SHAPING THE MARKET OFFERINGS IN THIS CHAPTER, WE WILL ADDRESS THE FOLLOWING QUESTIONS: 1. What are the characteristics of products and how can they be classified? 2. How can companies differentiate products? 3. How can a company build and manage its product mix and product lines? 4. How can companies combine products to create strong co- brands or ingredient brands? 5. How can companies use packaging, labeling, warranties, and guarantees as marketing CHAPTER 12 SETTING PRODUCT STRATEGY At the heart of a great brand is a great product. Product is a key element in the market offering. Market leaders generally offer products and services of superior quality. erhaps no other high-end product combines the skilled crafts- manship, market dominance, and longevity of Steinway pianos. One-hundred-fifty years old, the family-run company retains many of the same manufacturing processes from its humble origins in New York City. Although mass-produced pianos take roughly 20 days to build, build- ing a Steinway takes nine months to a year. A Steinway piano requires 12,000 parts, most of them handcrafted, and relies on 120 technical patents and innovations. Despite the fact that it can produce only a few thousand pianos a year and has only 2 percent of all keyboard unit sales in the United States, Steinway commands 25 percent of the sales dollars and 35 percent of the profits. Not surprisingly, Steinway owns the market in concert halls (where it has a market share over 95 percent) and with composers and musicians.^ A Steinway concert grand: the great product at the heart of a great brand. 371 372 PART 5 SHAPING THE MARKET OFFERINGS Marketing planning begins with formulating an offering to meet target cus- tomers' needs or wants. The customer will judge the offering by three basic ele- ments: product features and quality, services mix and quality, and price (see Figure 12.1). In this chapter, we examine product; in Chapter 13, services; and in Chapter 14, prices. All three elements must be meshed into a competitively attractive offering. Value-based prices • • • • • • Product Characteristics and Classifications | FIG. 12.1 Components of the Market Ottering Many people think that a product is a tangible offering, but a product can be more than that. A product is anything that can be offered to a market to satisfy a want or need. Products that are marketed include physical goods, services, experiences, events, persons, places, proper- ties, organizations, information, and ideas. Product Levels: The Customer Value Hierarchy In planning its market offering, the marketer needs to address five product levels (see Figure 12.2). 2 Each level adds more customer value, and the five constitute a customer value hier- archy. The fundamental level is the core benefit: the service or benefit the customer is really buying. A hotel guest is buying "rest and sleep." The purchaser of a drill is buying "holes." Marketers must see themselves as benefit providers. At the second level, the marketer has to turn the core benefit into a basic product. Thus a hotel room includes a bed, bathroom, towels, desk, dresser, and closet. At the third level, the marketer prepares an expected product, a set of attributes and con- ditions buyers normally expect when they purchase this product. Hotel guests expect a clean bed, fresh towels, working lamps, and a relative degree of quiet. Because most hotels can meet this minimum expectation, the traveler normally will settle for whichever hotel is most convenient or least expensive. At the fourth level, the marketer prepares an augmented product that exceeds customer expectations. In developed countries, brand positioning and competition take place at this level. In developing countries and emerging markets such as China and India, however, competition takes place mostly at the expected product level. Differentiation arises on the basis of product augmentation. Product augmentation also leads the marketer to look at the user's total consumption system: the way the user performs the tasks of getting and using products and related services. 3 As Levitt observed long ago: FIG. 12.2 | Five Product Levels SETTING PRODUCT STRATEGY CHAPTER 12 The new competition is not between what companies produce in their factories, but between what they add to their factory output in the form of packaging, ser- vices, advertising, customer advice, financing, delivery arrangements, warehous- ing, and other things that people value. 4 Some things should be noted about product-augmentation strategy. First, each augmen- tation adds cost. Second, augmented benefits soon become expected benefits and necessary points-of-parity. Today's hotel guests expect cable or satellite television with a remote con- trol and high-speed Internet access or two phone lines. This means competitors will have to search for still other features and benefits. Third, as companies raise the price of their aug- mented product, some competitors offer a "stripped-down" version at a much lower price. Thus, alongside the growth of fine hotels like Four Seasons and Ritz Carlton, we see the emergence of lower-cost hotels and motels like Motel 6 and Comfort Inn, which cater to clients who simply want the basic product. i- JAMESTOWN CONTAINER CO. What could be harder to differentiate than corrugated cardboard? Yet, Jamestown Container Company, the lead supplier of corrugated products for companies such as 3M, has formed strategic partnerships with area manu- facturers to provide every part of the shipping system. It not only provides boxes, but also offers tape, shrink- wrap, and everything else needed either to display or to ship a customer's final product. "It's a combination for survival," says the company's Chief Operating Officer. "More customers want to call one place for everything. We n have to keep reinventing ourselves and form these kinds of relationships to remain competitive." 5 At the fifth level stands the potential product, which encompasses all the possible aug- mentations and transformations the product or offering might undergo in the future. Here is where companies search for new ways to satisfy customers and distinguish their offer. For instance, in an era when customers are demanding ever-faster Internet and wireless con- nections, Verizon is investing its capital in creating a raft of potential products: r- VERIZON Rather than be seen as a follower in the highly competitive telecom industry, Verizon is pushing fast into totally new territory. For one thing, Verizon is rolling out fiber-optic connections to every home and business in its 29-state territory over the next 10 to 15 years. This will allow the lightning-fast transmission of everything from traditional phone service to HDTV. The company is no less aggressive when it comes to wireless technology. Verizon has covered Manhattan with more than 1,000 Wi-Fi hot spots that lets any Verizon broadband subscriber use a laptop to tap into the Net wirelessly when near a Verizon pay phone. The company is also deploying 3G, a third-generation wireless service that lets customers make super-speedy Net connections from their mobile phones. In short, the company is investing billions in services customers don't even know they want yet, but a which—Verizon is betting—will set the standard for the entire industry. 6 Also consider the customization platforms new e-commerce sites are offering, from which companies can learn by seeing what different customers prefer. Proctor & Gamble, for example, has developed Reflect.com, which offers customized beauty products created interactively on the Web site. Product Classifications Marketers have traditionally classified products on the basis of characteristics: durability, tangi- bility, and use (consumer or industrial). Each product type has an appropriate marketing-mix strategy. 7 DURABILITY AND TANGIBILITY Products can be classified into three groups, according to durability and tangibility: I. Nondurable goods are tangible goods normally consumed in one or a few uses, like beer and soap. Because these goods are consumed quickly and purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference. 374 PART 5 SHAPING THE MARKET OFFERINGS 2. Durable goods are tangible goods that normally survive many uses: refrigerators, machine tools, and clothing. Durable products normally require more personal selling and service, command a higher margin, and require more seller guarantees. 3. Services are intangible, inseparable, variable, and perishable products. As a result, they normally require more quality control, supplier credibility, and adaptability. Examples include haircuts, legal advice, and appliance repairs. CONSUMER-GOODS CLASSIFICATION The vast array of goods consumers buy can be classified on the basis of shopping habits. We can distinguish among convenience, shop- ping, specialty, and unsought goods. The consumer usually purchases convenience goods frequently, immediately, and with a minimum of effort. Examples include tobacco products, soaps, and newspapers. Convenience goods can be further divided. Staples are goods consumers purchase on a reg- ular basis. A buyer might routinely purchase Heinz ketchup, Crest toothpaste, and Ritz crackers. Impulse goods are purchased without any planning or search effort. Candy bars and magazines are impulse goods. Emergency goods are purchased when a need is urgent— umbrellas during a rainstorm, boots and shovels during the first winter snowstorm. Manufacturers of impluse and emergency goods will place them in those outlets where con- sumers are likely to experience an urge or compelling need to make a purchase. Shopping goods are goods that the consumer, in the process of selection and purchase, characteristically compares on such bases as suitability, quality, price, and style. Examples include furniture, clothing, used cars, and major appliances. Shopping goods can be further divided. Homogeneous shopping goods are similar in quality but different enough in price to justify shopping comparisons. Heterogeneous shopping goods differ in product features and services that may be more important than price. The seller of heterogeneous shopping goods carries a wide assortment to satisfy individual tastes and must have well-trained salespeople to inform and advise customers. Specialty goods have unique characteristics or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort. Examples include cars, stereo components, photographic equipment, and men's suits. A Mercedes is a specialty good because interested buyers will travel far to buy one. Specialty goods do not involve making comparisons; buyers invest time only to reach dealers carrying the wanted products. Dealers do not need convenient locations, although they must let prospective buyers know their locations. Unsought goods are those the consumer does not know about or does not normally think of buying, like smoke detectors. The classic examples of known but unsought goods are life insurance, cemetery plots, gravestones, and encyclopedias. Unsought goods require adver- tising and personal-selling support. INDUSTRIAL-GOODS CLASSIFICATION Industrial goods can be classified in terms of how they enter the production process and their relative costliness. We can distinguish three groups of industrial goods: materials and parts, capital items, and supplies and business ser- vices. Materials and parts are goods that enter the manufacturer's product completely. They fall into two classes: raw materials and manufactured materials and parts. Raw materials fall into two major groups: farm products (e.g., wheat, cotton, livestock, fruits, and vegetables) and natural products (e.g., fish, lumber, crude petroleum, iron ore). Farm products are sup- plied by many producers, who turn them over to marketing intermediaries, who provide assembly, grading, storage, transportation, and selling services. Their perishable and sea- sonal nature gives rise to special marketing practices. Their commodity character results in relatively little advertising and promotional activity, with some exceptions. At times, com- modity groups will launch campaigns to promote their product—potatoes, cheese, and beef. Some producers brand their products—Dole salads, Mott's apples, and Chiquita bananas. Natural products are limited in supply. They usually have great bulk and low unit value and must be moved from producer to user. Fewer and larger producers often market them directly to industrial users. Because the users depend on these materials, long-term supply contracts are common. The homogeneity of natural materials limits the amount of demand- creation activity. Price and delivery reliability are the major factors influencing the selection of suppliers. Manufactured materials and parts fall into two categories: component materials (iron, yarn, cement, wires) and component parts (small motors, tires, castings). Component mate- rials are usually fabricated further—pig iron is made into steel, and yarn is woven into cloth. SETTING PRODUCT STRATEGY CHAPTER 12 375 A Beef Council ad, part of the "Beef, It's What's for Dinner" campaign of TV and print ads designed to promote beef as a good food. The standardized nature of component materials usually means that price and supplier reli- ability are key purchase factors. Component parts enter the finished product with no further change in form, as when small motors are put into vacuum cleaners, and tires are put on automobiles. Most manufactured materials and parts are sold directly to industrial users. Price and service are major marketing considerations, and branding and advertising tend to be less important. Capital items are long-lasting goods that facilitate developing or managing the finished product. They include two groups: installations and equipment. Installations consist of buildings (factories, offices) and heavy equipment (generators, drill presses, mainframe computers, elevators). Installations are major purchases. They are usually bought directly from the producer, with the typical sale preceded by a long negotiation period. The pro- ducer's sales force includes technical personnel. Producers have to be willing to design to specification and to supply postsale services. Advertising is much less important than per- sonal selling. Equipment comprises portable factory equipment and tools (hand tools, lift trucks) and office equipment (personal computers, desks). These types of equipment do not become part of a finished product. They have a shorter life than installations but a longer life than operating supplies. Although some equipment manufacturers sell direct, more often they use intermediaries, because the market is geographically dispersed, the buyers are numer- ous, and the orders are small. Quality, features, price, and service are major considerations. The sales force tends to be more important than advertising, although the latter can be used effectively. Supplies and business services are short-term goods and services that facilitate develop- ing or managing the finished product. Supplies are of two kinds: maintenance and repair items (paint, nails, brooms), and operating supplies (lubricants, coal, writing paper, pencils). Together, they go under the name of MRO goods. Supplies are the equivalent of convenience 376 PART 5 SHAPING THE MARKET OFFERINGS goods; they are usually purchased with minimum effort on a straight rebuy basis. They are normally marketed through intermediaries because of their low unit value and the great number and geographic dispersion of customers. Price and service are important consider- ations, because suppliers are standardized and brand preference is not high. Business services include maintenance and repair services (window cleaning, copier repair) and business advisory services (legal, management consulting, advertising). Maintenance and repair services are usually supplied under contract by small producers or are available from the manufacturers of the original equipment. Business advisory services are usually purchased on the basis of the supplier's reputation and staff. Ill Differentiation To be branded, products must be differentiated. Physical products vary in their potential for differentiation. At one extreme, we find products that allow little variation: chicken, aspirin, and steel. Yet even here, some differentiation is possible: Perdue chickens, Bayer aspirin, and India's Tata Steel have carved out distinct identities in their categories. Procter & Gamble makes Tide, Cheer, and Gain laundry detergents, each with a separate brand identity. At the other extreme are products capable of high differentiation, such as automobiles, commer- cial buildings, and furniture. Here the seller faces an abundance of design parameters, including form, features, performance quality, conformance quality, durability, reliability, repairability, and style. 8 Marketers are always looking for new dimensions of differentiation. Otis Elevator Company has upped the ante in its category by making its elevators smarter: OTIS ELEVATOR COMPANY At a typical bank of elevators in an office building lobby, you press the "up" button and take the first elevator that comes, with no idea how many stops there will be until you get to your floor. Now Otis has developed a "smart" elevator. You key in your floor on a centralized panel. The panel tells you which elevator is going to take you to your floor. Your elevator takes you right to your floor and races back to the lobby. With this simple change, Otis has managed to turn every elevator into an express. This remarkable differentiator means a speedier ride and less groaning and sighing by riders, but it also has big benefits for builders. Buildings need fewer elevators for a given density of people, so builders can use the extra space for people rather than people conveyers. 9 Product Differentiation FORM Many products can be differentiated in form—the size, shape, or physical structure of a product. Consider the many possible forms taken by products such as aspirin. Although aspirin is essentially a commodity, it can be differentiated by dosage size, shape, color, coat- ing, or action time. 5 Most products can be offered with varying features that supplement its basic function. A company can identify and select appropriate new features by surveying recent buyers and then calculating customer value versus company cost for each potential feature. The company should also consider how many people want each feature, how long it would take to introduce each feature, and whether competitors could easily copy the feature. Companies must also think in terms of feature bundles or packages. Auto companies often manufacture cars at several "trim levels." This lowers manufacturing and inventory costs. Each company must decide whether to offer feature customization at a higher cost or a few standard packages at a lower cost. PERFORMANCE QUALITY Most products are established at one of four performance lev- els: low, average, high, or superior. Performance quality is the level at which the product's primary characteristics operate. Firms should not necessarily design the highest perfor- mance level possible. The manufacturer must design a performance level appropriate to the target market and competitors' performance levels. A company must also manage perfor- mance quality through time. Continuously improving the product can produce the high returns and market share. Lowering quality in an attempt to cut costs often has dire conse- quences. Schlitz, the number-two beer brand in the United States in the 1960s and 1970s, SETTING PRODUCT STRATEGY CHAPTER 12 377 was driven into the dust because management adopted a financially motivated strategy to increase its short-term profits and curry favor with shareholders. In fact, quality is becoming an increasingly important parameter for differentiation as companies adopt a value model and provide higher quality for less money. Cataloger J. Crew is raising the prices of its mer- chandise as it raises the quality bar higher: J. CREW J. Crew is returning to a tradition of preppy quality goods. It is adding pleats to the backs of its shirts and hav- ing them made in Italy instead of China. Its shoes are also being made in Italy, and the company is tailoring trousers to fit better. The cover of the Fall 2003 catalog reflected the company's emphasis on quality by crisply portraying each color-dyed stitch, the weave of the wool, and each tiny pearl collar button. 10 ONFORMANCI QUALITY Buyers expect products to have a high conformance quality, which is the degree to which all the produced units are identical and meet the promised specifications. Suppose a Porsche 944 is designed to accelerate to 60 miles per hour within 10 seconds. If every Porsche 944 coming off the assembly line does this, the model is said to have high conformance quality. The problem with low conformance quality is that the prod- uct will disappoint some buyers. DURABILITY Durability, a measure of the product's expected operating life under natural or stressful conditions, is a valued attribute for certain products. Buyers will generally pay more for vehicles and kitchen appliances that have a reputation for being long lasting. However, this rule is subject to some qualifications. The extra price must not be excessive. Furthermore, the product must not be subject to rapid technological obsolescence, as is the case with personal computers and video cameras. RELIABILITY Buyers normally will pay a premium for more reliable products. Reliability is a measure of the probability that a product will not malfunction or fail within a specified time period. Maytag, which manufactures major home appliances, has an outstanding rep- utation for creating reliable appliances. REPAIRABILITY Repairability is a measure of the ease of fixing a product when it malfunc- tions or fails. Ideal repairability would exist if users could fix the product themselves with lit- tle cost in money or time. Some products include a diagnostic feature that allows service people to correct a problem over the telephone or advise the user how to correct it. Many computer hardware and software companies offer technical support over the phone, or by fax or e-mail. Cisco put together a Knowledge Base of Frequently Asked Questions (FAQs) on its Web site which it estimates handles about 80 percent of the roughly 4 million monthly requests for information, and saves the company $250 million annually. Each new call and solution goes to a tech writer who adds the solution to the FAQs, thus reducing the number of future phone calls. 11 STYLE Style describes the product's look and feel to the buyer. Car buyers pay a premium for Jaguars because of their extraordinary look. Aesthetics play a key role in such brands as Absolut vodka, Apple computers, Montblanc pens, Godiva chocolate, and Harley-Davidson motorcycles. 12 Style has the advantage of creating distinctiveness that is difficult to copy. On the negative side, strong style does not always mean high performance. A car may look sen- sational but spend a lot of time in the repair shop. Design: The Integrative Force As competition intensifies, design offers a potent way to differentiate and position a com- pany's products and services. 13 In increasingly fast-paced markets, price, and technology are not enough. Design is the factor that will often give a company its competitive edge. Design is the totality of features that affect how a product looks and functions in terms of customer requirements. Design is particularly important in making and marketing retail services, apparel, packaged goods, and durable equipment. All the qualities we have discussed are design parameters. The 378 PART 5 SHAPING THE MARKET OFFERINGS designer has to figure out how much to invest in form, feature development, performance, conformance, durability, reliability, repairability, and style. To the company, a well-designed product is one that is easy to manufacture and distribute. To the customer, a well-designed product is one that is pleasant to look at and easy to open, install, use, repair, and dispose of. The designer has to take all these factors into account. The arguments for good design are particularly compelling for smaller consumer-products companies and start-ups that don't have big advertising dollars. That's how one small brewery got noticed. FLYING FISH BREWING CO. Before he started his company, founder Gene Muller sent Pentagram Design Company a case of beer bottles with blank labels and a note that said, "This space available for good design." He told Pentagram partner Michael Beirut that he wanted something a breed apart from the usual mountain-range motif themes that every- one else seemed to be doing. The Pentagram design Muller liked most and picked for his start-up was a fish- bone propeller plane. Flying Fish Brewing Company was born. Not only has the eye-catching image helped sell the beer, but the company's merchandise sales (T-shirts, hats, and pint glasses) have been surprisingly strong, especially at music festivals. 14 Certain countries are winning on design: Italian design in apparel and furniture; Scandinavian design for functionality, aesthetics, and environmental consciousness. Braun, a German division of Gillette, has elevated design to a high art in its electric shavers, coffeemak- ers, hair dryers, and food processors. The company's design department enjoys equal status with engineering and manufacturing. The Danish firm Bang & Olufsen has received many kudos for the design of its stereos, TV equipment, and telephones. "Marketing Insight: Design as a Powerful Marketing Tool" describes some successes and failures in design. Services Differentiation When the physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving their quality. The main service differentia- tors are: ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair. ORDERING EASE Ordering ease refers to how easy it is for the customer to place an order with the company. Baxter Healthcare has eased the ordering process by supplying hospitals with computer terminals through which they send orders directly to Baxter. Many banks now provide home banking software to help customers get information and do transac- tions more efficiently. Consumers are now able to order and receive groceries without going to the supermarket. DELIVERY Delivery refers to how well the product or service is delivered to the cus- tomer. It includes speed, accuracy, and care attending the delivery process. Today's cus- tomers have grown to expect delivery speed: pizza delivered in one-half hour, film devel- oped in one hour, eyeglasses made in one hour, cars lubricated in 15 minutes. Levi Strauss, Benetton, and The Limited have adopted computerized quick response sys- tems (QRS) that link the information systems of their suppliers, manufacturing plants, dis- tribution centers, and retailing outlets. Cemex, a giant cement company based in Mexico, has transformed the cement busi- A group of franchisees learning the business at McDonald's Hamburger U. in Oak Brook, Illinois. SETTING PRODUCT STRATEGY CHAPTER 12 379 C7 MARKETING INSIGHT DESIGN AS A POWERFUL MARKETING TOOL Manufacturers, service providers, and retailers seek new designs to create differentiation and establish a more complete connection with consumers. Holistic marketers recognize the emotional power of design and the importance to consumers of how things look and feel. Design is now more fully integrated into the marketing management process. For example: • After seeing some of their brands lose share to competitors with stronger designs and aesthetics, Procter & Gamble appointed a Chief Design Officer in 2001 and now hands out an A. G. Lafley Design award each Fall. Lafley, P&G's CEO, is credited with push- ing for more products to involve design at the front end—not as an afterthought. These products, such as Crest Whitestrips, Olay Daily Facials, and the whole line of Swifter Quick Clean products, have generated more trials, more repurchases, and more sales. • Sweden's IKEA has become one of the top furniture retailers in the world in part through its ability to design and manufacture inex- pensive furniture that doesn't seem cheap. Another Scandinavian company, Finland's Nokia, is credited with taking a little black blob with tiny buttons and turning it into an object of desire. Nokia was the first to introduce user-changeable covers for cellphones, the first to have elliptical-shaped, soft, and friendly forms, and the first with big screens. In the early 1990s, Nokia controlled only 12 per- cent of the global market for cell phones. Today, it is the world leader in handsets, with 38 percent of the market. With an increasingly visually oriented culture, translating brand meaning and positioning through design is critical. "In a crowded marketplace," writes Virginia Postrel in The Substance of Style, "aes- thetics is often the only way to make a product stand out." Design can shift consumer perceptions to make brand experiences more rewarding. Consider the lengths Boeing went to to make its 777 air- plane seem roomier and more comfortable. Raised center bins, side luggage bins, divider panels, gently arched ceilings, and raised seats make the aircraft interior seem bigger. As one design engineer noted, "If we do our jobs, people don't realize what we have done. They just say they feel more comfortable." Designers sometimes put a human face—literally—on their products. The Porsche Boxster's bulges and curves can be seen as suggestive of muscle; the Apple iMac was thought by one designer to be "a head stuck to a body via a long skinny arm"; and Microsoft's optical mouse can be seen as an outstretched hand. When Frog Design set out to make a Disney cordless phone for kids, it wanted the design to live up to the famed Disney imagery. After exhaustive study, Frog defined the composite elements of a Disney character and applied it to the phone. The eyes were interpreted in terms of the LCD screen and were made as big as possible; the torso was inter- preted in terms of the housing of the phone and was S-shaped, with a roundness in the top front and bottom back; and the feet were interpreted in terms of the base and charger stand, which used built- up plastic to emulate a sock pushed up around an ankle. A bad design can also ruin a product's prospects. Sony's e-Villa Internet appliance was intended to allow consumers to have Internet access from their kitchens. But at nearly 32 pounds and 16 inches, the mammoth product was so awkward and heavy that the owner's manual recommended customers bend their legs, not their back, to pick it up. The product was eventually withdrawn after three months. Sources: A. G. Lafley, "Delivering Delight," Fast Company, June 2004, p. 51; Frank Nuovo, "A Call for Fashion," Fast Company, June 2004, p. 52; Bobbie Gossage, "Strategies: Designing Success," Inc. Magazine, May 2004, pp. 27-29; Jim Hopkins, "When the Devil Is in the Design," USA Today, December 31, 2001, p. 3B; J. Lynn Lunsford and Daniel Michaels, "Masters of Illusion," Wall Street Journal, November 25, 2002, pp. B1, B5; Jerome Kathman, "Building Leadership Brands by Design," Brandweek, December 1, 2003, p. 20; Bob Parks, "Deconstructing Cute," Business 2.0, December 2002/January 2003, pp. 47-50; Lisa Margonelli, "How Ikea Designs Its Sexy Price Tags," Business 2.0, October 2002, pp. 106-112. ness by promising to deliver concrete faster than pizza. Cemex equips every truck with a global positioning system (GPS) so that its real-time location is known and full informa- tion is available to drivers and dispatchers. Cemex is able to promise that if your load is more than 10 minutes late, you get a 20 percent discount. 15 INSTALLATION Installation refers to the work done to make a product operational in its planned location. Buyers of heavy equipment expect good installation service. Differentiating at this point in the consumption chain is particularly important for compa- nies with complex products. Ease of installation becomes a true selling point, especially when the target market is technology novices. For customers wishing to connect to the Internet using a high-speed digital subscriber line (DSL), Pacific Bell developed installation kits that included an interactive software setup program so customers could complete their DSL setup in less than an hour. 16 CUSTOMER TRAINING Customer training refers to training the customer's employees to use the vendor's equipment properly and efficiently. General Electric not only sells and installs expensive X-ray equipment in hospitals; it also gives extensive training to users of this equipment. McDonald's requires its new franchisees to attend Hamburger University in Oak Brook, Illinois, for two weeks, to learn how to manage the franchise properly. [...]... well rather than try to prop up weak items Product-line managers must periodically review the line for deadwood that is depressing profits "Marketing Insight: Rationalizing Brand Portfolios for Growth" describes some SETTING PRODUCT STRATEGY MARKETING INSIGHT CHAPTER 12 RATIONALIZING BRAND PORTFOLIOS FOR GROWTH In 1999, Unilever owned more than 1,600 distinct brands Some of Unilever's famed brands include... create convenience value for cus- CHAPTER 12 397 tomers and promotional value for producers In effect, they can act as "five-second commercials" for the product Warranties and guarantees can offer further assurance to consumers APPLICATIONS : : : Marketing D e b a t e With Products, Is It Form or Function? The "form versus function" debate applies in many arenas, including marketing Some marketers believe... Forbes, July 24, 2000, p 145 12 Bernd Schmitt and Alex Simonson, Marketing Aesthetics: The Strategic Management of Brand, Identity, and Image (New York: The Free Press, 1997) 23 "Brand Challenge," The Economist, April 6, 2002, p 68 25 Igor Reichlin, "Racing to Stay Ahead," Chief Executive, November 2003, pp 50-53 26 Steuart Henderson Britt, "How Weber's Law Can Be Applied to Marketing, " Business Horizons... Adapted from George Wuebker, "Bundles Effectiveness Often Undermined," Marketing News, March 18, 2002, pp 9 -12 See Stefan Stremersch and Gerard J Tellis, "Strategic Bundling of Products and Prices," Journal ofMarketingBB (January 2002): 55-72 32 Akshay R Rao and Robert W Ruekert, "Brand Alliances as Signals of Product Quality," Sloan Management Review (Fall 1994): 87-97; Akshay R Rao, Lu Qu, and Robert... and Promise of the Nutrition Labeling and Education Act," Journal of Marketing 66 (July 2002): 112- 127; John C Koz.up, Elizabeth H Creyer, and Scot Burton, "Making Healthful Food Choices: The Influence of Flealth Claims and Nutrition Information on Consumers' Evaluations of Packaged Food Products and Restaurant Menu Items," Journal of Marketing6 7 (April 2003): 19-34 50 Jason Stein, "10-year Mitsubishi... Identify the brand, Convey descriptive and persuasive information, Facilitate product transportation and protection, Assist at-home storage, and Aid product consumption CHAPTER 12 393 394 PART 5 SHAPING THE MARKET OFFERINGS To achieve the marketing objectives for the brand and satisfy the desires of consumers, the aesthetic and functional components of packaging must be chosen correctly Aesthetic considerations... Consumers tend to buy them where they buy the original equipment because it is more convenient than making further shopping trips These items can carry higher margins SETTING PRODUCT STRATEGY CHAPTER 12 383 FIG 12. 3 I Product-item Contributions to a Product Line's Total Sales and Profits The main point is that companies should recognize that these items differ in their potential for being priced higher... Fujio Cho sees environmental performance as essential to the future of cars Introducing such leading-edge products presents marketing challenges For example, the marketing messages must educate consumers that the Prius doesn't need to be plugged in, as an electric car does The marketing messages must also communicate the value of fuel efficiency, not just for fuel savings for customers, but for the... Fast Followers Today's Global Leaders," Industry Week, February 2004, pp 22-29; "Lexus Considers Global Marketing, " Automotive News, January 26, 2004, p 17; and 3 What recommendations would you make to senior marketing executives going forward? What should they be sure to do with its marketing? NOTES : : : 1 Andy Servver, "Happy Birthday, Steinway," Fortune, March 17, 2003, pp 94-97 16... "Reducing Assortment: An Attribute-Based Approach," Journal of Marketings* (July, 2001): 50-63 6 Steven Rosenbush, "Verizon's Gutsy Bet," BusinessWeek, August 4, 2003, pp 53-62 21 Adapted from a Hamilton Consultants White Paper, December 1,2000 7 For some definitions, see Peter D Bennett, ed., Dictionary of Marketing Terms (Chicago: American Marketing Association, 1995) Also see Patrick E Murphy and Ben . quality, services mix and quality, and price (see Figure 12. 1). In this chapter, we examine product; in Chapter 13, services; and in Chapter 14, prices. All three elements must be meshed into. Hamburger U. in Oak Brook, Illinois. SETTING PRODUCT STRATEGY CHAPTER 12 379 C7 MARKETING INSIGHT DESIGN AS A POWERFUL MARKETING TOOL Manufacturers, service providers, and retailers. that is depressing profits. " ;Marketing Insight: Rationalizing Brand Portfolios for Growth" describes some SETTING PRODUCT STRATEGY CHAPTER 12 387 MARKETING INSIGHT RATIONALIZING BRAND