Lesson 8

Developing Product Strategy

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What is a product?
“A product is anything that can be offered to a
market to satisfy a want or need including physical
goods, services, experiences, events, persons,
places, properties, organizations, information and
ideas.”
(Kotler 2016)
Product Levels:
Customer value hierarchy
Core benefit

Basic product

Expected product

Augmented product

Potential product

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Product Levels:
Customer value hierarchy
 Core benefit:
 The service or benefit the customer is really buying
 E.g. Hotel guest: Rest and sleep

 Basic product
 E.g. Hotel room includes a bed, bathroom, towels, desk, and
dresser etc.

 Expected product
 A set of attributes & conditions buyer normally expect when
they purchase a product
 E.g. Clean bed, fresh towels, working lamps and television

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Product Levels:
Customer value hierarchy
 Augmented product
 Useful for exceeding customer expectations
 E.g. Higher level of customer service in a hotel

 Potential product
 All the possible augmentations and transformations the
product might undergo in the future
 New ways to satisfy customers and distinguish product
from the competitors
 E.g. Database marketing to personalize the hotel
experience
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Product Classifications
Consumer goods
 Convenience goods
 Consumer purchases frequently, immediately & with a minimum effort
 E.g. soft drinks, soaps, newspapers

 Shopping goods
 Consumer characteristically compares on such bases as suitability, quality, price
and style
 E.g. furniture, clothing, home appliances

 Specialty goods
 Have unique characteristics or brand identification for which buyers are willing
to make special purchasing effort
 E.g. car, audio-video components, men’s suits

 Unsought goods
 Consumer does not know about or does not normally think of buying
 E.g. life insurance, encyclopedias, reference books

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Product Classifications
Industrial goods

 Materials and parts

Goods that enter the manufacturer’s product completely

 Capital goods
Long-lasting goods that facilitate developing or managing
the finished product

 Supplies and business services

Short-term goods and services that facilitate developing or
managing the finished product

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Branding

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10
Sri Lanka Vs Amazon

76.3B vs 220B

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COVID-19 Global
Impact Analysis
 Companies likely to lose up to $1tn in Brand Value globally
as a Direct Impact of COVID-19 Outbreak, Effects to be Felt
Well into Next Year.
 Sri Lankan Brands Estimated to Drop 9.5% in value
following the impact of COVID-19 equating to Rs.
57.4 billion.
 Worst hit industries: airlines, hotels, retail and auto.
International aviation, airlines and airports to be
 Home delivery apps, online video conferencing
platforms, digital media see surge in demand from
remote working revolution
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Covid -19-Impact for brand

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High Impact

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Packaging
 All the activities of designing and producing the
container or wrapper for a product

 Primary package, secondary package & shipping

package

 Growing use of packaging as a marketing tool

 Self-service
 Consumer affluence
 Company & brand image
 Innovation opportunity
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Objectives of Packaging
 Identify the brand

 Convey descriptive & persuasive information

 Facilitate product transportation & protection

 Assist at-home storage

 Aid product consumption

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Color wheel of branding and packaging

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Labeling
 Label is a simple tag attached to the product or an
elaborately designed graphic that is part of the package

 Functions of labeling

 Identifies the product or brand

 Grade the product

 Describe the product

 Promote the product through attractive graphics

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Product support services
 Product support services help to gain a competitive
advantage and create customer loyalty
 The company should periodically survey its customers
to assess the customer satisfaction level and to get new
ideas for product improvements
 E.g. services to handle complaints, maintenance,
technical issues,

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2. Product line decisions
 Product line is a group of products that are closely
related because they function in a similar manner, are
sold to the same customer groups, are marketed
through the same types of outlets, or fall within given
price ranges.

 Product line length: the number of items in the

product line

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3. Product mix decisions
 Product mix consists of all the product lines and items
that a particular seller offers for sale
 Dimensions of product mix
 Product mix width: Number of different product lines
 Product mix length: Total number of items carries
within the product lines
 Product mix depth: Number of versions offered for each
product in the line
 Consistency: How closely related the various product
lines are in end use, production requirements,
distribution and etc.

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 The Product Life Cycle

Introductory Growth Maturity

Decline Stage
Stage Stage Stage

Total
Market
Sales

Time

1-24
 PLC Stages and Characteristics

1-25
 PLC Length and Shape

Style Fashion Fad

Sales Sales Sales

Time Time Time

1-26
 PLC Marketing Strategies
Stage Objective Marketing Strategy

Introduction Awareness & trial Communicate benefits

Growth Usage of firm’s brand Specific brand communication,

lower prices, expand distribution

Maturity Maintain market share Sales promotion, drop price,

Extend life cycle expand distribution, new uses
& new versions of product

Decline Decide what to do Maintain, harvest, or divest

with product

1-27
New product development (NPD)
process
 NPD is a process of taking a product or service from
conception to market
 NPD is a funnel process
 A large number of initial new product ideas and concepts are
started but it is narrowed down to few in later stages

 NPD is a spiral development process

 Sometimes it is required to return to earlier stages to make
improvements before moving forward

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New product development (NPD)
process
1. Idea generation
2. Idea screening
3. Concept development & testing
4. Marketing strategy development

5. Business analysis
6. Product development

7. Market testing
8. Commercialization

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Step 1: Idea Generation
 Idea Generation is the Systematic Search for New
Product Ideas
 Sources of idea generation:
 Interacting with employees

 Interacting with outsiders: customers, scientists, engineers,

universities, commercial laboratories, publications,
marketing and advertising agencies, suppliers
 Studying competitors

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Step 2: Idea Screening
 Process to spot good ideas and drop poor ones as soon as
possible.

 Many companies have systems for rating and screening

ideas which estimate:
 Market Size
 Product Price
 Development Time & Costs
 Manufacturing Costs
 Rate of Return

 Then, the idea is evaluated against a set of general

company criteria.
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Step 3: Concept development and
testing
 What is a product concept?
 An elaborated version of the idea expressed in consumer
terms
 Concept testing means presenting the product concept
to target consumers physically or symbolically and
getting their reactions
 Currently companies can use prototypes to show the
potential consumers for their reactions

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Concept development & testing
1. Develop Product Ideas into
Alternative
Product Concepts

2. Concept Testing - Test the

Product Concepts with Groups
of Target Customers

3. Choose the Best One

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Step 4: Marketing Strategy
Development
Part I:
Target Market’ size, structure and behavior
Planned Product Positioning
Sales market share and profit goals

Part II:
Product’s planned price
Distribution strategy
Marketing budget for 3 years

Part III:
Long-run sales & profit goals
Marketing mix strategy over time
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Step 5: Business Analysis
Business Analysis
Evaluation of business attractiveness of product concept
Review of product sales, costs,
and profits projections to see if
they meet company objectives

If No, Eliminate
Product Concept

If Yes, Move to
Product Development
1. Develop physical prototypes
2. Customer tests
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Step 6: Product development
 Develop a product prototype that embodies the key
attributes in the product concept
 Consumer tests
 When the prototypes are ready they must be put through
rigorous functional test within the organization (alpha
testing) and consumer tests (beta testing) before enter the
market place
 Consumer testing can bring consumers into a laboratory or
give them samples to use at home

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 Step 7: Market Testing
Standard Simulated
Controlled
Test Market Test Market
Test Market
Full marketing Test in a
campaign A few stores that simulated
have
in a small number shopping
agreed to carry environment
of new
representative to a sample of
products for a fee
cities consumers

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Commercialization
 Commercialization is the Introduction of the New
Product into the Marketplace.

To whom How
Where
When (Target (Introductor
(Geographic
(Timing) market y market
strategy)
prospects) strategy)

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