Product P 19 roduct, according to Kotler (2008), is anything that is offered to a market for attention, acquisition, use or consumption and that might satisfy a need or want. Products that are marketed include physical goods, services, experiences, events, persons, places, properties, organization, information and ideas. William J. Stanton defines a product as a complex of tangible and intangible attribute, including packaging, color, price, manufacturer’s prestige and retailers prestige and manufacturer’s and retailer’s services which the buyer may accept as offering satisfaction of wants and needs. Three Levels of a Product Core Product – considered as the essence of the product. This is that part of the product that the consumer is actually buying. Actual Product – considered as the product’s personality. This is the physical property of a product. This includes the product’s name, label, brand name, style, packaging, features, and quality level. Augmented Product – the level where the seller provides additional services and privileges to consumers of the product. It may be in the form of after-sales service, warranty, free maintenance, discounts, and many more. Classification of Products Consumer products are those bought by household consumers for their personal consumption. Consumer products are divided into four classes: Convenience goods are those that are widely distributed and relatively inexpensive goods which are purchased frequently and with minimum effort (http://www.learnmarketing.net). Examples are bread, coffee, photocopying services, etc. Convenience goods may be staples, impulse, and emergency goods. Examples of staples are rice and sugar. Chocolates and candies are impulse goods while umbrellas and batteries are classified as emergency goods. Shopping goods are those that the customer typically compares for suitability, quality, price, features, etc. before selection and purchase (http://en.mimi.hu/marketingweb /shopping_goods.html). These goods are usually of higher value Blackberry Playbook Tablet Product Product 20 than convenience goods, bought infrequently, and are durable. Shopping goods may either be homogenous or heterogeneous. Homogeneous shopping goods are those that are similar in quality but different enough in other attributes (such as price, brand image, or style) to justify a search process. Examples: Laptops of Acer and Asus brands, their quality is same, but their price, brand image and styles are different. Heterogeneous shopping goods have product features that are often more important to consumers than price; examples include clothes, high-tech equipment, and furniture. Specialty goods are those with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort (http://www.mbanotesworld.in). The consumers will conduct extensive research to make sure that their purchase decision is right, because these goods are expensive and not frequently purchased. For example, one may insist on buying a North Face® backpack for his outdoor activities. Or, a customer would insist on going to David’s Salon for her regular hair treatment. Unsought goods are consumer products that the consumer either does not know about or knows about but does not normally think of buying. These are goods that consumers did not even know they needed until either (a) an emergency arose that needed an immediate purchasing decision to help resolve said emergency; or (b) an aggressive sales representative influence them into a purchase. Memorial plans, life insurance, and security alarm systems are examples of unsought goods. Industrial products goods and services purchased by industrial buyers for use in the production of their own goods and services or in the conduct of their business (http://en.mimi.hu/marketingweb/industrial_goods.html). Raw Materials are industrial goods that are processed to become part of another product. Farm products such as pork, cotton, eggs, milk, and poultry, and natural resources like coal, iron ore, and lumber make up raw materials. Component parts and materials are finished goods of one producer that become part of the final products of another producer. Texas Instruments (TI) manufactures a product known as Open Multimedia Application Platform (OMAP) which is originally intended Product Product 21 for use as application processors in smart phones with processors hefty enough to run significant operating systems, support connectivity to personal computers, and support various audio and video applications. Now, the different generations of TI OMAP are used in products like Nokia N900, Motorola Droid, Samsung I9003 Galaxy SL, and LG Optimus Black. Installations include major capital investments for new factories and heavy machinery and for telecommunications systems. Accessory Equipment are capital items that typically cost less and last for shorter periods than installations. They do not become part of the finished product even if it has substantial value and is used in an organization’s operations. Some examples are forklifts, copying machines, power tools, and computers. Supplies are also called MRO supplies (Kotler and Armstrong, 2008) because they fall into three categories: (a) Maintenance items like brooms, and lightbulbs; (b) Repair items like nuts and bolts used in repairing equipment; and (c) Operating supplies like printer cartridges, pens, and staplers. The New Product Development Process The three distinct categories of new products are: a. Innovative Products These are considered as unique products and that they satisfy needs that have not been satisfied at the time they were introduced. This point-and-shoot camera is the first to include a built-in projector, capable of casting images that measure up to 40 inches diagonally. This newfangled technology may bring back the oldfashioned family slide show. Nikon Coolpix S1000PJ Camera Product Product 22 b. Replacement Products Replacement products are assigned when the current items become temporarily or permanently unavailable. OECD defines a replacement product as the product chosen to replace a sampled product either because it has disappeared completely from the market or because its market share has fallen either in a specific establishment or in the market as a whole. Memory sticks and Flash Drives have largely replaced floppy disks. c. Imitative Products These are new to the company but not entirely new to the market. These products imitate competitive products with identical features. iPod is a line of portable media players designed and marketed by Apple and launched in 2001. Zune is an entertainment platform and portable media player made by Microsoft launched in 2006. Microsoft Zune Apple iPod New Product Development Process Idea Generation The new-product development process starts with the search for ideas. Top managers should define the product and market scope and the new product’s objectives. They should state how much effort should be devoted to developing breakthrough products, modifying existing products, and copying competitors’ products. This is considered as the exploration stage of new product development. New-product ideas can come from many sources: customers, scientists, competitors, employees, channel members, and top management. Idea Screening This is the stage in which alternative ideas are sorted. The purpose of screening is to drop poor ideas as early as possible. The rationale is that product-development costs Product Product 23 rise substantially with each successive development stage. Most companies require newproduct ideas to be described on a standard form that can be reviewed by a committee. The description includes the product idea, the target market, and the competition, and it roughly estimates market size, product price, development time and costs, manufacturing costs as well as the rate of return. Idea Generation Amount of Investment Idea Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization Figure 4.1 New Product Development Process Concept Development and Testing Diola and Tichepco (2009) define this as the development of screened ideas into product concepts. A product idea is a possible product the company might offer to the market. A product concept is an elaborated version of the idea expressed in meaningful consumer terms. Concept testing involves testing the product concept with a group of consumers to determine their reaction. Marketing Strategy Development This consists of three parts. The first part describes the target market, the positioning of the product, the market share, and the target sales and profits for the first Product Product 24 few years. The second part describes the pricing, distribution, and marketing budget for the first year of production. The third part describes the long-term potential of the goods of the company in terms of sales, profits, and marketing mix strategy (Diola and Tichepco, 2009). Business Analysis This stage requires both qualitative and quantitative analysis. The quality of the product and its likely success are evaluated. The new product idea is also evaluated making use of quantitative facts and figures. Product Development In this stage, a prototype or a trial model of the product is developed. Test Marketing This is an experimental procedure in which the company tests a new product under realistic market conditions so that the company will be able to measure its potential sales once distributed in a bigger area. There are instances when the design of the product and the planned production may be modified based on the results of the tests conducted. This is also the part where management decides whether to continue or not with the product. Commercialization Production and distribution will be full blast at this stage. This entails great risks because it involves financial, physical, and human resources. The Product Mix This refers to the variety of product lines that a company produces, or that a retailer stocks. With the right blend of products offered, a company can maximize sales opportunities. Product mix is sometimes called product assortment (http://www.bnet.com/topics/product+mix). Product Line A product line is a collection of products, offered by a firm, that satisfy similar needs for different target audiences. Thus all products within a product line are related, but may vary in terms of size, color, quality etc. The product line is part of the broader product mix, which is the full suite of products offered by the company (http://en.mimi.hu/marketingweb/product_line.html). For example, Nike produces several lines of athletic shoes, and Motorola produces several lines of telecommunications products. Product Line Width This refers to the number of product lines the firm offers. For example, Procter & Gamble markets a fairly wide product mix consisting of many product Product Product 25 lines, including paper, food, household cleaning, medicinal, cosmetics, and personal care products. Product Line Length This refers to the number of different products a firm carries within its product lines. Procter & Gamble typically carries many brands within each line. For example, in the Philippines, it sells four laundry detergents, three shampoos, and three bath soaps. Product Line Depth This refers to the number of versions (such as size of packaging, different formulations, etc.) offered of each product in the line. For example, Pantene of Procter and Gamble has Pantene Soft and Silky, Pantene Hair Fall Control, Pantene Nourished Shine, and the latest Pantene Nature Care. Product Mix Strategies Establishing and managing the product mix have become increasingly important marketing activities. Improving the depth, length, and width to the product mix requires careful thinking and planning. Marketers have to look at the effectiveness of its depth, Product Product 26 length, and width. Otherwise, a company may end up with too many products including some that do not sell well. Product Positioning A product’s position is what the customer believes about your product's value, features, and benefits; it is a comparison to the other available alternatives offered by the competition. These beliefs tend to based on customer experiences and evidence, rather than awareness created by advertising or promotion. There are various strategies that can be utilized by marketing executives in order to create the most useful meaning in the minds of consumers. 1. Positioning in relation to a competitor More often than not, the best position is directly against the competitor especially if there are only few of them. Examples: Globe versus Smart Jollibee versus McDonalds 2. Positioning in relation to a product class A company may produce several brands within the same product class in order to appeal to different segments of the market. Example: Universal Robina Corporation offers different beverages that can be positioned to compete with the products of its rivals. URC offers Nature's Harvest FAB which is positioned against Del Monte’s Fit n’ Right. URC also offers Xplode, an energy drink, which is positioned against PepsiCo’s Sting and Asia Brewery’s Cobra. 3. Positioning in relation to a target market Example: The Generics Pharmacy has positioned itself to offer generic medicines to people who are not so particular with the brands of the medicines they buy and are in search for lower priced medicines. 4. Positioning by price and quality Example: Eastwood and Rockwell are known in the Philippines as prominent malls with high prices. On the other hand, SM and Robinsons are known for relatively lower prices. Product Product 27 Product Mix Expansion Another strategy a company may adopt is increasing the depth within a product line and/or the number of lines a firm offers to its market. 1. Product Line Extension is the use of an established product’s brand name for a new item in the same product category. For example, Coca-Cola, in addition to its Regular Coke, offered Diet Coke, Coke Light, Coke Vanilla, and Cherry Coke to the Philippine market. 2. Product Mix Extension occurs when a firm adds new product line to its present assortment of products. Globe Telecommunications offered Broadband services in 2007 in addition to its original assortment of services. Trading Up and Trading Down The product strategies of trading up and trading down involve an expansion of product line and a change in product positioning. Trading up means increasing the number of features (and their associated benefits) of a product, improving its quality, or backing it with a superior level of service to justify a higher price (http://www.businessdictionary.com). The purpose is to boost the image or prestige of the product and increase the sale of the existing low-priced products. With the iPad 2 going on sale in a week, Apple appears to be working to unload its remaining inventory of the tablet computer's first generation. It takes some poking around, but on Apple's website, the entry-level 16 GB iPads (Wi-Fi only) were on sale Thursday for $399 -- $100 less than before -- with refurbished models going for $349. A 32GB Wi-Fi model now sells for $499, and the 64GB version is $599. Prices range up to $729 for the 64GB version with Wi-Fi and 3G connectivity. iPad 2 by Apple iPad prices drop as iPad 2 approaches March 03, 2011| By Doug Gross, CNN Trading down means adding a low-priced item to its line of prestigious products. The purpose of this is to encourage people who cannot afford the original product to buy the new product because it carries some of the status or prestige of the higher-priced product. Product Product 28 The All-New NOOK, The Simple Touch Reader runs Android 2.1 and features a 6-inch touchscreen, the most-advanced EInk Pearl display yet with up to 80 percent less flashing, and a battery life of a whopping 2 months (with Wi-Fi off). It has 2GB of storage for up to 1,000 digital books, and sports a microSD card slot for even more storage. It's lighter and slimmer too. The All-New NOOK weighs in at only 7.48 ounces – that's 35 percent lighter and 15 percent thinner than the first model. (http://www.beststuff.com) This is available at www.nook.com and at Barnes & Noble stores for just $139 – cheaper than the NookColor which is sold for $249. Product Alteration Product alteration means improving an already existing product. This can be more profitable, less risky and less costly than developing a completely new product. Many companies frequently redesign or reformulate their products to give them a new appeal. For material goods, especially, redesigning is often the key to products, and renaissance packaging has been a very popular area for product alteration, particularly in consumer products (http://www.mbanetbook.co.in). Product Mix Contraction Product mix contraction means eliminating an entire product line or simplifying the assortment within a line. This is intended to weed out a low-profit and unprofitable products. The expected result is higher profits from fewer products. The Product Life Cycle All products have a particular life span, which is called the product life cycle. The length of time a product is on the market is largely contingent upon its competition, technology and even the savvy of a company's marketing department. One of the best ways of extending a product's life cycle is to continuously garner feedback from consumers, finding out what they need and want from a particular product (http://smallbusiness.chron.com). CDs have been around for several years already but the demand and use for such are declining due to the increase in the demand and use for digital files including music, movies, and others that can be stored in other saving devices. Telephones have been used for many years; cellular phones of different models are very young products by comparison. Product Product 29 Product Life Cycle Stages Management should be able to determine the stage which its product is already in to determine the competitive environment and marketing strategies to be used. 1. Introduction. At this stage, the product is launched full-scale into the market. During this stage, a firm works hard to stimulate demand for the new product. It focuses not only on finding first-time buyers of the product and using promotion to make them aware of the product, but also on creating channels of distribution by attracting retailers and other intermediaries to handle the product. At this stage, expenses are high and profits are low. 2. Growth. If the product earns market acceptance, it should at some point enter a period of comparatively rapid growth. It usually begins when a firm starts to realize substantial profits from its investment. As sales rise, competitors enter the market, resulting in a decline of profits toward the end of the growth stage. 3. Maturity. As the product approaches the end of its growth period, sales begin to decline. Sales eventually reach a plateau as the backlog of potential customers dwindles. Profits level off and then fall in the maturity stage. Later in this stage, for reasons like diminished popularity of the product, obsolescence, or market saturation, the product begins to lose market acceptance and some producers are forced to drop out of the market because of lack of sufficient customers and/or profits. The competitive environment becomes increasingly 4. Decline. The decline stage is characterized by falling sales and falling profits. Most competitors have withdrawn from the market. Survivor firms compete within an even smaller market, driving profit margins lower still. Figure 4.2 The Product Life Cycle Product Product 30 Extending the Product Life Cycle Marketers usually try to extend each stage of the lifecycles for their products as long as possible. Product lifecycles can stretch indefinitely as a result of decisions designed to increase the frequency of use by current customers, increase the number of users for the product, find new uses, or change package size, labels, or product quality. 1. Increasing Frequency of Use During the maturity stage, the sales curve for a product category reaches a maximum point if the competitors exhaust the supply of potential customers who previously had not made purchases. However, if current customers buy more frequently than they formerly did, total sales will rise even though no new buyers enter the market. For instance, consumers buy some products during certain seasons of the year. Marketers can boost purchase frequency by persuading these people to try the product year around. For decades, most people use sunscreen during warm and sunny seasons of the year. With greater warnings about the risks of sun damage and skin cancer, however, companies now advertise the benefits of using sunscreen year around. Even consumers of some skin products are encouraged by marketers to use said products “as often as possible”. As a result, frequency of use as well as frequency of purchase will be higher. 2. Increasing the Number of Users A second strategy for extending the product life cycle seeks to increase the overall market size by attracting new customers who previously have not used the product. Marketers may find their products in different stages of the lifecycle in different countries. This difference can help firms extend product growth. Items that have reached the maturity stage in United States may still be in the introductory stage somewhere else. NBC Universal, in 2008, announced that it will start a 24-hour local news channel along the lines of cable’s New York One. It will de-emphasize the identity of the NBC network’s flagship station, WNBC, Channel 4 in New York, rechristening it a “content center,” and making it one part of a larger local media effort. NBC Universal plans to de-emphasize the identity of the NBC network’s flagship station, WNBC, Channel 4 in New York. NBC’s plan calls for rebuilding Channel 4’s newsroom and melding its content closely with the coming news channel, the existing local Web site, and out-of-home video displayed in locations like gas pumps and back seats of taxicabs. NBC will even take WNBC’s name off its local news Web site, simply calling it NBC New York. (http://mediadecoder.blogs.nytimes) 3. Finding New Uses Finding new users for a product is an excellent strategy for extending a product’s lifecycle. New applications for mature products include oatmeal as a cholesterol reducer, antacids as a calcium supplement, and aspirin for promoting heart health. Product Product 31 Marketers sometimes conduct contests or surveys to identify new uses for their products. They may post the results or their own new ideas on their Web sites. Arm & Hammer cites a variety of alternative uses throughout the house for its baking soda. Consumers can use baking soda to clean crayon off walls, as an antacid to settle an upset stomach, as an agent to balance the pH in swimming pool water, as laundry detergent, underarm deodorant, and cat litter deodorizer. In their website, solutions to everyday household problems are made available. 4. Changing Package Sizes, Labels , or Product Quality Many firms try to extend their product lifecycles by introducing physical changes in their offerings. Alternatively, new packaging and labels with updated images and slogans can help revitalize a product. Procter & Gamble rejuvenated its Herbal Essences Shampoo line by aiming at a younger generation of consumers with new packaging and language. Different hair style products were given updated names such as “Totally Twisted”, “Break’s Over”, “Long Term Relationship” and “Drama Clean.” The shampoo and conditioner bottles are curved so that they fit together on the store shelf or bathroom counter. Brands and Trademark A brand is a name, term, symbol, special design, or a combination of these elements that is intended to differentiate the goods or services of a company from those of its competitors. A brand name is the verbal part of the brand. It consists of words, letters, and/or numbers that can be uttered or vocalized. Toyota, Jollibee, and Kleenex are brand names. One method of classifying brand is on the basis of who owns them – producers or retailers. Sony, Lexus, and Colgate are the producer’s brand. Body Shop, Bench, Blue Magic and Silver Works are brands that are owned by retailers. Baygon Insect - family brand. Bonus of SM is an example of a private brand. For many years, national brands have been used to describe brands owned by producers, while private brands or private labels for brands owned by retailers. A brand mark is a part of the brand that appears in the form of a symbol, design, distinctive coloring, or lettering. A well known brand mark is Colonel Sanders for Kentucky Fried Chicken. A brand name can be almost anything a marketer wants it to be, but it does not have legal status. Product Product 32 A trademark is defined as a brand that is given legal protection because, under the law, it has been appropriated to one seller. Hence, trademark is essentially a legal term. All trademarks are brands, thus, include the words, letters, numbers, and symbols or pictorial images. Coke for instance is a trademark of Coca-Cola Company. Nike’s Swoosh and Microsoft’s Windows are famous trademarks. Characteristics of Good Brand Names These days, with the dearth of good names, selecting a brand name has become quite challenging. The creation of a new brand name often involves research to determine whether consumers will react positively to it. A brand name should possess as many of the following characteristics as possible. 1. Suggestive of the product’s characteristics – its benefits, use, or action. Some names that suggest desirable benefits are Mr. Clean, Softee, Manila Pure, BeautyRest and Carefree. 2. Easy to pronounce, spell, and remember. Some simple, one-syllable names include Tide, Joy, and Axe. 3. Distinctive. Some companies begin their brand names with adjectives, like Allied Bank and United Airlines. Distinctive brand names include Swatch, Kodak, Nokia, Sony, and Porsche. 4. Adaptable to new products that may be added to the product line. Colgate and Rubbermaid are examples of this. 5. Capable of being registered and legally protected. Generic names would not meet this criterion. For example, the word “ice cream” used as a brand name cannot by itself be registered and legally protected. The same goes for names registered and used by other firms. Brand Equity Brand equity is the value a brand adds to a product. For many consumers, brand names such as Volvo, Nike, or Rolex on a product add value to it. A brand adds value to the product through its name awareness and its connotations of favorable attributes. A survey of computer buyers revealed that these buyers would pay more for IBM and Compaq brands equity is a process of creating loyal followers who provide word-ofmouth support and eventually, add value to the product. Brands with high equity confer financial advantages on a firm because they often command comparatively large markets shares and consumers may pay little attention to differences in prices. Studies have also linked brand equity to high profits and stock returns. Services companies are also aware of the value of brand equity. Product Product 33 According to Y & R, a firm builds brand equity sequentially on four dimensions of brand personality. These four dimensions are differentiation, relevance, esteem, and knowledge: Differentiation refers to a brand’s ability to stand apart from competitors. Brands such as Porsche and Victoria’s Secret stand out in consumers’ minds as symbols of unique product characteristics. Relevance refers to the real and perceived appropriateness of the brand to a big consumer segment. A large number of consumers must feel a need for the benefits offered by the brand. Brands with high relevance include Microsoft and Hallmark. Esteem is a combination of perceived quality and consumer perceptions about a brand’s growing or declining popularity. A rise in perceived quality or in public opinion about a brand enhances a brand’s esteem. But negative impressions reduce esteem. Brands with high esteem include General Mills and Honda. Knowledge refers to the extent of customers’ awareness of the brand and understanding of what a good or service stands for. Knowledge implies that customers feel an intimate relationship with a brand. Examples include Jell-O and Band-Aid. Protecting a Brand Name Sometimes, brands become so well-accepted that the brand name is substituted for the generic name of the product. Some brand names that have legally become generic are cellophane, linoleum, and nylon. The patent on these products has expired but the public continues to use the brand names as generic names. Some brand names that are usually used as generic names are Xerox, Band-Aid, Scotch Tape, and Shellane. To prevent the loss of the distinctive character of the brand name and avoid its falling into a generic name, three strategies could be used. One is by ensuring that the words “trademark” or the letters “TM” appear adjacent to the brand name. A second strategy is to use two names; the company’s name together with the brand name or the brand names together with the generic name. Examples are Johnson’s Baby Powder, San Miguel Beer, and Lucky Me Pancit Canton. The third strategy is incorporating into the brand name a distinctive signature or logo such as that of the SUBWAY® Restaurants. Brand Loyalty Brands achieve widely varying consumer familiarity and acceptance. A mountain climber might insist on a complete getup from The North Face, but the same consumer might show little loyalty to particular brands in another product category such as shampoo. Marketers measure brand loyalty in three stages: brand recognition, brand preference, and brand insistence. Brand recognition is a company’s first objective for newly introduced products. Marketers begin the promotion of new items by trying to make them familiar to the public. Advertising offers one effective way for increasing consumer awareness of a brand. Nike is a very famous brand and people easily recognize Product Product 34 its goods even only either through the swoosh or its Jumpman (better known as the Air Jordan) logo. At the second level of brand loyalty, brand preference, buyers rely on previous experiences with the product when choosing it, if available, over competitor’s products. You may prefer Kenneth Cole shoes or Ralph Lauren clothes to other brands and buy their new lines as a soon as they offered. If so, those products have established brand preference. Brand insistence, the ultimate stage in brand loyalty, leads consumers to refuse alternatives and to search extensively for the desirable merchandise. Although many firms try to establish brand insistence with all consumers, few achieve this ambitious goal. Companies that offer specialty or luxury goods and services, such as Tiffany & Co. jewelries or Rolex watches, are more likely to achieve this status than those offering mass-marketed goods and services. Types of Brands Generic Products There are characterized by plain On the difference between generic and labels, little or no advertising, and no brand branded medicines: names. Common categories of generic products include food and household staples. “In terms of quality analysis, they both These no-name products were first sold in undergo the same process at the Food and Europe at prices as much as 30 percent below Drug Administration. Quality, safety and efficacy are scrutinized. Meaning, when it those of branded products. The market shares passes through FDA, whether it’s generic for generic products increase during economic or branded, it has the same quality.” - (Dr. downturns but subside when the economy Melissa Guerrero, Head of the Department improves. However, many consumers do of Health’s National Center for request generic substitutions for certain brandPharmaceutical Access and Management name prescriptions at the pharmacy when they (DOH-NCPAM)) are available. Generic medicines are very http://www.abs-cbnnews.com/currentmuch in demand now in the Philippine market affairs-programs/03/16/11/salamat-dokbecause they are cheaper. And since many generic-vs-branded-medicines people are already informed about the similarities and differences of generic versus branded medicines, consumers are more aware about the purchases they make. Manufacturers’ Brands versus Private Brands Manufacturers’ brands, also called national brands, define the image most people from when they think of a brand. A manufacturer’s brand is one that is created by producers and bears their chosen brand name. Well-known manufacturer’s brands include Tabasco, Sony, Coca-Cola, and Dell. In contrast, many large wholesalers and retailers place their own brands on the merchandise they market. The brands offered by wholesalers and retailers usually are called private brands (or private labels). Although Product Product 35 some manufacturers refuse to produce private-label goods, most regard such production as a way to reach additional markets segments. Wal-Mart’s private-labels include Sam’s Choice Cola, Faded Glory, No Boundaries, and White Stag. In the Philippines, bottled water labeled as SM is supplied by the Philippine Spring Water Resources, Inc., the company that owns Nature’s Spring. Captive Brands Major discounters – such as Wal-Mart, Target, and Kmart – have come up with a spinoff of the private-label idea. So-called captive brands are national brands sole exclusively by a retail chain. Captive brands typically provide better profit margins than private labels. Target’s captive brands include housewares and apparel by Michael Graves and Mossimo Giannulli; paper collections, including party supplies such as napkins, tablecloths, and paper plates by Belgian designer Isabelle de Borchgrave; and furniture collections by Sean Conway. Wal-Mart’s captive brands include linens and home furnishings by Martha Stewart. Family and Individual Brands A family brand is a single brand name that identifies several related products. For example, Johnson & Johnson offers a line of baby powder, lotions, plastic pants, and baby shampoo under its name. All Heinz products, including ketchup, mustard, barbecue sauce, and salad dressing, carry the Heinz brand. Frito-Lay markets both chips and salsa under its Tostitos family brand. Alternatively, a manufacturer may choose to market a product as an individual brand, which uniquely identifies the item itself, rather than promoting it under the name of the company or under an umbrella name covering similar items. Procter and Gamble, for example, markets Ariel, Tide, Mr. Clean, Joy, Downy, and Perla for fabric and home care; Pantene, Head and Shoulders, and Rejoice for hair care; and Olay, Safeguard, and Zest bath soaps. PepsiCo’s Frito-Lay division makes Lays, Ruffles and Doritos chips and Smartfood popcorn, while the Pepsi-Cola brands include Sting Energy Drink, Lipton Ice Tea, Premier Distilled Water, and Gatorade. Individual brands cost more than family new product. Distinctive brands are extremely effective aids in implementing market segmentation strategies, however. On the other hand, a promotional outlay for a family brand can benefit all items in the line. Family brands also help marketers introduce new products to both customers and retailers. Because supermarkets stock thousands of items, they hesitate to add new products unless they are confident they will be in demand. Family brands should identify products of similar quality, or the firm risks harming its overall product image. If Bentley marketers were to place the Bentley name Product Product 36 on a low-end car or a line of discounted clothing, they would severely tarnish the image of the luxury car line. Individual brand names should, however, distinguish dissimilar products. For instance, PepsiCo’s Propel – water and energy drink - is different from Aquafina and Gatorade. Packaging This is defined by Entrepreneur.com as the wrapping material around a consumer item that serves to contain, identify, describe, protect, display, promote and otherwise make the product marketable and keep it clean. Young and Pagoso (2008) defined packaging as the process of product planning wherein the company researches, designs, and produces its packages. It is the activity of designing and producing the container or wrapper for a product. Primary packaging. First-level product packaging such as the bottle, can, jar, tube, etc., that contains the item sold. It is the last packaging thrown by the consumer (http://www.businessdictionary.com). Secondary packaging. This is a packaging material outside the primary packaging. It is commonly used to group primary packaging (i.e. boxes, cartons, shrinkwrap, etc.) and used to protect products from excessive moisture, light, heat, reactive gases, etc. Tertiary packaging. This is used for bulk handling, warehouse storage and transport shipping. The most common form is a palletized unit load that packs tightly into containers. Purposes of Packaging o o o o Protection - for the product: transportation without spoiling and/or breaking for the consumer: reduces worry and increases safety Convenience - ease of use and decision making, simplifies life Image - shelf-appeal, brand awareness, and product/company/consumer values Sustainability - reduction of environmental impact, consumers can make a difference Product Product 37 2011 Trends in Packaging Bells and whistles: Modern consumers are shopping experts who spend mere seconds making purchase decisions. Especially in supermarkets, packaging must work hard to tempt shoppers into trying new products. Revolutionary technologies such as thin film and printed batteries can have a phenomenal impact at the first moment of truth, adding light, sound, and movement to packaging. Sound chips can deliver promotional messages from store shelves; paper-thin video screens can demonstrate product use. The first brands to adopt these cutting-edge strategies are sure to make a splash in the crowded marketplace. Reusable: After noticing the product (first moment of truth) and reading the product label (second), there is now a third moment of truth for consumers: reusing packaging. More brands will make this possible, banking on the cool factor to extend brand message beyond the life of the product. Burt’s Bees, whose natural body care line already appeals to environmentally conscious customers, now provides reusable carrying cases for its lip balm. Sustainable: More companies will pledge to lessen their impact on the environment and look for innovative ways to do so. Paper Mate recently introduced biodegradable pens with compostable outer shells that break down into organic matter within a year. Following a more traditional route, Kraft Foods plans to reduce its carbon footprint in 2011 by decreasing waste from its plants, eliminating 150 million pounds of packaging material, and cutting CO2 emissions by 25 percent. Purposeful: To remain relevant in 2011, brands must stand for something and align their brand promise with the good they do—and convey both through their packaging. The Tide Loads of Hope program and its corresponding limited-edition detergent give back to the community in an on-brand way: by providing laundry facilities in areas affected by disaster. In New Orleans following Hurricane Katrina, the Procter & Gamble-sponsored initiative washed almost 14,000 loads of laundry for 11,000 families. Source: http://www.brandpackaging.com Labeling This refers to activities associated with the design and content of the wording on a product or package which identifies it and provides instructions for its handling and use. A label is the part of a package that carries information about the product it contains; a label may be a permanent part of the primary package or a tag, sticker, band, etc. (http://marketinginformationcentre.ca). Whether the label is a separate part of the package or is the package itself, it performs several functions. It carries the brand name and identifies the product. It carries information about the product, such as cooking instructions, the safe and proper use of the product, its manufacturer, where and when it was manufactures, its contents, nutritional information, legal restrictions, and sometimes, even a plea that littering be avoided. And, it helps promote the product through its attractive designs and colors. (Diola and Tichepco, 2009) Product Product Other Image-Building Features 1. 2. 3. 4. 5. Product design Color Product quality Warranties After-sales service Product 38 Product LEARNING ACTIVITY #4 Name: ____________________________________________ Date: __________________________ 39 Score: _____________ Part 1 TRUE OR FALSE. Write TRUE if the statement is true or correct. Otherwise, write FALSE. Use the space provided before each number. True False False True False True False False True True False True True False False True False True 1. Products that are marketed include physical goods, services, experiences, events, persons, places, properties, organization, information and ideas. 2. Actual product refers to that part of the product that the consumer is actually buying. 3. Shopping goods are widely-available, purchased frequently and with minimal effort. 4. Homogeneous products are identical products sold in the same market by different producers. 5. Consumers of convenience goods will conduct extensive research to make sure that their purchase decision is right, because these goods are expensive and not frequently purchased. 6. Raw materials are industrial goods that are processed to become part of another product. 7. Component parts and materials include major capital investments for new factories and heavy machinery and for telecommunications systems. 8. Innovative products are new to the company but not entirely new to the market. These products imitate competitive products with identical features. 9. Concept testing involves testing the product concept with a group of consumers to determine their reaction. 10. The variety of product lines that a company produces, or that a retailer stocks is referred to as the product mix. 11. The number of different products a firm carries within its product lines is referred to as the product line width. 12. The number of versions offered of each product in the line is referred to as the product line depth. 13. Product line extension is the use of an established product’s brand name for a new item in the same product category. 14. The purpose of trading down is to boost the image or prestige of the product and increase the sale of the existing low-priced products. 15. Product alteration means eliminating an entire product line or simplifying the assortment within a line. 16. A trademark is defined as a brand that is given legal protection because, under the law, it has been appropriated to one seller. 17. Brands with high equity confer financial disadvantages on a firm because they often command comparatively large markets shares and consumers may pay little attention to differences in prices. 18. The ultimate stage in brand loyalty that leads consumers to refuse alternatives and to search extensively for the desirable merchandise is known as brand insistence. Product Product 40 True 19. Generic products are characterized by plain labels, little or no True 20. Labeling refers to activities associated with the design and content of the wording on a product or package which identifies it and provides instructions for its handling and use. advertising, and no brand names. Part 2 IDENTIFICATION Augmented Product Unsought Goods Raw Materials Commercialization Product Mix Extension Trading Down Decline Stage Relevance Esteem Family Brand Brand Preference Primary Packaging Manufacturer’s Brand 1. The level where the seller provides additional services and privileges to consumers of the product. 2. These are products that the consumer either does not know about or knows about but does not normally think of buying. 3. Industrial goods that are processed to become part of another product. 4. A stage in the new product development process wherein production and distribution will be full blast. 5. When a firm adds new product line to its present assortment of products, the strategy is called ___. 6. The purpose of this is to encourage people who cannot afford the original product to buy the new product because it carries some of the status or prestige of the higher-priced product. 7. In this stage of the product life cycle, survivor firms compete within an even smaller market, driving profit margins lower still. 8. A dimension of brand personality that refers to the real and perceived appropriateness of the brand to a big consumer segment. 9. A dimension of brand personality which is a combination of perceived quality and consumer perceptions about a brand’s growing or declining popularity. 10. This is a single brand name that identifies several related products. 11. A level of brand loyalty wherein buyers rely on previous experiences with the product when choosing it, if available, over competitor’s products. 12. It is the last packaging thrown by the consumer. 13. _____ is one that is created by producers and bears their chosen brand name. Label Warranty 14. This is the part of a package that carries information about the product it contains. 15. The purpose of this is to assure buyers that they would be compensated in case the product does not perform according to expectations. Product