Part 4 Product Decisions MARKETING 17e Hult • Pride • Ferrell © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

11: Strategic Product Management 12: Services Marketing 10: Product Decisions 11: Strategic Product Management 12: Services Marketing 13: Strategic Management of Branding and Packaging © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Objectives To understand the concept of a product To explain how to classify products To examine the concepts of product item, product line, and product mix, and understand how they are connected To understand the product life cycle and its impact on marketing strategies To describe the product adoption process To understand why some products fail and some succeed © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product A good, a service, or an idea received in an exchange Includes function, social and psychological utilities, and benefits Includes supporting services such as installation, guarantees, product information, etc. Good – A tangible, physical entity Service – The intangible result of the application of human and mechanical efforts to people or objects Idea – A concept, philosophy, image, or issue © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

The Total Product © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

The Core Product Sports Drink Rehydrates The Core Product The product’s fundamental utility or main benefit Addresses the basic need of the consumer © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Supplemental Features Provide the added value or attributes in addition to a product’s core utility or benefit Installation Delivery Training Financing Help differentiate the product brand from another © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Symbolic and Experiential Benefits Buyers purchase the benefits and satisfaction they think the product will provide Services in particular are purchased on the basis of expectations The shopping experience can provide benefit Products often carry symbolic meaning Often, symbols and cues are used to make intangible products more tangible, or real, to the customer © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Classifying Products Consumer Products Products purchased to satisfy personal and family wants and needs Business Products Products bought to use in a firm’s operations to resell or to make other products Purchased to satisfy the goals of the organization © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Classification of Consumer Products Convenience Products Shopping Products Specialty Products Unsought Products © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Convenience Products Relatively inexpensive, frequently purchased items for which buyers exert minimal purchasing effort Strategic Considerations: Require no search Many retail outlets Low per-unit gross margins Heavy brand promotion, limited retailer promotion Packaging important Reliance on self-service Available at many retailers Usually low price points © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Shopping Products Items for which buyers are willing to expend considerable effort in planning and making purchases More extensive search Available substitutes Less frequent purchase © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Shopping Products Strategic Considerations: No brand loyalty Fewer retail outlets than convenience Lower inventory turnover Channel members demand higher gross margins Personal selling Producer and channel member cooperation © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point How do convenience products and shopping products differ? What are the distinguishing characteristics of each type of product? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Specialty Products Items with unique characteristics that buyers are willing to expend considerable effort to obtain Require extensive search Are generally higher price points Have no ready substitutes Strategic Considerations: Limited retail outlets Lower inventory turnover High gross margins © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point A bicycle is usually a shopping product When might it be a specialty products? What about denim jeans or t-shirts? Are they ever specialty products? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Unsought Products Products purchased to solve a sudden problem, products of which customers are unaware, and products that people do not necessarily think of buying No search Price not important Purchase compelled Strategic Considerations: Build trust with consumers prior to need Recognizable brand Superior performance © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Classification of Business Products Installations Accessory Equipment Raw Materials Component Parts Process Materials MRO Supplies Business Services © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Business Products Products bought to use in a firm’s operations, to resell, or to make other products Installations Facilities and nonportable equipment Accessory equipment Equipment that does not become part of the final physical product but is used in production or office activities © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Business Products Raw materials Basic natural materials that become part of a physical product Component parts Items that become part of the physical product and are either finished items ready for assembly or items that need little processing before assembly © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Business Products Process materials Materials that are used directly in the production of other products but are not readily identifiable MRO supplies Maintenance, repair, and operating items that facilitate production and operations but do not become part of the finished product Business services Intangible products that many organizations use in their operations © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point Business products vary widely Pens and paper Furniture and equipment Technology solutions and services Click here to explore the business products and services offered by Cisco. What kinds of business products does Cisco sell? Can you identify instances where business and consumer products are the same? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Line Product Item A specific version of a product that can be designated as a distinct offering among a firm’s products Product Line A group of closely related product items viewed as a unit because of marketing, technical, or end-use considerations © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Mix Product Mix The composite, or 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 © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Concepts of Product Mix Width and Depth Applied to U. S Concepts of Product Mix Width and Depth Applied to U.S. Proctor & Gamble Products © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point Does this advertisement illustrate Burberry’s product mix or a product line? What is the difference? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

The Four Stages of the Product Life Cycle © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Life Cycle The progression of a product through four stages: Introduction Growth Maturity Decline As a product moves through its life cycle, the strategies that relate to competition, promotion, distribution, pricing, and market information must be periodically evaluated and possibly changed © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

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 High risk of failure Less than 10% of new products succeed in the marketplace 90% of successes come from a handful of companies Because of high risks and costs, few product introductions represent revolutionary inventions © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Life Cycle: Introduction Buyers must be made aware of: Features Uses Advantages Sellers lack: Resources Technological knowledge Marketing know-how © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Life Cycle: Growth The product life cycle stage when sales rise rapidly, profits reach a peak, and then they start to decline Promotion costs drop as a percentage of sales Marketers must: Stress brand benefits to encourage brand loyalty Intensify segmentation Strengthen market share Analyze production position Ensure efficient distribution system © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Life Cycle: 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 exit the market © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Life Cycle: Maturity Advertising and dealer-oriented promotions predominate Distribution sometimes expands to the global market Strategic objectives: Generate cash flow Maintain market share Increase share of customer © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Selected Approaches for Managing Products in the Maturity Stage © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Life Cycle: Decline The stage of a product’s life cycle when sales fall rapidly Marketers will likely: Eliminate/reposition items Cut promotion Eliminate marginal distributors Plan to phase out product © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point What stage of the product life cycle do you think the following products are in? MP3 players Bottled water Desktop computers Tennis shoes How do industry profits change as a product moves through the four stages of its life cycle? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Products at Different Stages of Life Cycle © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

The Product Adoption Process The five-stage process of buyer acceptance of a product: 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 it, considering its value versus the competition © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

The Product Adoption Process 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 product arises © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Most New Ideas Have Their Skeptics © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Adopter Categories Innovators – First adopters of new products Early Adopters – People who adopt new products early, choose new products carefully, and are viewed as “the people to check with” by later adopters Early Majority – Individuals who adopt a new product just prior to the average person Late Majority – Skeptics who adopt new products when they feel it is necessary Laggards – The last adopters who distrust new products © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Why Some Products Fail Failure to match product to needs Failure to send right message Technical/design problems Poor timing Overestimate market Ineffective promotion Insufficient distribution © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Why Other Products Succeed Product’s ability to provide a significant and perceivable benefit to a sizable number of customers Products with an observable advantage over similar available products such as: More features Ease of operation Improved technology Companies that follow a systematic, customer- focused plan for new-product development are well positioned to launch successful products © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Successes and Failures © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point Some very successful companies have experienced high-profile failures Have you heard about any of these products? Why did they fail? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.