MAR3023 - Exam 2 Notes (Part 1)

consumers don't buy the drill, they buy the holes the drill makes

consumers don't buy the drill, they buy the holes the drill makes

when a consumer buys a product, they are really buying the BENEFITS that the product provides

three levels of product benefits

augmented, expected, and core

core product benefits

The basic level of benefits that the product has to offer to fit into the product category

expected product benefits

Benefits beyond the core benefits that consumers expect from the product

• consumers have expectations about durability, warranty, reliability, fair price, etc

augmented product benefits

Benefits above and beyond what the customer expects and thus, beyond what the competition provides

features

aspects that are built into a product

benefits

what the product does and what people get out of it

product

a good, service, or idea consisting of a bundle of tangible and intangible benefits

three emphasized aspects of products

• products do not have to be goods

• products offer benefits to consumers

• product benefits can be tangible or intangible

product item

A specific product, identified by its ordering code

Stock Keeping Unit (SKU)

a unique identifier for each distinct product

• an ordering code

product line

a group of closely related product items

• exists within an organization

product mix

The set of product lines sold by a company

the product life cycle

the life of a typical product over four stages: Introduction, growth, maturity, decline

introduction stage of product life cycle

slow growth as the market comes to accept the product. Few suppliers of the product at this stage. The focus at this stage should be on promotion and building awareness of the product

growth stage of product life cycle

rapid growth, lots of competitors enter the market. Competitive entry occurs, as firms recognize the huge opportunity that the market has to offer

maturity stage of product life cycle

slowing of growth. Competitive shakeout occurs as some competitors exit the market and invest elsewhere. Companies try to keep their products at this stage stage as long as possible. To battle competition, firms must start to market product variations to gain and retain as much of the market as possible

decline stage of product life cycle

sharp decrease in sales. Firms must decide if it is worth it to continue making the product despite the decrease in sales

fad product

short-lived; its product life cycle quickly peaks and then rapidly decreases

Product class life cycle

product classes, product form, brand product

product class life cycle

describes an entire product category or industry

product form life cycle

pertain to product forms within the class

brand product life cycle

Describes specific brands within a product form

4 ways to extend the product life cycle

market penetration, market development, product modification, product repositioning

market penetration

involves selling more of the product to the same basic set of customers

• can do this by temporarily lowering prices or offering coupons/incentives

• these firms want existing/potential consumers to use more of their product

share of wallet

the percentage of customers' expenditures that the firm accounts for

market development

involves extending a product's life cycle by looking for new markets

• example: exporting to new countries

• can also market to a new user group

product modification

involves extending the product life cycle by altering a product's characteristics- such as quality, performance, or appearance- to serve the changing needs of the marketplace

product repositioning

Involves changing the position that a product occupies in the mind of the consumer

Brand Development Index (BDI), and Category Development Index (CDI)

two tools used to manage product life cycle

Brand Development Index (BDI)

a tool used to determine how well a firm's brand is performing in each geographic territory in which it sells

• below 100 means the brand's per capita sales in that territory is below the brand's national average

• above 100 means it's above national average

• equal to 100 means its at the national average

Category Development Index (CDI)

measures how an entire product category is performing in the market

• below 100 = less than national average

• equals 100 = at national average

• above 100 = above national average

brand name

verbal label that is attached to a product

brand mark

nonverbal mark for the brand

trade character

A personified representation of the brand

logo

can consist of a brand name, brand mark, or both

trademark

brand name, brand mark, or trade character that is legally protected

family branding

a situation in which a firm puts the same basic brand name on all the products it sells

multiple branding

A situation in which a company attaches different brand names to the various products it sells, which is costlier and more research-intensive than family branding

co-branding

when two companies or brands cooperate and put both brand names on a product

national brands

these brands are designed to attract consumers to the brand and develop brand loyalty -responsible for most of the major innovations and advertising in the market, and take part in a lot of research and development

• tend to be market leaders due to having the highest perceived quality and the highest price

private label brands

brands associated with a particular retailer like Publix, Walmart, Costco, and they are usually 5-15% cheaper than national brands

• these brands are designed to build up customers' store loyalty

licensing

a branding strategy in which a firm that owns a brand name sells another company the rights to manufacture and sell products under that brand name

brand equity

is the added value a brand name gives to a product

4 components of brand equity

awareness, associations (brand image), perceived quality, loyalty

Customer Lifetime Value (CLV)

the monetary value of a customer's business over his or her lifetime

extend brand equity

obtained by launching new products

• can be achieved in two ways: line extension and category extension

line extension

a firm can build brand equity by introducing additional products in the same general product category using the brand name from the parent brand

category extension

brand equity can be built by extend a brand into other product categories

advantages of product expansion

instant recognition and encouragement of trial

disadvantages of product expansion

brand dilution and the risk of new product failure

packaging

any container in which it is offered for sale and on which label information is conveyed

the functions of packaging

• contain or protect

• facilitate use

• communicate the product

• fit channel needs

• innovation

two emerging issues in branding

consumer-brand relationships, brand communities

consumer-brand relationship

increasingly, the relationship between consumers and brands they like is becoming personal

brand communities

involve multiple consumers that have relationships with each other because of a relationship with the brand

continuous innovation

does not drastically change how consumers live their everyday lives

• ex: new colors, flavors, styles, or brands

"me-too" products

products that are introduced to mimic a competitor's product

dynamically continuous innovation

presents an existing product in a different form

• ex: change form VHS to DVD

discontinuous innovation

innovation that changes the way we live our lives

• rare because most involve the introduction of a new product category

• ex: internet, laptops, e-mail, telephones