The Meaning of “Product” A product is the need-satisfying offering of an organization. It may be a good, service, idea, person or place. A product is a set of tangible and intangible attributes/characteristics that allow the need satisfaction to occur.

Consumer and Business Products Consumer products are those which are ultimately used by the consumer. Business products are those used by intermediaries between the producer and the ultimate consumer.

Classification of Consumer Goods Convenience Goods - purchased with a minimum of effort and thought. No comparison shopping. Shopping Goods - consumers compare quality, price, style in several stores prior to making a purchase. Specialty Goods - consumers have a strong brand preference and insist on that particular brand. Unsought Goods - products that are so new that consumers are unaware of them.

Classification of Business Goods Raw Materials - Goods that become part of another tangible product without being processed. Fabricating Materials - Goods that become part of another tangible product after having been processed. Installations - Manufactured products that are an organization’s major, expensive, and long-lived equipment. Accessory Equipment - Goods that are used in an organization’s operation. Operating Supplies - Goods with low dollar value, short life, and which aid in operations without becoming part of the finished product.

Fig. 8-1 - Product as Tangible and Intangible Factors quality Physical characteristics of goods Seller’s services Seller’s reputation Price Color Brand Product warranty Packaging Design

Quality, Design and Color What is quality? How much quality? TQM ISO 9000 Product design/style and color Attractiveness, distinctiveness, and functionality Involves product and packaging Can be registered Planned Obsolescence Technological obsolescence - new products render current products obsolete. Style obsolescence - altering existing product to differentiate it from previous model or version.

Branding A brand is a name/mark that differentiates the product of one seller or group of sellers from competing products. A brand name consists of words, letters, and numbers that can be vocalized. A brand mark is the part of the brand that appears in the form of a symbol, design, distinctive color or lettering. A trademark is a brand that has been given legal protection. Note: Brand protection and brand names.

Table 10-1 - The 10 Best Brands In the U.S. In the U.K. In Argentina 1. Mercedes-Benz 2. BMW autos 3. Cadbury’s bars 4. Disney World 5. Lego toys 6. Duracell batteries 7. Sony televisions 8. Fisher-Price toys 9. Kodak film 10. Kellogs corn flakes 1. Mercedes-Benz 2. Alfa Romeo 3. BMW autos 4. Land Rover SUV 5. Havana pastries 6. Jeep Grand Cherokee SUV 7. Disney World 8. Sheraton hotels 9. Nissan Pathfinder 10. La Serenisima 1. Craftsman tools 2. Crayola crayons 3. Kodak film 4. Hallmark cards 5. Reynolds Wrap 6. Waterford crystal 7. Chiquita bananas 8. M&Ms candy 9. Ziploc bags 10. Hershey’s bars

Brand Equity Brand Equity is the extra value that the brand gives to the product. Brand Equity consists of . . . Brand awareness/familiarity Brand differentiation versus competition Brand esteem Brand preference Brand loyalty Product line extensions Trademark legal protection Trademark licensing

Packaging Purposes of packaging: Criticism of packaging Allows product to be shipped, stored, and displayed Protect the product from breakage, spoilage, tampering, and theft before and after purchase. Helps promote the product Criticism of packaging Deceptive Packaging Expensive Packaging Environmentally-Unfriendly Packaging Hazardous Packaging Disposing of Packaging

Labeling, Warranty, and Servicing Types of labels Brand label Descriptive label Grade label Warranty What’s covered and for how long Servicing How does customer order and repair product The level of service quality and convenience

What’s a New Product Categories of new products Really innovative and unique. Replacements that are significantly different from previous versions. Imitative products that are new to the organization, but not new to the market. Existing products attacking new markets. How do companies find and introduce new products into the market?

Fig 8-2 - The New-Product Development Process Identify the strategic role of new products, then... 1. Idea generation 2. Screening of ideas 3. Business analysis 4. Prototype development 5. Market Tests 6. Commer- cialization

Ten World-Class Product Failures 1. Ford’s Edsel automobile. 2. Dupont’s Corfam synthetic leather. 3. Polaroid’s Polavision. 4. United Artist’s Heaven’s Gate western movie. 5. RCA’s Videodisc. 6. Time’s TV-Cable Week magazine 7. IBM’s PCjr. 8. New Coke. 9. R.J. Reynolds’ Premier cigarette. 10. Nutrasweet’s Simplesse fat substitute. 11. Internet retailing business model

Fig. 9-2 - The Product Life Cycle The aggregate demand for all brands comprising a product category over time. INTRODUCTION GROWTH MATURITY DECLINE Sales Volume Dollars Profit Loss Time

Fig. 9-3 - Product Life Cycle Variations Part a - Extended introduction stage Part b - Fad Aggregate sales Time in years Time in years Time in years Time in years Part c - Indefinite maturity stage Aggregate sales Time in years

Life Cycle Management How to stay in the maturity stage a long time. Two basic strategies Find new customers Increase the frequency and variety of product usage by current customers Two basic tactics Promote new uses for the product Introduce new forms of the product

Life Cycles in Technological Markets A technological life cycle (TLC) has six phases: 1. Cutting Edge: Technology development that is ahead of the marketplace. 2. State of the Art: Adapting cutting-edge techniques to market needs. 3. Advanced: Increased competition and a less sophisticated customer base. 4. Mainstream: Market is fully developed with standardized products. 5. Mature: Competition shifts to customer service. 6. Decline: Other technologies replace the dying technology.

New Product Adoption Adoption process: The decision-making activity of an individual through which the new product is accepted. Stages in Adoption Process: Awareness  Interest  Evaluation  Trial  Adoption  Confirmation

Adopter Categories Researchers have identified five categories of individual adopters for new products: Innovators — 3% of the market. Early adopters — 13% of the market. Early majority — 34% of the market. Late majority — 34% of the market. Laggards — 16% of the market. In addition, some individuals (non-adopters) never accept the innovation. Diffusion: The process by which an innovation is spread through a social system over time.

Factors Affecting the Adoption/Diffusion Rate Five product characteristics affect the adoption rate for new—especially truly innovative—products. Example: A new, safer baseball for youngsters: 1. Relative advantage—superior to current balls in terms of safety? 2. Compatibility—coincides with cultural values and experiences of parents and coaches? 3. Complexity—no problem understanding concept? 4. Trialability—ball can be easily tested? 5. Observability—can see affects on youngsters hit with the new ball?