Chapter 11: Basic Concepts in Product Planning

Lindells Chapter 11 Notes BASIC PRODUCT 11-1 OVERVIEW A. Product planning is systematic decision making relating to all aspects of the development and management of a firms products including !randing and packaging.

B. "ach product consists of a !undle of attri!utes capa!le of e#change or use usually a mi# of tangi!le and intangi!le forms. C. A $ell%structured product plan ena!les a company to pinpoint opportunities develop appropriate marketing programs coordinate a mi# of products maintain successful products as long as possi!le reappraise faltering products and delete undesira!le products. &. A firm should define its products in three distinct $ays: tangi!le augmented and generic. 'ee (igure 11%1. 1. A tangi!le product is a !asic physical entity service or idea. ). An augmented product includes not only the tangi!le elements of a product !ut also the accompanying cluster of image and service features. *. A generic product focuses on $hat a product means to the customer not the seller. 'ee (igure 11%). 11%) A. 11%)a A. B. C. +,P"' -( P.-&/C+'

+he first product%planning decision involves the choice of the type0s1 of products to offer. (/N&A2"N+AL &3'+3NC+3-N' B"+4""N 5--&' AN& '".63C"' 5oods marketing entails the sale of physical products. 'ervice marketing encompasses the rental of goods servicing goods o$ned !y consumers and personal services. (our attri!utes distinguish services from goods: intangi!ility perisha!ility insepara!ility from the service provider and varia!ility in 7uality. Although services have different characteristics from goods their sales are fre7uently connected. C-N'/2". P.-&/C+' Consumer products are goods and services destined for the final consumer for personal family or household use.
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Chapter 11: Basic Concepts in Product Planning

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Consumer products may !e classified in the follo$ing categories. 'ee +a!le 11%1. 1. Convenience products are those !ought $ith a minimum of effort $here the !uyer has kno$ledge of product attri!utes prior to shopping. 'taples impulse goods and emergency goods are the kinds of convenience goods. ). 'hopping products are those for $hich consumers lack sufficient information a!out products prior to making a purchase decision and must therefore ac7uire further kno$ledge. +he t$o kinds of shopping goods are attri!ute%!ased and price%!ased. *. 'pecialty products are those for $hich consumers are !rand loyal and $ill make a significant purchase effort to ac7uire the desired !rand. +he classification is an e#cellent means for segmenting consumers. 3N&/'+.3AL P.-&/C+' 3ndustrial products are goods and services purchased for use in the production of other goods or services in the operation of a !usiness or for resale to other consumers. 3ndustrial goods are categori8ed !y the level of decision making in making a purchase costs consumption rapidity the role in production and the change in form. 'ee +a!le 11%). C. 3ndustrial services are of t$o general types. 11%* "L"2"N+' -( A P.-&/C+ 239

C. 11%)c A. B. C.

A. B. C. &.

A product item is a specific model !rand or si8e of a product that a company sells. A product line is a group of closely related items. A product mi# consists of all the different product lines a firm offers. A product mi# can !e descri!ed !y its $idth 0num!er of different product lines1 depth 0num!er of product items $ithin each product line1 and consistency 0ho$ closely related product lines are1. (igure 11%* sho$s product mi# alternatives in terms of $idth and depth. (igure 11%: highlights Colgate%Palmolives product mi#. 1. A $ide mi# ena!les a firm to diversify appeal to different consumer needs and encourage one%stop shopping. 3t re7uires investments and e#pertise in different areas. ). A deep mi# satisfies the needs of several segments ma#imi8es shelf space discourages competitors covers a range of prices and sustains dealer support. 3t may impose higher inventory and other costs as $ell as confuse consumers. *. A consistent mi# is easy to manage is efficient creates a strong image and generates solid distri!ution relations. 3t may leave the firm vulnera!le to environmental threats since it is not diversified.
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Chapter 11: Basic Concepts in Product Planning

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'everal e#amples of different companies product mi#es are provided. 11%: P.-&/C+ 2ANA5"2"N+ -.5AN3;A+3-N'

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+here are five !asic product%management organi8ational forms as sho$n in +a!le 11%*: +he correct organi8ation depends on the firms diversity the num!er of ne$ products introduced the level of innovativeness company resources management e#pertise and other factors. A com!ination of forms may !e !est. 11-5 PRODUCT POSITIONING

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A company must nsu! t"at ac" o# $ts p!o%ucts $s p !c $& % as p!o&$%$n' a com($nat$on o# un$)u # atu! s an% t"at t" s # atu! s a! % s$! % (y t" ta!' t ma!* t. A #$!m+s 'oa, $s to "a& consum !s p !c $& p!o%ucts+ att!$(ut s as $t $nt n%s. Onc consum ! p !c pt$ons a! #o!m %- t" y may ( "a!% to c"an' . P!o%uct pos$t$on$n' na(, s a #$!m to map $ts o## !$n's $n t !ms o# consum ! p !c pt$ons an% % s$! s- comp t$t$on- ot" ! company p!o%ucts- an% n&$!onm nta, c"an' s. Consum ! p !c pt$ons a! t" $ma' s consum !s "a& (ot" a company+s an% comp t$to!s+. o# p!o%ucts-

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Consum ! % s$! s ! # ! to t" att!$(ut s consum !s .ou,% ,$* p!o%ucts to poss ss/t" $! $% a, po$nts. Comp t$t$& p!o%uct pos$t$on$n' ! # !s to t" "a& o# a #$!m ! ,at$& to $ts comp t$to!s. p !c pt$ons consum !s

Company p!o%uct pos$t$on$n' s"o.s a #$!m "o. consum !s p !c $& %$## ! nt (!an%s o# t" #$!m .$t"$n t" sam p!o%uct ,$n . Its o.n (!an%s a! compa! % to on anot" !. En&$!onm nta, c"an' s may a,t ! p !c pt$ons o# p!o%ucts.

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Chapter 11: Basic Concepts in Product Planning

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0$'u! 11-5 $,,ust!at s p!o%uct pos$t$on$n' #o! t" U.S. auto ma!* tp,ac . T" ! a! n$n $% a, po$nts- ac" assoc$at % .$t" a sp c$#$c typ o# ca! an% % sc!$( % $n t" t 2t. T"!ou'" p!o%uct-pos$t$on$n' ana,ys$s- a company can , a!n a '! at % a, an% p,an ma!* t$n' ##o!ts acco!%$n',y. T.o 2amp, s a! p!o&$% %. S 0$'u! s 11-4 an% 11-5. 11-4 BRANDING

3.

A. B.

B!an%$n' $s t" p!oc %u! a #$!m #o,,o.s $n ! s a!c"$n'- % & ,op$n'- an% $mp, m nt$n' $ts (!an%6s7. A (!an% $s a nam - t !m- % s$'n- sym(o,- o! any ot" ! # atu! t"at $% nt$#$ s t" 'oo%s an% s !&$c s o# a s ,, ! o! '!oup o# s ,, !s. 1. A (!an% nam $s a .o!%- , tt ! 6num( !7- '!oup o# .o!%s- o! , tt !s 6num( !s7 t"at can ( spo* n. 8. A (!an% ma!* $s a sym(o,- % s$'n- o! %$st$nct$& co,o!$n' o! , tt !$n' t"at cannot ( spo* n. 9. A t!a% c"a!act ! $s a (!an% ma!* t"at $s p !son$#$ %. :. A t!a% ma!* $s a (!an% nam - (!an% ma!*- o! t!a% c"a!act ! o! com($nat$on t" ! o# t"at $s '$& n , 'a, p!ot ct$on. Brand e7uity is a ne$ !randing concept that recogni8es the financial value associated $ith a !rand apart from a products physical attri!utes. 4hile definitions of !rand e7uity may differ they have these factors in common: 1. 2onetary value. ). 3ntangi!ility. *. Perceived 7uality. 3n general !rands ease identification provide 7uality assurance identify the maker reduce price comparisons aid advertising segment markets increase prestige reduce consumer risk improve reseller cooperation sell a $hole product line and ease entry into a ne$ product category. A firm must make these four decisions related to !randing 0see (igure 11%<1: 1. Corporate sym!ols. ). Branding philosophy. *. Choosing a !rand name. :. /sing trademarks. CORPORATE S;<BO=S
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Chapter 11: Basic Concepts in Product Planning

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Co!po!at sym(o,s a! a #$!m+s nam - ,o'os- an% t!a% c"a!act !s. 'ym!ols are evaluated $hen a company does the follo$ing: 1. (irst !egins !usiness. ). 2erges $ith another company. *. .educes or e#pands product lines. :. 'eeks ne$ geographic markets. =. (inds its name to !e un$ieldy nondistinctive or confusing.

. 11-6b A. BRANDING PHILOSOPHY

A branding philosophy o !lin"s !h" s" o# $an #a%! r"r& pri'a!"& and(or g"n"ri% brands& as )"ll as #a$ily and(or indi'id al branding.

<anu#actu! !- P!$&at - an% G n !$c B!an%s A. <anu#actu! ! (!an%s contain the name of the manufacturer. 1. +hey have the most sales. ). +hese !rands appeal to consumers $ho desire lo$ risk good 7uality routine !ehavior status and convenience shopping. *. +hey are $ell kno$n and trusted !ecause 7uality control is strictly maintained. :. +hey are identifia!le and present distinctive images to shoppers. =. Attracting and retaining customer loyalty are important. P!$&at 6% a, !7 (!an%s contain the name of the $holesaler or retailer. 1. +hey have su!stantial sales. ). +hese !rands appeal to price%conscious consumers. *. +hey are 7uite similar to manufacturer !rands $ith less emphasis on packaging and variety. :. .esellers secure e#clusive rights are responsi!le for distri!ution control the marketing effort and charge lo$ prices. =. +he ma>or goal is to attract and retain consumers $ho are loyal to the reseller and for the distri!utor?retailer to e#ert control over the marketing of these !rands. 'ee (igure 11%@. G n !$c (!an%s emphasi8e the names of the products themselves and not manufacturer or reseller names. 1. +hey have the least sales. ). +hese !rands appeal to the most price%conscious consumers $ho $ill accept lo$er 7uality.
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Chapter 11: Basic Concepts in Product Planning

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+hey are seldom advertised and receive poor shelf space. Prices are less than the other !rands due to 7uality packaging assortment distri!ution and promotion economies. +he ma>or goal is to offer lo$%priced lo$er%7uality items to consumers interested in price savings.

+a!le 11%: compares the three types of !rands. +oday many companies employ a mi#ed%!rand strategy $here!y they sell a com!ination of manufacturer and private !rands 0and sometimes generics1. +his ena!les them to increase control reach more market segments encourage loyalty coordinate shelf space and locations improve channel cooperation increase assortments sta!ili8e production utili8e e#cess capacity ma#imi8e sales and utili8e e#cess capacity. 3n the !attle of the !rands each type of !rand attempts to gain a greater share of the consumers dollar control over marketing strategy consumer loyalty product distinctiveness ma#imum shelf space and locations and a large share of profits.

(.

0am$,y an% <u,t$p, B!an%$n' A. In #a$ily *blan+"!, branding& on" na$" is s"d #or !)o or $or" indi'id al prod %!s. 1. -any %o$pani"s s"lling ind s!rial prod %!s or %ons $"r s"r'i%"s s" so$" #or$ o# #a$ily branding. .. I! )or+s b"s! #or sp"%iali/"d #ir$s or !hos" )i!h narro) prod %! lin"s. 0h"y %an ha'" a ni#or$ i$ag" and !h" abili!y !o pro$o!" !h" sa$" na$" %on!in ally& )hi%h +""ps pro$o!ion %os!s do)n. 1. 0h" $a2or disad'an!ag"s o# #a$ily branding ar" !ha! di##"r"n!ia!"d $ar+"!ing "##or!s ar" $ini$i/"d& on" na$" #or di'"rs" prod %!s %an da$ag" a %o$pany3s i$ag"& and inno'a!i'"n"ss is no! pro2"%!"d !o %ons $"rs. An effective use of family !randing is !rand e#tension a strategy !y $hich an esta!lished !rand name is applied to ne$ products. +here are seven situations in $hich this strategy is most effective: 4ith $n%$&$%ua, 6mu,t$p, 7 (!an%$n'- separate !rands are used for different items or product lines. (or e#ample Procter A 5am!les $ide and deep product mi# includes eight !rands of laundry detergent. 1. 3t is useful in product positioning attracts various market segments increases sales and marketing control offers !oth premium and lo$%priced !rands and allo$s a manufacturer to secure greater shelf space in retail stores.
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Chapter 11: Basic Concepts in Product Planning

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2ultiple !rands re7uire large promotional costs may cause a loss of continuity lessen mass production economies and do not aid in ne$ product introductions.

2any companies com!ine family and individual !rands. 1. A firm could have a flagship !rand and other secondary !rands. (or e#ample one% third of Cein8s products have the Cein8 nameD the others have names like 'tarkist and -re%3da. ). A family !rand could !e used $ith individual !rands. (or e#ample Conda has t$o ma>or auto lines Conda and Acura. 4ithin the Conda line are the Conda Accord Conda Civic and Conda Prelude. C1OOSING A BRAND NA<E

11-4c A.

+here are several sources from $hich a firm can choose a !rand name: 1. "#isting company !rands 0!rand e#tension1. ). .esellers. *. Ne$ name. :. Licensing agreement $here!y the company pays a fee to use a name or logo $hose trademark rights are held !y another firm. =. Co%!randing $here!y t$o or more names are used $ith the same product to gain from the !rand images of each. 'ee (igure 11%1E. "#amples are provided for each of these in the te#t.

B. A good brand na$" has !h" #ollo)ing a!!rib !"s4 1. I! s gg"s!s !h" prod %!3s s" *".g.& 5l"an)ip"s,. .. I! is "asy !o sp"ll and r"$"$b"r& and prono n%"abl" in on" )ay *".g.& Bi%,. 1. I! %an b" appli"d !o a )hol" lin" o# prod %!s *".g.& D""r" !ra%!ors,. 6. I! %an b" l"gally pro!"%!"d *".g.& P"rri"r,. 7. I! has a pl"asan! or a! l"as! n" !ral $"aning in!"rna!ionally *".g.& On'ia,. 6. I! %on'"ys a di##"r"n!ial ad'an!ag" *".g.& P"r! Pl s,. C. As firms e#pand glo!ally !randing takes on special significance. Brands meanings must not have negative connotations or violate cultural ta!oos. 'peciali8ed firms such as Namestormers devise names for clients that are accepta!le around the $orld. 3n choosing a !rand name the firm should plan for the consumers !rand decision process as sho$n in (igure 11%11. 1. (or a ne$ !rand nonrecognition is the first stage.
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Chapter 11: Basic Concepts in Product Planning

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&uring recognition the !rand and its attri!utes are kno$n. A preference 0or dislike1 for the !rand is developed. Last there is insistence 0or aversion1 for the !rand.

4ith !rand e#tension the ne$ product starts at recognition preference or insistence. +C" /'" -( +.A&"2A.G' +he company determines $hether to apply for trademark protection under the Lanham Act 0updated !y the +rademark La$ .evision Act1. 1. +rademark protection grants the e#clusive use of a $ord name sym!ol com!ination of letters or num!ers or other devicesHsuch as distinctive packaging Hto identify the goods and services of that firm and distinguish them from others for as long as they are marketed. ). +rademarks are voluntary. *. +hey re7uire a registration procedure that can !e time consuming and e#pensive. :. A glo!al firm must register trademarks in every nation in $hich it operates. =. A trademark must have a distinct meaning !e used in interstate commerce not !e confusingly similar to other trademarks and not imply attri!utes a product does not have. Brands currently fighting to remain e#clusive trademarks include Leggs .oller!lade (ormica and +eflon. 4hen !rands !ecome too popular or descriptive of a product category they run the risk of !ecoming pu!lic property. +his occurred for cellophane aspirin shredded $heat cola linoleum and light !eer. 11%F PACGA53N5

B. C.

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Packaging is the procedure follo$ed in researching designing and producing package0s1. A package is a products physical container la!el and?or inserts. 1. A physical container may !e a card!oard metal plastic or $ooden !o#D a cellophane $a#paper or cloth $rapperD a glass aluminum or plastic >ar or canD a paper !agD styrofoamD some other materialD or a com!ination of these. ). A la!el indicates the !rand name company logo ingredients promotional messages inventory codes and?or instructions for use. *. 3nserts are instructions and safety information or coupons pri8es or recipe !ooklets. +hey are used as appropriate. A!out 1E percent of a typical products final selling price goes for its packaging. +he amount is higher for such products as cosmetics 0up to :E percent1.
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Chapter 11: Basic Concepts in Product Planning

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A complete package redesign of a ma>or product may cost millions of dollars. Packaging decisions must serve !oth resellers and consumers. +hey involve significant coordination $ith production logistics and legal personnel. Packaging redesign fre7uently occurs $hen a firms current packaging receives a poor response from channel mem!ers and customers or !ecomes too e#pensive. An e#ample is provided.

11-5a BASIC PAC>AGING 0UNCTIONS A. T" ! a! s$2 (as$c pac*a'$n' #unct$ons. 1. Conta$nm nt an% p!ot ct$on/A p!o%uct can ( s"$pp %- sto! %an% "an%, % sa# ,y an% ##$c$ nt,y. 8. Usa' /T" p!o%uct can ( as$,y us % an% ! sto! %. 9. Commun$cat$on/P!o%uct $n#o!mat$on an% company $ma' a! con& y %. :. S 'm ntat$on/A pac*a' can ( ta$,o!-ma% #o! a sp c$#$c ma!* t '!oup. 5. C"ann , coop !at$on/C"ann , m m( !s+ n %s a! m t. 4. N .-p!o%uct p,ann$n'/A n . pac*a' can ( an $nno&at$on. 11%F! A. (AC+-.' C-N'3&"."& 3N PACGA53N5 &"C3'3-N' +hese are the t$elve key factors to consider in packaging: 1. 3mage. ). (amily packaging. *. 'tandardi8ation 0see (igure 11%1)1. :. Costs. =. 2aterials and level of innovation 0see (igure 11%1*1. B. Package features. F. 'i8e0s1 color0s1 and shape0s1. <. Placement content si8e and prominence of the la!el. @. 2ultiple packaging. 1E. 3ndividual $rapping. 11. Preprinted price and inventory control coding. a. +he /niversal Product Code 0/PC1 is a system for coding information onto merchandise. 3t re7uires pre%marking $ith a series of vertical lines $hich cannot !e read !y humans. 3nventory data are instantly transmitted to the main computer of the retailer or manufacturer. 3n the /PC system human% reada!le prices must still !e marked on the merchandise. 1). 3nterrelation $ith other marketing varia!les.
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Chapter 11: Basic Concepts in Product Planning

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C.3+3C3'2' -( PACGA53N5 Packaging has !een critici8ed and regulated in recent years !ecause of environmental and resource pro!lems costs 7uestions a!out honesty and the confusion caused !y inconsistent designations of package si8es and lack of safety. Consumers must !ear part of the responsi!ility for the negative aspects of packaging. 1. +hro$a$ay !ottles $hich are preferred !y consumers use almost three times the energy of returna!le !ottles. ). 'hoplifting adds to packaging costs !ecause firms must add security tags and other$ise alter packages. 3n planning their packaging programs firms need to $eigh the short%term and long%term !enefits and costs of providing environmentally safer less confusing and more tamper% resistant packages. 11%< +C" 5L-BAL &32"N'3-N' -( P.-&/C+ PLANN3N5

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