PowerPoint

to accompany
Chapter 6
Creating and
Managing
Products
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Objectives for Chapter 6
Understand the product concept, and explain how
products are classified
1
2
Explain the importance of “new” products, and
describe how companies develop them
3
Understand the different types of innovations
Explain the adoption and diffusion processes.
4
5
Understand how companies manage their
products through the various stages of the
product life cycle (PLC)
6
Explain the roles that branding, and packaging
and labelling play in creating product identity
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Product
Product
What is it?
2. New Product
Development
Innovations
3. Product
Acceptance
Adoption
Diffusion
1. Product
Classifications
Duration
Purchase
Effort
4. Product
Management
PLC
5. Product Identity
Branding
Packaging
Labelling
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Making and Delivering Value
(Figure 3.1)
Making marketing value decisions
Understanding consumers’ needs
Communicating the value proposition
Delivering the value proposition
Creating the value proposition
This
chapter
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
The Product Concept
A product is
everything beneficial
than a customer receives
in an exchange
A good is a
tangible product
that we can see,
touch, smell, hear
or taste
A product is anything
tangible or intangible that
satisfies customers’ needs
as a result of an exchange
process
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Product Layers
The core product
(core benefits)
The augmented
product
The actual
product
Consists of all the benefits*
the product will provide
customers
Is the physical good (or
delivered service) that
supplies the desired benefit
Consists of added
supporting features, which
help further differentiate the
product
* A benefit is a positive outcome that the
customer receives from owning or using a
product
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Three Levels of Product
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Task
Give examples of the three layers
of the following products:

• A Qantas flight
• A laptop computer
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Qantas - three levels of product
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Classifying Products
Consumer products can
be defined by the
1. Life of a product
Durable goods
Non-durable
goods
Products that provide
benefits over a period
of months or years,
such as cars and
furniture
Products that are
consumed in the
short term, such
as petrol or food
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Classifying Products (cont’d)
Consumer
products can be
defined by
2. How consumers
buy the products
2. Shopping products
3. Specialty products
1. Convenience
products
4. Unsought products
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Classifying Products (cont’d)
Convenience
products
Usually low-priced, widely available and
purchased frequently with a minimum of
comparison and effort Eg, staples (basics),
impulse, and emergency products
Shopping
products
Where consumers spend suitable time and
effort gathering information and comparing
alternatives Eg, furniture clothes, cars…
Specialty
products
A product that has unique characteristics, is
important to the buyer, and where the buyer
will devote significant effort
Eg, loyal to a specific brand
Unsought
products
Where the consumer has little awareness
or interest until the product is brought to
their attention
Eg, life insurance, retirement planning
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Business-to-Business Products
Classified according to
how organisational
customers use them
(B2B users)
Equipment
Maintenance,
repair and
operating (MRO)
products Eg,
bulbs, bolts,
paper,

Component
parts Raw
materials
Specialised
services
Processed
materials
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Developing New Products
A continuous process of looking for ways to make the
existing product range better
WHY?
New product development is becoming
increasingly important to companies,
due to:
Changing consumer
lifestyles and values
Increasing
competition in
a global
marketplace
Rapid changes in
technology
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
What is an Innovation?
An innovation is defined as a
product that consumers perceive
to be new and different from
existing products
Note: It is estimated that between
1/3
rd
and ½ of new products fail
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Types of Innovations (newness)
1. Continuous
innovations
2. Dynamically
continuous
innovations
3. Discontinuous
innovations
A modification of
an existing
product sets one
brand apart from
its competition
(a “look-alike”
product)
A change in the
existing product
that requires a
moderate amount
of learning
(phone with
camera)
A totally new
product that
creates major
changes in the
way we live
(hybrid car,
digital TV)
Innovations vary in their degree of newness,
and this helps determine how quickly the
product will be adopted
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Adoption and Diffusion Processes
Product adoption is
the process by which a
consumer begins to buy
and use a new product
Diffusion is the process
by which the use of a
product spreads through
a population
The Adoption Pyramid (Figure 6.3)
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Categories of Adopters (Figure 6.4)
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
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edition
Factors Affecting the Rate of Product
Adoption
5. Observability
How visible (to others)
are the benefits of
using it?
4. Trialability
The ability to try a new
product and experience
its benefits
3. Complexity
Whether the product is
difficult to use or
understand
1. Relative advantage
The degree to which a
new product provides
superior benefits
2. Compatibility
The extent to which a
new product is consistent
with existing product
knowledge and practices
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Product Planning: Lines & Mixes
Product Line Strategies
An upward line stretch adds
higher quality products
2. A large number of
variations in a
product line is
known as a
full line or depth
Eg. Clairol, Pantene..
1. A product line is a
company’s total
offering designed to
satisfy a single need
Eg a shampoo line
3. The number of
separate items within
the same category
determines the length of
the product line
Eg for oily, dry, coloured hair
(= filling out)
Cannibalisation is when sales of existing
products are eaten up by a new product that the
company introduces
A downward line stretch
adds lower quality products
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Product Mix Strategies
Normally companies develop a
mix of product lines that have
something in common, such as
distribution channels or
manufacturing facilities
Eg, personal care products
The number of different
product lines produced is
known as the width of
the product mix
A product mix is
the total set of all
products that a
company sells
Eg, Gillette’s
broad mix
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Campbell’s Product Lines and
Product Mix
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
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edition
Congratulations it’s a product!
(PLC)
PLC Stages
Introduction • Usually a single company only produces the product
• The goal is to get first-time consumers to try the product
• If the product is successful, competitors will follow
Growth • The goal is to encourage repeat purchase and to build brand loyalty
• More product variations are introduced to target more market
segments
• Price competition may develop
Maturity • Usually the longest stage
• Companies will try and sell the product through as many outlets as
possible
• Promotion is targeted at reminding customers and reinforcing brand
loyalty
Decline • Competitors start to withdraw
• Fewer product variations exist
• A few companies may remain quite profitable
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Task

What stage in the product life style are
the following products?

(i) Barbie,
(ii) typewriter,
(iii) DVD player,
(iv) mobile phone
(v) Kellogg’s Cornflakes,
(vi) digital camera.
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Branding provides the recognition factor that
products need to succeed
Brand is a name, term, symbol, or any other
unique element, of a product that identifies one
company’s products and sets them apart from
the competition
BRANDING

What is a Brand?
Top Ten Global
Brands
Top Ten Global Brands
1. Coca-Cola U.S.
2. Microsoft U.S.
3. IBM U.S.
4. GE U.S.
5. Nokia Finland
6. Toyota Japan
7. Intel U.S.
8. McDonald's U.S.
9. Disney U.S.
10. Mercedes-Benz Germany
SOURCE: David Kiley, "Best Global Brands," Business Week, August 6, 2007

Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
The Importance of Branding
Brand equity = value of the
brand to an organisation
Strong brand equity
creates customer loyalty,
communicates quality,
helps establish clear,
positioning and allows for
premium prices
Strong brands build
an emotional
connection with the
consumer
Steinway piano – the chosen brand of
95% of concert pianists
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Branding Strategies
Generic
brands
Private-label
brands
Manufacturer
brands
Individual
brands
Family
brands
Also known as an umbrella brand strategy,
where the firm markets multiple products under
the same brand name Heinz
A no branding strategy, usually competing
on price
Brands developed by the producer of the
product Kelloggs
Brands exclusive to a particular retailer
Woolworth’s “Select”, Kmart’s “Now”
Having a separate, unique brand for each
product Unilever’s Dove, Rexona…
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Licensing the Brand and
Co-Branding
Some products will use
ingredient branding,
for example ‘Intel
inside’, Peters Cadbury
ice-cream

Usually limited to a
specific purpose,
geographical
location, and a
specific time period
Licensing is an
agreement in which one
company sells another
company the right to use
a brand name
Co-branding is when
two brands combine to
promote a product or other
enterprise, for example
Coles/Shell petrol stations
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Intellectual Property (IP)
Inventions, processes, brand names,
logos, designs, artistic and literary
creations are examples of intellectual
property and they can be protected as
trademarks, copyrights, & patents.
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Packaging
Designed to attract
the consumer’s
attention
Provides easy brand
recognition
May help augment
(add to) the product
with information,
recipes, warranties
Helps quickly
communicate the
product benefits
May provide
additional
benefits, such
as a special lid
Designed to physically
protect the product
Functions of Packaging (Figure 6.9)
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Labelling
Food items must list the
major ingredients and
the country of origin Should clearly
describe the
product
May need to show weight
or volume
Legislated by the
Trade Practices
Act 1974 Contains the bar code
(known as the Universal
Product Code – UPC)
Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Task on Classifications of Products

From the list of products below, classify
each product into a category
(convenience, shopping, specialty,
unsought) as if you were buying the product

Consider the following factors in your
analysis:
shopping effort, price, planning, brand
preference, and regularity of purchase.

Products: car stereo, winter coat, pair of
shoes, life insurance, blue jeans,
hamburgers, shampoo, canned vegetables,
frozen pizza.

Copyright ©2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) –9781442525207/Solomon/Marketing/2
nd
edition
Topic Review
Understand the product concept, and explain how products
are classified
1
2
Explain the importance of new products, and describe
how companies develop them
3
Understand the different types of innovations
Explain the adoption and diffusion processes. 4
5
Understand how companies manage their products
through the various stages of the product life cycle
6
Explain the roles that branding, and packaging and labelling
play in creating product identity