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Product, Branding, and Packaging Concepts
Part Five Product Decisions Chapter 10 Product, Branding, and Packaging Concepts
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Chapter Learning Objectives
Understand the concept of a product and how products are classified Explain the concepts of product item, product line, and product mix, and to understand how they are connected Understand the product life cycle and its impact on marketing strategies Describe the product adoption process Explain the value of branding and the major components of brand equity
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Chapter Learning Objectives (cont’d)
Recognize the types of brands and how they are selected and protected Identify two types of branding policies and explain brand extensions and brand licensing Describe the major packaging functions and design considerations and how packaging is used in marketing strategies Understand the functions of labeling and selected legal issues
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Chapter Outline What Is a Product? Classifying Products
Consumer Products - Business Products Product Line and Product Mix Product Life Cycles and Marketing Strategies Introduction - Maturity Growth - Decline Product Adoption Process
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Chapter Outline (cont’d)
Branding Value of Branding - Branding Policies Brand Equity - Brand Equity Types of Brands - Co-branding Selecting a Brand Name - Brand Licensing Protecting a Brand Packaging Packaging Functions - Packaging and Major Packaging Marketing Strategy Considerations Labeling
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What Is a Product? A Product Defined Why Buyers Purchase a Product
A good, a service, or an idea received in an exchange It can be tangible (a good) or intangible (a service or an idea) or a combination of both. It can include functional, social, and psychological utilities or benefits. It includes the core product itself, its supplemental features, and its symbolic or experiential value Why Buyers Purchase a Product To get the benefits and satisfaction that they think the product will provide Symbols and cues provided by marketing help consumers make judgments about products.
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Figure 10.1: The Total Product
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Classifying Products Consumer Products Business Products
Products purchased to satisfy personal and family needs Business Products Products bought to use in an organization’s operations, to resell, or to make other products (raw materials and components)
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Consumer Products Convenience Products
Relatively inexpensive, frequently purchased items for which buyers exert minimal purchasing effort Characteristics Marketed through many retail outlets Relatively low per-unit gross margins Little promotional effort at the retail level Packaging is important marketing mix element
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Consumer Products (cont’d)
Shopping Products Items for which buyers are willing to expend considerable effort in planning and making purchases Characteristics Expected to last a long time; less frequently purchased Do not have brand loyalty appeal Require fewer retail outlets Inventory turnover is lower Gross margins are higher More amenable to personal selling Supported (servicing and promoting the product) by both the producer and channel members
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Consumer Products (cont’d)
Specialty Products Items with unique characteristics that buyers are willing to expend considerable effort to obtain Characteristics Are preselected by the consumer Have no close substitutes or alternatives Are available in a limited number of retail outlets Purchased infrequently and represent a significant and expensive investment Have high gross margins and low inventory turnover
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Consumer Products (cont’d)
Unsought Products Products purchased to solve a sudden problem, products of which the customers are unaware, and products that people do not necessarily think about buying Characteristics Speed and problem resolution of the utmost importance Price and other features not considered No consideration of substitutes or alternatives Purchased infrequently
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Business Products Installations Accessory Equipment
Facilities and nonportable major equipment Office buildings, factories and warehouses, production lines, very large machines Accessory Equipment Equipment that does not become part of the final physical product but is used in production or office activities File cabinets, small motors, calculators, and tools
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Business Products (cont’d)
Raw Materials Basic natural materials that become part of a physical product such as ores, water, lumber, grains, and eggs Component Parts Items that become part of the physical product Finished items ready for assembly Items needing little processing before assembly Computer chips, engine blocks, girders, and paints
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Business Products (cont’d)
Process Materials Materials that are not readily identifiable when used directly in the production of other products such as screws, knobs, and handles MRO Supplies Maintenance, repair, and operating items that facilitate production and do not become part of the finished product such as cleaners, rubber bands, and staples
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Business Products (cont’d)
Business Services The intangible products that many organizations use in their operations such as cleaning, legal, consulting, and repair service.
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Product Line and Product Mix
Whole Milk Product Item A specific version of a product that can be designated as a distinct offering among a firm’s products Product Line A group of closely related product items viewed as a unit because of marketing, technical, or end-use considerations Whole Milk Skim Milk 2% Milk
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Product Line and Product Mix (cont’d)
The total group of products that an organization makes available to customers Width of Product Mix The number of product lines a company offers Depth of Product Mix The average number of different products in each product line
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Source: The Procter & Gamble Company. Used with permission.
Figure 10.2: The Concepts of Product Mix Width and Depth Applied to Selected United States Proctor & Gamble Products Source: The Procter & Gamble Company. Used with permission.
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Product Life Cycle Product Life Cycle
The progression of a product through four stages: introduction, growth, maturity, and decline.
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Figure 10.3: The Four Stages of the Product Life Cycle
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The Product Life Cycle Introduction Growth
The initial stage of a product’s life cycle—its first appearance in the marketplace—when sales start at zero and profits are negative Growth The stage of a product’s life cycle when sales rise rapidly and profits reach a peak and then start to decline More competitors enter the market Product pricing is aggressive Brand loyalty becomes important Gaps in market coverage are filled Promotion expenditures moderate Production efficiencies lower costs
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The Product Life Cycle (cont’d)
Maturity The stage of a product’s life cycle when the sales curve peaks and starts to decline and profits continue to fall Intense competition Emphasis on improvements and differences in competitors’ products Weaker competitors lose interest and exit the market Advertising and dealer-oriented promotions predominate Distribution sometimes expands to the global market Strategic objectives for maturity stage Generate cash flow Maintain market share Increase share of customer
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Product Life Cycle (cont’d)
Decline The stage of a product’s life cycle when sales fall rapidly Pruning items from the product line Cutting promotion expenditures Eliminating marginal distributors Planning to phase out the product
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Product Adoption Process
Production Adoption Process The stages buyers go through in accepting a product
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Product Adoption Process (cont’d)
Categories of Product Adopters Innovators First adopters of new products Early adopters Careful choosers of new products Early majority Those adopting new products just before the average person Late majority Skeptics who adopt new products when they feel it is necessary Laggards The last adopters, who distrust new products
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Figure 10.4: Distribution of Product Adopter Categories
Source: Reprinted with permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Diffusion of Innovations, Fourth Edition, by Everett M. Rogers. Copyright © 1995 by Everett M. Rogers. Copyright © 1962, 1971, 1983, by The Free Press.
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Branding: Key Terms Brand Brand Name
A name, term, design, symbol, or any other feature that identifies one marketer’s product as distinct from those of other marketers One item, family of items, or all items of a seller Corvette, Chevrolet, General Motors Brand Name The part of a brand that can be spoken Words, letters, numbers Union 76, NBA, 49’ers
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Branding: Key Terms (cont’d)
Brand Mark The part of a brand not made up of words Symbols or designs Nike swoosh, Mercedes star, McDonald’s arches Trademark A legal designation of exclusive use of a brand Coca-Cola®, Hewlett-Packard® Trade Name Full legal name of an organization American Telephone and Telegraph Corporation (AT&T)
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Branding (cont’d) Value of Branding To Buyers To Sellers
Helps speed consumer purchases by identifying specific preferred products Provides a form of self-expression and status Evaluates product quality to reduce the risk of purchase To Sellers Identifies and differentiates a firm’s products from competing products Helps in the introduction of new products Facilitates the promotion of all same-brand products Fosters the development of brand loyalty
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Branding (cont’d) Brand Equity Brand Loyalty Brand Recognition
The marketing and financial value associated with a brand’s strength in a market Brand Loyalty A customer’s favorable attitude toward a specific brand Brand Recognition A customer’s awareness that a brand exists and is an alternative purchase
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Branding (cont’d) Brand Preference Brand Insistence
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
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Figure 10.5: Major Elements of Brand Equity
Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Managing Brand Equity: Capitalizing on the Value of a Brand Name by David A. Aaker. Copyright © 1991 by David A. Aaker.
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Source: “The 100 Top Brands, 2006” BusinessWeek, http://bwnt
Source: “The 100 Top Brands, 2006” BusinessWeek, . The brand valuations draw upon publibly available information, which has not been independently investigated by Interbrand. Data: Interbrand Corp., J.P. Morgan Chase & Co., Citigroup, Morgan Stanley, Business Week.
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Types of Brands Manufacturer Brands Private Distributor Brands
Brands initiated by producers Private Distributor Brands Brands initiated and owned by resellers Dealer brands, private brands, store brands Generic Brands Brands indicating only the product category
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Selecting a Brand Name The name should
be easy to say, spell, and recall. indicate the product’s major benefits. suggest the product’s major uses and special characteristics. be distinctive, setting it apart from competing brands. be compatible with all products in line. be designed for use and recognition in all types of media.
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Protecting a Brand Degree of Brand Protection Through Registration
Fanciful Arbitrary Suggestive Descriptive Generic Surnames and descriptive, geographic, or functional names are also difficult to protect. Registration with the U.S. Patent and Trademark Office protects a brand for ten years with indefinite renewals. Most Least
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Branding Policies Individual Branding Family Branding
A policy of naming each product differently Avoids stigmatizing all products due to a failed product Family Branding Branding all of a firm’s products with the same name Promotion of one item also promotes all other products
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Brand Extensions Using an existing brand name on a new product in a different category. Provides support for new products through established brand name and image
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Co-Branding Using two or more brands on one product to capitalize on the brand equity (customer confidence and trust) of multiple brands Brands involved must represent a complementary fit in the minds of consumers.
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Brand Licensing An agreement whereby a company permits another organization to use its brand on other products for a licensing fee Advantages Low-cost and/or free publicity Revenues from royalty fees Disadvantages Lack of manufacturing control Creating too many unrelated products
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Packaging Involves the development of a container and a graphic design for a product Packaging Functions Protect the product from damage Offer convenience to consumers Prevent waste and make storage easier Promote the product by communicating its features, uses, benefits, and image
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Major Packaging Considerations
Cost of Packaging Limited consumer willingness to pay for better packaging Family Packaging Similar packaging for all of a firm’s products or packaging that has one common design element A A
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Major Packaging Considerations (cont’d)
Promotional Role (Informing the Consumer) Verbal and nonverbal symbols Size, shape, texture, color, and graphics Reseller Needs Transportation, storage, and handling
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Packaging and Marketing Strategy
Altering the Package To update style and to meet increased competition To highlight new features To take advantage of new packaging materials To make the product safer or easier to use To reduce packaging costs Secondary-Use Packaging Reusable packaging adds customer value Category-Consistent Packaging Packaging reflects customer expectations for the expected appearance of products in a category
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Packaging and Marketing Strategy (cont’d)
Innovative Packaging Unique features or ways of packaging that make a product more distinct from its competitors Multiple Packaging Bundling multiple units of a product together to encourage usage and to increase demand Handling-Improved Packaging Packaging that has been changed to facilitate product handling in the distribution channel
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Labeling Providing identifying, promotional, legal, or other information on package labels Purposes of Labels Help identify the product Display brand name and unique graphics Support promotional efforts for the product Coupons, discounts, product features Provide legally required labeling information Fair Packaging and Labeling Act of 1966 Nutrition Labeling Act of 1990 Provide information on product origin “Made in the USA”
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Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Managing Brand Equity: Capitalizing on the Value of a Brand Name by David A. Aaker. Copyright © 1991 by David A. Aaker.
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After reviewing this chapter you should:
Understand the concept of a product and how to classify products. Be familiar with the concepts of product item, product line, and product mix and understand how they are related. Understand the product life cycle and its impact on marketing strategies. Be able to describe the product adoption process. Be able to explain the value of branding and the major components of brand equity.
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After reviewing this chapter you should:
Recognize the types of brands and how they are selected and protected. Know about two types of branding policies and understand brand extensions, co-branding, and brand licensing. Be able to describe the major packaging functions and design considerations and how packaging is used in marketing strategies. Understand the functions of labeling and its legal issues.
