Multimedia Marketing/Marketing.iso/market/chapter5.1p

Text File | 1996-08-22 | 15KB | 327 lines

SECTION 5.1 Important Product Concepts

INSTRUCTIONS Reflect on this question--"Just what is a product?" Then go into
this section to explore this topic in depth.

EXAMPLE

A large newspaper, located on the west coast, recently decided to
introduce a new magazine, to be inserted in the Sunday edition
of the paper. It was felt that the existing home supplement
magazine was outdated and of little interest to readers.

The company became involved in a major marketing research project
to design a magazine that would be of major interest to the market.
Among the topics which were studied were target audience lifestyles,
values, and attitudes. The market segments which the research
indicated that the magazine should target were "outer-directed
achievers" and "inner-directed societally conscious". The final
decision was to design the magazine to include features relevant
to societally-conscious readers and also features with a human
relations perspective.

All of this effort has led to a highly successful new publication
that is being read by the target, according to follow-up research,
and advertisers have taken note, with revenues increasing
dramatically over the outdated old magazine.

DETAILS

Product management involves two steps. First managers must moniter
existing product performance and change strategy when necessary.
Second, management must make decisions relative to new product
introduction.

Before exploring specific product decisions we will examine several
concepts relating to products or services. These include attributes,
levels of product abstractions, product lines, and the idea of an
optimal product mix.

To marketers, a product is an entity that has certain attributes
such as color,size, weight, quality, reliability, and taste. For
instance, Tabasco pepper sauce is a red, easy-to-pour, concentrated
hot sauce for seasoning foods. People evaluate products by
deciding if acquiring the attributes of a given product will allow
them to accomplish their intended life activities. They make a
purchase when they believe that an item's attributes suit their
needs better than the attributes of other products. People seeking
a hot, spicy flavor are likely to buy a bottle of Tabasco sauce,
for instance, if they feel that it creates a more desirabale flavor
than would competing products such as steak sauce. To marketers,
therefore, the concept of a product is viewed in terms of the item's
ability to fulfill customers' desires.

Buyers also view products at three levels of abstraction: a generic
product, a specific product, and a total product. At the broadest level,
a generic product is a type or class of item designed to satisfy
some basic need, such as the refrigeration of food. The underlying
intention of most purchasers is the satisfaction of one or a
combination of basic needs. People do not buy refrigerators for their
own sake--because they have sophisticated electrical devices or
attractive hinges and handles--they buy them to preserve food.

A specific product is a subclass of a generic product. Specific
products have distinguishable attributes that set them apart from
other items within the same generic class. Because of differing
attributes, however slight they may be, General Electric, Westinghouse,
and Frigidaire refrigerators differ from each other.

The specific product attributes satisfy secondary needs. While
people buy refrigerators to preserve food (a primary need), secondary
needs such as color coordination, durability, and styling generally
determine which specific product they will buy within a generic class.
An important task of most marketers is to see to it that their
company's products satisfy the secondary needs of the selected target.

Finally, buyers evaluate a total product. This includes all of the
elements of a marketing mix, not just physical attributes. Instructions
for use, retailer locations, advertising messages, and all the other
marketing mix decisions shape a total product. By including discounters
in its list of appliance distributors, for example, a manufacturer
changed its total product offering.

PROBLEM 1

A manufacturer produces a degreaser for workers who are exposed
to grease and oils in the workplace. An example of a primary need
for this offering is:

A. Providing a smooth and creamy texture.
B. Cleaning hands and other parts of the body.
C. Having a pleasant odor.
D. Having an opener (a can) that is easy to open.

WORKED

For a manufacturer of a degreaser the primary need is to clean hands
and other parts of the body. This is the major reason why people buy
degreasers. If the need did not exist there would be no reason for
any company to offer the product. All other needs (secondary) are of
lesser importance than this one because they would still probably
still buy a degreaser even if the secondary needs were not satisfied.
No one would buy a degreaser, for instance, just because it had a
smooth and creamy texture.

ANSWER  B
INSTRUCTIONS Reflect on this question--"Just what is a product?" Then go into
this section to explore this topic in depth.

EXAMPLE

A large newspaper, located on the west coast, recently decided to
introduce a new magazine, to be inserted in the Sunday edition
of the paper. It was felt that the existing home supplement
magazine was outdated and of little interest to readers.

The company became involved in a major marketing research project
to design a magazine that would be of major interest to the market.
Among the topics which were studied were target audience lifestyles,
values, and attitudes. The market segments which the research
indicated that the magazine should target were "outer-directed
achievers" and "inner-directed societally conscious". The final
decision was to design the magazine to include features relevant
to societally-conscious readers and also features with a human
relations perspective.

All of this effort has led to a highly successful new publication
that is being read by the target, according to follow-up research,
and advertisers have taken note, with revenues increasing
dramatically over the outdated old magazine.

DETAILS

How many products should a firm offer for maximum profitability?
There is no ready answer to this question. Some have a fairly
modest set of offerings that are restricted to one or a few
closely related industries, such as automobile and truck production.
On the other hand, there are firms that produce a very wide variety
of unrelated products spanning several industries. Some of these
companies have developed most of their offerings, while others have
acquired them through mergers and purchases of the assets of other
firms.

Few companies rely solely on a single product. There are several
reasons for this. The risks are too great to rely on one item,
average overhead costs can be reduced by spreading the total over
several products, and distributors and other customers often
expect companies to handle several items. Large companies often rely
on thousands of items. And while most smaller companies begin with
a single product, they usually branch out rapidly into new items.

PROBLEM 2

An industrial lubricant company makes only one product--machine oil.
If it expanded its offerings it might benefit by:

A. Satisfying wholesalers who  do not offer a wide range of products.
B. Spreading overhead costs over more products.
C. Simplifying the production process, so that these costs decline.
D. Simplifying transportation decision making.

WORKED

An industrial lubricant company makes only one product--machine oil.
If it expanded its offerings it might benefit from spreading overhead
costs over more products. Every company has overhead (fixed costs)
that exist no matter how many products are produced. These can
include rent of the office, warehouse, and plant facility; salaries
of management; and property tax. If more products are sold, these
overhead costs can be allocated to the new products as well as the
old. This may make the old product (machine oil) less costly on a
per-unit basis.

ANSWER B
INSTRUCTIONS Reflect on this question--"Just what is a product?" Then go into
this section to explore this topic in depth.

EXAMPLE

A large newspaper, located on the west coast, recently decided to
introduce a new magazine, to be inserted in the Sunday edition
of the paper. It was felt that the existing home supplement
magazine was outdated and of little interest to readers.

The company became involved in a major marketing research project
to design a magazine that would be of major interest to the market.
Among the topics which were studied were target audience lifestyles,
values, and attitudes. The market segments which the research
indicated that the magazine should target were "outer-directed
achievers" and "inner-directed societally conscious". The final
decision was to design the magazine to include features relevant
to societally-conscious readers and also features with a human
relations perspective.

All of this effort has led to a highly successful new publication
that is being read by the target, according to follow-up research,
and advertisers have taken note, with revenues increasing
dramatically over the outdated old magazine.

DETAILS

A "product line" is a group of closely related products that are
offered for sale by a company. Product lines may be related because
they are substitutes (replace each other), complements (related to
each other such as riveting machines and rivets), sold to the same
target market, distributed through the same channel, or are within
the same price range. To illustrate, an electronics producer offers
several models that vary in size, style, and color. All of them are
part of the company's television set line.

A department store organization provides a good example of product
lines. In such stores, individual departments exist to sell
individual lines. In a typical store there are departments for
men's, women's, and children's clothing, for instance. Each of these
departments handles a single line.

A large electronics firm offers three related product lines. These
are large computer systems, personal computers, and typewriters.
Each of the three lines has a separate marketing organization,
including its own sales force.

In contrast, a product mix is the complete set of products that a
company offers for sale and involves one, two, or more product lines.
The television set producer, for instance, sells TV's, radios, and other
electronic product lines. A motel chain's product mix also includes
institutional furniture manufactured by a company division and other
products, in addition to its lodging line.

PROBLEM 3

A department store offers a wide variety of product lines. Which
of the following is an example?

A. Women's wear.
B. The store cafeteria.
C. The credit office
D. The lounge.

WORKED

For a department store, women's wear is a product line. It consists
of a group of items that are both substitutes (the store offers a
range of blouses, for instance) and complements (the store offers
both blouses and skirts). These items are sold to the same target
market. As such, they logically group together and are usually sold
within the same department within the store. Other departments, such
as the store cafeteria, the credit office, and the lounge are
service departments which support the various product lines.

ANSWER  A
INSTRUCTIONS Reflect on this question--"Just what is a product?" Then go into
this section to explore this topic in depth.

EXAMPLE

A large newspaper, located on the west coast, recently decided to
introduce a new magazine, to be inserted in the Sunday edition
of the paper. It was felt that the existing home supplement
magazine was outdated and of little interest to readers.

The company became involved in a major marketing research project
to design a magazine that would be of major interest to the market.
Among the topics which were studied were target audience lifestyles,
values, and attitudes. The market segments which the research
indicated that the magazine should target were "outer-directed
achievers" and "inner-directed societally conscious". The final
decision was to design the magazine to include features relevant
to societally-conscious readers and also features with a human
relations perspective.

All of this effort has led to a highly successful new publication
that is being read by the target, according to follow-up research,
and advertisers have taken note, with revenues increasing
dramatically over the outdated old magazine.

DETAILS

Another useful idea is that of the optimal product mix, which is the
one that best allows the company to reach its goals. Each item in
the product mix makes some contribution toward a firm's goals.In
turn , the firm's goals serve as yardsticks by which management can
measure performance and the need for some new type of action, if
necessary. Management makes product decisions to close the gaps
between goals and achievement.

A contribution gap is the difference between a company's goals and
its performance. If there is a gap, actions should be taken ahead of
time if the business is to keep on its intended track. Of course,
such a gap could result if management set goals too high, meaning that
expectations should be revised downward. A contribution gap also
occurs when the company needs new product strategies.

There are two fundamental product decision strategies for management
to make. The first, market expansion, involves fine-tuning the marketing
mix for one or more existing products in an attempt to squeeze a
greater contribution from the product mix toward company goals. The
second strategy is to develop and market new products--change the
product mix--to generate the additional contribution.

PROBLEM 4

A producer of microwave ovens is suffering from a contribution gap. One
of the major strategies that it can take to overcome this is to:

A. Issue more common stock to raise capital funds.
B. Purchase maintenance supplies from more efficient vendors.
C. Reduce the size of the work force on the production floor.
D. Add a line of digital clocks.

WORKED

A producer of microwave ovens that is suffering from a contribution
gap can take two steps to overcome the gap. One is to alter the
marketing mix for the microwaves. This could be accomplished by
changing advertising appeals, reducing prices, or improving the
quality of the microwave ovens. Another possibility is to add new
products or product lines, such as digital clocks. The major precaution
for this latter strategy is to make sure that the new offerings have
synergy with the existing products and with the company at large.

ANSWER  D