Page 364 - Marketing Management

SETTING PRODUCT STRATEGY | CHAPTER 12 341

Intercontinental Hotels Group Intercontinental Hotels Group Intercontinental Hotels

Group’s Holiday Inn brand broke its domestic hotels into four separate chains to tap into differ-
ent benefit segments—the upscale Crowne Plaza, the traditional Holiday Inn, the budget
Holiday Inn Express, and the business-oriented Holiday Inn Select. Each chain received a dif-
ferent marketing program and emphasis. Holiday Inn Express launched the humorous “Stay
Smart” advertising campaign, showing the brilliant feats ordinary people could attempt after staying at the
chain. By developing the brands for distinct consumer targets with unique needs, Holiday Inn prevents
overlap between them. 32

LINE FILLING A firm can also lengthen its product line by adding more items within the present
range. 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, and plugging holes to keep out competitors.

BMW AG BMW AG In four years BMW has morphed from a one-brand, five-model carmaker
into a powerhouse with 3 brands, 14 “Series,” and roughly 30 distinct models. Not only has the
carmaker expanded its product range downward with MINI Coopers and its compact 1-series
models, but it has also built it upward with Rolls-Royce and filled the gaps in between with its X3,
X5, and X6 sports activity vehicles, Z4 roadsters, and a 6-series coupe. The company has used
line filling successfully to boost its appeal to the rich, the super-rich, and the wannabe-rich, all without depart-
ing from its pure premium positioning. The latest challenges? Launching the 5-series Gran Turismo, which
combines the formality of a four-door sedan, the cargo capacity of a station wagon, and the high seating
position and convenient hatchback of a crossover SUV. After that, BMW still has to decide what type of
environmentally friendly “green” vehicles to introduce. 33

Line filling is overdone if it results in self-cannibalization and customer confusion. The com-
pany needs to differentiate each item in the consumer’s mind with a just-noticeable difference.
According to Weber’s law, customers are more attuned to relative than to absolute difference. 34
They will perceive the difference between boards 2 and 3 feet long and boards 20 and 30 feet long,
but not between boards 29 and 30 feet long. The proposed item should also meet a market need
and is not added simply to satisfy an internal need. The infamous Edsel automobile, on which Ford
lost $350 million in the late 1950s, met Ford’s internal positioning need for a car between its Ford
and Lincoln lines, but not the market’s needs.

LINE MODERNIZATION, FEATURING, AND PRUNING Product lines need to be
modernized.The question is whether to overhaul the line piecemeal or all at once.A piecemeal approach
allows the company to see how customers and dealers take to the new style. It is also less draining on the
company’s cash flow, but it lets competitors see changes and start redesigning their own lines.
In rapidly changing markets, modernization is continuous. Companies plan improvements to
encourage customer migration to higher-valued, higher-priced items. Microprocessor companies
such as Intel and AMD, and software companies such as Microsoft and Oracle continually intro-
duce more-advanced versions of their products. It’s important to time improvements so they do
not appear too early (damaging sales of the current line) or too late (giving the competition time to
establish a strong reputation). 35
The product line manager typically selects one or a few items in the line to feature. Sears will an-
nounce a special low-priced washing machine to attract customers. At other times, managers will
feature a high-end item to lend prestige to the product line. Sometimes a company finds one end of
its line selling well and the other end selling poorly.
The company may try to boost demand for slower sellers, especially if a factory is idled by lack
of demand, but it could be counterargued that the firm should promote items that sell well rather
than prop up weak ones. Nike’s Air Force 1 basketball shoe, introduced in the 1980s, is a billion-
dollar brand that is still a consumer and retailer favorite and a moneymaker for the company due
to collectable designs and tight supplies. Since their introduction, Air Force 1 shoes have been de-
signed or inspired by many celebrities and athletes. 36