Understanding Grades and Standards in Marketing

1. Obj. 2.06 Describe the uses of grades and standards in marketing

2. Grades and Standards • Why learn about Standards and Grades? • How do Standards and Grades affect YOU?

3. Grades and Standards • What did you eat for Breakfast or Lunch?

4. Grades and Standards • How did Grades and Standards affect your food? Fresh Fruit Milk Inspected Eggs Appearance and Condition Quality

5. WHAT ARE GRADES AND STANDARDS?= measures of product quality. Standards = statements that specify a product’s size, contents, and/or quality; used as a basis for comparing or judging goods or services Grades = are ratings assigned to products that tell to what extent standards

6. Other Examples of How Companies Use Grades and Standards • Specific tire sizes to fit our specific cars • ALL children’s fever-reducing medicine contains: • same ingredients • same doses • (regardless of what brand it is)

7. Other Examples of How Companies Use Grades and Standards • Restaurants: • Ratings • Movies: • Ratings Andy’s Rated: 97.5 Rated: R

8. REVIEW • Grades: Ratings assigned to products that tell to what extent standards were met • Standards: Specifications that are used as a basis for comparing or judging goods or services

9. INTERRELATIONSHIP BETWEEN GRADES AND STANDARDS Standards are set. Each product is rated against these preset standards and assigned a grade. Products that don’t meet the lowest standard are scrapped, reworked or sold at a discounted price. Example: School grading system – standards are set. You have to do this to earn an “A” in this class. Your work is compared to the standards and your grade is determined.

10. Grades and Standards • What are some standards being used in your classes? • What do you have to do to earn a good grade? A = Excellent!

11. Grades and Standards • These requirements now become your standards that the teacher uses as her evaluation tool • Your work compared to standards = GRADE

12. Grades and Standards • How do Businesses use Grades and Standards? • Standards are set • Products are rated against standards and assigned a grade

13. Grades and Standards • Why do we use grades and standards? • To make sure products are reliable • How to use a product correctly and safely • Where certain products can be sold

14. WHY ARE STANDARDS USED? Standards are used to establish uniform, consistent products. Example: CD’s made in the USA, Japan, and Mexico all have to fit into the same disc player

15. GRADES AND STANDARDS CAN INDICATE… • How the product can be used • Ex. Grades on milk and motor oil • Where the product will be sold • Ex. Gap, Inc. places higher quality clothes at the Gap and their lower grade clothing at Old Navy • How much the product will cost its buyer • Ex. Buyers will pay more for top grade • Who the user can/should be • Ex. Movie ratings indicate the audience: G, PG, PG13, and R

16. Grades and Standards Speeds things up! • G&S facilitate trade as buyers know what they will receive without physically handling or seeing the product. Consumers do not have to inspect. • G&S tell them what products rank higher than others. How do Grades and Standards aid in the buying and selling process?

17. GRADES AND STANDARDS AID BUYING AND SELLING Their use speeds up the process because consumers can buy products without having to inspect Consumers rely on grades and standards for product information

18. Grades and Standards • Products are disposed of or revamped • What do businesses do with products that fail to meet lowest standards?

19. Grades and Standards • Do you think the GAP will offer low standard clothes at their store? NO! • What would the GAP do with these clothes? Sell at Outlet or Old Navy

20. Grades and Standards • What are 4 types of standards that businesses use? 1. Quantity - ex. how much will be produced in 1 day 2. Quality -ex. no returns or defective products 3. Time -ex. how many products can be made per hour 4. Cost -ex. how much do the products cost to make

21. Identify examples of graded products. • What is graded according to its octane rating? • What is graded according to hardwood and softwood? • Prime, choice, and select grades refer to what product? • This grades for bacteria count, odor, and taste in what product? • This product is assigned numbers according to its thickness. • This product is graded according to its carbon and sulfur content. • This product is graded for profanity, violence, and nudity. • This product is graded for adult content, especially violence and blood.

22. ANSWERS • Video games • Gasoline • Milk • Coal • Lumber • Meat • Oil • Movies

23. Grades and Standards • Examples of Graded Products • Agricultural raw materials- like cotton • Food Products: • USDA - Meat • Dairy (IE Milk – whole, skim, non-fat, 2%) • Fresh Produce • Fish • 3. Oil- Graded according to its thickness • 4. Fuel- Graded according to its octane rating • 5. Coal- Graded according to its carbon and sulfur content • 6. Lumber- Hardwoods are graded according to size, quality, and type of wood

24. WHO SETS GRADES AND STANDARDS? • Government agencies • Ex. FDA – food and drugs, FCA – communication, County Health Dept. - restaurants • Trade and professional organizations (to promote product safety) • Ex. AAA - motels • Businesses • Ex. McDonalds buns have an exact size and color, Ford requires suppliers to meet certain standards when making “Q1” parts.

26. Professional Standards Nurses trust ANA because of our dedication to standards, guidelines, and principals. We work hard to elevate the nursing profession by defining the values and priorities for registered nurses across the nation. Through this work, ANA can provide direction to nurses across the nation, influence legislation, and implement a framework to objectively evaluate nursing excellence.

29. EXAMPLE - EGGS • STANDARDS FOR QUALITY OF INDIVIDUAL SHELL EGGS • 87.11. Individual eggs with clean unbroken shells. • 87.12. Individual eggs with stained or dirty, unbroken shells. • 87.13. Individual eggs with checked, cracked or broken shells. • STANDARDS AND WEIGHT CLASSES FOR WHOLESALE GRADES OF SHELL EGGS • MARKING OF CONSUMER RECEPTACLES OF SHELL EGGS

31. How are grades & standards important in a Global Market? • Improved Grades and Standards (G&S) have the potential to increase trade by improving the flow and consistency • By using certain requirements, • products are known safe to use • internationally. • The standard is known as 1S0 9000

32. GRADES & STANDARDS IN GLOBAL TRADE The ISO 9000 are international standards for quality This standard guarantees that manufacturers have meet certain requirements for producing and shipping their products

33. What is a warranty? • Warranty is a defined promise made by the seller to the consumer that the seller will repair or replace a product that does not perform as expected

34. 4 types of Warranties • Express – specific statement • Implied – A toaster should toast • Full – covers ENTIRE product • Limited – only certain repairs/parts covered

35. Types of warranties Express Warranty Implied Warranty Defined as an unwritten, unstated warranty understood by the consumer and the seller that a product will perform as expected The product will do what it is designed and recommended to do • Defined as promises expressed in a specific statement concerning the quality of the product • Can be written or oral

36. Types of warranties Full Warranty Limited Warranty Defined as warranties that do not contain the provisions of full warranties, may cover only certain repairs or specific parts • Defined as warranties that cover the entire product • If the product doesn’t work it must be made good in a reasonable time if not the customer can choose a replacement or refund • No time limits on implied warranties • The customer need only notify the warrantor in order to obtain repairs

37. What is a guarantee? • Defined as a promise made by the seller to the consumer that the seller will refund the consumer’s purchase price if the product doesn’t perform as expected. • AKA – “Money-back guarantees” • While warranties usually apply to goods, guarantees are given for both goods and services

38. Characteristics of an effective guarantee • Unconditional • No conditions for the customer to meet • Understandable • Clear language and no difficulty understanding the promises • Easy for the customer to implement • Not a lot of forms, people to see , and different locations • Easy for the customer to collect • When possible money should be refunded on the spot

39. Purposes of warranties and guarantees • To reassure prospective customers • To protect the producer and seller • To gain repeat customers • To increase sales • To use as a promotional tool • To use as a competitive tool • To use as a image builder

40. BENEFITS OF WARRANTIES AND GUARANTEES Consumer Benefits Business Benefits Reduced anxiety about purchases Free repairs Service information Legal recourse A customer-oriented focus Establishment of clear standards Feedback from customers Increased profits

41. WHY ARE WARRANTIES & GUARANTEES REGULATED & CONTROLLED BY THE LAW? • They can cause problems for producers • Consumers misuse the product • Customers expect problems to be fixed that are not under warranty • There have been times when companies have “guaranteed” their products without living up to the terms of the warranty or guarantee and the customer was cheated.

42. MAGNUSON-MOSS WARRANTY ACT OF 1975 • This Act provides guidelines for businesses offering warranties and guarantees with their product. • Protects consumers • Makes warranties stronger & easier for consumers to understand • Covers all consumer products & requires marketers to provide product information to consumers even before they make the purchase • FTC has the authority to regulate warranties on products that sell for more than $15

43. PRODUCT LIABILITY Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause. • 3 major types of claims: • manufacturing defect • design defect • a failure to warn (also known as marketing defects)

44. PRODUCT RECALLS A product recall is a request to return to the maker a batch or an entire production run of a product, usually due to the discovery of safety issues. The recall is an effort to limit liability (which can cause costly legal penalties & damage in reputation) Recalls are costly to a company because they often entail replacing the recalled product or paying for damage caused by use, although possibly less costly than consequential costs caused by damage to brand name and reduced trust in the manufacturer

45. PRODUCT RECALL AGENCIES US Coast Guard: Marine vehicles and related products (e.g. boats, personal watercraft, life jackets) Consumer Product Safety Commission (CPSC): Consumer products (e.g. toys, household goods, bicycles, off-road vehicles, etc.) Environmental Protection Agency (EPA): Pesticides, fertilizers, and anything harmful to the environment Federal Aviation Administration (FAA): Aircraft Food and Drug Administration (FDA): Food, pharmaceutical drugs, health supplements, cosmetics. United States Department of Agriculture (USDA): Meat, poultry, eggs. National Highway Traffic Safety Administration (NHTSA): On-road vehicles and related products (e.g. cars, trucks, vans, recreational vehicles, motorcycles, tires, motorcycle helmets, children's safety seats)

46. BP ACTIVITY – DUE….? • Use the Internet to locate information about a recent case involving the Consumer Product Safety Commission (CPSC). Record the following information: • Name of the company • Nature of the product safety issue • Outcome of the case • You will present your findings to the class