Chapter 12 PRODUCT STRATEGY Delivering More Value

Chapter 12: PRODUCT STRATEGY Delivering More Value © 2009 South-Western, a division of Cengage Learning 1

LOOKING AHEAD • What is the marketing definition of product? • What are the different categories of consumer and business products? • How can products be differentiated? • How does innovation relate to new product development? • What is the product life cycle and how does it relate to marketing? © 2009 South-Western, a division of Cengage Learning 2

PRODUCT DEFINITION: IT’S PROBABLY MORE THAN YOU THINK Car Wash ~ Cooking Lesson ~ Computer ~ Soap ~ Car Product – anything a company offers to satisfy customer needs and wants. Brand ~ Image ~ Packaging ~ Reputation ~ Guarantee © 2009 South-Western, a division of Cengage Learning 3

SERVICES: A PRODUCT BY ANY OTHER NAME Most services embody these qualities: Intangibility Inseparability Variability Perishability © 2009 South-Western, a division of Cengage Learning 4

GOODS V. SERVICES: A MIXED BAG © 2009 South-Western, a division of Cengage Learning 5

PRODUCT LAYERS: PEELING THE ONION © 2009 South-Western, a division of Cengage Learning 6

PRODUCT CLASSIFICATION: IT’S A BIRD, IT’S A PLANE…. Consumer Products • Convenience Products • Shopping Products • Specialty Products • Unsought Products © 2009 South-Western, a division of Cengage Learning 7

PRODUCT CLASSIFICATION: IT’S A BIRD, IT’S A PLANE: • Installations Business Products • Accessory Equipment • Maintenance, Repair, and Operating Products • Raw Materials • Component Parts & Processed Materials • Business Services © 2009 South-Western, a division of Cengage Learning 8

PRODUCT DIFFERENTIATION AND PLANNING • A Meaningful Difference: – Product Quality – Features & Benefits – Product Lines & Product Mixes – Branding – Packaging © 2009 South-Western, a division of Cengage Learning 9

PRODUCT QUALITY Quality Level – how well a product performs its core functions. Product Consistency – how reliably a product delivers it promised level of quality. © 2009 South-Western, a division of Cengage Learning 10

QUALITY INDICATORS Internet Search Engine: Fast, relevant, far-reaching results Stylish Blue Jeans: High-profile designer, high price, celebrity customers TV Editing Equipment: Reliability, flexibility, and customer services Roller Coasters: Thrill factor, design and setting Chain Saws: Effectiveness, safety, and reliability © 2009 South-Western, a division of Cengage Learning 11

FEATURES AND BENEFITS Product Features – specific characteristics of a product. Customer Benefit – the advantage that a customer gains from specific product features. © 2009 South-Western, a division of Cengage Learning 12

PRODUCT FEATURES AND BENEFITS Subway Sandwiches Lower fat Looser pants Contact Lenses Different colors A new-looking you High-definition TV 46 -inch screen The party’s at your house Hybrid Car Lower gas mileage More cash for other needs Triple Latte Caffeine, caffeine… More time to, uh, study © 2009 South-Western, a division of Cengage Learning 13

PRODUCT LINE AND PRODUCT MIX Product Line – products that are closely related, either in terms of how they work, or the customers they serve. Product Mix – the total number of product lines by a single firm. © 2009 South-Western, a division of Cengage Learning Cannibalization – a producer offers a new product that takes sales away from its existing product. 14

BRANDING Brand - a product’s identity that sets it apart from other players in the same category. © 2009 South-Western, a division of Cengage Learning Brand Equity – the extra money that consumers will spend to buy that brand. Brand Name – a catchy, memorable name is a powerful part of strong brand. 15

LINE EXTENSIONS AND BRAND EXTENSIONS Line Extensions Brand Extensions © 2009 South-Western, a division of Cengage Learning Similar products offered under the same brand name A product in a new category under an existing brand name 16

GOOD AND BAD BRAND EXTENSIONS GOOD • Snoop Dog Pet Accessories • Tide To Go stain removal pen • Budweiser Barbeque Sauce • Starbucks Coffee Liqueur w/ Jim Beam © 2009 South-Western, a division of Cengage Learning BAD • Cheetos Lip Balm • Smackers Starburst Bath and Body Collection • Hooters Air • Harley Davidson Cake Making Kit • Maxim Hair Color For Men 17

COBRANDING Cobranding - established brands from different companies join forces to market the same product. Examples: • Ford markets the Eddie Bauer Explorer • Frito-Lay markets KC Masterpiece BBQ chips • Betty Crocker markets brownies with Hershey’s syrup © 2009 South-Western, a division of Cengage Learning 18

NATIONAL BRANDS VS. STORE BRANDS National Brands/ Manufacturer Brands – Brands owned and marketed by the producer. Store Brands/ Private Label Brands – brands produced and marketed by the retailer. © 2009 South-Western, a division of Cengage Learning 19

BECOME CEO OF ME, INC. Create a meaningful brand for yourself • Become CEO of Me, Inc. – What makes you different from others? – Better than your competition? • Once you define your brand – Be sure to deliver – Pump up your visibility © 2009 South-Western, a division of Cengage Learning 20

A BRAND NEW YOU • Millions recognize Donald Trump’s trademark blond hair • Trump stands for autocratic power and self -indulgent luxury • There is a 25% premium for any property that carries his name • He told Business. Week that he is “a bigger brand now than Pepsi Cola or Coca-Cola. ” © 2009 South-Western, a division of Cengage Learning 21

PACKAGING • Protect the Product • Provide Information • Facilitate Storage • Suggest Product Uses • Promote the Brand • Attract Buyer Attention © 2009 South-Western, a division of Cengage Learning 22

PRODUCT LIABILITY AN ISSUE? • Toilet brush: “Do not use for personal hygiene. ” • Scooter: “This product moves when used. ” • Thermometer: “Once used rectally, thermometer should not be used orally. ” • Electric blender: “Never remove food or other items from the blades while the product is operating. ” • Bag of packing air: “Do not use this product as a toy, pillow, or flotation device. ” © 2009 South-Western, a division of Cengage Learning 23

NEW PRODUCT DEVELOPMENT Nuts, Bolts, And A Spark Of Brilliance © 2009 South-Western, a division of Cengage Learning 24

NEW PRODUCT DEVELOPMENT PROCESS © 2009 South-Western, a division of Cengage Learning 25

PRODUCT ADOPTION CATEGORIES How willing are consumers to buy/try new products? • First Adopters – 2. 5% – Adventurous – Risk Takers • Laggards – 16% • Everybody else falls in between © 2009 South-Western, a division of Cengage Learning 26

PRODUCT DIFFUSION RATES Observability How visible is the product to other potential consumers? Trialability How easily can potential consumers sample the new product? Complexity Can potential consumers easily understand what your product is and how it works? Compatibility How consistent is your product with the existing way of doing things? Relative Advantage How much better are the benefits of your new product compared to existing products? © 2009 South-Western, a division of Cengage Learning 27

THE PRODUCT LIFE CYCLE: RESULTS OVER TIME © 2009 South-Western, a division of Cengage Learning 28

PRODUCT LIFE CYCLE AND MARKETING STRATEGIES Phase Examples Sales/Profits Marketing Strategies Introduction Plasma TV, fuel cell technology Low sales, low profits Build awareness, trial, and distribution Growth Hybrid cars, video cell phones, Increasing sales and profits Reinforce brand positioning, often through heavy advertising Maturity Airlines, DVD players Flat sales and declining profits Target competitors, new product features, competitive advertising, promotion, and price cuts Decline Pagers, videocassettes Declining sales and profits Reduce spending and consider terminating the product © 2009 South-Western, a division of Cengage Learning 29

LOOKING BACK • What is the marketing definition of product? • What are the different categories of consumer and business products? • How can product be differentiated? • How does innovation relate to new product development? • What is the product life cycle and how does it relate to marketing? © 2009 South-Western, a division of Cengage Learning 30