© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Six The Marketing Mix Key Words / Outline Tangible product, Extended product, Generic product, Marketing myopia, Buyer derives, Vertical market, Horizontal market, Quality Value, Product mix, ,line extension, Brand extension, Franchise extension, Dual branding, Multi branding, Fashions, Fads, Innovators, Laggards, Market dimensions © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Marketing Management, 8e

Levels of Product Core Benefit or Service Augmented Product Levels This CTR corresponds to Figure 8-1 on p. 239 and relates to the material on pp. 239-240. Levels of Product Installation Packaging Brand Name Features Delivery & Credit After- Sale Service Core Benefit or Service Product A product is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Products can be physical objects, services, persons, places, organizations, and ideas. Product Levels Core Product. This concept refers to the use-benefit, problem-solving service that the consumer is really buying when purchasing a product. Actual Product. The actual product is the tangible product or intangible service that serves as the medium for receiving core product benefits. Five characteristics: Quality Level refers to product performance. Features include combinations of product attributes. Design consists of aesthetic or ergonomic aspects of the product. Brand Name may help consumers position and identify the product. Packaging serves to both protect the product and to promote it to consumers. Augmented Product. The augmented consists of the measures taken to help the consumer put the actual product to sustained use. Measures can include installation, delivery & credit, warranties, and after sale service. Quality Level Design Warranty Actual Product Core Product

Three Views Of Product Tangible (Actual Product)– physical entity or service Extended Augment Product– tangible product plus a whole cluster of services that accompany it Generic (Core Product) – the essential benefits the buyer expects to receive from the product

Product Definition A product is the sum of the physical, psychological, and sociological satisfactions the buyer derives from purchase, ownership and consumption

Product Classification Two basic criteria of product classification End use or market Degree of processing or physical transformation Three categories of products Agricultural products and raw materials Organizational goods Consumer goods

Organizational Goods Purchased by firms for the purpose of producing other goods Raw materials and semi-finished goods Major and minor equipment Parts or components needed to complete other finished goods Supplies or items used to operate the business but not an element of a finished good

Consumer Goods 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

Organizational Market Characteristics A primary purchasing motive for organizational goods is profit Organizational markets are concentrated geographically as in the case of steel or auto Can be categorized into Vertical market: Limited number of buyers Horizontal market: Limited number of industries

Quality and Value Buyers expect . . . Quality Value The degree of excellence or superiority that an organization’s product possesses Value What the customer gets in exchange for what the customer gives

Product and Service Decisions Product attributes Quality, features, style and design Branding name sign symbol or design to identifies products Packaging designing and producing the container or wrapper for product Labeling simple tags attached to product which is apart of packaging Product support services Key Decisions Individual Product Product Line Product Mix Goal 2: Learn decisions companies make regarding products

This CTR relates to the material on pp. 253-254. Packaging Decisions This CTR relates to the material on pp. 253-254. Packaging Sales Tasks Competitive Advantages Product Safety Packaging Labeling Packaging Concept The packaging concept states what the package should be or do for the product in support of marketing objectives. Packaging includes the activities of designing and producing the container or wrapper for a product. The package includes the immediate container (that holds the product for use), a secondary package that is discarded prior to use, and a shipping package necessary for storage and shipping. Discussion Note: Both environmentalists and consumer groups have complained about unnecessary packaging. Environmentalists point out the ecological costs of more packages to throw away. Many firms now recycle packages to reduce wastes and save money. Consumer groups, such as Consumer’s Union (publisher of Consumer Reports), express concern that unnecessary packaging costs consumers more. Labeling Decisions Labels perform several functions. Labels identify, describe, and promote the product. Also, labels must meet the demands of legal regulations. Identifies. Especially in support of brand strategies, labels distinguish the product from others. Describes. Labels can provide information about contents, production, freshness, and instructions on safe and effective use. Promotes. Use of color and graphics can stimulate and arouse consumer attention for the product. Legal Regulation Mis-use of labels has lead to regulation on product claims, the addition of unit prices, open dating, and nutritional labeling for processed foods. Including all required information is necessary to ward off governmental investigations. Identifies Describes Promotes

Product and Service Decisions Key Decisions Product line A group of products that are closely related because they may: function in a similar manner be sold to the same customer groups, be marketed through the same types of outlets fall within given price ranges Individual Product Product Line Product Mix Goal 2: Learn decisions companies make regarding products

Product and Service Decisions Key Decisions Product line length Line stretching: adding products that are higher or lower priced than the existing line Line filling: adding more items within the present price range Individual Product Product Line Product Mix

Product and Service Decisions Key Decisions Product mix Also known as product assortment Consists of all the product lines and items that a particular seller offers for sale Individual Product Product Line Product Mix

Product and Service Decisions Key Decisions Product mix width: Number of different product lines carried by company Product mix depth: Number of different versions of each product in the line Individual Product Product Line Product Mix

Branding Strategy Brand equity is the positive differential effect that knowing the brand name has on customer response to the product or service One measure of equity is the extent to which customers are willing to pay more for the brand Brand valuation is the process of estimating the total financial value of a brand

Branding Strategy Brands with strong equity have many competitive advantages: High consumer awareness Strong brand loyalty Helps when introducing new products Less susceptible to price competition

Goal 3: Understand branding strategy Brand Strategy Key Decisions Three levels of positioning: Product attributes Least effective Benefits Beliefs and values Taps into emotions Brand Positioning Brand Name Selection Brand Sponsorship Brand Development Goal 3: Understand branding strategy

Goal 3: Understand branding strategy Brand Strategy Good Brand Names: Suggest something about the product or its benefits Are easy to say, recognize and remember Are distinctive Translate well into other languages Can be registered and legally protected Key Decisions Brand Positioning Brand Name Selection Brand Sponsorship Brand Development Goal 3: Understand branding strategy

Goal 3: Understand branding strategy Brand Strategy Key Decisions Manufacturer brands Private (store) brands Costly to establish and promote Higher profit margins Licensed brands Name and character licensing has grown Brand Positioning Brand Name Selection Brand Sponsorship Brand Development Goal 3: Understand branding strategy

Goal 3: Understand branding strategy Brand Strategy Key Decisions Line extensions Minor changes to existing products Brand extensions Successful brand names help introduce new products Multibrands Multiple product entries in a product category New brands New product category Brand Positioning Brand Name Selection Brand Sponsorship Brand Development Goal 3: Understand branding strategy

Branding A brand identifies one seller’s good or service as distinct from competitors Brand can be A name A term A design A symbol

Branding Line extension: Uses brand name to facilitate entry into a new market segment Diet coke 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 (Toyota Lexus) Dual branding: Concept where two or more branded products are integrated (Pepsi) Multibranding: Assigning different brand names to each product Proctor &gamble laundry detergent dash& Tide

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

Brand Equity

Packaging Differentiates relatively homogeneous products Contributes to “Brand Equity” by creating new attributes or value Creates urgent salability within a target market

Product Lifecycle Introduction Growth Maturity Decline High costs, low or no profit Growth Reduced costs, profits increase, maximum value Maturity Marginal cost, marginal profit, high competition Decline Low costs, high profits, competition lessens

Product Lifecycle - Limitations As useful as the product life cycle can be to managers, it does have limitations that require it to be used cautiously Accuracy pertaining to the longevity of the product can’t be predicted Variations in life cycle exists Fashion: These are accepted and popular product styles Fads: Products which experience high but brief popularity

Product Lifecycle and Strategy

Product Adoption And Diffusion Adopter categories Innovators Early adopters Early majority Late majority Laggards Diffusion: The spread of the product through the population is known as the diffusion of innovation

How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions

Product Adoption

Product Audit The product audit is a marketing management technique whereby the company’s current product offerings are reviewed to ascertain (Assure) whether each product should be continued as is, improved, modified, or deleted

Deletions Deletion decisions are difficult because of the potential impact on customers and the firm Considerations in the deletion decision include Sales trends: Have sales moved over time? What has happened to market share? Profit contribution: What has been the profit contribution of the product to the company? Product life cycle: Has the product reached a level of maturity? Customer migration patterns: If the product is deleted, will customers switch to another product marketed by our firm?

Product Improvement Another important objective of the audit is to ascertain whether to alter the product in some way or leave things the way they are Attributes: Refer to main features of the product such as design, package and so forth Marketing dimensions: Refer to features like pricing, promotion strategy and distribution channels

Product Improvement Benchmarking: Continuous process of measuring products, services, and practices against those of the toughest competitors Advantages of benchmarking include Boosting product quality Developing more user-friendly products Improving customer order processing activities Shortening delivery lead times

Product Management Market management system: One person is responsible for overseeing an entire product line with all of the functional areas of marketing such as research, advertising, sales promotion, sales, and product planning Brand management system: A manager focuses on a single product or a very small group of new and existing products