Product & Service
Strategies
Definitions
Product
Anything offered to a market for attention, acquisition, use, or
consumption that might satisfy a need or want.
Product family—All the product classes that can satisfy a core need
with reasonable effectiveness. Example: shoes and socks.
Product class—A group of products within the product family
recognized as having a certain functional coherence, also known as a
product category. Example: all shoes.
Product line—A group of products within a product class that are
closely related because they perform a similar function, are sold to
the same customer groups, are marketed through the same outlets
or channels, or fall within given price ranges. A product line may
consist of different brands, or a single family brand, or individual
brand that has been line extended. Example: sports shoes.
Product type—A group of items within a product line that share one
of several possible forms of the product. Example: basket ball shoes
Item (also called stock-keeping unit or product variant)—A distinct
unit within a brand or product line distinguishable by size, price,
appearance, or some other attribute. Example: one pair of nike
basket ball shoes.
Product Mix
Most companies sell more than one product.
A product mix (also called a product assortment) is the set of all
products and items a particular seller (company) offers for sale.
A product mix consists of various product lines. Nike’s product mix
consists of athletic shoes, apparel and sports equipment.
Product Mix
A company’s product mix has a certain width, length, depth, and
consistency. These four dimensions are the tools for developing the
company’s marketing strategy and deciding which product lines to
grow, maintain, harvest, and divest.
• The width of a product mix refers to how many different
product lines the company carries. (In fact, P&G produces
many additional lines).
Product Mix
• The length of a product mix refers to the total number of items
in the mix. In Table 12.2, it is 20. We can also talk about the
average length of a line. We obtain this by dividing the total
length (here 20) by the number of lines (here 5), for an average
product line length of 4.
Product Mix
• The depth of a product mix refers to how many variants are offered
of each product in the line. If Tide came in two scents (Mountain
Spring and Regular), two formulations (liquid and powder), and two
additives (with or without bleach), it would have a depth of six
because there are six distinct variants.
• The consistency of the product mix describes how closely related
the various product lines are in end use, production
requirements, distribution channels, or some other way. P&G’s
product lines are consistent in that they are consumer goods that
go through the same distribution channels.
Product Mix
These four product mix dimensions permit the company to expand
its business in four ways. It can add new product lines, thus
widening its product mix. It can lengthen each product line. It can
add more product variants to each product and deepen its product
mix. Finally, a company can pursue more product line consistency.
Product Line Analysis
Managers need to analyze their product lines periodically to assess
each item’s sales and profits and understand how each item
contributes to the line’s overall performance.
Usually product lines tend to lengthen over time. Excess
manufacturing capacity puts pressure on the product line manager
to develop new items. The sales force and distributors also pressure
the company for a more complete product line to satisfy customers.
Product Line Analysis
But as items are added, costs rise for design and engineering,
inventory carrying, transportation, new-item promotions etc.
A company lengthens its product line in two ways:
• Product line stretching and
• Product line filling
Product Line stretching
Line stretching occurs when a company lengthens its product line
beyond its current range. The company can stretch its line to-
• Downward market
• Upward market, or
• Both ways
Down-Market Stretch
Potential reasons
A company positioned in the middle market may want to introduce
a lower-priced line for any of three reasons:
1. The company may notice strong growth opportunities as mass
retailers such as Wal mart, Best Buy, and others attract a growing
number of shoppers who want value-priced goods.
Down-Market Stretch
Potential reasons
2. The company may wish to tie up lower-end competitors. If the
company has been attacked by a low-end competitor, it often
decides to counterattack by entering the low end of the market.
3. The company may find that the middle market is stagnating or
declining.
Down-Market Stretch
Facts
A company faces a number of naming choices in deciding to move
a brand down-market:
1. Use the parent brand name on all its offerings. Sony has used its
name on products in a variety of price tiers.
2. Introduce lower-priced offerings using a sub-brand name, such as
P&G’s Charmin Basics and Bounty Basics.
Down-Market Stretch
Facts
3. Introduce the lower-priced offerings under a different name, such
as the Gap’s Old Navy brand. This strategy is expensive to
implement and means brand equity will have to be built from
scratch, but the equity of the parent brand name is protected.
Down-Market Stretch
Moving down market carries risks
e.g. Kodak introduced Kodak Funtime Film to counter lower priced
brands, but it did not price it low enough to match the lower-priced
film. It also found some of its regular customers buying Funtime, so
it was cannibalizing its core brand. Kodak withdrew the product and
may have also lost some of its quality image in the process.
Up-Market Stretch
Potential reasons
Companies may wish to enter the high end of the market for-
• More growth,
• Higher margins, or
• Simply position themselves as full-line manufacturers.
e.g. Starbucks in coffee, Häagen-Dazs in ice cream and Evian in
bottled water.
Up-Market Stretch
Facts
• Some companies invented entirely new names, because
consumers might not have given the brand “permission” to
stretch upward when those lines were first introduced.
e.g. Toyota’s Lexus, Nissan’s Infiniti, and Honda’s Acura.
• Some other companies have included their own name with
modifier in moving up-market. They use modifiers to signal a
quality improvement, such as Ultra Dry Pampers, Extra Strength
Tylenol etc.
Two-Way Stretch
Companies serving the middle market might stretch their line in
both directions.
e.g. Toyota has started at the lower end > Corolla in the executive
range > Camry in the upper management range > Lexus in the
luxury range.
Product Line Filling
A firm can also lengthen its product line by adding more items within
the present range.
Reasons/ Motives for line filling include-
• Reaching for incremental profits (satisfying dealers who complain
about lost sales because of items missing from the line)
• Utilizing excess capacity
• Trying to become the leading full-line company
• Plugging holes to keep out competitors
Product Line Filling
Problems associated with line filling-
If line filling is overdone, self-cannibalization and customer confusion
can occur. So, the company needs to differentiate each item in the
consumer’s mind with a just-noticeable difference. The proposed item
(intended to be used for line filling) should also meet a market need
and is not added simply to satisfy an internal need.
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