Chapter 7: Product PDF

Topic 7: Product 7.1 Define product & major classification of products & services. 7.2 Describe the decision companies make regarding their individual product & services, product lines & product mixes. After reading this chapter, you should be able Expla...

Topic 7: Product 7.1 Define product & major classification of products & services. 7.2 Describe the decision companies make regarding their individual product & services, product lines & product mixes. After reading this chapter, you should be able Explain how companies analyse marketing information. to : 7.3 Discuss branding strategy. 1) Define product and describe the major 7.4 Identify the types of new products. classifications of products and services. 7.5 Identify the new product development 2) Discuss branding strategy. process. 3) Identify the new product development 7.6 Identify the Product Life Cycle stages. process. 4) Identify the Product Life Cycle stages  Understanding Product Anything that can be offered to a market for Products is classified into 3 groups: attention, acquisition, use or consumption i.Durable goods –used repetitively over a longer that might satisfy a need or want. period of time Often offer tangible (goods) & intangible Non durable goods –Repeat purchases based on products (services). a short term need. iii.Services –Have 4 unique characteristics Tangible product : something that is felt, tasted, heard, smelled or seen. Usually stored for future usage. Example : Intangible product : something Nokia mobile phones, a that cannot be seen, smelled, BMW cars, DKNY watch, heard or touched. Only available etc. at the time of use. Example : attending course at a University/College (education) or night stay at Hilton Hotel (accommodation). Learning objective 1  Understanding Product Services –Have 4 unique characteristics Intangibility Services cannot be seen, tasted, felt, heard or smelled before they are bought. Inseparability Services cannot be separated from their providers, whether the providers are people or machines. Variability The quality of services depends on who provides them as well as when, where & how they are provided. Perishability Services cannot be stored for later sale or use. (Doctor Mike, NY)  Levels of Product Product Classification Types of product Consumer product (CP) Industrial product (IP) Supplies & Materials & Convenience Shopping Speciality Unsought services Capital parts CP : 2. Shopping Products CP : 1. Convenience Products i.Staple products : are bought on the most regular basis for regular use ii.Impulse products : are bought with a minimum planning or search effort i.Emergency products : are bought during emergency or critical condition  CP : 2. Shopping Products Homogeneous products : shop for the lowest price Heterogeneous products : products that consumer see as differ in quality, styles, suitability & lifestyle compatibility. CP : 3. Speciality Products Brand loyalty very strong. IP : 1. Materials & Parts Product Mix  - Width : Number of different product line. - Length : Total number of items the company carries within lines. Example : P&G - Depth : Number of version offered of each product line.  Product Identity The key factors that together help shape actual Packaging product or also known as product identity are : Can create product identity via Packaging unique packaging design. Example : J-Lo perfume is packed Labeling in a lady body-shaped bottle with a necklace hanging to the bottle to create a sexy image. Branding Packaging involves designing & producing the outer cover of the product, such as containers & wrappers. primary package like a jar for a day cream secondary package like paper box  Packaging Include a shipping package necessary to store, identify & ship the product. The important function of packaging :  Containing & protecting products  Promoting product  Facilitating storage, use & convenience  Attracting attention  To describe the product  To making the sale Packaging Level : Packaging Level : Packaging Level : 1st – level package 2nd – level package 3rd – level package Used to transport the Is protected by one or Packaging that holds the customer package thru more outer packages like actual product like the supply chain. box holding the perfume perfume bottle. Holds multiple customer bottle. Some is minimal because packages & offer a May act as the primary only serves to protect the higher level of damage package for the product. product. protection than that of Marketers use a variety of customer packaging. other methods to Example : communicate with Certain food products are Example : customers after they open sold in a plastic bag that A number of perfume the product package. contains the product like boxes may be put The insertion include fruits, vegetables, bread, together into a bigger information like instruction etc. thus, plastic bag wooden box for export manuals & warranty cards, become 1st - level package purposes. promotional incentives like & primary package. coupons & items that add value like recipes. Packaging Decision Packaging decision are important for several reasons including : 1.Protection 2.Visibility 3.Added value 4.Distributor acceptance 5.Cost 6.Expensive to create 7.Long-term decision 8.Environmental & legal issue  Effective Packaging Appropriately designed for target market : MCD meals for kid always come with colorful cartoon character box & small toys as a free gifts. Eye-catching : Kit Kat red coloured wrapper is easily recognizable. Suitable to product : Perfumes are mostly packed in the glass bottle rather than plastic bottle due to chemical reaction. Complaint with retailers’ requirements : Compatible with retailers’ image such as recyclable packaging, promotes by Body Shop.  Effective Packaging Promotes image of enterprise : Agricultural business typically feature plants, fruits, flowers image in the packaging. Distinguishable from competitors’ products : Colgate introduces toothpaste in pumped bottle in order to be different from other brands. Strong, convenient, well-designed : Most mobile phone nowadays are slim, light with various features for users’ convenience.  Labeling Labels identify products or brands & describe several things about the product. Labeling refers to visual label, symbolic or textual information (containing combinations of pictures, letters & numbers) about a product for product identification & reorganization. Successful product & market development depends on clear communication of core product attributes & the acceptance by consumer.  Types of Labeling 1.Persuasive : – Example : the label put on the box of Pizza Hut does not indicate any information about the ingredients of the pizza, only identify of Pizza Hut highlighted. 2. Informational : – Focus on the information that will aid consumer to proper selection. Example : ingredients in Panadol. 3.Universal product codes (UPC) : – Designed to make ideal coding products. – Printed on a package have 2 parts: The machine-readable bar code The human-readable 12-digits – Created to help grocery stores speed up the check-out process. Functions of Labeling The personality of the product, a variety of mechanisms thru which a brand is developed. A name, term, sign, symbol or symbol or a combination of these items indicate the For consumers identity of the products or services & to to capture the attention of differentiate one manufacturer from the others. shoppers. Important aspect of the tangible product. Likely to be the first thing a Major tool to distinguish their products from new customer sees & offer those of the competition. their first impression of the product. Provides consumer with Example : Nutritional Information product information to aid their purchase decision. For retailers make it easy to check-out customer & manage inventory via the UPC. Brand Element Branding Example Brand : A name, term, symbol & design or combination thereof that identifies a seller’s products & differentiates then form competitors’ products. Brand name : A name/part of the brand that can be spoken, example : Levi’s, Hilton& BMW. Brand name can be categorized as :  Brand Element INDIVIDUAL FAMILY COMBINES BRAND NAME BRAND NAME BRAND NAME Popular strategies involves the –Example : Where a product is org. combining the already Volkswagen in part of a family. established family name with a UK own the Example : Kellogg’s new individual brand name. brand SEAT & with Corn flakes, Rice Idea is to used the reputation of Skoda Krispies & Frosties the established family or company name to launch a new associated product. Example : Nestle may use their name to launch a new cereal or cereal bar.  Brand mark A design element that provides visual or auditory recognition for the product like : i.A symbol : Nike Swoosh ii.Logo : Yahoo! Graphic iii.A character : Disney Mickey iv.A sound : Intel inside sound Trade name A legal trading name or a business name which may or may not relate directly to the branding of its products. Example : Bayer pharmaceuticals also have trade names for ‘Aspirin’ which is often dissimilar to its chemical name, ‘acetylsalicylic acid’ A registered & protected brand name, symbol or logo. Comprises a name, word, phrase, logo, symbol, design, image or a combination of these elements. A distinctive sign or indicator which is used to uniquely identify products to consumers. ©®™  Types of Branding 1.Manufacturer brand – Brand created, used & owned by the manufacturer. – Example : Unilever produces toiletry products under Unilever brand. 2.Private brand (retailer & wholesaler brand) – Example : Unilever distributes one of their products which is toothpaste to Tesco & the company then uses Tesco’s in-house brand like Tesco Choice or Tesco Value with permission from Unilever when labeling the product.  Types of Branding 3.Co – branding – Occurs when 2 established brand names of different companies used on the same product. – Limitation  complex legal contract & license. – Example : Disney & Croc partnering designing footwear for children  Importance of Branding Helps an org. differentiate itself from its competitors. Example : Some people may only purchase a Sony TV although there are acceptable alternatives on the market, because of a past positive history with this brand. Benefits to manufacturers: Benefit to consumer: Makes it easier for the manufacturer to Tell the consumer process orders & track down problem. something about product Provide legal protection for unique quality production features. Increase the shopper’s Enables the manufacturer to attract a loyal & efficiency. profitable set of customers. Help call consumer’s Helps the manufacturer to segment markets. attention to new products that might benefit them.  Branding Strategy When a company manage its brands it has a number of strategies it can use to further increase its brand value. 1. Line extension 2. Brand Extension 3. Multi-branding 4. New Brands Learning objective 2 Advantages of Branding for Marketers Provide multiple sensory stimuli to enhance customer recognition. Example, via sound. Customer who are frequent purchasers;become brand loyal. Well-developed and promoted brands make product positioning efforts more effective. Can extend the brand by adding new products under the same ‘family’ brand. Strong brands can lead to financial advantages; brand itself becomes valuable. Characteristic of effective branding Successful brands are built on some or all of the following factors: 1. Superior functional performance, e.g. Sony, 3M, Kodak. 2. Intangible image associations, e.g. Gucci, Chanel, Coca-Cola. 3. A unique position in the market place. 4. Be first into the market with a unique brand. Consideration in Brand Name Selection There are some criteria for choosing brand names, which include; – Evoke positive associations – Be easy to pronounce and remember – Suggest product benefits – Be distinctive – Use numbers when emphasizing technology – Not infringe on an existing registered brand name. New product development New product development is the development of original products, product improvements, product modifications and new brands through the firm’s own R&D effort. Types of new product i.New to the world product: ii.New product lines iii.Additional to existing product line. iv.Improvements and revisions of existing product. v.Repositioning. vi.Cost reduction  New product Development Process Learning objective 3  Product Life Cycle Stages (PLC) Learning objective 4  Category of Adopters Category 1. Innovators 2. Early adopter Percentage 2.5% 13.5% Characteristics Venturesome Convey ideas innovation to Interested in new ideas. others. Greatest degree of leader leadership 3. Early majority 4. Late majority 5. Laggards 34% 34% 34% Deliberate Skeptical Traditional Adopt new innovations just Adopt new ideas just after Suspicious of innovations before the average the average member of a Last to adopt an innovation member of a system. system. Not opinion leader.  SUMMARY Define product and describe the major classifications of Discuss branding strategy—the decisions companies make in products and services. building and managing their brands. Broadly defined, a product is anything that can be offered to a Some analysts see brands as the major enduring asset of a market for attention, acquisition, use, or consumption that might company. Brands are more than just names and symbols; they satisfy a want or need. Products include physical objects but embody everything that the product or the service means to also services, events, persons, places, organizations, ideas, or consumers. Brand equity is the positive differential effect that mixtures of these entities. Services are products that consist of knowing the brand name has on customer response to the activities, benefits, or satisfactions offered for sale that are product or the service. A brand with strong brand equity is a very essentially intangible, such as banking, hotel, tax preparation, valuable asset. and home-repair services. Products and services fall into two In building brands, companies need to make decisions about broad classes based on the types of consumers who use them. brand positioning, brand name selection, brand sponsorship, Consumer products— those bought by final consumers—are and brand development. The most powerful brand positioning usually classified according to consumer shopping habits builds around strong consumer beliefs and values. Brand name (convenience products, shopping products, specialty products, selection involves finding the best brand name based on a and unsought products). careful review of product benefits, the target market, and Industrial products—those purchased for further processing or proposed marketing strategies. A manufacturer has four brand for use in conducting a business—include materials and parts, sponsorship options: It can launch a national brand (or capital items, and supplies and services. Other marketable manufacturer’s brand), sell to resellers that use a private brand, entities— such as organizations, persons, places, and ideas—can market licensed brands, or join forces with another company to also be thought of as products. co-brand a product. A company also has four choices when it comes to developing brands. It can introduce line extensions, brand extensions, multibrands, or new brands. References 1. Kotler, P., Armstrong, G. (2020). Principles of Marketing, Global Edition. United Kingdom: Pearson Education. 2. Marc Oliver Opresnik and Svend Hollensen (2018) Marketing: Principles and Practice: A management-oriented approach.Independently published  KEY TERMS Consumer product Product quality Convenience product Brand Shopping product Packaging Specialty product Product line unsought product Product mix DISCUSSION QUESTIONS Question 2: Question 1: A product is the item offered for sale. A product can be a service or an item. The price that can be charged depends on the market, the quality, the marketing and the segment that is targeted. Each product has a useful life after which it needs replacement, and a life cycle after which it has to be re-invented. REQUIRED REQUIRED Describe the various categories of industrial products with a) What are the FIVE (5) functions of examples. product labels? (10 marks) a) Materials and parts (7 marks) b) What FIVE (5) marketing roles do labels b) Capital items (7 marks) play on a product? (10 marks) c) Supplies and services (6 marks) (TOTAL 20 MARKS) (TOTAL 20 MARKS)  MODEL ANSWER FOR DISCUSSION QUESTIONS Answer Q1-Syllabus chapter 7: Product (CLO 2) Answer Q1-Syllabus chapter 7: Product (CLO 2) Model Answer to Question a) Model Answer to Question b) Materials and parts Raw material which has to be manufactured is Capital items are industrial products classified as manufactured materials. And many a  That aid in the buyer's production or operations, including times, small manufacturers manufacture smaller installations and accessory equipment. Installations consist parts which are used in larger machines like an of major purchases such as buildings (factories, offices) and Automobile. fixed equipment (generators, drill presses, large computer These are manufactured parts, and they are the 2nd systems, and elevators). type in classification of industrial products.  Accessory equipment includes portable factory equipment If we use the iron supplied to us to make a final and tools (hand tools, lift trucks) and office equipment product then, we have manufactured a material and (computers, fax machines, desks). that is the industrial product that we supply.  These types of equipment have shorter lives than do Any process which requires raw material to be installations and simply aid in the production process. processed to give final products is a part of  To make any manufacturing business or large scale manufactured materials classification. industry possible, capital items are used. They are important The pricing and marketing of the product in this case in the classification of industrial products. depends on the raw material being used.  Capital items generally fall under the Assets column of the So if the yarn which is used to make the cloth is very balance sheet. These are items necessary for the functioning high quality, the pricing of the end product will be of the organization, and very useful to be invested in for the high and the marketing will also be premium long term. marketing.  Due to their very nature, these capital items have a residual Manufactured materials and parts consist of value to the company. And hence a company which has large component materials (iron, yarn, cement, wires) and capital, has to ensure that it has large revenue, otherwise component parts (small motors, tires, castings). Capital (which is a fixed cost) will bring the company down.  MODEL ANSWER FOR DISCUSSION QUESTIONS Answer Q1-Syllabus chapter 7: Product (CLO 2) Answer Q2 -Syllabus chapter 7: Product (CLO 2) Model Answer to Question c) Model Answer to Question a) The final group of industrial products is supplies and services.  Labels range from simple tags attached to products to  Supplies include operating supplies (lubricants, coal, paper, complex graphics that are part of the packaging. pencils) and repair and maintenance items (paint, nails,  They perform several functions. At the very least, the brooms). label identifies the product or brand.  Supplies are two kinds: maintenance and repair items  The label might also describe several things about the (paint, nails, brooms) and operating supplies (lubricants, product–which made it, where it was made, when it was coal, writing paper, pencil). made, its contents, how it is to be used, and how to use it  Together, they go under the name of MRO goods. safely.  Supplies are the equivalent of convenience goods; they are  Finally, the label might help to promote the brand, usually purchased with minimum effort on a straight-rebuy support its positioning, and connect with customers. basis.  For many companies, labels have become an important  They are normally marketed through intermediaries element in broader marketing campaigns. because of their low unit value and the great number and geographic dispersion customers. (Related 5 point from above, with related explanation will  Price and service are important considerations, because be awarded full marks) suppliers are standardized and brand preference is not high. (Any point from above, with related explanation will be awarded full marks)  MODEL ANSWER FOR DISCUSSION QUESTIONS Answer Q2 -Syllabus chapter 7: Product (CLO 2) Model Answer to Question b) 1.  Labeling is another significant means of product 7. They compare the product with the same identification like branding and packaging. Labeling is nature products of other firms on the basis of the the act of attaching or tagging labels. information provided on the label. 2.  A label can be anything – a piece of paper, printed 8. Label becomes helpful to sellers to sell out the statement, imprinted metal, leather which is either a product. It protects the customers from part of a package or attached to it, indicating a value of malpractices of the middlemen. contents of a price of product name and place of 9. Labeling is very important element affecting producers or such useful information to be beneficial to sales and distribution process of a product, which the user. provides clear information about the grade, 3.  Thus, a label is an informative tag, wrapper or seal quantity, price, brand name, features etc. to the attached to a product or product’s package. customers. 4.  Labeling gives necessary information to the customers 10. In some countries, many products, including about the products. food and pharmaceuticals, are required by law to contain certain labels such as listing ingredients, 5.  The customers can get knowledge about the quality nutritional information, or usage warning and features of the product without tasting the product. information. 6.  They can recognize standard and grade of the product. Label provides information about the price, quantity, (Related 5 point from above, with related quality etc. of the product, due to which the customers explanation will be awarded full marks) buy the product without doubt and hesitation.