Texas A&M University Kingsville Marketing Concepts Discussion

Texas AM University Kingsville

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After reviewing Chapters 6-7 from the textbook, post a 500-word synopsis of your understanding of the marketing concepts. In your posting, include questions about any marketing concepts that are unclear.Complete the assignment in APA format and refer to the attached textbook and let me know if you have any questions.

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Chapter 6 Product and Brand Strategy Product strategy is a critical element of marketing and business strategy, since it is through the sale of products and services that companies survive and grow. This chapter discusses four important areas of concern in developing product strategies. First, some basic issues are discussed, including product definition, product classification, product quality and value, product mix and product line, branding and brand equity, and packaging. Second, the product life cycle and its implications for product strategy are explained. Third, the product audit is reviewed, and finally, three ways to organize for product management are outlined. These include the marketing manager system, brand manager system, and cross-functional teams. BASIC ISSUES IN PRODUCT MANAGEMENT Successful marketing depends on understanding the nature of products and basic decision areas in product management. In this section, we discuss the definition and classification of products, the importance of product quality and value, and the nature of a product mix and product lines. Also considered is the role of branding and packaging. Product Definition Part C The way in which the product variable is defined can have important implications for the survival, profitability, and long-run growth of the firm. For example, the same product can be viewed at least three different ways. First, it can be viewed in terms of the tangible product––the physical entity or service that is offered to the buyer. Second, it can be viewed in terms of the extended product––the tangible product along with the whole cluster of services that accompany it. For example, a manufacturer of computer software may offer a 24-hour hotline to answer questions users may have or to offer free or reduced-cost software updates, free replacement of damaged software, and a subscription to a newsletter that documents new applications of the software. Third, it can be viewed in terms of the generic product—the essential benefits the buyer expects to receive from the product. For example, many personal care products bring to the purchaser feelings of self-enhancement and security in addition to the tangible benefits they offer. From the standpoint of the marketing manager, to define the product solely in terms of the tangible product is to fall into the error of “marketing myopia.” Executives who are guilty of committing this error define their company’s product too narrowly, since they overemphasize the physical object itself. The classic example of this mistake can be found in railroad passenger The Marketing Mix 86 MARKETING INSIGHT Elements of Product Strategy 6–1 1. An audit of the firm’s actual and potential resources a. Financial strength b. Access to raw materials c. Plant and equipment d. Operating personnel e. Management f. Engineering and technical skills g. Patents and licenses 2. Approaches to current markets a. More of the same products b. Variations of present products in terms of grades, sizes, and packages c. New products to replace or supplement current lines d. Product deletions 3. Approaches to new or potential markets a. Geographical expansion of domestic sales b. New socioeconomic or ethnic groups c. Overseas markets d. New uses of present products e. Complementary goods f. Mergers and acquisitions 4. State of competition a. New entries into the industry b. Product imitation c. Competitive mergers or acquisitions service. Although no amount of product improvement could have staved off its decline, if the industry had defined itself as being in the transportation business, rather than the railroad business, it might still be profitable today. On the positive side, toothpaste manufacturers have been willing to exercise flexibility in defining their product. For years toothpaste was an oral hygiene product in which emphasis was placed solely on fighting tooth decay and bad breath (e.g., Crest with fluoride). More recently, many manufacturers have recognized the need to market toothpaste as a cosmetic item (to clean teeth of stains), as a defense against gum disease (to reduce the buildup of tartar above the gumline), as an aid for denture wearers, and as a breath freshener. As a result, special-purpose brands have been designed to serve these particular needs, such as Ultra Brite, Close-Up, Aqua-Fresh, Aim, Dental Care, and the wide variety of baking soda, tartar-control formula, and gel toothpastes offered under existing brand names. In line with the marketing concept philosophy, a reasonable definition of product is that it is the sum of the physical, psychological, and sociological satisfactions the buyer derives from purchase, ownership, and consumption. From this standpoint, products are customersatisfying objects that include such things as accessories, packaging, and service. Product Classification A product classification scheme can be useful to the marketing manager as an analytical device to assist in planning marketing strategy and programs. A basic assumption underlying such classifications is that products with common attributes can be marketed in a similar fashion. In general, products are classed according to two basic criteria: (1) end use or market and (2) degree of processing or physical transformation. 1. Agricultural products and raw materials. These are goods grown or extracted from the land or sea, such as iron ore, wheat, and sand. In general, these products are fairly homogeneous, sold in large volume, and have low value per unit or in bulk weight. 2. Organizational goods. Such products are purchased by business firms for the purpose of producing other goods or for running the business. This category includes the following: a. Raw materials and semifinished goods. b. Major and minor equipment, such as basic machinery, tools, and other processing facilities. 87 88 Part C The Marketing Mix c. Parts or components, which become an integral element of some other finished good. d. Supplies or items used to operate the business but that do not become part of the final product. 3. Consumer goods. Consumer goods can be divided into three classes: a. Convenience goods, such as food, which are purchased frequently with minimum effort. Impulse goods would also fall into this category. b. Shopping goods, such as appliances, which are purchased after some time and energy are spent comparing the various offerings. c. Specialty goods, which are unique in some way so the consumer will make a special purchase effort to obtain them. In general, the buying motive, buying habits, and character of the market are different for organizational goods vis-à-vis consumer goods. A primary purchasing motive for organizational goods is, of course, profit. As mentioned in a previous chapter, organizational goods are usually purchased as means to an end and not as an end in themselves. This is another way of saying that the demand for organizational goods is a derived demand. Organizational goods are often purchased directly from the original source with few middlemen, because many of these goods can be bought in large quantities; they have high unit value; technical advice on installation and use is required; and the product is ordered according to the user’s specifications. Many organizational goods are subject to multiple-purchase influence, and a long period of negotiation is often required. The market for organizational goods has certain attributes that distinguish it from the consumer goods market. Much of the market is concentrated geographically, as in the case of steel, auto, or shoe manufacturing. Certain products have a limited number of buyers; this is known as a vertical market, which means that (1) it is narrow, because customers are restricted to a few industries; and (2) it is deep, in that a large percentage of the producers in the market use the product. Some products, such as desktop computers, have a horizontal market, which means that the goods are purchased by all types of firms in many different industries. In general, buyers of organizational goods are reasonably well informed. As noted previously, heavy reliance is often placed on price, quality control, and reliability of supply source. In terms of consumer products, many marketing scholars have found the convenience, shopping, and specialty classification inadequate and have attempted either to refine it or to derive an entirely new typology. None of these attempts appears to have met with complete success. Perhaps there is no best way to deal with this problem. From the standpoint of the marketing manager, product classification is useful to the extent that it assists in providing guidelines for developing an appropriate marketing mix. For example, convenience goods generally require broadcast promotion and long channels of distribution as opposed to shopping goods, which generally require more targeted promotion and somewhat shorter channels of distribution. Product Quality and Value Quality can be defined as the degree of excellence or superiority that an organization’s product possesses. Quality can encompass both the tangible and intangible aspects of a firm’s products or services. In a technical sense, quality can refer to physical traits such as features, performance, reliability, durability, aesthetics, serviceability, and conformance to specifications. Although quality can be evaluated from many perspectives, the customer is the key perceiver of quality because his or her purchase decision determines the success of the organization’s product or service and often the fate of the organization itself. Many organizations have formalized their interest in providing quality products by undertaking total-quality management (TQM) programs. TQM is an organizationwide commitment to satisfying customers by continuously improving every business process involved in delivering products or services. Instead of merely correcting defects when Chapter Six Product and Brand Strategy 89 they occur, organizations that practice TQM train and commit employees to continually look for ways to do things better so defects and problems don’t arise in the first place. The result of this process is higher-quality products being produced at a lower cost. Indeed, the emphasis on quality has risen to such a level that more than 70 countries have adopted the ISO 9000 quality system of standards, a standardized approach for evaluating a supplier’s quality system, which can be applied to virtually any business.1 The term quality is often confused with the concept of value. Value encompasses not only quality but also price. Value can be defined as what the customer gets in exchange for what the customer gives. In other words, a customer, in most cases, receives a product in exchange for having paid the supplier for the product. A customer’s perception of the value associated with a product is generally based both on the degree to which the product meets his or her specifications and the price that the customer will have to pay to acquire the product. Some organizations are beginning to shift their primary focus from one that solely emphasizes quality to one that also equally encompasses the customer’s viewpoint of the price/quality trade-off. Organizations that are successful at this process derive their competitive advantage from the provision of customer value. In other words, they offer goods and services that meet or exceed customer needs at a fair price. Recall that Chapter 1 described various strategies based on value. Product Mix and Product Line A firm’s product mix is the full set of products offered for sale by the organization; A product mix may consist of several product lines, or groups of products that share common characteristics, distribution channels, customers, or uses. A firm’s product mix is described by its width and depth. Width of the product mix refers to the number of product lines handled by the organization. For example, one division of General Mills has a widespread mix consisting of five different product lines: ready-to-eat cereals, convenience foods, snack foods, baking products, and dairy products. Depth refers to the average number of products in each line. In its ready-to-eat cereals line, General Mills has eight different products. It has five different products in its line of convenience foods. Thus, the organization has a wide product mix and deep product lines. An integral component of product line planning revolves around the question of how many product variants should be included in the line.2 Manufacturing costs are usually minimized through large-volume production runs, and distribution costs tend to be lower if only one product is sold, stocked, and serviced. At a given level of sales, profits will usually be highest if those sales have been achieved with a single product. However, many firms offer many product variants. Organizations offer varying products within a given product line for three reasons. First, potential customers rarely agree on a single set of specifications regarding their “ideal product,” differing greatly in the importance and value they place on specific attributes. For example, in the laundry detergent market, there is a marked split between preferences for powder versus liquid detergent. Second, customers prefer variety. For example, a person may like Italian food but does not want to only eat spaghetti. Therefore, an Italian restaurant will offer the customer a wide variety of Italian dishes to choose from. Third, the dynamics of competition lead to multiproduct lines. As competitors seek to increase market share, they find it advantageous to introduce new products that subsegment an existing market segment by offering benefits more precisely tailored to the specific needs of a portion of that segment. For example, Proctor & Gamble offers Jif peanut butter in a low-salt version to target a specific subsegment of the peanut butter market. All too often, organizations pursue product line additions with little regard for consequences. However, in reaching a decision on product line additions, organizations need to evaluate whether (1) total profits will decrease or (2) the quality/value associated with current products will suffer. If the answer to either of these is yes, then the organization MARKETING INSIGHT 6–2 A. CLASSES OF CONSUMER GOODS—SOME CHARACTERISTICS AND MARKETING CONSIDERATIONS Type of Product Characteristics and Marketing Considerations Characteristics Time and effort devoted by consumer to shopping Time spent planning the purchase How soon want is satisfied after it arises Are price and quality compared? Price Frequency of purchase Importance Convenience Very little Considerable Very little Considerable Immediately Relatively long time Yes No Marketing considerations Length of channel Importance of retailer Number of outlets Stock turnover Gross margin Responsibility for advertising Importance of point-of-purchase display Brand or store name important Importance of packaging Shopping Specialty Cannot generalize; consumer may go to nearby store and buy with minimum effort or may have to go to distant store and spend much time and effort Considerable Relatively long time No Usually low Usually frequent Unimportant High Infrequent Often very important High Infrequent Cannot generalize Long Any single store is relatively unimportant As many as possible High Low Producer Very important Short Important Short to very short Very important Few Few; often only one in a market Lower High Retailer Less important Lower High Joint responsibility Less important Brand name Store name Both Very important Less important Less important Source: From Michael Etzel, Bruce Walker and William Stanton, Marketing 13E, 2004, p. 211, 214. Reprinted with permission of McGraw-Hill Education. should not proceed with the addition. Closely related to product line additions are issues associated with branding. These are covered next. Branding and Brand Equity A critical focus in marketing strategy is on building the company’s brand and brand equity. Marketing Insight 6–3 presents some of the most valuable worldwide brands. If you examine Marketing Insight 6–3 you will see that you are most likely familiar with each one of them. Why is this so? More than likely it is because of some or all of the following reasons: 1. 2. 3. 4. 90 Whatever they do, they do it very well (e.g., Microsoft, Mercedes-Benz). They tell their story often and very well (e.g., Gillette, GE). Customers see the brand wherever they shop (e.g., McDonald’s, Coca-Cola). The brand has a distinct personality, in other words, they stand for something (e.g., Disney, Louis Vuitton). MARKETING INSIGHT (continued) 6–2 B. CLASSES OF ORGANIZATIONAL PRODUCTS—SOME CHARACTERISTICS AND MARKETING CONSIDERATIONS Type of Product Characteristics and Marketing Considerations Raw Materials Fabricating Parts and Materials Installations Accessory Equipment Operating Supplies Example Iron ore Engine blocks Blast furnaces Storage racks Paper clips Characteristics Unit price Length of life Very low Very short Low Depends on final product Large Very high Very long Medium Long Low Short Very small Small Small Quantities purchased Frequency of purchase Standardization of competitive products Quantity of supply Marketing considerations Nature of channel Negotiation period Price competition Presale/postsale service Promotional activity Brand preference Advance buying contract Large Frequent delivery; long-term purchase contract Very much; grading is important Limited; supply can be increased slowly or not at all Infrequent purchase, but frequent delivery Very infrequent Medium frequency Frequent Very much Very little; custom made Little Much Usually no problem No problem Usually no problem Usually no problem Short; no middlemen Short; middlemen for small buyers Medium Short; no middlemen Middlemen used Middlemen used Long Medium Short Not important Very important Not main factor Important Important Sales people very important High Not usually used Important Not too important Low Not usually used Hard to generalize Important Important Not important Important Very little Moderate None Important; long-term contracts used Generally low Important; long-term contracts used High Not usually used Very little The brand name is perhaps the single most important element on the package, serving as a unique identifier. Specifically, a brand is a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers. The legal term for brand is trademark.3 A good brand name can evoke feelings of trust, confidence, security, and strength. To illustrate, consider the case of Bayer aspirin. Bayer can be sold at up to two times the price of generic aspirin due to the strength of its brand image. 91 MARKETING INSIGHT How Much Is a Brand Worth: Best Global Brands 2012 Report 6–3 2012 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2011 Rank 1 17 2 4 3 5 6 7 19 11 12 15 9 14 12 13 16 20 8 26 Brand Country of Origin Sector Coca-Cola Apple IBM Google Microsoft GE McDonald’s Intel Samsung Toyota Mercedes-Benz BMW Disney Cisco HP Gillette Louis Vuitton Oracle Nokia Amazon United States United States United States United States United States United States United States United States South Korea Japan Germany Germany United States United States United States United States France United States Finland United States Beverages Electronics Business services Internet services Computer software Diversified Restaurants Electronics Electronics Automotive Automotive Automotive Media Business services Electronics FMCG Luxury Computer software Electronics Retail Brand Value ($M) 77,8 ...
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Final Answer




Marketing concepts
Institutional Affiliation



Product strategy is an important aspect of promotion and commercial strategy as it is in
the sale of goods that the business endures and raises in the market. The chapter discusses the
important aspects of developing these strategies. Firstly, it outlines basic issues like; definition,
classification, quality and value, product mix and line, branding, and packaging. Secondly, it
discusses the produce cycle as well as its insinuations on product approach followed by a product
audit. Finally, ways of organizing product management are outlined.
Product definition is a way in which product variable is defined. This is very crucial since
it has direct implications on the survival, profitability, and s...

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