CHAPTER 7

PRODUCT DECISIONS
 CHAPTER CONTENT
PRODUCT & TYPES OF PRODUCT

PRODUCT LIFE CYCLE (PLC)

GROWTH DECISIONS: PRODUCT – MARKET EXPANSION GRID

BRAND

PRODUCT PACKAGING
 PRODUCT & TYPES OF PRODUCT
7.1.1 PRODUCT CONCEPT
• Definition: “A product is anything that can be offered to a market for attention,
acquisition, use or consumption that might satisfy a want or need.” (Kotler, 2014)
• Products can be tangible, intangible, or a combination of both.
• Example:
 PRODUCT & TYPES OF PRODUCT
7.1.2 Levels of a product

CORE BENEFIT OF THE PRODUCT

GENERIC PRODUCT
EXPECTED PRODUCT
AUGMENTED PRODUCT
POTENTIAL PRODUCT

5 LEVEL OF A PRODUCT (Philip Kotler)

 PRODUCT & TYPES OF PRODUCT
7.1.2 Levels of a product
Level 1: Core benefit is the most essential CORE BENEFIT OF
THE PRODUCT
benefit that the product is capable of
satisfying customers.

It is the value of the product, the core function

of the product that the business sells to
customers.

Core benefit answers the question: What is

customers really buying?
 PRODUCT & TYPES OF PRODUCT
7.1.2 Levels of a product
Level 2: Generic product are the general
characteristics of the product expressed in GENERIC PRODUCT

actual physical form such as: features,

functions, shape, size, color, brand, product
packaging.

These are the factors that help businesses

affirm their presence in the market.
 PRODUCT & TYPES OF PRODUCT
7.1.2 Levels of a product
Level 3: The expected product is the set of
attributes and conditions that buyers normally
expect and will be satisfied with when Expected product

purchasing the product.

If comparing core benefits and expected

products, core benefits satisfy immediate
needs while expected products are more long-
term in nature.
 PRODUCT & TYPES OF PRODUCT
7.1.2 Levels of a product
Level 4: Augmented product is the additions
to the expected product with other services or
benefits to differentiate the superiority of the
Augmented product
product that the business provides compared
to the products of competitors.

These are all the additional factors to the

product in terms of features, accompanying
services, ...
 PRODUCT & TYPES OF PRODUCT
7.1.2 Levels of a product
Level 5: The potential product is all the
additional and innovative elements that the
product can reach its highest level in the
future. Potential product

The potential product is not only intended to

satisfy customers but also to delight and
surprise them.
 PRODUCT & TYPES OF PRODUCT
7.1.3 Product classifications

Based on nature of a product:

• Tangible product: is a physical, touchable item that customers can see, feel,

and own.

• Intangible product: non-physical offering that customers cannot

touch or store but can experience or consume.

 PRODUCT & TYPES OF PRODUCT
7.1.3 Product classifications

Based on types of consumers:

• Consumer product: Bought by final consumers for personal consumption

• Industrial product: Bought by further processing or for use in conducting a business

 PRODUCT & TYPES OF PRODUCT
7.1.3 Product classifications

Consumer product:

• Convenience goods

• Shopping goods

• Specialty goods

• Unsought goods
 PRODUCT & TYPES OF PRODUCT
7.1.3 Product classifications

Category Frequency of Purchase Consumer Behavior Examples

Buy quickly, little

Convenience Goods Very frequent Snacks, toiletries, drinks
comparison

Compare price & Clothing, electronics,

Shopping Goods Occasionally
quality carefully furniture

Brand loyal, willing to Luxury cars, designer

Specialty Goods Rarely
seek out fashion

Limited awareness, Life insurance, funeral

Unsought Goods As needed (unplanned)
require persuasion services
 PRODUCT & TYPES OF PRODUCT
7.1.3 Product classifications

Industrial product:

• Material and parts

• Capital items

• Supplies
 PRODUCT & TYPES OF PRODUCT
7.1.3 Product classifications

Industrial product:

• Material and parts

• Capital items

• Supplies
 PRODUCT & TYPES OF PRODUCT
7.1.3 Product classifications

Category Purpose Examples Buying Decision

Raw inputs for Based

Materials & Parts Steel, microchips, cotton
manufacturing on quality and price

Long-term assets for Machinery, buildings, Based

Capital Items
operations vehicles on performance and ROI

Day-to-day business Office supplies, cleaning Based

Supplies & Services
operations products on availability and cost
 PRODUCT LIFE CYCLE (PLC)
7.2.1 Product life cycle concept
• Definition:
Product life cycle (PLC) is the course of a
product’s sales and profits over its lifetime.

• Product life cycle model:

 PRODUCT LIFE CYCLE (PLC)
7.2.1 Product life cycle concept
• Some notes on product life cycle:
o The concept of product life cycle can be
applied to different product forms.
o The length of product life cycle varies
between products.
o Product life cycle is getting shorter.
 PRODUCT LIFE CYCLE (PLC)
7.2.2 Phases in PLC

PRODUCT LIFE CYCLE PHASE

Factors
Introduction Growth Maturity Decline

Costs High High Low Low

Sales Low High Very high Low

Profits Low High Very high Low

Competitors Low Average High Very high

 INTRODUCTION GROWTH MATURITY DECLINE

Maximize profit while defending Reduce expenditure and milk the

Marketing Objectives Create product awareness and trial Maximize market share market share brand

Product Offer a basic product Offer product extensions, service, Diversify brand and models Phase out weak items
warranty

Price Penetration and skimming pricing Price adjustment Price to match or beat competitors Cut price

Place Build selective distribution Build intensive distribution Build more intensive distribution Go selective: phase out
unprofitable outlets

Continue to have campaigns to strongly

Increase Brand Awareness inform about the product. There may be Apply promotions & discounts
Promotion slight changes in communication Reduce to minimal level
Offer trials Maintain brand awareness
messages to suit the stage.
 PRODUCT LIFE CYCLE (PLC)

7.2.2 Phases in PLC

• Some methods to extend the product
life cycle:

-Add new features to the product

-Find new markets for the product

-Change the product packaging

 PRODUCT LIFE CYCLE (PLC)
7.2.2 Phases in PLC
• Other types of product life cycle:
 PRODUCT LIFE CYCLE (PLC)
7.2.3 The meaning of Product life cycle

• Businesses understand the dynamics of the Product Life Cycle through each stage,
enabling them to effectively coordinate the marketing mix.

• They can anticipate changes in costs, revenue, and profit, allowing them to
proactively manage resources and minimize risks.

• Businesses seize opportunities in the market.

 GROWTH DECISIONS:
PRODUCT – MARKET EXPANSION GRID
The product-market grid helps identify business growth opportunities through four
courses of actions:
EXISTING PRODUCT – EXISTING MARKET: Selling

NEW MARKET
the company’s current products in its existing
market
EXISTING PRODUCT – NEW MARKET: Selling
current products in new market

EXISTING MARKET
NEW PRODUCT – EXISTING MARKET: Selling new
products in the existing market
NEW PRODUCT – NEW MARKET: Selling new
EXISTING PRODUCT NEW PRODUCT
products in the new market
 GROWTH DECISIONS:
PRODUCT – MARKET EXPANSION GRID
7.3.1 Existing product - Existing market
• Description:
Penetrating the market more effectively and exploiting it further to increase market share. This
approach carries the lowest level of risk.
• Conditions for Application:
Commonly applied during the growth and maturity stages of the product life cycle.
Suitable for businesses with limited investment capacity or those unwilling to accept high levels of
risk.
• Decisions:
Maintain the market share of existing products.
Target new customers within the market segment.
Restructure the market by eliminating competitors.
Increase the customer retention rate.
 GROWTH DECISIONS:
PRODUCT – MARKET EXPANSION GRID
7.3.2 Existing product - New market
• Description:
Exploring new market segments for existing products. This is the second-lowest risk decision after
market penetration.
• Conditions for Application:
Commonly applied during the maturity stage of the product life cycle.
Consumer behavior in the new market should not differ significantly from the current market.
The business must conduct in-depth research on the new market.
• Decisions:
Introduce the product to a new geographic area.
Introduce the product to a new customer segment.
Introduce the product through a new distribution channel.
 GROWTH DECISIONS:
PRODUCT – MARKET EXPANSION GRID
7.3.3 New product - Existing market
• Description:
Product development involves expanding the current product line and offering new products to
customers in the existing market. This approach carries a higher level of risk.
• Conditions for Application:
Commonly applied at the late maturity stage or the early decline stage of the product life cycle.
Also applied when a business proactively seeks to capitalize on market opportunities.
• Decisions:
Research and develop entirely new products.
License and sell products from other companies.
 GROWTH DECISIONS:
PRODUCT – MARKET EXPANSION GRID
7.3.4 New product - New market
• Description:
Create a completely new market, diversify business activities for the enterprise. This growth decision
has the highest risk factor.
• Conditions for Application:
Commonly applied when the product is at the end of the maturity stage, the beginning of the
decline stage
Or when the enterprise proactively realizes that this is the right time to develop potential
opportunities
The enterprise needs to have good potential in terms of capital, accept the risk.
• Decisions:
Related diversification
Unrelated diversification
 BRAND
7.4.1 Brand & related concepts

• Definition of brand:
-According to AMA (American Marketing Association): “A brand is a name, symbol, term, icon or
a combination of these elements used to identify a product and distinguish it from competitors”
 BRAND
7.4.1 Brand & related concepts
- Brand: name, term, symbol, design or combination of these,
that identifies the maker or seller of a product or service.
- Trademark: legal designation indicating that the owner has
exclusive use of a brand that is prohibited by law. If the
company wants to have a trademark, it has to register with a
competent authorities to protect for its brand name or brand
mark.
- Trade name: a full and legal name of an organization
 BRAND
7.4.2 Brand elements

• 2 elements:

-Brand name: The part that can be spoken

(letters, numbers,…)

- Brand mark/logo: The part that not comprised

of words (symbol, design,…)
 BRAND
7.4.3 Types of brands
• Well-known marks:

Is a mark that is widely recognized by consumers

throughout the territory of Vietnam. (Excerpt
from Clause 20, Article 4 of the Intellectual
Property Law).
 BRAND
7.4.3 Types of brands
• Collective marks:

is a mark used to distinguish the goods and

services of members of an organization that owns
the mark from the goods and services of
organizations or individuals who are not
members of that organization. (Clause 17, Article
4, Intellectual Property Law 2005).
 BRAND
7.4.3 Types of brands
• Certification Trademark:
Is a mark whose owner allows other
organizations or individuals to use it on their
goods or services to certify characteristics such as
origin, raw materials, materials, production
methods, service provision methods, quality,
accuracy, safety, or other attributes of the goods
or services bearing the trademark. (Excerpt from
Clause 18, Article 4 of the Intellectual Property
Law).
 BRAND
7.4.3 Types of brands
• Associated Trademark:

An associated trademark consists of trademarks

registered by the same entity that are identical or
similar and used for the same, similar, or related
products and services. (Excerpt from Clause 19,
Article 4 of the Intellectual Property Law).
 BRAND
7.4.4 Branding decisions

• Should You Use a Trademark for Your Goods?

Advantages?

Disadvantages?
 BRAND
7.4.4 Branding decisions
• Who Owns the Brand on the Market?

Products Released Under the Manufacturer’s

Brand

Products Released Under the Distributor’s Brand

Products Carrying Both Manufacturer’s and

Distributor’s Brands
 BRAND
7.4.4 Branding decisions
• Naming a product brand:

Distinctive Brand Name

Uniform Trademark Name for All Products

Manufactured by the Company

Company Name Combined with Product

Trademark Name
 BRAND
7.4.4 Branding decisions
• Extending Brand name usage:
Extending Brand name usage refers to using an
already successful brand name for an improved
product or a new product introduced to the
market.
• Multi-Brand Strategy:
A multi-brand strategy is when a company uses
multiple trademarks for the same product
category to create different product lines
targeting various customer segments.
 PACKAGING
7.5.1 Product packaging
• Packaging definition:

- Packaging is a specialized product used to

contain and wrap other products to protect their
utility value, facilitating storage, transportation,
handling, and consumption.
 PACKAGE
7.5.1 Product Pakaging
• Structure of Packaging:
- The layer that directly contacts the product
- The protective layer for the contact layer
- Transport packaging
- Branding and descriptive information on the
package
 PACKAGE
7.5.2 Functions of packaging
• Protection

• Presentation

• Preservation

• Portability

• Proportation

• Promotion

• Preparation
 PACKAGE
7.5.3 Some Notes on Product Packaging
• Decision on characteristics: size, shape, material,

color, identification system, etc.

Distinctiveness

Attractiveness
 PACKAGING
7.5.3 Some Notes on Product Packaging
• Decision on characteristics: size, shape, material, color, identification system, etc. Ability to

reflect brand image/personality

Usability
 PACKAGING
7.5.3 Some Notes on Product Packaging
• Decisions on packaging information:

Information about the product type

Information on product quality

Information about the manufacturer, place of production, and characteristics

Safety instructions for use

Trademark information

Legally required information

 PACKAGING
7.5.3 Some Notes on Product Packaging
• Decisions on social benefit aspects:
CHAPTER 8
PRICE
DECISIONS
 PRICE AND ROLES OF PRICING POLICY

8.1.1. Concept of pricing

Price definition
• Price is the amount of money that
- a company charged for a product/service;
- a customer is willing to pay in exchange for a
product/service.
 RPICE AND ROLES OF PRICING POLICY

8.1.2. Roles of Price policy

• The most flexible element of the Marketing Mix

• The only variable among 4Ps that generates
revenue
• Influences sales/revenue and profit
• An effective tool for competition, market
penetration, and customer retention
 FACTORS AFFECTING PRICING

8.2.1. External factors of the business

• Supply and demand characteristics
• Competition
• Other external environmental factors
 FACTORS AFFECTNG PRICING

8.2.2. Internal factors of the business

• Marketing Objectives
• Positioning Strategy and Other Marketing Mix Variables
• Costs
• Other Factors
 PRICING DECISIONS

8.3.1. New-product pricing decisions

1. Marketing skimming pricing

2. Market penetration pricing
 (1) Market skimming pricing
• Definition:
Set high initial prices to “skim” revenues layer by layer from the market.
• Conditions to apply:
o The product’s quality and image should support its higher price and enough buyers must want the
product at that price
o The cost of producing a smaller volume can’t be so high
o Competitors should not be able to enter the market easily
and undercut the high price
o The company has absolute competitive advantage
o Often suitable for very new product that having high
technology
• Advantages / Disadvantages?
 (2) Penetration pricing
• Definition:
Set a low initial price to penetrate the market quickly and deeply – attract a
large number of buyers quickly and win a large market share.
• Conditions to apply
The market must be highly sensitive so that a low price produces more
market growth.
Production and distribution costs must decrease as sales volume increases
(economies of scale)
The low price must help keep out the competition
• Advantages / Disadvantages?
 8.3.2. Product mix pricing strategies
Pricing situation Description

Product line pricing Setting prices across an entire product line

Optional-product Pricing optional or accessory products sold with the

pricing main product
Captive-product Pricing products that must be used with the main
pricing product

By-product pricing Pricing low-value by-products to get rid of them

Product bundle
Pricing bundles of product sold together
pricing
 8.3.2. Price adjustments strategies
Pricing situation Description
Discount and allowance Reducing prices to reward customer responses such as paying
pricing early or promoting the product
Adjusting prices to allow for differences in customers,
Segmented pricing
products, or locations
Psychological pricing Adjusting prices for psychological effect

Promotional pricing Temporarily reducing prices to increase short-run sales

Adjusting prices to account for the geographic location of
Geographical pricing
customers
Adjusting prices continually to meet the characteristics and
Dynamic pricing
needs of individual customers and situations
Adjusting prices for international markets
International pricing
 8.3.4. Price changes

Initiating Price cuts

• Decrease in tax, salary or interest
• Company wants to dominate the market through lower costs
• Excess capacity
• Falling demand in strong price
• Competition
• Product in the decline period of PLC
• Weakened economy
• Price wars (commercial competition characterized by the repeated cutting of prices among
competitors)
 8.3.4. Price changes

Initiating Price increase

• Inflation
• Rising costs
• Overdemand (when a company cant supply all that its customers
need)
• Increase in tax, salary, interest
• More advantages, benefits for products
 PROCESS OF SETTING
OPITMAL PRICE

8.4.1. Selecting the pricing objective

8.4.2. Determine the market size
8.4.3. Estimating costs
8.4.4. Analyzing competitors
8.4.5. Selecting pricing strategies
8.4.6. Determining the final price
 CHAPTER 9

PLACE DECISIONS
 CHAPTER CONTENT

OBJECTIVES AND FUNCTIONS OF DISTRIBUTION ACTIVITIES

DISTRIBUTION CHANNELS

DISTRIBUTION CHANNELS DECISIONS

TYPES OF INTERMEDIARIES
 9.1.1. Objectives of distribution activities
DEFINITION: Marketing channel (or distribution channel): a set of interdependent
organizations that help make a product or service available for use or
consumption by the consumer or business user.

Objectives:
- Balance the demand in quantity, quality and structure
- Transfer ownership from manufacturer to the consumer
- Provide and receive information
- Financing
 9.1.2. Functions of marketing channels:
7 Functions
• Information: Gathering and distributing marketing research and information Marketing channel
intermediaries about actors and forces
• Promotion: developing and spreading persuasive communications about an offer
• Contact: Finding and communicating with prospective buyers
• Negotiate: Reaching and agreement on price and other terms of the offer that ownership or procession
can be transferred
• Financing: Acquiring and using funds to cover the cost of chanel works
• Matching: shaping and fitting the offer to the buyer’s needs
• Risk taking: Assuming the risks of carrying out the channel work.
 9.1.3. Requirements for distribution activities

3Rs and 1M
• Right goods
• Right place
• Right time
• Minimum cost
 9.2.1. Distribution channels

Marketing channel (or distribution

channel): a set of interdependent
organizations that help make a
product or service available for use
or consumption by the consumer
or business user.
9.2.2. Types of distribution channels
 9.2.2. Types of distribution channels
Direct Distribution channels:
• Direct distribution method is a distributing goods from
manufacturer to the final buyers that has no intermediaries.
• Direct distribution channel is a marketing channel that has no
intermediary levels.
 9.2.2. Types of distribution channels
Direct Distribution channels:
• Advantages:
o Directly control the distribution systems
o Don’t have to share profits
o Directly gather information from customers

• Disadvantages:
o Take all risks
o Investment expenses on building and managing stores
o Cant make use of experience from intermediaries
o Require enough human resouces and experience to manage
distribution system
 9.2.2. Types of distribution channels
Indirect Distribution channels:
• Indirect distribution method is a distributing goods from
manufacturer to the final buyers that has intermediaries.
• Indirect distribution channel is a marketing channel that has
one or more intermediary levels.
 9.2.2. Types of distribution channels
Indirect Distribution channels:
• Examples of indirect marketing channels (distribution channels):
Markets, supermarkets, convenience stores, department stores, factories
outlets, e-commerce websites, bankcassurance...
• They are classifies into 4 types:
o Wholesalers
o Retailers
o Agents
o Brokers
 9.2.2. Types of distribution channels
Indirect Distribution channels:
• Wholesaler: an intermediary that sell goods and services to those buying for resale or
business use
• Retailer: an intermediary that sell products/services directly to final consumers for their
personal, nonbusiness use.
• Agent: A wholesaler who represents buyers or sellers on a relatively permanent basis,
performs only a few functions, and does not take title to goods
• Brokers: A wholesaler who does not take title to goods and whose function is to bring
buyers and sellers together and assist in negotiation
 9.2.2. Types of distribution channels
Indirect Distribution channels:
Wholesaler/Retailer Agent Broker

Relationship with Purchase outright,

Buy/sell on behalf Sales promotion
manufacturer resell

Ownership Rights Yes No No

Pricing Decision Yes No No

Risk Bearing Yes No No

Commission Commission from

Profit Price difference
percentage both parties
 9.3. Distribution channels decisions
Selecting channel members:
• When selecting intermediaries, the company should determine what characteristics
distinguish the better ones.

• Criteria for selecting often include:

o Years in business, growth and profit record, cooperativeness, reputation
o Store’s location, customers and future growth potential
o The size and quality of the sale force
 9.3. Distribution channels decisions
Channel structure development:
Channel level: a layer of intermediaries that performs some work in
bringing the product and its ownership closer to the final buyer.

Structure of the channel can be defined through two factors: channel

length and channel width.
 9.3. Distribution channels decisions
Channel structure development:
• The number of intermediary levels indicates the
length of a channel.
o Short channel: zero or one intermediary level
o Long channel: two or more intermediary levels.
• The number of members within each intermediary
level (especially in the final intermediary level) in a
specific geographic area indicates the width of a
channel.
 9.3. Distribution channels decisions
Channel structure development:
• Major distribution strategies
➢ Three strategies regarding the number of members
to use at each intermediary level
 9.3. Distribution channels decisions
Channel structure development:
Exclusive distribution Selective distribution Intensive distribution

The use of more than one

Giving a limited number of
but fewer than all the
dealers the exclusive right to Stocking the product in as
intermediaries who are
Definition distribute the company’s many outlets as possible.
willing to carry the
products in their territories.
company’s products.

Few in number, trend-setter, Moderate in number, brand

Many in number,
willing to travel to store, conscious, somewhat willing
Consumers convenience oriented
brand loyal. to travel to store

Shopping goods: television,

Specialty or luxury goods Convenience goods or
furniture, and home
E.g: BMW, Bentley, Hermes, common raw materials:
Applied to appliance
Channel Coca-Cola, Unilever.
E.g: Samsung, Sunhouse
 9.3. Distribution channels decisions
Channel organization:
• Conventional distribution channel: Consists of one or more independent
producers, wholesalers and retailers.
o No channel member has much control over the others and no formal
means for assigning roles.
• Vertical marketing system: consist of producer, wholesalers and retailers
acting as unified system.
o One channel member owns the others has contract with them or wields
so much power that they must all cooperate.
• Horizontal marketing systems: a channel agreement inwhich two or
more companies at one level join together to follow a new marketing
opportunity
 9.3. Distribution channels decisions
Channel organization:
• Multichannel distribution system: A distribution system in which a single
firm sets up two or more marketing channels to reach one of more
customer segments.
o Almost companies distribute though multiple channels
o Multichannel distribution systems offer many advantages to companies
facing large and complex markets
o But it is hard to control and potentially generate conflicts
 9.3. Distribution channels decisions
Channel conflicts:

• Channel conflicts occur when channel members do not coordinate their activities and
cooperate well to achieve overall channel goals which leads to disagreements over goals,
roles, or rewards by channel members.
o Horizontal conflict occurs among firms at the same level of the channel
o Vertical conflict occurs between different levels of the same channel
 9.4. Types of intermediaries
Wholesaling:
• Wholesaling includes all the activities involved in selling goods and services to those buying
for resale or business use.
• Wholesaler is a firm engaged primarily in wholesaling activities
o Wholesalers buy mostly from producers and sell mostly to retailers, industrial consumers,
and other wholesalers. As a result, many of the nation’s largest and most important
wholesalers are largely unknown to final consumers.
 9.4. Types of intermediaries
Retailing:
• Retailing includes all the activities involved
in selling products or services directly to
final consumers for their personal,
nonbusiness use.
• Retailer is a business whose sales come
primarily from retailing.