1. Copyright © Houghton Mifflin Company. All rights reserved. 10–1 Chapter Outline What Is a Product? Classifying Products –Consumer products- Business products Product Line and Product Mix Product Life Cycles and Marketing Strategies –Introduction- Maturity –Growth- Decline Product Adoption Process

2. Copyright © Houghton Mifflin Company. All rights reserved. 10–2 Chapter Outline (cont’d) Branding –Value of branding- Protecting a brand –Brand equity- Branding Policies –Types of brands- Brand equity –Selecting a brand name- Co-branding –Brand licensing Packaging –Packing functions- Major packaging considerations –Packaging and marketing strategy Labeling

3. Copyright © Houghton Mifflin Company. All rights reserved. 10–3 What Is a Product? A Product Defined –A good, a service, or an idea received in an exchange –It can be tangible (a good) or intangible (a service or an idea) or a combination of both. –It can include functional, social, and psychological utilities or benefits. Why Buyers Purchase a Product –To get the benefits and satisfaction that they think the product will provide –Symbols and cues provided by marketing help consumers make judgments about products.

4. Copyright © Houghton Mifflin Company. All rights reserved. 10–4 Classifying Products Consumer Products –Products purchased to satisfy personal and family needs Business Products –Products bought to use in an organization’s operations, to resell, or to make other products (raw materials and components)

5. Copyright © Houghton Mifflin Company. All rights reserved. 10–5 Consumer Products Convenience Products –Relatively inexpensive, frequently purchased items for which buyers exert minimal purchasing effort –Characteristics Marketed through many retail outlets Relatively low per-unit gross margins Little promotional effort at the retail level Packaging is important marketing mix element

6. Copyright © Houghton Mifflin Company. All rights reserved. 10–6 Consumer Products (cont’d) Shopping Products –Items for which buyers are willing to expend considerable effort in planning and making purchases –Characteristics Expected to last a long time; less frequently purchased Do not have brand loyalty appeal Require fewer retail outlets Inventory turnover is lower Gross margins are higher More amenable to personal selling Supported (servicing and promoting the product) by both the producer and channel members

7. Copyright © Houghton Mifflin Company. All rights reserved. 10–7 Consumer Products (cont’d) Specialty Products –Items with unique characteristics that buyers are willing to expend considerable effort to obtain –Characteristics Are preselected by the consumer Have no close substitutes or alternatives Are available in a limited number of retail outlets Purchased infrequently and represent a significant and expensive investment Have high gross margins and low inventory turnover

8. Copyright © Houghton Mifflin Company. All rights reserved. 10–8 Consumer Products (cont’d) Unsought Products –Products purchased to solve a sudden problem, products of which the customers are unaware, and products that people do not necessarily think about buying –Characteristics Speed and problem resolution of the utmost importance Price and other features not considered No consideration of substitutes or alternatives Purchased infrequently

9. Copyright © Houghton Mifflin Company. All rights reserved. 10–9 Product Line and Product Mix Product Item –A specific version of a product Product Line –A group of closely related product items viewed as a unit because of marketing, technical, or end-use considerations Whole Milk Skim Milk 2% Milk

10. Copyright © Houghton Mifflin Company. All rights reserved. 10–10 Product Line and Product Mix (cont’d) Product Mix –The total group of products that an organization makes available to customers Width of Product Mix –The number of product lines a company offers Depth of Product Mix –The average number of different products in each product line

11. Copyright © Houghton Mifflin Company. All rights reserved. 10–11 The Concepts of Product Mix Width and Depth Applied to Selected United States Proctor & Gamble Products Source: The Procter & Gamble Company. Used with permission. FIGURE 10.1

12. Copyright © Houghton Mifflin Company. All rights reserved. 10–12 Product Life Cycle –The progression of a product through four stages: introduction, growth, maturity, and decline.

13. Copyright © Houghton Mifflin Company. All rights reserved. 10–13 The Four Stages of the Product Life Cycle FIGURE 10.2

14. Copyright © Houghton Mifflin Company. All rights reserved. 10–14 The Product Life Cycle Introduction –The initial stage of a product’s life cycle—its first appearance in the marketplace—when sales start at zero and profits are negative Growth –The stage of a product’s life cycle when sales rise rapidly and profits reach a peak and then start to decline More competitors enter the market Product pricing is aggressive Brand loyalty becomes important Gaps in market coverage are filled Promotion expenditures moderate Production efficiencies lower costs

15. Copyright © Houghton Mifflin Company. All rights reserved. 10–15 The Product Life Cycle (cont’d) Maturity –The stage of a product’s life cycle when the sales curve peaks and starts to decline and profits continue to fall Intense competition Emphasis on improvements and differences in competitors’ products Weaker competitors lose interest and exit the market Advertising and dealer-oriented promotions predominate Distribution sometimes expands to the global market –Strategic objectives for maturity stage Generate cash flow Maintain market share Increase share of customer

16. Copyright © Houghton Mifflin Company. All rights reserved. 10–16 Product Life Cycle (cont’d) Decline –The stage of a product’s life cycle when sales fall rapidly Pruning items from the product line Cutting promotion expenditures Eliminating marginal distributors Planning to phase out the product

17. Copyright © Houghton Mifflin Company. All rights reserved. 10–17 Product Adoption Process Production Adoption Process –The stages buyers go through in accepting a product

18. Copyright © Houghton Mifflin Company. All rights reserved. 10–18 Product Adoption Process (cont’d) Categories of Product Adopters –Innovators First adopters of new products –Early adopters Careful choosers of new products –Early majority Those adopting new products just before the average person –Late majority Skeptics who adopt new products when they feel it is necessary –Laggards The last adopters, who distrust new products

19. Copyright © Houghton Mifflin Company. All rights reserved. 10–19 Source: Reprinted with permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Diffusion of Innovations, Fourth Edition, by Everett M. Rogers. Copyright © 1995 by Everett M. Rogers. Copyright © 1962, 1971, 1983, by The Free Press. Distribution of Product Adopter Categories FIGURE 10.3

20. Copyright © Houghton Mifflin Company. All rights reserved. 10–20 Branding: Key Terms Brand –An identifying name, term, design, or symbol –One item, family of items, or all items of a seller Corvette, Chevrolet, General Motors Brand Name –The part of a brand that can be spoken –Words, letters, numbers Union 76, NBA, 49’ers Brand Mark –The part of a brand not made up of words –Symbols or designs Nike swoosh, Mercedes star, McDonald’s arches

21. Copyright © Houghton Mifflin Company. All rights reserved. 10–21 Branding: Key Terms (cont’d) Trademark –A legal designation of exclusive use of a brand Coca-Cola®, Hewlett-Packard® Trade Name –Full legal name of an organization American Telephone and Telegraph Corporation (AT&T)

22. Copyright © Houghton Mifflin Company. All rights reserved. 10–22 Branding (cont’d) Value of Branding –To Buyers Helps speed consumer purchases by identifying specific preferred products Provides a form of self-expression and status Evaluates product quality to reduce the risk of purchase –To Sellers Identifies and differentiates a firm’s products from competing products Helps in the introduction of new products Facilitates the promotion of all same-brand products Fosters the development of brand loyalty

23. Copyright © Houghton Mifflin Company. All rights reserved. 10–23 Branding (cont’d) Brand Equity –The marketing and financial value associated with a brand’s strength in a market Brand Loyalty –A customer’s favorable attitude toward a specific brand Brand Recognition –A customer’s awareness that a brand exists and is an alternative purchase

24. Copyright © Houghton Mifflin Company. All rights reserved. 10–24 Branding (cont’d) Brand Preference –The degree of brand loyalty in which a customer prefers one brand over competitive offerings Brand Insistence –The degree of brand loyalty in which a customer strongly prefers a specific brand and will accept no substitute

25. Copyright © Houghton Mifflin Company. All rights reserved. 10–25 Major Elements of Brand Equity Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Managing Brand Equity: Capitalizing on the Value of a Brand Name by David A. Aaker. Copyright © 1991 by David A. Aaker. FIGURE 10.4

26. Copyright © Houghton Mifflin Company. All rights reserved. 10–26 Source: “The 100 Top Brands,” BusinessWeek, Aug. 2, 2004, p.68. The brand valuations draw upon publibly available information, which has not been independently investigated by Interbrand. Data: Interbrand Corp., J.P. Morgan Chase & Co., Citigroup, Morgan Stanley, Business Week. BrandBrand Value (In Billion $) Coca-Cola67.4 Microsoft61.4 IBM53.8 GE44.1 Intel33.5 Disney27.1 McDonald’s25.0 Nokia24.0 Toyota22.7 Marlboro22.1 Top Ten Most Valuable Brands in the World FIGURE 10.2

27. Copyright © Houghton Mifflin Company. All rights reserved. 10–27 Types of Brands Manufacturer Brands –Brands initiated by producers Private Distributor Brands –Brands initiated and owned by resellers Dealer brands, private brands, store brands Generic Brands –Brands indicating only the product category

28. Copyright © Houghton Mifflin Company. All rights reserved. 10–28 Selecting a Brand Name The name should –be easy to say, spell, and recall. –indicate the product’s major benefits. –suggest the product’s major uses and special characteristics. –be distinctive, setting it apart from competing brands. –be compatible with all products in line. –be designed for use and recognition in all types of media.

29. Copyright © Houghton Mifflin Company. All rights reserved. 10–29 Branding Policies Individual Branding –A policy of naming each product differently –Avoids stigmatizing all products due to a failed product Family Branding –Branding all of a firm’s products with the same name –Promotion of one item also promotes all other products

30. Copyright © Houghton Mifflin Company. All rights reserved. 10–30 Brand Extensions Using an existing brand name on a new product in a different category. Provides support for new products through established brand name and image

31. Copyright © Houghton Mifflin Company. All rights reserved. 10–31 Co-Branding Using two or more brands on one product to capitalize on the brand equity (customer confidence and trust) of multiple brands Brands involved must represent a complementary fit in the minds of consumers.

32. Copyright © Houghton Mifflin Company. All rights reserved. 10–32 Packaging Involves the development of a container and a graphic design for a product Packaging Functions –Protect the product from damage –Offer convenience to consumers –Prevent waste and make storage easier –Promote the product by communicating its features, uses, benefits, and image

33. Copyright © Houghton Mifflin Company. All rights reserved. 10–33 Major Packaging Considerations Cost of Packaging –Limited consumer willingness to pay for better packaging Family Packaging –Similar packaging for all of a firm’s products or packaging that has one common design element A A

34. Copyright © Houghton Mifflin Company. All rights reserved. 10–34 Major Packaging Considerations (cont’d) Promotional Role (Informing the Consumer) –Verbal and nonverbal symbols –Size, shape, texture, color, and graphics Reseller Needs –Transportation, storage, and handling

35. Copyright © Houghton Mifflin Company. All rights reserved. 10–35 Packaging and Marketing Strategy Altering the Package –To update style and to meet increased competition –To highlight new features –To take advantage of new packaging materials –To make the product safer or easier to use –To reduce packaging costs Secondary-Use Packaging –Reusable packaging adds customer value Category-Consistent Packaging –Packaging reflects customer expectations for the expected appearance of products in a category

36. Copyright © Houghton Mifflin Company. All rights reserved. 10–36 Packaging and Marketing Strategy (cont’d) Innovative Packaging –Unique features or ways of packaging that make a product more distinct from its competitors Multiple Packaging –Bundling multiple units of a product together to encourage usage and to increase demand Handling-Improved Packaging –Packaging that has been changed to facilitate product handling in the distribution channel

37. Copyright © Houghton Mifflin Company. All rights reserved. 10–37 Labeling Providing identifying, promotional, legal, or other information on package labels Purposes of Labels –Help identify the product Display brand name and unique graphics –Support promotional efforts for the product Coupons, discounts, product features –Provide legally required labeling information Fair Packaging and Labeling Act of 1966 Nutrition Labeling Act of 1990 –Provide information on product origin “Made in the USA”