©2003 South-Western Chapter 8 Version 3e1 chapter Product Concepts 8 8 Prepared by Deborah Baker Texas Christian University

©2003 South-Western Chapter 8 Version 3e2 chapter Learning Objectives Define the term product. 2.Classify consumer products. 3. Discuss the importance of services to the economy 4.Identify the differences between services and goods. 5. Explain why services marketing is important to manufacturers

©2003 South-Western Chapter 8 Version 3e3 chapter Learning Objectives (continued) Define the terms product item, product line, and product mix 7. Describe marketing uses of branding 8. Describe marketing uses of packaging and labeling. 9.Describe how and why product warranties are important marketing tools.

©2003 South-Western Chapter 8 Version 3e4 Learning Objective 1 1 Define the term product.

©2003 South-Western Chapter 8 Version 3e5 Product Everything, both favorable and unfavorable, that a person receives in an exchange. 1 1

©2003 South-Western Chapter 8 Version 3e6 What is a Product? Promotion Product Product is the “heart” of Marketing Mix Product Product is the “heart” of Marketing Mix Place (Distribution) Price 1 1

©2003 South-Western Chapter 8 Version 3e7 Learning Objective 2 2 Classify consumer products.

©2003 South-Western Chapter 8 Version 3e8 Product Classifications BusinessProductBusinessProduct ConsumerProductConsumerProduct A product used to manufacture other goods or services, to facilitate an organization’s operations, or to resell to other consumers. Product bought to satisfy an individual’s personal wants Product bought to satisfy an individual’s personal wants 2 2

©2003 South-Western Chapter 8 Version 3e9 Types of Consumer Products Unsought Products Unsought Products Specialty Products Specialty Products Shopping Products Shopping Products Convenience Products Convenience Products Consumer Products Consumer Products Business Products Business Products PRODUCTS 2 2

©2003 South-Western Chapter 8 Version 3e10 Types of Consumer Products 2 2 Convenience Product Convenience Product Shopping Product Shopping Product Specialty Product Specialty Product Unsought Product Unsought Product 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 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.

©2003 South-Western Chapter 8 Version 3e11 Types of Consumer Products Specialty Products Convenience Products Shopping Products Unsought Products 2 2

©2003 South-Western Chapter 8 Version 3e12 Learning Objective 3 3 Discuss the importance of services to the economy.

©2003 South-Western Chapter 8 Version 3e13 Service The result of applying human or mechanical efforts to people or objects. 3 3

©2003 South-Western Chapter 8 Version 3e14 The Importance of Services 79% of workers are in service sector 79% of workers are in service sector Services account for 76% of U.S. GDP Service occupations will be responsible for all job growth through

©2003 South-Western Chapter 8 Version 3e15 Learning Objective 4 4 Discuss the differences between services and goods.

©2003 South-Western Chapter 8 Version 3e16 How Services Differ from Goods 4 4 Intangibility Inseparability Heterogeneity Perishability Characteristics That Distinguish Services Characteristics That Distinguish Services

©2003 South-Western Chapter 8 Version 3e17 Characteristics of Services 4 4IntangibilityIntangibilityInseparabilityInseparability HeterogeneityHeterogeneity PerishabilityPerishability Services that cannot be touched, seen, tasted, heard, or felt in the same manner as goods. A characteristic of services that allows them to be produced and consumed simultaneously. A characteristic of services that makes them less standardized and uniform than goods. A characteristics of services that prevents them from being stored, warehoused, or inventoried.

©2003 South-Western Chapter 8 Version 3e18 Learning Objective Explain why services marketing is important to manufacturers. 5 5

©2003 South-Western Chapter 8 Version 3e19 Services Marketing in Manufacturing 5 5

©2003 South-Western Chapter 8 Version 3e20 Learning Objective Define the terms product item, product line, and product mix. 6 6

©2003 South-Western Chapter 8 Version 3e21 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. 6 6

©2003 South-Western Chapter 8 Version 3e22 Gillette’s Product Lines and Mix 6 6 Blades andWriting razorsToiletriesinstrumentsLighters Mach 3 Series Paper Mate Cricket SensorAdorn Flair S.T. Dupont Trac IIToni 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

©2003 South-Western Chapter 8 Version 3e23 Benefits of Product Lines Equivalent Quality Efficient Sales and Distribution Standardized Components Standardized Components Package Uniformity Advertising Economies Why Form Product Lines? 6 6

©2003 South-Western Chapter 8 Version 3e24 Product Mix Width  Diversifies risk  Capitalizes on established reputations 6 6 The number of product lines an organization offers.

©2003 South-Western Chapter 8 Version 3e25 Product Line Depth  Attracts buyers with different preferences  Increases sales/profits by further market segmentation  Capitalizes on economies of scale  Evens out seasonal sales patterns 6 6 The number of product items in a product line.

©2003 South-Western Chapter 8 Version 3e26 Adjustments Product Modification Product Repositioning Product Line Extension or Contraction Product Line Extension or Contraction Adjustments to Product Items, Lines, and Mixes 6 6

©2003 South-Western Chapter 8 Version 3e27 Product Modifications 6 6 Types of Product Modifications Quality Modification Functional Modification Style Modification

©2003 South-Western Chapter 8 Version 3e28 Planned Obsolescence The practice of modifying products so those that have already been sold become obsolete before they actually need replacement. 6 6

©2003 South-Western Chapter 8 Version 3e29 Repositioning Changing Demographics Declining Sales Changes in Social Environment Why reposition established brands? 6 6

©2003 South-Western Chapter 8 Version 3e30 Product Line Extension Adding additional products to an existing product line in order to compete more broadly in the industry. 6 6

©2003 South-Western Chapter 8 Version 3e31 Product Line Contraction 6 6  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 Symptoms of Product Line Overextension

©2003 South-Western Chapter 8 Version 3e32 Learning Objective Describe marketing uses of branding. 7 7

©2003 South-Western Chapter 8 Version 3e33 Brand A name, term, symbol, design, or combination thereof that identifies a seller’s products and differentiates them from competitors’ products. 7 7

©2003 South-Western Chapter 8 Version 3e34 Branding Brand Name Brand Name Brand Mark Brand Mark Brand Equity Brand Equity Master Brand Master Brand That part of a brand that can be spoken, including letters, words, and numbers. The elements of a brand that cannot be spoken. The elements of a brand that cannot be spoken. The value of company and brand names. A brand so dominant that it comes to mind immediately when a product category, use, attribute, or benefit is mentioned. A brand so dominant that it comes to mind immediately when a product category, use, attribute, or benefit is mentioned. 7 7

©2003 South-Western Chapter 8 Version 3e35 Benefits of Branding 7 7 Product Identification Repeat Sales New Product Sales Branding distinguishes products from competition

©2003 South-Western Chapter 8 Version 3e36 An Effective 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 7 7

©2003 South-Western Chapter 8 Version 3e37 Master Brands Baking Soda Adhesive Bandages Rum Gelatin Soup Cream Cheese Crayons Petroleum Jelly Arm & Hammer Band-Aid Bacardi Jell-O Campbell’s Philadelphia Crayola Vaseline 7 7

©2003 South-Western Chapter 8 Version 3e38 Branding Strategies Brand No Brand Manufacturer’s Brand Private Brand Individual Brand Family Brand Combi- nation Individual Brand Family Brand Combi- nation 7 7

©2003 South-Western Chapter 8 Version 3e39 Generic Brand A no-frills, no-brand-name, low-cost product that is simply identified by its product category. 7 7

©2003 South-Western Chapter 8 Version 3e40 Manufacturers’ Brands Versus Private Brands Manufacturers’BrandManufacturers’Brand PrivateBrandPrivateBrand The brand name of a manufacturer. A brand name owned by a wholesaler or a retailer. 7 7

©2003 South-Western Chapter 8 Version 3e41 Advantages of Manufacturers’ Brands  Develop customer loyalty  Attract new customers  Enhance prestige  Offer rapid delivery, can carry less inventory  Ensure dealer loyalty 7 7

©2003 South-Western Chapter 8 Version 3e42 Advantages of Private Brands  Earn higher profits  Less pressure to mark down prices  Manufacturer may drop a brand or become a direct competitor to dealers  Ties to wholesaler or retailer  No control over distribution of manufacturers’ brands 7 7

©2003 South-Western Chapter 8 Version 3e43 Individual Brands Versus Family Brands IndividualBrandIndividualBrand FamilyBrandFamilyBrand Using different brand names for different products. Marketing several different products under the same brand name. Marketing several different products under the same brand name. 7 7

©2003 South-Western Chapter 8 Version 3e44 Cobranding Ingredient Branding Cooperative Branding Complementary Branding Types of Cobranding 7 7

©2003 South-Western Chapter 8 Version 3e45 Trademarks  Many parts of a brand and associated symbols qualify for trademark protection  The mark has to be continuously protected  Rights continue for as long as it is used A Trademark is the exclusive right to use a brand 7 7

©2003 South-Western Chapter 8 Version 3e46 Learning Objective Describe marketing uses of packaging and labeling. 8 8

©2003 South-Western Chapter 8 Version 3e47 Packaging Contain and Protect FunctionsofPackagingFunctionsofPackaging Promote Facilitate Storage, Use, and Convenience Facilitate Storage, Use, and Convenience Facilitate Recycling 8 8

©2003 South-Western Chapter 8 Version 3e48 Labeling Persuasive  Focuses on promotional theme  Information is secondary Informational  Helps make proper selections  Lowers cognitive dissonance  Includes use/care 8 8

©2003 South-Western Chapter 8 Version 3e49 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. 8 8

©2003 South-Western Chapter 8 Version 3e50 Learning Objective Describe how and why product warranties are important marketing tools. 9 9

©2003 South-Western Chapter 8 Version 3e51 Product Warranties Warranty Express Warranty Express Warranty 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. (UCC) An unwritten guarantee that the good or service is fit for the purpose for which it was sold. (UCC) 9 9

©2003 South-Western Chapter 8 Version 3e52 Product Warranties WarrantiesWarranties Written Guarantee Implied Warranty ExpressWarrantyExpressWarranty Unwritten Guarantee 9 9