Post on 20-Apr-2018
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Chapter 8 Products, Services, and Branding Nukhet Harmancioglu
Lecture Notes
Product vs. Service
Product
Anything offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want.
Service
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.
Soap
Auto With Accompanying Repair Services
Restaurant
Airline Trip With Accompanying
Snacks Doctor’s Exam
Pure Tangible Good
Pure Service
Tangible Good With Accompanying
Services
Hybrid Offer
Service With Accompanying Minor Goods
Product vs. Service Levels of a Product
Installation Delivery & Credit Warranty After-Sales Service
Features Design Quality Level Brand Name Packaging
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Consider Apple
What goods and services do they offer?
How do they differentiate through experience?
What is their core, actual and augmented product offering?
Product and Service Classifications
Consumer products
Industrial products
Materials and parts
Capital items
Supplies and services
Organization, Person, Places and Ideas
http://www.youtube.com/watch?v=EZWy1_KLtuc
Types of Consumer Products
Convenience
Frequent purchases bought with minimal buying effort and little comparison shopping
Low price
Widespread distribution
Mass promotion by producer
Eg. Toothpaste, candy, milk
Types of Consumer Products
Shopping
Less frequent purchases
More shopping effort for comparisons
Higher than convenience good pricing
Selective distribution in fewer outlets
Advertising and personal selling
Eg. Shoes, clothing
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Types of Consumer Products
Specialty
Strong brand preference and loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity
High price
Exclusive distribution
Carefully targeted promotions
Eg. Luxury products
Types of Consumer Products
Unsought
Little product awareness and knowledge (or if aware, sometimes negative interest)
Pricing varies
Distribution varies
Aggressive advertising and personal selling by producers and resellers
Product and Service Decisions
A name, term, sign, symbol, or design that identifies the product
• Contain and protect
• Promote the product
• Differentiate the product
• Quality • Features • Quality and Design
• Serves to identify the product
• Describes the product
• Promotes the product
Product Attributes
Developing a product/service involves defining the benefits that it will offer such as:
• Product Quality – Ability of a product to perform its functions and satisfy stated or implied customer needs.
– Quality Level (performance quality)
– Quality Consistency (conformance, freedom from defects)
• Product Features / Attributes – Help to differentiate the product from competition.
– Level of each attribute
• Product Style & Design – Contribute to a product’s usefulness as well as looks.
IMPROVE CUSTOMER VALUE /
CREATE STRONG COMPETITIVE ADVANTAGE
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Branding
A name, term, sign, symbol, or design, or a combination of these, that identifies the maker or seller of a product or service and differentiates them from those of competitors.
Products exist on shelves, but brands exist in minds.
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Brand Development Strategy
Brand Sponsor • Manufacturer’s Brand • Private Brand (Costly to establish and promote; Higher profit margins)
• Licensed Brand • Co-branding
Brand • Name • Mark • Trade character …
Branding
Why Brands?
• For Buyers – Identification, help in comparison
– Memory aid
– Quality and value assurance, consistency
– Self-expression through “brand personality”
• For Sellers – Communication, image
– Legal protection
– Basis for differentiation
– Help in segmentation
– Help in new product introduction
Brand Equity
(Positive) differential effect that knowing the brand name has on consumer response to marketing actions • The ‘value added’ to a product as a result of past marketing activity for
the brand.
• The extent to which customers are willing to pay more for the brand.
SOURCES OF BRAND EQUITY 1. BRAND KNOWLEDGE / AWARENESS
– Recall / Recognition
2. Brand associations: the meaning of the brand
– “What comes to your mind when you think of …?”
– Brand personality (e.g. old-fashioned vs. modern)
= BRAND IMAGE (set of brand associations)
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Benefits of Brand Equity
An Organization’s Evaluation
(more objective) Consumers’ Evaluation
(branded products)
Private Label - price: 2.89
Danone - price: 3.89
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Brand Equity Facts
Coca Cola charges 30-40% more than RC Cola – and still outsells it almost 10 to 1.
Tylenol charges $6.99 for 100 tablets while Advil charges $4.99 – still Tylenol is the leader.
Of the leading brands in 20 product categories in the year 1925, 17 – or 85% of them were still the market leader in 2000.
• Marketing perspective:
– Differentiated image
– Added value to customers
– Greater loyalty: powerful brands create strong customer relationships (customer equity)
– Less vulnerability to competitors’ marketing actions
– Barrier to entry against competition
– Channel leverage - Greater channel cooperation and support
– Increased marketing communication effectiveness
– Brand extension opportunities
• Financial perspective:
– More predictable revenue stream
– Premium pricing / Larger margins
– More inelastic consumer response to price increases
– More elastic consumer response to price decreases
– An asset that might potentially be sold
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Benefits of Brand Equity Brand Development Strategy
Bra
nd
Nam
e
Existing New
Product Category
Existing
New
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• Line Extension – Existing brand names extended to new forms, sizes, and flavors of an
existing product category – minor changes to exiting products
– http://www.tide.com/en-US/productLanding.jspx
• Brand Extension – Existing brand names extended to new or modified product
categories.
– Levis Tailored Classics
• Multibrands – New brand names introduced in the same product category (P&G)
• New Brands – New brand names in new product categories.
Brand Development Strategy (Dis) advantages of Extensions
ADVANTAGES
+ Leveraging existing brand awareness
+ Reduced advertising expenditure
+ Lower risk for consumers
+ Enhancement of the core brand
RISKS OF LINE EXTENSIONS:
– Brand name losing its meaning
– Consumer confusion / frustration
– Cannibalize other items in the line
RISKS OF BRAND EXTENSIONS:
– Dilute value of the brand
– Confuse image/positioning of the main brand
– A failed extension harming attitudes towards other products of the same brand
– Threaten associations with the original brand
McDonalds
“Made for you” Service (2000)
Expanded menu which included pizza, breakfast bagels, Arch Deluxe sandwich
New Tastes Menu (2001)
McDonalds ketchup (2000) – Germany
McCafe (2001) – Portugal and Austria
McTreat
McSnack Spot
Product Decisions
Packaging: primary, secondary, and shipping package
Containment and protection
Sales tasks / communication
Usage / storage / safety
Can give a competitive / strategic advantage
Labeling
Identifies
Describes
Promotes
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Differentiating by Packaging
Product Line / Product Mix Decisions
Product Line
Product Mix
Ind.P.
• Product Line: Group of closely related products (function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or gall within given prices ranges.
• Product Mix: Consists of all the product lines and items that a particular seller offers for sale.
Ind.P.
Ind.P.
Product Line
Ind.P. Ind.P.
Ind.P.
Ind.P.
Product Mix Decisions
Benefits of multiple product lines (greater width)
Diversifies risk
Capitalizes on established reputations
Protection from competition
Increased growth and profits
Greater market impact
Economical resource usage
Benefits of greater product mix length Attracts buyers with different
preferences
Increases sales/profits by further market segmentation
Capitalizes on economies of scale
Evens out seasonal sales patterns
P&G’s Product Lines and Mix Width of the product mix
Le
ng
th o
f th
e p
rod
uc
t li
ne
s
Laundry Baby Care Deodorants Hair Care Household Oral Care Cosmetics ….
Cleaners
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• Stretching: Lengthen beyond current range – Downward
(BMW 1 Series)
– Upward
(Toyota Lexus)
– Both ways
(GAP up with Banana Republic, down with Old Navy)
• Filling: Adding within current range
• Deleting, pruning
Product Line / Product Mix Decisions
• Width (breadth): Number of different product lines in a mix.
• Length: Total number of items carried within all product lines.
• Depth: Number of versions offered of each product in the product line.
• Consistency: How closely related the various product lines are.
EX: Gillette • Razors & Blades
– Mach 3 / Venus
• Dental (Oral-B)
• Appliances (Braun)
• Batteries (Duracell)
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Product Line / Product Mix Decisions
Characteristics of Services
INTANGIBILITY: Cannot be seen, tasted, felt, heard or smelled before purchase
• Try to add tangibles
• Offer evidence
• Signal quality
• Symbols, logos, communications, physical attributes, focus on image and word of mouth.
INSEPARABILITY: Cannot be separated from their providers (people or machines)
• Provider-customer interaction
VARIABILITY: Quality of the service depends on who provides it, when, where and how it is provided.
• Standardization vs. customization
PERISHABILITY: Cannot be stored for later sale or use (cannot be inventoried)
• Pre-planning
• Operations excellence (cannot be inspected prior to use)
Service Quality
• Consistently higher quality than competitors
• Customer retention
• 100% defect free
• Service recovery
• Empower the front line…
• TANGIBLES-Appearance of physical facilities, equipment, personnel, and communication materials
• RELIABILITY-Ability to perform the promised service dependably and accurately
• RESPONSIVENESS-Willingness to help customers and provide prompt service
• ASSURANCE-Knowledge and courtesy of employees & their ability to convey trust & confidence
• EMPATHY-Caring, individualized attention the firm provides its customer
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Services Management
Marketing mix implications Promotion / Adverting: setting customer expectations, helping with
pre-purchase evaluations
Distribution: franchising, agents/brokers, electronic channels
Price: difficult to determine/compare, often used as a quality indicator
Innovation Diffusion
The process by which the adoption of an innovation spreads.
Product Characteristics and Diffusion
A product will diffuse faster when product
has a relative advantage,
is compatible with consumer values and experiences
is not complex,
Is divisible – degree to which it can be tried
Is communicable.
Years it took to a market audience of 50 million
Radio ………. 38 years
TV …………… 13 years
Internet…….. 4 years
Ipod ………….. 3 years
Facebook ….. 2 years
Ipad ……………2 years