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Dr. Chen, Principle of Marketing Part 4 Part 4 PRODUCT AND PRICE DECISIONS.

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Presentation on theme: "Dr. Chen, Principle of Marketing Part 4 Part 4 PRODUCT AND PRICE DECISIONS."— Presentation transcript:

1 Dr. Chen, Principle of Marketing Part 4 Part 4 PRODUCT AND PRICE DECISIONS

2 Dr. Chen, Principle of Marketing 10: 10: Product, Branding, and Packing Concepts 11: Business Markets and Buying Behavior 12: Developing and Managing Prices 13: Marketing Channels and Supply-Chain Management 14: Retailing, Direct Marketing, and Wholesaling

3 Dr. Chen, Principle of Marketing Chapter 10 Product, Branding, and Packaging Concepts Professor Jason C. H. Chen, Ph.D. School of Business Administration Gonzaga University Spokane, WA

4 Dr. Chen, Principle of Marketing 4  Understand the concept of a product  Understand how products are classified  Explain the concepts of product line and product mix and understand how they are connected  Understand the product life cycle and its impact on marketing strategies Learning Objectives

5 Dr. Chen, Principle of Marketing 5  Describe the product adoption process  Explain the major components of branding, including brand types, branding policies, and brand protection  Describe the major packaging functions and design considerations as well as how packaging is used in marketing strategies  Understand the functions of labeling and selected legal issues Learning Objectives

6 Dr. Chen, Principle of Marketing 6  A good, a service, or an idea received in an exchange  Includes function, social and psychological utilities, and benefits  Includes supporting services such as installation, guarantees, product information, etc.  Good – A tangible, physical entity  Service – The intangible result of the application of human and mechanical efforts to people or objects  Idea – A concept, philosophy, image, or issue  Elements  Core product itself  Supplemental features  Symbolic or experiential benefits Product

7 Dr. Chen, Principle of Marketing Fig The Total Product [1] [2] [3]

8 Dr. Chen, Principle of Marketing The Core Product  The product’s fundamental utility or main benefit  Addresses the basic need of the consumer Sports Drink Rehydrates

9 Dr. Chen, Principle of Marketing Supplemental Features  Provide the _______ value or attributes in addition to a product’s core utility or benefit.  Supplemental products also can provide  Installation  Delivery  Training  Financing  These supplemental attributes are not required to make the core product function effectively, but they help ____________ the product brand from another differentiate added

10 Dr. Chen, Principle of Marketing Symbolic and Experiential Benefits  Buyers purchase the benefits and satisfaction they think the product will provide  Services in particular are purchased on the basis of expectations  The shopping experience can provide benefit  Products often carry symbolic meaning (e.g., Starbucks)  Often, symbols and cues are used to make intangible products more _________, or real, to the customer tangible

11 Dr. Chen, Principle of Marketing 11 Purchased to satisfy personal and family needs Consumer products Bought to: Use in a firm’s operations, to resell, or to make other products Business products Classifying Products

12 Dr. Chen, Principle of Marketing 12 Categories of Consumer Products Inexpensive, frequently purchased items for which buyers exert only minimal purchasing effort (e.g., Starbucks) Convenience products Items for which buyers are willing to expend considerable effort in planning and making the (strategic) purchase (e.g., Lowe’s vs. Home Depot) Shopping products Possess one or more unique characteristics; buyers will not accept a substitute (e.g., Mont Blanc pen) Buyers are willing to expend considerable effort to obtain them Specialty products Purchased when a sudden problem must be solved Products of which customers are unaware, and products that people do not necessarily think of purchasing (e.g., AAA for Emergent Road service) Unsought products

13 Dr. Chen, Principle of Marketing Specialty Products Items with unique characteristics that buyers are willing to expend considerable effort to obtain  Require extensive search  Are generally higher price points  Have no ready substitutes  Strategic Considerations:  Limited retail outlets  Lower inventory turnover  High gross margins

14 Dr. Chen, Principle of Marketing Classification of Business Products (p.264)

15 Dr. Chen, Principle of Marketing 15 Categories of Business Products Facilities, such as office buildings and warehouses, and major equipment that are nonportable (e.g., production lines and very large machines) Expensive and intended to be used for a considerable length of time Installations Does not become part of the final physical product but is used in production or office activities (e.g., file cabinets and calculators) Accessory equipment Basic natural materials that actually become part of a physical product (e.g., minerals, chemicals, agricultural products) Raw materials Become part of the physical product and are either finished items ready for assembly or products that need little processing before assembly (e.g., spark plugs, tires and head lights for automobile) Component parts

16 Dr. Chen, Principle of Marketing 16 Categories of Business Products Used directly in the production of other products Not readily identifiable (e.g., vinegar is a process material in salad dressing) Process materials Maintenance, repair, and operating items that facilitate production and operations but do not become part of the finished product (e.g., paper, pencils, oils, cleaning agents and paints) MRO supplies Intangible products that many organizations use in their operations Financial, legal, marketing research, information technology, and janitorial services (e.g., Accenture provides services with business process management - BPM) Business services

17 Dr. Chen, Principle of Marketing 17  Product item:  A product item is a specific version of a product that can be designated as a distinct offering among an organization’s products  Product line:  A product line is a group of closely related product items that are considered to be a unit because of marketing, technical, or end- use considerations (Teas have a variety of different flavors)  Marketers must understand buyers’ goals to develop the optimal product line  Firms with high market share are likely to expand their product lines aggressively, as are marketers with relatively high prices or limited product lines. PC industry, companies are likely to expand their product lines when industry barriers are low or perceived market opportunities exists. Product Line

18 Dr. Chen, Principle of Marketing 18  A product mix is the composite, or total, group of products that an organization makes available to customers (Fig. 10.2)  Width of product mix: Number of product lines a company offers  Depth of product mix: Average number of different products in each product line Product Mix

19 Dr. Chen, Principle of Marketing Fig Concepts of Product Mix Width and Depth Applied to U.S. Proctor & Gamble Products

20 Dr. Chen, Principle of Marketing 20  Introduction stage  Begins at a product’s first appearance in the marketplace, when sales start at _____ and profits are ________  Difficulties Sellers may ______ the resources to launch the product successfully Initial product price may have to be high to recoup expensive marketing research or development costs  Growth stage  Sales rise rapidly and profits reach a peak and then start to decline  Competitive reactions to the product’s success during this period will affect the product’s life expectancy Product Life Cycle zero negative lack

21 Dr. Chen, Principle of Marketing 21  Maturity stage  Sales curve ______ and starts to decline, and profits continue to fall  Due to increased competition, weaker competitors are pushed out of the market  Decline stage  Sales fall rapidly  Marketers must determine whether to eliminate the product or try to reposition it to extend its life Product Life Cycle peaks

22 Dr. Chen, Principle of Marketing 22 Product Life Cycle Introduction

23 Dr. Chen, Principle of Marketing 23 Figure Product Adoption Process Awareness: The buyer becomes aware of the product. Interest: The buyer seeks information and is receptive to learning about the product. Evaluation: The buyer considers the product’s benefits and decides whether to try it, considering its value vs. the competition. Trial: The buyer examines, tests, or tries the product to determine if it meets his or her needs. Adoption: The buyer purchase the product and can be expected to use it again whenever the need for this product arises.

24 Dr. Chen, Principle of Marketing 24 Figure Product Adoption Process Informing Awareness Interest Evaluation PersuadingTrial Decision RemindingConfirmation AIDA ModelAdoption ProcessPromotion Objectives ________ Relation of Promotion Objectives, Adoption process, and AIDA Model Attention Interest Action Desire

25 Dr. Chen, Principle of Marketing 25 First to adopt a new product simply because it is ne Innovators Choose new products carefully are often opinion leaders Early adopters Adopt just prior to the average person Early majority Skeptical of new products but eventually adopt them because of economic necessity or social pressure Late majority Last (and slow) to adopt a new product, are oriented toward the past Laggards Adopter Categories _____________ and ____________ are the critical mass that ensures adoption. Why?Early majoritylate majority

26 Dr. Chen, Principle of Marketing 26

27 Dr. Chen, Principle of Marketing 27 Why Some Products Fail  Failure to match product to needs  Failure to send right message  Technical/design problems  Poor timing  Overestimate market  Ineffective promotion  Insufficient distribution

28 Dr. Chen, Principle of Marketing 28 Why Other Products Succeed  Product’s ability to provide a significant and perceivable benefit to a sizable number of customers  Products with an __________ advantage over similar available products such as:  More features  Ease of ________  Improved technology  Companies that follow a systematic, customer- focused plan for new-product development are well positioned to launch successful products observable operation

29 Dr. Chen, Principle of Marketing 29 Name, term, design, symbol, or any feature Identifies one marketer’s product as distinct from those of other marketers Brand Part of a brand that can be spoken Letters, words and numbers Brand name Element of a brand not made up of words Brand mark Legal designation indicating that the owner has exclusive use of a brand Trademark Full and legal name of an organization Trade name Branding

30 Dr. Chen, Principle of Marketing 30  _________ benefit  Helps identify specific products that are preferred over others  Purchase of certain brands can be a form of self- expression  Symbolizes a certain quality level  Reduces perceived risk of purchase  Psychological reward from owning a brand that symbolizes status Value of Branding Buyers'

31 Dr. Chen, Principle of Marketing 31  ________ benefit  Identify products, making repeat purchases easier  Helps a firm introduce a new product that carries the name of one or more of its existing products  Facilitates promotional efforts  Fosters brand loyalty  Consistent price develops customer loyalty Value of Branding Sellers’

32 Dr. Chen, Principle of Marketing 32  Cultural dimension  Each consumer confers his or her own social meaning onto brands  Brand’s appeal is based on its symbolic image and key associations  Brands help consumers develop their identity and self-concept  Serve as a form of self-expression Value of Branding

33 Dr. Chen, Principle of Marketing 33  Cultural branding - Explains how a brand conveys a powerful myth that consumers find useful in cementing their identities  Every aspect of a brand is subject to: Consumer’s emotional involvement Interpretation Memory Value of Branding

34 Dr. Chen, Principle of Marketing Brand Loyalty  Brand loyalty is a customer’s favorable attitude toward a specific brand  Three degrees of brand loyalty  Brand recognition – the degree of brand loyalty in which a customer is aware that a brand exists and views the brand as an alternative purchase if their preferred brand is unavailable  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

35 Dr. Chen, Principle of Marketing 35 Customer is aware that the brand exists Views it as an alternative purchase if the preferred brand is unavailable Brand _____________ Prefers one brand over competitive offerings Will purchase this brand if it is available Brand preference Customer strongly prefers a specific brand Will accept no substitute Willing to spend a great deal of time and effort to acquire that brand Brand ___________ Brand Loyalty and Degrees of Brand Loyalty  Brand loyalty is a customer’s favorable attitude toward a specific brand recognition insistence

36 Dr. Chen, Principle of Marketing Brand Equity  Brand equity is the marketing and financial value associated with a brand’s strength in a market  Four major elements underlie brand equity:  Brand-name awareness  Brand loyalty  Perceived brand quality  Brand associations  An organization may buy a brand from another company at a premium price because it may be less expensive and less risky

37 Dr. Chen, Principle of Marketing 37 Figure Major Elements of Brand Equity

38 Dr. Chen, Principle of Marketing 38 Initiated by producers and ensure that producers are identified with their products at the point of purchase Requires a producer to become involved in distribution, promotion, and pricing decisions Manufacturer brands Initiated and owned by resellers Manufacturers are not identified on the products Private distributor brands Indicate only the product category Sold at lower prices Generic brands Types of Brands

39 Dr. Chen, Principle of Marketing 39 Browse The List Values calculated November 2013

40 Dr. Chen, Principle of Marketing World’s Most Valuable Brands

41 Dr. Chen, Principle of Marketing Rank2012 RankBrand NameRegion/CountrySector Brand Value ($m) Change in Brand Value 12AppleUnited StatesTechnology98,31628% 24GoogleUnited StatesTechnology93,29134% 31Coca-ColaUnited StatesBeverages79,2132% 43IBMUnited States Business Services 78,8084% 55MicrosoftUnited StatesTechnology59,5463% 66GEUnited StatesDiversified46,9477% 77McDonald'sUnited StatesRestaurants41,9925% 89SamsungSouth KoreaTechnology39,61020% 98IntelUnited StatesTechnology37,257-5% 10 ToyotaJapanAutomotive35,34617% Best Global Brands Top 100 List View - Interbrand

42 Dr. Chen, Principle of Marketing 42  Should be easy for customers to say, spell and recall  Should indicate the product’s major benefits  Should be distinctive  Should be designed to be used and recognized in all types of media  Combined use of words, numbers and letters to yield brand names  Use of fabricated words to avoid negative connotations Factors to Select a Brand Name

43 Dr. Chen, Principle of Marketing Protecting a Brand  A marketer should design a brand that can be easily protected through registration  A series of court decisions has created a broad hierarchy of protection based on brand type  From most protectable to least protectable:  Fanciful – Exxon  Arbitrary – Dr. Pepper  Suggestive – Spray ‘n Wash  Descriptive – Minute Rice  Generic, not protectable– aluminum foil  Surnames and descriptive, geographic or functional names are difficult to protect

44 Dr. Chen, Principle of Marketing Protecting a Brand  A company must ensure a brand is not likely to infringe upon any brand already registered with the U.S. Patent and Trademark Office  Infringement is determined by the courts  A marketer must guard against allowing a brand name to become a generic term  Examples: aspirin, escalator and shredded wheat  Congress enacted the Trademark Law Revision Act in 1988, strengthening trademark protection

45 Dr. Chen, Principle of Marketing Protecting a Brand  A U.S. company trying to protect a brand in a foreign country frequently encounters problems  In many countries, the first firm to use a brand automatically has the rights to it  Some companies have had to buy their own brands from those in a foreign country who first used it  Marketers trying to protect their brands must also contend with brand counterfeiting

46 Dr. Chen, Principle of Marketing Branding Strategies/Policies  An organization can use one or more of the following branding strategies:  Individual branding is a branding strategy in which each product is given a different name (Nestle). It facilitates market segmentation  Advantage:  Family branding is branding all of a firm’s products with the same name or part of a name (Kellogg’s Frosted Flakes, Kellogg’s Rice Krispies)  Advantage:  A brand extension is when an organization uses one of its existing brands to brand a new product in a different product category (Tylenol – Extra Strength Tylenol P.M.) if an organization introduces an inferior product, the negative images associated with it do not contaminate the company’s other products the promotion of one item with the family brand promotes the firm’s other products

47 Dr. Chen, Principle of Marketing 47 Co-Branding  Co-branding is using two or more brands on one product (e.g., credit cards – Visa team up with other brands such as airlines and Amazon)  Effective co-branding capitalizes on the _____ and confidence customers have in the brands involved  Co-branding can help a company __________ its products from those of competitors trust differentiate

48 Dr. Chen, Principle of Marketing 48  Brand licensing is an agreement in which a company permits another organization to use its brand on other products for a licensing fee (e.g., NFL, Walt Disney Company)  Royalties range from 2% of wholesale revenues to 10% or higher  Advantages Extra revenues and low-cost or free publicity New images and trademark protection  Disadvantages Lack of manufacturing control which could hurt the company’s name Bombarding consumers with too many unrelated products bearing the same name Brand Licensing

49 Dr. Chen, Principle of Marketing 49  Development of a container and a graphic design for (and containing) a product  Functions  Protect the product and maintain its functional form  Help deter shoplifting and convenience to customers  Promotes a product  Family packaging: When a firm decides that all packages should be similar or include one major element of the design Packaging

50 Dr. Chen, Principle of Marketing 50  Packaging may give a product a competitive advantage  Right type of package for a new product can help it to gain market recognition very quickly  Marketers must analyze:  Cost of packaging  Package changes  Packaging as “_______ Salesman”  More than merely containing the product.  Also referred to as 5 th P in the marketing mix Packaging and Marketing Strategies Silent

51 Dr. Chen, Principle of Marketing 51 Packaging Spending Companies That Spend the Most on Packaging [1] [5]

52 Dr. Chen, Principle of Marketing 52  Marketers sometimes alter a package due to:  Existing design is no longer in style  New product features that need to be highlighted  Availability of new packaging materials New packaging make a product safer or more convenient to use  Easier handling in the distribution channel  Comparison with competitor’s product Packaging and Marketing Strategies

53 Dr. Chen, Principle of Marketing 53  Multiple packaging  Uses twin-packs, tri-packs, and six-packs  Increases demand  Increases consumer acceptance of the product  Makes products easier to handle, store, and increases consumption Packaging and Marketing Strategies

54 Dr. Chen, Principle of Marketing 54 Labeling  Labeling is providing identification, promotional or other information and legal purpose on package labels.  Can be part of the package itself or a separate feature attached to the package  Very closely interrelated with packaging; information on the label may include: Brand nameTrademark symbol Package size and contentProduct features Nutritional informationPresence of allergens Type and style of productNumber of servings Care instructionsDirections for use Safety precautionsManufacturer name/address Expiration datesSeal of approval

55 Dr. Chen, Principle of Marketing 55  Contains promotional messages  Offer of a discount  Larger package size at the same price  About a new or improved product feature  Federal laws and regulations specify information that must be included on the labels of certain products  Nutrition Labeling Act of 1990 requires the FDA to review food labeling and packaging Labeling


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