Product Levels:

1. Core Benefits

2. Basic Product: to satisfy core benefit sought

3. Expected Product: meet buyers expectations for product

   Focus of competition in LDC
   

4. Augmented Product: exceed expectations
   Focus of competition in developed countries

5. Potential Product: future possibilities

Delight Customers by exceeding expectations.

Product Heirarchy:

1. Need Family

2. Product Family

3. Product Class

4. Product Line

5. Product Type

6. Brand

7. Item

1. Durable Goods

2. Non Durable Goods

3. Services

Consumer Goods Classification:

• Convenience: Packaging is important to sell the product. Consumers will accept a substitute. Marketers focus on intense distribution, time utility. Convenience products can be categorized into staple (milk), impulse (not intended prior to shopping trip).

• Shopping: Consumers expend considerable effort planning and making purchase decisions. IE appliances, stereos, cameras. Consumers are not particularly brand loyal. Need producer intermediary cooperation, high margins, less outlets than convenience goods. Use of sales personnel, communication of competitive advantage, branding, advertising, customer service etc. Attribute based (Non Price Competition), product with the best set of attributes is bought. If product attributes are judged to be similar, then priced based.

• Specialty: Buyer knows what they want and will not accept a substitute, IE Mercedes. Do not compare alternatives. Brand, store and person loyal. Will pay a premium if necessary. Need reminder advertising.
• Unsought: Sudden problem to resolve, products to which consumers are unaware, products that people do not necessary think of purchasing. Umbrellas, Funeral Plots, Encyclopedia!!

• Production Goods
  • Raw Materials:

  • Component parts: becomes part of the physical product: Intel, Gore

  • Process materials: not readily identifiable part of the production of other products

• Support Goods
  • Major Equipment:

  • Accessory Equipment: desk tops and tools

  • Consumable Supplies: IE Paper, pencils or ink cartridges

  • Business to Business services: Financial, legal marketing research etc.

• Product item--a single product

• Product line--all items of the same type

• Product mix--total group of products that an organization markets

Width measures the # of product lines a company offers. Enables a firm to diversify products, appeals to different consumer needs and encourages one stop shopping.

Product Line Decisions:
Cannibalization and consumer movement issues
Internal (company) versus external (market) needs/decisions

Coke Hunts for Talent ro Re-Establish Its Marketing Might

Brand

What is Branding? Why Brand?

Definition:
A name, term, design, symbol or any other feature that identifies one seller's good or service as distinct from anothers.

• Brand name is that part that can be spoken, including letters, words and #s, IE 7UP.

  Brand names simplify shopping, guarantee a certain level of quality and allow for self expression.

• Brand mark-elements of the brand that cannot not be spoken, IE symbol/ logo

• Trade Character IE Ronald McDonald, Pillsbury Doughboy

• Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand.

• Tradename-The full legal name of the organization. IE Ford, not the name for a specific product.

TO BUYER:

• Help buyers identify the product that they like/dislike.

• Identify marketer

• Helps reduce the time needed for purchase.

• Helps buyers evaluate quality of products especially if unable to judge a products characteristics.

• Helps reduce buyers perceived risk of purchase.

• Buyer may derive a psychological reward from owning the brand, IE Rolex or Mercedes.

TO SELLER:

• Differentiate product offering from competitors

• Helps segment market by creating tailored images

• Brand identifies the companies products making repeat purchases easier for customers

• Reduce price comparisons

• Brand helps firm introduce a new product that carries the name of one or more of its existing products...half as much as using a new brand, lower co. designs, advertising and promotional costs

• Easier cooperation with intermediaries with well known brands

• Facilitates promotional efforts

• Helps foster brand loyalty helping to stabilize market share.

• Firms may be able to charge a premium for the brand.

Brand Equity (Customer Equity)
Operating profits - expected profits for generic $: 10 Most Valuable

Share of Mind, Attitudes = ImagePower. Landor Associates
Brand awareness = considered set

Brand awareness:

1. within relevant market(s)

2. with influencers

3. with entire market

The Best Global Brands:Handout
Interbrand: Best Global Brand

Brand Name Decisions:

• Individual Names: Procter and Gamble, Tide, Cheer, Bold

• Family Names: GE, AT&T, and Sears

• Trade name with individual product name: Kraft Products

• MF Brand versus Private Brand?

Selecting a Brand Name

• Easy for customers to say, spell and recall (inc. international ppl)

• Indicate products major benefits

• Should be distinctive

• Compatible with all products in product line

• Used and recognized in all types of media

• Single and multiple words Bic, Dodge Grand Caravan, IBM PC (letters), or a combination Mazda RX7

• Availability, already over 400 car "name plates", this makes it difficult to select a new one.

• Use words of no meaning to avoid negative connotation, Kodak, Exxon

• Can be created internally by the organization, or by a consultancy

• Legal restrictions, i.e. Food products must adhere to the Nutrition Labeling and Education Act, 1990...May 8 1994

• Global translations ?

1. Features: tangible characteristics of product

2. Finctional Benefits: benefits to consumer for brand features

3. Emotional Rewards: psychological or emotional benefits received by using brand's product?

4. Values: what are the values of the typical loyal customer for this brand?

5. Personality: what words would you use to describe brand if it were a person?

Discussion Topic: Investigate the above issues to determine who has rights to the use of a domain name.

Online brand investment versus offline brand investment
Pampers

Discussion Topic: Discuss the challenges of branding on the web, how are Pampers developing a branding strategy?

Arthur Andersen changes name to Andersen
Accenture now a clear winner without Andersen name
Is there a window of confusion?
Andersen, Accenture

Discussion Topic: Discuss the evolution of the value of the brand: Andersen

Brand Licensing

Discussion Topic: Discuss the role the corporate logo plays in branding. Cite logos and their inherent value. Discuss logos which have changed, and why?

Packaging

Packaging Functions include:

• Protect product and maintain functional form, IE milk.

• Foil shop lifting

• Offer convenience, Usage (dispersement)

• Promote product by communicating features "last 5 seconds of mktg", Campbells red labels...

• Develop reusable package for alternative use.

• Segmentation, tailored to a specific group

• Cost--how much are customers willing to pay for the packaging?

• Preprinted cost, use UPC codes

• Must comply with the FDA packaging regulations.

• Make product tampering evident to the reseller and customer, cost benefit with liability

• Need to consider consistency among package designs--Family packaging...category consistent...Pringles

• Need to inform potential buyers of new products content, features, uses, advantages and hazards.

• Need to create a desirable image through color etc. Can be designed to appear taller or shorter (thin vertical lines for taller) People associate specific colors with certain feelings, Red with fire. Do not package meet in green!!

• Must meet the needs of resellers--transportation, storage and handling.

• Environmental responsibility.

AOL Packaging

Labeling

Product Positioning and Product Repositioning

How new and current items in the product mix are perceived, in the minds of the consumer, therefore reemphasizing the importance of perception!!

New Product--need to communicate benefits
Established Products--need to reinforce benefits

Ideal Characteristics

Consumers desires refer to the attributes consumers would like the products to possess--IDEAL POINTS.
Whenever a group of consumers has a distinctive "ideal" for a product category they represent a potential target market segment.
A firm does well if its attributes (of the product) are perceived by consumers as being close to their ideal. The objective is to be "more ideal" than the competitors.

Each product must provide some unique combination of new features desired by the target market.

Instead of allowing the customer to position products independently, marketers try to influence and shape consumers concepts and perceptions.

Marketers can use perception maps.

Existing Products

                              ^
                              |
                              |
     Old Position             |         New Position
                              |
                              |
                              |
Glamour--------------------------------------------------Health
                              |
                              |
                              |
                              |
                              |
                              |
                              |

• Change Promotion: "Tan don't Burn" The St. Tropez Tan vs. Ultra Sweat Proof Serious tan for...Be Sun Smart

• Change Product: Sunscreen and sunless tanning agent.

BMW positions on affordability

                              ^
                         Very Safe
                              |         Lexus/infiniti
                              |                   Mercedes
                              |                      BMW
                              |
                              |
                              |
Cheap--------------------------------------------------Expensive
                              |
                              |
                              |
                              |
                              |
                              |
                              |
                         Very Unsafe

Why did they repositition?
Safety
Affordability
Competitors include Infiniti, Lexus, Mercedes Benz and Aurora

If you already have a brand in the market, must be sure to avoid cannibalization. Attributes and brand image should give a product distinct appeal.

New Product Positioning

Second, identify important features/benefits used in making purchase decisions.

Determine the overall ranking of features by importance and relate the importance of each feature to its "uniqueness": what are the unique selling points (USPs).

For example you wouldn't buy a spreadsheet program that if it didn't perform basic math, so basic math is very important.
However since every spreadsheet has that its an "important fundamental feature", instead of an "important differentiating feature".

The flip side would be a spreadsheet that displays all numbers in binary (0-1) instead of "normal" numbers (0-9). This is unique but not important.

The evaluation becomes a 2 x 2 matrix with uniqueness on the X-axis and importance on the Y-axis.

                              ^
X                        Important to TM (Stockbroker)           X
Math functions                |                        Import Data
                              |
                              |              
                              |
                              |
                              |
----------------------------------------------------------Unique
                              |
                              |
                              |
                              |
                              |
                              |
                              |                           X
                                                       Binary Data

This is known as feature positioning, as opposed to product positioning. One can then see what type of customer needs the important (and perhaps unique) features.

If your spreadsheet accepts continuous data in real-time (such as stock market data) while Excel doesn't, you'd position your spreadsheet as a "real-time spreadsheet with all calculations needed by Wall Street."

Its a claim that tells something unique about your product, who it's for, and by implication, that Excel can't do it.

Product Life Cycle

• product category (Watch)

• product style (Digital)

• a product item/brand (Timex)

1. Introduction

2. Growth

3. Maturity

4. Decline

Introduction

Marketing Mix(MM) considerations

Price penetration...set a low price in order to avoid encouraging competitors to enter the market, also helps increase demand and therefore allows the company to take advantage of economies of scale.

Growth

MM considerations

Need to build brand loyalty (selective demand), communications should stress the brand of the product, since consumers are more aware of the products benefits and there is more competition, must differentiate your offering from your competitors.

May begin to move toward intensive distribution-the product is more accepted, therefore intermediaries are more inclined to risk accepting the product.

Price dealing/cutting or meeting competition, especially if previously adopted a price skimming strategy.

Maturity

MM Considerations

• Modification of product...use line extensions

• Reposition Product

Decline

MM Considerations

Need to manage product mix through their respective life-cycles. When to decide to introduce new (modified) products that compete with the current product offering.
With high-tech products, need to consider introducing new (and competing) products as the existing product is still in the growth stage of its life cycle.

Different types of Life Cycle Curves

• Fad Curve
  Fleeting fashions vs. lasting shifts in consumer preference. Cannot differentiate between the two using usual marketing tools like focus groups.
  "Hand anyone a hula hoop, and they'll have fun with it--at first"

• Seasonal Curve
  Life cycles that vary by season, clothing etc.

Developing and Managing Products

Need to understand competition and customer attitudes and preferences.

Timex Turns down the Swatch

DID NOT KEEP UP WITH WATCHES EVOLUTION FROM A FUNCTIONAL OBJECT TO A FASHION ACCESSORY.

Now consumer owns 5 watches up from 1.5 30 years ago (emphasizing fashion need). Timex has acquired Guess and Monet Jewellers (distribution outlets) in an effort respond to change.
Product mix:
Dressy watches to Walt Disney Character watches, Indigo. Now have 1,500 styles, 300 in 1970.

Developing New Products

• Continuous Innovation...No new buyer behavior to learn, i.e. -products not previously marketed by the firm, but by others

• Dynamic Continuous Innovation...minor education needed for consumers to adopt product

• Discontinuous Innovation...entirely new consumption patterns
  

  DVD Standard

  DVD Association

  Discussion Topic: Discuss the evolution of the DVD standard and its importance in new product development.

For a new product to succeed it must have:

• desirable attributes

• be unique

• have its features communicated to the consumer (mkt support necessary)

Firms develop new products in three ways:

• By acquisition, i.e. Timex bought Guess and Monet Jewellers in 1992, bringing in new products to their product mix.

• Acquiring patents, licensing technology

• Internal development, this is what we are going to focus on.

Why New Products Fail

• Lack of differentiating advantage

• Poor marketing plan

• Poor timing

• Target market too small

• Poor product quality

• No access to market

Seven phases to new product development:

1. New Product Strategy Development
   Only a few ideas are good enough to reach commercialization. Ideas can be generated by chance, or by systematic approach and by company culture (3M). Need a purposeful, focused effort to identify new ways to serve a market. New opportunities appear from the changes in the environment.

2. Idea Generation
   Continuous systematic search for new product opportunities.
   • Marketing oriented sources--identify opportunities based on consumer needs, lab research is directed to satisfy that research. 1-800#s, research etc.

   • Laboratory oriented sources--identify opportunities based on pure research or applied research.

   • Intrafirm devises--brain storming, incentives and rewards for ideas. 3Ms Post it, from choir practice. Hewlett Parkards lab is open 24 hrs. day. Analyzing existing products, reading trade publications.

     Brainstorming for your group project. Ideas should not be criticized, no matter how off-beat they are.

3. Product Screening and Evaluation
   New product check list; list new product attributes considered most important and compare each with these attributes. Check list is standardized and allows ideas to be compared.
   --General characteristics, Marketing Characteristics and Production Characteristics.

   Ideas with the greatest potential are selected for further research.

   Do they match the organizations goals (Some companies have many patents that they have not exploited for this very reason.)

   Look at companies ability to produce and market the product.

   Need to look at the nature and wants of the buyers and possible environmental changes.

   Concept Testing
   Sample of potential buyers is presented with the product idea through a written or oral description to determine the attitudes and initial buying intentions.

   Conjoint Analysis to see feature tradeoffs.

   This is done before investing considerable sums of money and resources in Research and Development.

   Can better understand product attributes and the benefits customers feel are most important.

   Would you buy the product?
   Would you replace your current brand with the new product?
   Would this product meet real needs?

4. Business Analysis
   Analyze potential contribution to sales, costs and profits.

   Does the product fit into the current product mix?
   What kind of environmental and competitive changes can be anticipated?
   How will these changes effect sales etc.?
   Are the internal resources adequate?
   Cost and time line of new facilities etc.?
   Is financing available?
   Synergies with distribution channel etc.
   MIS to determine the market potential sales etc.
   Patentability should be determined, last 17 years, 14 years for a pharmaceutical product.
   Find out if it is technically feasible to produce the new product.
   If you can produce the new product at a low enough cost so as to be able to make a profit.

5. Product Development
   Develop a prototype, working model, lab test etc.

   Attributes that consumers have identified that they want must be communicated through the design of the product.

6. Test Marketing
   Can observe actual consumer behavior.
   Limited introduction in geographical areas chosen to represent intended market.
   Aim is to determine the reaction of probable buyers.
   It is the sample launch of the Marketing Mix.
   Determine to go ahead, modify product, modify marketing plan or drop the product.

   PROS are:
   

   • Lessens the risk of product failure.

   • Reduces the risk of loss of credibility or undercutting a profitable product.

   • Can determine the weaknesses in the MM and make adjustments.

   • Can also vary parts of the MM during the test market.

   • Need to select the appropriate MM and check the validity.

   CONS are:
   
   • Test market is expensive.

   • Firm's competitors may interfere.

   • Competitors may copy the product and rush it out. IE Clorox detergent with bleach P&G. "In a live test you've tipped your hand, and believe me, the competition is going to come after you. Unless you have patented chemistry, they can rip you off and beat you to a national launch" -Director of Marketing at Gillette's Personnel division.
   Alternatively can use a simulated test market. Free samples offered in the mall, taken home and interviewed over the telephone later.
7. Commercialization
   Corresponds to introduction stage of the Product Life Cycle.
   Plans for full-scale marketing and manufacturing must be refined and settled.
   Need to analyze the results of the test market to determine any changes in the marketing mix.
   Need to make decisions regarding warranties etc (reduces consumers risk). Warranties can offer a competitive advantage.

   Spend alot of $s on advertising, personnel etc. Combined with capital expenditure makes commercialization very expensive.

• the speed of acceptance among consumers and channel members;

• intensity of distribution,

• production capabilities,

• promotional capabilities,

• prices,

• competition,

• time period to profitability and commercialization costs.

Buyers' Product Adoption Process

1. Awareness
   Buyers become aware of the product

2. Interest
   Buyers seek information and is receptive to learning about product

3. Evaluation
   Buyers consider product benefits and determines whether to try it

4. Trial
   Buyers examine, test or try the product to determine usefulness relative to needs

5. Adoption
   Buyers purchase the product and can be expected to use it when the need for the general type of product arises.

Diffusion Process

1. Innovators
   Techno-savvies first customers to buy a product, 2.5 % of consumers

2. Early Adopters
   Tend to be opinion leaders. Adopt new products but use discretion, 13.5%

3. Early Majority
   34% of consumers, first part of the mass market to buy the product

4. Late Majority
   Less cosmopolitan and responsive to change, 34%

5. Laggards
   Price conscious, suspicious of change, 16%, do not adopt until the product has reached maturity.

Discussion topic: Discuss the differences in the new product development process for digital goods versus tangible goods, consider intellectual property issues, standards issues etc?

Relevant Knowledge@Wharton Articles

Intellectual Property: WIPO
Intellectual Property and the National Information Infrastructure

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