness advertising to
product-preference advertising.

64. MATURITY STAGE
• Sales are increasing but at a decreasing
rate.
• Profits are beginning to decline.
• Price competition increases.
• The manufacturer assume a greater
share of the total promotional effort in
the fight to retain dealers and shelf space
in their stores.

65. MATURITY STAGE
To understand better, we can devide
Maturity Stage into three stages :
• Growth Maturity : When the rate of sales growth starts
to decline because of distribution saturation.
• Stable Maturity : When the rate of sales growth starts
declining due to market saturation.
• Decaying Maturity : The sales level starts to decline as
some of the customers move towards other competitive
and substitute products.

66. MARKETING STRATEGIES IN THE
MATURITY STAGE
• Market Modification
• Product Modification
• Marketing Mix Modification

67. MARKETING STRATEGIES IN THE
MATURITY STAGE
Market Modification
• Expand number of users :
- Convert non-users
- Enter new market segments
- Win competitors’ customers
• Increase annual usage :
- More frequent use
- More usage per occasion
- New and more varied uses

68. MARKETING STRATEGIES IN THE
MATURITY STAGE
Product Modification
• A strategy of quality improvement aims at
increasing the product’s functional
performance - its durability, reliability, speed,
taste.
• A strategy of feature improvement aims at
adding new features ( for example - size,
weight, materials, additives, accessories ) that
expand the product’s versatility, safety, or
convenience.

69. MARKETING STRATEGIES IN THE
MATURITY STAGE
Product Modification (contd.)
• A strategy of style improvement aims at
increasing the product’s aesthetic appeal.
The periodic introduction of new car
models amounts to style competition
rather than quality or feature
competition.

70. MARKETING STRATEGIES IN THE
MATURITY STAGE
•
•
•
•
•
•
Marketing Mix Modification
Prices
Distribution
Advertising
Sales Promotion
Personal Selling
Services

71. MARKETING STRATEGIES IN THE
DECLINE STAGE
• Identifying the Weak Products
To do this, many companies appoint a
product-review committee with
representatives from marketing, R&D,
manufacturing and finance. The product
review committee makes a
recommendation for each dubious
product--leave it alone, modify its
marketing strategy, or drop it.

72. MARKETING STRATEGIES IN THE
DECLINE STAGE (Contd.)
• Determining Marketing Strategies :
( Go Strategy )
Continuation Strategy :
-Increasing the firm’s investment ( to
dominate the market or strengthen the
competitive position )
- Maintaining the firm’s investment level
until the uncertainties about the industry
are resolved.
(Contd.)

73. MARKETING STRATEGIES IN THE
DECLINE STAGE (Contd)
• Determining Marketing Strategies :
( Go Strategy )
Concentration Strategy :
- Decreasing the firm’s investment level
selectively, by dropping unprofitable customer
groups, while simultaneously strengthening the
firm’s investment in lucrative niches.
Harvesting Strategy :
- Divesting the business quickly by disposing of
its assets as advantageously as possible.

74. MARKETING STRATEGIES IN THE
DECLINE STAGE (Contd)
• The Drop Strategy
- When a company decides to drop a product, it
faces further decisions. If the product has
strong distribution and residual goodwill, the
company can probably sell it to another firm.
- If the company can’t find any buyers, it must
decide whether to liquidate the brand quickly
or slowly. It must also decide on how much
parts inventory and service to maintain for past
customers.

75. NEW PRODUCT DEVELOPMENT
PROCESS
•
•
•
•
•
•
•
•
(1) Idea Generation
(2) Screening
(3) Concept Development and Testing
(4) Marketing Strategy
(5) Business Analysis
(6) Product Development
(7) Market Testing
(8) Commercialization

76. THE CONSUMER ADOPTIONPROCESS
(STAGES IN THE ADOPTION PROCESS )
• Awareness : The consumer becomes aware of
the innovation but lacks information about it.
• Interest : The consumer is stimulated to seek
information about the innovation.
• Evaluation : The consumer considers whether
to try the innovation.
• Trial : The consumer tries the innovation to
improve his or her estimate of its value.
• Adoption : The consumer decides to make full
and regular use of the innovation.

77. ADOPTER CATEGORIZATION ON THE
BASIS OF RELATIVE TIME OF
ADOPTION OF INNOVATIONS
Time of adoption of innovations