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Chapter 11: Basic Concepts in Product Planning

Lindell’s Chapter 11 Notes

BASIC PRODUCT11-1 OVERVIEW

A. Product planning is systematic decision making relating to all aspects of the development

and management of a firm’s products including !randing and packaging.

B. "ach product consists of a !undle of attri!utes capa!le of e#change or use usually a mi# of

tangi!le and intangi!le forms.

C. A $ell%structured product plan ena!les a company to pinpoint opportunities develop

appropriate marketing programs coordinate a mi# of products maintain successful

products as long as possi!le reappraise faltering products and delete undesira!le products.

&. A firm should define its products in three distinct $ays: tangi!le augmented and generic.

'ee (igure 11%1.1. A tangi!le product is a !asic physical entity service or idea.

). An augmented product includes not only the tangi!le elements of a product !ut

also the accompanying cluster of image and service features.

*. A generic product focuses on $hat a product means to the customer not the seller.'ee (igure 11%).

11%) +,P"' -( P-&/C+'

A. +he first product%planning decision involves the choice of the type0s of products to offer.

11%)a (/N&A2"N+AL &3'+3NC+3-N' B"+4""N 5--&' AN& '"63C"'

A. 5oods marketing entails the sale of physical products. 'ervice marketing encompasses the

rental of goods servicing goods o$ned !y consumers and personal services.

B. (our attri!utes distinguish services from goods: intangi!ility perisha!ility insepara!ility

from the service provider and varia!ility in 7uality.

C. Although services have different characteristics from goods their sales are fre7uently

connected.

11%)! C-N'/2" P-&/C+'

A. Consumer products are goods and services destined for the final consumer for personalfamily or household use.

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B. Consumer products may !e classified in the follo$ing categories. 'ee +a!le 11%1.

1. Convenience products are those !ought $ith a minimum of effort $here the !uyerhas kno$ledge of product attri!utes prior to shopping. 'taples impulse goods and

emergency goods are the kinds of convenience goods.

). 'hopping products are those for $hich consumers lack sufficient information a!out products prior to making a purchase decision and must therefore ac7uire further

kno$ledge. +he t$o kinds of shopping goods are attri!ute%!ased and price%!ased.

*. 'pecialty products are those for $hich consumers are !rand loyal and $ill make asignificant purchase effort to ac7uire the desired !rand.

C. +he classification is an e#cellent means for segmenting consumers.

11%)c 3N&/'+3AL P-&/C+'

A. 3ndustrial products are goods and services purchased for use in the production of other

goods or services in the operation of a !usiness or for resale to other consumers.

B. 3ndustrial goods are categori8ed !y the level of decision making in making a purchase

costs consumption rapidity the role in production and the change in form. 'ee +a!le

11%).

C. C. 3ndustrial services are of t$o general types.

11%* "L"2"N+' -( A P-&/C+ 239

A. A product item is a specific model !rand or si8e of a product that a company sells.

B. A product line is a group of closely related items.

C. A product mi# consists of all the different product lines a firm offers.

&. A product mi# can !e descri!ed !y its $idth 0num!er of different product lines depth

0num!er of product items $ithin each product line and consistency 0ho$ closely related

product lines are. (igure 11%* sho$s product mi# alternatives in terms of $idth and depth.

(igure 11% highlights Colgate%Palmolive’s product mi#.

1. A $ide mi# ena!les a firm to diversify appeal to different consumer needs andencourage one%stop shopping. 3t re7uires investments and e#pertise in different

areas.). A deep mi# satisfies the needs of several segments ma#imi8es shelf space

discourages competitors covers a range of prices and sustains dealer support. 3t

may impose higher inventory and other costs as $ell as confuse consumers.*. A consistent mi# is easy to manage is efficient creates a strong image and

generates solid distri!ution relations. 3t may leave the firm vulnera!le to

environmental threats since it is not diversified.

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. 'everal e#amples of different companies’ product mi#es are provided.

11% P-&/C+ 2ANA5"2"N+ -5AN3;A+3-N'

A. +here are five !asic product%management organi8ational forms as sho$n in +a!le 11%*:

B. +he correct organi8ation depends on the firm’s diversity the num!er of ne$ products

introduced the level of innovativeness company resources management e#pertise andother factors.

C. A com!ination of forms may !e !est.

11-5 PRODUCT POSITIONING

A. A company must nsu! t"at ac" o# $ts p!o%ucts $s p!c$&% asp!o&$%$n' a com($nat$on o# un$)u #atu!s an% t"at t"s #atu!s a!%s$!% (y t" ta!'t ma!*t.

B. A #$!m+s 'oa, $s to "a& consum!s p!c$& p!o%ucts+ att!$(uts as $t$ntn%s. Onc consum! p!cpt$ons a! #o!m% t"y may ( "a!% toc"an'.

C. P!o%uct pos$t$on$n' na(,s a #$!m to map $ts o##!$n's $n t!ms o#consum! p!cpt$ons an% %s$!s compt$t$on ot"! companyp!o%ucts an% n&$!onmnta, c"an's.

D. Consum! p!cpt$ons a! t" $ma's consum!s "a& o# p!o%ucts(ot" a company+s an% compt$to!s+.

E. Consum! %s$!s !#! to t" att!$(uts consum!s ou,% ,$* p!o%uctsto possss/t"$! $%a, po$nts.

0. Compt$t$& p!o%uct pos$t$on$n' !#!s to t" p!cpt$ons consum!s"a& o# a #$!m !,at$& to $ts compt$to!s.

G. Company p!o%uct pos$t$on$n' s"os a #$!m "o consum!s p!c$&%$##!nt (!an%s o# t" #$!m $t"$n t" sam p!o%uct ,$n. Its on (!an%sa! compa!% to on anot"!.

. En&$!onmnta, c"an's may a,t! p!cpt$ons o# p!o%ucts.

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I. 0$'u! 11-5 $,,ust!ats p!o%uct pos$t$on$n' #o! t" U.S. auto ma!*tp,ac. T"! a! n$n $%a, po$nts ac" assoc$at% $t" a spc$#$c typ o# ca!an% %sc!$(% $n t" t2t.

3. T"!ou'" p!o%uct-pos$t$on$n' ana,ys$s a company can ,a!n a '!at %a,an% p,an ma!*t$n' ##o!ts acco!%$n',y. To 2amp,s a! p!o&$%%. S0$'u!s 11-4 an% 11-.

11-4 BRANDING

A. B!an%$n' $s t" p!oc%u! a #$!m #o,,os $n !sa!c"$n' %&,op$n' an%$mp,mnt$n' $ts (!an%6s7.

B. A (!an% $s a nam t!m %s$'n sym(o, o! any ot"! #atu! t"at$%nt$#$s t" 'oo%s an% s!&$cs o# a s,,! o! '!oup o# s,,!s.1. A (!an% nam $s a o!% ,tt! 6num(!7 '!oup o# o!%s o!

,tt!s 6num(!s7 t"at can ( spo*n.8. A (!an% ma!* $s a sym(o, %s$'n o! %$st$nct$& co,o!$n' o!

,tt!$n' t"at cannot ( spo*n.9. A t!a% c"a!act! $s a (!an% ma!* t"at $s p!son$#$%.:. A t!a%ma!* $s a (!an% nam (!an% ma!* o! t!a% c"a!act! o!

com($nat$on t"!o# t"at $s '$&n ,'a, p!otct$on.

A. Brand e7uity is a ne$ !randing concept that recogni8es the financial value associated $itha !rand apart from a product’s physical attri!utes. 4hile definitions of !rand e7uity maydiffer they have these factors in common:

1. 2onetary value.

). 3ntangi!ility.*. Perceived 7uality.

B 3n general !rands ease identification provide 7uality assurance identify the maker reduce price comparisons aid advertising segment markets increase prestige reduce consumer

risk improve reseller cooperation sell a $hole product line and ease entry into a ne$

product category.

C. A firm must make these four decisions related to !randing 0see (igure 11%<:

1. Corporate sym!ols.

). Branding philosophy.*. Choosing a !rand name.

. /sing trademarks.

11-4a CORPORATE S;<BO=S

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A. Co!po!at sym(o,s a! a #$!m+s nam ,o'os an% t!a% c"a!act!s.

B. 'ym!ols are evaluated $hen a company does the follo$ing:

1. (irst !egins !usiness.

). 2erges $ith another company.*. educes or e#pands product lines.

. 'eeks ne$ geographic markets.

=. (inds its name to !e un$ieldy nondistinctive or confusing.

.

11-6b BRANDING PHILOSOPHY

A. A branding philosophy o!lin"s !h" s" o# $an#a%!r"r& pri'a!"&

and(or g"n"ri% brands& as )"ll as #a$ily and(or indi'idal branding.

<anu#actu!! P!$&at an% Gn!$c B!an%s

A. <anu#actu!! (!an%s contain the name of the manufacturer.

1. +hey have the most sales.

). +hese !rands appeal to consumers $ho desire lo$ risk good 7uality routine !ehavior status and convenience shopping.

*. +hey are $ell kno$n and trusted !ecause 7uality control is strictly maintained.

. +hey are identifia!le and present distinctive images to shoppers.=. Attracting and retaining customer loyalty are important.

B. P!$&at 6%a,!7 (!an%s contain the name of the $holesaler or retailer.

1. +hey have su!stantial sales.

). +hese !rands appeal to price%conscious consumers.*. +hey are 7uite similar to manufacturer !rands $ith less emphasis on packaging

and variety.

. esellers secure e#clusive rights are responsi!le for distri!ution control themarketing effort and charge lo$ prices.

=. +he ma>or goal is to attract and retain consumers $ho are loyal to the reseller and

for the distri!utor?retailer to e#ert control over the marketing of these !rands. 'ee

(igure 11%@.

C. Gn!$c (!an%s emphasi8e the names of the products themselves and not manufacturer

or reseller names.

1. +hey have the least sales.). +hese !rands appeal to the most price%conscious consumers $ho $ill accept lo$er

7uality.

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*. +hey are seldom advertised and receive poor shelf space.

. Prices are less than the other !rands due to 7uality packaging assortment

distri!ution and promotion economies.=. +he ma>or goal is to offer lo$%priced lo$er%7uality items to consumers interested

in price savings.

&. +a!le 11% compares the three types of !rands.

". +oday many companies employ a mi#ed%!rand strategy $here!y they sell a com!inationof manufacturer and private !rands 0and sometimes generics. +his ena!les them to

increase control reach more market segments encourage loyalty coordinate shelf space

and locations improve channel cooperation increase assortments sta!ili8e production

utili8e e#cess capacity ma#imi8e sales and utili8e e#cess capacity.

(. 3n the !attle of the !rands each type of !rand attempts to gain a greater share of the

consumer’s dollar control over marketing strategy consumer loyalty productdistinctiveness ma#imum shelf space and locations and a large share of profits.

0am$,y an% <u,t$p, B!an%$n'

A. In #a$ily *blan+"!, branding& on" na$" is s"d #or !)o or $or"

indi'idal prod%!s.

1. any %o$pani"s s"lling inds!rial prod%!s or %ons$"r

s"r'i%"s s" so$" #or$ o# #a$ily branding.

. I! )or+s b"s! #or sp"%iali/"d #ir$s or !hos" )i!h narro)

prod%! lin"s. 0h"y %an ha'" a ni#or$ i$ag" and !h" abili!y

!o pro$o!" !h" sa$" na$" %on!inally& )hi%h +""ps

pro$o!ion %os!s do)n.

. 0h" $a2or disad'an!ag"s o# #a$ily branding ar" !ha!

di##"r"n!ia!"d $ar+"!ing "##or!s ar" $ini$i/"d& on" na$" #or

di'"rs" prod%!s %an da$ag" a %o$pany3s i$ag"& and

inno'a!i'"n"ss is no! pro2"%!"d !o %ons$"rs.

B. An effective use of family !randing is !rand e#tension a strategy !y $hich an esta!lished !rand name is applied to ne$ products. +here are seven situations in $hich this strategy is

most effective:

C. 4ith $n%$&$%ua, 6mu,t$p,7 (!an%$n' separate !rands are used for different items or

product lines. (or e#ample Procter 5am!le’s $ide and deep product mi# includes eight !rands of laundry detergent.

1. 3t is useful in product positioning attracts various market segments increases sales

and marketing control offers !oth premium and lo$%priced !rands and allo$s amanufacturer to secure greater shelf space in retail stores.

11%

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). 2ultiple !rands re7uire large promotional costs may cause a loss of continuity

lessen mass production economies and do not aid in ne$ product introductions.

&. 2any companies com!ine family and individual !rands.

1. A firm could have a flagship !rand and other secondary !rands. (or e#ample one%

third of ein8’s products have the ein8 nameD the others have names like 'tarkistand -re%3da.

). A family !rand could !e used $ith individual !rands. (or e#ample onda has t$o

ma>or auto lines onda and Acura. 4ithin the onda line are the onda Accordonda Civic and onda Prelude.

11-4c COOSING A BRAND NA<E

A. +here are several sources from $hich a firm can choose a !rand name:

1. "#isting company !rands 0!rand e#tension.

). esellers.

*. Ne$ name.. Licensing agreement $here!y the company pays a fee to use a name or logo $hose

trademark rights are held !y another firm.

=. Co%!randing $here!y t$o or more names are used $ith the same product to gainfrom the !rand images of each. 'ee (igure 11%1E.

"#amples are provided for each of these in the te#t.

B. A good brand na$" has !h" #ollo)ing a!!rib!"s4

1. I! sgg"s!s !h" prod%!3s s" *".g.& 5l"an)ip"s,.

. I! is "asy !o sp"ll and r"$"$b"r& and pronon%"abl" in on"

)ay *".g.& Bi%,.

. I! %an b" appli"d !o a )hol" lin" o# prod%!s *".g.& D""r"

!ra%!ors,.

. I! %an b" l"gally pro!"%!"d *".g.& P"rri"r,.

7. I! has a pl"asan! or a! l"as! n"!ral $"aning in!"rna!ionally

*".g.& On'ia,.

6. I! %on'"ys a di##"r"n!ial ad'an!ag" *".g.& P"r! Pls,.

C. As firms e#pand glo!ally !randing takes on special significance. Brands’ meanings must

not have negative connotations or violate cultural ta!oos. 'peciali8ed firms such as Namestormers devise names for clients that are accepta!le around the $orld.

&. 3n choosing a !rand name the firm should plan for the consumer’s !rand decision process

as sho$n in (igure 11%11.1. (or a ne$ !rand nonrecognition is the first stage.

11%F

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). &uring recognition the !rand and its attri!utes are kno$n.

*. A preference 0or dislike for the !rand is developed.

. Last there is insistence 0or aversion for the !rand.

". 4ith !rand e#tension the ne$ product starts at recognition preference or insistence.

11%d +" /'" -( +A&"2AG'

A. +he company determines $hether to apply for trademark protection under the Lanham Act

0updated !y the +rademark La$ evision Act.

1. +rademark protection grants the e#clusive use of a $ord name sym!ol

com!ination of letters or num!ers or other devicesHsuch as distinctive packaging Hto identify the goods and services of that firm and distinguish them from others

for as long as they are marketed.

). +rademarks are voluntary.*. +hey re7uire a registration procedure that can !e time consuming and e#pensive.

. A glo!al firm must register trademarks in every nation in $hich it operates.

=. A trademark must have a distinct meaning !e used in interstate commerce not !econfusingly similar to other trademarks and not imply attri!utes a product does not

have.

B. Brands currently fighting to remain e#clusive trademarks include L’eggs oller!lade(ormica and +eflon.

C. 4hen !rands !ecome too popular or descriptive of a product category they run the risk of !ecoming pu!lic property. +his occurred for cellophane aspirin shredded $heat cola

linoleum and light !eer.

11%F PACGA53N5

A. Packaging is the procedure follo$ed in researching designing and producing package0s.

B. A package is a product’s physical container la!el and?or inserts.

1. A physical container may !e a card!oard metal plastic or $ooden !o#D a

cellophane $a#paper or cloth $rapperD a glass aluminum or plastic >ar or canD a paper !agD styrofoamD some other materialD or a com!ination of these.

). A la!el indicates the !rand name company logo ingredients promotionalmessages inventory codes and?or instructions for use.

*. 3nserts are instructions and safety information or coupons pri8es or recipe

!ooklets. +hey are used as appropriate.

C. A!out 1E percent of a typical product’s final selling price goes for its packaging. +he

amount is higher for such products as cosmetics 0up to E percent.

11%<

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&. A complete package redesign of a ma>or product may cost millions of dollars.

". Packaging decisions must serve !oth resellers and consumers. +hey involve significant

coordination $ith production logistics and legal personnel.

(. Packaging redesign fre7uently occurs $hen a firm’s current packaging receives a poor

response from channel mem!ers and customers or !ecomes too e#pensive. An e#ample is

provided.

11-a BASIC PAC>AGING 0UNCTIONSA. T"! a! s$2 (as$c pac*a'$n' #unct$ons.

1. Conta$nmnt an% p!otct$on/A p!o%uct can ( s"$pp% sto!%an% "an%,% sa#,y an% ##$c$nt,y.

8. Usa'/T" p!o%uct can ( as$,y us% an% !sto!%.9. Commun$cat$on/P!o%uct $n#o!mat$on an% company $ma' a!

con&y%.:. S'mntat$on/A pac*a' can ( ta$,o!-ma% #o! a spc$#$c

ma!*t '!oup.5. C"ann, coop!at$on/C"ann, mm(!s+ n%s a! mt.4. N-p!o%uct p,ann$n'/A n pac*a' can ( an $nno&at$on.

11%F! (AC+-' C-N'3&""& 3N PACGA53N5 &"C3'3-N'

A. +hese are the t$elve key factors to consider in packaging:

1. 3mage.). (amily packaging.

*. 'tandardi8ation 0see (igure 11%1).

. Costs.=. 2aterials and level of innovation 0see (igure 11%1*.

. Package features.

F. 'i8e0s color0s and shape0s.

<. Placement content si8e and prominence of the la!el.@. 2ultiple packaging.

1E. 3ndividual $rapping.

11. Preprinted price and inventory control coding.a. +he /niversal Product Code 0/PC is a system for coding information onto

merchandise. 3t re7uires pre%marking $ith a series of vertical lines $hich

cannot !e read !y humans. 3nventory data are instantly transmitted to themain computer of the retailer or manufacturer. 3n the /PC system human%

reada!le prices must still !e marked on the merchandise.

1). 3nterrelation $ith other marketing varia!les.

11%@

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11%Fc C3+3C3'2' -( PACGA53N5

A. Packaging has !een critici8ed and regulated in recent years !ecause of environmental andresource pro!lems costs 7uestions a!out honesty and the confusion caused !y inconsistent

designations of package si8es and lack of safety.

B. Consumers must !ear part of the responsi!ility for the negative aspects of packaging.

1. +hro$a$ay !ottles $hich are preferred !y consumers use almost three times the

energy of returna!le !ottles.

). 'hoplifting adds to packaging costs !ecause firms must add security tags andother$ise alter packages.

C. 3n planning their packaging programs firms need to $eigh the short%term and long%term !enefits and costs of providing environmentally safer less confusing and more tamper%

resistant packages.

11%< +" 5L-BAL &32"N'3-N' -( P-&/C+ PLANN3N5

11%1E

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