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Part 4
PRODUCT AND PRICE
DECISIONS
Dr. Chen, Principle of Marketing
10: Product, Branding, and
Packing Concepts
11: Business Markets and Buying
Behavior
12: Developing and Managing
Prices
13: Marketing Channels and
Supply-Chain Management
14: Retailing, Direct Marketing,
and Wholesaling
Dr. Chen, Principle of Marketing
Chapter 10
Product, Branding, and
Packaging Concepts
Professor Jason C. H. Chen, Ph.D.
School of Business Administration
Gonzaga University
Spokane, WA 99258
[email protected]
Dr. Chen, Principle of Marketing
Learning Objectives
 Understand the concept of a product
 Understand how products are classified
 Explain the concepts of product line and
product mix and understand how they are
connected
 Understand the product life cycle and its impact
on marketing strategies
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Learning Objectives
 Describe the product adoption process
 Explain the major components of branding,
including brand types, branding policies, and
brand protection
 Describe the major packaging functions and
design considerations as well as how packaging
is used in marketing strategies
 Understand the functions of labeling and
selected legal issues
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Product
 A good, a service, or an idea received in an exchange

Includes function, social and psychological utilities, and
benefits

Includes supporting services such as installation, guarantees,
product information, etc.
 Good – A tangible, physical entity
 Service – The intangible result of the application of
human and mechanical efforts to people or objects
 Idea – A concept, philosophy, image, or issue
 Elements



Core product itself
Supplemental features
Symbolic or experiential benefits
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Fig. 10.1 The Total Product
[1]
[3]
Dr. Chen, Principle of Marketing
[2]
The Core Product
Sports
Drink
Rehydrates
The Core Product
 The product’s fundamental utility or main benefit
 Addresses the basic need of the consumer
Dr. Chen, Principle of Marketing
Supplemental Features
added value or attributes in
 Provide the _______
addition to a product’s core utility or benefit.
 Supplemental products also can provide




Installation
Delivery
Training
Financing
 These supplemental attributes are not required
to make the core product function effectively,
differentiate the product brand
but they help ____________
from another
Dr. Chen, Principle of Marketing
Symbolic and Experiential Benefits
 Buyers purchase the benefits and satisfaction they
think the product will provide
 Services in particular are purchased on the basis
of expectations
 The shopping experience can provide benefit
 Products often carry symbolic meaning (e.g.,
Starbucks)
 Often, symbols and cues are used to make
tangible , or real, to
intangible products more _________
the customer
Dr. Chen, Principle of Marketing
Classifying Products
Consumer products
• Purchased to satisfy personal and
family needs
Business products
• Bought to:
• Use in a firm’s operations, to resell, or
to make other products
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Categories of Consumer Products
Convenience products
• Inexpensive, frequently purchased items for which buyers exert only
minimal purchasing effort (e.g., Starbucks)
Shopping products
• Items for which buyers are willing to expend considerable effort in
planning and making the (strategic) purchase (e.g., Lowe’s vs. Home
Depot)
Specialty products
• Possess one or more unique characteristics; buyers will not accept a
substitute (e.g., Mont Blanc pen)
• Buyers are willing to expend considerable effort to obtain them
Unsought products
• Purchased when a sudden problem must be solved
• Products of which customers are unaware, and products that people do
not necessarily think of purchasing (e.g., AAA for Emergent Road
service)
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Specialty Products
Items with unique characteristics that buyers
are willing to expend considerable effort to
obtain
 Require
extensive search
 Are generally higher price points
 Have no ready substitutes
 Strategic Considerations:
 Limited
retail outlets
 Lower inventory turnover
 High gross margins
Dr. Chen, Principle of Marketing
Classification of Business Products (p.264)
Installations
Business
Services
Accessory
Equipment
Business
Products
MRO
Supplies
Raw
Materials
Process
Materials
Dr. Chen, Principle of Marketing
Component
Parts
Categories of Business Products
Installations
• Facilities, such as office buildings and warehouses, and major
equipment that are nonportable (e.g., production lines and very
large machines)
• Expensive and intended to be used for a considerable length of time
Accessory equipment
• Does not become part of the final physical product but is used in
production or office activities (e.g., file cabinets and calculators)
Raw materials
• Basic natural materials that actually become part of a physical
product (e.g., minerals, chemicals, agricultural products)
Component parts
• Become part of the physical product and are either finished items
ready for assembly or products that need little processing before
assembly (e.g., spark plugs, tires and head lights for automobile)
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Categories of Business Products
Process materials
• Used directly in the production of other products
• Not readily identifiable (e.g., vinegar is a process material in salad dressing)
MRO supplies
• Maintenance, repair, and operating items that facilitate production and
operations but do not become part of the finished product (e.g., paper, pencils,
oils, cleaning agents and paints)
Business services
• Intangible products that many organizations use in their operations
• Financial, legal, marketing research, information technology, and janitorial
services (e.g., Accenture provides services with business process
management - BPM)
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Product Line
 Product item:

A product item is a specific version of a product that can be
designated as a distinct offering among an organization’s
products
 Product line:



A product line is a group of closely related product items that are
considered to be a unit because of marketing, technical, or enduse considerations (Teas have a variety of different flavors)
Marketers must understand buyers’ goals to develop the optimal
product line
Firms with high market share are likely to expand their product
lines aggressively, as are marketers with relatively high prices or
limited product lines.
 PC industry, companies are likely to expand their product lines when
industry barriers are low or perceived market opportunities exists.
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Product Mix
 A product mix is the composite, or total,
group of products that an organization makes
available to customers (Fig. 10.2)
 Width
of product mix:
Number of product lines a company offers
 Depth
of product mix:
Average number of different products in each product
line
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Fig. 10.2 Concepts of Product Mix Width and
Depth Applied to U.S. Proctor & Gamble Products
Dr. Chen, Principle of Marketing
Product Life Cycle
 Introduction stage


Begins at a product’s first appearance in the marketplace,
zero and profits are ________
negative
when sales start at _____
Difficulties
lack the resources to launch the product successfully
 Sellers may ______
 Initial product price may have to be high to recoup expensive
marketing research or development costs
 Growth stage


Sales rise rapidly and profits reach a peak and then start to
decline
Competitive reactions to the product’s success during this
period will affect the product’s life expectancy
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Product Life Cycle
 Maturity stage


peaks and starts to decline, and profits
Sales curve ______
continue to fall
Due to increased competition, weaker competitors are
pushed out of the market
 Decline stage


Sales fall rapidly
Marketers must determine whether to eliminate the product
or try to reposition it to extend its life
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Product Life Cycle
Introduction
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Figure 10.4 - Product Adoption Process
• Awareness: The buyer becomes aware of the product.
• Interest: The buyer seeks information and is receptive to
learning about the product.
• Evaluation: The buyer considers the product’s benefits and
decides whether to try it, considering its value vs. the
competition.
• Trial: The buyer examines, tests, or tries the product to
determine if it meets his or her needs.
• Adoption: The buyer purchase the product and can be
expected to use it again whenever the need for this product
arises.
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Figure 10.4 - Product Adoption Process
Relation of Promotion Objectives, Adoption process, and AIDA Model
Promotion Objectives
Informing
Persuading
Adoption Process
Awareness
Interest
Evaluation
Trial
AIDA Model
Attention
________
________
Interest
________
Desire
Decision
________
Action
Reminding
Dr. Chen, Principle of Marketing
Confirmation
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Adopter Categories
Innovators
• First to adopt a new product simply because it is ne
Early adopters
• Choose new products carefully are often opinion leaders
Early majority
• Adopt just prior to the average person
Late majority
• Skeptical of new products but eventually adopt them because of
economic necessity or social pressure
Laggards
• Last (and slow) to adopt a new product, are oriented toward the past
_____________
Early
majority and ____________
late majority are the critical mass that ensures adoption. Why?
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Join when
there is a
productivity
gain
Join when
they
perceive a
benefit
Join when there
is a plenty of
help and
support
Join
when
they have
to
Join
when it is
new
Numbers of adopters by group.
Cumulative number of adopters
over time.
Critical Mass
(Late
Adopters)
The diffusion of innovations according to Rogers. With successive groups of
consumers adopting the new technology (shown in blue), its market share (yellow)
will eventually reach the saturation level. In mathematics the S curve is known as
the logistic function.
Dr. Chen, Business Intelligence
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Why Some Products Fail







Failure to match product to needs
Failure to send right message
Technical/design problems
Poor timing
Overestimate market
Ineffective promotion
Insufficient distribution
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Why Other Products Succeed
 Product’s ability to provide a significant and
perceivable benefit to a sizable number of
customers
observable advantage over
 Products with an __________
similar available products such as:



More features
operation
Ease of ________
Improved technology
 Companies that follow a systematic, customerfocused plan for new-product development are
well positioned to launch successful products
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Branding
Brand
• Name, term, design, symbol, or any feature
• Identifies one marketer’s product as distinct from those of other marketers
Brand name
• Part of a brand that can be spoken
• Letters, words and numbers
Brand mark
• Element of a brand not made up of words
Trademark
• Legal designation indicating that the owner has exclusive use of a brand
Trade name
• Full and legal name of an organization
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Value of Branding
Buyers' benefit
 _________
 Helps
identify specific products that are preferred
over others
 Purchase of certain brands can be a form of selfexpression
 Symbolizes a certain quality level
 Reduces perceived risk of purchase
 Psychological reward from owning a brand that
symbolizes status
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Value of Branding
Sellers’ benefit
 ________
 Identify
products, making repeat purchases easier
 Helps a firm introduce a new product that carries
the name of one or more of its existing products
 Facilitates promotional efforts
 Fosters brand loyalty
 Consistent price develops customer loyalty
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Value of Branding
 Cultural dimension
 Each
consumer confers his or her own social
meaning onto brands
 Brand’s appeal is based on its symbolic image and
key associations
 Brands help consumers develop their identity and
self-concept
 Serve as a form of self-expression
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Value of Branding
 Cultural
branding - Explains how a brand conveys a
powerful myth that consumers find useful in
cementing their identities
 Every aspect of a brand is subject to:
Consumer’s emotional involvement
Interpretation
Memory
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Brand Loyalty
 Brand loyalty is a customer’s favorable attitude
toward a specific brand
 Three degrees of brand loyalty

Brand recognition – the degree of brand loyalty in
which a customer is aware that a brand exists and views
the brand as an alternative purchase if their preferred
brand is unavailable

Brand preference – the degree of brand loyalty in
which a customer prefers one brand over competitive
offerings

Brand insistence – the degree of brand loyalty in which
a customer strongly prefers a specific brand and will
accept no substitute
Dr. Chen, Principle of Marketing
Brand Loyalty and Degrees of Brand Loyalty
 Brand loyalty is a customer’s favorable attitude toward a
specific brand
recognition
Brand _____________
• Customer is aware that the brand exists
• Views it as an alternative purchase if the preferred brand is
unavailable
Brand preference
• Prefers one brand over competitive offerings
• Will purchase this brand if it is available
insistence
Brand ___________
• Customer strongly prefers a specific brand
• Will accept no substitute
• Willing to spend a great deal of time and effort to acquire that
brand
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Brand Equity
 Brand equity is the marketing and financial value
associated with a brand’s strength in a market
 Four major elements underlie brand equity:




Brand-name awareness
Brand loyalty
Perceived brand quality
Brand associations
 An organization may buy a brand from another
company at a premium price because it may be less
expensive and less risky
Dr. Chen, Principle of Marketing
Figure 10.5 - Major Elements of Brand Equity
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Types of Brands
Manufacturer brands
•Initiated by producers and ensure that producers are identified
with their products at the point of purchase
•Requires a producer to become involved in distribution,
promotion, and pricing decisions
Private distributor brands
•Initiated and owned by resellers
•Manufacturers are not identified on the products
Generic brands
•Indicate only the product category
•Sold at lower prices
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Browse The List Values calculated November 2013
http://www.forbes.com/powerful-brands/list/
Rank
1
2
3
4
5
6
7
8
9
10
Brand
Value ($bil)
104.3
Apple
56.7
Microsoft
54.9
Coca-Cola
50.7
IBM
47.3
Google
39.4
McDonald's
General Electric 34.2
30.9
Intel
29.5
Samsung
28.4
Louis Vuitton
1-Yr Value
Change (%)
Brand
Dr. Chen, Principle of Marketing
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4
9
5
26
5
2
-4
53
16
Brand Revenue
($bil)
156.5
77.8
23.5
104.5
43.5
88.3
132.1
53.3
181.0
9.4
Company Advertising
($mil)
1,100
2,600
3,342
1,339
772
788
2,000
4,398
4,211
Industry
Technolog
Technolog
Beverages
Technolog
Technolog
Restauran
Diversifie
Technolog
Technolog
Luxury
39
World’s Most Valuable Brands
Dr. Chen, Principle of Marketing
Best Global Brands 2013 - Top 100 List View - Interbrand
2013 Rank
2012 Rank
Brand Name
Region/Country
Sector
Brand Value
($m)
Change in
Brand Value
1
2
Apple
United States
Technology
98,316
28%
2
4
Google
United States
Technology
93,291
34%
3
1
Coca-Cola
United States
Beverages
79,213
2%
4
3
IBM
United States
Business
Services
78,808
4%
5
5
Microsoft
United States
Technology
59,546
3%
6
6
GE
United States
Diversified
46,947
7%
7
7
McDonald's
United States
Restaurants
41,992
5%
8
9
Samsung
South Korea
Technology
39,610
20%
9
8
Intel
United States
Technology
37,257
-5%
10
10
Toyota
Japan
Automotive
35,346
17%
http://www.interbrand.com/en/best-global-brands/2013/top-100-list-view.aspx
Dr. Chen, Principle of Marketing
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Factors to Select a Brand Name
 Should be easy for customers to say, spell and
recall
 Should indicate the product’s major benefits
 Should be distinctive
 Should be designed to be used and recognized
in all types of media
 Combined use of words, numbers and letters to
yield brand names
 Use of fabricated words to avoid negative
connotations
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Protecting a Brand
 A marketer should design a brand that can be easily
protected through registration
 A series of court decisions has created a broad
hierarchy of protection based on brand type
 From most protectable to least protectable:





Fanciful – Exxon
Arbitrary – Dr. Pepper
Suggestive – Spray ‘n Wash
Descriptive – Minute Rice
Generic, not protectable– aluminum foil
 Surnames and descriptive, geographic or functional
names are difficult to protect
Dr. Chen, Principle of Marketing
Protecting a Brand
 A company must ensure a brand is not likely to
infringe upon any brand already registered with
the U.S. Patent and Trademark Office
 Infringement is determined by the courts
 A marketer must guard against allowing a brand
name to become a generic term
 Examples:
aspirin, escalator and shredded wheat
 Congress enacted the Trademark Law Revision
Act in 1988, strengthening trademark protection
Dr. Chen, Principle of Marketing
Protecting a Brand

A U.S. company trying to protect a brand
in a foreign country frequently encounters
problems
 In many countries, the first firm to use a
brand automatically has the rights to it
 Some companies have had to buy their own
brands from those in a foreign country who
first used it

Marketers trying to protect their brands
must also contend with brand
counterfeiting
Dr. Chen, Principle of Marketing
Branding Strategies/Policies

An organization can use one or more of the following
branding strategies:
 Individual branding is a branding strategy in which each
product is given a different name (Nestle). It facilitates
market segmentation
 Advantage: if an organization introduces an inferior product, the negative
images associated with it do not contaminate the company’s other
products
 Family branding is branding all of a firm’s products with
the same name or part of a name (Kellogg’s Frosted Flakes,
Kellogg’s Rice Krispies)
 Advantage: the promotion of one item with the family brand
promotes the firm’s other products
 A brand extension is when an organization uses one of its
existing brands to brand a new product in a different product
category (Tylenol – Extra Strength Tylenol P.M.)
Dr. Chen, Principle of Marketing
Co-Branding
 Co-branding is using two or more brands
on one product (e.g., credit cards – Visa team
up with other brands such as airlines and
Amazon)


trust
Effective co-branding capitalizes on the _____
and confidence customers have in the brands
involved
differentiate
Co-branding can help a company __________
its products from those of competitors
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Brand Licensing
 Brand licensing is an agreement in which a company
permits another organization to use its brand on other
products for a licensing fee (e.g., NFL, Walt Disney Company)



Royalties range from 2% of wholesale revenues to 10% or
higher
Advantages
Extra revenues and low-cost or free publicity
New images and trademark protection
Disadvantages
Lack of manufacturing control which could hurt the
company’s name
Bombarding consumers with too many unrelated products
bearing the same name
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Packaging
 Development of a container and a graphic
design for (and containing) a product
 Functions
 Protect
the product and maintain its functional form
 Help deter shoplifting and convenience to
customers
 Promotes a product
 Family packaging: When a firm decides that all
packages should be similar or include one major
element of the design
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Packaging and Marketing Strategies
 Packaging may give a product a competitive advantage
 Right type of package for a new product can help it to
gain market recognition very quickly
 Marketers must analyze:


Cost of packaging
Package changes
Silent Salesman”
 Packaging as “_______
 More than merely containing the product.
 Also referred to as 5th P in the marketing mix
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Packaging Spending
Companies That Spend the Most on Packaging
[1]
Dr. Chen, Principle of Marketing
[5]
51
Packaging and Marketing Strategies
 Marketers sometimes alter a package due to:
 Existing
design is no longer in style
 New product features that need to be highlighted
 Availability of new packaging materials
New packaging make a product safer or more convenient
to use
 Easier
handling in the distribution channel
 Comparison with competitor’s product
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Packaging and Marketing Strategies
 Multiple packaging
 Uses
twin-packs, tri-packs, and six-packs
 Increases demand
 Increases consumer acceptance of the product
 Makes products easier to handle, store, and
increases consumption
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Labeling
 Labeling is providing identification, promotional or other
information and legal purpose on package labels.


Can be part of the package itself or a separate feature attached to the
package
Very closely interrelated with packaging; information on the label
may include:
Brand name
Package size and content
Nutritional information
Type and style of product
Care instructions
Safety precautions
Expiration dates
Dr. Chen, Principle of Marketing
Trademark symbol
Product features
Presence of allergens
Number of servings
Directions for use
Manufacturer name/address
Seal of approval
54
Labeling
 Contains promotional messages
 Offer
of a discount
 Larger package size at the same price
 About a new or improved product feature
 Federal laws and regulations specify
information that must be included on the labels
of certain products
 Nutrition
Labeling Act of 1990 requires the FDA to
review food labeling and packaging
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