Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel...

Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1

Lamb, Hair, McDaniel

CHAPTER 10

Product Concepts

2011-2012

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LO 1 Define the term product

LO 2 Classify consumer products

LO 3 Define the terms product item, product line, and product mix

LO 4 Describe marketing uses of branding

Learning OutcomesLearning Outcomes


LO 5 Describe marketing uses of packaging and labeling

LO 6 Discuss global issues in branding and packaging

LO 7 Describe how and why product warranties are important marketing tools

Learning OutcomesLearning Outcomes


Define the term product

What Is a Product?What Is a Product?

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

ProductProduct

LO1


Classify consumer products

Types of Consumer ProductsTypes of Consumer Products

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 customers

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

organization’s operations, or to resell to other customers

A product bought to satisfy an individual’s personal wants

A product bought to satisfy an individual’s personal 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

LO2


Define the terms product item, product line,

and product mix

Product Items, Product Items, Lines, and MixesLines, and Mixes

LO3


Product Items, Lines, and Mixes

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.

LO3


LO3

Exhibit 10.1Exhibit 10.1Campbell’s Product Campbell’s Product

Lines and Product MixLines and Product Mix


Benefits of Product Lines

Equivalent QualityEquivalent Quality

Efficient Sales andDistribution

Efficient Sales andDistribution

Standardized Components

Standardized Components

Package UniformityPackage Uniformity

Advertising EconomiesAdvertising Economies

LO3


Adjustments

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

LO3


Types of Product Modifications

Quality ModificationQuality Modification

Functional ModificationFunctional Modification

Style ModificationStyle Modification

Planned Obsolescence: The practice of modifying products so those that have already been sold become obsolete before they actually need replacement.

LO3


Repositioning

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?

LO3


Product Line ExtensionAdding additional products to an existing product

line in order to compete more broadly in the

industry.

• 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

LO3

Symptoms of Overextension


Describe marketing uses of branding

BrandingBranding

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 a third of theearnings come from outside its home country

LO4


Benefits of Branding

Product Identification

Product Identification

Repeat SalesRepeat Sales

New Product Sales

New Product Sales

LO4


Top Ten Global BrandsLO4

1. Coca-Cola U.S.

2. IBM U.S.

3. Microsoft U.S.

4. GE U.S.

5. Nokia Finland

6. McDonald’s U.S.

7. Google U.S.

8. Toyota Japan

9. Intel U.S.

10. Disney U.S.

Source: Burt Helm, "Best Global Brands," BusinessWeek September 28, 2009

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Branding Strategies

Brand No Brand

Manufacturer’s Brand Private Brand

IndividualBrand

Family Brand

Combi-nation

IndividualBrand

Family Brand

Combi-nation

LO4


Branding Strategies

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.

Captive

A brand manufactured by a third party for exclusive retailer, without evidence of a that retailer’s affiliation.

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 dealerLO4


Trader Joe’s—The Brand

• About 80 percent of the items offered at Trader Joe’s are private label.

• Trader Joe’s offers several subbrands withing the Trader Joe’s brand family, such as Trader Ming’s for Chinese food and Trader Darwin’s for vitamins.

• Trader Joe’s purchases directly from the manufacturer and ships directly to its distribution centers, where many of the products are portioned and packaged.

Source: Beth Kowitt, “Inside Trader Joe’s,” Fortune, September 6, 2010. 86-96

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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

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Advantagesof Captive Brands

• No evidence of store’s affiliation• Manufactured by third party• Sold exclusively at the chain• Can ask price similar to

manufacturer’s 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

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.

To renew the trademark, the company must prove use of the mark.

Rights continue for as long as the mark is used.

Trademark law applies to the online world.LO4


Describe marketing uses of packaging

and labeling

PackagingPackaging

LO5


Functions of Packaging

Contain and Protect

Promote

Facilitate Storage, Use, and Convenience

Facilitate Recycling

LO5


LabelingPersuasive

Focuses on promotional theme

Consumer information is secondary

Informational

Helps make proper selections

Lowers cognitive dissonance

LO5

GreenwashingWhen a product or company attempts to give the impression of environmental friendliness whether or not it is environmentally friendly.


Universal Product Codes

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.

LO5


Discuss global issues in branding

and packaging

Global Issues in Global Issues in Branding and PackagingBranding and Packaging

LO6


Global Issues in Branding

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

LO6


Global Issues in Packaging

AestheticsAesthetics

Global Global Considerations Considerations for Packagingfor Packaging

Climate Considerations

Climate Considerations

LabelingLabeling

LO6


Describe how and why product

warranties are important

marketing tools

Product WarrantiesProduct Warranties

LO7


Product Warranties

Warranty

ExpressWarranty

ImpliedWarranty

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.

LO7


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Kodak – Product Concepts

List the attributes of the Kodak brand. What benefits of branding has the company experienced over time?

Have there been pitfalls to having a brand with such strong associations?

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Chapter 10 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel...

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