Chapter 8 – Product Differentiation, Product Portfolio & Packaging
(Exam Notes)
1. Product Differentiation
Definition: Making a product different from competitors' products so
customers prefer it.
Ways to Differentiate Products
1. Core Functionality
The product must provide its basic benefit effectively.
If it fails to perform its main function, it will fail in the market.
Example: Nokia lost market share because it failed to keep up with
smartphone technology.
2. Features
Additional characteristics that improve the product.
Companies select features based on customer needs and cost.
More useful features can increase customer satisfaction.
3. Performance Quality
The level at which a product performs its main functions.
Higher quality usually increases customer value.
Companies should continuously improve quality.
Example: Kodak suffered because it failed to improve products with
changing technology.
4. Conformance Quality
Degree to which all products are identical and meet promised
specifications.
Customers expect consistent quality in every unit produced.
5. Durability
Expected operating life of a product.
Important for:
o Vehicles
o Kitchen appliances
o Durable goods
Customers may pay more for durable products.
6. Reliability
Probability that a product will work without failure for a specific
period.
Reliable products reduce customer risk.
Customers often pay a premium for reliability.
7. Form
Physical appearance of the product.
Includes:
o Size
o Shape
o Physical structure
8. Style
Product's look and feel.
Creates uniqueness and emotional appeal.
Difficult for competitors to copy.
9. Customization
Products are modified according to individual customer needs.
Helps firms satisfy customers better than competitors
Ways to Expand Product Portfolio
1. Add New Product Lines
Increases portfolio width.
2. Lengthen Existing Product Lines
Increases portfolio length.
3. Add More Variants
Increases portfolio depth.
4. Increase Consistency
Makes product lines more closely related.
Product Line Manager Responsibilities
Analyse sales and profits.
Decide which products to:
o Build
o Maintain
o Harvest
o Eliminate
5. Product Map
Benefits
Identifies competitors.
Reveals market gaps.
Shows customer preferences.
Helps in market segmentation.
6. Product Line Lengthening
Methods
A. Line Stretching
Extending the product line beyond its current range.
i. Down-Market Stretch
Introduce lower-priced products.
Target budget-conscious customers.
ii. Up-Market Stretch
Introduce premium products.
Gain higher profits and prestige.
iii. Two-Way Stretch
Extend both upward and downward.
Serve multiple market segments.
B. Line Filling
Adding more items within the existing range.
Reasons
Increase profits.
Satisfy dealers.
Block competitors.
7. Product Line Modernization, Featuring and Pruning
Product Line Modernization
Updating products with new technology and features.
Featuring
Promoting selected products in the line.
Pruning
Removing weak or unprofitable products ("deadwood").
8. Packaging
Importance
First thing customers notice.
Acts as a "5-second advertisement."
Influences buying decisions.
Builds brand image.
10. Packaging Components
Functional Components
Protection
Storage
Transportation
Convenience
Aesthetic Components
Color
Shape
Graphics
Design
Color Importance
Creates brand identity.
Different colors have different meanings in different cultures.
11. Labeling
Functions of Labels
1. Identification
Identifies the product or brand.
2. Grading
Indicates quality level.
Example: Grade A, B, C.
3. Description
Provides information such as:
Manufacturer
Ingredients
Manufacturing date
Usage instructions
Safety instructions
4. Promotion
Attractive graphics help promote the product.