Chapter 10 Product Concepts MKTG9 Lamb, Hair, and McDaniel © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Chapter 10 Product Concepts LEARNING OUTCOMES 10-1 Define the term product 10-2 Classify consumer products 10-3 Define the terms product item, product line, and product mix 10-4 Describe marketing uses of branding © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Chapter 10 Product Concepts LEARNING OUTCOMES 10-5 Describe marketing uses of packaging and labeling 10-6 Discuss global issues in branding and packaging 10-7 Describe how and why product warranties are important marketing tools © 2016 Cengage Learning. All Rights Reserved.

Define the term product Chapter 10 Product Concepts What Is a Product? 10-1 Define the term product © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Chapter 10 Product Concepts What Is a Product? Everything, both favorable and unfavorable, that a person receives in an exchange. Tangible Good Service Idea Notes: 1. The product offering, the heart of an organization’s marketing program, is usually the starting point in creating a marketing mix. 2. To most people, the term product means a tangible good. However, services and ideas are also products. © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Chapter 10 Product Concepts What Is a Product? Promotion Place (Distribution) Price Product Notes: Price, distribution, and promotion strategies can not be determined until the firm has a product to sell. Well-conceived price, distribution, and promotion strategies have little value without a strong product offering. © 2016 Cengage Learning. All Rights Reserved.

Classify consumer products Chapter 10 Product Concepts Types of Consumer Products 10-2 Classify consumer products © 2016 Cengage Learning. All Rights Reserved.

Types of Products Business Product Consumer Chapter 10 Product Concepts Types of Products Business Product Consumer A product used to manufacture other goods or services, to facilitate an organization’s operations, or to resell to other customers A product bought to satisfy an individual’s personal wants Notes: Products can be classified as either business (industrial) or consumer products. The classification as a business or consumer product depends on the buyer’s intentions. © 2016 Cengage Learning. All Rights Reserved.

Types of Consumer Products Chapter 10 Product Concepts Unsought Products Specialty Shopping Convenience Consumer Business Notes: Chapter 7 examined seven categories of business products: major equipment, accessory equipment, component parts, processed materials, raw materials, supplies, and services. Consumer products are classified into four types: convenience products, shopping products, specialty products, and unsought products. This approach classifies products by how much effort is used to shop for them. © 2016 Cengage Learning. All Rights Reserved.

Types of Consumer Products Chapter 10 Product Concepts Types of Consumer Products Market Development Convenience Product Shopping Specialty Unsought 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 Discussion/Team Activity: Name products and services that fall into each of the consumer product categories: Convenience: Candy, soft drinks, deodorant, aspirin, hardware, and dry cleaning. Shopping: Homogeneous shopping products include washers, dryers, and televisions. Heterogeneous shopping products include furniture, clothing, housing, and universities. Specialty: Fine watches, expensive automobiles, and gourmet restaurants. Unsought: New products, insurance, burial plots, and encyclopedias. © 2016 Cengage Learning. All Rights Reserved.

Define the terms product item, product line, Chapter 10 Product Concepts Product Items, Lines, and Mixes 10-3 Define the terms product item, product line, and product mix © 2016 Cengage Learning. All Rights Reserved.

Product Items, Lines, and Mixes Chapter 10 Product Concepts 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 organization’s products. A group of closely-related product items. All products that an organization sells. Notes: Rarely does a company sell a single product. Instead, it sells a variety of product items that may be categorized into product lines and product mixes. Product mix width (or breadth) refers to the number of product lines an organization offers. Product line depth is the number of product items in a product line. © 2016 Cengage Learning. All Rights Reserved.

10.1 Campbell’s Product Lines and Product Mix Chapter 10 Product Concepts Notes: All of Campbell’s products constitute its product mix. Each product in the product mix may require a separate marketing strategy. In some cases, product lines and mixes share some marketing strategy components. An example of Campbell’s product lines and product mix is shown in Exhibit 10.1. Discussion/Team Activity: Identify a few companies with extensive product lines and product mixes. Pick one and create a matrix similar to Exhibit 10.1. Evaluate the marketing strategies in use. Source: Campbell's Web site: http://www.campbellsoup.com.

Benefits of Product Lines Chapter 10 Product Concepts Benefits of Product Lines Equivalent Quality Efficient Sales and Distribution Standardized Components Package Uniformity Advertising Economies Notes: Advertising economies: Product lines provide economies of scale in advertising. Package uniformity: Packages in the product line may have a common look but maintain their individual identities. Standardized components: Reductions in manufacturing and inventory costs. Efficient sales and distribution: A product line enables a full range of choices to customers, and as a result, better distribution and retail coverage. Equivalent quality: All products in a line are perceived as having similar quality. Discussion/Team Activity: Discuss product lines that demonstrate the above benefits. Some ideas include: Gillette, General Motors, Procter & Gamble, Mary Kay Cosmetics © 2016 Cengage Learning. All Rights Reserved.

Adjustments Adjustments to Product Items, Lines, and Mixes Chapter 10 Product Concepts Product Modification Product Repositioning Product Line Extension or Contraction Adjustments to Product Items, Lines, and Mixes Notes: Over time, firms change product items, lines, and mixes to take advantage of new technical or product developments or to respond to changes in the environment. The three strategies for making these changes are: Product modification Product repositioning Product line extension or contraction © 2016 Cengage Learning. All Rights Reserved.

Types of Product Modifications Chapter 10 Product Concepts Types of Product Modifications Quality Modification Functional Modification Style Modification Notes: Marketing managers must decide if and when to modify existing products. Product modification changes one or more of a product’s characteristics: • Quality modification: Change in a product’s dependability or durability. • Functional modification: Change in a product’s versatility, effectiveness, convenience, or safety. • Style modification: An aesthetic product change (like color) rather than a quality or functional change. Planned obsolescence is a style modification change to make old products “obsolete” to the consumer. Planned Obsolescence: The practice of modifying products so those that have already been sold become obsolete before they actually need replacement. © 2016 Cengage Learning. All Rights Reserved.

Repositioning Why reposition established brands? Chapter 10 Product Concepts Repositioning Changing Demographics Declining Sales Changes in Social Environment Why reposition established brands? Notes: The second way of adjusting product items, lines, and mixes is by repositioning. Repositioning changes consumers’ perceptions of a brand. Changing demographics, declining sales, or changes in the social environment often motivate firms to reposition established brands. © 2016 Cengage Learning. All Rights Reserved.

Product Line Extension Chapter 10 Product Concepts Adding additional products to an existing product line in order to compete more broadly in the industry. Symptoms of Overextension Some products have low sales or cannibalize sales of other items Resources are disproportionately allocated to slow-moving products Items have become obsolete because of new product entries Notes: The third way of adjusting product items, lines, and mixes is by product line extensions. A company can add too many products, or demand can change for the type of products that were introduced over time. Contracting product lines is a strategic way to deal with overextension. © 2016 Cengage Learning. All Rights Reserved.

Describe marketing uses of branding Chapter 10 Product Concepts Branding 10-4 Describe marketing uses of branding © 2016 Cengage Learning. All Rights Reserved.

Branding Brand Name Mark Equity Chapter 10 Product Concepts Branding Brand Name Mark Equity 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 Global Brand A brand where at least a third of the earnings come from outside its home country Notes: A brand is a name, term, symbol, design, or combination thereof that identifies a seller’s products and differentiates them from competitors’ products. Discussion/Team Activity: What attributes make a good brand name, based on the names of strongly recognized brands? Discuss examples of strong global brands. © 2016 Cengage Learning. All Rights Reserved.

Product Identification Chapter 10 Product Concepts Benefits of Branding Product Identification Repeat Sales New-product Sales Notes: 1. Branding has three main purposes: product identification, repeat sales, and new-product sales. The most important purpose is product identification. 2. Brand equity refers to the value of company and brand names. 3. Global brand refers to a brand that obtains at least a third of its earnings from outside its home country, is recognizable outside its home base of customers, and has publicly available marketing and financial data. 4. Brand loyalty, a consistent preference for one brand over all others, is quite high in some product categories. © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Chapter 10 Product Concepts Branding Strategies Brand No Brand Manufacturer’s Brand Private Brand Individual Brand Family Brand Combi- nation Notes: The lack of a brand name, a generic product, can be a selling point. If a brand is used, the choice is made between a manufacturers’ brand, a private brand, or both. With either a manufacturers’ brand or a private brand, a decision is made among: Individual brand—different brands for different products Family brand—common names for different products or a Combination of individual branding and family branding. Discussion/Team Activity: Name brands that fall into each of the categories shown on this slide. © 2016 Cengage Learning. All Rights Reserved.

Branding Strategies Manufacturers’ Brand Private Chapter 10 Product Concepts Manufacturers’ Brand Private The brand name of a manufacturer. A brand name owned by a wholesaler or a retailer. Also known as a private label or store brand. Captive A brand manufactured by a third party for exclusive retailer, without evidence of a that retailer’s affiliation. © 2016 Cengage Learning. All Rights Reserved.

Advantages of Manufacturers’ Brands Chapter 10 Product Concepts Advantages of Manufacturers’ Brands Heavy consumer ads by manufacturers Attract new customers Enhance dealer’s prestige Rapid delivery, carry less inventory If dealer carries poor quality brand, customer may simply switch brands and remain loyal to dealer Notes: Advantages of carrying manufacturers are compared to the advantages of carrying private brands in Exhibit 10.3. © 2016 Cengage Learning. All Rights Reserved.

Advantages of Private Brands Chapter 10 Product Concepts Advantages of Private Brands Earn higher profits on own brand Less pressure to mark down price Manufacturer can become a direct competitor or drop a brand/reseller Ties customer to wholesaler or retailer Wholesalers and retailers have no control over the intensity of distribution of manufacturers’ brands Notes: Advantages of carrying manufacturers are compared to the advantages of carrying private brands in Exhibit 10.3. © 2016 Cengage Learning. All Rights Reserved.

Advantages of Captive Brands Chapter 10 Product Concepts Advantages of Captive Brands No evidence of store’s affiliation Manufactured by third party Sold exclusively at the chain Can ask price similar to manufacturer’s brands Notes: Captive brands are brands manufactured by a third party for an exclusive retailer, without evidence of that retailers affiliation. © 2016 Cengage Learning. All Rights Reserved.

Individual Brands Versus Family Brands Chapter 10 Product Concepts Individual Brands Versus Family Brands Individual Brand Family Using different brand names for different products. Marketing several different products under the same brand name. Notes: Companies use individual brands when their products vary greatly in use or performance. For instance, it would not make sense to use the same brand name for a pair of dress socks and a baseball bat. © 2016 Cengage Learning. All Rights Reserved.

Co-branding Ingredient Branding Types of Co-branding Chapter 10 Product Concepts Co-branding Ingredient Branding Cooperative Branding Complementary Branding Types of Co-branding Notes: Cobranding is placing two or more brand names on a product or its package. Ingredient branding identifies the brand of a part that makes up the product. Cooperative branding occurs when two brands receive equal treatment. Complementary branding refers to products advertised or marketed together to suggest usage. Co-branding is a useful strategy when a combination of brand names enhances the prestige or perceived value of a product or when it benefits brand owners and users. © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Trademarks Chapter 10 Product Concepts A Trademark is the exclusive right to use a brand. A service mark performs the same function for services. Many parts of a brand and associated symbols qualify for trademark protection. Trademark right comes from use rather than registration. The Digital Millennium Copyright Act (DMCA) explicitly applies trademark law to the digital world. Companies that fail to protect their trademarks face the possibility that their product names will become generic. Notes: A trademark is the exclusive right to use a brand or part of a brand. Others are prohibited to use without permission. A service mark performs the same function for services. Parts of a brand or other product identification may qualify for trademark protection. Companies that fail to protect trademarks face the risk of product names becoming generic. This list includes aspirin, cellophane, thermos, monopoly, cola, and shredded wheat. Discussion/Team Activity: Discuss some heavily-protected product brands that are used generically in conversations. Examples might include Kleenex, Xerox, Band-Aid Brand Adhesive Bandages, etc. © 2016 Cengage Learning. All Rights Reserved.

Describe marketing uses of packaging and labeling Chapter 10 Product Concepts Packaging 10-5 Describe marketing uses of packaging and labeling © 2016 Cengage Learning. All Rights Reserved.

Functions of Packaging Chapter 10 Product Concepts Functions of Packaging Contain and Protect Promote Facilitate Storage, Use, and Convenience Facilitate Recycling Notes: The three most important functions of packaging are to contain and protect products; promote products; facilitate the storage, use and convenience of products, and facilitate recycling and reduce environmental damage. © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Chapter 10 Product Concepts Labeling Persuasive Focuses on promotional theme Consumer information is secondary Informational Helps make proper selections Lowers cognitive dissonance Notes: Package labeling takes one of two forms: persuasive or informational. Greenwashing Attempting to give the impression of environmental friendliness whether or not it is environmentally friendly. © 2016 Cengage Learning. All Rights Reserved.

Universal Product Codes Chapter 10 Product Concepts Universal Product Codes A series of thick and thin vertical lines (bar codes), readable by computerized optical scanners, that represent numbers used to track products. Notes: Universal product codes, often called bar codes, were first introduced in 1974. UPCs help retailers prepare records of customer purchases, control inventories, and track sales. © 2016 Cengage Learning. All Rights Reserved.

issues in branding and packaging Chapter 10 Product Concepts Global Issues in Branding and Packaging 10-6 Discuss global issues in branding and packaging © 2016 Cengage Learning. All Rights Reserved.

Global Issues in Branding Chapter 10 Product Concepts Global Issues in Branding Adaptations & Modifications Global Options for Branding One Brand Name Everywhere Different Brand Names in Different Markets Notes: When entering a foreign market with an existing product a firm has three options for handling the brand name: One brand name everywhere. Coca-Cola uses this strategy in 195 countries around the world. This strategy allows greater recognition of the product and easier promotional coordination from market to market. Adaptations and modifications are used when the name cannot be pronounced or interpreted successfully in a different language. Different brand names for different markets: Local brand names are used when translation or pronunciation problems occur, when the marketer wants the brand to appear to be a local brand, or when regulations require localization. © 2016 Cengage Learning. All Rights Reserved.

Global Issues in Packaging Chapter 10 Product Concepts Global Issues in Packaging Aesthetics Global Considerations for Packaging Climate Considerations Labeling Notes: The major labeling concern is proper translation of ingredient, promotional, and instructional information on labels. Package aesthetics are important from a cultural perspective. For example, colors may have different connotations in different countries. Package size is influenced by availability of refrigeration, amount of storage space, and even the purchasing power of buyers. Extreme climates and long-distance shipping necessitate sturdier packages. Packages may need a longer shelf life. © 2016 Cengage Learning. All Rights Reserved.

and why product warranties are important Chapter 10 Product Concepts Product Warranties 10-7 Describe how and why product warranties are important marketing tools © 2016 Cengage Learning. All Rights Reserved.

A confirmation of the quality or performance of a good or service. Chapter 10 Product Concepts Product Warranties Warranty Express 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. © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Chapter 10 Product Concepts Chapter 10 Video Zappos Zappos discusses how the company builds its product offerings and enters into new fields. Zappos also has a limited line of private label offerings that it creates to fill a perceived gap in the market. Choosing the correct products is the starting point for Zappos to offer its great customer service and “deliver happiness.” CLICK TO PLAY VIDEO © 2016 Cengage Learning. All Rights Reserved.