Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared by Deborah Baker, Texas Christian University Lamb, Hair, McDaniel CHAPTER Product Concepts

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 2 Learning Outcomes Define the term product Classify consumer products Define the terms product item, product line, and product mix Describe marketing uses of branding LO 1 LO 2 LO 3 LO 4

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 3 Learning Outcomes Describe marketing uses of packaging and labeling Discuss global issues in branding and packaging Describe how and why product warranties are important marketing tools LO 5 LO 6 LO 7

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 4 Define the term product What Is a Product? LO 1

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 5 LO 1 What Is a Product? Everything, both favorable and unfavorable, that a person receives in an exchange.  Tangible Good  Service  Idea Product

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 6 LO 1 What Is a Product? Product is the starting point of Marketing Mix Promotion Place (Distribution) PriceProduct

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 7 REVIEW LEARNING OUTCOME LO 1 Define the term product Product Good Service Idea Good Service Idea

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 8 Classify consumer products Types of Consumer Products LO 2

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 9 LO 2 Types of Products Business Product Business Product Consumer Product Consumer Product A product used to manufacture other goods or services, to facilitate an organization’s operations, or to resell to other consumers. A product bought to satisfy an individual’s personal needs or wants A product bought to satisfy an individual’s personal needs or wants

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 10 LO 2 Types of Consumer Products Unsought Products Unsought Products Specialty Products Specialty Products Shopping Products Shopping Products Convenience Products Convenience Products Consumer Products Consumer Products Business Products Business Products

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 11 LO 2 Types of Consumer Products Market Development Diversification Increase market share among existing customers Attract new customers to existing products Introduce new products into new markets Create new products for present markets 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

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 12 REVIEW LEARNING OUTCOME LO 2 Consumer Products

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 13 Define the terms product item, product line, and product mix Product Items, Lines, and Mixes Product Items, Lines, and Mixes LO 3

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 14 Product Items, Lines, and Mixes LO 3 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.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 15 Campbell’s Product Lines and Mix LO 3 {}

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 16 Benefits of Product Lines LO 3 Equivalent Quality Efficient Sales and Distribution Standardized Components Standardized Components Package Uniformity Advertising Economies

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 17 Product Mix Width LO 3 The number of product lines an organization offers.  Diversifies risk  Capitalizes on established reputations The number of product lines an organization offers.  Diversifies risk  Capitalizes on established reputations Product Mix Width

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 18 Product Line Depth LO 3 The number of product Items in a product line.  Attracts buyers with different preferences  Increases sales/profits by further market segmentation  Capitalizes on economies of scale  Evens out seasonal sales patterns The number of product Items in a product line.  Attracts buyers with different preferences  Increases sales/profits by further market segmentation  Capitalizes on economies of scale  Evens out seasonal sales patterns Product Line Depth Product Line Depth

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 19 Adjustments LO 3 Product Modification Product Repositioning Product Line Extension or Contraction Product Line Extension or Contraction Adjustments to Product Items, Lines, and Mixes

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 20 Types of Product Modifications LO 3 Quality Modification Functional Modification Style Modification

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 21 Planned Obsolescence LO 3 Planned Obsolescence The practice of modifying products so those that have already been sold become obsolete before they actually need replacement.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 22 Repositioning LO 3 Changing Demographics Declining Sales Changes in Social Environment Why reposition established brands?

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 23 Product Line Extension LO 3 Product Line Extension Adding additional products to an existing product line in order to compete more broadly in the industry.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 24 Product Line Contraction LO 3  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 Symptoms of Product Line Overextension

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 25 REVIEW LEARNING OUTCOME LO 3 Product item, product line, and product mix

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 26 Describe marketing uses of branding Branding LO 4

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 27 LO 4 Brand A name, term, symbol, design, or combination thereof that identifies a seller’s products and differentiates them from competitors’ products. Brand

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 28 LO 4 Branding Brand Name Brand Mark Brand 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 20 percent of the product is sold outside its home country

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 29 LO 4 Benefits of Branding Product Identification Repeat Sales New Product Sales

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 30 Biz Flix LO 4 Josie and the Pussycats

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 31 LO 4 Top Five Global and North American Brands Global 1. Apple 2. Google 3. IKEA 4. Starbucks 5. Al Jazeera North American 1. Apple 2. Google 3. Target 4. Starbucks 5. Pixar SOURCE: Deborah L. Vence, “Not Taking Care of Business,” Marketing News, March 15, 2005, p. 19.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 32 LO 4 Branding Strategies BrandNo Brand Manufacturer’s Brand Private Brand Individual Brand Family Brand Combi- nation Individual Brand Family Brand Combi- nation

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 33 LO 4 Generic Brand A no-frills, no-brand-name, low-cost product that is simply identified by its product category. Generic Product Generic Product

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 34 LO 4 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. Also known as a private label or store brand.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 35 LO 4 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

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 36 LO 4 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

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 37 LO 4 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.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 38 LO 4 Cobranding Ingredient Branding Cooperative Branding Complementary Branding Types of Cobranding Online

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 39 LO 4 Trademarks A Trademark is the exclusive right to use a brand.  Many parts of a brand and associated symbols qualify for trademark protection.  Trademark right comes from use rather than registration.  The mark has to be continuously protected.  Rights continue for as long as the mark is used.  Trademark law applies to the online world.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 40 REVIEW LEARNING OUTCOME LO 4 Marketing Uses of Branding

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 41 Describe marketing uses of packaging and labeling Packaging LO 5

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 42 Functions of Packaging LO 5 Contain and Protect Promote Facilitate Storage, Use, and Convenience Facilitate Recycling Online

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 43 Labeling LO 5 Online Persuasive  Focuses on promotional theme  Consumer information is secondary Informational  Helps make proper selections  Lowers cognitive dissonance  Includes use/care

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 44 Universal Product Codes LO 5 Universal Product Codes (UPCs) A series of thick and thin vertical lines (bar codes), readable by computerized optical scanners, that represent numbers used to track products.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 45 REVIEW LEARNING OUTCOME LO 5 Packaging and Labeling

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 46 Discuss global issues in branding and packaging Global Issues in Branding and Packaging LO 6

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 47 Global Issues in Branding LO 6 Adaptations & Modifications Global Options for Branding One Brand Name Everywhere Different Brand Names in Different Markets

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 48 Global Issues in Packaging LO 6 Aesthetics Global Considerations for Packaging Climate Considerations Labeling

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 49 REVIEW LEARNING OUTCOME LO 6 Global Issues in Branding and Packaging Branding Choices: 1 name Modify or adapt 1 name Different names in different markets Packaging Considerations: Labeling Aesthetics Climate

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 50 Describe how and why product warranties are important marketing tools Product Warranties LO 7

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 51 Product Warranties LO 7 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)

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 52 REVIEW LEARNING OUTCOME LO 7 Product Warranties Express warranty=written guarantee Implied warranty=unwritten guarantee

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 53 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared by Deborah Baker, Texas Christian University Lamb, Hair, McDaniel Services and Nonprofit Organization Marketing 11 CHAPTER

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 54 Learning Outcomes Discuss the importance of services to the economy Discuss the differences between services and goods Describe the components of service quality and the gap model of service quality LO 1 LO 2 LO 3

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 55 Learning Outcomes Develop marketing mixes for services Discuss relationship marketing in services Explain internal marketing in services Discuss global issues in services marketing Describe nonprofit organization marketing LO 6 LO 5 LO 7 LO 8 LO 4

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 56 Discuss the importance of services to the economy The Importance of Services LO 1

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 57 LO 1 Service The result of applying human or mechanical efforts to people or objects. Service

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 58 REVIEW LEARNING OUTCOME LO 1 The Importance of Services 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 81% Services as a percentage of GDP 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 81% Services as a percentage of employment Services Deed Performance Effort Deed Performance Effort

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 59 Discuss the differences between services and goods How Services Differ from Goods LO 2

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 60 How Services Differ from Goods LO 2 Intangible Inseparable Heterogeneous Perishable

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 61 How Services Differ from Goods LO 2 Intangibility  Search Qualities  Experience Qualities  Credence Qualities Online

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 62 Describe the components of service quality and the gap model of service quality Service Quality LO 3

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 63 Components of Service Quality LO 3 Tangibles The physical evidence of a service. The physical evidence of a service. Empathy Caring, individualized attention to customers. Assurance The knowledge and courtesy of employees. The knowledge and courtesy of employees. Responsiveness The ability to provide prompt service. The ability to provide prompt service. Reliability The ability to perform the service right the first time.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 64 The Gap Model of Service Quality LO 3

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 65 Biz Flix LO 3 Intolerable Cruelty

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 66 REVIEW LEARNING OUTCOME LO 3 Service Quality

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 67 Develop marketing mixes for services Marketing Mixes for Services Marketing Mixes for Services LO 4

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 68 LO 4 Product Strategies for Services Service Mix Standardization or Customization Core and Supplementary Process

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 69 LO 4 Service as a Process Mental Stimulus Processing People Processing People Processing Possession Processing Information Processing

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 70 LO 4 The Service Factory Possession processing Mental-stimulus processing

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 71 LO 4 The Service Offering Core Service Supplementary Service Supplementary Service The most basic benefit the consumer is buying. A group of services that support or enhance the core service. A group of services that support or enhance the core service.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 72 LO 4 Core and Supplementary Services for FedEx Overnight transportation and delivery of packages Problem solving Billing statements Tracing Documentation Order taking Supplies Pickup Advice and information

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 73 LO 4 Customization/Standardization A strategy that uses technology to deliver customized services on a mass basis. Mass Customization

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 74 LO 4 The Service Mix  Determine what new services to introduce  Determine target market  Decide what existing services to maintain and to eliminate

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 75 LO 4 Place (Distribution) Strategy Scheduling Location Direct or indirect distribution Direct or indirect distribution Number of outlets Convenience

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 76 LO 4 Promotion Strategy Stress tangible cues Use personal information sources Create a strong organizational image Engage in postpurchase communication

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 77 LO 4 Price Strategy Pricing Challenges for Services  Define the unit of service consumption  Determine if multiple elements are “bundled” or priced separately

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 78 LO 4 Pricing Objectives Revenue-Oriented Pricing Operations-Oriented Pricing Patronage-Oriented Pricing Maximize the surplus of income over costs Match supply and demand by varying price Maximize the number of customers by varying price Online

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 79 REVIEW LEARNING OUTCOME LO 4 Marketing Mixes for Services PLACE PROMOTION PRICE PRODUCT = SERVICE Process Core and Supplementary Mass Customization Standardization Number of outlets Direct Indirect Location Tangible cues Personal information Strong image Post-purchase communication Revenue oriented Operations oriented Operations oriented Patronage oriented

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 80 Discuss relationship marketing in services Relationship Marketing LO 5

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 81 REVIEW LEARNING OUTCOME LO 5 Relationship Marketing in Services 2 Social Financial 1 Financial 3 Structural Social Financial Pricing incentives Design services to meet customer needs Creating value-added services not available elsewhere

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 82 Explain internal marketing in services Internal Marketing in Service Firms LO 6

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 83 Internal Marketing LO 6 Internal Marketing Treating employees as customers and developing systems and benefits that satisfy their needs.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 84 REVIEW LEARNING OUTCOME LO 6 Internal Marketing in Services

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 85 Discuss global issues in services marketing Global Issues in Services Marketing LO 7

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 86 REVIEW LEARNING OUTCOME LO 7 Global Issues in Services Marketing United States is world’s largest exporter of services. U.S.A.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 87 Describe nonprofit organization marketing Nonprofit Organization Marketing LO 8

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 88 Nonprofit Organization Marketing LO 8 Nonprofit Organization Marketing An organization that exists to achieve some goal other than the usual business goals of profit, market share, or return on investment.

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 89 Nonprofit Organization Marketing LO 8  Government  Museums  Theaters  Schools  Churches

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 90 Nonprofit Organization Marketing LO 8 Market intangible products Production requires customer’s presence Production requires customer’s presence Services vary greatly Services cannot be stored Shared Characteristics with Service Organizations Shared Characteristics with Service Organizations

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 91 Nonprofit Organization Marketing LO 8 Identify desired customers Specify objectives Develop, manage, eliminate programs and services Decide on prices Schedule events or programs Communicate their availability

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 92 Unique Aspects of Nonprofit Organization Marketing Strategies LO 8  Setting of marketing objectives  Selection of target markets  Development of marketing mixes

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 93 Objectives LO 8 Provide services that respond to the wants of :  Users  Payers  Donors  Politicians  Appointed officials  Media  General Public

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 94 Target Markets LO 8 Apathetic or strongly opposed targets Apathetic or strongly opposed targets Pressure to adopt undifferentiated segmentation Complementary positioning Unique Issues of Nonprofit Organizations

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 95 Product Decisions LO 8 Distinctions between Business and Nonprofit Organizations  Benefit complexity  Weak or indirect benefit strength  Low involvement

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 96 Promotion Decisions LO 8 Sales promotion activities Public service advertising Professional volunteers Online

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 97 Pricing Decisions LO 8 Below-cost pricing Separation between payers and users Indirect payment Nonfinancial prices Pricing objectives Characteristics Distinguishing Pricing Decisions of Nonprofit Organizations Characteristics Distinguishing Pricing Decisions of Nonprofit Organizations

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 98 REVIEW LEARNING OUTCOME LO 8 Nonprofit Organization Marketing TARGET Apathetic or strongly opposed Undifferentiated segmentation Complementary positioning PRODUCT PROMOTION PLACE PRICE Professional volunteers Sales Public Service Advertising Involvement Benefit strength Benefit complexity Special facilities Nonfinancial Indirect payment Separation Below cost pricing