The Meaning of “Product”

A product is the need-satisfying offering of an
organization.

It may be a good, service, idea, person or place.

A product is a set of tangible and intangible
attributes/characteristics that allow the need
satisfaction to occur.
8-1
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Consumer and Business Products
Consumer products are those which are
ultimately used by the consumer.
 Business products are those used by
intermediaries between the producer and
the ultimate consumer.

8-2
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Classification of Consumer
Goods




Convenience Goods - purchased with a
minimum of effort and thought. No comparison
shopping.
Shopping Goods - consumers compare quality,
price, style in several stores prior to making a
purchase.
Specialty Goods - consumers have a strong
brand preference and insist on that particular
brand.
Unsought Goods - products that are so new
that consumers are unaware of them.
8-3
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Classification of Business Goods





Raw Materials - Goods that become part of another
tangible product without being processed.
Fabricating Materials - Goods that become part of
another tangible product after having been processed.
Installations - Manufactured products that are an
organization’s major, expensive, and long-lived
equipment.
Accessory Equipment - Goods that are used in an
organization’s operation.
Operating Supplies - Goods with low dollar value, short
life, and which aid in operations without becoming part
of the finished product.
8-4
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Fig. 8-1 - Product as Tangible and Intangible Factors
Seller’s
services
Product
quality
Seller’s
reputation
Physical
characteristics
of goods
Price
Color
Brand
Product
warranty
Packaging
Design
8-5
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Quality, Design and Color

What is quality? How much quality?
> TQM
> ISO 9000

Product design/style and color
> Attractiveness, distinctiveness, and
functionality
> Involves product and packaging
> Can be registered
> Planned Obsolescence
8-6
McGraw-Hill/Irwin
» Technological obsolescence - new products
render current products obsolete.
» Style obsolescence - altering existing product to
differentiate it from previous model or version.
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Branding




8-7

A brand is a name/mark that differentiates the
product of one seller or group of sellers from
competing products.
A brand name consists of words, letters, and
numbers that can be vocalized.
A brand mark is the part of the brand that
appears in the form of a symbol, design,
distinctive color or lettering.
A trademark is a brand that has been given
legal protection.
Note: Brand protection and brand names.
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Table 10-1 - The 10 Best Brands
In the U.S.
1. Craftsman tools
2. Crayola crayons
3. Kodak film
4. Hallmark cards
5. Reynolds Wrap
6. Waterford crystal
7. Chiquita bananas
8. M&Ms candy
9. Ziploc bags
10. Hershey’s bars
In the U.K.
1. Mercedes-Benz
2. BMW autos
3. Cadbury’s bars
4. Disney World
5. Lego toys
6. Duracell batteries
7. Sony televisions
8. Fisher-Price toys
9. Kodak film
10. Kellogs corn flakes
In Argentina
1. Mercedes-Benz
2. Alfa Romeo
3. BMW autos
4. Land Rover SUV
5. Havana pastries
6. Jeep Grand
Cherokee SUV
7. Disney World
8. Sheraton hotels
9. Nissan Pathfinder
10. La Serenisima
8-8
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Brand Equity
Brand Equity is the extra value that the
brand gives to the product.
 Brand Equity consists of . . .

8-9
> Brand awareness/familiarity
> Brand differentiation versus competition
> Brand esteem
> Brand preference
> Brand loyalty
> Product line extensions
> Trademark legal protection
> Trademark licensing
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Packaging

Purposes of packaging:
> Allows product to be shipped, stored, and
displayed
> Protect the product from breakage, spoilage,
tampering, and theft before and after purchase.
> Helps promote the product

8-10
Criticism of packaging
> Deceptive Packaging
> Expensive Packaging
> Environmentally-Unfriendly Packaging
> Hazardous Packaging
> Disposing of Packaging
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Labeling, Warranty, and
Servicing

Types of labels
> Brand label
> Descriptive label
> Grade label

Warranty
> What’s covered and for how long

8-11
Servicing
> How does customer order and repair product
> The level of service quality and convenience
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
What’s a New Product

Categories of new products
> Really innovative and unique.
> Replacements that are significantly different
from previous versions.
> Imitative products that are new to the
organization, but not new to the market.
> Existing products attacking new markets.

How do companies find and introduce
new products into the market?
8-12
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Identify
the strategic
role of new
products,
then...
1.
Idea
generation
Fig 8-2 - The NewProduct Development
Process
2.
3.
4.
Screening Business Prototype
of ideas
analysis development
5.
Market
Tests
6.
Commercialization
8-13
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Ten World-Class Product Failures










8-14

1. Ford’s Edsel automobile.
2. Dupont’s Corfam synthetic leather.
3. Polaroid’s Polavision.
4. United Artist’s Heaven’s Gate western movie.
5. RCA’s Videodisc.
6. Time’s TV-Cable Week magazine
7. IBM’s PCjr.
8. New Coke.
9. R.J. Reynolds’ Premier cigarette.
10. Nutrasweet’s Simplesse fat substitute.
11. Internet retailing business model
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Fig. 9-2 - The Product Life Cycle
The aggregate demand for all brands
comprising a product category over time.
INTRODUCTION
GROWTH
MATURITY
DECLINE
Dollars
Sales Volume
Profit
0
Loss
Time
8-15
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Fig. 9-3 - Product Life Cycle Variations
Part b - Fad
Aggregat
e
sales
Part a - Extended
introduction stage
Time
years
Time
inin
years
Timein
inyears
years
Time
Aggregat
e
sales
Part c - Indefinite
maturity stage
8-16
McGraw-Hill/Irwin
Time in years
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Life Cycle Management
How to stay in the maturity stage a long
time.
 Two basic strategies

> Find new customers
> Increase the frequency and variety of
product usage by current customers

Two basic tactics
> Promote new uses for the product
> Introduce new forms of the product
8-17
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Life Cycles in Technological Markets
8-18
A technological life cycle (TLC) has six phases:
1. Cutting Edge: Technology development that is
ahead of the marketplace.
2. State of the Art: Adapting cutting-edge
techniques to market needs.
3. Advanced: Increased competition and a less
sophisticated customer base.
4. Mainstream: Market is fully developed with
standardized products.
5. Mature: Competition shifts to customer service.
6. Decline: Other technologies replace the dying
technology.
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
New Product Adoption


Adoption process: The decision-making activity
of an individual through which the new product
is accepted.
Stages in Adoption Process:
Awareness 
 Interest 
 Evaluation 
 Trial 
 Adoption 
 Confirmation

8-19
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Adopter Categories

Researchers have identified five categories
of individual adopters for new products:
>
>
>
>
>


8-20
Innovators — 3% of the market.
Early adopters — 13% of the market.
Early majority — 34% of the market.
Late majority — 34% of the market.
Laggards — 16% of the market.
In addition, some individuals (non-adopters)
never accept the innovation.
Diffusion: The process by which an
innovation is spread through a social system
over time.
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Factors Affecting the
Adoption/Diffusion Rate


Five product characteristics affect the adoption rate for
new—especially truly innovative—products.
Example: A new, safer baseball for youngsters:
> 1. Relative advantage—superior to current balls in
terms of safety?
> 2. Compatibility—coincides with cultural values and
experiences of parents and coaches?
> 3. Complexity—no problem understanding concept?
> 4. Trialability—ball can be easily tested?
> 5. Observability—can see affects on youngsters hit
with the new ball?
8-21
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.