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PRODUCT PLANNING

PRODUCT
anything, tangible or intangible, received in an exchange to satisfy a want or need

Products include:

  • physical objects (goods)
  • services
  • ideas
  • people
  • places
  • organizations

Good:
a tangible physical entity that one can touch

  • e.g., car, computer, shirt

Service:
an action that one party can offer to another which provides an outcome with intangible benefits but does not result in the ownership of anything

  • e.g., marketing class, haircut, bank machine transaction

Idea:
a concept, philosophy, image, or issue

  • e.g., messages of: don't do drugs, do use condoms, don't wear fur, do eat meat

Entities such as people, places, and organizations can also be products.  A political candidate provides promises of future performance in exchange for your vote.  A country can promise low taxes and operating expenses to attract businesses which provide jobs.


PRODUCT OFFERING

  • Core Product
    the problem-solving benefits of a product

  • Augmented or Extended Product
    additional customer benefits built around the core product

These together make up the product offering.

E.g., the product offering of an automobile would include the core product of some bundle of tangible features at some price and the augmented product which includes the ministrations of the salesperson, the expectations that the particular dealership does good service work, the convenient location of the dealership, and such.

E.g., the core product of a life insurance policy includes a particular contractual agreement to provide so much death benefit, so much annuity value, etc. for some set price, but many products are purchased because buyers appreciate the trustworthiness of a particular sales agent, who is part of the augmented product.

Indeed, many products are differentiated not on the core features, but on the augmented features.


CONSUMER PRODUCTS
products purchased by final consumers for personal or household consumption

  • convenience products
    inexpensive, frequently purchased; minimal comparison and buying effort
    -e.g., a pack of chewing gum, a loaf of bread

  • shopping products
    more effort and time expended in selection and purchase
    -e.g., clothing

  • specialty products
    products with unique characteristics or brand identification; considerable consumer effort might be expended
    -e.g., a music CD, a pair of eye glasses

  • unsought products
    consumer unaware, does not think about; sometimes purchased to solve emergency
    -e.g., a casket, a tow for a disabled car

Although many sorts of products could fall in more than one of these categories, these classifications are important conceptually because they can affect how a product is designed, promoted, distributed, and priced.  For example, if you owned a wrecker (tow truck) service, would it be at all beneficial to advertise your services and to offer the lowest prices?  Generally, people would have an interest in hearing about your service at the particular time when the need arises; in most cases, they probably would not shop around for the best price. You would therefore merely need to advertise in places like the Yellow Pages and to set your prices at a "customary" rate.  Rather than focus on long term relationships with final consumers of your product, you would focus more on maintaining good relationships with local and state police departments and services like AAA, who can provide referrals to your business.


PRODUCT ATTRIBUTES

Products have features or attributes which provide benefits to the buyer. Note that benefits, not features, provide solutions to a buyer's needs.  People buy a bundle of benefits, not features.

A reason that many people fail as salespeople is that they attempt to sell features rather than benefits.


QUALITY
the ability of a product to perform its functions as expected by the buyer

conformance to specifications

Two elements of quality:

  • level of quality
    the amount of quality possessed by a product

  • consistency
    the ability of a product to provide the same level of quality over time

    • In many cases, cans of vegetables sold under a "generic" brand label are well known "name" brand products - the only difference is the paper label that is on the can.  Although quality of the product inside the can might be every bit as good as a name brand, consumers nonetheless rightfully perceive a difference in quality because there is a difference in the contents every time the generic can is purchased.  A can of mushrooms, for instance, might be whole or chopped, large or small, and with or without stems.  The seller simply purchases the production surpluses from name brand manufacturers and adds the generic label to the finished canned product.

Note that value has to do with the difference between the buyer's expectations and the buyer's cost of obtaining the product.

Should a marketer provide the highest level of quality possible?  Remember that the meaning of the term is relative.  Relate to the idea of value. Remember that providing more of some attribute merely makes the product more expensive, not better, if it does not provide additional value to the prospective buyer.


TQM
Total Quality Management two definitions:

1) a philosophy that quality requires a commitment at all levels of an organization and is a continuous and dynamic process

2) a dangerous buzzword that was adopted by many ill-fated American companies who listened to too many high-paid consultants

Don't ever forget: quality is relative, and merely providing more of some attribute without a concurrent increase in value to the customer is a pointless drain on human and physical resources, not to mention profits.

Recall that quality has to do with the ability of a product closely meet the needs of the buyer, not with having more of some attribute.  If the body of a ball-point pen is manufactured to a diameter of 0.24995 - 0.25005 inches (i.e., a tolerance in the diameter of plus or minus 0.00005 inches), would this indicate that the pen is of high quality?  Most of us would be unwilling to pay $12 for a pen if one which looked similar to us sold for 39-cents.  Such a feature (holding a close tolerance on diameter) provides no benefit to the buyer, and does not, therefore, add value to the product.  I.e., such a pen does not conform to the specifications set by the buyer if it does not meet the required price specification. 

The idea of TQM is that marketing, and therefore the ability to best meet the needs of the buyer, must be pervasive and continuous throughout the selling organization.


ISO 9002

  • A set of standards for quality management and quality assurance
  • A company becomes " ISO certified" by periodically going through audits


PRODUCT MIX DECISIONS

Product line
a group of products that are closely related because they

  • function in a similar manner,
  • are sold to the same customer groups,
  • are marketed through the same types of outlets, or
  • fall within given price ranges

Product mix
the set of all product lines and items that a particular seller offers for sale to buyers

Product Mix Decisions

  • product mix width (narrow, deep)

  • product line depth (shallow, deep)


product manager, brand manager
someone who is responsible for marketing management activities associated with a product item, a line of products, or a brand of products


BRANDING

  • name
  • term
  • sign
  • symbol
  • design
  • phrase
  • utterance
  • or combination of these

which identifies one seller to differentiate it from competitors


Brand Names

  • brand name
    part of the brand consisting of words or letters that forms a name to identify the firmís offerings
  • brand mark
    a symbol or pictorial design that distinguishes a product
  • trademark
    a brand for which the owner legally claims exclusive protection


generic name
a brand name that has become a general descriptive term for a product class

  • e.g., Aspirin
      NOT:
    • Kleenex
    • Xerox
    • Coke

      Note: Don't confuse with generic branding.


brand equity

  • >the added value that a brand name gives to a product, due to perceived quality, brand loyalty, name awareness, etc.
  • the revenue premium that a brand earns in the marketplace in comparison with identical alternatives

Kim Berley owned a diner doing business as "Berley's Bar and Grill."  When Kim wanted to retire due to a sudden illness, she was unable to find a local buyer for the business even though Berley's had a very good reputation and attracted patrons from a very long distance.  Coincidentally, Polly Wog had recently received all licenses and had begun installing equipment for her own diner in another town, to be called "'Wog's Bar and Grill."  Polly would have wanted to purchase Berley's because it had so many loyal customers and such a good reputation.  Unfortunately, it was now too late to back out of her obligations to her own business.  Berley's restaurant equipment was sold to a used equipment supply house and the building was put up for lease.  Polly, however, believed that the name " Berley's Bar and Grill" sounded a lot better than " Wog's" and that the name would immediately reflect the reputation of Berley's and would quickly attract many of the customers who had frequented Berley's.  Kim agreed to sell Polly all rights to use the name " Berley's Bar and Grill." for $5,000.

Consider the amount of equity associated with brand names such as Kleenex, Coke, or Xerox.  The parent companies of these brand names have invested a considerable amount of effort and money, over a very long period of time, to develop a brand name which represents specific feelings and beliefs in people's minds.  The owner of the brand has a right and an obligation to protect that equity, and the future earning power that it holds, as much as it has an obligation to protect any other asset in the organization.

The Western economy has been allowed to flourish perhaps in part because of legal and cultural protection that is given to brand equity.  Where piracy of brand names is permitted, it is difficult for a single company to emerge as a producer of goods with high consumer value (high quality at low price). Pirated goods generally seem to be grossly inferior to the name brand, with the result that the consumer obtains poor value, no one has any incentive to produce goods of high quality for a reasonable price, and Western brand name producers have a disincentive to sell products in areas where branding has no legal or cultural protection.


BRANDING STRATEGIES

Manufacturer branding (national brand)
brands created and owned by the producer of a product

  • multiproduct branding strategy
    • E.g., Bosch makes automotive parts as well as consumer appliances.  The reputation that it holds in one product category carries over into other product categories.

  • multibranding strategy
    • E.g., Procter & Gamble makes Tide, Cheer, and Oxydol detergents.  If all products carried the same brand name, consumers might become confused regarding the differences between products.

Private distributor branding (store brand, dealer brand)
brands initiated and owned by resellers

  • E.g., Sears Kenmore, Wal*Mart Sam's Choice.  Although store brands are generally not manufactured by the retailer, the reputation of the retailer for selling goods of certain levels of quality and price can carry over to a level of consumer trust into the store brand.

Generic branding
brands indicating only the product category

  • E.g., a wholesaler purchases surplus canned vegetables from various manufacturers, adding only a label that indicates the contents.  Consumers receive good value if consistency of product is not an important attribute.


BRANDING STRATEGIES

  • brand extension
    attaching a popular brand name to a new product in an unrelated category
  • line extension
    new sizes, styles, or related products in a product line


    BRAND DISTRIBUTION ISSUES

    • Slotting Fees
      payments demanded by retailers from producers before they will accept new products and find "slots" for them on the shelves

    • Licensing
      a contractual agreement whereby a company allows another firm to use its brand name, patent, trade secret, or other property for a royalty or fee

    • co-branding
      multiple brand names are used with the same product


    PACKAGING
    activities of designing and producing the container or wrapper for a product

    • protection
    • convenience
    • information
    • promotion

    LABELING
    providing identifying, promotional, or other information on package labels


    WARRANTY
    specifies what the producer will do if the product malfunctions

    express warranty:
    a written statement of liability

    implied warranty:
    assigns responsibility for product deficiencies to the manufacturer


    NEW PRODUCT LAUNCH

    Pricing strategies:

    skimming pricing
    a high initial price to help recover the costs of development and to Capitalize on the price insensitivity of early buyers

    penetration pricing
    a low initial price to discourage competitive entry and build unit volume


    PRODUCT LIFE CYCLE (PLC) CONCEPT
    the course of a product's sales and profits over its lifetime

    • introduction

    • growth

    • maturity

    • decline

    Note that this is a useful concept to guide strategy in some cases, but that it is a concept which is not applicable in many situations.  Although the notion of PLC has been attacked on issues of validity and relevance to many types of products, it is, nonetheless, useful conceptually to guide thinking about changes in product strategy over time and about product portfolio management.


    Variations on the traditional product life cycle

    • style
    • fad
    • fashion


    Issues associated with PLC

    • Diffusion
      acceptance of new products throughout a social system
    • Innovator
      initial purchasers of a new product
    • Laggard
      the last purchasers to adopt


    edited 4 JUL 05