PRODUCT CONCEPTSStrategic Marketing

Chapter 9

CAPITALISM• Capitalism: Political & economical philosophy

• Characterized by marketplace competition • Private ownership of business.• Also known as Free Enterprise

• United States & Japan are two examples

• Government takes care of people via social services

• Government is associated with capitalism• Democracy• Vote republican, democratic, independent, etc…

SOCIALISM

• Government has an increased role in society

• Main goal is to meet the basic needs for all and to provide employment for many

• The goal is to have a classless society• No poverty, middle class, rich• Citizens are equal

SOCIALISM• More social programs to ensure a certain standard of living for their

citizens

• Medical care & education is free or very cheap

• Businesses & individuals pay MUCH higher taxes than those in a capitalistic society

• The government runs most industries• Telephone companies, banks, electric companies, water, gas, transportation,

etc..

• Sweden, Canada, The United Kingdom use this philosophy

COMMUNISM• Government controls factors of production• No private ownership of property or capital• Built around the belief that if goods are owned by government they are available to

everyone• Promotes a Classless society• Government acts as the community

• All workers are assigned jobs• No unemployment• Always get paid (regardless if you go or not)

• Housing & education are determined by government• Medical Care is free• No financial incentive for people to work harder• Examples include Cuba and North Korea

ASSIGNMENT

• Learning objectives are on back

• You should be able to answer each question by end of chapter

• Take notes. PowerPoint will not be posted until after lesson.

LEARNING OBJECTIVE 1

• The products a company creates are the basis of their marketing mix.• Product is the most important because nothing else could exist

without it

• What is a product?• Everything both favorable & unfavorable that a person receives in

an exchange• Can be a good, service, or idea

LEARNING OBJECTIVE 2• Types of consumer products consist of either industrial or consumer products

• The intended use of product is what distinguishes it• Some products can be both industrial & consumer (e.g. light bulbs, pencils,

paper, etc..)

• If used for businesses purposes; it is an industrial product• Manufactures other goods• Facilitate an organizations operations• Resell to other customers

• If used for consumer purposes; it is a consumer product• Bought to satisfy an individual’s personal wants

LEARNING OBJECTIVE 2

• Why does a marketer care if they are dealing with industrial or consumer products?• Each is marketed very differently• Target Markets are very different• Distribution, Pricing, & Promotion is done much

differently

LEARNING OBJECTIVE 2

Business Products (Industrial) Classification

Consumer Product Classification

Major Equipment Shopping ProductsAccessory Equipment Convenience ProductsRaw Materials Specialty ProductsProcessed Materials Unsought ProductsSupplies

Consumer products are classified based on how much effort is

normally used to shop for them.ServicesComponent Parts

DISTINGUISHING BETWEEN PRODUCT TYPES

• Convenience Product• Relatively inexpensive item that merits little shopping effort• Products are bought regularly & without much planning• Consumer will not shop extensively for such an item• Consumers are aware of brands that sell convenience products• Wide distribution is required in order for profit goals to be met

• Examples: • Candy, soda, aspirin, combs, dry cleaning, car washes, etc…

DISTINGUISHING BETWEEN PRODUCT TYPES

• Shopping Products are usually more expensive than a convenience product and are sold in fewer stores• Consumers will comparison shop between products to find the best one

• There are two types of shopping products• Heterogeneous: Products that are different & cause consumers to have a hard time comparing products

because the prices, quality, & features, vary so much• Consumers buy the product that is best for them• Example: Furniture, clothes houses, etc…

• Homogenous: Similar products that consumers exam and generally select the cheapest brand that has desired features.

• Example: Washer & dryer

DISTINGUISHING BETWEEN PRODUCT TYPES

• Specialty Products are products consumers search extensively for & are reluctant to accept substitutes for• Examples: Rolex watch, Rolls Royce, Bose Speakers, Ruth’s Chris Steak House, & Highly

specialized forms of medical car

• Marketers use selective, status-conscious advertising to maintain their product’s exclusive image.

• Distribution is limited to one or very few outlets in a geographic area• Brand names & quality of service are key components

DISTINGUISHING BETWEEN PRODUCT TYPES

• Unsought Products are products that are unknown to the potential buyer or a known product that the buyer does not actively seek.• New products that are not advertised or distributed are unsought

products• Products we do not like to talk about or spend money on are typically

unsought • Require aggressive personal selling & highly persuasive advertising• Salespeople seek leads and then approach the consumer through personal

selling, direct mail, or direct-response advertising• Examples:

• Insurance, burial plots, encyclopedias, etc…

LEARNING OBJECTIVE #3PRODUCT ITEMS, LINES, & MIXES

• Product Items: A specific version of a product that can be designated as a distinct offering among an organizations products• Each item in a mix may require their own marketing strategies• Example:

• 12 oz can of coca-cola is a product item • 20 oz bottle of coca-cola is a different product item

• Product Lines: A group of closely-related product items.

• Product Mix: All products that an organization sells

EXAMPLE: CAMPBELL’S PRODUCT MIX

PRODUCT MIX STRATEGIES• Advantages of grouping product items into product lines include:

• Advertising Economies: Product lines can market all items with one approach. • Example: “Mmm good” is used as the slogan for all Campbell soups.

• Packaging uniformity: Products can be packaged similarly and have a common look• Example: Campbell’s soup label

• Standardized Components: Reduces manufacturing & inventory costs.• Example: General Motors uses the same parts on many automobile makes & models

• Efficient Sales & Distribution: Offer a fuller range of services to consumers• Distributors & retailers are more likely to stock a company’s product if it is a full line• Transportation & warehousing costs are likely to be lower for a product line than a collection of

items• Equivalent Quality: Purchasers usually expect quality amongst all products within a

product line to be equal

PRODUCT MIX STRATEGIES• Product Mix Width (Breadth): The number of product lines an organization offers.

• Diversifies risk• Better to depend on a variety of product lines to generate sales rather than just 1 or 2 lines

• Capitalizes on established reputations. • People trust the brand Oreo so when they see it on other products they believe it to be good.

• Product Line Depth: The number of product items in a product line. Attracts buyers with different preferences Increases sales/profits by further market segmentation Evens out seasonal sales patterns

ASSIGNMENT: INDIVIDUAL ON PAPER

ASSIGNMENT: SOLO OR DUO ON CONSTRUCTION PAPER

• Choose a brand (no repeats)• General Motors, Mars, Nestle, Sony, Proctor & Gamble, Kraft, General Mills, Johnson &

Johnson, Unilever, Kellogg’s, Coca-Cola, Pepsico, Dr. Pepper/Snapple

• Create at least 3 product lines based on the mix given.

• Label each product line and list as many products as you can that fall within that line.

• Answer the questions on your handout when done

EXAMPLES OF PRODUCT MIXES

LABEL EACH COLUMN & LIST ITEMS

Product Line #1 Product Line #2 Product Line #3

Label each product line has shallow or deep

GROUPS

• General Mills Austin & Libby• General Motors John• Mars Maggie• Proctor & Gamble Nate & Ryan• Johnson & Johnson Louis & Dhraj• Pepsico Uthman & Earvin• Coca-Cola Eric• Kellogg's Jackson & Brett• Kraft Blake & Michael• Uniliever Alec & Jack

TUESDAY

WARM-UP & OBJECTIVE

Warm-up: • Give one example of a convenience, shopping, specialty, & unsought

good. • Convenience: Bread• Shopping: Dishwasher Couch• Specialty: Armani Suit• Unsought: Burial Plot

• What is the key factor in determining what type of good you are classifyingHow much time is spent picking out a product.

PRODUCT MIX:

LABEL THIS CHART

• They function similarly • All of Chevrolets Cars are a Product Line

• They are sold to the same groups of people • All of Staples Supplies sold to schools

• Are marketed the same way

• Are priced similarly

PRODUCT LINE CAN BE DETERMINED BY:

ADJUSTMENT TO PRODUCT ITEMS, LINES, & MIXES

• Firms change product items, lines, & mixes to take advantage of product developments or to respond to changes in the environment• Product Modification• Product Repositioning• Product Line Extension or

Contraction

Product Modification

ProductRepositioning

Product LineExtension or Contraction

Adjustments to Product Items,

Lines, and Mixes

ADJUSTMENT TO PRODUCT ITEMS, LINES, & MIXES

• Product Modification occurs when 1 or more of a product’s characteristics are altered• Quality• Functional• Style• Planned Obsolescence

• Quality Modification: Change in products durability or dependability• Decrease quality will make products cheaper thus increasing buying audience• Increase quality will allow the company to compete with rival firms easier

• Increase brand loyalty & chances to segment target market differently

ADJUSTMENT TO PRODUCT ITEMS, LINES, & MIXES

• Functional Modification: Change in product’s versatility, effectiveness, convenience, or safety• Example: Tide with Downey Laundry Detergent combines function of cleaning with fabric

softener

• Style Modification: Aesthetic product change rather than a quality or functional modification.• Proctor & Gamble adding Frabreze to its products• Common among clothing & car manufacturers

• Planned Obsolesce: The practice of modifying products so those that have already been sold become obsolete before they actually need replacement.• Considered unethical by some

PRODUCT REPOSITIONING

Companies reposition because they want to change a consumers perception of a brand

Changing Demographics Declining Sales

Changes in Social

Environment

Why reposition established

brands?

PRODUCT LINE EXTENSIONS

• Product Line Extensions: Adding additional products to an existing product line in order to compete more broadly in the industry.• Example: Nabisco sells 100 calorie snack packs for people with active lifestyles

• Companies seek to expanding their product width by making it broader

• Expanding allows you • Reach more markets• Gain a competitive edge

• Example of product width is Red Lobster• Specialize in seafood• Sell pasta, chicken, & steak to broaden product mix

PRODUCT WIDTH: BROADENING

PRODUCT LINE CONTRACTION

• Product Line Contraction: Deleting products from a product mix so that a company can focus on what it does best• 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

• In 2009; General Motors (GM) filed for bankruptcy protection

• They were told they needed to cut back• GMC• Cadillac • Buick• Chevy • Pontiac• Saturn• Saab• Hummer

PRODUCT WIDTH: NARROWING

REVIEW LEARNING OUTCOMEPRODUCT ITEM, PRODUCT LINE, AND

PRODUCT MIX

LEARNING OBJECTIVE 4: DESCRIBE MARKETING USES OF

BRANDING• A Brand is a name, term, symbol, design, or combination thereof that identifies a

seller’s products and differentiates them from competitors’ products.• Main tool to distinguish a brand from its competitors• The internet has been helpful in building brand awareness.

• Branding has three main purposes• Product Identification**• Repeat sales• New product sales

**Product Identification is the most important purpose

BENEFITS OF BRANDINGKey Term Definition

Brand Name That part of a brand that can be spoken, including letters, words, and numbers

Brand Mark The elements of a brand that cannot be spoken (logos)

Brand Equity The value of company and brand names

Global Brand A brand where at least 20 percent of the product is sold outside its home country

Brand Loyalty

A consistent preference for one brand over all others

BRANDING STRATEGIES

• Not at firms will choose to adapt a branding strategy• Generic items

• Branding strategies can be accomplished in a variety of ways• Manufacturer Brands• Private Brands

• Regardless of manufacturer or private; a company must develop an individual branding, family branding, or combination of both approach• Individual Brand: Different brands for different products (Proctor & Gamble & Marriot)• Family Brand: Common names for different products (e.g.: Holiday Inn Hotels & Sony)

BRANDING STRATEGIES

• Generic Items: A no-frills, no-brand-name, low-cost product that is simply identified by its product category• Usually 30-40% cheaper than manufacturer brand & 20-25% cheaper than private brand

• Manufacturers’ Brand: The brand name of a manufacturer• 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 dealer

TYPES OF BRANDS

BRANDING STRATEGIES• Private Brand: A brand name owned by a wholesaler or a retailer. Also

known as a private label or store brand.

• Advantages of Private Brand:• 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

• Customer who wants a Diehard battery must go to Sears

• Wholesalers and retailers have no control over the intensity of distribution of manufacturers’ brands

BRANDING STRATEGIES

Brand No Brand

Manufacturer’s Brand Private Brand

IndividualBrand:

Pepsi & Frito Lay

Family Brand:Coach

Combination Kellogg’s Rice

KrispiesIndividual

BrandFamily Brand:Kroger

Combi-nation:

Sears-Kenmore

BRANDING STRATEGIES

• Co-Branding entails placing two or more brand names on a product or its package.• Ingredient Branding: Occurs when a brand is a part in another product

• Examples: Intel microprocessor in a Dell computer or XM radio in a Cadillac

• Cooperative Branding: Occurs when two brands receiving equal treatment borrow from each others brand equity• Example: American Express partners with Ramada Inn to win a flight with Continental

Airlines

• Complementary Branding: Products are advertised or marketed together to suggest usage• Example: Captain Morgan’s & Coca-Cola

TRADEMARK V. SERVICE MARK

• Trademark: is the exclusive right to use a brand.

• Service Mark: Performs the same function for services, such as H&R Block

Many parts of a brand and associated symbols qualify for trademark protection.

Trademark right comes from use rather than registration.

The mark has to be continuously protected.

Rights continue for as long as the mark is used.

Trademark law applies to the online world.

P. 294 ITEMS THAT HAVE BEEN TRADEMARKED

• A generic product name identifies a product by class or type and cannot be trademarked.• Examples: Aspirin, cellophane, coke, monopoly, & shredded wheat

• Companies work to fight off knockoffs• Example: Burberry

ASSIGNMENT

LEARNING OBJECTIVE 5: PACKAGING

• Packaging has always been used to get the product through the distribution process

• Three Most Important Packaging functions:• Contain & Protect products• Promote Products• Facilitate the storage, use, & convenience of products

• A growing 4th Function is • Facilitate recycling & reducing environmental damage

Packaging Function Definition

Contain & Protect products • Package items in specific quantities• Physical protection of product from spillage, spoilage,

light, heat, cold, infestation, breakage, & evaporationPromote the Products • Differentiates a product from competing products

• Associates a new product with other products from the same manufacturer.

• Color of packaging also sets a tone.Facilitate the storage, use, & convenience of products

• Wholesalers want products that are easy to ship, store, & stock.

• Consumers want products that are easy to, handle, open, & reclose

• Childproof packaging

Facilitate recycling & reducing environmental damage

• Packaging that is compatible with the environment• Products that are eco-friendly, recyclable, & better for

climate• Pump sprays are easier than aerosol

Meet Customer Needs: Squirt Bottle

Ensure Safe Use: Child Proof Medicine

BottlePromote & Sell Product: New Balance

Protect the Product: Egg Carton

Environmentally Friendly: French Rabbit

Wine

LABELINGPersuasive

Focuses on promotional theme

Consumer information is secondary

Informational

Helps make proper selections

Lowers cognitive dissonance

Includes use/care

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.

REVIEW OF LEARNING OBJECTIVE:

DESCRIBE MARKETING USES OF PACKAGING & LABELING

LEARNING OBJECTIVE 6:GLOBAL ISSUES IN BRANDING & PACKAGING

• When a firm enters a foreign market they have three options:• One brand name everywhere

• Strong brand that can be used without negatives being associated with it• Adaptations & malfunctions

• A one-brand name strategy is not possible when the name cannot be pronounced in the local language, is owned by someone else, or name is inappropriate

• Different brand names in different markets• Company takes a local name to be familiar or stronger in new market

LEARNING OBJECTIVE 6:GLOBAL ISSUES IN BRANDING & PACKAGING

• Three aspects of packaging in foreign markets are:• Labeling:

• Making sure information is properly translated & meets government regulation• Aesthetics:

• Packaging color & size should reflect societies values and needs• Logo adds brand value

• Climate Considerations• Products are being shipped further so packaging needs to be more protective, sturdier,

& durable

LEARNING OBJECTIVE 7:PRODUCT WARRANTIES

Warranty

ExpressWarranty

Implied Warranty

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. (UCC)

WARRANTY V. GUARANTEE

• Express warranty = written guarantee

• Implied warranty = unwritten guarantee