Chapter 4 Product PDF

CHAPTER 4 Product LEARNING OUTCOMES 4.1 Types of consumer products 4.2 Branding 4.2.1 Benefits, strategies & trademarks 4.3 Packaging 4.3.1 Packaging functions 4.3.2 Labeling 4.4 Importance of new products 4.5 New product development process 4.6 Product life cycles LO 1 : Types of con...

CHAPTER 4 Product LEARNING OUTCOMES 4.1 Types of consumer products 4.2 Branding 4.2.1 Benefits, strategies & trademarks 4.3 Packaging 4.3.1 Packaging functions 4.3.2 Labeling 4.4 Importance of new products 4.5 New product development process 4.6 Product life cycles LO 1 : Types of consumer products Product A product may be defined as everything, both favorable and unfavorable, that a person receives in an exchange. A product may be a tangible good such as a pair of shoes, or an intangible good (service) such as a haircut. LO 1 : Types of consumer products LO 1 : Types of consumer products LO 1 : Types of consumer products LO 2 : Branding Branding is the main tool marketers use to distinguish their products from the competition’s. A brand is a name, term, symbol, design, or combination thereof that identifies a seller’s products and differentiates them from competitors’ products. A brand name is that part of a brand that can be spoken, including letters (GM, YMCA), words (Chevrolet), and numbers (WD-40, 7- Eleven). The elements of a brand that cannot be spoken are called the brand mark—for example, the well-known Mercedes-Benz and Delta Air Lines symbols. LO 2 : Branding Benefits of Branding Branding has three (3) main purposes: 1. Product identification 2. Repeat sales 3. New product LO 2 : Branding Benefits of Branding The most important purpose is product identification. Branding allows marketers to distinguish their products from all others. The term brand equity refers to the value of company and brand names. A brand that has high awareness, perceived quality, and brand loyalty among customers has high brand equity. Starbucks, Volvo, and Dell are companies with high brand equity. LO 2 : Branding Benefits of Branding The best generator of repeat sales is satisfied customers. Branding helps consumers identify products they wish to buy again and avoid those they do not. Brand loyalty, a consistent preference for one brand over all others, is quite high in some product categories. Over half the users in product categories such as cigarettes, mayonnaise, toothpaste, coffee, headache remedies, photographic film, bath soap, and ketchup are loyal to one brand. LO 2 : Branding Benefits of Branding The third main purpose of branding is to facilitate new product sales. The Internet provides firms with a new alternative for generating brand awareness, promoting a desired brand image, stimulating new and repeat brand sales, enhancing brand loyalty, and building brand equity. LO 2 : Branding Branding Strategies Firms face complex branding decisions and may choose to follow a policy of using manufacturers’ brands, private (distributor) brands, or both. Manufacturers’ Brands is the brand name of a manufacturer— such as Kodak. A private brand, also known as a private label or store brand, is a brand name owned by a wholesaler or a retailer – e.g. Tesco brand LO 2 : Branding Trademarks A trademark is the exclusive right to use a brand or part of a brand. Others are prohibited from using the brand without permission. Parts of a brand or other product identification may qualify for trademark protection. Some examples are: Shapes, such as the Jeep front grille and the Coca-Cola bottle. Ornamental color or design, such as the decoration the black and-copper color combination of a Duracell battery. Catchy phrases, such as Nike’s “Just Do It” Abbreviations, such as Bud, Coke, or The Met Sounds, such as General Electric Broadcasting Company’s ship’s bell clock sound and the MGM lion’s roar LO 3 : Packaging Packaging Functions Three most important functions of packaging are : to contain and protect products, promote products, and facilitate the storage, use, and convenience of products. A fourth function of packaging that is becoming increasingly important is to facilitate recycling and reduce environmental damage LO 3 : Packaging Packaging Functions Containing and Protecting Products The most obvious function of packaging is to contain products that are liquid, granular, or otherwise divisible. Packaging also enables manufacturers, wholesalers, and retailers to market products in specific quantities. Packages protect products from breakage, evaporation, spillage, spoilage, light, heat, cold, infestation, and many other conditions. LO 3 : Packaging Packaging Functions Promoting Products A package differentiates a product from competing products and may associate a new product with a family of other products from the same manufacturer. Packages use designs, colors, shapes, and materials to try to influence consumers’ perceptions and buying behavior. LO 3 : Packaging Packaging Functions Facilitating Storage, Use, and Convenience Wholesalers and retailers prefer packages that are easy to ship, store, and stock on shelves. They also like packages that protect products, prevent spoilage or breakage, and extend the product’s shelf life. Consumers are constantly seeking items that are easy to handle, open, and reclose. Such packaging innovations as zipper tear strips, hinged lids, tab slots, screw-on tops, and pour spouts were introduced to solve packaging problems. Packaging convenience can increase a product’s utility and, therefore, its market share and profits. LO 3 : Packaging Packaging Functions Facilitating Recycling and Reducing Environmental Damage One of the most important packaging issues today is compatibility with the environment. Some firms use their packaging to target environmentally concerned market segments. The introduction of Tetra-Pak could offer consumers eco-friendly alternative to glass bottles. Groups like the Sustainable Packaging Coalition assist companies in creating perpetually recycled packaging so that materials don’t ever end up in landfills, damaging the ecosystem LO 4 : Importance of new products What is the advantages having a new products? 1. Increased sales through longer sales life 2. Increased margins 3. Increased product loyalty 4. More resale opportunities 5. Greater market responsiveness 6. A sustained leadership position  LO 5 : New product developmen t process LO 5 :New product development process New-Product Strategy A new-product strategy links the new-product development process with the objectives of the marketing department, the business unit, and the corporation. A new-product strategy is part of the organization’s overall marketing strategy. It sharpens the focus and provides general guidelines for generating, screening, and evaluating new- product ideas. LO 5 :New product development process Idea Generation Customers Employees Distributors Vendors Sources of Competitors New-Product Ideas R&D Consultants LO 5 :New product development process Idea Screening The first filter in the product development process called screening, eliminates ideas that are inconsistent with the organization’s new-product strategy or are obviously inappropriate. Concept tests are often used at the screening stage to rate concept (or product) alternatives. A concept test evaluates a new-product idea, usually before any prototype has been created. LO 5 :New product development process Business Analysis The preliminary figures for demand, cost, sales, and profitability are calculated. The newness of the product, the size of the market, and the nature of the competition all affect the accuracy of revenue projections. These questions are commonly asked during the business analysis stage: What is the likely demand for the product? What impact would the new product probably have on total sales, profits, market share, and return on investment? How would the introduction of the product affect existing products? Would current customers benefit from the product? LO 5 :New product development process Development In the early stage of development, the R&D or engineering department may develop a prototype of the product. The marketing department should decide on the product’s packaging, branding, labeling, and so forth. The development process works best when all the involved areas (R&D, marketing, engineering, production, and even suppliers) work together. This approach allows firms to shorten the development process and reduce costs. With simultaneous product development, all relevant functional areas and outside suppliers participate in all stages of the development process. LO 5 :New product development process Test Marketing Test marketing is the limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. Test marketing allows management to evaluate alternative strategies and to assess how well the various aspects of the marketing mix fit together. Some products remain in test markets even longer. McDonald’s spent 12 years developing and testing salads before introducing them. LO 5 :New product development process Commercialization The final stage is the decision to market a product. The decision to commercialize the product sets several tasks in motion: ordering production materials and equipment, starting production, building inventories, shipping the product to field distribution points, training the sales force, announcing the new product to the trade, and advertising to potential customers. LO 6 :Product life cycle (PLC) A biological metaphor that traces the stages of a product’s acceptance, from its introduction (birth) to its decline (death).