Chapter 8 Notes

Definition of a Product Anything that can be offered to a market for attention, acquisition use, or consumption and that might satisfy a want or need. Products can be physical objects, services, events, persons, places, organizations, ideas, or a combination of these things. Services are products that do not result in the ownership of anything. Countries are marketed as products to encourage tourism. What is a Product? A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or a need. It could take in any one of the following forms: Goods Services Experiences Organizations Places People Ideas Levels of a Product Core product or benefit Actual product Packaging, features, design, quality level, brand name Augmented Product Warranty, delivery, credit, installation, service Consumer Products (used for personal consumption) Convenience products Frequent purchase, easy buy, highly available, mass promotion E.g. soap, candy, newspapers Shopping products Less frequent, brand comparison, selective distribution and promotion E.g. furniture, clothing, cars, appliances Specialty products Strong brand preference, social effort, low price sensitivity, exclusive distribution, targeted promotion

E.g. Lamborghini, Rolex Unsought products Low awareness, negative interest, use personal selling E.g. life insurance, cemetery plots, blood donations Industrial Products (purchased for reselling purposes) Materials and parts Capital items Suppliers and services Those purchased for further processing or for use in conducting business. Does not include consumer products as they move through a distribution channel. Product Characteristics Three product levels: core, actual, augmented Product Decisions Product attributes: quality, features, design Packaging and labelling Product support services Product line decisions Product mix (or assortment) decisions Width refers to the number of product lines in the mix Depth refers to the number of versions of each product Social responsibility decisions Regulated by the Competition BUreau Regulated by federal statues such as the Hazardous products and the Consumer Packaging and Labelling Act International product decisions Which countries Whether to standardize, adapt, or invent Packaging, labelling, and language Individual Product Decisions Quality Ability of a product to perform its functions Features Differentiates a product from the competition Assessed based on value and cost Style and design Style = appearance: design is the heart of the product Branding Creating, maintaining, protecting, and enhancing products and services.

A brand is a name, term, sign, symbol, design, or a combination of these that identifies the marker or seller of a product or service. Packaging Designing and producing the container or wrapper for a product. Developing a good package includes developing the packaging concept, packaging elements, product safety concerns and environmental concerns. Labelling Printed information appearing on or with the package. Performs several functions such as identifying the product or brand, describes the product and promotes the produce through attractive graphics. Product Support Services Assess the value of current services and obtain ideas for new services. Assess the cost of providing new services. Put together a package of services that delights the customers and yields profits for the company. Product Line Decisions Product line is a group of products that are closely related because they function in a similar manner, are sold the the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. Product line decisions are based on the line length. Can manage the line by.... Line stretching - adding products to the line outside of current range. Line filling - adding more products within current range. Product Mix Decisions Product Mix All of the product lines and items that a particular seller offers for sale. Width Number of different product lines the company carries. Depth Number of versions offered of each product in the line. Consistency How closely related the various lines are. Services Marketing Service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

anything. Services marketing is associated with marketing the intangible components related to a product. Services Marketing Considerations Special characteristics of services that make them different from goods: Intangibility, inseparability, variability, perishability Services marketing strategy requires: The service-profit chain, internal marketing, interactive marketing Service differentiation: Just like products, services must be positioned in the minds of consumers and differentiated from the competition Service Characteristics Intangibility Cannot be seen, tasted,felt, or smelled before purchasing. Inseparability Produced and consumed at the same time and cannot be separated from their providers. Variability Quality may vary greatly, depending on who provides them and when, where, and how. Perishability Cannot be stored for later sale or use. The Service-Profit Chain Links service firm profits with employee and customer satisfaction. Consists of five links: Internal service quality Satisfied and productive service employees Greater service value Satisfied and loyal customers Healthy service profits and growth Service firms should pay attention to both interactive as well as internal marketing strategies. Brand Strategy and Management A brand is what defines one seller's product as distinct from those of other sellers Brands have status, value, and personality Any type of product (service, idea, person, etc.) may be branded As defined earlier, a brand is beyond a name. It could be a word, symbol, or image that identifies a company, product, or service

Branding Decisions Brand Equity Is the dollar amount attributed to the value of the brand, based on all the intangible qualities that create that value. Brand Positioning Attributes, benefits, beliefs, and values. Brand Attributes The qualities associated with a brand. Brand Name Selection, protection. Brand Management Lovemark A term to describe a brand that consumers feel especially passionate about. Coined by advertising agency Saatchi & Saatchi. Brand Development Strategies Manufacturer's brand, private brand (i.e. private label, licensing, co-branding, line extension, brand extension, multi brand. Brand Management Strategies Manufacturer's Brand Brand sponsored and promoted by the producer of the item Private Brand Brand created and owned by a reseller of a product or service Licensing Selling the use of established brand names or identities to companies Co-branding Using the established brand names of two different companies on the same product Brand Development Strategies

Line Extension Introduction of additional items in a given product category under the same brand name (e.g. new flavours, forms, colours, ingredients, or package sizes)

ingredients, or package sizes) Brand Extension Using a successful brand name to launch a new or modified product in a new category Multi-brands Offers a way to establish different features and appeal to different buying motives New Brands Developed based on belief that the power of its existing brand is waning and a new brand name is needed. Also used for products in new product categories Why Develop New Products? Follow changing market demands Remain competitive Keep up to changing technology Replace dying products Refresh and evolve existing products Diversify product offering to reduce risk Obtaining New Products Acquire Patents Licenses Companies Develop New products Modifications to existing products Improvements to existing products Successful New Products Offer a unique superior product Higher quality in products Features and higher value in use Have a well-defined product concept Senior management commitment Relentless innovation Smoothly functioning new product development process Clear understanding of its target market New Product Failures Target market not appropriately defined or evaluated Failure to conduct market research to understand the potential Market size may have been overestimated Poor quality or design

Incorrect positioning, pricing, or promotion Does not deliver superior value Product is developed as a pet project of an executive New Product Development Process Idea Generation Idea Screening Product Concept Marketing Strategy Business Analysis Product Development Test Marketing Commercialization Initial Stages Sources of new ideas Employees, customers, suppliers, partners, competitors Idea screening Narrow down to those worth more time and money Concept development Develop prototypes and test consumer interest Idea Generation Systematic search for new ideas Sources Own staff, executives, scientist, engineers, manufacturing, and sales personnel Customers, distributors, and suppliers Marketers could get valuable insights from customers by watching and listening to them E.g. Heinz launching green ketchup targeting kids Outside new product consultants and design firms could also provide valuable insights Idea Screening Sorting through new product ideas to identify good ideas, and separate them from the not-so-good ideas In screening for ideas, estimations of market size, product price, development time, manufacturing, and marketing costs and rate of return would be useful Evaluate these findings against a set of company criteria for new products Concept Development and Testing A product concept is a detailed version of the new product idea that can be shown to potential customers

It involves developing the new product idea into various alternative forms and testing the concept with a group of potential customers Picture description, more physical presentation of the concept will increase reliability of the test Today virtual reality through computer simulations are increasing being used for concept tests. Business Case Stages Marketing Strategy Target market Product positioning Sales, market share, and profit objectives Involves designing an initial marketing strategy for a new product based on the product concept Phase One - describes target market Value proposition, sales, market share, and profit goals Phase Two - strategy statement Product's planned price, distribution, marketing budget Phase Three - planned long run return Sales and profit goals, marketing mix strategy Business Analysis Review of sales, costs, and profit projections Will product meet corporate objectives? Involves a review of the sales, costs, and profit projections to assess fit with company obejectives If yes, then move to the product development phase Product Development Developing the product concept into a real working version of the product Subjecting it to a variety of tests Calls for large jump in investment Prototypes are developed Prototype must have correct physical features and convey psychological characteristics Stages of New Product Development Idea generation - from internal and external sources Idea screening - choose the best ideas to develop Concept development and testing - define marketing goals Business analysis - figure out return on investment Product development and testing - using the actual product Test marketing - find out how customers respond to the new product

Commercialization - product is rolled out to the market Commercialization Relates to the full scale introduction of the new product into the market Must decide on timing (when to introduce the product) Must decide on where to introduce the product (single location, state, region, nationally, or internationally) Must develop a market rollout plan Test Marketing Testing the product and marketing program in real, but limited, market conditions Can be expensive and time consuming, but better than making a major marketing mistake If the response to the test marketing is favourable, then the new product will be rolled out to the larger market Approaches to Managing New Product Development Customer-centered new product development Truly begins and ends by solving customer problems Team-based new product development Departments work closely together in cross-functional teams overlapping the steps of the process Product Life Cycle (PLC) The lifespan of a new product, from its development to its eventual decline. The product typically runs through five stages. Development - no customers, no profits, heavy spending Introduction - early adopter customers, no profits, high launch costs Growth - early majority customers, rapid sales growth and revenues Maturity - late majority customers, flat sales, declining profits Decline - laggard customers, declining sales, replaced by new products Introduction Phase The product life cycle stage in which the new product is first launched into the market. This stage is characterized by: Sales - low Costs - high cost per customer Profits - negative Marketing objectives - create product awareness and trial

Product - offer a basic product Price - use cost-plus Distribution - build selection distribution Promotion - heavy to entice product trial Growth Phase The product life cycle stage in which a product's sales start climbing quickly. This stage is characterized by: Sales - rapidly rising Costs - average cost per customer Profits - rising Marketing objectives - maximize market share Product - offer extension, service, warranty Price - penetration strategy Distribution - build intense distribution Promotion - reduce to take advantage of demand Maturity Phase The stage in the product life cycle in which sales growth slows, then levels off. This stage is characterized by: Sales - peak Costs - low cost per customer Profits - high Marketing objectives - maximize profits while defending market share Product - diversify brand and models Price - match or best competitors Distribution - build more intensive distribution Promotion - increase to encourage brand switching Maturity Stage Strategy Modify the market Increase the consumption of the current product How? Look for new users and market segments Reposition the brand to appeal to larger or faster-growing segment Look for ways to increase usage among present customers Modify the product Changing characteristics such as quality, features, or style to attract new users and to inspire more usage How?

Improve durability, reliability, speed, taste Improve styling and attractiveness Add new features Expand usefulness, safety, convenience Modify the marketing Mix Improving sales by changing one or more marketing mix elements How? Cut prices Launch a better ad campaign Move into larger market channels Offer new or improved services to buyers Decline Phase The product life cycle stage in which a product's sales begin to decrease This stage is characterized by: Sales - declining Costs - low cost per customer Profits - declining Marketing objectives - reduce expenditures and milk the brand Product - phase out weak items Price - cut price Distribution - selective and phase out unprofitable outlets Promotion - reduce to minimum level Style, Fashion, and Fads Style is a basic and distinctive mode of expression E.g. styles appear in homes, clothing, art, etc. Fashion is a popular style in a given field E.g. prime time game shows Fad is a fashion that enters quickly, is adopted quickly and declines quickly E.g. pet rocks

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