PRODUCT CONCEPTS
Strategic Marketing
Chapter 9
CAPITALISM
• Capitalism: Political & economical philosophy
• Characterized by marketplace competition
• Private ownership of business.
• Also known as Free Enterprise
• United States & Japan are two examples
• Government takes care of people via social services
• Government is associated with capitalism
• Democracy
• Vote republican, democratic, independent, etc…
SOCIALISM
• Government has an increased role in society
• Main goal is to meet the basic needs for all and to provide employment
for many
• The goal is to have a classless society
• No poverty, middle class, rich
• Citizens are equal
SOCIALISM
• More social programs to ensure a certain standard of living for their citizens
• Medical care & education is free or very cheap
• Businesses & individuals pay MUCH higher taxes than those in a capitalistic
society
• The government runs most industries
• Telephone companies, banks, electric companies, water, gas, transportation, etc..
• Sweden, Canada, The United Kingdom use this philosophy
COMMUNISM
• Government controls factors of production
• No private ownership of property or capital
• Built around the belief that if goods are owned by government they are available to
everyone
• Promotes a Classless society
• Government acts as the community
• All workers are assigned jobs
• No unemployment
• Always get paid (regardless if you go or not)
• Housing & education are determined by government
• Medical Care is free
• No financial incentive for people to work harder
• Examples include Cuba and North Korea
ASSIGNMENT
• Learning objectives are on back
• You should be able to answer each question by end of chapter
• Take notes. PowerPoint will not be posted until after lesson.
LEARNING OBJECTIVE 1
• The products a company creates are the basis of their marketing mix.
• Product is the most important because nothing else could exist
without it
• What is a product?
• Everything both favorable & unfavorable that a person receives in
an exchange
• Can be a good, service, or idea
LEARNING OBJECTIVE 2
• Types of consumer products consist of either industrial or consumer products
• The intended use of product is what distinguishes it
• Some products can be both industrial & consumer (e.g. light bulbs, pencils,
paper, etc..)
• If used for businesses purposes; it is an industrial product
• Manufactures other goods
• Facilitate an organizations operations
• Resell to other customers
• If used for consumer purposes; it is a consumer product
• Bought to satisfy an individual’s personal wants
LEARNING OBJECTIVE 2
• Why does a marketer care if they are dealing with industrial
or consumer products?
• Each is marketed very differently
• Target Markets are very different
• Distribution, Pricing, & Promotion is done much differently
LEARNING OBJECTIVE 2
Business Products (Industrial) Classification
Consumer Product Classification
Major Equipment
Shopping Products
Accessory Equipment
Convenience Products
Raw Materials
Specialty Products
Processed Materials
Unsought Products
Supplies
Services
Component Parts
Consumer products are classified based
on how much effort is normally used to
shop for them.
DISTINGUISHING BETWEEN
PRODUCT TYPES
• Convenience Product
• Relatively inexpensive item that merits little shopping effort
• Products are bought regularly & without much planning
• Consumer will not shop extensively for such an item
• Consumers are aware of brands that sell convenience products
• Wide distribution is required in order for profit goals to be met
• Examples:
• Candy, soda, aspirin, combs, dry cleaning, car washes, etc…
DISTINGUISHING BETWEEN
PRODUCT TYPES
• Shopping Products are usually more expensive than a convenience product and are sold in
fewer stores
• Consumers will comparison shop between products to find the best one
• There are two types of shopping products
• Heterogeneous: Products that are different & cause consumers to have a hard time comparing products
because the prices, quality, & features, vary so much
• Consumers buy the product that is best for them
• Example: Furniture, clothes houses, etc…
• Homogenous: Similar products that consumers exam and generally select the cheapest brand that has
desired features.
• Example: Washer & dryer
DISTINGUISHING BETWEEN
PRODUCT TYPES
• Specialty Products are products consumers search extensively for & are
reluctant to accept substitutes for
• Examples: Rolex watch, Rolls Royce, Bose Speakers, Ruth’s Chris Steak House, & Highly specialized
forms of medical car
• Marketers use selective, status-conscious advertising to maintain their product’s exclusive
image.
• Distribution is limited to one or very few outlets in a geographic area
• Brand names & quality of service are key components
DISTINGUISHING BETWEEN
PRODUCT TYPES
• Unsought Products are products that are unknown to the potential buyer or a
known product that the buyer does not actively seek.
• New products that are not advertised or distributed are unsought products
• Products we do not like to talk about or spend money on are typically unsought
• Require aggressive personal selling & highly persuasive advertising
• Salespeople seek leads and then approach the consumer through personal selling,
direct mail, or direct-response advertising
• Examples:
• Insurance, burial plots, encyclopedias, etc…
LEARNING OBJECTIVE #3
PRODUCT ITEMS, LINES, & MIXES
• Product Items: A specific version of a product that can be designated as a distinct
offering among an organizations products
• Each item in a mix may require their own marketing strategies
• Example:
• 12 oz can of coca-cola is a product item
• 20 oz bottle of coca-cola is a different product item
• Product Lines: A group of closely-related product items.
• Product Mix: All products that an organization sells
EXAMPLE: CAMPBELL’S PRODUCT MIX
PRODUCT MIX STRATEGIES
• Advantages of grouping product items into product lines include:
• Advertising Economies: Product lines can market all items with one approach.
• Example: “Mmm good” is used as the slogan for all Campbell soups.
• Packaging uniformity: Products can be packaged similarly and have a common look
• Example: Campbell’s soup label
• Standardized Components: Reduces manufacturing & inventory costs.
• Example: General Motors uses the same parts on many automobile makes & models
• Efficient Sales & Distribution: Offer a fuller range of services to consumers
• Distributors & retailers are more likely to stock a company’s product if it is a full line
• Transportation & warehousing costs are likely to be lower for a product line than a collection of items
• Equivalent Quality: Purchasers usually expect quality amongst all products within a product
line to be equal
PRODUCT MIX STRATEGIES
• Product Mix Width (Breadth): The number of product lines an organization offers.
• Diversifies risk
• Better to depend on a variety of product lines to generate sales rather than just 1 or 2 lines
• Capitalizes on established reputations.
• People trust the brand Oreo so when they see it on other products they believe it to be good.
• Product Line Depth: The number of product items in a product line.
 Attracts buyers with different preferences
 Increases sales/profits by further market segmentation
 Evens out seasonal sales patterns
ASSIGNMENT: INDIVIDUAL ON PAPER
ASSIGNMENT: SOLO OR DUO
ON CONSTRUCTION PAPER
• Choose a brand (no repeats)
• General Motors, Mars, Nestle, Sony, Proctor & Gamble, Kraft, General Mills, Johnson &
Johnson, Unilever, Kellogg’s, Coca-Cola, Pepsico, Dr. Pepper/Snapple
• Create at least 3 product lines based on the mix given.
• Label each product line and list as many products as you can that fall within
that line.
• Answer the questions on your handout when done
EXAMPLES OF PRODUCT MIXES
LABEL EACH COLUMN & LIST ITEMS
Product Line #1
Product Line #2
Label each product line has shallow or deep
Product Line #3
GROUPS
• General Mills
Austin & Libby
• General Motors
John
• Mars
Maggie
• Proctor & Gamble
Nate & Ryan
• Johnson & Johnson
Louis & Dhraj
• Pepsico
Uthman & Earvin
• Coca-Cola
Eric
• Kellogg's
Jackson & Brett
• Kraft
Blake & Michael
• Uniliever
Alec & Jack
TUESDAY
WARM-UP & OBJECTIVE
Warm-up:
• Give one example of a convenience, shopping, specialty, & unsought good.
• Convenience:
Bread
• Shopping:
Dishwasher
• Specialty:
Armani Suit
• Unsought:
Burial Plot
Couch
• What is the key factor in determining what type of good you are classifying
How much time is spent picking out a product.
PRODUCT MIX:
LABEL THIS
CHART
PRODUCT LINE CAN BE DETERMINED BY:
• They function similarly
• All of Chevrolets Cars are a Product Line
• They are sold to the same groups of people
• All of Staples Supplies sold to schools
• Are marketed the same way
• Are priced similarly
ADJUSTMENT TO PRODUCT
ITEMS, LINES, & MIXES
• Firms change product items, lines, &
mixes to take advantage of product
developments or to respond to changes
in the environment
Adjustments to
Product Items,
Lines, and Mixes
• Product Modification
• Product Repositioning
• Product Line Extension or Contraction
Product
Modification
Product
Repositioning
Product Line
Extension or
Contraction
ADJUSTMENT TO PRODUCT
ITEMS, LINES, & MIXES
• Product Modification occurs when 1 or more of a product’s characteristics are
altered
• Quality
• Functional
• Style
• Planned Obsolescence
• Quality Modification: Change in products durability or dependability
• Decrease quality will make products cheaper thus increasing buying audience
• Increase quality will allow the company to compete with rival firms easier
• Increase brand loyalty & chances to segment target market differently
ADJUSTMENT TO PRODUCT
ITEMS, LINES, & MIXES
• Functional Modification: Change in product’s versatility, effectiveness,
convenience, or safety
• Example: Tide with Downey Laundry Detergent combines function of cleaning with fabric
softener
• Style Modification: Aesthetic product change rather than a quality or functional
modification.
• Proctor & Gamble adding Frabreze to its products
• Common among clothing & car manufacturers
• Planned Obsolesce: The practice of modifying products so those that have already
been sold become obsolete before they actually need replacement.
• Considered unethical by some
PRODUCT REPOSITIONING
Why reposition
established brands?
Changing
Demographics
Declining Sales
Changes in
Social
Environment
Companies reposition because they want to
change a consumers perception of a brand
PRODUCT LINE EXTENSIONS
• Product Line Extensions: Adding additional products to an
existing product line in order to compete more broadly in the
industry.
• Example:
Nabisco sells 100 calorie snack packs for people with active lifestyles
PRODUCT WIDTH: BROADENING
• Companies seek to expanding their product width by making it broader
• Expanding allows you
• Reach more markets
• Gain a competitive edge
• Example of product width is Red Lobster
• Specialize in seafood
• Sell pasta, chicken, & steak to broaden product mix
PRODUCT LINE CONTRACTION
• Product Line Contraction: Deleting products from a product mix so
that a company can focus on what it does best
• Some products have low sales or cannibalize sales of other items
• Resources are disproportionately allocated to slow-moving
products
• Items have become obsolete because of new product entries
PRODUCT WIDTH: NARROWING
• In 2009; General Motors (GM) filed for bankruptcy protection
• They were told they needed to cut back
• GMC
• Cadillac
• Buick
• Chevy
• Pontiac
• Saturn
• Saab
• Hummer
REVIEW LEARNING OUTCOME
PRODUCT ITEM, PRODUCT LINE, AND
PRODUCT MIX
LEARNING OBJECTIVE 4:
DESCRIBE MARKETING USES OF BRANDING
• A Brand is a name, term, symbol, design, or combination thereof that identifies a
seller’s products and differentiates them from competitors’ products.
• Main tool to distinguish a brand from its competitors
• The internet has been helpful in building brand awareness.
• Branding has three main purposes
• Product Identification**
• Repeat sales
• New product sales
**Product Identification is the most important purpose
BENEFITS OF BRANDING
Key Term
Definition
Brand Name
That part of a brand that can be spoken, including letters, words, and numbers
Brand Mark
The elements of a brand that cannot be spoken (logos)
Brand Equity
The value of company and brand names
Global Brand
A brand where at least 20 percent of the product is sold outside its home country
Brand Loyalty
A consistent preference for one brand over all others
BRANDING STRATEGIES
• Not at firms will choose to adapt a branding strategy
• Generic items
• Branding strategies can be accomplished in a variety of ways
• Manufacturer Brands
• Private Brands
• Regardless of manufacturer or private; a company must develop an individual branding,
family branding, or combination of both approach
• Individual Brand: Different brands for different products (Proctor & Gamble & Marriot)
• Family Brand: Common names for different products (e.g.: Holiday Inn Hotels & Sony)
BRANDING STRATEGIES
• Generic Items: A no-frills, no-brand-name, low-cost product that is simply identified by
its product category
• Usually 30-40% cheaper than manufacturer brand & 20-25% cheaper than private brand
• Manufacturers’ Brand: The brand name of a manufacturer
• Heavy consumer ads by manufacturers
• Attract new customers
• Enhance dealer’s prestige
• Rapid delivery, carry less inventory
• If dealer carries poor quality brand, customer may simply switch brands and remain loyal to
dealer
TYPES OF BRANDS
BRANDING STRATEGIES
• Private Brand: A brand name owned by a wholesaler or a retailer. Also known as a
private label or store brand.
• Advantages of Private Brand:
• Earn higher profits on own brand
• Less pressure to mark down price
• Manufacturer can become a direct competitor or drop a brand/reseller
• Ties customer to wholesaler or retailer
• Customer who wants a Diehard battery must go to Sears
• Wholesalers and retailers have no control over the intensity of distribution of manufacturers’
brands
BRANDING STRATEGIES
Brand
No Brand
Manufacturer’s
Brand
Individual
Brand:
Pepsi &
Frito Lay
Family
Brand:
Coach
Private Brand
Combination
Kellogg’s Rice
Krispies
Individual
Brand
Family
Brand:
Kroger
Combination:
Sears-Kenmore
BRANDING STRATEGIES
• Co-Branding entails placing two or more brand names on a product or its package.
• Ingredient Branding: Occurs when a brand is a part in another product
• Examples: Intel microprocessor in a Dell computer or XM radio in a Cadillac
• Cooperative Branding: Occurs when two brands receiving equal treatment borrow from
each others brand equity
• Example: American Express partners with Ramada Inn to win a flight with Continental Airlines
• Complementary Branding: Products are advertised or marketed together to suggest
usage
• Example: Captain Morgan’s & Coca-Cola
TRADEMARK V. SERVICE MARK
• Trademark: is the exclusive right to use a brand.
• Service Mark: Performs the same function for services, such as H&R Block
 Many parts of a brand and associated symbols qualify for trademark protection.
 Trademark right comes from use rather than registration.
 The mark has to be continuously protected.
 Rights continue for as long as the mark is used.
 Trademark law applies to the online world.
P. 294 ITEMS THAT HAVE BEEN
TRADEMARKED
• A generic product name identifies a product by class or type and cannot be
trademarked.
• Examples: Aspirin, cellophane, coke, monopoly, & shredded wheat
• Companies work to fight off knockoffs
• Example: Burberry
ASSIGNMENT
LEARNING OBJECTIVE 5: PACKAGING
• Packaging has always been used to get the product through the distribution process
• Three Most Important Packaging functions:
• Contain & Protect products
• Promote Products
• Facilitate the storage, use, & convenience of products
• A growing 4th Function is
• Facilitate recycling & reducing environmental damage
Packaging Function
Definition
Contain & Protect products
• Package items in specific quantities
• Physical protection of product from spillage, spoilage, light,
heat, cold, infestation, breakage, & evaporation
Promote the Products
• Differentiates a product from competing products
• Associates a new product with other products from the same
manufacturer.
• Color of packaging also sets a tone.
Facilitate the storage, use, &
convenience of products
• Wholesalers want products that are easy to ship, store, &
stock.
• Consumers want products that are easy to, handle, open, &
reclose
• Childproof packaging
Facilitate recycling & reducing
environmental damage
• Packaging that is compatible with the environment
• Products that are eco-friendly, recyclable, & better for climate
• Pump sprays are easier than aerosol
Ensure Safe Use:
Promote & Sell Product: New Balance
Child Proof Medicine Bottle
Protect the Product:
Egg Carton
Environmentally Friendly:
French Rabbit Wine
Meet Customer Needs:
Squirt Bottle
LABELING
Persuasive

Focuses on
promotional theme

Consumer
information is
secondary
Informational

Helps make proper
selections

Lowers cognitive
dissonance

Includes use/care
UNIVERSAL PRODUCT CODES
Universal
Product Codes
(UPCs)
A series of thick and thin
vertical lines (bar codes),
readable by computerized
optical scanners, that represent
numbers used to track
products.
REVIEW OF
LEARNING
OBJECTIVE:
DESCRIBE
MARKETING
USES OF
PACKAGING &
LABELING
LEARNING OBJECTIVE 6:
GLOBAL ISSUES IN BRANDING & PACKAGING
• When a firm enters a foreign market they have three options:
• One brand name everywhere
• Strong brand that can be used without negatives being associated with it
• Adaptations & malfunctions
• A one-brand name strategy is not possible when the name cannot be
pronounced in the local language, is owned by someone else, or name is
inappropriate
• Different brand names in different markets
• Company takes a local name to be familiar or stronger in new market
LEARNING OBJECTIVE 6:
GLOBAL ISSUES IN BRANDING & PACKAGING
• Three aspects of packaging in foreign markets are:
• Labeling:
• Making sure information is properly translated & meets government regulation
• Aesthetics:
• Packaging color & size should reflect societies values and needs
• Logo adds brand value
• Climate Considerations
• Products are being shipped further so packaging needs to be more protective, sturdier, &
durable
LEARNING OBJECTIVE 7:
PRODUCT WARRANTIES
Warranty
A confirmation of the quality or
performance of a good or service.
Express
Warranty
A written guarantee.
Implied
Warranty
An unwritten guarantee that the
good or service is fit for the purpose for
which it was sold. (UCC)
WARRANTY V. GUARANTEE
• Express warranty
=
written guarantee
• Implied warranty
=
unwritten guarantee