Product concepts

1. Product concepts Strategic Marketing Chapter 9

2. Capitalism • Capitalism: Political & economical philosophy • Characterized by marketplace competition • Private ownership of business. • Also known as Free Enterprise • United States & Japan are two examples • Government takes care of people via social services • Government is associated with capitalism • Democracy • Vote republican, democratic, independent, etc…

3. Socialism • Government has an increased role in society • Main goal is to meet the basic needs for all and to provide employment for many • The goal is to have a classless society • No poverty, middle class, rich • Citizens are equal

4. Socialism • More social programs to ensure a certain standard of living for their citizens • Medical care & education is free or very cheap • Businesses & individuals pay MUCH higher taxes than those in a capitalistic society • The government runs most industries • Telephone companies, banks, electric companies, water, gas, transportation, etc.. • Sweden, Canada, The United Kingdom use this philosophy

5. Communism • Government controls factors of production • No private ownership of property or capital • Built around the belief that if goods are owned by government they are available to everyone • Promotes a Classless society • Government acts as the community • All workers are assigned jobs • No unemployment • Always get paid (regardless if you go or not) • Housing & education are determined by government • Medical Care is free • No financial incentive for people to work harder • Examples include Cuba and North Korea

6. Assignment • Learning objectives are on back • You should be able to answer each question by end of chapter • Take notes. PowerPoint will not be posted until after lesson.

7. Learning Objective 1 • The products a company creates are the basis of their marketing mix. • Product is the most important because nothing else could exist without it • What is a product? • Everything both favorable & unfavorable that a person receives in an exchange • Can be a good, service, or idea

8. Learning Objective 2 • Types of consumer products consist of either industrial or consumer products • The intended use of product is what distinguishes it • Some products can be both industrial & consumer (e.g. light bulbs, pencils, paper, etc..) • If used for businesses purposes; it is an industrial product • Manufactures other goods • Facilitate an organizations operations • Resell to other customers • If used for consumer purposes; it is a consumer product • Bought to satisfy an individual’s personal wants

9. Learning Objective 2 • Why does a marketer care if they are dealing with industrial or consumer products? • Each is marketed very differently • Target Markets are very different • Distribution, Pricing, & Promotion is done much differently

10. Learning objective 2

11. Distinguishing between product types • Convenience Product • Relatively inexpensive item that merits little shopping effort • Products are bought regularly & without much planning • Consumer will not shop extensively for such an item • Consumers are aware of brands that sell convenience products • Wide distribution is required in order for profit goals to be met • Examples: • Candy, soda, aspirin, combs, dry cleaning, car washes, etc…

12. Distinguishing between product types • Shopping Products are usually more expensive than a convenience product and are sold in fewer stores • Consumers will comparison shop between products to find the best one • There are two types of shopping products • Heterogeneous: Products that are different & cause consumers to have a hard time comparing products because the prices, quality, & features, vary so much • Consumers buy the product that is best for them • Example: Furniture, clothes houses, etc… • Homogenous: Similar products that consumers exam and generally select the cheapest brand that has desired features. • Example: Washer & dryer

13. Distinguishing between product types • Specialty Products are products consumers search extensively for & are reluctant to accept substitutes for • Examples: Rolex watch, Rolls Royce, Bose Speakers, Ruth’s Chris Steak House, & Highly specialized forms of medical car • Marketers use selective, status-conscious advertising to maintain their product’s exclusive image. • Distribution is limited to one or very few outlets in a geographic area • Brand names & quality of service are key components

14. Distinguishing between product types • Unsought Products are products that are unknown to the potential buyer or a known product that the buyer does not actively seek. • New products that are not advertised or distributed are unsought products • Products we do not like to talk about or spend money on are typically unsought • Require aggressive personal selling & highly persuasive advertising • Salespeople seek leads and then approach the consumer through personal selling, direct mail, or direct-response advertising • Examples: • Insurance, burial plots, encyclopedias, etc…

15. Learning Objective #3Product Items, lines, & mixes • Product Items: A specific version of a product that can be designated as a distinct offering among an organizations products • Each item in a mix may require their own marketing strategies • Example: • 12 oz can of coca-cola is a product item • 20 oz bottle of coca-cola is a different product item • Product Lines: A group of closely-related product items. • Product Mix: All products that an organization sells

16. Example: Campbell’s product mix

17. Product mix strategies • Advantages of grouping product items into product lines include: • Advertising Economies: Product lines can market all items with one approach. • Example: “Mmm good” is used as the slogan for all Campbell soups. • Packaging uniformity: Products can be packaged similarly and have a common look • Example: Campbell’s soup label • Standardized Components: Reduces manufacturing & inventory costs. • Example: General Motors uses the same parts on many automobile makes & models • Efficient Sales & Distribution: Offer a fuller range of services to consumers • Distributors & retailers are more likely to stock a company’s product if it is a full line • Transportation & warehousing costs are likely to be lower for a product line than a collection of items • Equivalent Quality: Purchasers usually expect quality amongst all products within a product line to be equal

18. Product mix strategies • Product Mix Width (Breadth): The number of product lines an organization offers. • Diversifies risk • Better to depend on a variety of product lines to generate sales rather than just 1 or 2 lines • Capitalizes on established reputations. • People trust the brand Oreo so when they see it on other products they believe it to be good. • Product Line Depth: The number of product items in a product line. • Attracts buyers with different preferences • Increases sales/profits by further market segmentation • Evens out seasonal sales patterns

19. Assignment: individual on paper

20. Assignment: solo or duo on construction paper • Choose a brand (no repeats) • General Motors, Mars, Nestle, Sony, Proctor & Gamble, Kraft, General Mills, Johnson & Johnson, Unilever, Kellogg’s, Coca-Cola, Pepsico, Dr. Pepper/Snapple • Create at least 3 product lines based on the mix given. • Label each product line and list as many products as you can that fall within that line. • Answer the questions on your handout when done

21. Examples of Product Mixes

22. Label each column & list items Label each product line has shallow or deep

23. Groups • General Mills Austin & Libby • General Motors John • Mars Maggie • Proctor & Gamble Nate & Ryan • Johnson & Johnson Louis & Dhraj • PepsicoUthman & Earvin • Coca-Cola Eric • Kellogg's Jackson & Brett • Kraft Blake & Michael • Uniliever Alec & Jack

24. Tuesday

25. Warm-up & Objective Warm-up: • Give one example of a convenience, shopping, specialty, & unsought good. • Convenience: Bread • Shopping: Dishwasher Couch • Specialty: Armani Suit • Unsought: Burial Plot • What is the key factor in determining what type of good you are classifying How much time is spent picking out a product.

26. Product Mix:Label This Chart

27. Product Line can be determined by: • They function similarly • All of Chevrolets Cars are a Product Line • They are sold to the same groups of people • All of Staples Supplies sold to schools • Are marketed the same way • Are priced similarly

28. Adjustments to Product Items,Lines, and Mixes Product Modification ProductRepositioning Product Line Extension or Contraction Adjustment to product items, lines, & mixes • Firms change product items, lines, & mixes to take advantage of product developments or to respond to changes in the environment • Product Modification • Product Repositioning • Product Line Extension or Contraction

29. Adjustment to product items, lines, & mixes • Product Modification occurs when 1 or more of a product’s characteristics are altered • Quality • Functional • Style • Planned Obsolescence • Quality Modification: Change in products durability or dependability • Decrease quality will make products cheaper thus increasing buying audience • Increase quality will allow the company to compete with rival firms easier • Increase brand loyalty & chances to segment target market differently

30. Adjustment to product items, lines, & mixes • Functional Modification: Change in product’s versatility, effectiveness, convenience, or safety • Example: Tide with Downey Laundry Detergent combines function of cleaning with fabric softener • Style Modification: Aesthetic product change rather than a quality or functional modification. • Proctor & Gamble adding Frabreze to its products • Common among clothing & car manufacturers • Planned Obsolesce: The practice of modifying products so those that have already been sold become obsolete before they actually need replacement. • Considered unethical by some

31. Why reposition established brands? Changing Demographics Declining Sales Changes in Social Environment Product Repositioning Companies reposition because they want to change a consumers perception of a brand

32. Product Line extensions • Product Line Extensions: Adding additional products to an existing product line in order to compete more broadly in the industry. • Example: Nabisco sells 100 calorie snack packs for people with active lifestyles

33. Product Width: Broadening • Companies seek to expanding their product width by making it broader • Expanding allows you • Reach more markets • Gain a competitive edge • Example of product width is Red Lobster • Specialize in seafood • Sell pasta, chicken, & steak to broaden product mix

34. Product Line Contraction • Product Line Contraction: Deleting products from a product mix so that a company can focus on what it does best • 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

35. Product Width: Narrowing • In 2009; General Motors (GM) filed for bankruptcy protection • They were told they needed to cut back • GMC • Cadillac • Buick • Chevy • Pontiac • Saturn • Saab • Hummer

36. REVIEW LEARNING OUTCOMEProduct item, product line, and product mix

37. Learning Objective 4: Describe marketing uses of Branding • A Brand is a name, term, symbol, design, or combination thereof that identifies a seller’s products and differentiates them from competitors’ products. • Main tool to distinguish a brand from its competitors • The internet has been helpful in building brand awareness. • Branding has three main purposes • Product Identification** • Repeat sales • New product sales **Product Identification is the most important purpose

38. Benefits of Branding

39. Branding strategies • Not at firms will choose to adapt a branding strategy • Generic items • Branding strategies can be accomplished in a variety of ways • Manufacturer Brands • Private Brands • Regardless of manufacturer or private; a company must develop an individual branding, family branding, or combination of both approach • Individual Brand: Different brands for different products (Proctor & Gamble & Marriot) • Family Brand: Common names for different products (e.g.: Holiday Inn Hotels & Sony)

40. Branding strategies • Generic Items: A no-frills, no-brand-name, low-cost product that is simply identified by its product category • Usually 30-40% cheaper than manufacturer brand & 20-25% cheaper than private brand • Manufacturers’ Brand: The brand name of a manufacturer • Heavy consumer ads by manufacturers • Attract new customers • Enhance dealer’s prestige • Rapid delivery, carry less inventory • If dealer carries poor quality brand, customer may simply switch brands and remain loyal to dealer

41. Types of Brands

42. Branding strategies • Private Brand: A brand name owned by a wholesaler or a retailer. Also known as a private label or store brand. • Advantages of Private Brand: • Earn higher profits on own brand • Less pressure to mark down price • Manufacturer can become a direct competitor or drop a brand/reseller • Ties customer to wholesaler or retailer • Customer who wants a Diehard battery must go to Sears • Wholesalers and retailers have no control over the intensity of distribution of manufacturers’ brands

43. Brand No Brand Manufacturer’s Brand Private Brand IndividualBrand: Pepsi & Frito Lay Family Brand: Coach Combination Kellogg’s Rice Krispies IndividualBrand Family Brand: Kroger Combi-nation: Sears-Kenmore Branding strategies

44. Branding strategies • Co-Branding entails placing two or more brand names on a product or its package. • Ingredient Branding: Occurs when a brand is a part in another product • Examples: Intel microprocessor in a Dell computer or XM radio in a Cadillac • Cooperative Branding: Occurs when two brands receiving equal treatment borrow from each others brand equity • Example: American Express partners with Ramada Inn to win a flight with Continental Airlines • Complementary Branding: Products are advertised or marketed together to suggest usage • Example: Captain Morgan’s & Coca-Cola

45. Trademark v. service mark • Trademark: is the exclusive right to use a brand. • Service Mark: Performs the same function for services, such as H&R Block • Many parts of a brand and associated symbols qualify for trademark protection. • Trademark right comes from use rather than registration. • The mark has to be continuously protected. • Rights continue for as long as the mark is used. • Trademark law applies to the online world.

46. P. 294 items that have been trademarked • A generic product name identifies a product by class or type and cannot be trademarked. • Examples: Aspirin, cellophane, coke, monopoly, & shredded wheat • Companies work to fight off knockoffs • Example: Burberry

47. Assignment

48. Learning Objective 5: packaging • Packaging has always been used to get the product through the distribution process • Three Most Important Packaging functions: • Contain & Protect products • Promote Products • Facilitate the storage, use, & convenience of products • A growing 4th Function is • Facilitate recycling & reducing environmental damage

50. Protect the Product: Egg Carton Promote & Sell Product: New Balance Ensure Safe Use: Child Proof Medicine Bottle Meet Customer Needs: Squirt Bottle Environmentally Friendly: French Rabbit Wine