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Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1
Lamb, Hair, McDaniel
CHAPTER 10
Product Concepts
2011-2012
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Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2
LO 1 Define the term product
LO 2 Classify consumer products
LO 3 Define the terms product item, product line, and product mix
LO 4 Describe marketing uses of branding
Learning OutcomesLearning Outcomes
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3
LO 5 Describe marketing uses of packaging and labeling
LO 6 Discuss global issues in branding and packaging
LO 7 Describe how and why product warranties are important marketing tools
Learning OutcomesLearning Outcomes
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4
Define the term product
What Is a Product?What Is a Product?
LO1
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5
What Is a Product?
Everything, both favorable
and unfavorable, that a
person receives in an
exchange.
Tangible Good
Service
Idea
ProductProduct
LO1
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6
What Is a Product?
Product is the starting point of Marketing Mix
PromotionPromotion
Place (Distribution)Place (Distribution)
PricePrice
ProductProduct
LO1
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7
Classify consumer products
Types of Consumer ProductsTypes of Consumer Products
LO2
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8
Types of Products
BusinessProduct
BusinessProduct
Consumer Product
Consumer Product
A product used to manufacture other goods or services, to facilitate an
organization’s operations, or to resell to other customers
A product used to manufacture other goods or services, to facilitate an
organization’s operations, or to resell to other customers
A product bought to satisfy an individual’s personal wants
A product bought to satisfy an individual’s personal wants
LO2
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9
Types of Consumer Products
UnsoughtProducts
UnsoughtProducts
SpecialtyProductsSpecialtyProducts
ShoppingProducts
ShoppingProducts
ConvenienceProducts
ConvenienceProducts
ConsumerProducts
ConsumerProducts
BusinessProductsBusinessProducts
ProductsProducts
LO2
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10
Types of Consumer Products
MarketDevelopment Diversification
Increase market share among existing customers
Attract new customers to existing products
Introduce new products into new markets
Create new products for present markets
ConvenienceProduct
ShoppingProduct
SpecialtyProduct
UnsoughtProduct
A relatively inexpensive item that merits little shopping effort
A product that requires comparison shopping, because it is usually more expensive and found in fewer stores
A particular item for which consumers search extensively and are reluctant to accept substitutes
A product unknown to the potential buyer or a known product that the buyer does not actively seek
LO2
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11
Define the terms product item, product line,
and product mix
Product Items, Product Items, Lines, and MixesLines, and Mixes
LO3
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12
Product Items, Lines, and Mixes
Product ItemProduct Item
Product LineProduct Line
Product MixProduct Mix
A specific version of a product that can be designated as a distinct offering among an organization’s products.
A specific version of a product that can be designated as a distinct offering among an organization’s products.
A group of closely-related product items.
A group of closely-related product items.
All products that an organization sells.
All products that an organization sells.
LO3
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13
LO3
Exhibit 10.1Exhibit 10.1Campbell’s Product Campbell’s Product
Lines and Product MixLines and Product Mix
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14
Benefits of Product Lines
Equivalent QualityEquivalent Quality
Efficient Sales andDistribution
Efficient Sales andDistribution
Standardized Components
Standardized Components
Package UniformityPackage Uniformity
Advertising EconomiesAdvertising Economies
LO3
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15
Adjustments
Product Modification
Product Modification
ProductRepositioning
ProductRepositioning
Product LineExtension or Contraction
Product LineExtension or Contraction
Adjustments to Product Items,
Lines, and Mixes
Adjustments to Product Items,
Lines, and Mixes
LO3
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16
Types of Product Modifications
Quality ModificationQuality Modification
Functional ModificationFunctional Modification
Style ModificationStyle Modification
Planned Obsolescence: The practice of modifying products so those that have already been sold become obsolete before they actually need replacement.
LO3
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17
Repositioning
Changing Demographics
Changing Demographics Declining SalesDeclining Sales
Changes in Social
Environment
Changes in Social
Environment
Why reposition Why reposition established brands?established brands?
Why reposition Why reposition established brands?established brands?
LO3
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18
Product Line ExtensionAdding additional products to an existing product
line in order to compete more broadly in the
industry.
• Some products have low sales or cannibalize sales of other items
• Resources are disproportionately allocated to slow-moving products
• Items have become obsolete because of new product entries
LO3
Symptoms of Overextension
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19
Describe marketing uses of branding
BrandingBranding
LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20
Branding
Brand Name
BrandMark
Brand Equity
That part of a brand that can be spoken, including letters, words, and numbers
The elements of a brand that cannot be spoken
The value of company and brand names
GlobalBrand
A brand where at least a third of theearnings come from outside its home country
LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21
Benefits of Branding
Product Identification
Product Identification
Repeat SalesRepeat Sales
New Product Sales
New Product Sales
LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22
Top Ten Global BrandsLO4
1. Coca-Cola U.S.
2. IBM U.S.
3. Microsoft U.S.
4. GE U.S.
5. Nokia Finland
6. McDonald’s U.S.
7. Google U.S.
8. Toyota Japan
9. Intel U.S.
10. Disney U.S.
Source: Burt Helm, "Best Global Brands," BusinessWeek September 28, 2009
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Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23
Branding Strategies
Brand No Brand
Manufacturer’s Brand Private Brand
IndividualBrand
Family Brand
Combi-nation
IndividualBrand
Family Brand
Combi-nation
LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24
Branding Strategies
Manufacturers’ Brand
Private Brand
The brand name of a manufacturer.
A brand name owned by a wholesaler or a retailer. Also
known as a private label or store brand.
Captive
A brand manufactured by a third party for exclusive retailer, without evidence of a that retailer’s affiliation.
LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25
Advantages of Manufacturers’ Brands
Heavy consumer ads by manufacturers
Attract new customers
Enhance dealer’s prestige
Rapid delivery, carry less inventory
If dealer carries poor quality brand, customer may simply switch brands and remain loyal to dealerLO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26
Trader Joe’s—The Brand
• About 80 percent of the items offered at Trader Joe’s are private label.
• Trader Joe’s offers several subbrands withing the Trader Joe’s brand family, such as Trader Ming’s for Chinese food and Trader Darwin’s for vitamins.
• Trader Joe’s purchases directly from the manufacturer and ships directly to its distribution centers, where many of the products are portioned and packaged.
Source: Beth Kowitt, “Inside Trader Joe’s,” Fortune, September 6, 2010. 86-96
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LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27
Advantages of Private Brands
Earn higher profits on own brand
Less pressure to mark down price
Manufacturer can become a direct competitor or drop a brand/reseller
Ties customer to wholesaler or retailer
Wholesalers and retailers have no control over the intensity of distribution of manufacturers’ brands
LO4
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Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28
Advantagesof Captive Brands
• No evidence of store’s affiliation• Manufactured by third party• Sold exclusively at the chain• Can ask price similar to
manufacturer’s brands
LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29
Individual Brands Versus Family Brands
Individual Brand
Family Brand
Using different brand names for different products.
Marketing several different products under the same brand name.
LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30
Cobranding
IngredientBranding
IngredientBranding
Cooperative Branding
Cooperative Branding
Complementary Branding
Complementary Branding
Types of Types of CobrandingCobranding
LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31
Trademarks
A Trademark is the exclusive right to use a brand.
Many parts of a brand and associated symbols qualify for trademark protection.
Trademark right comes from use rather than registration.
To renew the trademark, the company must prove use of the mark.
Rights continue for as long as the mark is used.
Trademark law applies to the online world.LO4
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32
Describe marketing uses of packaging
and labeling
PackagingPackaging
LO5
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33
Functions of Packaging
Contain and Protect
Promote
Facilitate Storage, Use, and Convenience
Facilitate Recycling
LO5
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34
LabelingPersuasive
Focuses on promotional theme
Consumer information is secondary
Informational
Helps make proper selections
Lowers cognitive dissonance
LO5
GreenwashingWhen a product or company attempts to give the impression of environmental friendliness whether or not it is environmentally friendly.
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35
Universal Product Codes
Universal Product Codes
(UPCs)
A series of thick and thin
vertical lines (bar codes),
readable by computerized
optical scanners, that
represent numbers used to
track products.
LO5
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36
Discuss global issues in branding
and packaging
Global Issues in Global Issues in Branding and PackagingBranding and Packaging
LO6
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37
Global Issues in Branding
Adaptations & Modifications
Adaptations & Modifications
Global Options Global Options for Brandingfor Branding
One Brand NameEverywhere
One Brand NameEverywhere
Different Brand Names in Different
Markets
Different Brand Names in Different
Markets
LO6
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38
Global Issues in Packaging
AestheticsAesthetics
Global Global Considerations Considerations for Packagingfor Packaging
Climate Considerations
Climate Considerations
LabelingLabeling
LO6
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39
Describe how and why product
warranties are important
marketing tools
Product WarrantiesProduct Warranties
LO7
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40
Product Warranties
Warranty
ExpressWarranty
ImpliedWarranty
A confirmation of the quality or performance of a good or service.
A written guarantee.
An unwritten guarantee that the good or service is fit for the purpose for which it
was sold.
LO7
Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 41
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Kodak – Product Concepts
List the attributes of the Kodak brand. What benefits of branding has the company experienced over time?
Have there been pitfalls to having a brand with such strong associations?
http://www.cengage.com/marketing/book_content/1439039429_lamb/company_clips/ch10.html