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Chapter 8

74-231 Chapter 8 notes.pdf

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University of Windsor
Alex Wellington

Chapter 8: Product Concepts 2013-02-11 8:07 AM 1) Learning Objective 1: define the term product • Think: product offerings • A very interesting brand à Virgin o Latest initiative is taking people into space o Ask yourself, what do you think of when you see Virgin? The music, virgin financial, virgin air, and virgin galactic now • Why you like products relates to what they are • What is a product? o Everything, both favorable and unfavorable, that a person receives in an exchange o Tangible good § You could argue that we don’t buy anything for their tangibility. Rather, we buy them for their services (i.e. what it does) o Service o Idea § Most important to us as humans. Think of what politicians promise us, religious convictions, etc • See picture o Product is the starting point of marketing mix o We need to know what needs and wants were fulfilling, what the product is gonna do to fulfill those, then how we’re gonna price, promote and distribute it to the market • Types of products: o Business product – a product used to manufacture other goods or services, to facilitate an organizations operations, or to resell to other consumers o Consumer product – a product bought to satisfy an individual’s personal wants 2) Learning Objective 2: • See classification scheme: types of consumer products o Convenience product: a relatively inexpensive item that merits little shopping effort § Ex: beverages, replacement batteries, bandaids and things you find in a convenience store o Shopping product: a product that requires comparison shopping, because it is usually more expensive and found in fewer stores § Can be heterogeneous or homogenous shopping goods. Heterogeneous is when you have a lot of different features, sizes, etc (TVs and computers). Homogenous is when there are only a few brands around and you’re looking for the best price (ex: cell phone providers of the iPhone 5 – you want the one with the shortest contract and best price) o Specialty product: a particular item fro which consumers search extensively and are reluctant to accept substitutes § Ex: iPhone 5 § For example, you won’t drink vodka unless its Grey Goose. You won’t wear a watch unless it’s a Rolex o Unsought product: a product unknown to the potential buyer or a known product that the buyer does not actively seek § There’s a 100% chance you’re going to die, yet we don’t all have our funerals preplanned and life insurance. • How are products classified? By the amount of effort that is normally expended in the shopping process! o Ex: Coke for one person can be a convenience product, yet for another person it could be a specialty product (aka a treat) 3) Learning Objective 3: define … • Product items, lines and mixes o Product item: a specific version of a product that can be designated as a distinct offering among an organization’s products § Apple’s computers? o Product line: a group of closely-related product items o Product mix: all products that an organization sells § Apple making computers then making music à versatility • Most companies can’t survive with a single product item • Think of Campbell’s product lines and mix as an example o Depth of product lines: how many items you have in it (ex: chicken and beef flavors of soup) o Width of product mix: all the different unrelated product lines (ex: soups and gravies) • Benefits of product lines: o Advertising economies o Package uniformity o Standardized components o Efficient sales and distribution o Equivalent quality • Product mix width: o The number of product lines an organization offers o Diversifies risk o Capitalizes on established reputations • Product line depth: o The number of product items in a product line o Attracts buyers with different preferences o Increases sales/profits by further market segmentation o Capitalizes on economies of scale o Evens out on seasonal sales patterns • Adjustments to product items, lines and mixes: o Product modification § Evolution of razors: safety razors à track 2 razors à disposable razors à double blade system à triple blade system à five blade system § Problem is what do you do with your old customers that liked your old product? Keep it! Hence the track 2 razor system that was created in the 90s is still available today…Or, you want to phase out the old product by offering bounties (for example: Gillette can say give us your track 2 razors and we’ll give you 5$ off the Fusion razor) o Product repositioning § McDonalds Hamburgers becoming McDonalds Restaurants § A lot of their advertising focusing on coffee and baked goods o Product line extension or contraction § Diet coke and coke zero § Coke zero targeted at men, which competes with regular coke as well as diet coke à issue! • Types of product modifications: o Quality modification § Quality isn’t the same between a Gillette disposable razor and a Mach3 razor o Functional modification § Changes the way it works à new razor has a sideburn cutter as well as batteries to give you vibrations that lead to a better shave o Style modification § Changing colors, design of handles, how the blades fit on the razor, etc § See with clothing all the time • Planned obsolescence: the practice of modifying products so those that have already been sold become obsolete before they actually need replacement o Shoes haven’t got holes in them, but they’re out of style o Microsoft is a big practitioner of this, bringing out new operating systems every 2 years which aren’t really necessary. It seems that Microsoft is only successful every other time (Windows 95, XP, 7) • Repositioning: why reposition established brands? o Changing demographics § Sometimes a product is seen as being for an older person or a younger person. In Canada, the median age is demographically getting higher and higher o Declining sales § Baking soda example repositioned from being used for baking to being used
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