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Chapter 6 Product and service concepts. Learning objectives. 1 Define the term product 2 Classify consumer products 3 Discuss the importance of services to the economy 4 Identify the differences between services and goods 5 Explain why services marketing is important to manufacturers.
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Learning objectives 1 Define the term product 2 Classify consumer products 3 Discuss the importance of services to the economy 4 Identify the differences between services and goods 5 Explain why services marketing is important to manufacturers
Learning objectives (cont.) 6 Define the terms product item, product line and product mix 7 Describe marketing uses of branding 8 Describe marketing uses of packaging and labelling 9 Describe how and why product warranties are important marketing tools
Learning objective 1 Define the term marketing Define the term product
1 Product Everything, both favourable and unfavourable, that a person receives in an exchange.
1 What is a product? Product is the heart of the marketing mix Price Promotion Place (distribution)
Learning objective 2 Describe four marketing management philosophies. Classify consumer products
Business product A product used to manufacture other goods or services, to facilitate an organisation’s operations or to resell to other consumers. Consumer product Product bought to satisfy an individual’s personal wants. 2 Product classifications
2 Types of consumer products Products Consumer products Business products Convenience products Shopping products Specialty products Unsought products
2 Types of consumer products (cont.) Convenience product A relatively inexpensive item that merits little shopping effort. Shopping product A product that requires comparison shopping because it is usually more expensive and found in fewer stores. Specialty product A particular item for which consumers search extensively and are reluctant to accept substitutes. Unsought product A product unknown to the potential buyer or a known product that the buyer does not actively seek.
Learning objective 3 Discuss the importance of services to the economy Describe four marketing management philosophies.
3 Service The result of applying human or mechanical efforts to people or objects.
3 The importance of services 8 out 10 workers are in service sector Services account for 74% of US GDP Service occupations will be responsible for all job growth through 2005
Learning objective 4 Identify the differences between services and goods
4 How services differ from goods Characteristics that distinguish services: • intangibility • inseparability • heterogeneity • perishability.
4 Characteristics of services Intangibility Services that cannot be touched, seen, tasted, heard or felt in the same manner as goods. Inseparability A characteristic of services that allows them to be produced and consumed simultaneously. Heterogeneity A characteristic of services that makes them less standardised and uniform than goods. Perishability A characteristics of services that prevents them from being stored, warehoused or inventoried.
Learning objective 5 Explain why services marketing is important to manufacturers
5 Services marketing in manufacturing Strong competitive advantages
Learning objective 6 Define the terms product item, product line and product mix
6 Product items, lines and mixes Product item A specific version of a product that can be designated as a distinct offering among an organisation’s products. Product line A group of closely related product items. Product mix All products that an organisation sells.
6 Benefits of product lines Why form product lines? • Advertising economies • Package uniformity • Standardised components • Efficient sales and distribution • Equivalent quality
6 Product mix width The number of product lines an organisation offers: • diversifies risk • capitalises on established reputations.
6 Product line depth The number of product items in a product line: • attracts buyers with different preferences • increases sales/profits by further market segmentation • capitalises on economies of scale • evens out seasonal sales patterns.
6 Adjustments Adjustments to product items,lines and mixes Product modification Product line extension or contraction Productrepositioning
6 Product modifications • Quality modification • Functional modification • Style modification
6 Planned obsolescence The practice of modifying products so those that have already been sold become obsolete before they actually need replacement.
6 Repositioning Why reposition established brands? • Changing demographics • Declining sales • Changes in social environment
6 Product line extension Adding additional products to an existing product line in order to compete more broadly in the industry.
6 Product line contraction Symptoms of product line over-extension: • some products have low sales or cannibalise sales of other items • resources are disproportionately allocated to slow-moving products • items have become obsolete because of new product entries.
Learning objective 7 Describe marketing uses of branding
7 Brand A name, term, symbol, design or combination thereof that identifies a seller’s products and differentiates them from competitors’ products.
7 Branding 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. Brand equity The value of company and brand names. Master brand A brand so dominant that it comes to mind immediately when a product category, use, attribute or benefit is mentioned.
Product identification New product sales Repeat sales 7 Benefits of branding Branding distinguishes products from competition
7 An effective brand name … • is easy to pronounce • is easy to recognise and remember • is short, distinctive and unique • describes the product, use and benefits • has a positive connotation • reinforces the product image • is legally protectable.
7 Master brands Photography Kodak Adhesive bandages Band-Aid Rum Bundaberg Vacuum cleaners Hoover Biscuits Arnott’s Cream cheese Philadelphia Crayons Crayola Petroleum jelly Vaseline
7 Branding strategies Brand No brand Manufacturer’s brand Private brand Individualbrand Family brand Combi-nation Individualbrand Family brand Combi-nation
7 Generic brand A no-frills, no-brand-name, low-cost product that is simply identified by its product category.
Manufacturers’ brand The brand name of a manufacturer. Private brand A brand name owned by a wholesaler or a retailer. 7 Manufacturers’ brands versusprivate brands
7 Advantages of manufacturers’ brands • Develop customer loyalty • Attract new customers • Enhance prestige • Offer rapid delivery so can carry less inventory • Ensure dealer loyalty
7 Advantages of private brands • Earn higher profits • Less pressure to mark down prices • Manufacturer may drop a brand or become a direct competitor to dealers • Ties to wholesaler or retailer • No control over distribution of manufacturers’ brands
Individual brand Using different brand names for different products. Family brand Marketing several different products under the same brand name. 7 Individual brands versusfamily brands
7 Co-branding Types of co-branding Ingredientbranding Complementary branding Cooperative branding
7 Trademarks A trademark is the exclusive right to use a brand. • Many parts of a brand and associated symbols qualify for trademark protection. • The mark has to be continuously protected. • Rights continue for as long as it is used.
Learning objective 8 Describe marketing uses of packaging and labelling
8 Packaging Functions of packaging: • contain and protect • promote • facilitate storage, use and convenience • facilitate recycling.
8 Labelling Persuasive Informational • Focuses on promotional theme • Information is secondary • Helps make proper selections • Lowers cognitive dissonance • Includes use/care
8 Universal product codes A series of thick and thin vertical lines (bar codes), readable by computerised optical scanners, that represent numbers used to track products.
Learning objective 9 Describe how and why product warranties are important marketing tools
9 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).
9 Product warranties (cont.) Express warranty Implied warranty Written guarantee Unwritten guarantee
