THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA POSTGRADUATE DIPLOMA IN BUSINESS MANAGEMENT MARKETING STRATEGY SETTING PRODUCT STRATEGY HAFEEZ RAJUDIN SETTING PRODUCT STRATEGY Marketing Planning begins with formulating an offering to meet target customers’ needs and wants. The customer will judge the offerings by three basic elements: 1. Product Features and Quality. 2. Services Mix and Quality. 3. Price COMPONENTS OF THE MARKET OFFERING Value-based prices Attractiveness of the Market offering Product features and quality Services mix and quality Product Characteristics and Classifications Definition of Product: “ 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, properties, organizations, Product Levels: The Customer Value Hierarchy Core Benefit Basic Product Expected Product Augmented Product Potential Product Product Levels: The Customer Value Hierarchy Core Benefit: the service or benefit the customer is really buying e.g. a hotel guest is buying “rest and sleep” . The purchaser of a drill is buying “holes”. (Marketers should see themselves as benefit providers) 1. Product Levels: The Customer Value Hierarchy 2. Basic Products: at the second level Marketers has to turn the core benefit into a basic product. Thus a hotel room includes a bed, bathroom, towels, desk, dresser and closet. Product Levels: The Customer Value Hierarchy 3. Expected Product At the third level the marketer prepares an EXPECTED PRODUCT, a set of attributes and conditions buyers normally expect when the purchase a product. e.g. hotel guest expect a clean bed, fresh towels, working lamps, and a relative degree of quite. Product Levels: The Customer Value Hierarchy 4. Augmented Product: At the fourth level the marketer prepares an augmented product that exceeds customer expectations. 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 the products and related services. Product Levels: The Customer Value Hierarchy 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, services, advertising, customer advice, financing, delivery arrangements, warehousing and other things that people value. Product Levels: The Customer Value Hierarchy Some thing should be noted about product-augmentation strategy. 1. Each augmentation adds cost. 2. Augmented benefits become expected benefits and necessary point-of parity “ today’s hotel guests expect cable or satellite television with a remote control and high-speed internet access or two phone lines. This means competitors will have to search for still other features and benefits”. Product Levels: The Customer Value Hierarchy 5. Potential Product: This encompasses all the possible augmentations 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.