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Chapter 8 - slide 1Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

ILP108Topic 8a

Chapter Eight

Product, Services, and Brands: Building Customer Value


Chapter Objectives

• Define product and the major classifications of products and services

• Describe the decisions companies make regarding their individual products and services, product lines, and product mixes

• Discuss branding strategy—the decisions companies make in building and managing their brands

• Identify the four characteristics that affect the marketing of a service and the additional marketing considerations that services require


Product, Services, and Branding Strategy

• What Is a Product?• Product and Services

Decisions• Branding Strategy:

Building Strong Brands

• Services Marketing

Topic Outline


What Is a Product?

Product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want- include services, events, persons, places, organizations, ideas, or mixes of these.

Services are a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

To differentiate their offers, marketers are creating and managing customer experiences with their brands or company.

Products, Services, and Experiences


What Is a Product?Levels of Product and Services


Product levels• Core benefits represent what the buyer is really buying.

• Actual product represents the design, brand name, and packaging that delivers the core benefit to the customer.

• Augmented product represents additional services or benefits of the actual product.

• When developing products, marketers first must identify the core customer value that consumers seeks from the product. They must then design the actual product and find ways to augment it in order to create this customer value and the most satisfying customer experience.


What Is a Product?

Product and Service Classifications

Products and services for personal consumption

Convenience products

Shopping products

Specialty products

Unsought products

Products purchased for further processing or for use in conducting a business

Materials and partsCapital itemsSupplies and materials


What Is a Product?

Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort

• Newspapers• Candy• Fast food

Consumer Product Classifications


What Is a Product?

Shopping products are consumer products and services that the customer compares carefully on suitability, quality, price, and style

When buying shopping products and services, consumers spend much time and effort in gathering information and making comparisons.

• Furniture• Cars• Appliances



What Is a Product?

Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort

Buyers do not normally compare specialty products. They invest only the time needed to reach dealers carrying the wanted products.

• Medical services• Designer clothes• High-end electronics



What Is a Product?

Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying

Most major innovations are unsought until the consumer becomes aware of them through advertising.

Unsought products require a lot of advertising, personal selling, and other marketing efforts.

• Life insurance• Funeral services• Blood donations



What is a product that could be convenience, shopping, and specialty?


What Is a Product?

Materials and parts include raw materials and manufactured materials and parts usually sold directly to industrial users

• Raw materials: – farm products (wheat, cotton, livestock, fruits, vegetables) – natural products (fish, lumber, crude petroleum, iron ore).

• Manufactured materials and parts – component materials (iron, yarn, cement, wires) – component parts (small motors, tires, castings).

Industrial Product Classifications


What Is a Product?

Capital items are industrial products that aid in the buyer’s production or operations, including installations and accessory equipment

• Installations consist of major purchases – buildings (factories, offices) – fixed equipment (generators, drill presses, large computer systems,

elevators).• Accessory equipment (Shorter life than installations and aid in

the production process)– portable factory equipment and tools (hand tools, lift trucks) – office equipment (computers, fax machines, desks).



What Is a Product?

Supplies and services

Supplies are the convenience products of the industrial field because they are usually purchased with a minimum of effort or comparison

– operating supplies (lubricants, coal, paper, pencils) – repair and maintenance items (paint, nails, brooms).

• Business services – maintenance and repair services (window cleaning, computer

repair)– business advisory services (legal, management consulting,

advertising).



What Is a Product?

Organization marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward an organization

Organizations, Persons, Places, and Ideas


What Is a Product?

Person marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward particular people



What Is a Product

Place marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward particular placese.g. the Great Wall of China, Walt Disney World, Malaysia Truly Asia


© Jeff Christiansen


What Is a Product

Social marketing is the use of commercial marketing concepts and tools in programs designed to influence individuals’ behavior to improve their well-being and that of societyE.g. Public health campaigns



Product and Service Decisions

• 3 levels of product and service decision– Individual Product and Service Decisions– Product line decisions– Product mix decisions


Product and Service DecisionsIndividual Product and Service Decisions



Product attributes are the benefits of the product or service. They include:

• Quality• Features• Style and design

Individual Product and Service Decisions



Quality in terms of – The product or service is the lack of defects– The customer is the value and satisfaction provided by

the product or service

Product quality includes level and consistency– Quality level is the level of quality that supports the product’s

positioning– Conformance quality is the product’s freedom from defects

and consistency in delivering a targeted level of performance




Product features are a competitive tool for differentiating a product from competitors’ products

Product features are assessed based on the value to the customer versus the cost to the company




Style describes the appearance of the product

Design contributes to a product’s usefulness as well as to its looks




Brand is the name, term, sign, or design, or a combination of these, that identifies the maker or seller of a product or service.




Packaging involves designing and producing the container or wrapper for a product

Labels identify the product or brand, describe attributes, and provide promotion




Product support services augment actual products


Companies must continually:• Assess the value of

current services to obtain ideas for new ones.

• Assess the costs of providing these services.

• Develop a package of services to satisfy customers and provide profit to the company



Product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges

Product Line Decisions



Product line length is the number of items in the product line. • The line is too short if the manager can increase profits by

adding items.• The line is too long if the manager can increase profits by

dropping items.• Product line length is influenced by company objectives and

resources.– upselling.– cross-selling – protect against economic swings.




• Product line stretching occurs when a company lengthens its product line beyond its current range.

– Companies located at the upper end of the market can stretch their lines downward.

– Companies at the lower end of a market can stretch their lines upward.

– Companies in the middle range of the market may decide to stretch their lines in both directions.



• Downward product line stretching is used by companies at the upper end of the market to plug a market hole or respond to a competitor’s attack.

• Upward product line stretching is by companies at the lower end of the market to add prestige to their current products.

• Combination line stretching is used by companies in the middle range of the market to achieve both goals of upward and downward line stretching.


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• Product line fillingis adding more items within the present range of

the line. Several reasons:

Product and Service DecisionsProduct Line Decisions

–More profits–Satisfying dealers–Excess capacity–Plugging holes to fend off competitors



Product mix consists of all the products and items that a particular seller offers for sale

Product Mix Decisions

•Product mix width is the number of different product lines the company carries.

•Product mix length is the total number of items the company carries within its product lines.


Product and Service DecisionsProduct Mix Decisions

•Product line depth is the number of versions offered of each product in the line.

•Consistency is how closely the various product lines are in end use, production requirements, or distribution channels.


The company can increase its business in four ways

• It can add new product lines, widening its product mix.

• The company can lengthen its existing product lines to become a more full-line company.

• It can add more versions of each product and thus deepen its product mix.

• It can pursue more product line consistency—or less—depending on whether it wants to have a strong reputation in a single field or in several fields.


Brand represents the consumer’s perceptions and feelings about a product and its performance. It is the company’s promise to deliver a specific set of features, benefits, services, and experiences consistently to the buyers

Branding Strategy: Building Strong Brands



Brand equity is the positive differential effect that knowing the brand name has on customer response to the product or service.

• Provides competitive advantage:– Consumer awareness and loyalty– Bargaining power with retailers– High credibility -> easier to launch line and brand

extensions– Defense against price competition– Building profitable relationships with customers


• Customer equity is the value of the customer relationships that the brand creates.– A powerful brand is important, but what it really

represents is a profitable set of loyal customers. – The proper focus of marketing is building

customer equity, with brand management serving as a major marketing tool.



Brand Strategy Decisions•Brand strategy decisions include:

•Brand positioning

•Brand name selection

•Brand sponsorship

•Brand development


• Initially, Pampers focused on product attributes (fluid absorption, fit, disposability)

product benefits. (healthy skin benefits from dryness)

product Beliefs and Values (Baby development)

“ … our baby care business didn’t start growing aggressively until we changed Pampers from being about dryness to being about helping mom with her baby’s development.”


Brand Strategy Decisions

Brand can be positioned at any 3 levels:

• Product attributes• Product benefits• Product beliefs and

values

Brand Positioning

Great brands are inspirational



• Product attributes

• Product benefits

• Product beliefs and values

How would you position …



Desirable qualities 1. Suggest benefits and qualities2. Easy to pronounce, recognize, and remember3. Distinctive4. Extendable5. Translatable for the global economy6. Capable of registration and legal protection

Brand Name Selection



• Manufacturer’s brand (National brand)• Private brand• Licensed brand• Co-brand

Brand Sponsorship


Private brands provide retailers with advantages.

• Product mix control• Slotting fees for manufacturers’ brands• Higher margins• Exclusivity

Licensing: license name or symbols previously created by other manufacturers, names of well-known celebrities, or characters from popular movies and books for a fee.


• Cobranding occurs when two established brand names of different companies are used on the same product.– Ingredient branding

• Advantages – The combined brands create broader consumer appeal

and greater brand equity. – allows a company to expand its existing brand into a

category it might otherwise have difficulty entering alone. • Limitations

– Complex legal contracts and licenses. – Partners must carefully coordinate their advertising, sales

promotion, and other marketing efforts. – Each partner must trust the other will take good care of

its brand


Brand Strategy DecisionsBrand Development Strategies


A line extension involves extending a current brand name to new forms, colors, sizes, flavors, etc. in one of the company's existing product categories.

– Microwave Quaker oatmeal, Skippy low fat peanut butter, and Kleenex facial tissue with lotion.



Reasons• low-cost, low-risk way to introduce new products.• consumer desires for variety• use excess capacity• command more shelf space from resellers.Risks. • An overextended brand name might lose its

specific meaning, • Consumer confusion or frustration• Sales of an extension may come at the expense of

other items in the line. (cannibalization)


Brand extension extends a current brand name to a new or modified product in a new product category.

– Apple’s iPhone, Quaker oatmeal breakfast squares, and Arm & Hammer carpet deodorizer.



Benefits• instant recognition and faster acceptance for new

products• Saves high advertising costs Risks• The extension may confuse the image of the main

brand. • If fails, may harm consumer attitudes toward the

other products carrying the same brand name. • A brand name may not be appropriate to a

particular new product, even if it is well made and satisfying.


• Multibrands are additional brands in the same category.

– Procter & Gamble markets many different brands in each of its product categories.



Multibranding offers a way to establish different features and appeal to different buying motives. It also allows a company to lock up more reseller shelf space.

Drawback • Each brand might obtain only a small market

share, and none may be very profitable. The company may end up spreading its resources over many brands instead of building a few brands to a highly profitable level.


• A company might believe that the power of its existing brand name is waning and a new brand name is needed.

• Or a company may create a new brand name when it enters a new product category for which none of the company’s current brand names is appropriate.


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• Megabrand strategy—weeding out weaker brands and focusing their marketing dollars only on brands that can achieve the number-one or number-two market share positions in their categories.


Managing Brands

• Requires:– Continuous brand communication– Customer-centered training– Brand audits

• The brand experience is customers coming to know a brand through a wide range of contacts and touchpoints.

• Companies need to periodically audit their brands’ strengths and weaknesses.


Services MarketingNature and Characteristics of a Service


• Intangibility refers to the fact that services cannot be seen, tasted, felt, heard, or smelled before they are purchased.

• Inseparability refers to the fact that services cannot be separated from their providers.

• Variability refers to the fact that service quality depends on who provides the services as well as when, where, and how they are provided.

• Perishability refers to the fact that services cannot be stored for later sale or use.


Services Marketing

Service firms often require additional strategies

• Service-profit chain• Internal marketing• Interactive marketing

Marketing Strategies for Service Firms


Services Marketing

Service-profit chain links service firm profits with employee and customer satisfaction. This chain consists of five links:

• Internal service quality• Satisfied and productive service employees• Greater service value• Satisfied and loyal customers• Healthy service profits and growth

Marketing Strategies for Service Firms

The service-profit chain


Services Marketing

Internal marketing means that the service firm must orient and motivate its customer contact employees and supporting service people to work as a team to provide customer satisfaction

Internal marketing must precede external marketing

Marketing Strategies for Service FirmsInternal Marketing


Services Marketing

Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter

• Service differentiation• Service quality• Service productivity

Marketing Strategies for Service FirmsInteractive Marketing


Services Marketing

• Offer can include distinctive features

• Delivery can include more able and reliable customer contact people, environment, or process

• Image can include symbols and branding

Managing service differentiation creates a competitive advantage from the offer, delivery, and image of the service



Services Marketing

Managing service quality provides a competitive advantage by delivering consistently higher quality than its competitors

Service quality always varies depending on interactions between employees and customers



Services Marketing

Managing service productivity refers to the cost side of marketing strategies for service firms

• Employee recruiting, hiring, and training strategies

• Service quantity and quality strategies


Chapter 9- slide 69Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Chapter Nine

New-Product Development and Product Life-Cycle Strategies

Topic 8b


Chapter Objectives• Explain how companies find and develop new-

product ideas. • List and define the steps in the new-product

development process. • Describe the stages of the product life cycle and

how marketing strategies change during the product’s life cycle.


New-Product Development and Product Life-Cycle Strategies

• New-Product Development Strategy

• New-Product Development Process

• Product Life-Cycle Strategies

Topic Outline


New-Product Development Strategy

Acquisition refers to the buying of a whole company, a patent, or a license to produce someone else’s product

New product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development

Two ways to obtain new products


New-Product DevelopmentReasons for new product failure


New-Product Development ProcessMajor Stages in New-Product Development


New-Product Development Process

Idea generation is the systematic search for new-product ideas

Sources of new-product ideas• Internal • External

Idea Generation



Internal sources refer to the company’s own formal research and development, management and staff, and intrapreneurial programs

External sources refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms

Idea Generation



• Idea screening refers to reviewing new-product ideas in order to drop poor ones as soon as possible.

• R-W-W Screening Framework:– Is it real?– Can we win?– Is it worth doing?

Idea Screening



In concept development, several descriptions of the product are generated to find out how attractive each concept is to customers. From these concepts, the best one is chosen.

Concept Development and Testing



Product idea is an idea for a possible product that the company can see itself offering to the market

Product concept is a detailed version of the idea stated in meaningful consumer terms

Product image is the way consumers perceive an actual or potential product




Concept testing refers to testing new-product concepts with groups of target consumers




Marketing strategy development refers to the initial marketing strategy for introducing the product to the market.

– Marketing strategy statement– Business analysis– Product development– Test marketing– Commercialization

Marketing Strategy Development



Marketing strategy statement includes:Part 1:

– Description of the target market– Product positioning, sales, market share, and profit goals

Part 2:– Price distribution and budget

Part 3:– Long-term sales, profit goals, and marketing mix strategy

Marketing Strategy Development



Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives

Business Analysis



Product development involves the creation and testing of one or more physical versions by the R&D or engineering departments

• Requires an increase in investment

Product Development



Test marketing is the stage at which the product and marketing program are introduced into more realistic marketing settings.

Provides the marketer with experience in testing the product and entire marketing program before full introduction.

Test Marketing


New-Product Development ProcessApproaches to Test Marketing



• Standard test markets – Small representative markets where the firm

conducts a full marketing campaign– Uses store audits, consumer and distributor

surveys, and other measures to gauge product performance

– Results are used to • Forecast national sales and profits• Discover product problems• Fine-tune the marketing program

Test Marketing



Challenges of standard test markets– Cost– Time– Competitors can monitor the test as well– Competitor interference– Competitors gain access to the new product

before introduction

Test Marketing



• Controlled test markets – Panels of stores that have agreed to carry

new products for a fee– Less expensive than standard test markets– Faster than standard test markets– Competitors gain access to the new

product

Test Marketing


• Simulated test markets – Events where the firm will create a shopping

environment and note how many consumers buy the new product and competing products.

– Provides measure of trial and the effectiveness of promotion.

– Researchers can interview consumers.

New-Product Development ProcessTest Marketing


• Advantages of simulated test markets– Less expensive than other test methods– Faster– Restricts access by competitors

• Disadvantages of simulated test markets– Not considered as reliable and accurate due to

the controlled setting




Commercialization is the introduction of the new product• When to launch• Where to launch• Planned market rollout

Commercialization


Product life cycle (PLC) is the course that a product’s sales and profits take over its lifetime


• Product development – Sales are zero and investment costs mount

• Introduction – Slow sales growth and profits are nonexistent

• Growth– Rapid market acceptance and increasing profits.

• Maturity – Slowdown in sales growth and profits level off or decline

• Decline– Sales fall off and profits drop

Product Life-Cycle Stages


• The PLC concept can describe a product class (gasoline-powered automobiles), a product form (SUVs), or a brand (the Ford Escape). – Product classes have the longest life cycles.– Product forms have the standard PLC shape. – Product brand PLC can change quickly because

of changing competitive attacks and responses.


Example of PLC: TV

Product Class

Product Form


The PLC can be applied to styles, fashions, and fads (Figure 9.3).

Style is a basic and distinctive mode of expression.Fashion is a currently accepted popular style in a given field.


Product Life-Cycle Strategies

Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity


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Documents

services chapter

actual product

levels of product

product mixes

product lines

augmented product

form of product

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