Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared by

Chapter 9 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1

MKTG

Designed byAmy McGuire, B-books, Ltd.

Prepared byDeborah Baker, Texas Christian University

Lamb, Hair, McDaniel 2007-2008

9CHAPTER Product Concepts


Learning Outcomes

Define the term product

Classify consumer products

Define the terms product item, product line, and product mix

Describe marketing uses of branding

LO1

LO2

LO3

LO4


Learning Outcomes

Describe marketing uses of packaging and labeling

Discuss global issues in branding and packaging

Describe how and why product warranties are important marketing tools

LO5

LO6

LO7



What Is a Product?What Is a Product?LO1


LO1

What Is a Product?

Everything, both favorable and

unfavorable, that a person

receives in an exchange.

Tangible Good

Service

Idea

ProductProduct


LO1

What Is a Product?

Product is the starting point of Marketing Mix

PromotionPromotion

Place (Distribution)Place (Distribution)

PricePrice

Product Product


REVIEW LEARNING OUTCOMELO1


ProductProduct

GoodService

Idea

GoodService

Idea


Classify consumer products

Types of Consumer ProductsTypes of Consumer ProductsLO2


LO2

Types of Products

BusinessProduct

BusinessProduct

Consumer Product

Consumer Product

A product used to manufacture other goods or services, to facilitate an

organization’s operations, or to resell to other consumers.

A product used to manufacture other goods or services, to facilitate an

organization’s operations, or to resell to other consumers.

A product bought to satisfy an individual’s personal needs or wants

A product bought to satisfy an individual’s personal needs or wants


LO2

Types of Consumer Products

UnsoughtProducts

UnsoughtProducts

SpecialtyProductsSpecialtyProducts

ShoppingProducts

ShoppingProducts

ConvenienceProducts

ConvenienceProducts

ConsumerProducts

ConsumerProducts

BusinessProductsBusinessProducts

ProductsProducts


LO2

Types of Consumer Products

MarketDevelopment

Diversification

Increase market share among existing customers

Attract new customers to existing products

Introduce new products into new markets

Create new products for present markets

ConvenienceProduct

ShoppingProduct

SpecialtyProduct

UnsoughtProduct

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 for which consumers search extensively and are reluctant to accept substitutes

A product unknown to the potential buyer or a known product that the buyer does not actively seek



Consumer Products


Define the terms product item, product line,

and product mix

Product Items, Lines, and MixesProduct Items, Lines, and MixesLO3


Product Items, Lines, and MixesLO3

Product ItemProduct Item

Product LineProduct Line

Product MixProduct Mix

A specific version of a product that can be designated as a distinct offering among an organization’s products.

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.

A group of closely-related product items.

All products that an organization sells.

All products that an organization sells.


Campbell’s Product Lines and MixLO3

{ }


Benefits of Product LinesLO3

Equivalent QualityEquivalent Quality

Efficient Sales andDistribution

Efficient Sales andDistribution

Standardized Components

Standardized Components

Package UniformityPackage Uniformity

Advertising EconomiesAdvertising Economies


Product Mix WidthLO3

The number of product lines an organization offers.

Diversifies risk Capitalizes on established

reputations

The number of product lines an organization offers.

Diversifies risk Capitalizes on established

reputations

Product MixWidth

Product MixWidth


Product Line DepthLO3

The number of product Items in a product line.

Attracts buyers with different preferences

Increases sales/profits by further market segmentation

Capitalizes on economies of scale Evens out seasonal sales patterns

The number of product Items in a product line.

Attracts buyers with different preferences

Increases sales/profits by further market segmentation

Capitalizes on economies of scale Evens out seasonal sales patterns

Product LineDepth

Product LineDepth


AdjustmentsLO3

Product Modification

Product Modification

ProductRepositioning

ProductRepositioning

Product LineExtension or Contraction

Product LineExtension or Contraction

Adjustments to Product Items,

Lines, and Mixes

Adjustments to Product Items,

Lines, and Mixes


Types of Product ModificationsLO3

Quality ModificationQuality Modification

Functional ModificationFunctional Modification

Style ModificationStyle Modification


Planned ObsolescenceLO3

PlannedObsolescence

PlannedObsolescence

The practice of modifying products

so those that have already been

sold become obsolete before they

actually need replacement.


RepositioningLO3

Changing Demographics

Changing Demographics Declining SalesDeclining Sales

Changes in Social

Environment

Changes in Social

Environment

Why reposition Why reposition established brands?established brands?

Why reposition Why reposition established brands?established brands?


Product Line ExtensionLO3

Product Line Extension

Product Line Extension

Adding additional products to an

existing product line in order to

compete more broadly in the

industry.


Product Line ContractionLO3

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 OverextensionSymptoms of Product Line Overextension



Product item, product line, and product mix


Describe marketing uses of branding

BrandingBrandingLO4


LO4

Brand

A name, term, symbol,

design, or combination

thereof that identifies a

seller’s products and

differentiates them from

competitors’ products.

BrandBrand


LO4

Branding

Brand Name

BrandMark

Brand Equity

That part of a brand that can be spoken, including letters, words, and numbers

The elements of a brand that cannot be spoken

The value of company and brand names

GlobalBrand

A brand where at least 20 percent of theproduct is sold outside its home country


LO4

Benefits of Branding

Product Identification

Product Identification

Repeat SalesRepeat Sales

New Product Sales

New Product Sales


Biz Flix

LO4Josie and the Pussycats


LO4

Top Five Global and North American Brands

Global

1. Apple

2. Google

3. IKEA

4. Starbucks

5. Al Jazeera

North American

1. Apple

2. Google

3. Target

4. Starbucks

5. Pixar

SOURCE: Deborah L. Vence, “Not Taking Care of Business,” Marketing News, March 15, 2005, p. 19.


LO4

Branding Strategies

Brand No Brand

Manufacturer’s Brand Private Brand

IndividualBrand

Family Brand

Combi-nation

IndividualBrand

Family Brand

Combi-nation


LO4

Generic Brand

A no-frills, no-brand-

name,

low-cost product that is

simply identified by its

product category.

GenericProduct

GenericProduct


LO4

Manufacturers’ Brands VersusPrivate Brands

Manufacturers’ Brand

Private Brand

The brand name of a manufacturer.

A brand name owned by a wholesaler or a retailer. Also

known as a private label or store brand.


LO4

Advantages of Manufacturers’ Brands

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


LO4

Advantages of Private Brands

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

Wholesalers and retailers have no control over the intensity of distribution of manufacturers’ brands


LO4

Individual Brands Versus Family Brands

Individual Brand

Family Brand

Using different brand names for different products.

Marketing several different products under the same brand name.


LO4

Cobranding

IngredientBranding

IngredientBranding

Cooperative Branding

Cooperative Branding

Complementary Branding

Complementary Branding

Types of Types of CobrandingCobranding

http://www.bose.com

Online


LO4

Trademarks

A Trademark is the exclusive right to use a brand.

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.



Marketing Uses of Branding


Describe marketing uses of packaging

and labeling

PackagingPackagingLO5


Functions of PackagingLO5

Contain and Protect

Promote

Facilitate Storage, Use, and Convenience

Facilitate Recyclinghttp://www.levesquedesign.com/http://www.design4packaging.com

Online


LabelingLO5

Online

http://www.fda.gov

Persuasive

Focuses on promotional theme

Consumer information is secondary

Informational

Helps make proper selections

Lowers cognitive dissonance

Includes use/care


Universal Product CodesLO5

Universal Product Codes

(UPCs)

A series of thick and thin vertical lines

(bar codes), readable by computerized

optical scanners, that represent

numbers used to track products.



Packaging and Labeling


Discuss global issues in branding

and packaging

Global Issues in Global Issues in Branding and PackagingBranding and Packaging

LO6


Global Issues in BrandingLO6

Adaptations & Modifications

Adaptations & Modifications

Global Options Global Options for Brandingfor Branding

One Brand NameEverywhere

One Brand NameEverywhere

Different Brand Names in Different

Markets

Different Brand Names in Different

Markets


Global Issues in PackagingLO6

AestheticsAesthetics

Global Global Considerations Considerations for Packagingfor Packaging

Climate Considerations

Climate Considerations

LabelingLabeling



Global Issues in Branding and Packaging

Branding Choices:

1 nameModify or adapt 1 nameDifferent names in

different markets

Packaging Considerations:

LabelingAestheticsClimate


Describe how and why product

warranties are important

marketing tools

Product WarrantiesProduct WarrantiesLO7


Product Warranties

LO7

Warranty

ExpressWarranty

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)



Product Warranties

Express warranty = written guarantee

Implied warranty = unwritten guarantee


MKTG

Designed byAmy McGuire, B-books, Ltd.

Prepared byDeborah Baker, Texas Christian University

Lamb, Hair, McDaniel 2007-2008 Services

and Nonprofit Organization Marketing

11

CHAPTER


Learning Outcomes

Discuss the importance of services to the economy

Discuss the differences between services and goods

Describe the components of service quality and the gap model of service quality

LO1

LO2

LO3


Learning Outcomes

Develop marketing mixes for services

Discuss relationship marketing in services

Explain internal marketing in services

Discuss global issues in services marketing

Describe nonprofit organization marketing

LO6

LO5

LO7

LO8

LO4


Discuss the importance of services to the

economy

The Importance of ServicesThe Importance of ServicesLO1


LO1

Service

The result of

applying human or

mechanical efforts to

people or objects.

ServiceService



The Importance of Services

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

81%

Services as a percentage of GDP

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

81%

Services as a percentage of employment

ServicesDeedPerformanceEffort

DeedPerformanceEffort


Discuss the differences between services and goods

How Services Differ from GoodsHow Services Differ from GoodsLO2


How Services Differ from Goods

LO2

IntangibleIntangible

InseparableInseparable

HeterogeneousHeterogeneous

PerishablePerishable


How Services Differ from Goods

LO2

IntangibilityIntangibility

Search Qualities

Experience Qualities

Credence Qualities

Online

http://www.webmd.com


Describe the components

of service quality and the gap model of service quality

Service QualityService QualityLO3


Components of Service QualityLO3

TangiblesTangibles The physical evidence of a service.

The physical evidence of a service.

EmpathyEmpathy Caring, individualized attention to customers.Caring, individualized attention to customers.

AssuranceAssurance The knowledge and courtesyof employees.

The knowledge and courtesyof employees.

ResponsivenessResponsiveness The ability to provideprompt service.

The ability to provideprompt service.

ReliabilityReliability The ability to perform the service right the first time.The ability to perform the service right the first time.


The Gap Model of Service Quality

LO3


Biz Flix

LO3Intolerable Cruelty



Service Quality


Develop marketing mixes for services

Marketing Mixes for ServicesMarketing Mixes for ServicesLO4


LO4

Product Strategies for Services

ServiceMix

Standardizationor

Customization

Core andSupplementary

Process


LO4

Service as a Process

Mental StimulusProcessing

Mental StimulusProcessing

People Processing

People Processing

PossessionProcessing

PossessionProcessing

InformationProcessing

InformationProcessing


LO4

The Service Factory

Possession processing

Mental-stimulus processing


LO4

The Service Offering

CoreServiceCore

Service

SupplementaryService

SupplementaryService

The most basic benefit the consumer is buying.

The most basic benefit the consumer is buying.

A group of services that supportor enhance the core service.

A group of services that supportor enhance the core service.


LO4

Core and Supplementary Services for FedEx

Overnight Overnight transportation transportation and delivery of and delivery of

packagespackages

Problem solving

Billing statements

TracingDocumentation

Order taking

Supplies

Pickup

Advice andinformation


LO4

Customization/Standardization

A strategy that uses

technology to

deliver customized

services on a mass

basis.

MassCustomization

MassCustomization


LO4

The Service Mix

Determine what new services to introduce

Determine target market

Decide what existing services to maintain and to eliminate


LO4

Place (Distribution) Strategy

SchedulingScheduling

LocationLocation

Direct or indirect distribution

Direct or indirect distribution

Number of outletsNumber of outlets

ConvenienceConvenience


LO4

Promotion Strategy

Stress tangible cues

Use personal information sources

Create a strong organizational image

Engage in postpurchase communication


LO4

Price Strategy

Pricing Challenges for Services

Define the unit of service consumption

Determine if multiple elements are “bundled” or priced separately


LO4

Pricing Objectives

Revenue-OrientedPricing

Operations-OrientedPricing

Patronage-OrientedPricing

Maximize the surplus of income over costs

Match supply and demand by varying price

Maximize the number of customers by varying price

http://www.etrade.comhttp://www.tdameritrade.comhttp://www.schwab.com

Online



Marketing Mixes for Services

PLACEPLACE PROMOTIONPROMOTION PRICEPRICEPRODUCT

= SERVICE

PRODUCT =

SERVICE

ProcessProcess

Core and Supplementary

Core and Supplementary

Mass Customization

Mass Customization

StandardizationStandardization

Number ofoutlets

Number ofoutlets

DirectDirect

IndirectIndirect

LocationLocation

Tangiblecues

Tangiblecues

Personalinformation

Personalinformation

Strong imageStrong image

Post-purchasecommunication

Post-purchasecommunication

Revenueoriented

Revenueoriented

Operationsoriented

Operationsoriented

Patronageoriented

Patronageoriented


Discuss relationship marketing in services

Relationship MarketingRelationship MarketingLO5



Relationship Marketing in Services

2Social

Financial

1Financial

3Structural

SocialFinancial

Pricing incentives

Design services to meet customer needs

Creating value-added services not available elsewhere


Explain internal marketing in services

Internal Marketing in Internal Marketing in Service FirmsService Firms

LO6


Internal MarketingLO6

Internal Marketing

Internal Marketing

Treating employees as customers and developing systems and benefits that satisfy their needs.



Internal Marketing in Services


Discuss global issues

in services marketing

Global Issues in Global Issues in Services MarketingServices MarketingLO7



Global Issues in Services Marketing

United States is world’s largest exporter of services.

U.S.A.


Describe nonprofit organization

marketing

Nonprofit Organization Nonprofit Organization MarketingMarketingLO8


Nonprofit Organization Marketing

LO8

NonprofitOrganization

Marketing

NonprofitOrganization

Marketing

An organization that exists to achieve some goal other than the usual business goals of profit, market share, or return on investment.



LO8

Government

Museums

Theaters

Schools

Churches



LO8

Market intangible productsMarket intangible products

Production requires customer’s presenceProduction requires customer’s presence

Services vary greatlyServices vary greatly

Services cannot be storedServices cannot be stored

Shared Characteristics

with Service

Organizations

Shared Characteristics

with Service

Organizations



LO8

Identify desired customersIdentify desired customers

Specify objectivesSpecify objectives

Develop, manage, eliminate programs and servicesDevelop, manage, eliminate programs and services

Decide on pricesDecide on prices

Schedule events or programsSchedule events or programs

Communicate their availabilityCommunicate their availability


Unique Aspects of Nonprofit Organization Marketing Strategies

LO8

Setting of marketing objectives

Selection of target markets

Development of marketing mixes


Objectives

LO8

Provide services that respond to the wants of :

Users

Payers

Donors

Politicians

Appointed officials

Media

General Public


Target Markets

LO8

Apathetic or strongly opposed

targets

Apathetic or strongly opposed

targets

Pressure to adopt undifferentiated segmentation

Pressure to adopt undifferentiated segmentation

Complementary positioning

Complementary positioning

Unique Issues of Nonprofit

Organizations


Product Decisions

LO8

Distinctions between Business and Nonprofit Organizations

Benefit complexity

Weak or indirect benefit strength

Low involvement


Promotion Decisions

LO8

Sales promotion activities

Public service advertising

Professional volunteers

Online

http://www.adcouncil.com


Pricing Decisions

LO8 Below-cost pricingBelow-cost pricing

Separation betweenpayers and users

Separation betweenpayers and users

Indirect paymentIndirect payment

Nonfinancial pricesNonfinancial prices

Pricing objectivesPricing objectives

Characteristics Distinguishing

Pricing Decisionsof Nonprofit

Organizations

Characteristics Distinguishing

Pricing Decisionsof Nonprofit

Organizations




TARGET• Apathetic or

strongly opposed• Undifferentiated

segmentation• Complementary

positioning

PRODUCT

PROMOTION

PLACE

PRICE

Professional

volunteersSales

Public ServiceAdvertising

Involvement

Benefitstrength

Benefitcomplexity

Specialfacilities

Nonfinancial

Indirect payment

Separation

Below costpricing

Documents

Chapter 9Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared by