Marketing Management Chapter 12

7/31/2019 Marketing Management Chapter 12

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begins with formulating an offering tomeet target customers needs or wants.

The customer will judge the offering bythree basic elements:

product features and quality

services mix and quality price


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core benefit - the service or benefit thecustomer is really buying

basic product what a marketer mustturn the core benefit into

expected product - a set of attributesand conditions buyers normally expect

when they purchase this product


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augmented product - exceeds customerexpectations

potential product - encompasses all thepossible augmentations andtransformations the product or offeringmight undergo in the future

consumption system - the way the userperforms the tasks of getting and usingproducts and related services


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Marketers classify products on the following

basis:

Durability

Use

Tangibility

ConsumerIndustrial


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Nondurable

goods

Services

Durable

goods


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Nondurable goods - are tangible goodsnormally consumed in one or a few uses

Durable goods - are tangible goods thatnormally survive many uses

Services - are intangible, inseparable,

variable, and perishable products thatnormally require more quality control,supplier credibility, and adaptability


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We classify the vast array of consumergoods on the basis of shopping habits.

Convenience

Unsought

Shopping

Specialty


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usually purchased frequently,immediately and with minimal effort.

Staples - are convenience goods consumerspurchase on a regular basis.

Impulsegoods - are purchased without any

planning or search effort. Emergency goods - are purchased when a

need is urgent


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those the consumer characteristicallycompares on such bases as suitability,quality, price, and style.

Homogeneous shopping goods - are

similar in quality but different enough in

price to justify shopping comparisons. Heterogeneous shopping goods - differ in

product features and services that may

be more important than price.


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have unique characteristics or brandidentification for which enough buyersare willing to make a special purchasing

effort.

are those the consumer does not knowabout or normally think of buying


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We classify industrial goods in terms oftheir relative cost and how they enter

the production process: materials and parts

capital items

Supplies and Business Services


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are goods that enter the manufacturersproduct completely. Raw materials

farm products - supplied by many producers natural products - are limited in supply. They usually

have great bulk and low unit value and must bemoved from producer to user.

Manufactured materials and parts

Component materials - are usually fabricatedfurther

Component parts - enter the finished product withno further change in form


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long-lasting goods that facilitatedeveloping or managing the finished

product. Installations - consist of buildings and heavy

equipment

Equipment - includes portable factory

equipment and tools and office equipment


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are short-term goods and services thatfacilitate developing or managing the finishedproduct. Supplies

maintenance and repair items operating supplies

Business Services maintenance and repair services - are usually supplied

under contract by small producers or from the

manufacturers of the original equipment. business advisory services - are usually purchased on

the basis of the suppliers reputation and staff.


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FORM - the size, shape, or physical structure ofa product. FEATURESsupplement a products basic

function. CUSTOMIZATION - differentiate products by

customizing Mass customization - is the ability of a company

to meet each customers requirements

PERFORMANCE QUALITY - is the level at which

the products primary characteristicsoperate. CONFORMANCE QUALITYthe degree to which

all produced units are identical and meetpromised specifications


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DURABILITY - a measure of the productsexpected operating life under natural or

stressful conditions

RELIABILITY - is a measure of the probability

that a product will not malfunction or failwithin a specified time period.

REPAIRABILITY - measures the ease of fixing

a product when it malfunctions or fails. STYLE - describes the products look and

feel to the buyer. It creates distinctiveness

that is hard to copy.


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When the physical product cannot easilybe differentiated, the key to competitive

success may lie in adding valued services

and improving their quality.

ORDERING EASE - refers to how easy it is for thecustomer to place an order with the company.

DELIVERY - refers to how well the product orservice is brought to the customer. It includes

speed, accuracy, and care throughout theprocess.

INSTALLATION - refers to the work done to makea product operational in its planned location.


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CUSTOMER TRAINING - helps thecustomers employees use the vendorsequipment properly and efficiently.

CUSTOMER CONSULTING - includes data,information systems, and advice servicesthe seller offers to buyers.

MAINTENANCE AND REPAIR - programs

help customers keep purchasedproducts in good working order.


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Controllable returns - result fromproblems or errors by the seller or

customer Uncontrollable returns - result from the

need for customers to actually see, try,or experience products in person to

determine suitability


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is the totality of features that affect howa product looks, feels, and functions to a

consumer. Design offers functional andaesthetic benefits and appeals to bothour rational and emotional sides.


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1. bold simplicity

2. real authenticity

3. the power of red4. a familiar yet surprising nature

Design thinking is a very data-drivenapproach with three phases: observation

Ideation

implementation.


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Need family - The core need that underlies the existence

of a product family. Product family -All the product classes that can satisfy a

core need with reasonable effectiveness.

Product class -A group of products within the productfamily recognized as having a certain functionalcoherence, also known as a product category.

Product line -A group of products within a product classthat are closely related because they perform a similarfunction, are sold to the same customer groups, aremarketed through the same outlets or channels, or fallwithin given price ranges.

Product type -A group of items within a product line thatshare one of several possible forms of the product.

Item (also called stock-keeping unit or product variant) -A distinct unit within a brand orproduct linedistinguishable by size, price, appearance, or some otherattribute


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product system - is a group of diversebut related items that function in a

compatible manner. product mix

also called a product assortment

is the set of all products and items aparticular seller offers for sale.


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A companys product mix has a certainwidth, length, depth, and consistency.

Width - refers to how many differentproduct lines the company carries.

Length - refers to the total number of itemsin the mix.

Depth - refers to how many variants areoffered of each product in the line.

Consistency - describes how closely relatedthe various product lines are in end use,production requirements, distributionchannels, or some other way.


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Provides information for two key decisionareasproduct line length and productmix pricing.

SALES AND PROFITSmust be carefullymonitored and protected to determinewhich items to build, maintain, harvest, ordivest.

MARKET PROFILE - reviews how the line ispositioned against competitors lines.


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shows which competitors items arecompeting against a companys item

it identifies market segments.

Product Map for aPaper-Product Line


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Company objectives influence product

line length:

to create a product line to create aproduct line to induce up-selling

to create a product line that facilitatescross-selling

to create a product line that protectsagainst economic ups and downs


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A company lengthens its product line in

two ways:

1. LINE STRETCHING - occurs when acompany lengthens its product line

beyond its current range, whether down-

market, up-market, or both ways.


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A company positioned in the middle

market may want to introduce a lower

priced line for any of three reasons:

1.The company may notice strong growthopportunities as mass retailers.

2. The company may wish to tie up lower-end competitors who might otherwise

try to move up-market.

3. The company may find that the middlemarket is stagnating or declining.


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Companies may wish to enter the high

end of the market to achieve moregrowth, realize higher margins, or simplyposition themselves as full-line

manufacturers.

Companies serving the middle marketmight stretch their line in both directions.


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Product lines need to be modernized.

The question is whether to overhaul the

line piecemeal orall at once.

A piecemeal approach allows the companyto see how customers and dealers take to

the new style.


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the firm searches for a set of prices thatmaximizes profits on the total mix.

six situations calling for product mix

pricing: product line pricing optional-feature pricing captive-product pricing two-part pricing

by-product pricing product-bundling pricing


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PRODUCT LINE PRICING - Companies normally develop product

lines rather than single products and introduce price steps. OPTIONAL-FEATURE PRICING - Many companies offer optional

products, features, and services with their main product.

CAPTIVE-PRODUCT PRICING - Some products require the use of

ancillary or captive products.

TWO-PART PRICING - Service firms engage in two-part pricing,consisting of a fixed fee plus a variable usage fee.

BY-PRODUCT PRICING - The production of certain good soften

results in by-products that should be priced on their value.

PRODUCT-BUNDLING PRICING Sellers often bundle products and

features.

Pure bundling - occurs when a firm offers its products only as a bundle.

Mixed bundling - the seller offers goods both individually and in

bundles, normally charging less for the bundle than if the items

were purchased separately.


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Marketers often combine their products withproducts from other companies in variousways.

Co-Branding - also called dual branding orbrand bundlingtwo or more well known

brands are combined into a joint productor marketed together in some fashion.

same-company co-branding

joint-venture co-branding

multiple-sponsor co-branding

retail co-branding


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a product can be convincingly positionedby virtue of the multiple brands.

can generate greater sales from the

existing market and open opportunities fornew consumers and channels.

can also reduce the cost of productintroduction, because it combines two well-

known images and speeds adoption. means to learn about consumers and how

other companies approach them.


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risks and lack of control in becomingaligned with another brand in consumersminds.

Consumer expectations of co-brands arelikely to be high, so unsatisfactory

performance could have negativerepercussions for both brands.

If the other brand enters a number of co-branding arrangements, overexposure may

dilute the transfer of any association. lack of focus on existing brands

Consumers may feel less

sure of what they know about the brand.


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the two brands must separately havebrand equityadequate brandawareness and a sufficiently positivebrand image.

logical fit between the two brands, tomaximize the advantages of each whileminimizing disadvantages. they are

complementary and offer unique quality, rather than overly similar

and redundant.


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is a special case of co-branding

It creates brand equity for materials,

components, or parts that arenecessarily contained within otherbranded products.


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Consumers must believe the ingredient mattersto the performance and success of the endproduct.

Consumers must be convinced that not allingredient brands are the same and that theingredient is superior.

A distinctive symbol or logo must clearly signal

that the host product contains the ingredient. A coordinated pull and push program must

help consumers understand the advantages of

the branded ingredient.


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includes all the activities of designingand producing the container for aproduct.

The package is the buyers firstencounter with the product. A goodpackage draws the consumer in and

encourages product choice.


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Self-serviceeffective package must perform many salestasks: attract attention, describe the products features,create consumer confidence, and make a favorableoverall impression.

Consumer affluence - means consumers are willing to paya little more for the

convenience, appearance, dependability, and prestigeof better packages.

Company and brand image - Packages contribute toinstant recognition of the company or brand. In the store,

they can create a billboard effect, such as Garnier Fructiswith its bright green packaging in the hair care aisle.

Innovation opportunity - Unique or innovative packagingsuch as resealable spouts can bring

big benefits to consumers and profits to producers.


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1. Identify the brand.

2. Convey descriptive and persuasive

information. 3. Facilitate product transportation and

protection.

4. Assist at-home storage. 5. Aid product consumption.


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can be a simple attached tag or an

elaborately designed graphic that is part ofthe package

can be a simple attached tag or anelaborately designed graphic that is part of

the package Functions of Labeling:

Identifies

Grade

Describe Promote


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Warranties - are formal statements of

expected product performance by themanufacturer.

Products under warranty can be

returned to the manufacturer ordesignated repair center for repair,replacement, or refund.

Marketing Management Chapter 12

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