Mma6e Chapter 12
Mma6e Chapter 12
Mma6e Chapter 12
An Asian Perspective,
6th Edition
Instructor Supplements
Created by Geoffrey da Silva
Setting Product Strategy
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12
Learning Issues for Chapter Twelve
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?
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Chapter Outline
• The customer will judge the offering by three basic elements: product
features and quality, services mix and quality, and price. See Figure 12.1.
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Figure 12.1: Components of the Market Offering
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Product Characteristics and Classifications
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Product Levels: The Customer Value Hierarchy
• Each level adds more customer value, and the five constitute
a customer value hierarchy.
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Figure 12.2: Five Product Levels
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Product Levels: The Customer Value Hierarchy
• At the second level, the marketer has to turn the core benefit
into a basic product.
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Product Levels: The Customer Value Hierarchy
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Core Benefit
What is the core benefit of Web sites such as Alibaba? A place for businesses to source and
showcase their supplies.
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Differentiation
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Augmentation
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Getting “Back-to-Basics”
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Product Classifications
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Durability and Tangibility
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Product Classification
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Consumer-Goods Classification
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Consumer-Goods Classification
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Consumer-Goods Classification
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Consumer-Goods Classification
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Industrial-Goods Classification
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Industrial-Goods Classification
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Industrial-Goods Classification
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Industrial-Goods Classification
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Product and Services Differentiation
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Product Differentiation: Form
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Product Differentiation: Features
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Differentiation through Features
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Product Differentiation: Customization
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Product Differentiation: Performance Quality
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Performance Quality
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Product Differentiation: Conformance Quality
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Product Differentiation: Durability
• Buyers will generally pay more for products that have a reputation
for being long lasting.
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Product Differentiation: Reliability
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Product Differentiation: Repairability
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Product Differentiation: Style
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Style Decisions in Asia
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Style Decisions in Asia
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Complexity of Design
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Services Differentiation
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Services Differentiation
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Services Differentiation
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Customer Training—McDonald’s
• In 2010, it launched a
Hamburger University in China,
its seventh worldwide, to
educate local talent before
promoting them to management
level.
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Services Differentiation
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Design
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Design
• Given the creative nature of design, it’s no surprise that there isn’t one
widely adopted approach. Some firms employ formal, structured processes.
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Design
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Marketing Insight: Marketing Luxury Brands
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Product and Brand Relationships
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The Product Hierarchy
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The Six Levels in a Product Hierarchy
(using insurance as an example)
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The Six Levels in a Product Hierarchy
(using insurance as an example)
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The Six Levels in a Product Hierarchy
(using insurance as an example)
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Product Systems and Mixes
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Table 12.2: Product-Mix Width and Product-Line
Length for Lion Products
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The Product Mix Dimensions
1. The width of a product mix refers to how many different product lines the
company carries.
2. The length of a product mix refers to the total number of items in the
mix.
• We can also talk about the average length of a line. This is obtained by
dividing the total length by the number of lines.
1. The depth of a product mix refers to how many variants are offered of
each product in the line.
2. 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.
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Product Mix Strategies
1. It can add new product lines, thus widening its product mix.
3. It can add more product variants to each product and deepen its
product mix.
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Product-Line Analysis
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Sales and Profits
• A company can classify its products into four types that yield different
gross margins, depending on sales volume and promotion.
– Core products
– Staples
– Specialties
– Convenience items
• Companies should recognize that items can differ in their potential for
being priced higher or advertised more as ways to increase their sales,
their margins, or both.
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Figure 12.3: Product-Item Contributions to a Product
Line’s Total Sales and Profits
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Market Profile
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Figure 12.4: Product Map for a Paper-Product Line
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Product-Line Length
• A company lengthens its product line in two ways: by line stretching and
line filling.
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Line Stretching
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Down-market Stretch
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Down-market Stretch: Choices
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Down-market Stretch Example: Airlines
In addition to its full-service carrier, Singapore Airlines also has a regional carrier in SilkAir and a
medium- and long-haul budget airline in Scoot.
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Up-market Stretch
Companies may wish to enter the high end of the market for:
a. More growth
b. Higher margins
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Examples of Up-market Stretch
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Two-way Stretch
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Two-way Stretch: Toyota
Toyota adopts a two-way stretching strategy where the Lexus and the Camry serve the upper end,
the Corona and the Corolla the midrange, and the Vios the lower end.
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Line Filling
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Line Filling: Point of Caution
• The company should also check that the proposed item meets
a market need and is not being added simply to satisfy an
internal need.
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Line Modernization, Featuring, and Pruning
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Line Modernization, Featuring, and Pruning
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Product Line Modernization–Nike
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Line Modernization, Featuring, and Pruning
• The company may try to boost demand for the slower sellers.
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Line Modernization, Featuring, and Pruning
• The weak items can be identified through sales and cost analysis.
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Product Line Pruning
Haier has a wide range of diversified products that may add more to product costs and complexity
than sales. Some line pruning may be needed
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Brand Portfolio and Core Brands
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Product-mix Pricing
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Six Situations Involving Product-mix Pricing:
1. Product-line pricing
• Companies normally develop product lines rather than single products
and introduce price steps.
• In many lines of trade, sellers use well-established price points for the
products in its personal line.
• The seller’s task is to establish perceived-quality differences that justify
the price differences.
1. Optional-feature pricing
• Many companies offer optional products, features, and services along
with their main product.
• Pricing is a sticky problem, because companies must decide which items
to include in the standard price and which to offer as options.
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Six Situations Involving Product-mix Pricing:
3. Captive-product pricing
• Some products require the use of ancillary or captive products.
• There is a danger in pricing the captive product too high in the
aftermarket.
3. Two-part pricing
• Service firms often engage in two-part pricing, consisting of a
fixed fee plus a variable usage fee.
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Six Situations Involving Product-mix Pricing:
5. By-product pricing
• 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.
5. Product-bundling pricing
• Sellers often bundle product and features.
• Pure bundling occurs when a firm only offers its products as a bundle
(tied-in sales).
• In mixed bundling, the seller offers goods both individually and in
bundles.
• When offering a mixed bundle, the seller normally charges less for the
bundle than if the items were purchased separately.
• Some customers will want less than the whole bundle.
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Marketing Memo
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Co-branding
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Co-branding
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Advantages of Co-branding
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Disadvantages of Co-branding
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Requirements for Successful Co-branding
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Ingredient Branding
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The Requirements for Successful Ingredient
Branding
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The Requirements for Successful Ingredient
Branding
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Packaging, Labeling, and Warranties and Guarantees
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Packaging
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Impact of Packaging on Consumer Behavior
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Example: Packaging for Chinese Herbal Medicines
Health Food Enterprises—Most packaging for herbal medicines in China use traditional designs with
very earthy colors such as brown or yellow. Health Food Enterprises wanted a rich-looking package
that reflected its costly contents.
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Factors that have Contributed to the Growing Use of
Packaging as a Marketing Tool
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Factors that have Contributed to the Growing Use of
Packaging as a Marketing Tool
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Factors that have Contributed to the Growing Use Of
Packaging as a Marketing Tool
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Packaging Objectives
Table 12.3 summarizes the beliefs of some visual marketing experts about its role.
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Balancing Different Objectives in Packaging
• Coca-Cola Japan’s
environmentally friendly
packaging for the drink
ILOHAS appeals to those who
want to leave little carbon
footprint.
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Aesthetic Aspects of Packaging
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Functional Aspects of Packaging
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Labeling
• Even if the seller prefers a simple label, the law may require
more.
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Labeling Functions
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Refreshing Labels
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Labeling Laws
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Imitative Packaging
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Labeling Standards and Laws
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Warranties and Guarantees
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Warranties and Guarantees
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Schema for Chapter Twelve
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Thank you