PRODUCT/SERVICE MANAGEMENT AND PRICING 3.02 Position products/services to acquire desired business image.

Business image The way the public perceives or views the company. Importance of business image Creates a favorable impression Builds a reputation for quality Encourages repeat sales

What factors affect business image? Business considerations Price Location Store Policies Customer service Product/service mix Customer considerations Target market Personal selling Advertising Visual merchandising Product/service considerations Product life cycle Competition Market positioning

Product life cycle The stages that a product goes through during its life. Stages of the product life cycle Introduction Growth Maturity Decline

Introduction stage Begins when a product is made available to the market and ends when sales of the product begin to rapidly increase No profit or low return Low initial sales High expenditures in promotion High price Very little competition

Growth stage Begins when the new product gains acceptance in the market and sales begin to rapidly increase Increase in sales and market popularity Product alterations may take place to meet consumer demand and introduce other product features. New competition Pricing tends to decrease due to increased competition.

Maturity stage The product has saturated the marketplace Sales have peaked and are slowing down. Competition is at its highest level. Profits level off. Promotional costs increase to gain market share. Modifications are made to extend product life. Improvements to quality Improvements of features Style improvements Marketing mix is modified or extended.

Decline stage Final stage of the product life cycle Profits decline dramatically. The product moves towards obsolescence. Product elimination is discussed by the business.

Factors influencing product life cycles Customer loyalty Cost of production innovations Government regulations Competition Product features Consumer reactions Fashion trends

Product positioning The efforts a business makes to identify, place, and sell its products in the marketplace. Ways to position a product Price and quality Features and benefits Unique characteristics In relation to competition In relation to other products in the line

Branding Branding: A name, term, design, symbol, or combination of these elements that identifies a product or service and distinguishes it from its competitors. Brand name (product brand): A word, group of words, letters, or numbers that represent a product or service. Trade name (corporate brand): The name that identifies and promotes a company or a division of a particular corporation.

Branding (cont.) Brand mark: A unique symbol, coloring, lettering, or other design elements used to identify a product or company. Trade character: A specific type of brand mark using a human form or characteristics. Trademark: A word, name, symbol, device, or a combination of these elements that is given protection by the federal government.

The role of branding Assures consistent quality Identifies the manufacturer Helps to reach new target markets Introduces new products Establishes a business image

Types of brands National brands (producer brands): Brands owned and initiated by national manufacturers or national companies that provide services. Private distributor brands (private brands, store brands, dealer brands, or private labels): Brands developed and owned by wholesalers and retailers. Generic brand products: Items which do not carry a brand name but which are made by the same manufacturers as identified brand products.

Branding strategies Brand extension: A branding strategy that uses an existing brand name to promote a new or improved product in a company’s product line. Mixed branding: A strategy that offers a combination of manufacturer, private distributor, and generic brands.

Branding strategies (cont.) Brand licensing: A legal licensing agreement that gives permission to another company to use a company’s brand, brand mark, or trade character for a fee called a royalty. Many companies choose to license their products to increase sales, profits, and market exposure.

Branding strategies (cont.) Co-branding: A strategy that combines one or more brands in the manufacture of a product or in the delivery of a service.

Packaging Package: The physical container or wrapping for a product. Identifies the product Promotes and sells the product Provides information Expresses customer benefits Ensures safe use Protects the product

Product labeling Label: An information tag, wrapper, seal, or imprinted message that is attached to a product or its package. Brand label: A type of label that gives the brand name, trademark, or logo. Descriptive label: A type of label that gives information about the product’s use, construction, care, performance, and other features. Grade label: States the quality of the product.

Legislation and agencies regulating the labeling of products The Fair Packaging and Labeling Act of 1966 (FPLA) The Nutrition Labeling and Education Act of 1990 The Care Labeling Rule of 1972 Country of Origin Labeling Act (COOL) Federal Food and Drug Administration (FDA) The Federal Trade Commission (FTC) U.S. Department of Agriculture

The Fair Packaging and Labeling Act of 1966 (FPLA) Set mandatory labeling requirements and voluntary adoption of packaging standards by firms within industries Gave power to the FDA and FTC to establish and enforce packaging regulations A 1992 amendment called for packages of select products to include metric measurements.

Nutrition Labeling and Education Act of 1990 Protects consumers from deceptive labeling Labels must include nutritional value information—calories, fat, carbohydrates, sodium, percentage of daily intake of 2,000 calories Regulates health claims and descriptive terms such as “lite” or “light,” “free,” “low,” “reduced,” and “good source of.” Alcoholic beverages must print “According to the Surgeon General, women should not drink alcoholic beverages during pregnancy because of the risk of birth defects,” and “Consumption of alcoholic beverages impairs ability to drive a car or operate machinery and may cause health problems.”

Care Labeling Rule of 1972 Requires care labels be placed in textile clothing Specific information must cover washing instructions, drying instructions, and ironing instructions.

Country of Origin Labeling Act (COOL) Signed in 2002, in effect as of 2006 Requires that a country-of-origin label be placed on all fruit, vegetables, peanuts, meats, and fish

Food and Drug Administration (FDA) “Responsible for protecting the public health by assuring the safety, and security of human and veterinary drugs, biological products, medical devices, our nation’s food supply, cosmetics, and products that emit radiation…” www.fda.gov

Federal Trade Commission (FTC) Works to ensure that the nation’s markets are vigorous, efficient, and free of restrictions that harm consumers Enforces federal consumer protection laws that prevent fraud, deception, and unfair business practices Enforces federal antitrust laws that prohibit anticompetitive mergers and other business practices that restrict competition and harm consumers www.ftc.gov

U.S. Department of Agriculture Provides leadership on food, agriculture, natural resources, and related issues based on sound public policy, the best available science, and efficient management www.usda.gov