Session 21 MG 220 MBA - 25 Oct 10

MG 220 Marketing Management
MBA 10
Fall 2010
Muhammad Talha Salam, Asst. Professor
talha.salam@nu.edu.pk
Access it online: www.slideshare.net/talhasalam
Part 5:
Shaping the Marketing Offerings
> Product Characteristics
> Differentiation
> Product & Brand Relationships
> Case Study Class Discussion: LEGO
Class Presentation | Session 21 | 25 Oct 2010

Product Characteristics & Classifications
Product Levels: The Customer value Heirarchy
What is a Product?
• Anything that can be offered to a market to satisfy a want or a need
Product Levels (Example: A motorcycle)
• Levels which a marketers needs to address
• Core Benefit (Fundamental)
Transportation
• Basic Product
Standard structure and features
• Expected Product (buyer’s expectations at buying)
Efficient, certain guaranteed life
• Augmented Product (Exceeds customer expect.)
High performance, After sales
• Potential Product (All augment. even considering future)
More speed, power, safety, easy maintenance etc.
MG 220 Marketing Management 2

Product Levels: The Customer value Hierarchy
Competing at different levels
• In developed countries, branding & positioning is done at Augmented Level.
• In developing countries, it takes place at Expected product level.
Important points related to Product Augmentation Strategies
• Each Augmentation adds costs
• Augmented benefits soon become expected benefits (necessary POPs)
• As companies raise the price of their augmented products, some companies go
for simple, stripped-down versions at very low costs

Product Classifications
Three Key areas of Classifying products
• Durability & Tangibility
Use:
• Consumer-Goods Classification OR
• Industrial-Goods Classification
Durability & Tangibility
• Non-durable Goods
• Durable Goods
• Services

Consumer-Goods Classification
• Convenience Goods
– Bought freq. with min effort and consumed quickly
Types:
– Staples (regular basis. Bread, eggs)
– Impulse goods (without any planning. Chocolates, ice cream)
– Emergency goods (for a special need, umbrellas for rain)
• Shopping Goods
– Consumers compare during process of selection and purchase
Types:
– Homogenous shopping goods (similar in quality but difference in price. E.g. refrigerator with same
features)
– Heter0genous shopping goods (different product features and services. E.g. cars of different models)
• Specialty goods
– Unique characteristics, Considerable effort in selection e.g. a house
– Generally comparisons not made if decision is made for product
• Unsought goods
– Doesn’t normally think of buying e.g. insurance
– Personal selling is required

Industrial-Goods Classifications
• Materials & Parts
– Raw Materials
• Farm Products
• Natural Products
– Manufactured Materials & Products
• Component Materials
• Component parts
• Capital items
– Installations
• Buildings
• Heavy Equipment
– Equipment
• Portable factory equipment & tools
• Office equipment
• Supplies & Business Services
– Supplies
• Maintenance & Repair Items
• Operating supplies
– Business Services
• Maintenance & Repair services
• Business Advisory Services

Differentiation
Product Differentiation | Design
Concept of Differentiation
• To be branded, products must be differentiated
Product Differentiation
• Form
• Features
• Performance Quality
• Conformance Quality
• Durability
• Reliability
• Repairability
• Style
Design: The integrative force
• Totality of features that affect how a product looks and functions in terms of customer
requirements
• Some products, brands focus it too much and consider it to be a winning factor
• Ferrari & 3M’s projectors!

Differentiation
Services Differentiation
Services Differentiation
• Ordering Ease
• Delivery
• Installation
• Customer Training (how to handle vendor’s equipment)
• Customer Consulting (helping customers with information & advisory)
• Maintenance & Repair (service program to help product function optimally)

Product & Brand Relationships
The Product Hierarchy
The Product Hierarchy
• Need family
• Product family
• Product class
• Product line
• Product type
• Items (Stock Keeping Unit – SKU or product variant)

Product Systems and Mixes
Product System
• A group of diverse but related items that function in an compatible manner
Product Mix
• Also called product assortment. Set of all products and items a particular seller
offers for sale. Product mix consists of various product lines
• A company’s product mix has certain width, length, depth and consistency
• Width: Number of product lines a company has
• Length: Number of items in mix (overall).
Average length: Total prods/no. of lines
• Depth: Number of variants for each product in a line
Average depth: average of number of variants for all items
• Consistency: How closely related various product lines are in end use, production
requirements, distribution channels, or some other way.
• Discuss examples of different FMCGs

Product Line Analysis
Deciding on what lines to keep and which to divest
• Key variables:
– Sales & Profits
– Market Profile
Sales & Profits
• Every company’s portfolio contains different products of different margins
• Classifying products based on margins yielded by different products:
– Core Products: High volume | High promotion | low margins
– Staples: Low volume | No promotion | Somewhat higher margins
– Specialties: Low volumes | High promotion | Higher margins
– Convenience items: High volume | Less promotion | Higher margins
Market Profile
• Creating a product map for lines
• Identifying new areas for operating
• Identifying different market segments
• Example in Graph

Product Line Analysis
Deciding on what lines to keep and which to divest
• Key variables:
– Sales & Profits
– Market Profile
Sales & Profits
• See the graph for comparison/analysis
Market Profile
• Example in Graph: Paper company X
• Compared against competitors:
A, B, C & D

Product-Line Length
Company’s overall objectives influence product-line length
Generally product-line length increases
Line Stretching
• Company lengthens line beyond current range. Options are:
• Down-market stretch
• Up-market stretch
• Two-way stretch
Line Filling
Line Modernization, Featuring & Running

Product-Mix Pricing
Pricing strategies related to Product Mix and Product Line
Product-Line Pricing (Establishing pricing levels for a product line)
Optional-Feature Pricing (pricing for features separately)
Captive-Product Pricing (pricing for ancillaries like razors for Gillette)
Two-Part Pricing (Fixed fee plus variable usage fee)
By-Product Pricing (Pricing by-products produced during production process)
Product-Bundling Pricing (offering a bundled package price)

Co-branding & Ingredient Branding
Co-Branding
• Dual-branding or brand bundling
• Two well-known brands combined
Ingredient Branding
• Special case of co-branding

MG 220 Marketing Management
MBA 10
Fall 2010
Muhammad Talha Salam, Asst. Professor
talha.salam@nu.edu.pk
Part 5:
Shaping the Marketing Offerings
> Packaging, Labeling, Warranties & Guarantees
> Chap 13: Designing & Managing Services (SKIM)
> Quiz 6: Chap 9, 13/ed. Or Chap 11, 12/ed.
Class Presentation | Session 22 | 28 Oct 2010

Session 21 MG 220 MBA - 25 Oct 10

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