6 Marketing Management Product Strategy SECTION 1 7th Edition menu Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors C H A P T E R S I X Marketing Management 7th Edition J. Paul Peter James H. Donnelly, Jr. 6 Product Strategy McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

6 SECTION 1 Product Definition menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Product Definition A product is the sum of the physical, psychological, physiological, and sociological satisfactions the buyer derives from purchase, ownership, and consumption. 6

6 SECTION 1 Three Views of Product Products can be considered . . . menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Three Views of Product Products can be considered . . . Tangible – physical entity or service Extended – tangible product plus a whole cluster of services that accompany it Generic – the essential benefits the buyer expects to receive from the product 6

6 SECTION 1 Product Classification Two basic criteria: menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Product Classification Two basic criteria: >> End use or market >> Degree of processing or physical transformation Three categories: Agricultural products and raw materials Organizational goods Consumer goods 6

6 SECTION 1 Agricultural Products and Raw Materials menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Agricultural Products and Raw Materials Identified by these characteristics . . . Grown or extracted from the land or the sea Fairly homogeneous, Sold in large volume, and Low value per unit 6

6 SECTION 1 Organizational Goods menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Organizational Goods Purchased by firms for the purpose of producing other goods. Includes: > Raw materials and semi-finished goods > Major and minor equipment > Parts or components needed to complete another finished good > Supplies or items used to operate the business but not an element of a finished good 6

6 SECTION 1 Consumer Goods Three classes based on consumer behavior: menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Consumer Goods Three classes based on consumer behavior: Convenience goods – such as food which require minimal effort Shopping goods – such as appliances, which are purchased after some time and energy is spent comparing Specialty goods – which are unique in some way to the consumer and are characterized by special effort 6

6 SECTION 1 Organizational Market Characteristics menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Organizational Market Characteristics Organizational markets differ from consumer markets. Buyers tend to be concentrated. >Auto in Detroit, tires in Akron Buyers tend to be limited. Identified as . . . Vertical Market - Limited number of buyers Horizontal Market - Limited number of industries 6

6 SECTION 1 Quality and Value Quality Value Buyers expect . . . menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Quality and Value Buyers expect . . . Quality The degree of excellence or superiority that an organization’s product possesses Value What the customer gets in exchange for what the customer gives 6

menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Product Mix Product mix is the full set of products offered for sale by an organization. It may consist of several product lines, or groups of products sharing common characteristics, distribution channels, customers or uses. Product mix exhibits . . . Width – number of product lines in the organization Depth – average number of products in each line 6

6 SECTION 1 Branding A brand is . . . a name, term, design symbol, or menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Branding A brand is . . . a name, term, design symbol, or any other unique feature that identifies one seller’s good or service as distinct from competitors. 6

menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Branding Line extension -- uses brand name to facilitate entry into a new market segment. Brand extension -- uses an existing brand to enter a different product class Family branding -- attaches the corporate name to a product to either enter a new market or a new product class Multibranding -- assigning different brand names to each product 6

menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Brand Equity Factors that increase the strength of a brand: High performance Consistent advertising Distribution intensity Brand personality 6

6 SECTION 1 Advantages of a Multi-branding strategy menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Advantages of a Multi-branding strategy The firm can distance products from other offerings it markets The image of one product is not associated with other products the company markets The products can be specifically targeted If the product fails, the effect on other products is minimized 6

6 SECTION 1 Packaging Purpose – menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Packaging Purpose – Differentiates relatively homogeneous product Contributes to Brand Equity by creating new attributes or value Creates urgent salability within a target market. 6

6 SECTION 1 Product Lifecycle High costs, low or no profit menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Product Lifecycle INTRODUCTION High costs, low or no profit GROWTH Reduced costs, profits increase, maximum value MATURITY 6 Marginal cost, marginal profits, high competition DECLINE Low costs, high profits, competition lessens

menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Product Audit The product audit is a marketing management technique whereby the company’s current product offerings are reviewed to ascertain whether each product should be continued as is, improved, modified, or deleted 6

menu SECTION 1 Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors Deletions Deletion decision are difficult because of the potential impact on customers and the firm Considerations: Have sales moved over time? What has happened to market share? What has been the profit contribution of the product to the company? Has the product reached a level of maturity? If the product is deleted, will customers switch to another product marketed by our firm? 6

6 SECTION 1 The Authors menu J. Paul Peter, Ph.D. Chapter Six Product Definition Three Views of Product Product Classification Agricultural Products and Raw Materials Organizational Goods Consumer Goods Organizational Market Characteristics Quality and Value Product Mix Branding Brand Equity Multi-branding Strategy Packaging Product Lifecycle Product Audit Deletions The Authors The Authors J. Paul Peter, Ph.D. University of Wisconsin – Madison 3Click image to go to author’s web site James H. Donnelly, Jr., Ph.D. University of Kentucky – Lexington 3Click image to go to author’s web site 6 Marketing Management 7th Edition – McGraw-Hill 3Click on the book to go to the book site PowerPoint design by Lance Fuhrer, MBA PowerPoint content by Larry Fuhrer, MBA, MBA Keller Graduate School of Management of DeVry University