CHAPTER 13: SETTING PRODUCT STRATEGY

Question 1

How can companies differentiate products? (9)

Answer 1

Companies can differentiate products using several key strategies. Below is an explanation of each major point with a real-life example:

1. Form

• Explanation: The physical characteristics or appearance of the product can be distinguished.
• Example: Apple’s iPhones have sleek, minimalist designs that stand out visually from many competitors.

2. Features

• Explanation: The product’s additional attributes or functionalities that add value.
• Example: Samsung Galaxy phones offer features like a high-resolution camera and an S-Pen stylus for drawing and note-taking.

3. Performance Quality

• Explanation: How well the product performs its core function relative to competitors.
• Example: Dyson vacuum cleaners perform at a high suction power level, offering superior cleaning performance.

4. Conformance Quality

• Explanation: The degree to which a product matches its design and specifications consistently.
• Example: Toyota is known for high conformance quality where each car reliably meets specifications and quality standards.

5. Durability

• Explanation: The product’s expected operating life before it deteriorates.
• Example: The rugged construction of Caterpillar heavy machinery ensures long operational life under harsh conditions.

6. Reliability

• Explanation: The likelihood that the product will not fail within a specified time.
• Example: Honda motorcycles have a strong reputation for reliability, frequently running for many miles with minimal issues.

7. Repairability

• Explanation: How easily the product can be fixed when broken.
• Example: Framework laptops are designed for easy repair and part replacement, promoting longevity and sustainability.

8. Style

• Explanation: The product’s aesthetic appeal or design elements that attract customers.
• Example: Nike shoes combine performance with stylish designs that appeal to sports and fashion-conscious consumers.

9. Customization

• Explanation: The ability to tailor the product to individual customer preferences.
• Example: Dell offers customizable PCs where customers can select components like processor, RAM, and storage.

Question 2

*How can companies use packaging, labeling, warranties, and guarantees as marketing tools? (4)

Answer 2

Companies use packaging, labeling, warranties, and guarantees as important marketing tools to attract customers, communicate value, and build trust. Here’s how each works with simple explanations and examples:

1. Packaging

• Packaging helps identify the product, protects it during transport, and makes it attractive on the shelf. It can also provide important information and make the product easier to use.
• Example: A juice company uses colorful, easy-to-open bottles that stand out on store shelves and keep the juice fresh. This makes customers more likely to pick their brand.

2. Labeling

• Labels tell customers what the product is, what it contains, and how to use it. They also help promote the brand and some labels indicate quality grades.
• Example: A cereal box label showing it has whole grains, vitamins, and delicious taste helps customers quickly understand the benefits, making it more appealing.

3. Warranties

• Warranties are formal promises from the company about how well the product will perform or how long it will last. They assure customers they are buying a reliable product.
• Example: A smartphone brand offers a one-year warranty, promising to repair or replace the phone if it breaks due to a manufacturing fault. This builds customer confidence.

4. Guarantees

• Guarantees are promises that assure customer satisfaction. If customers are not happy with the product, they can get a refund or replacement.
• Example: A shoe company offers a 30-day satisfaction guarantee, so if the shoes don’t fit well, customers can return them for free. This reduces buying risks and encourages purchases.

Together, these tools help companies attract attention, build trust, and encourage people to buy their products by reducing risk and clearly communicating benefit.

Question 3

Discuss product classifications.

Answer 3

Certainly! Here’s a clear and detailed explanation of product classifications based on durability, tangibility, and use, along with real-brand examples to help you understand better:

1. Durability & Tangibility

Products can be classified based on how long they last (durability) and whether they are tangible (physical) or intangible (services):

• Nondurable Goods:

These are tangible products that are consumed quickly, usually in one or a few uses.

Examples: Food, beverages, toiletries.

Real Brand Example: Coca-Cola (soft drink)—you consume it quickly and must buy frequently.

• Durable Goods:

Tangible products that last for a long time and can be used repeatedly over months or years.

Examples: Appliances, cars, clothing.

Real Brand Example: Apple (MacBook laptops)—last many years and used multiple times.

• Services:

Intangible products that cannot be physically possessed; they often involve a performance or action.

Examples: Haircuts, legal advice, cleaning services.

Real Brand Example: Uber—provides ride services rather than a physical product.

This classification helps marketers decide how to promote and price the product according to its nature,.

2. Use-Based Classification

Products are also grouped by their usage: consumer goods and industrial goods.

A. Consumer-Goods Classification (based on shopping habits)

• Convenience Goods:

Bought frequently, with minimal effort, usually inexpensive.

Examples: Snacks, toothpaste.

Example: Colgate toothpaste—easy to find, regular purchase.

Types of convenience goods include:

Staples (regular items e.g., bread)

Impulse goods (unplanned buys e.g., candy at checkout)

Emergency goods (urgent need e.g., umbrella on a rainy day).

• Shopping Goods:

Consumers compare brands and qualities before buying; usually more expensive than convenience goods.

Examples: Clothing, electronics.

Example: Nike shoes—consumers compare style, price, quality before purchase.

Two types:

Homogeneous (similar products, e.g., TVs)

Heterogeneous (differentiated, e.g., furniture).

• Specialty Goods:

Unique products that buyers make a special effort to purchase, often with brand loyalty.

Examples: Luxury cars, designer clothes.

Example: Rolex watches—people seek this brand specifically.

• Unsought Goods:

Products consumers don’t normally think about or need until a situation arises.

Examples: Life insurance, funeral services.

Example: Aflac insurance—often requires aggressive marketing to inform and sell.

B. Industrial-Goods Classification (for business use)

• Materials and Parts:

Raw materials or manufactured parts used in producing other goods.

Examples: Steel, computer components.

Example: Intel processors supplied to computer manufacturers.

• Capital Items:

Long-lasting goods that facilitate production but do not become part of the product.

Examples: Machinery, buildings.

Example: Caterpillar construction equipment used in building projects.

• Supplies and Business Services:

Short-term goods and services supporting product creation or business operations.

Examples: Office supplies, cleaning services.

Example: Office Depot supplies; FedEx logistics services.

Includes:

Maintenance & repair items (e.g., copier repair)

Business advisory services (e.g., consulting firms like McKinsey).

Question 4

Discuss product hierarchy. (6)

Answer 4

Product hierarchy is a way to organize products from the broadest category (core need) down to the most specific item. It helps marketers understand how products relate to customer needs and how companies structure their product offerings.

Levels of Product Hierarchy

1. Need Family

• The fundamental human requirement or want the product satisfies.
• It answers the question: Why does this product exist?
• Example: Security is a basic need.
• Real Brand Example: The need for security is what drives the existence of life insurance and home security products.

2. Product Family

• All product classes that satisfy a core need in a reasonably effective way.
• It’s a broad group of related product classes.
• Example: Savings and Income products satisfy the need for security by providing financial protection or growth.
• Real Brand Example: The family includes anything from savings accounts to insurance products.

3. Product Class

• A group of products within the product family sharing similar functions.
• Also called a product category.
• Example: Financial Instruments is a product class under the savings and income family.
• Real Brand Example: Prudential’s range of financial products like mutual funds, annuities, life insurance.

4. Product Line

• Products within a product class that are closely related because they perform similar functions, target the same customers, or share marketing channels.
• Example: Life Insurance is a product line within financial instruments.
• Real Brand Example: Prudential’s life insurance offerings including term life, whole life, and universal life insurance.

5. Product Type

• Various forms within a product line that differ in features or functions.
• Example: Term Life Insurance is a product type within the life insurance line.
• Real Brand Example: Prudential renewable term life insurance (a specific form of term life insurance).

6. Item

• The most specific unit, a distinct product with unique size, price, or features.
• Example: Prudential Renewable Term Life Insurance, $500,000 coverage for 20 years.
• Real Brand Example: Specific policy options like the Prudential 20-year $500,000 coverage renewable term life insurance plan.

Question 5

Discuss product systems and mixes. (4)

Answer 5

What are Product Systems and Mixes?

• Product System: A group of diverse but related products that work together to satisfy a broader customer need or function in a compatible way.
• Product Mix (also called Product Assortment): The complete set of all product lines and individual items a company offers for sale.

Understanding these helps companies plan what products to offer and how to organize them efficiently,.

Main Points of Product Mix

A company’s product mix has four key dimensions:

1. Width

• Refers to how many different product lines a company carries.
• Example: A company with apparel, footwear, and accessories lines has a mix width of 3.
• Real Brand Example: Nike has a product mix width that includes lines like running shoes, sports apparel, and sports equipment.

2. Length

• The total number of individual items the company offers across all product lines.
• Real Brand Example: Nike offers thousands of different products (like various shoe models, apparel sizes, etc.), so it has a long product mix.

3. Depth

• The number of variants offered within each product line (different sizes, colors, styles).
• Real Brand Example: Nike’s running shoes come in multiple variants—different colors, sizes, and specialized models (e.g., for trail running vs. road running).

4. Consistency

• How closely related the product lines are in terms of use, production, distribution, or other factors.
• High consistency means the product lines are closely related; low consistency means they are more diverse.
• Real Brand Example: Nike’s product mix has high consistency because all products are related to sports and athletic performance.