Session 7 Lecture

8/17/2019 Session 7 Lecture

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MARKETING MANAGEMENT

SESSION VII

-PRODUCT MARKETING

-BRANDS-SERVICES MARKETING

Instructor:

Dr. S. SahneyVisiting Faculty

School of Management, Asian Institute of Technology, Bangkok.

Source of Slides: 1. Philip Kotler 2. Rajan Saxena 3. Self

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THE PRODUCT AND THE PRODUCT MIX

Product is a key element in the market offering.

Product strategy calls for making coord inated decis ions on

produ ct m ixes, product l ines, brands , and packaging and

labeling.

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DEFINITION OF A PRODUCT:

“A product is anything that can be offered to a market for attention,acquisition, use, or consumption that might satisfy a want or a need”.

Products that are marketed include physical goods, services,experiences, events, persons, places, properties, organizations,

information, and ideas.

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PRODUCT LEVELS: THE CUSTOMER VALUE

HIERARCHY

In planning its market offering, the marketer needs to think throughfive levels of the product.

Each level adds more customer value, and the five constitute acustomer value hierarchy.

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Five Product Levels

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Some things should be noted about product-augmentation strategy.

a) Each augmentation adds cost.-The marketer has to ask whether customers will pay enough to

cover the extra cost.

b) Augmented benefits soon become expected benefits andnecessary points of parity.-Today's hotel guests expect a remote-control television set. This

means competitors will have to search for still other features andbenefits.

c) Third, as companies raise the price of their augmentedproduct, some competitors offer a "stripped-down" version at a

much lower price.

Today's competi t ion essent ial ly takes place at the produ ct-

augmentat ion level.

In less developed countr ies, competi t ion takes place mostly atthe expected product level .6


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Potential product:

- which encompasses all the possible augmentations andtransformations the product or offering might undergo in the future.

Whereas the augmented product describes what is included in theproduct today, the potential product points to its possible evolution.

Here is where companies search for new ways to satisfy customersand distinguish their offer.

Eg. Richard Branson of Virgin Atlantic.

- thinking of adding a casino and a shopping mall in the 600-passenger planes that his company will acquire in the next fewyears.

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PRODUCT CLASSIFICATIONS:

Marketers have traditionally classified products on the basis ofcharacteristics durability, tangibility, and use (consumer orindustrial).

Each product type has an appropriate marketing-mix strategy.

A Durability and Tangibility: Non-durable, Durable,

Services

B. Consumer-Goods Classification: Convenience goods,

Shopping goods, Specialty goods, Unsought goods.

C Industrial-Goods Classification: Materials and parts,

Capital items, Supplies and business services

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PRODUCT RELATIONSHIPS:

- Each product can be related to other products to ensure that a firm isoffering and marketing the optimal set of products.

i Product Systems and Mixes

i i Produc t-Line An alysis

i i i Produc t-Line Length

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i Product Systems and Mixes:

A product system is a group of diverse bu t related items th atfun ct ion in a compatib le manner.

For example, the Nikon Company sells a basic 35 mm camera along with anextensive set of lenses, filters and other options that constitute a product

system.

A product mix (also called a product assortment) is a set of allprod uc ts and items a part icular seller offers for sale .-A product mix consists of various product lines.

- A company’s product mix has a certain width, length, depth, andconsistency.

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A product mix ( also called produ ct assor tment ) is the set of all

prod ucts and items that a part icu lar sel ler offers for sale.

Example: Kodak's product mix consists of two strong product lines:information products and image products.

A company's product mix has a certain w idth, length , depth, and

consis tency.

These concepts are illustrated in the Table for selected Proctor andGamble consumer products.

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1. The width of a product mix refers to how many differentproduct lines the company carries.In this example: 5(P &G has many additional lines)

2. The length of a product mix refers to the total number ofitems in the mix. In the table, it is 16. Average length of a line: Dividing the total length (here 16) by thenumber of lines (here 5), or an average product length of 3.2.

3. The depth of a product mix refers to how many variantsare offered of each product in the line.If Gleem comes in three sizes and two formulations (regular andgel), it has a depth of six.

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4. The consistency of the product mix refers to how closelyrelated the various product lines are in end use, productionrequirements, distribution channels, or some other way.

P&Gs product lines are consistent insofar as they are consumer goodsthat go through the same distribution channels.

The lines are less consistent insofar as they perform different functionsfor the buyers.

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These four product-mix dimensions permit the company to expandits business in four ways:

1.It can add new product lines, thus widening its product mix.

2.It can lengthen each product line.

3.It can add more product variants to each product and deepen itsproduct mix.

4.Finally, a company can pursue more product-line consistency.

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Product-Mix Width and Product-Line Length for Proctor&

Gamble Products

PRODUCT-LINELENGTH

Product-Mix Width

Detergents ToothpasteDisposableBar Soap Diapers

PaperTissue

Ivory

Snow

(1930)

Dreft

(1933)

Tide

(1946)

Cheer

(1950)

Gleem (1952)

Crest (1955)

Ivory

(1879)

Kirk’s

(1885)

Lava

(1893)

Camay

(1926)

Pampers

(1961)

Luvs

(1976)

Charmin

(1928)

Puffs

(1960)

Banner

(1982)

Summit

(1992)

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Product-Mix Width and Product-Line Length for Unilever Ltd.

Products

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ii) Product-Line Analysis:

- Product-line managers need to know the sales and profits of eachitem in their line in order to determine which items to build, maintain,harvest, or divest.

a) Sales and Profits

b) Market Profile: how the line is positioned against competitors’ lines.

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iii) Product-Line Length:

-A product line is too short if profits can be increased by-adding items;

the line is too long if profits can be increased by dropping items

Company objectives influence product-line length.

1. One objective is to create a product line to induce upselling.

Thus, Toyota would like to move customers up from the a chapermodel to a more expensive one.

2. A different objective is to create a product line that facilitatescross-selling. Hewlett-Packard sells printers as well as computers.

3. Still another objective is to create a product line that protectsagainst economic ups and downs; thus the GAP runs variousclothing-store chains covering different price points in case theeconomy moves up or down (GAP, Old Navy, Banana Republic,Piperlime, Athleta).

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Companies seeking high market share and market growth willgenerally carry longer product lines.

Companies that emphasize high profitability will carry shorter linesconsisting of carefully chosen items.

Product lines tend to lengthen over time.

But as items are added, several costs rise: design and engineeringcosts, inventory-carrying costs, manufacturing-changeover costs,order-processing costs, transportation costs, and new-item

promotional costs.

Eventually, someone calls for a halt and pruning follows.

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A company lengthens its product line in two ways: by line

stretching and line filling.

a) Line stretching occurs when a company lengthens its productline beyond its current range.

The company can stretch its line downmarket, upmarket, or both ways.

Downmarket Stretch: A company positioned in the middle market may want to

introduce a lower-priced line (Mercedes launched C class Mercedes for30000$; John Deere launched low cost tractors called Sabre).

Upmarket Stretch: Companies may wish to enter the high end of the marketfor more growth, higher margins, or simply to position themselves as full-linemanufacturers (Toyota’s Lexus; Honda’s Acura).

Two-Way Stretch: Companies serving the middle market might decide tostretch their line in both directions.e.g-mobile phone handsets;Hidesign launched Salsa for the young, teenaged low priced segment.

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b) Line Filling: A product line can also be lengthened by adding more

items within the present range.

There are several motives for line filling:

-trying to satisfy dealers who complain about lost sales because of

missing items in the line,

-trying to utilize excess capacity,

-trying to be the leading full-line company, and

-trying to plug holes to keep out competitors.

FMCG companies start with detergents, soaps and shampoos and thenmove on to edibles, staples or vice versa.

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3. Line modernization, featuring and pruning:

Product lines need to be modernized.

The product-line manager selects one or few items in the line tofeature.

Product-line managers must periodically review the line fordeadwood that is depressing profits and prune accordingly. Theweak items can be identified through sales and cost analysis andmay be pruned.- pruning is also done when the company is short of production

capacity.

Companies typ ica lly sho r ten thei r produc t l ines in per iods of

t ight demand and lengthen their l ines in per iods of slow

demand.

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PACKAGING, LABELING, WARRANTIES, AND

GUARANTEES:

-Most physical products have to be packaged and labeled.

-Many marketers have called packaging a fifth P.

-Most marketers, however, treat packaging and labeling as an element

of product strategy.

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a) PACKAGING:

- defined as all the activities of designing and producing the container

for a product.

Objectives of packaging:

-Identify the brand

-Convey descriptive and persuasive information

-Facilitate product transportation and protection

-Assist at-home storage

-Aid product consumption

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b) LABELING:

-Sellers must label products

-Labels perform several functions

The label identifies the product or brand

The label might also grade the product

The label might describe the product

The label might promote the product through attractive graphics

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c) WARRANTIES AND GUARANTEES:

Warrant ies are formal statements of expected product

performance by th e manufacturer.

-Warranties, whether expressed or implied are legally enforceable.

Many sellers offer either general guarantees or specific guarantees.

Guarantees reduce the buyer’s perceived risk.

Guarantees are most effective in two situations:

-Where the company or the produc t is n ot well -know n.- Where the product’s quality is superior to the competition.

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-BRANDS

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WHAT IS A BRAND? The American Marketing Association defines a brand as:-a name, term, sign, symbol, or design, or a combination ofthem, intended to identify the goods or services of one seller or

group of sellers and to differentiate them from those of

competitors.

Thus a brand identifies the seller or maker.

Under trademark law, the seller is granted exclusive rights to the use

of the brand name in perpetuity.

Brands differ from other assets such as patents and copyrights,which have expiration dates.

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A brand is thus a product or service that adds dimensions thatdifferentiate it in some way from other products or services designedto satisfy the same need.

These differences may be functional, rational, or tangible- related to

the product performance of the brand.

They may also be more symbolic, emotional, or intangible -related towhat the brand represents.

A brand is a complex symbol that can convey up to six levels ofmeaning:

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1 Attributes:


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1. Attributes: Mercedes suggests expensive, well-built, well-engineered, durable, high-prestige automobiles.

2. Benefits:

Attributes must be translated into functional and emotional benefits.-The attribute "durable" could translate into the functional benefit "I won't haveto buy another car for several years."-The attribute "expensive" translates into the emotional benefit "The car makesme feel important and admired."

3. Values: Mercedes stands for high performance, safety, and prestige.

4. Culture: The Mercedes represents German culture: organized, efficient, high quality.

5. Personality:-Mercedes may suggest a no-nonsense boss (person), a reigning lion(animal), or an austere palace (object).

6. User:

-We would expect to see a 50+ year-old top executive behind the wheel of a

Mercedes, not a 20-year-old secretary. 30

I B di t t


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I Branding strategy:

Branding is viewed as the major enduring asset of a company,outlasting products.

They are powerful assets that must be developed and managed.

1. Brand name selection:-A good name contributes significantly to the success of a brand.Given the global market, great care needs to be taken regarding the

translation of the brand name.

Desirable qualities for a brand name:

- Should suggest something about the product’s features and benefits.

- Easy to pronounce, recognise and remember.- Brand name must be distinctive.- Must translate easily and accurately into other major languages.- Must be capable of registration and legal protection.

Once selected, the brand name needs to be legally protected and registered

with the appropriate Trade Marks Register. 31


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Manufacturer’s brand (national brand)Brand created and owned by the producer of the product or service.Tata, Sony

Private brand (middleman, distributor or store brand) A brand created and owned by a reseller of a product or service.Big C, Tesco Lotus

Licensed brand

A product or service using a brand name offered by the brand owner tothe licensee for an agreed fee or royalty.KFC, Mc Donalds

Co-brand

The practice of using the established brand names of two differentcompanies on the same product.ITC Welcome Group and Sheraton

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Branding decision:

1. Individual names: P&G has several individual brands in differentproduct categories; Vicks (Healthcare), Ariel and Tide (fabric care),Pantene, Heads and Shoulders (hair care).

2. Blanket family names: Tata (Salt, Tea, Hotels, Steel, Automobiles).

3. Separate family names for all products: Swift and Company for itsham (Premium) and fertilizers (Vigoro).

4. Corporate name combined with individual product names: Kellogg’s Rice Krispies, Kellogs Corn Flakes;

Sony Bravia

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2.Building brand identity :

Building the brand identity requires additional decisions on the brand'sname, logo, colors, tagline, slogan, character , and symbol.

3. Branding tools:

Marketers use various tools for attracting attention to their brands.

Among the most important are ads, public relations and press releases,sponsorships, trade shows, event marketing, public facilities, socialcause marketing.

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Why do sellers brand their products when doing so clearly

involves costs?

1. The brand name makes it easier for the seller to process orders and

track down problems.

2. The seller's brand name and trademark provide legal protection ofunique product features.

3. Branding gives the seller the opportunity to attract a loyal and

profitable set of customers. Brand loyalty gives sellers some protection fromcompetition.

4. Branding helps the seller segment markets.

5. Strong brands help build the corporate image, making it easier to

launch new brands and gain acceptance by distributors and consumers.

6. Distributors and retailers want brand names because brands makethe product easier to handle, hold production to certain quality standards,strengthen buyer preferences, and make it easier to identify suppliers.

7. Consumers want brand names to help them identify quality differences andsho more efficientl .

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II Brand Equity:

Brand equi ty is defined as the value of the brand, based on th eextent to w hich it has high brand lo yalty, name awareness,

perceived quali ty, stro ng b rand assoc iat ions and other assets

suc h as patents, trademarks and channel relat ions hips .

Brand + Distinctive value (benefits) = Brand equity

Brand equi ty :

Brands represent the consumers’ perceptions and feelings about products and

their performance.

The real value of branding is the ability to capture consumer preference and

loyalty.

Brands vary in power and value and have varying degrees of brand awareness,

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Perspectives of brand equity:

Customer-based brand equity, which is obtained from post purchasebehaviour and brand loyalty and is the value of the brand to thecustomers, and;

Financial based brand equity, where equity is derived from the pricepremium and market share or sales turnover which gives value to thefirm.

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III Brand development:

-Line extensions

-Brand extensions

-Multi-brands

-New brands

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Brand development strategies

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1. Line extensions: -Using a successful brand name to introduce additional items in a given product

category under the same brand name, such as new flavours, forms, colours,added ingredients or package size.-Danger of overextending the brand and losing meaning.-Danger of cannibalisation of own products.

2. Brand extensions -Using a successful brand name to launch a new or modified product in a newcategory.-Gives new product greater recognition and faster acceptance.-Save high advertising costs due to familiar brand name.

-Must ensure the appropriateness of the new product to the brand and marketto customers that value the brand.-Guard against confusing the consumer .-Gillette Razors, Gillette Shave forms, Gillette After Shave

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3. Multi-brands: Firm develops two or more brands in the same product category.

Establishes different features and appeals to different market segments andbuying motives.

Some companies develop multiple brands for different families of products.This is called range b randing and is illustrated by the Matsushita Group withits ranges of Technics™, National™, Panasonic™ and Quasar™.

In corpo rate branding the firm makes its company name the dominant brandidentity across all products, e.g. Johnson & Johnson™.

Other companies use the company and ind iv idual branding approach, e.g.Nestlé KitKat™.

4. New brands:

Some companies create a new brand for a new product if their existing

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IV Brand loyalty:

Brand loyalty is a biased behaviour of a consumer decision makingprocess where the same brand is chosen for repeat purchase and

referral irrespective of any change.

1. Hard-core loyals: buy one brand only:A,A,A,A,A,A,A2. Split loyals: loyal to 2 or 3 brabds: A,A,B,B,A,B3. Shifting loyals: shift from favoring one brand to another:

A,A,A,B,B,B4. Switchers: no lyalty: A,C,E,B,D,A,B

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-SERVICES MARKETING


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WHAT IS A SERVICE?

- Any act of performance that one party can offer another that is

essentially intangible and does not result in the ownership of

anything.

- Its production may or may not be tied to a physical product.


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CHARACTERISTICS OF SERVICES:

-Services are intangible, inseparable, variable, andperishable.

-Each characteristic poses challenges and requires certainstrategies.

-Marketers mus t f ind ways to give tangibi l i ty to intangibles; toincrease the produ ct ivi ty o f service providers; to inc rease and

standardize the qual i ty of the service prov ided; and to match thesupp ly of s ervices wi th m arket demand.

CHARACTERISTICS OF SERVICES AND THE MARKETING


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IMPLICATIONS:

I Intangibility:

- services cannot be seen, heard, touched, tasted or felt.

-To reduce uncertainty, buyers will look for evidence of quality; They willdraw inferences about quality from the place, people, equipment,communication material, symbols, and price that they see.

- A cr i t ical element here is the signs or evidence of service qual i ty to

transform intangible services into meaning ful benefi ts

- Service positioning strategy can be made tangible through:PlacePeople

EquipmentCommunication materialSymbolsPrice

Service com panies can try to demon strate their service qual i ty

throu gh physic al evidence and presentat ion.


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II Inseparability:

- services are produced and consumed simultaneously, and theprov ider-cl ient interact ion is an important aspect in the outcome

Several strategies exist for getting around this limitation:- Work with larger groups- Work faster

- Train more service providers

III Variability

- the quality of a service depends on when, where and by whom they areprovided, with training a crucial differentiator- Quality control by:

Good hiring and training procedures Service blueprint: Standardize the service-performance processMonitoring customer satisfaction


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IV Perishability:

- services cannot be stored for later use.-There are several strategies that can be used for producing a bettermatch between service demand and supply.

- Strategies for better match ing between demand and su pply in a

service business

Demand side

• Differential pricing

• Nonpeak demand

• Complementary services

• Reservation systems

Supply side

• Part-time employees

• Increased consumerparticipation

• Shared services

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Demand side:i) Differential pricing: This would shift some demand from peak to off-peakperiods: eg., Air tickets, Movie tickets.

ii) Nonpeak demand: Non peak demand can be cultivated: eg., Airlines,Hotels, Tourism packages

iii) Complementary services: Alternatives to waiting customers; eg., ATM inbanks, Lounges in Airports, Restaurants (Complementary snacks when theflight gets delayed).

iv) Reservation systems: Used to manage the demand level. eg., airlines,hotels, hospitals.

Supply side:i) Part-time employees: can serve peak demand; eg., Part time teachers, part

time doctors.

ii) Increased consumer participation: eg., patients fill up their own medicalhistory in the form; consumers bag their own groceries.

iii) Shared services: eg. Hospitals share specialist, equipment, medicine

supply etc; Libraries share books

CATEGORIES OF SERVICE MIX


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CATEGORIES OF SERVICE MIX:

The service component can be a minor/major part of the total

offering.

- 5 categories.

i) Pure tangible good: tangible product; no services accompany theproduct.

ii) Tangible good with accompanying service: cars, computers, cellphones.

iii) Hybrid: Equal parts of goods and services; restaurants: both foodand service.

iv) Major Service with accompanying minor goods and services: Airline: Capital intensive aircraft; We buy transportation services asalso snacks and drinks.

v) Pure service: Physiotherapy.


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MARKETING STRATEGIES FOR SERVICE FIRMS:

a) Three additional “Ps”

People:

- should be competent, caring and responsive

Physical evidence: - development of a look and observable style; presentationProcesses: - how the service is delivered

Goal: achieve a high level of interactive marketing betweenprovider and client


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b) Managing differentiation:

- offering, faster and better delivery, image (perceived by customers,and to develop a differentiated offer, delivery or image as thealternative to price competition)

- Offering primary service package, secondary service features

c ) Managing service quality:

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- one way to differentiate is through consistently higher quality servicethat meets or exceeds customer expectations (perceived versusexpected service)

Determinants of service qual i ty:

Reliability: The ability to perform the promised service dependably andaccurately.

Responsiveness: The willingness to help customers and to provideprompt service.

Assurance: the knowledge and courtesy of employees and their abilityto convey trust and confidence.

Empathy: The provision of caring, individualized attention tocustomers.

Tangibles: The appearance of physical facilities, equipments,

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