Busn 101 Chapter 14

1. Busn 101 Chapter 14 Developing & Pricing Products and Services

2. Goals • Total Product Offer • Consumer And Industrial Goods • Functions Of Packaging • Describe The Differences Between: • Brand • Brand Name • Trademark • Brand Equity • Brand Loyalty • Brand Manager • New Product Development Process • Product Life Cycle • Pricing Objectives And Strategies • Nonpricing Strategies

3. Value • Good quality at a fair price • When customers calculate the value of a product, they look at the benefit and then subtract the cost to see if the benefits exceed the cost • Value = Benefits – Costs • If Benefits > Costs, Then: Value, Otherwise: Not Value • Why would someone buy Milk at 7-11 that cost $3.99 when it is $2.50 at Safeway? • Best value includes factors such as price, benefits sought, service they receive, and more

4. Better Products and Services • With global competition, companies try to avoid market share loss by continuing to design and promote better products • To satisfy customers, marketers must: • Learn to listen to customers better than they do now • Adapt to constantly changing market demands • This means: listen to customers, make what they want • Example of listening: • Product: Fast food restaurants offer salads • Service: Fast food restaurants accept credit cards • Continually developing new products is a key activity for businesses around the globe

5. Better Products and Services (Economist meg, Oct 11, 2007) • Lego listened to customers (and others) when they designed Lego-Mindstorms • GM launched OnStar, a mobile-information system meant only to provide safety and emergency services for drivers • But customers wanted it to do more: • See if car is working properly • Open the doors for a driver who accidentally locks the keys inside • Locate the nearest pizza place

6. Total Product Offer or Value Package • Everything that consumers evaluate when deciding whether to buy something • From a strategic marketing point of view, total product offer is more than just the product or service

7. Total Product Offer:Milk at 7-11 = $3.99 or Milk at Safeway = $2.50

8. Products at a Business • Product Mix • The combination of product lines offered by a manufacturer • Product Line • A group of products that are physically similar or are intended for a similar market • More on Products: http://pgdba.blogspot.com/2008/05/product-mix-product-line.html

9. University Products (http://www.enotes.com/business-finance-encyclopedia/product-mix)

10. Procter & Gamble Products http://www.pg.com/common/product_sitemap.shtml

11. Product Differentiation • The creation of real or perceived product differences • Actual product differences can be quite small, so marketers must use a creative mix of value enhancers: • Price • Advertising • Packaging • Image

12. Product Differentiation • How much difference is there between: Bounce, Cheer, Downy, Dreft, Era, Febreze Air Fresheners, Gain, Ivory and Tide?

13. Groups of Consumer Goods • Convenience Goods and Services • Shopping Goods and Services • Specialty Goods and Services • Unsought Goods and Services

14. Convenience Goods and Services • Products that the customer wants to purchase frequently and with a minimum of effort • Examples: • Milk • Gum • Gas • ATM • Important marketing considerations: • Location • Brand awareness • Image • Some convenience items are available on the internet: Banking services, Books

15. Shopping Goods and Services • Those products that the consumer buys only after comparing value, quality, price, and style from a variety of sellers • Examples: • Appliances • Repair Services • Shoes and Clothes • Important marketing considerations: • Price differences • Quality differences

16. Specialty Goods and Services • Consumer products with unique characteristics and brand identity • Because these products are perceived as having no substitute, the consumer puts forth a special effort to purchase them • Examples: • Medical specialists • Expensive cars • Fancy foods • Important marketing considerations: • High quality, Image, Service, Brand Name • Sold through: • Internet, specialty goods retailer or specialty magazines

17. Unsought Goods and Services • Products that consumers are unaware of, haven’t necessarily thought of buying, or find that they need to solve an unexpected problem • Examples: • Emergency car-towing • Burial services • Insurance

18. Industrial Goods or Business Goods or B2B Goods • Products used in the production of other products • Examples: • Rubber for a tire factory • Microsoft Office can be both a B2B Good and a Consumer Good

20. Importance Of Packaging • Protection • Attraction • Description • Explain Benefits • Information on warranties, warnings, etc. • Indication of price, value, and uses

21. Packaging is important and can change the product • Morton’s • When it rains, it pours • Squeeze bottles • UPCs (Universal Product Code) makes check out and inventory control much easier • RFID (Radio frequency identification chip)

22. Brand • A name, symbol, or design that identifies the goods or services and distinguishes them from the goods and services of competitors • Examples of Brand Names: • Campbell • Coca Cola • WholeFoods • Toyota 

23. Trademark • A Brand that has been given exclusive legal protection for both the brand name and the pictorial design

24. Brands • Brand name assures quality • Reduces search time • Adds prestige to purchase • Generic Name • Name for product category • Companies are afraid to have brand name become a generic name • Examples: • Aspirin, Linoleum, Kleenex, Styrofoam, Rollerblade

25. Manufacturers’ Brand Name • The brand name of manufacturers that distribute products nationally and internationally • Examples: • Sony • Honda • Kodak

26. Dealer (Private Label) Brands or House Brands or Distributor Brands • Products that do not carry the manufacturer’s name but carry a distributor or retailer's name • Examples: • 365 Everyday Value • http://www.wholefoodsmarket.com/products/private-label.php • Kenmore at Sears

27. Generic Goods • Nonbranded products that usually sell at a sizable discount compared to national or private label brands • Examples: • Lucky Foods Yellow Brand • Generic cigarettes

28. Knockoff Brands • Illegal Copies of national brand name goods • Examples: • Is you expensive watch or dress a knockoff?

29. Brands • Brand Equity • The combination of factors – such as loyalty, perceived quality, images, and emotions – that people associate with a given brand name • Examples: Ziploc, GE • Brand Loyalty • The degree to which customers are satisfied, like the brand, and are committed to further purchases • Brand Awareness • How quickly or easily a given brand name comes to mind when a product category is mentioned • Brand insistence  Specialty Good

30. Brands • Brand Association • The linking of a brand to other favorable images • Think of Michael Jordon, Tiger Woods • Brand Manager or Product Manager • A manager who has direct responsibility for one brand or one product line

31. Characteristics of a Good Brand Name • Short, sweet, and easily pronounced, but flexible and expandable, and does not lend itself to abbreviation • Unique within its industry and retain its age • Legally available and defensible • Good alliteration and linguistically clean • Embraces company personality / brand portfolio Source: The Brand Name Awards 2005

32. Best/Worst/Weirdest Car Brand Names Source: FT Weekend, November, 2005

33. Betty Crocker Chef Boyardee Uncle Ben Colonel Sanders Little Debbie Fake Real Both Real guy, fake rank Real Brand Characters: Are They Real or Fake? Source: Fast Company, August 2004

34. 10 Most Valuable Brands Source: Business Week, August 7, 2006

35. Top 10 Favorite Mascots of America • M&Ms figures / Mars • Doughboy / General Mills, Smucker’s • Duck / Aflac • Tony the Tiger / Kellogg • Gecko / Berkshire Hathaway’s Geico • Chester the Cheetah / Pepsi’s Frito-Lay • Energizer Bunny / Energizer Holdings • Kool-Aid Man / Kraft Foods • Trix Rabbit / General Mills • Snap, Crackle and Pop / Kellogg Source: Forbes, January 9, 2006

36. Developing New Products • 86% of new products fail to reach the business objectives within one year of release • Reasons: • Poor positioning • Little differentiation from other products • Poor packaging

37. Idea Generation Screening Analysis Development Testing Commercialize New-ProductDevelopment Process

38. New Products • Product Screening • A process designed to reduce the number of new product ideas being worked on at any one time • Does product fit well with present products? • Is it profitable? • Is it marketable? • Do we have the equipment and personnel?

39. New Products • Product Analysis • Making costs estimates and sales forecasts to get a feeling for profitability of a new product idea • Concept Testing • Taking a product idea to consumers to test their reactions • Are there benefits? • How frequently would you buy it? • What price would you pay? • Try different packaging, branding, ingredients

40. Commercialization • Promoting a product to distributors and retailers to get wide distribution, and develop strong advertising and sales campaigns to generate and maintain interest in the product among distributors and consumers • Commercialization: • Promoting to get wide distribution (distributors & retailers) • Advertising and sales efforts to generate & maintain interest (distributors & retailers & consumers) • Internet can speed this process up

41. First Products Producedby Five Major Companies • Hershey - Caramels • Amway - No-rinse car wash • Heinz - Horseradish • Avon - Little Dot perfume set • 3M - Sandpaper Source: World Features Syndicate

42. People Behind Product Innovation • Liquid Paper – an American Secretary • Paper Clip – a Norwegian Patent Clerk • Fax Machine – a Scottish Clock Maker • Lewis Waterman Fountain Pen – an American Insurance Salesman • Pencil Sharpener – French Mathematician • Ballpoint pen – a Hungarian Journalist • Eraser Head – English Chemist Source: World Features Syndicate

43. Best ProductInnovation of ALL Time % of Consumers’ Choice Source: American Demographics

44. Consumers Attitudes about New Products Source: USA Today

45. Why People Purchase New Products Source: USA Today

46. Product Life Cycle • The theoretical model of what happens to sales and profits for a product class over time (not all products follow this model, especially brands and classics)

47. Product Life Cycle

48. Product Life Cycle: Different Stages Require Different Marketing Strategies

49. Product Life Cycle: Different Stages Require Different Marketing Strategies

50. Pricing • Pricing is important because it is a CRITICAL ingredient in consumer evaluation of product • Objectives of Pricing • ROI: gain a profit (long-run) • Traffic: get people into your store (short-run) • Market Share: gain market share (short-run) • Image: Price high to give status (long-run) • Social: Lower price to help people with little money • No matter what a business does, ultimately, prices are set in the market