Products Services and Brands Building Customer Value Chapter

Products, Services, and Brands Building Customer Value Chapter 7

What Is a Product? • A product: is anything that can be offered to a market for sale to satisfy a want or need. • Broadly defined, “products” also include services, events, persons, places, organizations, ideas, or mixes of these. 7 -2

What Is a Service? • A service: is any activity, benefit, or satisfaction offered for sale that is essentially intangible and does not result in the ownership of anything. Examples: banking services, hotels, airline tickets, home repairs, education, tourism, … etc. 7 -3

Products, Services, and Experiences • • • A company’s market offering often includes tangible goods, services, or combinations of both. At one extreme, the offer may consist of a pure tangible good, such as soap or toothpaste. At the other extreme is a pure service, such as a legal service. To differentiate their offers, marketers create and manage customer experiences with their brands or company. Creating and managing customer experiences differentiates marketing offers from the competition. 7 -4

Levels of Products and Services Marketers look at their products and services on three levels: 1. Core customer value, which addresses the question “What is the buyer really buying? ” 2. Actual product, which includes the brand name, features, design, packaging, and quality level. 3. Augmented product, which is created around the core benefit and actual product by offering additional consumer services and benefits. See next slide…

Figure 7. 1 - Three Levels of Products

Consumer Products • A product bought by final consumers for personal consumption • Classified by how consumers buy them Convenience products Shopping products Specialty products Unsought products

1 - Convenience products • Convenience products are consumer products that are purchased frequently and immediately with little comparison and shopping effort • Usually, they are: ü Low priced. ü Mass advertised and promoted. ü Distribution to many convenient locations. Examples: candy, Bread, soft drink, newspapers…

2 - Shopping products • Shopping products are less frequently • purchased with more planning and effort, effort and carefully compared (e. g. suitability, quality, price, and style). Usually, they have the following characteristics: ü ü ü Higher prices. Selective distribution in fewer purchase locations. Advertising and personal selling is undertaken by both producers and resellers. Examples: furniture, clothing, cars, appliances. . . 7 -9

3 - Specialty products • Specialty products are perceived with • unique characteristics that consumers have strong brand preference and loyalty, loyalty and are willing to make special purchasing effort with little or no comparison Usually, they have the following characteristics: ü ü ü High price. Exclusive distribution in only one or a few outlets. Carefully promoted by both producer and reseller. Examples: Lamborghini, Lexus, Rolex watches… 7 - 10

4 - Unsought products • Unsought products are products that • consumers are not aware of or have little knowledge, knowledge and do not normally think of buying Usually, they have the following characteristics: ü ü Sometimes, consumers have negative interest. Pricing strategies vary. Distribution strategies vary. Require aggressive advertising and personal selling by both producer and resellers. Examples: life insurance, car service contract… 7 - 11

Industrial Products • Products bought by individuals and organizations for further processing or for use in conducting a business Materials and Parts Capital items Supplies and services

Classification of Industrial Products § Materials and parts include raw materials § Capital items are industrial products that aid § and manufactured materials and parts. in the buyer’s production or operations, including installations and accessory equipment. Supplies and services include operating supplies and maintenance and repair services.

Marketing of Organizations, Persons, Places, and Ideas • Organization marketing consists of activities • • • undertaken to create, maintain, or change the attitudes and behaviors of target consumers toward an organization. Person marketing consists of activities undertaken to create, maintain, or change attitudes or behaviors toward particular people. Place marketing involves activities undertaken to create, maintain, or change attitudes or behaviors toward particular places. Social marketing is the use of commercial marketing concepts and tools to influence individuals’ behaviors to improve the well-being of a society. Examples: Examples Public health campaigns, environmental campaigns, family planning campaigns, human rights campaigns. 7 - 14

Product Decisions • Individual product decisions must be made on the following aspects: 1. 2. 3. 4. 5. Product (and service) attributes Branding Packaging Labeling Product support services See next slide…

Figure 7. 2: Individual Product Decisions

Product and Service Attributes • Product quality: The characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs • Product features Differentiate the company’s product from competitors’ products • Product style and design

Branding • A name, term, sign, symbol, or design, or a combination of these, that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors • Customers attach meanings to brands and develop brand relationships

Packaging • Packaging involves designing and producing a container or wrapper for a product. • Ideally, good packages should: Help to market the brand. Protect the contents. Provide convenience and ease of use. Ensure product safety. Address environmental concerns. 7 - 19

Packaging and Labeling • Packaging: Designing and producing the container or wrapper for a product • • Protects the product Attracts customers and closes the sale Help to market the brand. Provide convenience and ease of use. • Labels: Labeling refers to printed information appearing on or with the package, including the product name. • • • Identify the product Describe the product Promote the brand

Product Support Services • Product Support Services must be monitored regularly. Therefore, marketers should: Talk to customers to assess the value and quality of current services and obtain ideas for new services. Fix problems and add new services that delight customers and yield profits for the company. Take advantage of new technologies to enhance many support service offerings. 7 - 21

Product line • 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 decisions: ► Product line length is the number of items in the product line. ► Product line filling is adding more items to the present line. ► Product line stretching occurs when a company lengthens its product line beyond its current range. The stretch can be: § Downward (for companies located at the upper end of the market) § Upward (for companies located at the lower end of the market) § Downward, upward, or both ways (for companies located in the middle range of the market)

Product mix • The set of all product lines and items that a particular seller offers for sale

Product Mix Decisions • Product mix dimensions include: Product mix width refers to the number of different product lines the company carries. Product mix length refers to the total number of items the company carries within its product lines. Product mix depth refers to the number of versions offered of each product in the line. Product mix consistency refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. 7 - 25

Product Mix Decisions (cont’d) • The company can increase its business in four ways: § It can add new product lines, widening its product mix. § It can lengthen its existing product lines. § It can add more versions of each product, deepening its product mix. § It can pursue more product line consistency.

Nature and Characteristics of a Service • Intangibility: Services cannot be seen, tasted, felt, heard, or smelled before purchase. • Inseparability: Services cannot be separated from their providers. • Variability: Quality of services depends on who provides them and when, where, and how they are delivered. • Perishability: Services cannot be stored for later sale or use. 7 - 27

Figure 7. 3: Four Service Characteristics

The Service-Profit Chain • In a service business, customers and front-line service employees interact to create the service. • The service-profit chain consists of five links: 1. 2. 3. 4. 5. Internal service quality: superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which leads to… ▼ Satisfied and productive service employees: more satisfied, loyal, and hardworking employees, which leads to… ▼ Greater service value: more effective and efficient customer value creation and service delivery, which leads to… ▼ Satisfied and loyal customers: satisfied customers who remain loyal, repeat purchase, and refer other customers, which leads to… ▼ Healthy service profits and growth: superior service performance with healthy profits.

Effective Service marketing requires: • External marketing: Traditional marketing via the “ 4 Ps” • Internal marketing: Orienting and motivating • customer-contact employees and supporting service people to work as a team to provide customer satisfaction Interactive marketing: The interaction between a customer and a service employee during the service delivery. ü This means that service quality depends heavily on the quality of this interaction during the service encounter. See and examine next slide…

Figure 7. 4: Three Types of Service Marketing

Managing Service Differentiation • Developing a differentiated offer, delivery, and image • • • The offer can include features that set one company’s offer apart from competitors’ offers Service delivery can be differentiated with better customer-contact people or a superior delivery process Images can be differentiated through symbols and branding

Managing Service Quality and Productivity • Managing service quality Identify what customers expect • Set high quality standards • Emphasize service recovery in case of a mistake Managing service productivity • Train current employees better or hire new ones • Increase quantity by reducing quality • Use technology • •

Brands Equity • Brand equity: Is the positive differential effect that knowing the brand name has on customer response to the product or service. Is a valuable asset that offers many competitive advantages. Builds strong and profitable customer relationships that result in loyal customers Indicates the popularity of the brand in market Overall, It is the strength of the brand. 7 - 34

Measuring brand strength • According to “Young & Rubicam’s Brand Asset Evaluator” brand strength can be measured, based on consumer perception, along four dimensions: 1. 2. 3. 4. differentiation (what makes the brand stand out), relevance (how consumers feel it meets their needs), knowledge (how much consumers know about the brand), and esteem (how highly consumers regard and respect the brand). • A relevant term, in this context, is “Brand Valuation”, which is the process of estimating the total financial value of a brand. • High brand equity provides a company with several competitive advantages: ü ü • ü High level of consumer brand awareness and loyalty. More leverage in bargaining with resellers. More easily when launching line and brand extensions. Defense against fierce price competition. Forms the basis for building strong and profitable customer relationships. The fundamental asset underlying brand equity is customer equity—the value of the customer relationships that the brand creates.

Major Brand Strategy Decisions

Brand Positioning • Marketers can position brands clearly in customers’ minds at any of three levels: Product attributes Desirable product benefits Beliefs and values • Marketers should create a clear vision of what the brand must be and do in the consumer mind. 7 - 37

Brand Name Selection Desirable qualities for a brand name include: 1. 2. 3. 4. 5. 6. It should suggest the product’s benefits. It should be easy to pronounce, recognize, and remember. It should be distinctive. It should be extendable. It should translate easily into foreign languages. It should be capable of registration and legal protection. 7 - 38

Brand Sponsorship • A manufacturer has four sponsorship options: 1. 2. 3. 4. The product may be launched as a manufacturer’s brand (or national brand). (e. g. , Sony) The manufacturer may sell to resellers who give it a private brand (also called a store brand, distributor brand, private label). The manufacturer can market licensed brands. The manufacturer may choose a Cobranding option (two established brand names of different companies are used on the same product). 7 - 39

National Brands Versus Store Brands • By comparison between national and private brands, store brands have many advantages: ü Retailers often price their store brands lower than comparable national brands. ü Store brands yield higher profit margins for the retailer. ü Store brands give retailers exclusive products that cannot be bought from competitors.

Co-branding: Adv. and disadv • Co-branding offers many advantages. Ø Ø The combined brands create broader consumer appeal and greater brand equity. Co-branding also allows a company to expand its existing brand into a category it might otherwise have difficulty entering alone. • Co-branding also has limitations. Ø Ø Ø Such relationship involves legal and contractual complications. Co-branding partners must carefully coordinate their advertising, sales promotion, and other marketing efforts. Each partner must trust that the other partner will take good care of its brand.

Brand Development A company has four choices for developing brands: 1. 2. 3. 4. Line Extensions is extending a current brand name to new forms, colors, sizes, ingredients, or flavors within an existing product category. Brand Extensions is extending a current brand name to new or modified products in a new category. Multibrands is introducing additional brands in the same product category. New Brands is using a totally new brand name in a new product category. Megabrand strategy: is weeding out weaker brands and focusing attention only on brands that can achieve the number-one or number-two market share positions in their categories. See next slide…

Figure 7. 6: Brand Development Strategies

Managing Brands In effective managing of brands, marketers should: ► ► ► continuously communicate the brand’s positioning to consumers. Manage all brand touch points to maximize the brand experience. Live the brand–the firm must train employees to be customer-oriented. Implement internal branding campaign among employees. Audit brand’s strengths and weaknesses periodically.