Understanding business 11th by mchugh nickels chapter a14

Explain the concept of a total product offer and summarize the functions of packaging.. DEVELOPING a TOTAL PRODUCT A14-9 LO A14-1 • Products are evaluated on many different dimensions,

Copyright © 2015 by the McGraw-Hill Companies, Inc All rights reserved McGraw-Hill/Irwin

LEARNING OBJECTIVES

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1 Explain the concept of a total product offer and

summarize the functions of packaging.

2 Contrast brand, brand name, and trademark, and

discuss the concept of brand equity.

3 Describe the product life cycle.

4 Identify various pricing objectives and strategies, and

explain why non-pricing strategies are growing in

importance.

LEARNING OBJECTIVES

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5 Explain the concept of marketing channels and the

value of marketing intermediaries.

6 Discuss the differences between wholesale and

retail intermediaries and explain the various kinds of non-store retailing.

7 Define promotion and list the traditional tools that

make up the promotional mix.

8 Assess the effectiveness of various forms of sales

promotion

• In college, Hastings spent

his summers training with the Marines and joined the Peace Corps

• Was inspired to start Netflix after racking up a $40 late fee

NAME that COMPANY

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This U.S company is known for having low prices

all the time One way it keeps prices low is by

eliminating as many wholesalers as possible and doing all the wholesale function itself

Name that company!

DEVELOPING VALUE

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• Value Good quality at a fair price.

• What customers perceive as the best value

depends on many factors

• Adapting products to new markets is an ongoing

challenge

• Product development is a key activity in any

modern business

PRODUCTS CONSUMERS

WON’T GIVE UP

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PRODUCTS “EXPENDABLE”

by SPENDING CUTS

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• Total Product Offer Everything consumers

evaluate when deciding whether to buy something.

DEVELOPING a TOTAL PRODUCT

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• Products are evaluated on

many different dimensions,

both tangible and intangible

• Marketers must think like and

talk to consumers to find out

what’s important

PRODUCT INNOVATION DURING

the GREAT DEPRESSION

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ANYTHING YOU CAN DO…

Products Replacing Products

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POTENTIAL COMPONENTS

of a TOTAL PRODUCT OFFER

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• Product Line A group of products that are

physically similar or intended for a similar market.

UNDERSTANDING PRODUCT LINES

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Photo Courtesy of: Coca-Cola Art Gallery

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• Product lines often include

competing brands like:

- Downy

The PRODUCT MIX

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• Product Mix The combination of all product lines

offered by a manufacturer or service provider.

• Product mixes like Procter & Gamble’s can be

SEALING the DEAL

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• As a Navy Seal, Randy

Hetrick found keeping

his fitness levels up

while in the field was

difficult

• He created the TRX

out of parachute

harnesses

• While earning his MBA, he raised capital to

launch Fitness Anywhere Now, a $50 million

company!

DIFFERENTIATING PRODUCTS

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• Product Differentiation The creation of real or

perceived product differences.

• Marketers use a mix of pricing, advertising and

packaging to create different images Examples

USES of PACKAGING

• Good packaging can also make

a product more attractive to

retailers

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• Companies often use packaging to change and

improve their basic product Examples include:

- Microwave popcorn

- Tuna pouches

- McDonald’s green packaging

SOME KEY FUNCTIONS of

PACKAGING

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1) To attract buyers’ attention

2) Protect the goods inside and be

tamperproof

3) Be easy to open

4) Describe and give information about the

product

5) Explain the product’s benefits

6) Provide warranty information and warnings

7) Give an indication of price, value, and

uses

• Bundling Grouping two or more products together

and pricing them as a unit.

BUNDLING

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Photo Credit: Joey Day

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• Virgin Airlines bundles

door-to-door limo

service and inflight

massage with some

tickets

• Financial institutions

bundle advice with

purchases

• Brand Name, symbol, or design that identifies the

goods or services and distinguishes them from

competitors’ offerings.

UNDERSTANDING BRANDING

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• Trademark A brand

that has exclusive legal

protection for both its

brand name and design.

PLAYING the NAME GAME

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• With a couple hundred countries

on the cyber-platform, choosing

the right name is a global issue

• Every once in a while, a successful

name is created by accident

Häagen-Dazs means nothing!

• What would you rename Very

Vegetarian if given the chance?

Would you want to ask an expert?

The NAME GAME

Source: Bloomberg Businessweek, www.businessweek.com , accessed March 2015 A14-23

ESTABLISHING BRAND EQUITY

and LOYALTY

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• Brand Equity – The value of the brand name and

associated symbols

• Brand Loyalty The degree to which consumers

are satisfied and are committed to further purchases.

• Brand Awareness How quickly or easily a given

brand name comes to mind when someone mentions

a product category.

MOST VALUABLE BRANDS

Source: Forbes, www.forbes.com , accessed March 2015 A14-25

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ORIGINS of AUTOMOBILE SYMBOLS

Source: World Features Syndicate A14-26

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• Volvo - Symbol for iron

• Lamborghini - Company founder’s

zodiac sign was Taurus

• Volkswagen - Product of an office

contest

• Porsche - Coat of arms for city and

state headquarters

BRAND MANAGEMENT

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• Brand Manager Person responsible for a

particular brand and handles all the elements of the

brand’s marketing mix.

• Many large companies created this position to

have greater control over new-product

development and product promotion

• Some companies have brand management

teams

MADE in AMERICA?

Home Countries of America’s Favorite Brands

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The FOUR STAGES of a PRODUCT LIFE CYCLE

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• Product Life Cycle A theoretical model of what

happens to sales and profits for a product over time.

• Product Life Cycle Stages:

1 Introduction

2 Growth

3 Maturity

4 Decline

SALES and PROFITS DURING

the PRODUCT LIFE CYCLE

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PROFITS BEYOND the GRAVE

Top Earning Deceased Celebrities in 2014

Source: Forbes, www.forbes.com , accessed March 2015 A14-32

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The PRODUCT LIFE CYCLE and

the MARKETING MIX

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TEST PREP

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• What is the theory of the product life cycle?

• When a product is in the mature stage of the

product life cycle, are its profits generally

increasing or decreasing?

PRICING OBJECTIVES

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1) Achieving a target return on

5) Furthering social objectives

both short-run and long-run

PRICING STRATEGIES

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• Cost-based pricing measures cost of producing a

product including materials, labor, and overhead

• Target Costing – Designing a product that satisfies customers and meets the firm’s targeted profit

margins.

• Competition-Based Pricing A strategy based

on what the competition is charging for its products.

USING BREAK-EVEN ANALYSIS

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• Break-Even Analysis The process used to

determine profitability at various levels of sales The

break-even point is where revenues equals cost.

• Total Fixed Costs All costs that remain the same

no matter how much is produced or sold.

• Variable Costs Costs that change according to

the level of production.

HOW to FIND the BREAK-EVEN POINT

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• The break-even point equals the total fixed costs (FC)

divided by the price of one unit (P) minus the variable cost of one unit (VC).

BEP = FC/P - VC

• If you have a fixed cost of $200,000, a variable cost of

$2 per item, and you sell your product for $4 each,

what would be your BEP?

PRICING ALTERNATIVES

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• Skimming Price Strategy Pricing new products

high to recover costs and make high profits while

• Everyday Low Pricing (EDLP) Setting prices

lower than competitors with no special sales.

PRICING STRATEGIES

of RETAILERS

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• High-Low Pricing Using

regular prices that are higher

than EDLP stores except

during special sales when they

are lower.

• Psychological Pricing

Pricing products at price points

that make a product seem less

expensive than it is

TEST PREP

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• List two short-term and two long-term pricing

objectives? Can the two be compatible?

• What is a disadvantage of using cost-based

pricing strategy?

• Why is increasing focus being placed on

non-price competition?

WHAT are MARKETING INTERMEDIARIES?

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• Marketing Intermediaries Organizations that

assist in moving goods and services from businesses

to businesses (B2B) and from businesses to

consumers (B2C).

• They are called intermediaries because they’re in

the middle of a series of firms that distribute

goods

• Channel of Distribution A group of marketing

intermediaries that joining together to transport and

store goods from producers to consumers.

WHAT are MARKETING INTERMEDIARIES?

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TYPES of MARKETING INTERMEDIARIES?

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• Agents and Brokers Intermediaries who bring

buyers and sellers together and assist in negotiating

an exchange but do not take title to the goods.

• Wholesaler An intermediary that sells products to

other organizations such as retailers, manufacturers,

and hospitals.

• Retailer An organization that sells products to

ultimate customers.

SELECTED CHANNELS of

DISTRIBUTION

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• Intermediaries perform marketing tasks faster

and cheaper than most manufacturers could

HOW INTERMEDIARIES CREATE

EXCHANGE EFFICIENCY

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TEST PREP

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• What is a channel of distribution, and what

intermediaries are involved?

• Why do we need intermediaries?

• Illustrate how intermediaries create exchange

efficiency

WHOLESALE INTERMEDIARIES

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• Wholesalers normally make B2B sales, however,

stores like Staples and Costco also have retail

functions

- Retail sales are sales of goods and services to customers

for their own use.

- Wholesale sales are sales of goods and services to other

businesses for use in the business or resale.

• Consumers are more familiar with retailers

than wholesalers

• Agents generally maintain long-term relationships

with the clients they represent

ROLES of AGENTS

and BROKERS

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- Manufacturer’s agents

represent several

manufacturers in a specific

territory.

- Sales agents represent a

single client in a larger territory

• Brokers usually represent

clients on a temporary

basis

• There are over 2 million retailers in the U.S., not

including websites

RETAILING in the U.S.

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• Retailers in the U.S

employ about 5 million

people and operate

under many different

structures

FASTEST GROWING RETAIL

CATEGORIES

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• Video games

• Sports and fitness

• Home, garden, and

furniture

• Event tickets

• Consumer electronics

HOW to PREVENT COUPON FRAUD

A14-53 Source: Entrepreneur, www.entrepreneur.com , accessed March 2015.

Photo Credit: Walmart Stores

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• Make sure your coupons

are unique.

• Have clear expiration

dates and rules.

• Train staff on how to spot

fraudulent coupons.

HOW to PREVENT RETURN POLICY FRAUD

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Photo Credit: Bill Ballentyne

Source: Entrepreneur, www.entrepreneur.com , accessed March 2015.

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• Always require receipts for

returns.

• Shred receipts so they cannot be

used to return stolen goods.

• Check for tampering.

• Have customers fill out a return

form and check details.

TYPES of RETAIL STORES

Department Store Sears, JC Penney, Nordstom

Discount Store Wal-Mart, Target

Supermarket Safeway, Kroger, Albertson’s

Warehouse Club Costco, Sam’s Club

Convenience Store 7-Eleven

Category Killer Toys-R-Us, Bass Pro Shops, Office

Depot Outlet Store Nordstrom Rack, TJ Maxx, Nike

Outlet Specialty Store Jewelry store, shoe stores, bicycle

shops

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RETAIL DISTRIBUTION

STRATEGIES

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• Intensive Distribution Puts products into as

many retail outlets as possible

• Selective Distribution Uses only a preferred

group of the available retailers in an area.

• Exclusive Distribution The use of only one

retail outlet in a given geographic area

PICK a STRATEGY…

What’s the Correct Retail Strategy for These Products?

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• Ralph Lauren Polo Shirts

• Diet Pepsi

• Rolls Royce Automobiles

• Calloway Golf Clubs

• Snickers Candy Bars

• Steinway Pianos

• Electronic Retailing Selling goods and services

to ultimate consumers online.

• Telemarketing The sale of goods and services

via the telephone.

FORMS of NON-STORE

RETAILING

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• Vending machines dispense

convenience goods when

consumers deposit sufficient

money

FORMS of NON-STORE

RETAILING

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• Direct Selling Selling goods

and services to customers in

their homes or workplaces.

• Multilevel marketing uses

salespeople who work as

independent contractors

• Direct Marketing Any

activity that directly links

manufacturers or intermediaries

with ultimate customers.

SUPPLY CHAINS

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• Supply Chain All the linked activities various

organizations must perform to move goods and

services from the source of raw materials to ultimate

consumers.

• Supply chains include: farmers, miners, suppliers

of all kinds, manufacturers, wholesalers and

retailers

• One major concern of supply chain managers is

selecting a mode of transportation

COMPARING TRANSPORTATION MODES

Mode Cost Speed Dependability Flexibility Frequency Reach

Pipeline Low Medium Highest Lowest Highest Lowest

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TEST PREP

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• What are some of the ways in which retailers

compete?

• What kinds of products would call for each of the

different distribution strategies: intensive,

selective, and exclusive?

• Give examples of non-store retailing and describe

each

• Which transportation mode is fastest, which is

cheapest, and which is most flexible?

• Promotion Mix The combination of promotional

tools an organization uses The traditional mix

INTEGRATED MARKETING

COMMUNICATION (IMC)

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Combines the promotional tools into one

comprehensive strategy IMC is used to:

- Create a positive brand image.

- Meet the strategic marketing and promotional

goals of the firm.

ADVERTISING in the FIRM

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• Advertising Paid,

non-personal communication

through various media by

organizations and individuals

who are in some way

indentified in the message.

• Major goals of advertising:

- Inform

- Persuade

- Remind

IMPACT of ADVERTISING

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• Total advertising expenditures

exceed $215 billion yearly

• Consumers benefit because

production costs of TV

programs, radio programs,

newspapers and magazines are

paid for by advertisers

• Marketers choose ad media

that will reach the target market

MATCH GAME

Match the Company with the Slogan

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• “Everybody doesn’t like something, but nobody

doesn’t like _.”

• “We bring good things to life.”

• “It takes a licking and keeps on ticking.”

• “With a name like _, it has to be good.”

• “Good to the last drop.”

• “Betcha can’t eat just one!”

• “Because you’re worth it.”