mcgraw-hill/irwin ©2009 the mcgraw-hill companies, all rights reserved tangible product, extended...
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McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved
Tangible Product, Extended Product, Generic Product, Marketing Tangible Product, Extended Product, Generic Product, Marketing Myopia, Product, Product Classification, Vertical Market, Myopia, Product, Product Classification, Vertical Market,
Horizontal Market, Quality, Value, Product Mix, Product Line, Horizontal Market, Quality, Value, Product Mix, Product Line, Width, Depth, Brand, Line Extension, Franchisee Extension, Width, Depth, Brand, Line Extension, Franchisee Extension,
Dual Branding, Multibranding, Brand Equity, Packaging, Product Dual Branding, Multibranding, Brand Equity, Packaging, Product Life Cycle, Fashions, Fads, Innovators, Early Adopters, Late Life Cycle, Fashions, Fads, Innovators, Early Adopters, Late
Majority, Laggards, Product Audit, Attributes, Market Dimensions, Majority, Laggards, Product Audit, Attributes, Market Dimensions, Benchmarking, Organization of Product Management, Cross-Benchmarking, Organization of Product Management, Cross-
Functional TeamsFunctional Teams
Product and Brand StrategyProduct and Brand Strategy
Chapter 6Chapter 6
Key TermsKey Terms
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Elements of Product StrategyElements of Product Strategy
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Three Perspectives of a ProductThree Perspectives of a Product
Tangible product – Physical entity or service Tangible product – Physical entity or service offeredoffered
Extended product – Tangible product along with Extended product – Tangible product along with whole cluster of services that accompany itwhole cluster of services that accompany it
Generic product – Essential benefits the buyer Generic product – Essential benefits the buyer expects to receive from the productexpects to receive from the product
Marketing myopia – Executives who view their Marketing myopia – Executives who view their company’s product too narrowly by company’s product too narrowly by overemphasizing the physical object itselfoveremphasizing the physical object itself
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Product Definition and Product Definition and ClassificationClassification
Product – The sum of the physical, psychological, Product – The sum of the physical, psychological, physiological, and sociological satisfactions the physiological, and sociological satisfactions the buyer derives from purchase, ownership and buyer derives from purchase, ownership and consumptionconsumption
Two basic criteria for product classificationTwo basic criteria for product classification End use or marketEnd use or market Degree of processing or physical transformationDegree of processing or physical transformation
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Categories of Product ClassificationCategories of Product Classification
Agricultural products and raw materials – Grown or extracted from the land or the seaAgricultural products and raw materials – Grown or extracted from the land or the sea Fairly homogeneousFairly homogeneous Sold in large volume, and low value per unitSold in large volume, and low value per unit
Organizational goods – Purchased by firms for the purpose of producing other goodsOrganizational goods – Purchased by firms for the purpose of producing other goods Raw materials and semi-finished goodsRaw materials and semi-finished goods Major and minor equipmentMajor and minor equipment Parts needed to complete other finished goodsParts needed to complete other finished goods Supplies or items used to operate the businessSupplies or items used to operate the business
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Categories of Product ClassificationCategories of Product Classification
Consumer goodsConsumer goods Convenience goods – Purchased frequently with Convenience goods – Purchased frequently with
minimum effortminimum effort Include items such as food and impulse goodsInclude items such as food and impulse goods
Shopping goods – Purchased after some time and Shopping goods – Purchased after some time and energy are spent on comparing alternativeenergy are spent on comparing alternative Includes items such as appliancesIncludes items such as appliances
Specialty goods – Are unique in some way so the Specialty goods – Are unique in some way so the consumer will make some effort to obtain themconsumer will make some effort to obtain them
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Organizational Market CharacteristicsOrganizational Market Characteristics
A primary purchasing motive for organizational goods A primary purchasing motive for organizational goods is profitis profit
Organizational markets are concentrated Organizational markets are concentrated geographically as in the case of steel, auto or shoesgeographically as in the case of steel, auto or shoes
Can be categorized intoCan be categorized into Vertical market – Limited number of buyersVertical market – Limited number of buyers
It is narrow and deepIt is narrow and deep Horizontal market – Goods are purchased by all types of Horizontal market – Goods are purchased by all types of
firms in many different industriesfirms in many different industries
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Product Quality and ValueProduct Quality and Value
Quality – Defined as the degree of excellence or Quality – Defined as the degree of excellence or superiority that an organization’s product possessessuperiority that an organization’s product possesses Total-quality management (TQM)Total-quality management (TQM) ISO 9000 quality systems of standardsISO 9000 quality systems of standards
Value – Defines as what the customer gets in Value – Defines as what the customer gets in exchange for what the customer givesexchange for what the customer gives Customers perception of value based onCustomers perception of value based on
Degree the product meets expected specificationsDegree the product meets expected specifications PricePrice
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Product MixProduct Mix
Full set of products offered for sale by an organizationFull set of products offered for sale by an organization May consist of several product lines, or groups of May consist of several product lines, or groups of
products sharing common characteristics, distribution products sharing common characteristics, distribution channels, customers, or useschannels, customers, or uses
Product mix described byProduct mix described by Width – Number of product lines handled by Width – Number of product lines handled by
organizationorganization Depth – Average number of products in each lineDepth – Average number of products in each line
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Product LineProduct Line
Product line planning revolves around the question of Product line planning revolves around the question of how many product variants should be includedhow many product variants should be included
Varying products offered for three reasonsVarying products offered for three reasons Potential customers rarely agree on a single set of Potential customers rarely agree on a single set of
specificationsspecifications Customers prefer varietyCustomers prefer variety Dynamics of competition lead to multiproduct linesDynamics of competition lead to multiproduct lines
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BrandingBranding
A brand identifies one seller’s good or service as A brand identifies one seller’s good or service as distinct from competitorsdistinct from competitors Name, term, design, symbol, or any other featureName, term, design, symbol, or any other feature
Trademark – Legal term for brandTrademark – Legal term for brand Factors that increase strength of brand includeFactors that increase strength of brand include
Product qualityProduct quality Consistent advertising and marketing communicationConsistent advertising and marketing communication Distribution intensityDistribution intensity Brand personalityBrand personality
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BrandingBranding
Line extension – Brand name used to facilitate entry into a Line extension – Brand name used to facilitate entry into a new market segmentnew market segment
Brand extension – Current brand name used to enter a Brand extension – Current brand name used to enter a completely different product classcompletely different product class
Franchisee extension – Corporate name attached to a Franchisee extension – Corporate name attached to a product to enter a new market or a new product classproduct to enter a new market or a new product class
Dual branding – Integration of two or more branded Dual branding – Integration of two or more branded productsproducts
Multibranding – Different brand names assigned to each Multibranding – Different brand names assigned to each productproduct
Private-label brands – Retail firms producing or marketing Private-label brands – Retail firms producing or marketing their productstheir products
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Multi-Branding StrategyMulti-Branding Strategy
AdvantagesAdvantages Firm can distance products from other offerings it marketsFirm can distance products from other offerings it markets Image of one product is not associated with other Image of one product is not associated with other
products the company marketsproducts the company markets Products can be targeted at specific market segmentsProducts can be targeted at specific market segments If the product fails, the effect on other products is If the product fails, the effect on other products is
minimizedminimized DisadvantagesDisadvantages
No consumer brand awareness due to different namesNo consumer brand awareness due to different names Significant money spent on familiarizing new brandsSignificant money spent on familiarizing new brands
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Elements of Brand EquityElements of Brand Equity
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PackagingPackaging
Differentiates relatively homogeneous productsDifferentiates relatively homogeneous products Contributes to creating new attributes of value in a Contributes to creating new attributes of value in a
brandbrand Creates urgent salability within a target marketCreates urgent salability within a target market
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Product Life CycleProduct Life Cycle
Introduction – High costs, low or no profitIntroduction – High costs, low or no profit Growth – Increased profits, positively correlated with Growth – Increased profits, positively correlated with
salessales Maturity – Profits do not keep pace with sales due to Maturity – Profits do not keep pace with sales due to
high competitionhigh competition Decline – Seller must decide whether toDecline – Seller must decide whether to
Drop the productDrop the product Alter the productAlter the product Seek new uses for the productSeek new uses for the product Seek new marketsSeek new markets Continue with more of the sameContinue with more of the same
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Product Life CycleProduct Life Cycle
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Product Life Cycle – LimitationsProduct Life Cycle – Limitations
Accuracy pertaining to the longevity of the product in Accuracy pertaining to the longevity of the product in different stages of the cycle can’t be predicteddifferent stages of the cycle can’t be predicted
Misjudging when a stage is ending and implementing Misjudging when a stage is ending and implementing an inappropriate strategyan inappropriate strategy
Variations in life cycle existsVariations in life cycle exists Fashion – These are accepted and popular product Fashion – These are accepted and popular product
stylesstyles Fads – Products which experience high but brief Fads – Products which experience high but brief
popularitypopularity
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Marketing Strategy Implications of theMarketing Strategy Implications of theProduct Life CycleProduct Life Cycle
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Product Adoption And DiffusionProduct Adoption And Diffusion
Adopter categoriesAdopter categories InnovatorsInnovators Early adoptersEarly adopters Early majorityEarly majority Late majorityLate majority LaggardsLaggards
Diffusion – Spread of the product through the Diffusion – Spread of the product through the population is known as the diffusion of innovationpopulation is known as the diffusion of innovation
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Adopter CategoriesAdopter Categories
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Product AuditProduct Audit
A marketing management technique whereby the A marketing management technique whereby the company’s current product offerings are reviewed to company’s current product offerings are reviewed to ascertain whether each product should be continued ascertain whether each product should be continued as is, improved, modified, or deletedas is, improved, modified, or deleted
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DeletionsDeletions
Deletion decisions are difficult because of the Deletion decisions are difficult because of the potential impact on customers and the firmpotential impact on customers and the firm
Considerations in the deletion decision includeConsiderations in the deletion decision include Sales trends – Have sales moved over time? What has Sales trends – Have sales moved over time? What has
happened to market share?happened to market share? Profit contribution – What has been the profit Profit contribution – What has been the profit
contribution of the product to the company?contribution of the product to the company? Product life cycle – Has the product reached a level of Product life cycle – Has the product reached a level of
maturity?maturity? Customer migration patterns – If the product is deleted, Customer migration patterns – If the product is deleted,
will customers switch to another product marketed by will customers switch to another product marketed by our firm?our firm?
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Product ImprovementProduct Improvement
Another important objective of the audit is to ascertain Another important objective of the audit is to ascertain whether to alter the product in some way or leave whether to alter the product in some way or leave things the way they arethings the way they are
Attributes – Refer mainly to product features, design, Attributes – Refer mainly to product features, design, package and so forthpackage and so forth
Marketing dimensions – Refer to features like pricing, Marketing dimensions – Refer to features like pricing, promotion strategy and distribution channelspromotion strategy and distribution channels
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Product ImprovementProduct Improvement
Benchmarking – Continuous process of measuring Benchmarking – Continuous process of measuring products, services, and practices against those of the products, services, and practices against those of the toughest competitors or companies renowned as toughest competitors or companies renowned as leaders leaders
AdvantagesAdvantages Boosting product qualityBoosting product quality Developing more user-friendly productsDeveloping more user-friendly products Improving customer order processing activitiesImproving customer order processing activities Shortening delivery lead timesShortening delivery lead times
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Advantages of Rejuvenating a Advantages of Rejuvenating a ProductProduct
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Organizing for Product ManagementOrganizing for Product Management
Market management system – One person is Market management system – One person is responsible for overseeing an entire product line with responsible for overseeing an entire product line with all of the functional areas of marketing such as all of the functional areas of marketing such as research, advertising, sales promotion, sales, and research, advertising, sales promotion, sales, and product planningproduct planning
Brand management system – A manager focuses on Brand management system – A manager focuses on a single product or a very small group of new and a single product or a very small group of new and existing productsexisting products
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Cross Functional TeamsCross Functional Teams
Use of cross functional teams has become an Use of cross functional teams has become an important way to manage the development of new important way to manage the development of new productsproducts
Venture team – A cross-functional team responsible Venture team – A cross-functional team responsible for all tasks involved in development of new productfor all tasks involved in development of new product
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Some Requirements for the Effective Use of Cross-Some Requirements for the Effective Use of Cross-Functional Teams in Product Management and New Product Functional Teams in Product Management and New Product
DevelopmentDevelopment