Customers view regularly unsought products as

Chapter 8

Elements of Product Planning for Goods and Services

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CHAPTER EIGHT

Lecture Notes for

Essentials of Marketing 16e

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Lecture Script 8-‹#›

At the end of this presentation, you should be able to:

understand what “Product” really means.

cite the key differences between goods and services.

describe how technology augments a produce to add value for customers.

understand what branding is and how to use it in strategy planning.

understand the importance of packaging in strategy planning.

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

At the end of this presentation, you should be able to:

1. understand what “Product” really means.

2. cite the key differences between goods and services.

3. understand what branding is and how to use it in strategy planning.

understand the importance of packaging in strategy planning.

understand the role of warranties in strategy planning.

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Lecture Script 8-‹#›

At the end of this presentation, you should be able to:

understand the role of warranties in strategy planning.

know the differences among various consumer and business product classes and how product classes can help a marketing manager plan marketing strategy.

understand important new terms.

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

At the end of this presentation, you should be able to:

know the differences among various consumer and business product classes.

understand how product classes can help a marketing manager plan marketing strategies.

understand important new terms.

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Lecture Script 8-‹#›

Product Decisions for Marketing Strategy Planning (Exhibit 8-1)

Chapter 9

Product Management and New-Product Development

Product idea

Branding

Other strategy decisions

Product classes

Chapter 8 Elements of Product Planning for Goods and Services

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Summary Overview

Chapter 8 introduces Product Planning, while Chapter 9 will cover Product Management and New-Product Development.

Key Issues

What is a product? Product: means the need-satisfying offering of a firm.

Discussion Question: Why should the main focus of the product area be on consumers?

The product idea encompasses many attributes of a physical good or service: its features, benefits, and quality level, as well as its accessories, installation requirements, and instructions. Any product must also be positioned relative to the other offerings of the organization in its product line.

Branding is a key product strategy area. Marketers need to decide what types of brands they wish to produce.

The package is more than just a means of protecting the product. It can help to promote the product or enhance its use.

Marketers must decide if they want to offer product warranties, and if they do, how extensive the warranties will be.

The type of consumer (product class) that will use it determines whether a product is a consumer or business product.

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Product Quality and Customer Needs

Source: Oracle Corporation

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Summary Overview

From a marketing perspective, quality means a product’s ability to satisfy a customer’s needs or requirements.

Key Issues

Quality may be absolute or relative, but in all cases the customer’s expectations for quality in a given product form the basis for determining how to achieve customer satisfaction.

For example, when Volkswagen introduced its environmentally friendly Bluemotion Technology cars, the idea that it can be fun to do the right thing was showcased.

The idea is then tied to Volkswagen’s green technology, and eco-friendly cars.

Discussion Question: Did Volkswagen’s Bluemotion Technology add quality to the product if a consumer doesn’t really care about fuel efficiency or the environment?

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Whole Product Lines Must Be Developed Too

©Spencer Grant/PhotoEdit

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Text Caption: This photo shows part of the product assortment offered by Coca-Cola. Each individual size and brand represents an individual product. All of the carbonated soft drinks—Coca-Cola, Diet Coke, and Coke Zero—are part of the same product line.

Summary Overview

There are many different product arrangements within organizations, depending upon the number of products offered and how diverse the offerings are.

Key Issues

A product assortment is the set of all product lines and individual products that a firm sells.

A product line is a set of individual products that are closely related.

Related because they are produced or operate in a similar way; sold to the same target market, through similar types of outlets, or be similarly priced.

An individual product is a particular product within a product line.

It is differentiated by brand, level of service offered, price, or some other characteristic.

Each individual product and target market may require a separate strategy.

Discussion Question: Think about Sony, an electronics manufacturer. Can you describe its (a) product assortment; (b) product lines; and (c) individual products?

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Product Assortment, Product Line, or Individual Product?

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Dunkin’ Donuts’ product assortment is the set of all the product lines and individual products that the firm sells. Its product lines include donuts and coffees. Dunkaccino is an individual product, within the coffee product line, which is part of Dunkin Donuts’ product assortment.

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Examples of Possible Blends of Physical Goods and Services in a Product (Exhibit 8-2)

Restaurant meal, cell phone, automobile tune-up

100% service emphasis

100% physical good emphasis

Blend of physical

good and service

Canned soup, steel pipe, paper towels

Satellite radio, hair styling, postal service

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Summary Overview

A product can be a physical good or an intangible service, or it can be a blend of both.

Key Issues

This diagram shows how one can position products in terms of their physical good emphasis or their service emphasis.

Some products, such as canned soup, steel pipe, and paper towels, have an emphasis that is almost completely physical.

Other products have a significant service component, such as a restaurant meal, a cellular phone, or an automobile tune-up.

Still other products have an emphasis mainly on the service component, such as a satellite radio, a hair stylist, or a postal service.

Discussion Question: Why does the increased demand for more service make product management more difficult?

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Reducing the Uncertainty of Services

Source: Allstate Insurance Company

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Text Caption: See below.

Summary Overview

A consumer can‘t hold a service and look at it before purchasing, so service firms often use messages and images in their promotion that help make the benefits of the service experience more tangible. Allstate’s “Mayhem” ads are a vivid reminder of the value of a good insurance policy.

Discussion Question: How do service customers reduce the uncertainty of the services they purchase?

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Technology and Intelligent Agents Add Value to Products

Technology integrated =

Apps add services

AI anticipates needs

Key Issues

Augmented reality adds to experience

Sellers get data too

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Summary Overview

Firms often seek to add customer value to their core product offering. These days, many find that technology—often a website or software application—provides additional value and improves a customer’s experience and satisfaction.

Key Issues

Many products that were previously not thought of as “tech” products, such as cars, now include technology.

 Another opportunity to provide value follows from software applications that offer value-adding services to a core product.

 Augmented reality (AR) overlays a computer-generated image, sound, text, or video on a user’s view of the physical world. It can augment a customer’s experience of a product.

 Artificial intelligence (AI) refers to having machines operate like humans with respect to learning and decision making; intelligent agents such as Google Now are devices that observe an environment and act to achieve a goal. Analytics are used to help AI and intelligent agents make anticipate customer needs.

 While customers see value from the integration of technology into products, it also offers value to firms that collect and analyze the data.

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Recognized Trademarks and Symbols Help in Promotion (Exhibit 8-3)

Source: ©R Heyes Design/Alamy; ©TP/Alamy; ©Peter Probst/Alamy; ©grzegorz knec/Alamy; ©Ingvar Björk/Alamy; Courtesy of Boys & Girls Clubs of America; ©PSL Images/Alamy; ©R Heyes Design/Alamy; ©R Heyes Design/Alamy; ©TP/Alamy; ©R Heyes Design/Alamy; ©R Heyes Design/Alamy; ©Tanuha2001/Shutterstock RF

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Summary Overview

What is branding? Branding means the use of a name, term, symbol, or design to identify a product. Some companies use a combination of some or all of these when branding. This exhibit shows many familiar brands.

Key Issues

A brand name is a word, letter, or a group of words or letters.

A trademark includes only those words, symbols, or marks that are legally registered for use by a single company.

A service mark is a trademark that refers to a service offering.

Discussion Question: Can you provide other examples of brand names, trademarks, or service marks?

Brands meet needs. For example, brands make shopping easier, because consumers can identify levels of quality with specific products and shorten the time needed for information search.

Branding also helps marketers, because it can:

reduce selling time and cost.

improve the company’s image.

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Conditions Favorable to Branding

Market price can be high

Product quality and best value

Easy to label and identify

Key

Issues

Favorable shelf or display space

Dependable, widespread availability

Economies of scale

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Summary Overview

There are several conditions favorable to successful branding. They are as follows (under Key Issues):

Key Issues

The product is easy to label and identify by brand or trademark.

The product quality is easy to maintain and is the best value for the price.

Dependable and widespread availability is possible.

Demand is strong enough that the market price can be high enough to make the branding effort profitable.

There are economies of scale. If branding is really successful, costs should drop and profits should increase.

Favorable shelf locations or display space in stores will help.

These conditions are less common in less-developed economies.

Discussion Question: Consider a product category that has popular, easy-to-recall brand names (such as soft drinks, computers, or automobiles), compared to a product category for which brand names are difficult to remember (file folders, nails, electric extension cords, or something similar). How do the two product categories match up on the six conditions favorable to successful branding?

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Achieving Brand Familiarity is Not Easy

Brand Rejection

Brand Non- Recognition

Brand Recognition

Brand Preference

Brand Insistence

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Summary Overview

Brand familiarity means how well customers recognize and accept a company’s brand.

Key Issues

Five levels of brand familiarity are useful for strategy planning:

Brand rejection means that potential customers won’t buy a brand unless its image is changed.

Brand nonrecognition means final consumers don’t recognize a brand at all, even though intermediaries may use it for identification and inventory control.

Brand recognition means that customers remember the brand.

Discussion Question: A supermarket may hold 20,000 different products and many varieties of a single type of product. In this environment, why is it so critical to achieve brand recognition?

Brand preference means that target customers choose the brand over other brands.

Brand insistence means customers insist on a firm’s branded product and are willing to search for it.

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Brand Familiarity

(left) ©nycshooter/iStock/Getty Images RF; (right) ©Jessica Kirsh/Shutterstock RF

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Text Caption: See below.

Summary Overview

It takes time and money to build brand awareness.

Key Issues

Familiar brands convey trust.

For most consumers, roofing shingles fall in the category of brand nonrecognition. Consumers do not buy roofing shingles often and few know the names of any brand. Apple not only has very high brand recognition, but a high level of brand insistence. These customers are lined up outside an Apple Store to be among the first to get their hands on the latest iPhone.

Discussion Question: Other than advertising, what aspects of the marketing mix might be useful in generating brand recognition, preference, or insistence?

This slide relates to material on p. 214.

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Characteristics of a Good Brand Name (Exhibit 8-4)

Short and simple Suggestive of product benefits
Easy to spell and read Adaptable to packaging/labeling needs
Easy to recognize and remember No undesirable imagery
Easy to pronounce Always timely (does not go out of date)
Can be pronounced in only one way Adaptable to any advertising medium
Can be pronounced in all languages (for international markets) Legally available for use (not in use by another firm)
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Summary Overview

There are several characteristics of a good brand name. Some successful brand names are exceptions to all or many of these guidelines, but many of them originated when they faced little competition.

Key Issues

A good brand name can help build brand familiarity.

Among the characteristics of a good brand name are the following:

Short and simple

Easy to spell and read

Easy to recognize and remember

Easy to pronounce

Can be pronounced in only one way

Can be pronounced in all languages

Suggests product benefits

Adapts to packaging and labeling needs

No undesirable imagery

Always timely

Adapts to any advertising medium

Legally available

Discussion Question: Think of a popular brand name. How does it measure up to these characteristics of a good brand name?

A respected name builds brand equity—the value of the brand’s overall strength in the market.

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A Good Brand Name?

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AFLAC has become one of the most familiar brand names in the United States, even though it identifies a business service—business insurance. The use of clever, humorous ads has helped to accelerate the progression of the brand through the stages of brand familiarity. Which of the characteristics of a good brand name does AFLAC possess?

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Protecting Brand Names and Trademarks

You Must Protect Your Own

Lanham Act

Counterfeiting Is Accepted In Some Cultures

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Summary Overview

Registering brand names and trademarks is important because it means that no one else can use them without specific authorization from the owner.

Key Issues

U.S. common law and civil law protect the rights of trademark and brand name owners.

The Lanham Act (1946) spells out what kinds of marks can be protected and the exact method of protecting them.

A brand can be a real asset to a company, but each company must protect its own.

If a brand becomes a generic descriptive word for a product category, protection is lost and the brand becomes public property.

Discussion Question: Why do the makers of Kleenex, Q-Tips, Band-Aids, and other widely used brand names refer to their products as, for example, “Band-Aid brand adhesive bandages,” instead of just Band-Aids?

 Even if brands are registered, counterfeiting is accepted in some cultures, especially in developing nations. Many popular branded products, such as Levi’s jeans and Rolex watches, have been copied without authorization. Weak regulation in many developing countries makes it difficult for companies to protect their brands from counterfeits.

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What Kind of Brand to Use?

Individual Brand

Family Brand

Brand Choices

Generic “Brand”

Licensed Brand

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Summary Overview

In developing a product concept, a marketing manager must consider the different possible approaches for branding.

Key Issues

 A family brand is the same brand for several products, such as Sunkist, which appears on fresh fruit, juice, vitamins, and soft drinks.

Using a family brand is a good approach if individual products are of a similar quality.

 A special case of family branding is a licensed brand, a well-known brand that sellers pay a fee to use.

 Individual brands are separate brand names for each product.

May be used for outside and inside competition.

When a company makes very unrelated products that require a separate identity to avoid confusion, developing individual brands for each can be a good idea.

Some companies develop several versions of a product such as toothpaste, each with a unique position in the market.

Discussion Question: Proctor & Gamble markets many individual brands of laundry detergent. Aside from differentiating the products, what other advantages are there to having so many individual brands in a product category?

 Generic brands are products that have no brand at all other than the identification of their contents.

They can be important, low-cost alternatives for consumers, such as in the market for prescription drugs.

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Licensing

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This video clip highlights the licensing of the Louisville Slugger Brand.

(video clip length 3:31)

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Who Should Do the Branding?

Battle of the Brands

Manufacturer

Brands

Also called national brands

Created/owned by producers

Dealer Brands

Also called private brands or private labels

Created/owned by intermediaries

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Summary Overview

In addition to the type of brand, the brand’s creation and ownership are also part of the overall product strategy.

Key Issues

Manufacturer brands are brands created by producers.

Manufacturer brands are sometimes called national brands because of their wide appeal.

 Dealer brands, also called private brands, are created by intermediaries, such as wholesalers and retailers.

 The battle of the brands is a competition between manufacturer and dealer brands.

Many retailers have expanded the lines of products sold under their store brands, while reducing the amount of space given to manufacturer brands.

Discussion Question: Think about a recent trip you made to a grocery store or discount drugstore. Can you think of specific ways in which dealers position their brands against comparable manufacturer brands?

Who’s winning the battle of brands? The big winner is the consumer, who benefits from greater choice and more intense price competition.

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Checking Your Knowledge

Target’s “Cherokee” brand of men’s clothing is available only at Target stores. The brand provides a low-cost alternative to other men’s fashions available at department stores and via catalogs. The Cherokee brand is a:

A. manufacturer brand.

B. dealer brand.

C. licensed brand.

D. national brand.

E. generic brand.

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Checking Your Knowledge

Answer: B

Feedback: Dealer brands are brands created by intermediaries. The Cherokee brand available only at Target stores is an example of the dealer brand. The best answer selection is B.

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Packaging Can Create Value for Buyers and Sellers

Packaging Promotes, Protects, and Enhances

Packaging Can Lower Distribution Costs

Packaging Sends a Message

Packaging Can Enhance the Product

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Summary Overview

Packaging involves promoting, protecting, and enhancing the product. Good packaging makes products easier to identify and promotes the brand.

Key Issues

Packaging can enhance the product

Packaging can do more than contain and protect the product. The package can make the product easier to use or safer to use. Packaging can deter shoplifting and it can also be designed to achieve ecological objectives.

 Packaging sends a message

Creative use of design in packaging can visually help to tie the product to other elements of the promotion mix. Packages also convey information, such as the nutritional information on food products. The package promotes the brand at the point of purchase or in use.

 Packaging can lower distribution costs

Good packages save space and weight so they are easier to transport, handle, and display. In helping distributors and end-sale retailers, good packages are more welcome by these intermediaries.

 Greener packaging creates value for buyers and sellers

Growing numbers of consumers are interested in making greener choices.

Most sustainable packaging initiatives lower costs for producers too.

Discussion Question: Do you know of any products that never seem to get scanned at a checkout counter? How much more time does it take to hand enter the code? Could time savings lead to lower costs? How can packages be re-designed to make them easier to scan?

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Checking Your Knowledge

Heinz has a new ketchup bottle that has the cap on the bottom instead of the top. The bottle uses gravity to help the consumer get every last drop of ketchup out of the bottle. The cap is also designed to pour cleanly, so that dried ketchup does not accumulate around the opening. This new bottle demonstrates how packaging can:

A. promote product.

B. protect the product.

C. lower distribution costs.

D. incorporate UP codes.

E. enhance product usage.

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Checking Your Knowledge

Answer: E

Feedback: In the above question, Heinz has redesigned the ketchup bottle to enhance product usage. The placement of the cap on the bottom allows for a clean pour and complete usage of all the product (little waste left in the bottle). The best answer selection is E.

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What Is Socially Responsible Packaging?

Packaging

Can Hurt Environment

Federal Fair Packaging and Labeling Act

Ethical Decisions Remain

Socially Responsible Packaging Issues

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Summary Overview

In determining what is socially responsible packaging, marketers are helped by the clarity of legal regulations. However, other issues require them to make ethical judgments.

Key Issues

Packaging can hurt the environment. Ecological concerns are becoming more prominent in packaging decisions.

Producers have been criticized for developing packages that harm the environment.

Others contend that manufacturers do not disclose all of the possible harmful effects of their products.

 The Federal Fair Packaging and Labeling Act (1966) requires that consumer goods be clearly labeled in easy-to-understand terms, to give consumers more information. The law also calls on industry to try to reduce the number of package sizes and to make labels more useful.

 Ethical issues remain.

Some companies have been accused of designing packages that conceal downsized products.

Dealer-branded products are often packaged to look very similar to manufacturer brands.

Discussion Question: Have you ever purchased products and thought that the packaging wasted resources? Which ones?

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Warranty Policies Are a Part of Strategy Planning

May Improve Marketing Mix

Promises in Writing

Magnuson-Moss Act

Service Guarantees

©PhotoAlto/Eric Audras/Getty Images

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Summary Overview

A warranty puts the seller’s promises about a product in writing. A marketing manager should decide whether to offer a warranty and if so, what the warranty will cover and how it will be communicated to target customers.

Key Issues

 The Magnuson-Moss Act (1975) says that producers must provide a clearly written warranty if they choose to offer any warranty. The warranty does not have to be strong.

 Warranties may improve the marketing mix. A warranty says that the company stands behind the product.

This fact is reassuring to customers and can make a big difference in whether customers buy the product, especially if the product is complex or expensive.

Discussion Question: For which products would the terms of the warranty be a key factor in determining whether you would buy the product? Do marketers of these products emphasize their warranties in promotion?

 Backing up a product or service with service guarantees helps consumers focus on specific levels of satisfaction and expectations.

Service guarantees are becoming more common, but there’s more risk in offering a service guarantee than a warranty on a physical product.

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Checking Your Knowledge

McDonald’s announced that at select locations, if drive-through customers do not get exactly what they want within two minutes of placing the order, their next meal will be free. This promise by McDonald’s is a good example of a(n):

A. service guarantee.

B. warranty.

C. unit price.

D. limited warranty.

E. no-fault insurance policy.

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Checking Your Knowledge

Answer: A

Feedback: McDonald’s promise of a two-minute delivery time in the drive-through is a service guarantee. If the food is not delivered correctly within two minutes of placing the order, the next meal is free. The best answer selection is A.

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Product Classes Help Plan Marketing Strategies

Consumer Products

Business Products

©Creative Crop/Getty Images

©Shutterstock / Sebastian Duda

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Summary Overview

Developing product strategies is simplified somewhat because some product classes require similar marketing mixes. Understanding the product classes is a useful strategic starting point.

Key Issues

Consumer products are products meant for the final consumer.

 Business products are products meant for use in producing other products.

Some products might be in both groups.

Discussion Question: Have you ever been to a warehouse club, such as Sam’s or Costco? Business and final consumers often purchase the same items there. How might their purchases be different?

Selling the same product to final consumers and business customers requires two or more different strategies.

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Consumer Product Classes (Exhibit 8-6)

Homogeneous

Heterogeneous

Shopping Products

Specialty Products

Convenience Products

Impulse

Emergency

New Unsought

Regularly Unsought

Unsought Products

Staples

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Summary Overview

Consumer product classes are based on how consumers think about and shop for products.

Key Issues

Convenience products are purchased quickly with little effort. They may be inexpensive, bought often, require little service or selling, and bought by habit.

Staples are bought often, routinely, and without much thought—like breakfast cereal, canned soup, and other packaged foods used every day in almost every household.

Impulse products are bought quickly, as unplanned purchases, because of a strongly felt need. They may be strongly affected by the immediate situation.

 Emergency products are purchased immediately when the need is great. Consumers don’t shop around for these products or ask how much they cost.

Shopping products are products that are compared with competing products.

Homogeneous shopping products are ones that the customer sees as basically the same and wants at the lowest price.

 Heterogeneous shopping products are seen as different in quality and/or suitability. Quality, features, and style of the products matter more than their price.

 Specialty products are ones that the consumer really wants, because there are no acceptable substitutes. They are characterized by the consumer’s willingness to search.

Unsought products need promotion; customers don’t want them yet or don’t know that they can buy them.

New unsought products represent ideas potential customers don’t know about yet.

Regularly unsought products are ones that don’t motivate customers to seek them out, even though they may need them.

Discussion Question: Can you provide an example of each product class?

 Indicates place where slide “builds” to include the corresponding point (upon mouse click).

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Lecture Script 8-‹#›

Classifying consumer products

Casey Winston wanted to purchase a new set of towels for her mother as a Mother’s Day present. Casey knew her mom had never given much thought to her bathroom towels, but Casey wanted to find some really nice towels for her mom. Casey also had a limited budget. So Casey went to her local Kohl’s department store and looked through several different brands and styles of bath towels. She compared them on softness, size, absorbency, and price. She then went to her local Bed Bath & Beyond store to look at some other towels. She finally purchased a set that was mid-priced and really soft and absorbent.

Homogeneous Shopping Products

Heterogeneous Shopping Products

Impulse Products

Emergency Products

Staples

New Unsought Products

Regular Unsought Products

Specialty Products

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

This next series of slides is adapted from a similar exercise in the no longer produced Learning Aid. Consumer product classes are based on the way people think about and buy products. However, different groups of potential customers may have different needs and buying behavior for the same product. The same product can be placed in two or more product classes—depending on the needs and behavior of target customers. This exercise will give students practice in using consumer product classes. It emphasizes that the product classes only have meaning related to specific target markets.

The slide is set up such that the first click removes some of the alternatives. This could allow the questions to be used with “clickers”—with five alternatives remaining.

Each of the scenarios consider the purchase of a set of towels.

Question: Read the scenario above. Which product class best fits this situation?

Answer: Heterogeneous shopping product

Reason: Customer spends time and effort to compare quality and features, has little concern for brand, and is not too concerned about price as long as it's within her budget.

Related definitions

Shopping products are compared with competing products.

Homogeneous shopping products are ones that the customer sees as basically the same and wants at the lowest price.

Heterogeneous shopping products are seen as different in quality and/or suitability.

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Lecture Script 8-‹#›

Jeremy Bower walked into a Walmart store and told the clerk he wanted to buy a set of bath towels. The clerk said the store carried several different brands including Mainstays, Utica, Better Homes and Gardens, and Hotel Style. "I'll take the one with the lowest price," Jeremy told the clerk.

Homogeneous Shopping Products

Heterogeneous Shopping Products

Impulse Products

Emergency Products

Staples

New Unsought Products

Regular Unsought Products

Specialty Products

Classifying consumer products

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

See description of the exercise on the first slide in this series.

The slide is set up such that the first click removes some of the alternatives. This could allow the questions to be used with “clickers”—with five alternatives remaining.

Each of the scenarios consider the purchase of a set of towels.

Question: Read the scenario above. Which product class best fits this situation?

Answer: Homogeneous shopping product

Reason: Customer apparently views all products with the features described in the case as homogeneous commodities—i.e., there is no perceived difference in quality or performance. Demand is very elastic, and the customer is willing to shop for the brand with the lowest price.

Related definitions:

Shopping products are compared with competing products.

Homogeneous shopping products are ones that the customer sees as basically the same and wants at the lowest price.

Heterogeneous shopping products are seen as different in quality and/or suitability.

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Lecture Script 8-‹#›

Classifying consumer products

After an overnight stay at her cousin’s house, Dawn Brady took a shower. She was impressed with the soft and luxurious towel she used to dry herself. Her cousin said the towels were Wamsutta Turkish cotton bath towels and he bought them online at Amazon for a reasonable price. A few days later Dawn stopped at a Target store to look for the same towels, but Target did not carry the brand. She then visited a JCPenney store that also didn’t carry the brand. Finally, she went to Bed Bath & Beyond where she found the towels. They were not on sale. While she knew they were lower priced online, she bought them at Bed Bath & Beyond anyway.

Homogeneous Shopping Products

Heterogeneous Shopping Products

Impulse Products

Emergency Products

Staples

New Unsought Products

Regular Unsought Products

Specialty Products

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

See description of the exercise on the first slide in this series.

The slide is set up such that the first click removes some of the alternatives. This could allow the questions to be used with “clickers”—with five alternatives remaining.

Each of the scenarios consider the purchase of a set of towels.

Question: Read the scenario above. Which product class best fits this situation?

Answer: Specialty product

Reason: Customer displays brand insistence and a willingness to spend considerable time and effort searching for the product. Price is not critical, and customer will not accept substitutes.

Related definitions:

Specialty products are ones that the consumer really wants, because there are no acceptable substitutes. They are characterized by the consumer’s willingness to search.

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Lecture Script 8-‹#›

Classifying consumer products

While on vacation in Hawaii, Toby Rosso hiked a mile from his hotel to a recommended beach. When Toby arrived, he realized he had forgotten to bring a towel. Toby saw a 7-11 convenience store and found a couple of beach towels. The quality was not great and prices were high, but he bought one anyway.

Homogeneous Shopping Products

Heterogeneous Shopping Products

Impulse Products

Emergency Products

Staples

New Unsought Products

Regular Unsought Products

Specialty Products

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

See description of the exercise on the first slide in this series.

The slide is set up such that the first click removes some of the alternatives. This could allow the questions to be used with “clickers”—with five alternatives remaining.

Each of the scenarios consider the purchase of a set of towels.

Question: Read the scenario above. Which product class best fits this situation?

Answer: Emergency convenience product

Reason: Customer has immediate need for product: price, and perhaps even quality, are of small concern. Demand is inelastic and place is important.

Relevant definitions:

Emergency products are purchased immediately when the need is great. Consumers don’t shop around for these products or ask how much they cost.

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Lecture Script 8-‹#›

Classifying consumer products

While Hope Jekubovich was shopping in her local supermarket, she came upon an end-of-aisle display with several different bath towels. Hope had not thought about buying new towels, but she remembered her sister’s family was visiting next week. The prices seemed reasonable and she liked the blue color so she put three blue bath towels in her shopping cart.

Homogeneous Shopping Products

Heterogeneous Shopping Products

Impulse Products

Emergency Products

Staples

New Unsought Products

Regular Unsought Products

Specialty Products

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

See description of the exercise on the first slide in this series.

The slide is set up such that the first click removes some of the alternatives. This could allow the questions to be used with “clickers”—with five alternatives remaining.

Each of the scenarios consider the purchase of a set of towels.

Question: Read the scenario above. Which product class best fits this situation?

Answer: Impulse convenience products

Reason: Customer has decided to buy on sight--an unplanned purchase. She is unwilling to search for a better buy. Place and price are important, as is advertising in this case.

Relevant definition:

Impulse products are bought quickly, as unplanned purchases, because of a strongly felt need. They may be strongly affected by the immediate situation.

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Lecture Script 8-‹#›

Checking Your Knowledge

Jack White wanted to purchase a new dress shirt. He went to a local department store, toured the men’s department, and thought all the brands looked about the same. He decided to buy the store brand shirt, because it was the cheapest. For Jack, the new shirt was a(n):

A. convenience product.

B. heterogeneous shopping product.

C. specialty product.

D. homogeneous shopping product.

E. impulse product.

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Checking Your Knowledge

Answer: D

Feedback: Homogeneous shopping products are products the customer sees as basically the same and wants at the lowest price. In the above question, Jack sees all the brands as the same and selects the store brand based on the price. The best answer selection for this question is D.

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Lecture Script 8-‹#›

Business Products Are Different

Inelastic Industry Demand

Derived Demand

Differing Tax Treatments

©Shutterstock / Radu Bercan

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

Many factors affect strategy planning for business products.

Key Issues

Derived demand means that the demand for business products derives from the demand for the final consumer products they are used to make.

Discussion Question: How might one derive an estimate of the demand for steel?

 Total industry demand for business products is inelastic—a change in price doesn’t have much effect on the quantity ordered.

As a result, price increases might not reduce the quantity purchased.

However, the demand facing individual business suppliers may be extremely elastic—a situation approaching pure competition.

 Tax treatments affect buying, too.

An expense item is a product whose total cost is treated as a business expense in the year it’s purchased.

A capital item is a long-lasting product that can be used and depreciated for many years.

Customers pay for the capital item in the year it is purchased, but for tax purposes, the cost is spread over several years, reducing the cash available for other purchases.

 Indicates place where slide “builds” to include the corresponding point (upon mouse click).

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Lecture Script 8-‹#›

Business Product Classes – How They Are Defined (Exhibit 8-8)

Installations

Accessories

Raw Materials

Component Parts & Materials

MRO Supplies

Professional Services

Business Product Classes

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

Business product classes are based on how buyers see products and their uses.

Key Issues

Installations are important capital items. One-of-a-kind installations such as office buildings and custom-made equipment require special negotiations for each sale. Installations are a boom-or-bust business. Economic upturns spur expansion while downturns cause sales of installations to fall off sharply. Suppliers sometimes include special services with an installations at no extra cost.

 Accessories are short-lived capital items, such as tools and production equipment.

 Raw materials are unprocessed expense items that become a physical part of a physical good.

Farm products are grown or raised by farmers.

Natural products are those that occur in nature, such as timber and mineral ores.

 Components are processed expense items that become part of a finished product. Component parts are finished or nearly finished products that go into other products. Component materials require more processing before becoming part of the final product. Both component parts and materials must meet the specifications of the buyer.

 Supplies are expense items that do not become part of a finished product. Supplies can be divided into three types: maintenance, repair, and operating supplies.

Maintenance supplies include products like paint and light bulbs.

Repair supplies are parts needed to fix worn or broken equipment.

Operating supplies are things needed to do work, like copier toner and paper clips.

 Professional services are specialized services that support a firm’s operations. They are expense items.

 Indicates place where slide “builds” to include the corresponding point (upon mouse click).

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Lecture Script 8-‹#›

Key Terms

product

quality

individual product

product line

product assortment

service

augmented reality (AR)

branding

brand name

trademark

service mark

brand familiarity

brand rejection

brand nonrecognition

brand recognition

brand preference

brand insistence

brand equity

Lanham Act

…..

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

These are key terms you should be familiar with based upon the material in this presentation.

Key Issues

Product: the need satisfying offering of a firm.

Quality: a product's ability to satisfy a customer's needs or requirements.

Individual product: a particular product within a product line.

Product line: a set of individual products that are closely related.

Product assortment: the set of all product lines and individual products that a firm sells.

Service: an intangible offering involving a deed, performance, or effort.

Augmented reality: An overlay of a computer-generated image, sound, text, or video onto a user’s view of the physical world.

Branding: the use of a name, term, symbol, or design—or a combination of these—to identify a product.

Brand name: a word, letter, or a group of words or letters.

Trademark: those words, symbols, or marks that are legally registered for use by a single company.

Service mark: those words, symbols, or marks that are legally registered for use by a single company to refer to a service offering.

Brand familiarity: how well customers recognize and accept a company's brand.

Brand rejection: potential customers won't buy a brand unless its image is changed.

Brand nonrecognition: final customers don't recognize a brand at all—even though intermediaries may use the brand name for identification and inventory control.

Brand recognition: customers remember the brand.

Brand preference: target customers usually choose the brand over other brands, perhaps because of habit or favorable past experience.

Brand insistence: customers insist on a firm's branded product and are willing to search for it.

Brand equity: the value of a brand's overall strength in the market.

Lanham Act: a 1946 law that spells out what kinds of marks (including brand names) can be protected and the exact method of protecting them.

This slide refers to boldfaced terms appearing in Chapter 8.

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Lecture Script 8-‹#›

Key Terms

family brand

licensed brand

individual brands

generic products

manufacturer brands

dealer brands

private brands

battle of the brands

packaging

Federal Fair Packaging and Labeling Act

warranty

Magnuson-Moss Act

consumer products

business products

convenience products

staples

impulse products

…..

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

These are additional key terms.

Key Issues

Family brand: a brand name that is used for several products.

Licensed brand: a well-known brand that sellers pay a fee to use.

Individual brands: separate brand names used for each product.

Generic products: products that have no brand at all other than identification of their contents and the manufacturer or middleman.

Manufacturer brands: brands created by producers.

Dealer brands: brands created by intermediaries—sometimes referred to as private brands.

Private brands: brands created by intermediaries—sometimes referred to as dealer brands.

Battle of the brands: the competition between dealer brands and manufacturer brands.

Packaging: promoting and protecting the product.

Federal Fair Packaging and Labeling Act: a 1966 law requiring that consumer goods be clearly labeled in easy‑to‑understand terms.

Warranty: what the seller promises about its product.

Magnuson‑Moss Act: a 1975 law requiring that producers provide a clearly written warranty if they choose to offer any warranty.

Consumer products: products meant for the final consumer.

Business products: products meant for use in producing other products.

Convenience products: products a consumer needs but isn't willing to spend much time or effort shopping for.

Staples: products that are bought often, routinely, and without much thought.

Impulse products: products that are bought quickly as unplanned purchases because of a strongly felt need.

This slide refers to boldfaced terms appearing in Chapter 8.

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Lecture Script 8-‹#›

Key Terms

emergency products

shopping products

homogeneous shopping products

heterogeneous shopping products

specialty products

unsought products

new unsought products

regularly unsought products

derived demand

expense item

capital item

installations

accessories

raw materials

farm products

natural products

components

supplies

professional services

Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Summary Overview

These are additional key terms.

Key Issues

Emergency products: products that are purchased immediately when the need is great.

Shopping products: products that a customer feels are worth the time and effort to compare with competing products.

Homogeneous shopping products: shopping products the customer sees as basically the same and wants at the lowest price.

Heterogeneous shopping products: shopping products the customer sees as different and wants to inspect for quality and suitability.

Specialty products: consumer products that the customer really wants and makes a special effort to find.

Unsought products: products that potential customers don't yet want or know they can buy.

New unsought products: products offering really new ideas that potential customers don't know about yet.

Regularly unsought products: products that stay unsought but not unbought forever.

Derived demand: demand for business products derives from the demand for final consumer products.

Expense item: a product whose total cost is treated as a business expense in the period it's purchased.

Capital item: a long-lasting product that can be used and depreciated for many years.

Installations: important capital items such as buildings, land rights, and major equipment.

Accessories: short‑lived capital items—tools and equipment used in production or office activities.

Raw materials: unprocessed expense items such as logs, iron ore, and wheat that are moved to the next production process with little handling.

Farm products: products grown by farmers, such as oranges, sugar cane, and cattle.

Natural products: products that occur in nature such as timber, iron ore, oil, and coal.

Components: processed expense items that become part of a finished product.

Supplies: expense items that do not become part of a finished product.

Professional services: specialized services that support a firm's operations.

This slide refers to boldfaced terms appearing in Chapter 8.

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Lecture Script 8-‹#›