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CHAPTER 5

PRODUCT DECISIONS

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LEARNING OUTCOMES
LO 1 Define the term product
LO 2 Classify consumer product
LO 3 Define the terms product item, product line,
and product mix
LO 4 Describe marketing uses of branding
LO 5 Describe marketing uses of packaging
and labeling
LO 6 Describe how and why product warranties
are important marketing tools
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LO 1

WHAT IS A PRODUCT?

Everything, both favorable


Product
and unfavorable, that a
person receives in an
exchange.

§ Tangible Good
§ Service
§ Idea
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LO 1

WHAT IS A PRODUCT?
Product is the starting point of
Marketing Mix

Product

Price Promotion

Place (Distribution)

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LO 2

TYPES OF PRODUCTS

A product used to manufacture other


Business goods or services, to facilitate an
Product organization’s operations, or to resell
to other consumers.

Consumer A product bought to satisfy an


Product individual’s personal needs or wants

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LO 2

TYPES OF CONSUMER PRODUCTS

Products

Consumer Business
Products Products

Convenience Shopping Specialty Unsought


Products Products Products Products

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LO 2

TYPES OF CONSUMER PRODUCTS

Convenience A relatively inexpensive item that merits little


Product shopping effort

A product that requires comparison shopping,


Shopping
because it is usually more expensive and
Product
found in fewer stores

A particular item for which consumers search


Specialty
extensively and are reluctant to accept
Product
substitutes

A product unknown to the potential buyer or a


Unsought
known product that the buyer does not
Product
actively seek
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LO 2

LEVEL OF PRODUCTS
Augmented Product

Installation

Packaging
Brand Features
Name Core After-
Delivery
Benefit or Sale
& Credit
Quality Service Service
Design
Level

Warranty

Actual Product Core Product


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LO 3

PRODUCT ITEMS, LINES, AND MIXES

A specific version of a product


that can be designated as a
Product Item
distinct offering among an
organization’s products.

A group of closely-related
Product Line
product items.

All products that an


Product Mix organization sells.

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LO 3
Campbell’s Product Lines
and Mix

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LO 3

BENEFITS OF PRODUCT LINES

Advertising Economies

Package Uniformity

Standardized
Components

Efficient Sales and


Distribution

Equivalent Quality

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LO 3

PRODUCT MIX WIDTH

The number of product


Product Mix lines an organization
Width
offers.

§ Diversifies risk
§ Capitalizes on established reputations

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LO 3

PRODUCT LINE DEPTH

The number of product items in a


Product Line
product line.
Depth

§Attracts buyers with different preferences


§Increases sales/profits by further market segmentation
§Capitalizes on economies of scale
§Evens out seasonal sales patterns

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LO 3

ADJUSTMENTS

Adjustments to
Product Items,
Lines, and Mixes

Product Line
Product Product
Extension or
Modification Repositioning
Contraction

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LO 3

TYPES OF PRODUCT MODIFICATIONS

Quality Modification

Functional Modification

Style Modification

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LO 3

Planned Obsolescence

Planned The practice of modifying


Obsolescence products so those that have
already been sold become
obsolete before they actually
need replacement.

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LO 3

Repositioning

Why reposition
established brands?

Changes in
Changing
Declining Sales Social
Demographics
Environment

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LO 3

Product Line Extension

Product Line Adding additional products to


Extension an existing product line in
order to compete more broadly
in the industry.

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LO 3

Product Line Contraction

Symptoms of Product Line Overextension

§ Some products have low sales or cannibalize


sales of other items
§ Resources are disproportionately allocated to
slow-moving products
§ Items have become obsolete because of new
product entries

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LO 3
REVIEW LEARNING OUTCOME
Product item, product line, and product mix

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LO 4

BRAND

A name, term, symbol,


Brand
design, or combination
thereof that identifies a
seller’s products and
differentiates them from
competitors’ products.

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LO 4

BRANDING

Brand That part of a brand that can be spoken,


Name including letters, words, and numbers

Brand The elements of a brand that


Mark cannot be spoken

Brand
The value of company and brand names
Equity

Global A brand where at least one-third of the


Brand product is sold outside its home country

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LO 4

BENEFITS OF BRANDING

Product
Identification

Repeat Sales

New Product
Sales

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LO 4

TOP TEN GLOBAL BRANDS

RANK BRAND 2009 BRAND VALUE ($m)

1 COKE 68,734
2 IBM 60,211
3 MICROSOFT 56,647
4 GE 47,777
5 NOKIA 34,864
6 MC DONALD 32,275
7 GOOGLE 31,980
8 TOYOTA 31,330
9 INTEL 30,636
10 DISNEY 28,447
http://www.interbrand.com/best_global_brands.aspx?year=2009&langid=1000
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LO 4

BRANDING STRATEGIES

Brand No Brand

Manufacturer’s
Private Brand
Brand

Individual Family Combi- Individual Family Combi-


Brand Brand nation Brand Brand nation

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LO 4

GENERIC BRAND

Generic A no-frills, no-brand-name,


Product low-cost product that is simply
identified by its product
category.

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LO 4
MANUFACTURERS’ BRANDS
Vs. PRIVATE BRANDS

Manufacturers’ The brand name of a


Brand manufacturer.

A brand name owned by a


Private wholesaler or a retailer.
Brand Also known as a private
label or store brand.

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LO 4
ADVANTAGES OF MANUFACTURERS’
BRANDS

§ Heavy consumer ads by manufacturers


§ Attract new customers
§ Enhance dealer’s prestige
§ Rapid delivery, carry less inventory
§ If dealer carries poor quality brand, customer may
simply switch brands and remain loyal to dealer

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LO 4

Advantages of Private Brands


§ Earn higher profits on own brand
§ Less pressure to mark down price
§ Manufacturer can become a direct competitor
or drop a brand/reseller
§ Ties customer to wholesaler or retailer
§ Wholesalers and retailers have no control over
the intensity of distribution of manufacturers’
brands

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LO 4
INDIVIDUAL BRANDS VERSUS
FAMILY BRANDS

Individual Using different brand names


Brand for different products.

Marketing several different


Family
products under the same
Brand
brand name.

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30
LO 4
INDIVIDUAL BRANDS VERSUS
FAMILY BRANDS
INDIVIDUAL BRANDS FAMILY BRANDS
– P&G Diapers – HONDA Products

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LO 4

CO-BRANDING
Ingredient
Branding

Types of Cooperative
Cobranding Branding

Complementary
Branding

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LO 4

CO-BRANDING
Ingredient The brands of a part that makes up
branding the product. – DVVT engine in Perodua
Kembara
Cooperative When two brands receiving equal
branding treatment ( in the context of
advertisement) borrow from each
other’s brand equity

Complementary Products are advertised or marketed


branding together to suggest usage. E.g. Oil of
Olay and Pantene are marketed
together to help eliminate 7 signs of
aging.
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LO 4

TRADEMARKS

A Trademark is the exclusive right to use a brand.

§ Many parts of a brand and associated symbols


qualify for trademark protection.

§ Trademark right comes from use rather than


registration.

§ The mark has to be continuously protected.

§ Rights continue for as long as the


mark is used.

§ Trademark law applies to the online world.


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34
LO 4
REVIEW LEARNING OUTCOME
Marketing Uses of Branding

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LO 5

FUNCTIONS OF PACKAGING

Contain and Protect

Promote

Facilitate Storage, Use,


and Convenience

Facilitate Recycling

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LO 5

LABELING
Persuasive Informational

§ Focuses on § Helps make proper


promotional selections
theme
§ Lowers cognitive
§ Consumer dissonance
information is
secondary § Includes use/care

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LO 5

LABELING

Persuasive

Informational

Informational

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LO 5

UNIVERSAL PRODUCT CODES

Universal A series of thick and thin


Product Codes vertical lines (bar codes),
(UPCs) readable by computerized
optical scanners, that represent
numbers used to track
products.

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LO 5
REVIEW LEARNING OUTCOME
Packaging and Labeling

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LO 5

Global Issues in Branding

One Brand Name


Everywhere

Global Options Adaptations &


for Branding Modifications

Different Brand
Names in Different
Markets

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LO 5

Global Issues in Packaging

Labeling

Global
Considerations Aesthetics
for Packaging

Climate
Considerations

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LO 5
REVIEW LEARNING OUTCOME
Global Issues in Branding and Packaging

Branding Choices: Packaging Considerations:

1 name Labeling
Modify or adapt 1 name Aesthetics
Different names in Climate
different markets

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LO 6

PRODUCT WARRANTIES

Warranty A confirmation of the quality or


performance of a good or service.

Express A written guarantee.


Warranty

An unwritten guarantee that the


Implied
good or service is fit for the purpose for
Warranty which it was sold. (UCC)

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