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MARK 3321: Chap 10-14
What is a product?
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A product is defined as everything, both favorable and unfavorable, that a person receives in an exchange.
Services and ideas are also products.
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Types of Consumer Products?
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Products can be classified as either business (industrial) or consumer, depending on the buyer's intentions.
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Key distinction between the two types of products?
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Their intended use.
Business Product - used to manufacture other goods or services, to facilitate an organization's operations.
Consumer Product - bought to satisfy an individual's personal wants or needs.
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Categorizing Consumer Products - 4 ways
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Convenience Products
Shopping Products
Specialty Products
Unsought Products
Classifieds products according to how much effort is normally used to shop for them.
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Convenience Product
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Relatively inexpensive item that merits little shopping effort.
Candy, soft drinks, aspirin etc
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Shopping Products
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More expensive than convenience product, found in fewer stores. Comparison shopping.
Homogeneous - similar - washer, dryer, TV, fridge
Heterogeneous - different - IKEA, La-Z-Boy
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Specialty Products
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Consumers search extensively for. Reluctant to accept substitutes.
Rolls-Royce, Bose Speakers, Rolex
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Unsought Products
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Product unknown to the potential buyer or a known product the buyer does not seek.
Insurance, burial plot.
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Product Item
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Specific version of a product that can be designated as a distinct offering among an organization's products.
Campbell's Cream of Chicken soup
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Product Line
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A group of closely related products.
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Product Mix
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All products that an organization sells.
Campbell's - soup, sauces, frozen entree, beverages..etc
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Product Mix Width
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Number of product lines an organization offers.
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Product Line Depth
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Number of product items in a product line.
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Product Modification
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Changes one or more of a products characteristics.
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Three types of Product Modification
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Quality Modification - change in a product's dependability or durability. Reducing products quality may lower price and appeal to different markets, vice versa.
Functional Modification - change in a product's versatility, effectiveness, convenience or safety.
Style Modification - aesthetic product change rather than a quality or functional change. Preventative maintenance.
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Planned Obsolescence
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Practice of modifying products so that those that have already been sold become obsolete before they actually need replacement.
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Product Line Extension
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Management decides to add products to an existing product line in order to compete more broadly.
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Overextended
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Company adds too many products, or demand can change for the type of products that were introduced over time.
The way to deal with overextension is through contracting product lines.
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Brand
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A name, term, symbol, design or combination thereof that identifies a seller's products and differentiates them from competitors' products
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Brand Name
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that part of a brand that can be spoken, including letters, words and numbers.
Ex: GM, YMCA, Chevrolet, WD-40, 7-Eleven
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Brand Mark
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The elements of a brand that cannot be spoken.
Ex: Mercedes-Benz, Delta Air Line symbols
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Brand Equity
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The value of a company or brand name.
High awareness, perceived quality, brand loyalty - high brand equity.
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Global Brand
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A brand that obtains at least one-third of its earning from outside its home country, is recognizable outside its home base of customers, and has publicly available marketing and financial data.
Ex: YUM! Brands
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Brand Loyalty
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Consistent preference for one brand over all others.
Ex: cigarettes, mayonnaise, toothpaste, coffee, headache medicine, bath soap, ketchup.
Brand identity is essential to developing brand loyalty.
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Manufacturer's Brand
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The brand name of a manufacturer.
Ex: Kodak, La-Z-Boy, Fruit of the Loom. National Brand - Synonym
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Private Brand
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A brand name owned by a wholesaler or a retailer. aka private label/store brand.
Ex: Target's Archer Farms
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Benefits of Branding
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Product identification - most important
Repeat Sales
New-product sales
Branding allows marketers to distinguish their products from all others.
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Advantages & Disadvantages of Manufacturer's & Private Brands
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44% of shoppers believe private label brands are simply repackaged manu brands.
59% believe that manu brands are more expensive because more money is spent advertising them.
70% believe that private label foods are just as good or better than national brands.
Private label has 29% market share.
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Advantages & Disadvantages of Manufacturer's & Private Brands
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Private Brand - overhead is low, there are no marketing costs, also has 10% higher margins than manufacturer's brand.
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Captive Brand
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No evidence of the store's affiliation, manufactured by a 3rd party, sold only at chains.
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Individual Branding
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Uses different brand names for different products.
Ex: Proctor & Gamble - Laundry Detergent - Bold, Cheer, Dash Dreft, Era, Gain and Tide
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Family Branding
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Marketing several different products under the same brand name.
Ex: Jack Daniel's - Whiskey, coffee, barbeque sauce, etc.
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Co-Branding
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Joins two or more brand names on a product or its package.
Ex:
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Three Popular types of Co-Branding
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Ingredient Branding
Cooperative Branding
Complementary Branding
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Ingredient Branding
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Identifies the brand of a part that makes up the product.
Ex: Church & Dwight co-branded an entire line of Arm & Hammer laundry detergents with OxiClean.
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Cooperative Branding
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Occurs when two brands receiving equal treatment borrow from each others brand equity.
Ex: Promotional contest jointly sponsored by Ramada, American Express, United Airlines used cooperative Branding. Guests at Ramada who paid with an American Express card were automatically entered in a contest which offered round trip airfare with United.
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Complementary Branding
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Products are advertised or marketed together to suggest usage, such as a spirits brand (Seagram's) and a compatible mixer (7UP).
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Trademarks
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The exclusive right to use a brand or part of a brand.
Service Mark - performs the same functions for services, such as H&R Block, Weight Watchers, etc. Ex: Coca Cola bottle, "Just Do It!", MGM lion's roar.
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Trademark rights..
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Come from use rather than registration.
Company must have genuine intention to use the mark when it files and must actually use it within three years of the granting application.
Protection usually lasts 10 years.
Rights to a tm last as long as it is being used.
2 years of non use, considered abandoned.
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Generic Product Name
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Identifies a product by class or type and cannot be trademarked.
Ex: Aspirin, cellophane, linoleum, thermos, kerosene, monopoly, cola, shredded wheat.
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Warranty
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A confirmation of the quality or performance of a good or service.
Protects the buyer and gives essential information about the product.
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Express Warranty
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Written guarantee
Ex: 100% cotton, complete satisfaction guaranteed
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Implied Warranty
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Unwritten guarantee that the good or service is fit for the purpose for which it was sold.
All sales have an implied warranty under the Uniform Commercial Code.
Ex:
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New-Product Development Process
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1. New-product strategy
2. Idea generation
3. Idea screening
4. Business Analysis
5. Development
6. Market Testing
7. Commercialization
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New-Product Strategy
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Links the new-product development process with the objectives of the marketing department, the business unit, and the corporation.
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Idea Generation
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New product ideas come from many sources, customers, employees, distributors, competitors, R&D, consults, etc.
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Idea Screening
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1st filter.
This stage eliminates ideas that are inconsistent with the organization's new-product strategy or are obviously inappropriate for some other reason.
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Business Analysis
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2nd Stage
Where preliminary figures for demand, cost, sales and profitability are calculated.
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Development
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Stage in which a prototype is developed and a marketing strategy is outlined.
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Test Marketing
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Limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.
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Commercialization
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The decision to market a product.
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Why Products Fail?
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1. They simple do not offer any discernible benefit compared to existing products.
2. Poor match between product features and customer desires.
3. Overestimation of market size, incorrect targeting or positioning, a price too high or too low, inadequate distribution, poor promotion inferior product.
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Diffusion of Innovation
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Innovation - product perceived as new by a potential adopter.
Diffusion - process by which the adoption of an innovation spreads. Five categories of adopters participate in the diffusion process.
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Five Categories of Adopters
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- Innovators: The first 2.5%, eager to try new products, worldly, active, higher incomes, self-confident, well educated
- Early adopters: The next 13.5%. Rely on group norms, oriented to the local community, opinion leaders
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Five Categories of Adopters
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- Early majority: The next 34%, seek out information about products, deliberate
- Late majority: The next 34%, rely on group norms and word-of-mouth, older, below average income, skeptics
- Laggards: The final 16%, independent, suspicious of new products, traditional
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Product Life Cycles (PLC) - 4 Stages
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Introduction
Growth
Maturity
Decline
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Introductory Stage
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High Failure Rates and Little Competition
Frequent product modification and Limited distribution
High marketing and production costs
Negative profits with slow sales increases
Promotion focuses awareness and information
challenge is to stimulate primary demand
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Growth Stage
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Second stage of the product lifecycle.
Sales typical grow
Competitors enter the market
Large companies acquire small firms
Profits rise rapidly
Reach their peak
Begin to decline as competition intensifies
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Maturity Stage
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Sales increase at a decreasing rate.
New users cannot be added indefinitely
Market approaches saturation
Longest stage of the PLC
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Decline Stage
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Long drop in sales
Rate of decline governed by how rapidly consumer tastes change or substitute products are adopted
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Fads
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They die very quickly
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Service
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The result of applying human or mechanical efforts to people or objects.
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How do services differ from goods? (4 ways)
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Intangibility - inability of services to be touched, seen, tasted, heard, or felt in the same manner that goods can be sensed.
Inseparability - inability of the production and consumption of a service to be separated; consumers must be present during the production. Ex. Haircut, surgery,
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How do goods and services differ? (4 ways)
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Heterogeneity - Services depend on their employees for quality, consistency difficult to achieve.. Ex. Barbers in a barbershop, different skills.
Perishability - Services cannot be saved. Challenging to synchronize supply and demand. Ex. Empty hotel room or airplane seat.
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Search Quality
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Characteristic that can be easily assessed before purchase.
Ex: car color
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When Services are Assessed
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Search Quality - More often applied to goods, assessed before purchase.
Experience Quality - Assessed after purchase.
Credence Quality - Assessed only with appropriate knowledge.
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Experience Quality
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Characteristic that can be assessed only after use.
Ex: Quality of a meal
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Credence Quality
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Characteristic that consumers may have difficulty assessing even after purchase because they do not have the necessary knowledge or experience.
Ex: Medical & consulting services
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5 ways customers evaluate service quality.
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1. Reliability- the ability to perform the service dependably and accurately
2. Responsiveness- the willingness to help customers and provide prompt service
3. Assurance- the knowledge of and courtesy by employees and their ability to convey trust and confidence
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Five ways customers evaluate service quality.
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4. Empathy- the caring, individualized attention provided to customers
5. Tangibles- the appearance of physical facilities, equipment, personnel, and communication materials
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RATER - Components of Service Quality
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1. Reliability - Do it right the first time.
2. Assurance - Prompt service.
3. Tangibles - Knowledge and courtesy of employees.
4. Empathy - Caring, individualized attention to customers.
5. Responsiveness - Physical evidence of the service
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Gap Model of Service Quality
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Identifies five gaps that can cause problems in service delivery and influence customer evaluations of service quality.
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Gap model of Service quality
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Gap 1 - management has incorrect view of what customers want
Gap 2 - management fails to translate customers needs into delivery plan
Gap 3 - service plan differs from service actually provided, firm don't follow through
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Gap Model of Service Quality
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Gap 4 - company's services do not meet customer expectations about what the firm provides (deception by firm)
Gap 5 - difference between what customer expects and what they receive, can be (+) or (--)
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Service as a Process
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People Processing - service directed at customers. Ex. Transportation, health care. Physical location.
Possession Processing - service directed at customers' physical possessions. Ex. Lawn care, dry cleaning. No physical location, normally.
Mental Stimulus Processing - services directed at people's minds. Ex. theater performers, education.
Information Processing - services that use tech or brainpower directed at a customer's assets. Ex. Insurance, consulting.
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Servicescope
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The environment in which the customer and service provider interact.
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Marketing Channel (or distribution channel)
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a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.
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Marketing Channel Functions
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Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
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Channel Intermediaries
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Merchant Wholesaler - Institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them.
Agents & Brokers - Wholesaling intermediaries who facilitate the sale of a product by representing channel members.
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Agent & Broker
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Do NOT take title to goods.
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Channel Structures
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Describe common channel structures and strategies, and the factors that influence that choice.
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Marketing Channels for Consumer Products
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1. direct:Directly from producer to consumer
2. retailer:Producer to retailers to consumers
3. wholesaler:Producers to wholesalers to retailers to consumers
4. Agent/broker:Producers to agents to wholesalers to retailers to consumers
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Alternate Channel Arrangements
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Dual or multiple distribution
Non traditional channels - internet/mail order
Strategic channel alliances - starbucks/pepsi (partner)
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Disintermediation
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Cut of intermediaries and go directly to final buyers.
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Product Factors
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-Complexity
-Price - more expensive, shorter channel distribution. Vice versa
-Standardization
-Life Cycle
-Delicacy - Don't want product moved. Limited hands touch
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Producer Factors that Affect Channel Choices
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-Producer Resources
-Number of Product Lines
-Desire for Channel Control
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Levels of Distribution Intensity
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Intensive - every place carries your product.
Selective - shopping, specialty brands, select places.
Exclusive - 1 or very few. Specialty products, nice cars, Rolex.
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Channel Power, Control, and Leadership
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Channel power- influence over other channel members
Channel control- one member intentionally affects another member's behavior
Channel leader- member with authority over activities of other channel members
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Channel Conflict
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Clash of goals and methods among the members of a distribution channel.
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