PRODUCT (2)

Product Decisions
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Learning outcomes

1. Product and Service Decisions

2. Branding (in detail)
3. New Product Development
4. Product Lifecycle
5. Product Portfolio Planning and Analysis
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Product and Service Decisions

▸ Three levels of product and service

decisions
▹ individual product decisions
▹ product line decisions
▹ product mix decisions
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Product and Service Decisions

▸ Individual ▸ Product ▸ Product Mix

Product and Line (or Product
Service Decisions Portfolio)
Decisions ▹ Product ▹ Product mix
▹ Product and line length width
service ▹ Product mix
attributes length
▹ Branding ▹ Product mix
▹ Packaging
▹ Labelling and
depth
logos ▹ Product mix
▹ Product support consistency
services
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Product Mix Decisions

Tide Regular liquid soft

Tide Regular powder soft
Tide Blossom powder soft Product Mix: The set of all
Tide Blossom liquid soft product lines and items that a
Tide Blossom powder Tide Regular powder particular seller offers for sale
Tide Blossom liquid Tide Regular liquid
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Individual Product and Service Decisions
Product and service attributes

Developing a ▸Product quality: the characteristics of a product or service that

product or service bear on its ability to satisfy stated or implied customer needs.
involves defining the ▹product quality level (performance quality): choose a
benefits that it will quality level that will support the product’s positioning.
offer. These benefits ▹performance quality: the product’s ability to perform
are communicated its functions
and delivered by ▹Choose a quality level that matches the target market
product attributes needs and levels of competing products.
such as quality,
features, and style ▹product quality consistency (conformance quality):
and design. ▹conformance quality: freedom from defects and
consistency delivering a targeted level of performance.
▹Strive for high levels of conformance quality.
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Five Guys

Five Guys Burgers and

Fries is an American fast-
casual restaurant chain
dedicated to crafting
high-quality hamburgers,
shakes, and French fries.
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Individual Product and Service Decisions
Product and service attributes

Developing a ▸Product features

product or service ▹Most products can be offered with varying
involves defining the features that supplement their basic function.
benefits that it will
offer. These benefits
The company can then create higher-level
are communicated models by adding more features.
and delivered by ▹Features are a competitive tool for
product attributes differentiating the company’s product from
such as quality,
features, and style competitors’ products. Being the first producer
and design. to introduce a valued new feature is one of the
most effective ways to compete.
▹Examples of features of water bottle products:
natural ingredients, vitamin content,
▹How can a company identify new features and
decide which ones to add to its product?
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Individual Product and Service Decisions
Product and service attributes

Developing a ▸Product style and design

product or service
involves defining the ▹Distinctive product style and design can add
benefits that it will customer value.
offer. These benefits ▹Style describes the appearance of a product.
are communicated
and delivered by
▹A sensational style may grab attention and
product attributes produce pleasing aesthetics, but it does not
such as quality, necessarily make the product perform better.
features, and style ▹Design is a larger concept than style. Design
and design.
goes to the heart of a product and good design
contributes to a product’s usefulness as well as
its looks.
▹How to come up with a good design?
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Samsung Odyssey G9 Curved Gaming Monitor

The Samsung Odyssey G9 Curved Gaming Monitor is one of our
best product designs of 2020 because it will immerse you in any
game. It has a lit blue circle—the Infinity Core—that looks like an
eyeball, and the curved screen lets it match the contours of your
eye.
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Design - an important aspect of
luxury products
▸ Quality
▸ Uniqueness
▸ Craftsmanship
▸ Heritage
▸ Authenticity
▸ History
12 Individual Product and Service
Decisions
Branding
A brand is a name, term, sign, symbol, or ▸ Branding helps
design or a combination of these, that companies:
identifies the products or services of one
seller or group of sellers and differentiates
▹ legal protection
them from those of competitors. ▹ serve different
segments with
different brands
Customers perceive a brand as an
important part of a product, and ▸ Branding helps
branding can add value to a consumer’s consumers:
purchase. ▹ identify products
that benefit them
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14 Individual Product and Service
Decisions
Packaging
Packaging involves the activities
of designing and producing the
container or wrapper for a product.

▸ Increased competition and clutter

on retail store shelves means that
packages must now perform
many sales tasks—from
attracting buyers to communicating
brand positioning to closing the
sale.
15 Individual Product and Service
Decisions
Logos and Labelling
Labels and logos range from They perform several functions:
simple tags attached to products - identify the product or brand.
to complex graphics that are part - describe several things about the product—
of the packaging who made it, where it was made, when it was
made, its contents, how it is to be used, and
how to use it safely.
- help to promote the brand and engage
customers
- support the brand’s positioning and add
personality to the brand. In fact, they can
become a crucial element in the brand-
customer connection.
16 Individual Product and Service
Decisions
Product support service
- Customer service is another element of Services Differentiation
product strategy. A company’s offer usually - Ordering ease
- Delivery
includes some support services, which can
- Installation
be a minor part or a major part of the total - Customer training
offering. - Customer consulting
- Maintenance and repair
- Returns
Note: Services discussed in this part are the
services that augment actual products.

- See services of Lexus on page 253 (Kotler

and Amstrong, 2017).
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Product Mix Decisions

Tide Regular liquid soft

Tide Regular powder soft
Tide Blossom powder soft Product Mix: The set of all
Tide Blossom liquid soft product lines and items that a
Tide Blossom powder Tide Regular powder particular seller offers for sale
Tide Blossom liquid Tide Regular liquid
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Product Line Decisions

Product line Examples:

▸ Major product line
A group of products ▸ Nike produces
decisions:
that are closely several lines of ▹ product line length:
related because
they function in a athletic shoes the number of items in
similar manner, are and apparel, the product line
sold to the same ▸ Marriott offers ▹ expand product line
customer groups,
are marketed several lines of by: line filling or
through the same hotels line stretching
types of outlets, or
fall within given
price ranges.
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Product Line Decisions
Product line filling
▸ Product line ▸ Reasons: ▸ Overdone
filling ▹ reaching for extra when:
involves profits ▸ resulting in
adding more ▹ satisfying dealers cannibalization
items within ▹ using excess (eating up sales
the present capacity of the company’s
range of the ▹ being the full-line own existing
line. company products)
▹ plugging holes to
▸ customer
keep out
confusion
competitors
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▸ Product line
filling of BMW
BMW has used line filling
successfully to boost its appeal to
the rich, the super-rich, and the
wannabe-rich, all without departing
from its pure premium positioning
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Product Line Decisions
Product line stretching

Product Ways of Line stretching downward

line stretching ▸ Companies located at the
stretching upper end of the market can
▸ Line stretching stretch their lines downward.
occurs when downward ▸ to plug a market hole that
a company
▸ Line stretching otherwise would attract a new
lengthens its competitor
upward
product line ▸ to respond to a competitor’s
beyond its ▸ Two-way attack on the upper end
current stretch: ▸ it may add low-end products
Companies serving
range. because it finds faster growth
the middle market
might stretch their taking place in the low-end
line in both segments
directions.
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Product Line Decisions
Product line stretching
Line stretching upward
Product Ways of ▸ to add prestige to their current
line stretching products
stretching ▸ Line ▸ to reap higher margins
occurs when stretching ▸ Examples: The leading Japanese
a company downward auto companies have each
introduced an upscale automobile:
lengthens its
▸ Line Toyota’s Lexus, Nissan’s Infiniti, and
product line Honda’s Acura. They invented
stretching entirely new names, because
beyond its
upward consumers might not have given
current the brand “permission” to stretch
range. ▸ Both ways upward when those lines were first
introduced.
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Product Mix Decisions

Tide Regular liquid soft

Tide Regular powder soft
Tide Blossom powder soft Product Mix: The set of all
Tide Blossom liquid soft product lines and items that a
Tide Blossom powder Tide Regular powder particular seller offers for sale
Tide Blossom liquid Tide Regular liquid
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Product Mix Decisions

▸ The width ▸ The ▸ The depth of ▸ The

of a length of a product consistency of
product a product mix refers to the product
mix describes
mix refers mix refers how many how closely
to how to the variants are related the
many total offered of various product
different number of each product lines are in end
product items in in the line. use, production
lines the the mix. requirements,
distribution
company
channels, or
carries. some other way.
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BRANDING

▸ Branding is endowing ▸ Branding creates

products and services with mental structures that
the power of a brand. It’s all help consumers
about creating differences
organize their
between products.
knowledge about
▸ Marketers need to teach products and services
consumers “who” the product
in a way that clarifies
is—by giving it a name and
other brand elements to their decision making
identify it—as well as what and, in the process,
the product does and why provides value to the
consumers should care. firm.
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BRANDING

▸ For branding ▸ Brand ▸ Other brands create

competitive
strategies to be differences
advantages through
successful and often relate to nonproduct-related
attributes or means. Gucci,
brand value to be
benefits of the Chanel, and Louis
created, consumers Vuitton have become
product itself.
must be convinced Gillette, Merck,
category leaders by
understanding
there are and 3M have led consumer
meaningful their product motivations and
differences among categories for desires and creating
relevant and
brands in the decades, due in appealing images
product or service part to continual around their
category. innovation. products.
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Measuring Brand Strength through Brand
Equity and Brand Value
▸ Brands are more than ▸ Brand ▸ Brand value
just names and symbols.
They are a key element
Equity The is the total
in the company’s differential financial
relationships with effect that value of a
consumers. Brands knowing the brand.
represent consumers’
perceptions and brand name
feelings about a has on
product and its customer
performance—
everything that the
response to
product or the service the product
means to consumers. or its
marketing
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BUILDING STRONG BRANDS

INDIVIDUAL
HOMEWORK
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NEW PRODUCT DEVELOPMENT

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PRODUCT LIFE-CYCLE STRATEGIES

Product Life-Cycle
The course of a product’s sales
and profits over its lifetime.
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PRODUCT LIFE-CYCLE STRATEGIES

NOTES: Not all products Some products Some enter the

follow all five are introduced decline stage and
stages of the and die quickly; are then cycled
PLC. others stay in back into the
the mature growth stage
stage for a long, through strong
long time. promotion or
repositioning.
It seems that a
well-managed
brand could live
forever.
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PRODUCT LIFE-CYCLE STRATEGIES

▸ The PLC Product Product Brand:

concept can class: form: - a brand’s life-
describe a - the longest - standard cycle can
product class life cycle PLC. E.g., change quickly
(e.g., gasoline-
powered - sales could dial because of
telephones, changing
automobiles, stay VHS tapes,
laundry soaps),
a mature for and film competitive
product form a long time cameras attacks and
(e.g., SUVs, responses
powdered
detergents), or a
brand (e.g., the
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PRODUCT LIFE-CYCLE STRATEGIES

▸ Using the PLC [☓] should not blindly push products

concept to develop through the traditional product life-
marketing cycle stages.
strategy also can [✓] defy the “rules” of the life cycle
be difficult because and position or reposition their
strategy is both a products in unexpected ways
cause and a result
[✓] must continually innovate
of the PLC.
Kotler and Amstrong (2017, p. 297)
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Product Portfolio Planning and
Analysis
▸Many companies are ▸companies must ▸ within a product line,
multiproduct, serving decide how to management needs to
multiple markets and distribute their decide which brands to
segments limited resources invest in or hold, or from
▸Some of these among the which to withdraw
products will be competing needs of support.
strong, others weak. products so as to ▸ within the product mix,
Some will require achieve the best decisions regarding which
investment to finance performance for the product lines to build or
their growth, others company as a whole hold, or from which to
will generate more withdraw support, need
cash than they need. to be taken.
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Product Portfolio Planning and
Analysis
▸ The process of ▸ Key decisions ▸Several companies’
managing regarding portfolio approach to portfolio
groups of planning involve planning.
brands and decisions regarding ▸ Boston Consulting
product lines is the choice of which Group Growth Share
called brands/product lines Matrix
portfolio to build, hold, ▸ General Electric
planning harvest or divest. Market
Attractiveness–
Competitive Position
portfolio evaluation
models
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Product Portfolio Planning and
Analysis
▸ Like the product lifecycle these are very flexible
tools and can be used at both the brand and
product line levels.
▸ Indeed, corporate planners can also use them
when making resource allocation decisions at the
strategic business unit level.
39 Product Portfolio Planning and Analysis
Boston Consulting Group Growth Share
Matrix
▸ The matrix allows portfolios of products to
be depicted in a 2x2 box, the axes of which
are based on market growth rate (a
proxy for market attractiveness) and
relative market share (a proxy for
company strength).
▸ The analysis is based upon cash flow (rather
than profits) and its key assumptions are:
• market growth has an adverse effect on
cash flow because of the investment in such
assets as manufacturing facilities, equipment
and marketing needed to finance growth
• market share has a positive effect on
cash flow as profits are related to market
share.
40 Product Portfolio Planning and Analysis
Boston Consulting Group Growth Share
Matrix
▸ Market ▸ Relative ▸ The Boston Consulting Group
growth rate market argued that cash flow is
dependent on the box in which
forms the share is
a product falls.
vertical axis shown on the ▸ Note that cash flow is NOT
and indicates horizontal the same as profitability.
the annual axis and Profits add to cash flow but
growth rate refers to the heavy investment in such
assets as manufacturing
of the market market share facilities, equipment and
in which each of each marketing expenditure can
product line product mean that a company can
make profits and yet have a
operates. relative to its negative cash flow.
▸ (0-15%) largest
41 Product Portfolio Planning and Analysis
Boston Consulting Group Growth Share
Matrix
▸ Stars are likely to be ▸Question marks ▸Cash cows are ▸Dogs also operate in
profitable because are products in market leaders in low growth markets but
they are market high growth mature (low have low market share.
leaders but require markets, which growth) markets. Except for some products
substantial near the dividing line
cause a drain on High market share
investment to leads to high between cash cows and
finance growth (e.g. cash flow, but dogs (sometimes called
these are low profitability and low
new production market growth cash dogs) most dogs
facilities) and to share products; produce low or negative
means that
meet competitive consequently cash flows.
investment in new
challenges. they are unlikely ▸Relating to their
production facilities
▸ Cash flow is to be profitable. is minimal. position in the product
therefore likely to be ▸ lifecycle, they are the also
Overall, then, ▸This leads to a large
roughly in balance rans in mature or
they are big cash positive cash flow. declining markets.
users.
Implications /Question marks
of BCG
analysis
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Individual Research Homework

▸ General Electric
▸ Criticisms of Market
▸ Read page 683-
BCG Growth Attractiveness–
691, JOBBER, D.
Share Matrix Competitive
and CHADWICK,
Position portfolio
F. (2019)
evaluation
models
▸ Product
Strategies for
Growth (Ansoff
Matrix)