Copyright © Houghton Mifflin Company. All rights reserved. 10–1 Chapter Outline What Is a Product? Classifying Products –Consumer products- Business products

Copyright © Houghton Mifflin Company. All rights reserved. 10–1

Chapter Outline

• What Is a Product?

• Classifying Products

–Consumer products - Business products

• Product Line and Product Mix

• Product Life Cycles and Marketing Strategies

–Introduction - Maturity

–Growth - Decline

• Product Adoption Process


Chapter Outline (cont’d)

• Branding

– Value of branding - Protecting a brand

– Brand equity - Branding Policies

– Types of brands - Brand equity

– Selecting a brand name - Co-branding

– Brand licensing

• Packaging

– Packing functions - Major packaging considerations

– Packaging and marketing strategy

• Labeling


What Is a Product?

• A Product Defined

– A good, a service, or an idea received in an exchange

– It can be tangible (a good) or intangible (a service or an idea) or a combination of both.

– It can include functional, social, and psychological utilities or benefits.

• Why Buyers Purchase a Product

– To get the benefits and satisfaction that they think the product will provide

– Symbols and cues provided by marketing help consumers make judgments about products.


Classifying Products

• Consumer Products

– Products purchased to satisfy personal and family needs

• Business Products

– Products bought to use in an organization’s operations,to resell, or to make other products (raw materials and components)


Consumer Products

• Convenience Products

–Relatively inexpensive, frequently purchased items for which buyers exert minimal purchasing effort

–Characteristics• Marketed through many retail outlets

• Relatively low per-unit gross margins

• Little promotional effort at the retail level

• Packaging is important marketing mix element


Consumer Products (cont’d)

• Shopping Products

– Items for which buyers are willing to expend considerable effort in planning and making purchases

– Characteristics• Expected to last a long time; less frequently purchased

• Do not have brand loyalty appeal

• Require fewer retail outlets

• Inventory turnover is lower

• Gross margins are higher

• More amenable to personal selling

• Supported (servicing and promoting the product) by both the producer and channel members



• Specialty Products

– Items with unique characteristics that buyers are willing to expend considerable effort to obtain

– Characteristics• Are preselected by the consumer

• Have no close substitutes or alternatives

• Are available in a limited number of retail outlets

• Purchased infrequently and represent a significantand expensive investment

• Have high gross margins and low inventory turnover



• Unsought Products

– Products purchased to solve a sudden problem, products of which the customers are unaware, and products that people do not necessarily think about buying

– Characteristics• Speed and problem resolution of the utmost importance

• Price and other features not considered

• No consideration of substitutes or alternatives

• Purchased infrequently


Product Line and Product Mix

• Product Item

–A specific version of a product

• Product Line

–A group of closely related product itemsviewed as a unit because of marketing, technical, or end-use considerations

WholeMilk

WholeMilk

SkimMilk

2%Milk


Product Line and Product Mix (cont’d)

• Product Mix

–The total group of products that an organization makes available to customers

• Width of Product Mix

–The number of product lines a company offers

• Depth of Product Mix

–The average number of different products in each product line


The Concepts of Product Mix Width and Depth Applied to Selected United States Proctor & Gamble Products

Source: The Procter & Gamble Company. Used with permission.

FIGURE 10.1


Product Life Cycle

• Product Life Cycle

–The progression of a product through four stages: introduction, growth, maturity, and decline.


The Four Stages of the Product Life Cycle

FIGURE 10.2


The Product Life Cycle

• Introduction– The initial stage of a product’s life cycle—its first

appearance in the marketplace—when sales start at zero and profits are negative

• Growth– The stage of a product’s life cycle when sales rise

rapidly and profits reach a peak and then start to decline• More competitors enter the market• Product pricing is aggressive• Brand loyalty becomes important• Gaps in market coverage are filled• Promotion expenditures moderate• Production efficiencies lower costs


The Product Life Cycle (cont’d)

• Maturity

– The stage of a product’s life cycle when the sales curve peaks and starts to decline and profits continue to fall• Intense competition

• Emphasis on improvements and differences in competitors’ products

• Weaker competitors lose interest and exit the market

• Advertising and dealer-oriented promotions predominate

• Distribution sometimes expands to the global market

– Strategic objectives for maturity stage• Generate cash flow

• Maintain market share

• Increase share of customer


Product Life Cycle (cont’d)

• Decline

–The stage of a product’s life cycle when sales fall rapidly• Pruning items from the product line

• Cutting promotion expenditures

• Eliminating marginal distributors

• Planning to phase out the product


Product Adoption Process

• Production Adoption Process

–The stages buyers go through in accepting a product

Stage Buyer’s response

Awareness The buyer becomes aware of the product

Interest The buyer seeks information and is receptive to learning about the product

Evaluation The buyer considers the product’s benefits and decides whether to try the product

Trial The buyer examines, tests, or tries the product to determine if it meets his or her needs

Adoption The buyer purchases the product and can be expected to use it again whenever the need for this general type of product arises


Product Adoption Process (cont’d)

• Categories of Product Adopters

– Innovators• First adopters of new products

– Early adopters• Careful choosers of new products

– Early majority• Those adopting new products just

before the average person

– Late majority• Skeptics who adopt new products

when they feel it is necessary

– Laggards• The last adopters, who distrust new products


Source: Reprinted with permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Diffusion of Innovations, Fourth Edition, by Everett M. Rogers. Copyright © 1995 by Everett M. Rogers. Copyright © 1962, 1971, 1983, by The Free Press.

Distribution of Product Adopter Categories

FIGURE 10.3


Branding: Key Terms

• Brand

– An identifying name, term, design, or symbol

– One item, family of items, or all items of a seller• Corvette, Chevrolet, General Motors

• Brand Name

– The part of a brand that can be spoken

– Words, letters, numbers• Union 76, NBA, 49’ers

• Brand Mark

– The part of a brand not made up of words

– Symbols or designs• Nike swoosh, Mercedes star, McDonald’s arches


Branding: Key Terms (cont’d)

• Trademark

–A legal designation of exclusive use of a brand• Coca-Cola®, Hewlett-Packard®

• Trade Name

–Full legal name of an organization• American Telephone

and Telegraph Corporation (AT&T)


Branding (cont’d)

• Value of Branding

– To Buyers• Helps speed consumer purchases by identifying specific

preferred products

• Provides a form of self-expression and status

• Evaluates product quality to reduce the risk of purchase

– To Sellers• Identifies and differentiates a firm’s products from competing

products

• Helps in the introduction of new products

• Facilitates the promotion of all same-brand products

• Fosters the development of brand loyalty


Branding (cont’d)

• Brand Equity

–The marketing and financial value associated with a brand’s strength in a market

• Brand Loyalty

–A customer’s favorable attitude toward a specific brand

• Brand Recognition

–A customer’s awareness that a brand exists and is an alternative purchase


Branding (cont’d)

• Brand Preference

–The degree of brand loyalty in which a customer prefers one brand over competitive offerings

• Brand Insistence

–The degree of brand loyalty in which a customer strongly prefers a specific brand and will accept no substitute


Major Elements of Brand Equity

Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Managing Brand Equity: Capitalizing on the Value of a Brand Name by David A. Aaker. Copyright © 1991 by David A. Aaker.

FIGURE 10.4


Source: “The 100 Top Brands,” BusinessWeek, Aug. 2, 2004, p.68. The brand valuations draw upon publibly available information, which has not been independently investigated by Interbrand. Data: Interbrand Corp., J.P. Morgan Chase & Co., Citigroup, Morgan Stanley, Business Week.

Brand Brand Value (In Billion $)

Coca-Cola 67.4

Microsoft 61.4

IBM 53.8

GE 44.1

Intel 33.5

Disney 27.1

McDonald’s 25.0

Nokia 24.0

Toyota 22.7

Marlboro 22.1

Top Ten Most Valuable Brands in the World

FIGURE 10.2


Types of Brands

• Manufacturer Brands

–Brands initiated by producers

• Private Distributor Brands

–Brands initiated and owned by resellers• Dealer brands, private brands,

store brands

• Generic Brands

–Brands indicating only the product category


Selecting a Brand Name

• The name should

–be easy to say, spell, and recall.

–indicate the product’s major benefits.

–suggest the product’s major uses and special characteristics.

–be distinctive, setting it apart from competing brands.

–be compatible with all products in line.

–be designed for use and recognition in all types of media.


Branding Policies

• Individual Branding

–A policy of naming each product differently

–Avoids stigmatizing all products due to a failed product

• Family Branding

–Branding all of a firm’s products with the same name

–Promotion of one item also promotes all other products


Brand Extensions

• Using an existing brand name on a new product in a different category.

• Provides support for new products through established brand name and image


Co-Branding

• Using two or more brands on one product to capitalize on the brand equity (customer confidence and trust) of multiple brands

• Brands involved must represent a complementary fit in the minds of consumers.


Packaging

• Involves the development of a container and a graphic design for a product

• Packaging Functions

–Protect the product from damage

–Offer convenience to consumers

–Prevent waste and make storage easier

–Promote the product by communicating its features, uses, benefits, and image


Major Packaging Considerations

• Cost of Packaging

–Limited consumer willingness to pay for better packaging

• Family Packaging

–Similar packaging for all of a firm’s products or packaging that has one common design element

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Major Packaging Considerations (cont’d)

• Promotional Role (Informing the Consumer)

–Verbal and nonverbal symbols

–Size, shape, texture, color, and graphics

• Reseller Needs

–Transportation, storage, and handling


Packaging and Marketing Strategy

• Altering the Package

– To update style and to meet increased competition

– To highlight new features

– To take advantage of new packaging materials

– To make the product safer or easier to use

– To reduce packaging costs

• Secondary-Use Packaging

– Reusable packaging adds customer value

• Category-Consistent Packaging

– Packaging reflects customer expectations for the expected appearance of products in a category


Packaging and Marketing Strategy (cont’d)

• Innovative Packaging

– Unique features or ways of packaging that make a product more distinct from its competitors

• Multiple Packaging

– Bundling multiple units of a product together to encourage usage and to increase demand

• Handling-Improved Packaging

– Packaging that has been changed to facilitate product handling in the distribution channel


Labeling

• Providing identifying, promotional, legal, or other information on package labels

• Purposes of Labels

– Help identify the product• Display brand name and unique graphics

– Support promotional efforts for the product• Coupons, discounts, product features

– Provide legally required labeling information• Fair Packaging and Labeling Act of 1966

• Nutrition Labeling Act of 1990

– Provide information on product origin• “Made in the USA”

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Copyright © Houghton Mifflin Company. All rights reserved. 10–1 Chapter Outline What Is a Product? Classifying Products –Consumer products- Business products