Creating and Pricing Products that Satisfy Customers Chapter Fourteen Creating and Pricing Products that Satisfy Customers

Classification of Products Everything, both favorable and unfavorable, one receives in an exchange. Can be a good or service Consumer product A product purchased to satisfy personal and family needs-grouped by how shop for them Business (industrial) product A product bought for resale, for making other products, or for use in a firm’s operations-grouped by what you use them for Many products can be both

Consumer Product Classifications 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 that consumers search extensively for and are reluctant to accept substitutes. A product unknown to the potential buyer or a known product that the buyer does not actively seek.

Business Product Classifications Major Equipment-machines & vehicles-custom made Accessory Equipment-drills copiers Raw Materials-no processing - oil, fish, trees Component Parts-identifiable in final product-bolts, tires Processed Materials- not identifiable in final product - plastic, sugar Supplies-not in final product-pens, lube oil Business Services-legal, maintenance

The Product Life Cycle A series of stages in which a product’s sales revenue and profit increase, reach a peak, then decline Introduction Customer awareness and acceptance are low Growth Sales increase rapidly as the product becomes well known Maturity Sales still increasing but at a slower rate and profits begin to decline. later in this stage, sales peak Decline stage Sales volume decreases sharply and profits continue to fall

Product Life Cycle Sales Growth Stage Maturity Stage Decline Stage Introductory Stage Growth Stage Maturity Stage Decline Stage Sales Profits Dollars Time

Using the Product Life Cycle The stage of the product life cycle affects the marketing strategy for a product Introduction Make potential customers aware of product Growth strengthen product position by encouraging brand loyalty Improve product; reduce price; broaden distribution Maturity Redesign packaging; encourage new product uses; increase promotional efforts Decline Retain or eliminate product

Class Exercise For the products below, determine what stage of product life cycle the product is currently in and the marketing implications involved. ipod Car gps navigation systems Aspirin vcrs

Product Line and Product Mix A group of similar products that differ only in relatively minor characteristics Product mix All of the products that a firm offers for sale Width of the mix The number of product lines the mix contains Depth of the mix The number of individual products within each line

Width of the product mix Depth of the product lines Product Mix Example Blades and Writing razors Toiletries instruments Lighters Mach 3 Series Paper Mate Cricket Sensor Adorn Flair Trac II Toni Atra Right Guard Swivel Silkience Double-Edge Soft and Dri Lady Gillette Foamy Super Speed Dry Look Twin Injector Dry Idea Techmatic Brush Plus Width of the product mix Depth of the product lines

Product Mix Width-Slice of Another Pie The number of product lines an organization offers. Diversifies risk Capitalizes on established reputations Notes: In Exhibit 8.3, Gillette’s product mix width is four product lines. Product mix width diversifies risk across many product lines rather than depend on one or two lines. Widening the mix also capitalizes on established reputations.

Product Line Depth-Bigger Slice of your Pie The number of product items in a product line. Attracts buyers with different preferences Increases sales/profits by further market segmentation Capitalizes on economies of scale Notes: In Exhibit 8.3, product line depth can be seen in Gillette’s ten product items in its razor and blade product line.

What is a Brand A name, term, symbol, design, or any combination of these that identifies a seller’s products as distinct from those of other sellers Brand name The part of a brand that can be spoken Brand mark The part of a brand that is a symbol or distinctive design Trademark A brand name or mark that is registered with the U.S. Patent and Trademark Office and is legally protected

Branding Choices No Brand- Brand Generic Manufacturer’s Brand Private Brand Individual Brand Family Brand Individual Brand Family

Advantages of Manufacturers’ Brands to the Retailer Develop customer loyalty Attract new customers Enhance store’s prestige Offer rapid delivery, can carry less inventory

Advantages of Private Brands to the Retailer Earn higher profits Less pressure to mark down prices Manufacturer may drop a brand Ties customer to wholesaler or retailer More control over distribution – retailers have no control over distribution of manufacturers’ brands

Benefits of Branding Because brands are easily recognizable, they reduce the amount of time buyers must spend shopping Brands help consumers judge quality Branding helps a firm introduce a new product with the same brand name Branding aids in promotional efforts because promotion of each branded product indirectly promotes others with the same brand

Choosing a Brand Name Is easy to pronounce Is easy to recognize and remember Is short, distinctive, and unique Describes the product, use, and benefits Has a positive connotation Reinforces the product image Is legally protectable Kleenex