1. CHAPTER 12: PRODUCT AND PROMOTION Delivering More Value

2. PRODUCT DEFINITION: IT’S PROBABLY MORE THAN YOU THINK Product – anything a company offers to satisfy customer needs and wants… including not only physical goods, but also services and ideas. Brand ~ Image ~ Packaging ~ Reputation ~ Guarantee Car Wash ~ Cooking Lesson ~ Computer ~ Soap ~ Car

3. GOODS V. SERVICES: A MIXED BAG Intangibility Inseparability Variability Perishability Most services embody these qualities :

4. PRODUCT LAYERS: PEELING THE ONION Core Benefit Communications Entertainment Image Augmented Product Warrantee Owner’s Manual Insurance Customer Service Actual Product Lightness Thinness Look and Feel Ease of Use Ring Tones Game Options

5. PRODUCT CLASSIFICATION: IT’S A BIRD, IT’S A PLANE…. Convenience Products Shopping Products Specialty Products Unsought Products Consumer Products Installations Accessory Equipment Maintenance, Repair, and Operating Products Raw Materials Component Parts & Processed Materials Business Services Business Products

6. PRODUCT DIFFERENTIATION AND PLANNING  A Meaningful Difference: 1. Product Quality 2. Features & Benefits 3. Product Lines & Product Mixes 4. Branding 5. Packaging

7. PRODUCT QUALITY Quality Level – how well a product performs its core functions. Product Consistency – how reliably a product delivers it promised level of quality. Product CategoryQuality Indicators Internet Search Engine:Fast, relevant, far-reaching results Stylish Blue Jeans:High-profile designer, high price, celebrity customers TV Editing Equipment:Reliability, flexibility, and customer services Roller Coasters:Thrill factor, design and setting Chain Saws:Effectiveness, safety, and reliability Product CategoryQuality Indicators Internet Search Engine: Stylish Blue Jeans: TV Editing Equipment: Roller Coasters: Chain Saws:

8. FEATURES AND BENEFITS Product Features – specific characteristics of a product. Customer Benefit – the advantage that a customer gains from specific product features. ProductProduct FeatureCustomer Benefit Subway Sandwiches Contact Lenses High-definition TV Hybrid Car Triple Latte Lower Fat Different Colors Caffeine, Caffeine… 46-inch screen Better gas mileage Looser pants A new-looking you The party’s at your house More cash for other needs More time to, uh, study

9. PRODUCT LINE AND PRODUCT MIX Product Mix Product Mix – the total number of product lines by a single firm. Product Line Product Line – products that are closely related, either in terms of how they work, or the customers they serve. Cannibalization – a producer offers a new product that takes sales away from its existing product.

10. BRANDING Brand - a product’s identity that sets it apart from other players in the same category. Brand Equity – the extra money that consumers will spend to buy that brand. Brand Name – a catchy, memorable name is a powerful part of strong brand.

12. LINE EXTENSIONS AND BRAND EXTENSIONS Similar products offered under the same brand name Line Extensions Similar products offered under the same brand name Brand Extensions A product in a new category under an existing brand name

13. COBRANDING CobrandingCobranding - established brands from different companies join forces to market the same product. Examples: Ford markets the Eddie Bauer Explorer Frito-Lay markets KC Masterpiece BBQ chips Betty Crocker markets brownies with Hershey’s syrup

14. NATIONAL BRANDS VS. STORE BRANDS National Brands/ Manufacturer Brands – Brands owned and marketed by the producer. Store Brands/ Private Label Brands – Brands produced and marketed by the retailer. <>

15. PACKAGING  Protect the Product  Provide Information  Facilitate Storage  Suggest Product Uses  Promote the Brand  Attract Buyer Attention

16. PRODUCT LIABILITY AN ISSUE?  Toilet brush: “Do not use for personal hygiene.”  Scooter: “This product moves when used.”  Bathroom Heater: “This product is not to be used in bathrooms.”  Cardboard car sunshield: “Do not drive with sunshield in place.”  Thermometer: “Once used rectally, the thermometer should not be used orally.”  Baby stroller cautions: “Remove child before folding”  Electric blender: “Never remove food or other items from the blades while the product is operating.”  Hand-held massager: “Not for use while sleeping or unconscious.”

17. NEW PRODUCT DEVELOPMENT Nuts, Bolts, And A Spark Of Brilliance Brand new ideas that radically change how people live Characterized by changes to existing products Slight modification of an existing product

18. PRODUCT DIFFUSION RATES How consistent is your product with the existing way of doing things? How visible is the product to other potential consumers? How easily can potential consumers sample the new product? How much better are the benefits of your new product compared to existing products? The adoption of new products is called diffusion; consumers try new things at different rates. Consumers range from first adopters to laggards.

19. PRODUCT ADOPTION CATEGORIES  Innovators 2.5% are the first to adopt and display behavior that demonstrates that they likely to want to be ahead, and to be the first to own new products, well before the average consumer.  Early Adopters 13.5% quick to buy new products and services, and so are key opinion leaders with their neighbors and friends.  Early Majority 34% look to the innovators and early majority to see if a new product or idea works and begins to stand the test of time. They stand back and watch the experiences of others.  Late Majority 34% tends to purchase the product later than the average person. They are slower to catch on to the popularity of new products, services, ideas, or solutions. There is still mass consumption, but it begins to end.  Laggards 16% tend to very late to take on board new products and include those that never actually adopt at all.

20. PRODUCT LIFE CYCLE AND MARKETING STRATEGIES IntroductionGrowthMaturityDecline Characteristics Sales Low salesRadically rising salesPeak salesDeclining sales Costs High cost per customer Low cost per customer Profits NegativeRisingHighDecline Customers Innovators Middle MajorityLaggards Competitors FewGrowing numberStable number beginning to decline Declining number Marketing Objectives Create product awareness and trial Maximize market share Maximize profit while defending market share Reduce expenditure and milk the brand

21. PRODUCT LIFE CYCLE AND MARKETING STRATEGIES IntroductionGrowthMaturityDecline Strategies Product Offer a basic product Offer product extensions, services, warranty Diversify brands and models Phase out weak items Price Charge cost-plusPrice to penetrate the market Price to match or beat competitors Cut prices Distribution Build selective distribution Build intensive distribution Build more intensive distribution Go selective; phase out unprofitable outlets Advertising Build product awareness among early adopters and dealers Build awareness and interest in the mass market Stress brand differences and benefits Reduce to level needed to retain hard-core loyals Sales Promotion Use heavy sales promotion to entice trial Reduce to take advantage of heavy customer demand Increase to encourage brand switching Reduce to minimal level

22. PROMOTION IN CHAOS: DANGER OR OPPORTUNITY? Technology has empowered consumers to choose when they interact with media Internet users spent an average of nearly 33 hours per week surfing the web Network television watching is declining Consumers watching TV are zapping ads with TiVo Rising consumer power and the breakneck pace of technology have created a growing need and stunning opportunity

23. INTEGRATED MARKETING COMMUNICATION: CONSISTENCY AND FOCUS Consumers combine – or integrate – information from all sources to form a unified impression Coordinate promotional messages Create a coherent impression in customer’s mind Identify key points of contact between product and target market Integrated Marketing Communication is the coordination of messages through multiple promotional vehicles Advertising Sales Promotion Direct Marketing Personal Selling Emerging Tools

24. TRADITIONAL PROMOTIONAL TOOLS: ADVERTISING Which media effectively reaches your target market? Television Broadcast Cable Print Newspaper Magazines Direct Mail OutdoorRadioInternet Yellow Pages

25. TRADITIONAL PROMOTIONAL TOOLS: CONSUMER PROMOTION Premiums Promotional Products Samples Coupons Rebates Displays designed to stimulate immediate sales

26. TRADITIONAL PROMOTIONAL TOOLS: PUBLIC RELATIONS 26 The media looks for newsworthy stories Smart firms push potential news of their company The advantage of PR is that it is usually credible The disadvantage is that marketers don’t control media perceptions

27. TRADITIONAL PROMOTIONAL TOOLS: PERSONAL SELLING Today selling means building relationships Consultative Selling Shifting focus from product to customers Personal selling is best for: High-ticket items Complex products High volume customers Prospect and Qualify PreparePresent Handle Objections Close SaleFollow-up