2. © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Chapter Six
The Marketing Mix
Key Words / Outline
Tangible product, Extended product, Generic product, Marketing myopia, Buyer derives, Vertical market, Horizontal market, Quality Value, Product mix, ,line extension, Brand extension, Franchise extension, Dual branding, Multi branding, Fashions, Fads, Innovators, Laggards, Market dimensions
© The McGraw-Hill Companies, Inc., All Rights Reserved.
McGraw-Hill/Irwin
Marketing Management, 8e

3. Levels of Product Core Benefit or Service Augmented Product Levels
This CTR corresponds to Figure 8-1 on p. 239 and relates to the material on pp
Levels of Product
Installation
Packaging
Brand
Name
Features
Delivery
& Credit
After-
Sale
Service
Core
Benefit or
Service
Product
A product is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Products can be physical objects, services, persons, places, organizations, and ideas.
Product Levels
Core Product. This concept refers to the use-benefit, problem-solving service that the consumer is really buying when purchasing a product.
Actual Product. The actual product is the tangible product or intangible service that serves as the medium for receiving core product benefits. Five characteristics:
Quality Level refers to product performance.
Features include combinations of product attributes.
Design consists of aesthetic or ergonomic aspects of the product.
Brand Name may help consumers position and identify the product.
Packaging serves to both protect the product and to promote it to consumers.
Augmented Product. The augmented consists of the measures taken to help the consumer put the actual product to sustained use. Measures can include installation, delivery & credit, warranties, and after sale service.
Quality
Level
Design
Warranty
Actual
Product
Core
Product

4. Three Views Of Product
Tangible (Actual Product)– physical entity or service
Extended Augment Product– tangible product plus a whole cluster of services that accompany it
Generic (Core Product) – the essential benefits the buyer expects to receive from the product

5. Product Definition
A product is the sum of the physical, psychological, and sociological satisfactions the buyer derives from purchase, ownership and consumption

6. Product Classification
Two basic criteria of product classification
End use or market
Degree of processing or physical transformation
Three categories of products
Agricultural products and raw materials
Organizational goods
Consumer goods

7. Organizational Goods
Purchased by firms for the purpose of producing other goods
Raw materials and semi-finished goods
Major and minor equipment
Parts or components needed to complete other finished goods
Supplies or items used to operate the business but not an element of a finished good

8. Consumer Goods
Convenience goods – such as food which require minimal effort
Shopping goods – such as appliances, which are purchased after some time and energy is spent comparing
Specialty goods – which are unique in some way to the consumer and are characterized by special effort

9. Organizational Market Characteristics
A primary purchasing motive for organizational goods is profit
Organizational markets are concentrated geographically as in the case of steel or auto
Can be categorized into
Vertical market: Limited number of buyers
Horizontal market: Limited number of industries

10. Quality and Value Buyers expect . . . Quality Value
The degree of excellence or superiority that an organization’s product possesses
Value
What the customer gets in exchange for what the customer gives

11. Product and Service Decisions
Product attributes
Quality, features, style and design
Branding name sign symbol or design to identifies products
Packaging designing and producing the container or wrapper for product
Labeling simple tags attached to product which is apart of packaging
Product support services
Key Decisions
Individual Product
Product Line
Product Mix
Goal 2: Learn decisions companies make regarding products

12. This CTR relates to the material on pp. 253-254.
Packaging Decisions
This CTR relates to the material on pp
Packaging
Sales
Tasks
Competitive
Advantages
Product
Safety
Packaging
Labeling
Packaging Concept
The packaging concept states what the package should be or do for the product in support of marketing objectives. Packaging includes the activities of designing and producing the container or wrapper for a product. The package includes the immediate container (that holds the product for use), a secondary package that is discarded prior to use, and a shipping package necessary for storage and shipping.
Discussion Note: Both environmentalists and consumer groups have complained about unnecessary packaging. Environmentalists point out the ecological costs of more packages to throw away. Many firms now recycle packages to reduce wastes and save money. Consumer groups, such as Consumer’s Union (publisher of Consumer Reports), express concern that unnecessary packaging costs consumers more.
Labeling Decisions
Labels perform several functions. Labels identify, describe, and promote the product. Also, labels must meet the demands of legal regulations.
Identifies. Especially in support of brand strategies, labels distinguish the product from others.
Describes. Labels can provide information about contents, production, freshness, and instructions on safe and effective use.
Promotes. Use of color and graphics can stimulate and arouse consumer attention for the product.
Legal Regulation
Mis-use of labels has lead to regulation on product claims, the addition of unit prices, open dating, and nutritional labeling for processed foods. Including all required information is necessary to ward off governmental investigations.
Identifies
Describes
Promotes

13. Product and Service Decisions
Key Decisions
Product line
A group of products that are closely related because they may:
function in a similar manner
be sold to the same customer groups,
be marketed through the same types of outlets
fall within given price ranges
Individual Product
Product Line
Product Mix
Goal 2: Learn decisions companies make regarding products

14. Product and Service Decisions
Key Decisions
Product line length
Line stretching: adding products that are higher or lower priced than the existing line
Line filling: adding more items within the present price range
Individual Product
Product Line
Product Mix

15. Product and Service Decisions
Key Decisions
Product mix
Also known as product assortment
Consists of all the product lines and items that a particular seller offers for sale
Individual Product
Product Line
Product Mix

16. Product and Service Decisions
Key Decisions
Product mix width:
Number of different product lines carried by company
Product mix depth:
Number of different versions of each product in the line
Individual Product
Product Line
Product Mix

17. Branding Strategy
Brand equity is the positive differential effect that knowing the brand name has on customer response to the product or service
One measure of equity is the extent to which customers are willing to pay more for the brand
Brand valuation is the process of estimating the total financial value of a brand

18. Branding Strategy
Brands with strong equity have many competitive advantages:
High consumer awareness
Strong brand loyalty
Helps when introducing new products
Less susceptible to price competition

19. Goal 3: Understand branding strategy
Brand Strategy
Key Decisions
Three levels of positioning:
Product attributes
Least effective
Benefits
Beliefs and values
Taps into emotions
Brand Positioning
Brand Name Selection
Brand Sponsorship
Brand Development
Goal 3: Understand branding strategy

20. Goal 3: Understand branding strategy
Brand Strategy
Good Brand Names:
Suggest something about the product or its benefits
Are easy to say, recognize and remember
Are distinctive
Translate well into other languages
Can be registered and legally protected
Key Decisions
Brand Positioning
Brand Name Selection
Brand Sponsorship
Brand Development
Goal 3: Understand branding strategy

21. Goal 3: Understand branding strategy
Brand Strategy
Key Decisions
Manufacturer brands
Private (store) brands
Costly to establish and promote
Higher profit margins
Licensed brands
Name and character licensing has grown
Brand Positioning
Brand Name Selection
Brand Sponsorship
Brand Development
Goal 3: Understand branding strategy

22. Goal 3: Understand branding strategy
Brand Strategy
Key Decisions
Line extensions
Minor changes to existing products
Brand extensions
Successful brand names help introduce new products
Multibrands
Multiple product entries in a product category
New brands
New product category
Brand Positioning
Brand Name Selection
Brand Sponsorship
Brand Development
Goal 3: Understand branding strategy

23. Branding
A brand identifies one seller’s good or service as distinct from competitors
Brand can be
A name
A term
A design
A symbol

24. Branding
Line extension: Uses brand name to facilitate entry into a new market segment Diet coke
Brand extension: Uses an existing brand to enter a different product class
Family branding: Attaches the corporate name to a product to either enter a new market or a new product class (Toyota Lexus)
Dual branding: Concept where two or more branded products are integrated (Pepsi)
Multibranding: Assigning different brand names to each product Proctor &gamble laundry detergent dash& Tide

25. Advantages of a Multi-branding strategy
The firm can distance products from other offerings it markets
The image of one product is not associated with other products the company markets
The products can be specifically targeted
If the product fails, the effect on other products is minimized

26. Brand Equity

27. Packaging Differentiates relatively homogeneous products
Contributes to “Brand Equity” by creating new attributes or value
Creates urgent salability within a target market

28. Product Lifecycle Introduction Growth Maturity Decline
High costs, low or no profit
Growth
Reduced costs, profits increase, maximum value
Maturity
Marginal cost, marginal profit, high competition
Decline
Low costs, high profits, competition lessens

29. Product Lifecycle - Limitations
As useful as the product life cycle can be to managers, it does have limitations that require it to be used cautiously
Accuracy pertaining to the longevity of the product can’t be predicted
Variations in life cycle exists
Fashion: These are accepted and popular product styles
Fads: Products which experience high but brief popularity

30. Product Lifecycle and Strategy

31. Product Adoption And Diffusion
Adopter categories
Innovators
Early adopters
Early majority
Late majority
Laggards
Diffusion: The spread of the product through the population is known as the diffusion of innovation

33. How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions

34. Product Adoption

35. Product Audit
The product audit is a marketing management technique whereby the company’s current product offerings are reviewed to ascertain (Assure) whether each product should be continued as is, improved, modified, or deleted

36. Deletions
Deletion decisions are difficult because of the potential impact on customers and the firm
Considerations in the deletion decision include
Sales trends: Have sales moved over time? What has happened to market share?
Profit contribution: What has been the profit contribution of the product to the company?
Product life cycle: Has the product reached a level of maturity?
Customer migration patterns: If the product is deleted, will customers switch to another product marketed by our firm?

37. Product Improvement
Another important objective of the audit is to ascertain whether to alter the product in some way or leave things the way they are
Attributes: Refer to main features of the product such as design, package and so forth
Marketing dimensions: Refer to features like pricing, promotion strategy and distribution channels

38. Product Improvement
Benchmarking: Continuous process of measuring products, services, and practices against those of the toughest competitors
Advantages of benchmarking include
Boosting product quality
Developing more user-friendly products
Improving customer order processing activities
Shortening delivery lead times

39. Product Management
Market management system: One person is responsible for overseeing an entire product line with all of the functional areas of marketing such as research, advertising, sales promotion, sales, and product planning
Brand management system: A manager focuses on a single product or a very small group of new and existing products