Chapter 6:    Product Planning for Goods  and Services

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Main Points . What is a product?Product classesBranding, packaging and warrantiesPLC(product life cycle)New product. 1. What Product" really means. Product(p255): the need-satisfying offering of a firm (goods, services, experiences, events, persons, places, properties, organizations, informatio

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Chapter 6: Product Planning for Goods and Services

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2. Main Points What is a product? Product classes Branding, packaging and warranties PLC(product life cycle) New product

3. 1. What “Product” really means Product(p255): the need-satisfying offering of a firm (goods, services, experiences, events, persons, places, properties, organizations, information and ideas.) A product - total satisfaction (the right service, a physical good with the right features, instructions on use, convenient packaging, warranties, and the like.(p256)

4. Strategic Planning for Product

5. The Product Levels

6. Hotel

7. Quality (P256) Quality: a product’s ability to satisfy a customer’s needs or requirements. Quality focuses on the customer feelings. Differentiate “technical quality” and “perceived quality”.

8. Goods and Services (P257) A product may be a physical good or a service or a blend of both. A good is a tangible, physical item that can be seen and touched. A service is a deed performed by one party for another. Difference b/w goods and services. Time of production; supply and demand balance; economies of scale

9. 2. Product Lines (p260) Product assortment/mix: the set of all product lines and individual products that a firm sells. Product line: a set of individual products that are closely related. ( be produced or operated in a similar way; sold to the same target market; sold to the same types of outlets; priced at about the same level.) Individual product: a particular product within a product line.( differentiated by brand, level of service offered, price, or some other characteristic)

10. P&G???????

11. 3. Product Classes (p260) Consumer products(p261): products meant for the final consumers. Business products(p261): products meant for use in producing other products. Basis - type of customer

12. 3.1 Consumer Product Classes

13. 3.1.1 Convenience Products – purchased quickly (p262) Convenience products: products a consumer needs but isn’t willing to spend much time or effort shopping for. Staples: bought often, routinely, and without much thought, toothpaste. Impulse goods: bought quickly as unplanned purchases because of a strongly felt need. Emergency goods: purchased immediately when the need is great, such as umbrellas during a rainstorm.

14. 3.1.2 Shopping Products are compared (p262) Shopping products: products that a customer feels are worth the time and effort to compare with competing products. Homogeneous shopping products: shopping products the customers sees as basically the same and wants at the lowest price. Heterogeneous shopping products: shopping products that the customer sees as different and wants to inspect for quality and suitability.

15. 3.1.3 Specialty Products(p262) -- no substitutes, please! Specialty products: consumer products that the customer really wants and makes a special effort to find. Cars, stereo components, photographic equipment, men’s suits, etc. Any branded product that consumers insist on by name is a specialty product.

16. 3.1.4 Unsought Products need promotion (p263) Unsought products: that potential customers don’t yet want or know they can buy. new unsought products: offering really new ideas that potential customers don’t know about yet. Regularly unsought products: not normally thinking of buying. Life insurance,, gravestones, encyclopedias, etc.

17. One product may be seen several ways

18. Assignment The buying behaviour of several customers or potential customers is described below for Kodak digital cameras. Assume in each situation that the customer being described is representative of a particular group of customers-all possessing the same needs and exhibiting similar buying behaviour. Then (a) indicate in which consumer product class the product should be placed based on the characteristics of each group of customers, and (b) state why you placed the product in this class.

19. 1.Mary Wang, a college student, wished to purchase a camera as a birthday gift for her boy friend. Although Mary could afford to spend less than $500, she wanted a digital camera of reasonably good quality-but also one that would be easy to operate. Knowing very little about cameras, Mary asked a salesperson at the Campus Camera Shop for his advice. He recommended that she buy the new Kodak digital camera because of its low price and many convenient features.

20. 2.While deep-sea fishing off the coast of Hawaii, Vic Shaw caught a large swordfish. He decided that his friends back home would never believe his" fish story" if he didn't have pictures. But he did not have a camera. As soon as the boat got back to the dock, Vic went to a nearby tourist shop. He was pleased to see a display of Kodak digital cameras, but was sorry to see a much higher price than the same camera sold for in his hometown. He bought one anyway, because he wanted to take some pictures right away before the fish was taken away to the fish market. He also liked the idea of being able to e-mail pictures to his friends and family.

21. 3.Maury Schmidt walked into a Wal-Mart store and told the clerk at the camera counter that he wanted to buy a digital camera. The clerk said the store carried several such cameras, including the Kodak digital camera. "I'll take the one with the lowest price," Maury told the clerk.

22. 4. Bob Goff teaches high school science courses. He spends most of his leisure time with amateur photography. In fact, he enjoys photography so much that for several years he has volunteered to teach the advanced photography workshop offered by the city recreation department. He has won several awards for his photographs of mountain landscapes. Bob has even earned extra cash by selling some of his photos to companies that print postcards. Several of his friends have encouraged him to turn professional, but he prefers using his talents mainly as a hobby.

23. 5. While Mrs. Lotz was shopping in her local mall, she came upon a special display of Kodak digital cameras. At first, she doubted the product quality because they were priced quite low compared to her friend's Sony camera. But remembering all the Kodak advertisements she had seen on television and in magazines, she decided to buy one to take photographs of her grandchildren who were visiting for the week.

24. 6. Ellen Pierce was at her cousin's house and saw some photographs that her cousin had taken with a Kodak digital camera. She was so impressed by the quality of the pictures that she decided to purchase the same camera. The next day she went to a nearby camera store and found that the store did not have the camera in stock-although it did have other digital camera in stock in the same price range. The salesperson in the store assured her that the others were just as good. But Ellen ignored this advice and tried two other stores that were also out of stock. Getting frustrated, Ellen was ready to drive downtown to a large camera store when she came upon a display of Kodak digital cameras in a nearby department store. She quickly bought one-even though she felt the price would probably be lower at the camera store.

25. 3.2 Business Products (p264-267)

26. 4. Branding 4.1 What is a brand?(p269) Branding: the use of a name, term, symbol, or design ---- or a combination of these ---- to identify a product. Brand name: a word, letter, or a group of words or letters. Trademark: those words, symbols, or marks that are legally registered for use by a single company. Service mark: those words, symbols, or marks that are legally registered for use by a single company to refer to a service offering.

27. 4.2 the Meaning and Advantages of a Brand Identify the seller or maker promise to the buyers a warranty of quality make shopping easier reduces selling time and effort improve the company’s image speed up acceptance of new products Brand equity(p271): the value of a brand’s overall strength in the market. A brand can be a real asset to a company. It must be protected. The Trademarks Act (p273).

28. 4.3 Five Levels of Brand Familiarity Brand familiarity: how well customers recognize and accept a company’s brand. Brand rejection: potential customers won’t buy a brand unless its image changed. Brand nonrecognition: final customers don’t recognize a brand at all. Brand recognition: customers remember the brand. Brand preference: target customers usually choose the band over other brands, perhaps because of habit or favorable past experience. Brand insistence: customers insist on a firm’s branded product and are willing to search for it.

29. Branding

30. 4.4 Characteristics of a Good Brand Name (P271) Easy to pronounce, recognize and remember. E.g. Tide, Crest, Puffs. Suggesting benefits: Beauty-rest Suggesting qualities: firebird Distinctive: Kodak, Exxon Not carry poor meanings in other countries and languages: Nova is a poor name for a car to be sold in Spanish-speaking countries; it means “star” but sounds the same as the Spanish words for “no go”.

31. 4.5 Branding Decisions To brand or not to brand Generic products: products that have no brand at all. Branded products Brand sponsor decision Manufacturer brands (national brand, NB, own brand): brands created by producers. Dealer brands (distribution brand, private brands, PB): brands created by intermediaries. Brand name decision Family brand: a brand name that is used for several products. Licensed brand: a well-known brand that sellers pay a fee to use. Individual brands: separate brand names used for each product.

32.

33. Family Brand/Umbrella Brand [??]:??????? ???:?????????????????????????(???????????????/??)?????????????,?????????????? ? ?:????????????????????(?????),?????????????? ???:????????????????????????????????(?????),?????????????? Sony, Philips, Kraft, Coca-cola

34. Licensed Brand

35. Individual Brand Procter & Gamble’s brands

36. What Kind of Brand to Use?

37. 5. Packaging

38. The Importance of Packaging A well-designed package can make the product easier to use; Prevent spoilage or damage; Save pace and easier to handle and display; Identify and promote the brand; Be green(degradable and recycled).

45. 6. Using Warranties to Improve the Marketing Mix

46. 7. Product Life Cycles 7.1 PLC: the stages a new product idea goes through from beginning to end. Customers’ attitudes and needs; Target markets; Nature of competition; Total sales and profits Four main stages of the PLC: Introduction Growth Maturity decline

47. The Product Life Cycle Sales and profits do not move together over time.

48. Introduction Sales are low. Customers do not know about the product; Informative promotion is needed. Most companies experience losses.

49. Growth Sales grow fast. Profits rise and then start falling. Competition increases.

50. Maturity Sales level off. Competition gets tougher. Profits go down. Less efficient firms can’t compete and drop out of the market. Persuasive promotion becomes more important.

51. Decline New products replace the old. Price competition increases. Firms with strong brands may make profits until the end.

52. 7.2 Planning for Different Stages of PLC

53. Current Examples at Different Stages Introduction: third generation mobile phones, e-conferencing, iris-based personal identity cards; Growth: portable DVD players, email, smart cards; Maturity: personal computers, faxes, credit cards; Decline: typewriters, handwritten letters, cheque books.

54. Assignment Read the following five cases carefully and for each one: a. Decide which stage of the product life cycle best describes the situation in the case -- considering the relevant product-market. b. Briefly explain your answer, including such factors as profitability, number of competitors, place, promotion, and pricing.

55. 1. One of the largest food manufacturers is testing a new product for the large soft-drink market – a patented paper cup coated with a secret formula. All the consumer has to do is add water and it becomes a carbonated beverage! It is no longer necessary to carry home six-packs or eight-packs. There are no empty bottles or cans to return, and less storage space is needed. The product can also be distributed through normal wholesale channels rather than requiring the special distribution networks now used by the bottling industry. Therefore, the product offers economy as well as convenience.

56. 2. Altos Stereo Systems is just entering the fast-growing, but increasingly competitive market for "home theatre" sound systems. Like other available systems, the Altos line creates excellent "surround sound" that is like what you hear in a movie theatre. The Altos marketing manager is confident that he can capture a profitable share of the market because his firm ' s system has an integrated control unit that automatically coordinates the settings for various components -- say, the TV, the stereo system, a cable box, and a VCR ? -even if they are from different manufacturers. All the user has to do is press the "on" button on the remote control and set the volume. Well-known competitors like Pioneer and Sony still don't have anything to match the ease-of-use of the Altos model. In addition, to attract support from traditional retailers of home electronics products, Altos is offering a very low wholesale price. Even at the very low suggested retail price, this will make the Altos receiver very profitable for the retailers. Altos's marketing manager says that this very aggressive pricing will pay off. He predicts that in the next decade home theatre systems will replace standard stereo receiver systems-and that already prices of the surround sound systems are dropping rapidly. He says that this will stimulate even faster growth in the home theatre market.

57. 3. Visual Health Corporation has announced that it will no longer produce hard contact lenses. A spokesman for the company said that the firm's share of the market for hard contact lenses had grown in each of the last five years, but that the overall market was shrinking as more consumers were switching to other alternatives-including disposable contacts, gas-permeable lenses, and even surgical procedures such as radial keratotomy. Visual Health's management has indicated that its decision was motivated by the need to pursue more profitable opportunities. The firm' s sales manager also said that the decision was hastened by the fact that several other firms serving this market had begun to focus on "ill-conceived price promotions" that were eroding what profit might be possible from serving those consumers who still prefer the old-style hard lenses.

58. 4. Bill Works, legendary founder of Orange Computer Company, has announced that his computer company will no longer manufacture computer hardware. Instead, the company will focus its effort on developing high-performance, graphically oriented soft ware for use in navigating the Internet and searching for information on the World Wide Web. Some experts applaud Works's decision to focus on software for the Web, which takes advantage of the explosive growth of interest in the Internet and the revolution it is likely to prompt in computing. However, Netware, Novell, Microsoft , IBM, and other firms that helped create the market for network software, already have a formidable head start.

59. 5. Beauty Care, Inc., one of the nation's largest producers of personal care products, has just announced plans to sell a new shampoo called Gentle-Care. The company is spending heavily on magazine and TV ads that will promote Gentle-Care as 'The shampoo that everyone can use daily. No other shampoo is as gentle on your hair or provides as clean and natural a scent." Free samples of Gentle-care will be attached to packages of other Beauty Care products, and magazine ads will include cents-off coupons. Despite intense competition, Beauty Care expects its new product to capture a 5 percent share of the slowly growing shampoo market.

60. 8. New Product Development New product: a product that is new in any way for the company concerned. For many firms the key to success and survival is identifying and developing new product ideas, along with effective strategies to go with them. But it is not easy. It demands money, effort, time and talent---and even then, the risks and costs of failure are high.

61. New-Product Development Process

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