Chapter 6 Product and service concepts

Learning objectives 1Define the term product 2Classify consumer products 3Discuss the importance of services to the economy 4Identify the differences between services and goods 5Explain why services marketing is important to manufacturers

Learning objectives (cont.) 6Define the terms product item, product line and product mix 7Describe marketing uses of branding 8Describe marketing uses of packaging and labelling 9Describe how and why product warranties are important marketing tools

Learning objective 1 Define the term marketing Define the term product

Product Everything, both favourable and unfavourable, that a person receives in an exchange. 1

What is a product? Promotion Place (distribution) Price 1 Product is the heart of the marketing mix

Learning objective 2 Describe four marketing management philosophies. Classify consumer products

Product classifications Business product Consumer product A product used to manufacture other goods or services, to facilitate an organisation’s operations or to resell to other consumers. Product bought to satisfy an individual’s personal wants. 2

Types of consumer products Unsought products Specialty products Shopping products Convenience products Consumer products Business products Products 2

Types of consumer products (cont.) Convenience product Shopping product Specialty product Unsought product A relatively inexpensive item that merits little shopping effort. A product that requires comparison shopping because it is usually more expensive and found in fewer stores. A particular item for which consumers search extensively and are reluctant to accept substitutes. A product unknown to the potential buyer or a known product that the buyer does not actively seek. 2

Learning objective 3 Describe four marketing management philosophies. Discuss the importance of services to the economy

Service The result of applying human or mechanical efforts to people or objects. 3

The importance of services 8 out 10 workers are in service sector Services account for 74% of US GDP Service occupations will be responsible for all job growth through

Learning objective 4 Identify the differences between services and goods

How services differ from goods 4 Characteristics that distinguish services: intangibility inseparability heterogeneity perishability.

Characteristics of services Intangibility Inseparability Heterogeneity Perishability Services that cannot be touched, seen, tasted, heard or felt in the same manner as goods. A characteristic of services that allows them to be produced and consumed simultaneously. A characteristic of services that makes them less standardised and uniform than goods. A characteristics of services that prevents them from being stored, warehoused or inventoried. 4

Learning objective 5 Explain why services marketing is important to manufacturers

Services marketing in manufacturing Strong competitive advantages 5

Learning objective 6 Define the terms product item, product line and product mix

Product items, lines and mixes Product item Product line Product mix A specific version of a product that can be designated as a distinct offering among an organisation’s products. A group of closely related product items. All products that an organisation sells. 6

Benefits of product lines 6 Why form product lines? Advertising economies Package uniformity Standardised components Efficient sales and distribution Equivalent quality

Product mix width diversifies risk capitalises on established reputations. The number of product lines an organisation offers: 6

Product line depth attracts buyers with different preferences increases sales/profits by further market segmentation capitalises on economies of scale evens out seasonal sales patterns. The number of product items in a product line: 6

Adjustments Product modification Product repositioning Product line extension or contraction Adjustments to product items, lines and mixes 6

Product modifications 6 Quality modification Functional modification Style modification

Planned obsolescence The practice of modifying products so those that have already been sold become obsolete before they actually need replacement. 6

Repositioning 6 Why reposition established brands? Changing demographics Declining sales Changes in social environment

Product line extension Adding additional products to an existing product line in order to compete more broadly in the industry. 6

Product line contraction some products have low sales or cannibalise sales of other items resources are disproportionately allocated to slow-moving products items have become obsolete because of new product entries. Symptoms of product line over- extension: 6

Learning objective 7 Describe marketing uses of branding

Brand A name, term, symbol, design or combination thereof that identifies a seller’s products and differentiates them from competitors’ products. 7

Branding Brand name Brand mark Brand equity Master brand That part of a brand that can be spoken, including letters, words and numbers. The elements of a brand that cannot be spoken. The value of company and brand names. A brand so dominant that it comes to mind immediately when a product category, use, attribute or benefit is mentioned. 7

Benefits of branding Product identification Repeat sales New product sales Branding distinguishes products from competition 7

An effective brand name … is easy to pronounce is easy to recognise and remember is short, distinctive and unique describes the product, use and benefits has a positive connotation reinforces the product image is legally protectable. 7

Master brands Photography Adhesive bandages Rum Vacuum cleaners Biscuits Cream cheese Crayons Petroleum jelly Kodak Band-Aid Bundaberg Hoover Arnott’s Philadelphia Crayola Vaseline 7

Branding strategies 7 BrandNo brand Manufacturer’s brand Private brand Individual brand Family brand Individual brand Combi- nation Family brand Combi- nation

Generic brand A no-frills, no-brand- name, low-cost product that is simply identified by its product category. 7

Manufacturers’ brands versus private brands Manufacturers’ brand Private brand The brand name of a manufacturer. A brand name owned by a wholesaler or a retailer. 7

Advantages of manufacturers’ brands 7 Develop customer loyalty Attract new customers Enhance prestige Offer rapid delivery so can carry less inventory Ensure dealer loyalty

Advantages of private brands 7 Earn higher profits Less pressure to mark down prices Manufacturer may drop a brand or become a direct competitor to dealers Ties to wholesaler or retailer No control over distribution of manufacturers’ brands

Individual brands versus family brands Individual brand Family brand Using different brand names for different products. Marketing several different products under the same brand name. 7

Co-branding Ingredient branding Cooperative branding Complementary branding Types of co- branding 7

Trademarks Many parts of a brand and associated symbols qualify for trademark protection. The mark has to be continuously protected. Rights continue for as long as it is used. A trademark is the exclusive right to use a brand. 7

Describe marketing uses of packaging and labelling Learning objective 8

Packaging 8 Functions of packaging: contain and protect promote facilitate storage, use and convenience facilitate recycling.

Labelling Persuasive Focuses on promotional theme Information is secondary Informational Helps make proper selections Lowers cognitive dissonance Includes use/care 8

Universal product codes A series of thick and thin vertical lines (bar codes), readable by computerised optical scanners, that represent numbers used to track products. 8

Describe how and why product warranties are important marketing tools Learning objective 9

Product warranties Warranty Express warranty Implied warranty A confirmation of the quality or performance of a good or service. A written guarantee. An unwritten guarantee that the good or service is fit for the purpose for which it was sold (UCC). 9

Product warranties (cont.) Written guarantee Implied warranty Express warranty Unwritten guarantee 9