Setting Product Strategy What is a Product? Anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Includes: physical product, service, information, experience, person, place, organization, ideas, or mixes of these entities. Figure: Three Levels of Product Example: Hotel Core benefit: rest and sleep. Actual product: bed, bathroom, towels, desk, closet, or food. Augmented product: restaurant, gym, man’s suit, or remembering customers’ special needs. Example: Sony Camcorder Core benefit: a convenient, high-quality way to capture important moments. Actual product: Sony Camcorder. Augmented product: warranty, instructions, quick, repair service, or toll-free telephone number. When Do a Firm Advertise the Core Benefit? Innovated product Chaos stage E.g. The war of hamburger among McDonald’s, Burger King and Wendy. Wendy: Where is the beef ? 打回核心的第一家廠商，雖然會引起別人跟進，但 讓人印象最深。 Product Classifications Durability Nondurable goods → many locations, small markup, and heavily advertise. Durable goods → more personal selling and service, higher margin, and more seller guarantees. Timing of quality identification Search goods Experience goods Credence goods Continuum of Evaluation for Different Types of Products Consequence of High in Experience and Credence Qualities Service consumers generally rely on word of mouth rather than advertising. Consumers rely heavily on price, personnel, and physical cues to judge quality. Consumers are highly loyal to service providers who satisfy them. In one-shot relationships, may a high price signal a high quality? Is it possible that a low price may signal a high quality? Product Classifications Consumer-goods classification Convenience goods – staples, impulse goods and emergency goods. Shopping goods Specialty goods Unsought goods Marketing considerations for consumer products Drift principle Individual Product Decisions Product attributes Product quality – performance & conformance Product features Product style and design Branding Packaging Labeling Product support services Packaging Primary container, secondary package, and shipping package. Functions: contain and protect the product, describe the product, attract attention, and create instant consumer recognition of the company or brand. Packaging In an average supermarket, which stocks 15,000 to 17,000 items, the typical shoppers passes by some 300 items per minute. More than 60% of all purchases are made on impulse. The package may be the seller’s last chance to influence consumers. Packaging – Examples Skippy Squeez’It, Heinz’s EZ Squirt, Dutch Boy, 可口可樂 曲線瓶, and 郭元益 黃金喜餅 Failure: Planters Lifesavers’s BrikPacs, Aunt Jemima Labeling Functions: identify the product or brand, describe the product, and promote the product. Legal concerns E.g. Dr. Bronner’s Magic Soaps Product Mix Width: how many different product lines the company carries. Length: the total number of items in the mix. Depth: how many variants are offered of each product in the line. Consistency: how closely related the various product lines are in end use, product requirements, distribution channels, or some other way. Example: P&G, 花王. Product-Mix Width and Product-Line Length for Proctor & Gamble Products Product-Mix Width Detergents Toothpaste Ivory Snow Gleem (1952) (1930) PRODUCT- Dreft LINE (1933) LENGTH Crest (1955) Disposable Bar Soap Diapers Paper Tissue Ivory (1879) Pampers (1961) Charmin (1928) Kirk’s (1885) Luvs (1976) Puffs (1960) Tide (1946) Lava (1893) Banner (1982) Cheer (1950) Camay (1926) Summit (1992) Product Line Decisions Product-line analysis Product line length is influenced by company objectives and resources, e.g. up-selling, crossselling, or protecting against economic swings. Vertical differentiation → Line stretching: downmarket stretch, upmarket stretch, or two-way stretch Horizontal differentiation → Line filling Line modernization, featuring and pruning Product-Item Contributions to a Product Line’s Total Sales and Profits Is it a good idea to drop the 5th product in the last slide? If not, what may be the reasons? Case: American Iron and Steel Market Source: The Innovator’s Solution (2003) Downmarket Stretch Examples: Rolex’s Tudor, Benz’s Smart. Reasons: growth opportunity, tie up lowerend competitors, or the middle market is stagnating or declining. Branding: individual name, blanket family name, or separate family names for all products. Risk of Cannibalization Upmarket Stretch Reasons: more growth, higher margins or full-line manufacturers. Examples: Toyata’s Lexus, Nissan’s Infiniti, and Honda’s Acura. The examples above invented entirely new names rather than using or including their own names. Two-way Stretch Marriott hotels & resorts L'ORÉAL PARiS LANCOME, SHU UEMURA, and BIOTHERM (700~4000); L’OREAL PARiS (500~1000); MAYBELLINE & GARNIER (100~400). Toyota Cannibalization Consumers have two segments, H & L. Given quality q, H’s valuation is 5q, L’s valuation is 2q, and the unit cost is q2/2. What are the efficient quality levels for H and L respectively? Is it optimal for the firm to provide the twoitem product line with efficient quality levels? Is it always optimal for the firm to provide a product line? Case: Pampers & Luvs 1980年代，Pampers & Luvs分占全美紙尿布 銷售排名第一與第三。 1993年，P&G為因應通路自有品牌的挑戰， 重新定位Luvs為打手品牌(fighter brand)。 Luvs的改變：降價16%、縮減研發和產品創新、 減少電視廣告和促銷支援、取消包裝上的提帶 等。 P&G集中更多管理和財物資源，投入Pampers 的行銷，而且改進它的特色。 節錄自哈佛商業評論 全球繁體中文版 (p. 49, October 2009) Line Filling Add more items within the present range of the line. Motives: incremental profits, satisfying dealers, excess capacity, full-line company, and keep out competitors. Sony’s walkman – solar-powered and waterproof, MiniDisc, CD, or Memory Stick. Weber’s Law: just-noticeable difference. Risk of cannibalization Line Modernization, Featuring and Pruning 人潮創造者 & 旗艦產品。 Line pruning E.g. Unilever: 1600 → 970 → 400; Hyundai’s Kia: 30→20. Brand Definition: a name, term, sign, symbol, design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. (AMA) Six levels of meaning: attribute, benefits, values, culture, personality, and user. Brand Equity The positive differential effect that knowing the brand name has on customer response to the product or service. Measure: the extent to which customers are willing to pay more for the brand. Tide, Heinz → 100%; Coca Cola → 50%; Volvo → 40%. Brand valuation: Coca Cola - $70 billion; Microsoft - $65 billion; IBM - $52 billion. Interbrand模式的三個重點 品牌收入淨值估計（過去三年平均值） 品牌優勢 領導力（Leadership） 穩定度（Stability） 市場（Market） 國際化（Internationality） 時尚趨勢（Trend） 後勤支援（Support） 智財保護（Protection） 多重收益 由品牌優點得分估計各項收入淨值，加總出品牌價值 Branding Decisions 1. 2. 3. 4. 5. 6. Brand or No brand Brand-sponsor decision Brand-name decision Brand positioning Brand-strategy decision Brand-management decision Brand or No Brand? Advantages of branding: processing orders and track down problems, legal protection, loyal customers, segmenting markets, and the corporate image. Advantages of no branding: cheap (national brand: 20~40% off, store brand: 10~20% off). Brand-Sponsor Decision Manufacturer brand (national brand) Distributor brand (store brand or private label), e.g. Wellcome, Carrefour – past, now. Licensed brand name Co-branding: the practice of using the established brand names of two different companies on the same product. Ingredient branding If a store brand is not profitable, are there other reasons for the retailer to develop the store brand? If you have owned a national brand in the market, will you produce the same product for a retailer’s store brand? Brand-Name Decision Individual names (個別品牌), e.g. P&G, Toyota. Blanket family names (家族品牌), e.g. Sony, Hitachi, and Panasonic. Separate family names for all products (單一家族品 牌), e.g. 黑松公司：碳酸飲料 → 黑松, 果汁 → 綠洲, 咖啡 → 韋恩. Corporate name combined with individual product names (公司名稱結合個別產品名稱), e.g. 統一純喫 茶, 統一茶裏王; Sony Bravia, Sony Walkman, Sony Vaio, Sony PlayStation. Selecting a Brand Relationship Spectrum Position Brand-Name Selection Suggest something about the product’s benefits and qualities, e.g. OFF! bug spray. Easy to pronounce, recognize, and remember, e.g. Tide, Qoo. Distinctive, e.g. Kodak, Oracle. Extendable, e.g. Amazon. Translate easily into foreign languages, e.g. Exxon. Capable of registration and legal protection Brand-Strategy Decision Product Category Brand Existent New Existent Line Extensions Brand Extensions New Multibrands Diversification Line Extensions 優點：存活率較高，利用過剩產能，滿足多樣 化需求，防禦競爭者，獲得更多貨架空間。 缺點：品牌可能喪失特定意義，所增加之銷售 額不足以抵補發展和促銷成本，產品線競食 （Cannibalization）。 Branded variants (品牌變體策略): specific brand lines supplied to specific retailers or distribution channels. Brand Extensions 優點：消費者較易認同與接受、節省廣告成本。 缺點：新產品失敗會影響對原產品的評價、品 牌可能不適用於新產品（如：HCG牙刷）、 品牌稀釋（如：皮爾卡登）。 Multibrands 優點：樹立不同特色，吸引不同購買動機的顧 客，較多貨架空間，保護主要品牌。 缺點：每一品牌市場佔有率小，廣告成本較大， Cannibalization。 Example: 海倫仙度絲，潘婷，沙宣，飛柔。 Peter Lynch’s Comment on Diversification Over-Diversification → Diworseification Examples Mobil Oil（美孚石油） purchased Marcor Inc. (retail industry). 吉列曾收購藥廠、電子錶廠。 通用食品曾擁有中國餐館、玩具公司、旅行社、大 賣廠、鞋類產品等。 The Product Life Cycle Product development Introduction Growth Maturity Decline Figure: Sales and Profit Life Cycles Introduction Stage of PLC Sales: low Costs: high cost per customer Profits: negative Marketing Objective: create product awareness and trial Product: offer a basic product Price: use cost-plus formula Distribution: build selective distribution Promotion: heavy to entice product trial Growth Stage of PLC Sales: rapidly rising Costs: average cost per customer Profits: rising Marketing Objective: maximize market share Product: offer extension, service, warranty Price: penetration strategy Distribution: build intensive distribution Promotion: reduce to take advantage of demand Maturity Stage of PLC Sales: peak Costs: low cost per customer Profits: high Marketing Objective: maximize profits while defending market share Product: diversify brand and models Price: match or best competitors Distribution: build more intensive distribution Promotion: Increase to encourage brand switching Maturity Stage of the PLC Modifying the Market: Increase the consumption of the current product. How? Look for new users and market segments, e.g. Johnson & Johnson. Reposition the brand to appeal to larger or fastergrowing segment Look for ways to increase usage among present customers, e.g. Campbell, Amazon. Modifying the Market The WD-40 company’s knack for finding new uses has made this popular substance one of the truly essential survival items in most American homes. Maturity Stage of the PLC Modifying the Product: Changing characteristics such as quality, features, or style to attract new users and to inspire more usage. How? Improve durability, reliability, speed, taste Improve styling and attractiveness Add new features Expand usefulness, safety, convenience Case: Yamaha Piano 當山葉(Yamaha)控制40%的全球鋼琴市場時， 總需求每年下降了10%。 山葉發現大多數的鋼琴都閒置，並成為家中最 大沾灰塵的家具，且都未曾調音。似乎許多人 擁有鋼琴，但很少彈奏。人們並不想投資時間 來彈奏鋼琴。 因此，山葉決定增加市場上數百萬台鋼琴的價 值，開發複雜的數位與光學科技，可在鋼琴上 彈奏出專業鋼琴師的演奏。數位鋼琴的出現， 活化了鋼琴產業，也增加鋼琴維修的市場。 Modifying the Product Crayola has added a steady stream of new colors, forms, and packages. Maturity Stage of the PLC Modifying the Marketing Mix: Improving sales by changing one or more marketing mix elements. How? Cut prices Launch a better ad campaign Move into larger market channels Offer new or improved services to buyers Decline Stage of PLC Sales: declining Costs: low cost per customer Profits: declining Marketing Objective: reduce expenditures and milk the brand (harvesting or divesting) Product: phase out weak items Price: cut price Distribution: selective--phase out unprofitable outlets Promotion: reduce to minimal level Product Life Cycles The PLC concept can be used to analyze a product category, a product form, a product, or a brand. Not all products exhibit a bell-shaped PLC. Growth-slump-maturity pattern Cycle-recycle pattern Scalloped pattern Style, Fashion, Fad Practical Problems of PLC Hard to identify which stage of the PLC the product is in. Hard to pinpoint when the product moves to the next stage. Hard to identify factors that affect product’s movement through stages. Hard to forecast sales level, length of each stage, and shape of PLC. Strategy is both a cause and result of the PLC.