CHAPTER IV: Product Strategy

1. CHAPTER IV: Product Strategy

2. “ For the poor majority, the downscale consumers, the issue is not product quality. It is simply product. It is not quality of life that matters for them. What matters is simply life. Survival”. • By: Dr. Eduardo Roberto • Professor, Asian Institute of Management

3. - It is the tangible offering of a firm that satisfies customer’s needs and wants.

4. Two Fundamental Product questions: • 1. Who are my target market (or target customers) ?

5. 2. What are their needs and wants?

6. Maslow Hierarchy of Needs Model

7. Maslow Hierarchy of Needs Model

8. 3 TYPES OF PRODUCTS • 1. Durables - have a long interval between repeat purchases. Some examples are:

9. 2. Non-durables - have stronger repeat purchases. Examples are:

10. 3. Services – which are essentially intangible because there are no physical products involved. Examples are as follows:

12. CONSUMER SATISFACTION • = benefits expected – costs incurred • (Murphy and Enis, 1986)

13. 1. Effort – which is the amount of money, time, and energy the buyer is willing to spend to purchase a given product.

14. 2. Risk – which is the buyer’s subjective feeling about the consequences of making a purchasing mistake.

15. Four Types of Product according to customer’s effort and risk • 1. Convenience products, • 2. Preference products, • 3. Shopping products, and • 4. Specialty products

17. Convenience Product – the lowest risk and lowest effort products where either none or very small decision-making is made by target consumers before buying the products.

18. Two types of convenience products: • 1. Staple goods • 2. Impulse goods

19. Preference Product – wherein consumer has a specific preferences for brands or suppliers.

20. Shopping Product – consumers feel are worth the time and effort to compare with other competing products.

21. Specialty Product – products that consumers really want and are willing to make a special purchasing effort. Painting done by Fernando Amorsolo Painting done by Cesar Legaspi

22. 3 LEVELS OF PRODUCT • Formal product – physical and tangible product. • Augmented product – “extras” built-in to the formal product. • Core product – the generic benefit that each product gives.

24. Examples:

25. Customer-Oriented Product Framework Company’s Differentiation Low High Improve or Change Gear Maintain High Customer Purchase Decision Criteria Low Priority Possible Overkill Low

26. Methods of satisfying customer’s needs and wants : • 1. Problem Solving Method – identifies and satisfies an actual or existing need and want of a customer. • “What problems or needs can our product solve?”

27. 2. Creating Dissatisfaction Method – introduces new ways of doing things to the customers by converting customer’s existing satisfaction level to a dissatisfaction level. • “Could our product enable customers to do what they could not do or could not do as well?”

28. MANSMITH AND FIELDERS PRODUCT PHILOSOPHY

29. Mansmith and Fielders, Inc. Product Philosophy No.1 • “No relevant product advantage from competition must be allowed to exist”. • Must satisfy the following criteria: • A real consumer need exists; • The product offers a unique benefit; and 3. The product actually delivers the benefit.

30. Some of the many defensive alternatives which can be adopted individually or in combination with other alternatives by the marketer of Purefoods are: • 1. Product – match the product by launching similar version. • 2. Price – offer a lower price of their regular corned beef. VS

31. 3. Promotion – preempt the successful launching of Swifts by loading homes with Purefoods corned beef. • 4. Placement – improve and increase display by renting island displays at class. VS

32. Mansmith and Fielders, Inc. Product Philosophy No.2 • “A product advantage should be converted into a market advantage”. • This can be realized if the following criteria are met: • Target customers must be aware of the existence of unique benefit; • Target customers must be convinced about the merit of the product offer.

33. The bottom line is this: A product advantage can only become a market advantage if consumers are aware and are patronizing the product regularly.

34. Quality - The ability of a product to satisfy a customer’s needs and wants

35. Profit Impact on Marketing Strategies (PIMS) – studies have shown that companies with quality scores in the top third outearn those in the bottom third by a 2-to-1 margin. PIMS co-author Robert Buzzell

36. New product activity, Relative product quality, and Marketing expenditures, specially: 1.“Share-gaining companies typically developed and added more new products to their line.”

37. 2. “Companies that increased their product QUALITY relative to competitors enjoyed greater share gains than those whose quality ratings remained constant or declined.”

38. 3. “Companies that increased their marketing expenditures faster than the rate of market growth typically achieved share gains.

39. 4. “Companies that cut their prices more deeply than their competitors did not achieve significant market share gains, contrary to expectation.”

40. Quality can be achieved by: • Delivering the right product, • Satisfying customer needs, • Meeting customer expectations, and • Treating every customer with integrity, respect, and courtesy

41. Attributes that signal quality have often been divided into: 1. Intrinsic cues – involve the physical composition of the product such as the flavor, color and sweetness in an orange drink.

42. 2. Extrinsic cues – product related but not part of the physical product itself such as the brand name, price, warranty, product form and level of advertising.

43. Ten Learning Lesson about “Quality and Customer Satisfaction” 1. “Before a disappointing experience, consumers take a broad general concept of quality. It is stated almost like the statistician’s “null hypothesis” – “In a quality product, nothing must go wrong”. 2. “It is when something goes wrong that consumers are able to go into the specific quality elements”.

44. 3. “It is also when consumers are able to compare that they are able to say something about quality elements”. 4. “To the consumer, there is such a thing as the right amount of quality. More is not necessarily better. Neither is lesser. Just right is the right amount”.

45. 5. “When consumers do go into the specific quality elements, they often need to be probed in order that their concept of quality becomes truly specific”. 6. “To the consumer, there is such a thing as the right kind of quality. Each kind defines a need segment that must be satisfied”.

46. 7. “It is the product’s unexpected quality characteristic that impresses the consumer that most. The more unexpected that quality characteristic is, the deeper the consumer’s favorable impression and satisfaction”. 8. “There is a certain kind of customer satisfaction that they may be called a lower order because it results in, at most, a retrial. Once another product offers something a little better than what it provides, the consumer is ready to switch immediately”.

47. 9. “There is a second kind of customer satisfaction that is longer lasting. It is a satisfaction that brings the consumer to a committed usage of the product. It results in consumer loyalty”. 10. “For the poor majority, the downscale consumers, the issue in targeting marketing perfection is not product quality. It is simply product. It is not quality of life that matters to them. What matters is simply life. Survival”.

48. Cost of Quality and Non-quality

49. LOOK-ALIKE PRODUCTS

50. ISO 9000 • (International Organization for Standardization) • It is a series of quality management and assurance standards which define the elements required to achieve a quality system regardless of the product manufactured or the technology used.