1. Product Concepts Chapter 10 Lamb, Hair, McDaniel 2014-2015
Chapter 10 Product Concepts
Product Concepts
Chapter 10
Lamb, Hair, McDaniel
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2. © 2015 by Cengage Learning Inc. All Rights Reserved.
Chapter 10 Product Concepts
Define the term product
Classify consumer products
Define the terms product item, product line, and product mix
Describe marketing uses of branding, packaging and labeling
Discuss global issues in branding and packaging
Describe how and why product warranties are important marketing tools
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3. © 2015 by Cengage Learning Inc. 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. 1
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4. SUPPORT SERVICES COMPONENT  Repair and maintenance
Chapter 10 Product Concepts
Core Vs. Augmented Product
SUPPORT SERVICES COMPONENT
PACKAGING
COMPONENT
 Repair and maintenance
 Deliveries
CORE
COMPONENT
 Trademark
 Price
 Product platform
 Design features
 Functional features
 Legal
 Installation
 Quality
 Warranty
 Brand name
 Package
 Instructions
Core product offers the basic/primary benefits and augmented product offers secondary/extended benefits. Marketers mostly compete in offering secondary benefits.
 Spare parts
 Legal
 Styling
 Other related
services
 Legal

5. Types of Consumer Products
Chapter 10 Product Concepts
Types of Consumer Products
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.
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6. 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. 2
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7. Characteristics of Consumer Products
Type/
Criteria
Convenience
Shopping
Specialty
Distribution
Intensive
Selective
Exclusive
Retail margin
low
medium
High
Consumer Shopping time
Purchase frequency
high
Inventory turnover
Support services

8. 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. 3
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9. Exhibit 10.1 Campbell’s Product Lines and Product Mix
Chapter 10 Product Concepts
Exhibit 10.1 Campbell’s Product Lines and Product Mix
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 Evaluate the marketing strategies in use.
Source: Campbell's Web site:

10. Optimum Product Mix Decisions
Optimum product mix decision of a company is the width (number of product lines) and depth (items in each line) that a company can carry considering the following factors.
Level of market/economic development
Sales/Profit
Competition
Market characteristics
Product characteristics
Legal considerations
It is an issue of “trade-off.” More lines or items can provide increased sales but there is a cost of managing the line/item.

11. Adjustments Adjustments to Product Items, Lines, and Mixes
Chapter 10 Product Concepts
Adjustments
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 3
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12. Types of Product Modifications
Chapter 10 Product Concepts
Types of Product Modifications
Functional Modification
Style Modification
Quality 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. 3
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13. Repositioning Why reposition established brands? 3
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. 3
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14. 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. 3
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15. Branding 4 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. 4
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16. Branding Strategies 4 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. 4
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17. 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 10.2. 4
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18. 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 10.2. 4
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19. 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. 4
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20. 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. 4
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21. 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. 4
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22. © 2015 by Cengage Learning Inc. 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. 4
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23. 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. 5
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24. © 2015 by Cengage Learning Inc. 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. 5
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25. 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. 5
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26. 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. 6
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27. 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. 6
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28. 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. 7
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29. Ch 10 Discussion Questions
What is a product? Explain Core and Augmented Product.
Define the four types of consumer products. How can we classify them using various criteria? Explain.
Explain the concept of product item, product line, and product mix.
What is an optimum product mix decision? Explain the factors affecting optimum product mix of a company.
What is a brand? Explain the rationale for branding from manufacturer’s and distributor’s perspective.
What is packaging and labeling? Explain their benefits.