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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

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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