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The major product line decision involves

23/11/2021 Client: muhammad11 Deadline: 2 Day

Marketing: An Introduction

Thirteenth Edition

Chapter 7

Products, Services, and Brands: Building Customer value

Learning Objectives (1 of 4)

7-1. Define product and describe the major classifications of products and services.

7-2. Describe the decisions companies make regarding their individual products and services, product lines, and product mixes.

This chapter defines product and describes the major classifications of products and services. It also describes the decisions companies make

regarding their individual products and services, product lines, and product mixes.

Learning Objectives (2 of 4)

7-3. Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require.

7-4. Discuss branding strategy—the decisions companies make in building and managing their brands.

This chapter also identifies the four characteristics that affect the marketing of services and the additional marketing considerations that services require. Finally, this chapter discusses branding strategy, which involves the decisions companies make in building and managing their brands.

First Stop Go Pro: Be a Hero

GoPro’s runaway success comes from understanding that it’s selling much more than wearable sports- action video cameras.

GoPro’s amazing little cameras let even the rankest video amateurs take stunning videos, giving them a way to celebrate the action-charged moments

and emotions of their lives with others.

GoPro’s runaway success comes from a deep-down understanding that it’s selling much more than just tiny, wearable sports action video cameras. GoPro

helps people capture, share, and celebrate with others the most meaningful experiences in their lives.

Learning Objective 7-1

Define product and describe the major classifications of products and services.

What Is 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 need.

A service is an activity, benefit, or satisfaction offered for sale; it is intangible and does not result in ownership of anything.

A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Broadly defined, products include services, events, persons, places, organizations, and ideas, or a mixture 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.

Products, Services, and Experiences (1 of 2)

Market offerings include both tangible goods and services

Companies create and manage customer experiences with their brands or companies.

To differentiate their offers from that of the competitors

A company’s market offering often includes both tangible goods and services. At one extreme, the market offering may consist of a pure tangible good and at the other extreme a pure service. Between these two extremes, however, many goods-and-services combinations are possible. Today, as products and services become more commoditized, many companies are moving to a new level in creating value for their customers. To differentiate their offers, beyond simply making products and delivering services, firms are creating and managing customer experiences with their brands or companies.

Products, Services, and Experiences (2 of 2)

Verizon’s redesigned Smart Stores create lifestyle experiences.

Verizon’s redesigned Smart Stores don’t just sell phones. they create lifestyle experiences—a kind of “rec room for geeks” in which customers can hang around and experience the wonders of mobile technology.

Figure 7.1 - Three Levels of Product

Core customer value deals with what is bought by the customer. For example, people who buy an Apple iPad are buying much more than just a tablet computer. They are buying entertainment, self-expression, productivity, and connectivity with friends and family—a mobile and personal window to the world.

At the second level, product planners must turn the core benefit into an actual product. They need to develop product and service features, a design, a quality level, a brand name, and packaging. For example, the iPad is an actual product. Its name, parts, styling, operating system, features, packaging, and other attributes have all been carefully combined to deliver the core customer value of staying connected.

Finally, product planners must build an augmented product around the core benefit and actual product by offering additional consumer services and benefits. For example, when consumers buy an iPad, Apple and its resellers also might give buyers a warranty on parts and workmanship, quick repair services when needed, and a Web site to use if they have problems or questions. Apple also provides access to a huge assortment of apps and accessories.

Product and Service Classifications

Consumer products are bought by final consumers for personal consumption.

Industrial products are bought by individuals and organizations for further processing or for use in conducting a business.

Materials and parts, capital items, and supplies and services

Products and services fall into two broad classes based on the types of consumers who use them: consumer products and industrial products.

Consumer products are bought by final consumers for personal consumption. Consumer products include convenience products, shopping products, specialty products, and unsought products. These products differ in the ways consumers buy them and, therefore, in how they are marketed. This is explained by the table on the next slide.

Industrial products are those products purchased for further processing or for use in conducting a business. The three groups of industrial products and services are materials and parts, capital items, and supplies and services.

Materials and parts include raw materials as well as manufactured materials and parts. Raw materials consist of farm products and natural products. Manufactured materials and parts consist of component materials and parts.

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

Installations consist of major purchases such as buildings and fixed equipment.

The final group of industrial products is supplies and services. Supplies include operating supplies and repair and maintenance items. Supplies are the convenience products of the industrial field because they are usually purchased with a minimum of effort or comparison.

Table 7.1 - Marketing Considerations for Convenience and Shopping Products

Marketing Considerations Convenience Shopping
Customer buying behavior Frequent purchase; little planning, little comparison or shopping effort; low customer involvement Less frequent purchase; much planning and shopping effort; comparison of brands on price, quality, and style
Price Low price Higher price
Distribution Widespread distribution; convenient locations Selective distribution in fewer outlets
Promotion Mass promotion by the producer Advertising and personal selling by both the producer and resellers
Examples Toothpaste, magazines, and laundry detergent Major appliances, televisions, furniture, and clothing
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

This table illustrates the marketing considerations for convenience and shopping products.

Table 7.1 - Marketing Considerations for Specialty and Unsought Products

Marketing Considerations Specialty Unsought
Customer buying behavior Strong brand preference and loyalty; special purchase effort; little comparison of brands; low price sensitivity Little product awareness or knowledge (or, if aware, little or even negative interest)
Price High price Varies
Distribution Exclusive distribution in only one or a few outlets per market area Varies
Promotion More carefully targeted promotion by both the producer and resellers Aggressive advertising and personal selling by the producer and resellers
Examples Luxury goods, such as Rolex watches or fine crystal Life insurance and Red Cross blood donations
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

This table illustrates the marketing considerations for specialty and unsought products.

Other Market Offerings

Organizations

Persons

Places

Ideas

In addition to tangible products and services, marketers have broadened the concept of a product to include other market offerings.

Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization. Business firms sponsor public relations or corporate image marketing campaigns to market themselves and polish their images.

Person marketing consists of activities undertaken to create, maintain, or change attitudes or behavior toward particular people. The skillful use of marketing can turn a person’s name into a powerhouse brand. For example, The Food Network’s celebrity chef, Rachael Ray, is a one-woman marketing phenomenon, with her own daytime talk show, cookware and cutlery brands, dog food brand, and even her own brand of EVOO (Extra Virgin Olive Oil.)

Place marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places.

Ideas can also be marketed. We will narrow our focus to the marketing of social ideas. This area has been called social marketing, which consists of using traditional business marketing concepts and tools to create behaviors that will create individual and societal well-being. Social marketing involves much more than just advertising. It involves a broad range of marketing strategies and marketing mix tools designed to bring about beneficial social change.

Learning Objective 7-1 Summary

What is a product? – physical products, services, and experiences

Actual and augmented product – core customer value

Consumer products – convenience, shopping, specialty, and unsought

Industrial products – materials and parts, capital items, and supplies and services

Organization, person, place, and idea marketing

Broadly defined, a product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Products include physical objects but also services, events, persons, places, organizations, ideas, or mixtures of these entities. Services are products that consist of activities, benefits, or satisfactions offered for sale that are essentially intangible, such as banking, hotels, tax preparation services, and home-repair services.

Products and services fall into two broad classes based on the types of consumers who use them. Consumer products—those bought by final consumers—are usually classified according to consumer shopping habits (convenience products, shopping products, specialty products, and unsought products). Industrial products—those purchased for further processing or for use in conducting a business—include materials and parts, capital items, and supplies and services. Other marketable entities—such as organizations, persons, places, and ideas—can also be thought of as products.

Learning Objective 7-2

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

Product and Service Decisions

Individual Product Decisions

Product Line Decisions

Product Mix Decisions

Marketers make product and service decisions at three levels: individual product decisions, product line decisions, and product mix decisions. Each of these decisions is discussed in greater detail in the following slides.

Figure 7.2 - Individual Product and Service Decisions

This figure shows the important decisions in the development and marketing of individual products and services.

Developing a product or service involves defining the benefits that it will offer. The characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs is known as product quality, one of the marketer’s major positioning tools. Total quality management (TQM) is an approach in which all of the company’s people are involved in constantly improving the quality of products, services, and business processes. A product can be offered with varying features. Another way to add customer value is through distinctive product style and design.

A brand is a name, term, sign, symbol, or design or a combination of these that identifies the maker or seller of a product or service. Consumers view a brand as an important part of a product, and branding can add value to a consumer’s purchase. Brand names help consumers identify products that might benefit them. Brands also say something about product quality and consistency.

Packaging involves designing the container or wrapper for a product. Increased competition means that packages must now perform many sales tasks—from attracting buyers to communicating brand positioning to closing the sale.

Labels help to identify and describe the product or brand as well as promote the brand, support its positioning and engage customers.

The first step in designing product support services is to survey customers periodically. Once the company has assessed the quality of various support services, it can take steps to fix problems and add new services that will both delight customers and yield profits to the company.

Product Line Decisions (1 of 2)

A product line is closely related products that:

Have similar functions and customer groups

Are sold through similar outlets or fall within given price ranges

Product line length is the number of items in the product line.

Product line filling

Product line stretching

A 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. For example, Nike produces several lines of athletic shoes and apparel.

The major product line decision involves product line length, which is the number of items in the product line. A company can expand its product line in two ways: line filling and line stretching.

Line filling involves adding more items within the present range of the line. There are several reasons for product line filling. These reasons include reaching for extra profits, satisfying dealers, using excess capacity, being the leading full-line company, and plugging holes to keep out competitors.

Line stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line downward, upward, or both ways. A reason for downward product line stretching is to plug a market hole that would attract a potential competitor. The reason for upward product line stretching is to add prestige to the current product.

Product Line Decisions (2 of 2)

Samsung’s bulging Galaxy mobile devices line now offers a size for any need or preference.

As an illustration of product line stretching and filling, Samsung’s bulging Galaxy mobile devices line now offers a size for any need or preference, including smartphones, “phablets,” tablets, and even a wristwatch-like wearable smartphone, the Galaxy Gear.

Product Mix (or Product Portfolio)

The Clorox Company has a nicely contained product mix consistent with its mission to “make everyday life better, every day.”

An organization with several product lines has a product mix. A product mix (or product portfolio) consists of all the product lines and items that a particular seller offers for sale.

For example, The Clorox Company is best known for its CLOROX bleach. But, in fact, Clorox is a $5.6 billion firm that makes and markets a full product mix consisting of dozens of familiar lines and brands. Clorox divides its overall product mix into five major lines: Cleaning, Household, Lifestyle, Professional, and International. Each product line consists of many brands and items.

Product Mix Decisions

Width

Number of different product lines the company carries

Length

Total number of items a company carries within its product lines

Depth

Number of versions offered for each product in the line

Consistency

Relativity of the various product lines in end use, production requirements, distribution channels, or some other aspect

A company’s product mix has four important dimensions: width, length, depth, and consistency.

The mix width refers to the number of different product lines the company carries. Product mix length refers to the total number of items a company carries within its product lines. Product mix depth refers to the number of versions offered for each product in the line. Finally, the consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other aspect.

A 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. Finally, the company 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. Finally, a company 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.

Learning Objective 7-2 Summary

Product attribute decisions – quality, features, and style and design

Branding, packaging, and labeling decisions

Product support services – enhance customer service and satisfaction

Product line and product mix decisions

Individual product decisions involve product attributes, branding, packaging, labeling, and product support services. Product attribute decisions involve product quality, features, and style and design. Branding decisions include selecting a brand name and developing a brand strategy. Packaging provides many key benefits, such as protection, economy, convenience, and promotion. Package decisions often include designing labels, which identify, describe, and possibly promote the product. Companies also develop product support services that enhance customer service and satisfaction and safeguard against competitors. Most companies produce a product line rather than a single product. A product line is a group of products that are related in function, customer-purchase needs, or distribution channels. All product lines and items offered to customers by a particular seller make up the product mix. The mix can be described by four dimensions: width, length, depth, and consistency. These dimensions are the tools for developing the company’s product strategy.

Learning Objective 7-3

Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require.

Figure 7.3 - Four Service Characteristics

This figure depicts the four special service characteristics a company must consider when designing marketing programs: intangibility, inseparability, variability, and perishability.

Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled before they are bought. To reduce uncertainty, buyers look for signals of service quality. They draw conclusions about quality from the place, people, price, equipment, and communications that they can see.

Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. Customer coproduction makes provider–customer interaction a special feature of services marketing. Both the provider and the customer affect the service outcome.

Service variability means that the quality of services depends on who provides them as well as when, where, and how they are provided. For example, within a Marriott hotel, one registration-counter employee may be cheerful and efficient, whereas another standing just a few feet away may be grumpy and slow.

Service perishability means that services cannot be stored for later sale or use. Some doctors charge patients for missed appointments because the service value existed only at that point and disappeared when the patient did not show up.

Service Profit Chain (1 of 2)

Links service firm profits with employee and customer satisfaction

The chain consist of five links:

Internal service quality

Satisfied and productive service employees

Greater service value

Satisfied and loyal customers

Healthy service profits and growth

Successful service companies focus their attention on both their customers and their employees. They understand the service profit chain, which 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, and healthy service profits and growth. For example, the supermarket chain Wegmans believes that happy, superbly trained employees create a superior customer experience.

Figure 7.4 - Three Types of Services Marketing

Services marketing requires more than just traditional external marketing using the four Ps. This figure shows that services marketing also requires internal marketing and interactive marketing.

Internal marketing means that the service firm must orient and motivate its customer-contact employees and supporting service employees to work as a team to provide customer satisfaction. For example, Zappos starts by hiring the right people and carefully orienting and inspiring them to give unparalleled customer service.

Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter. In services marketing, service quality depends on both the service deliverer and the quality of delivery. All new hires at Zappos —at all levels of the company—complete a four-week customer-loyalty training regimen.

Service Profit Chain (2 of 2)

Zappos knows that delivering customer happiness begins with happy, dedicated, energetic employees. Zappos is “Powered by Service.”

Marketing Tasks for Service Companies

Managing service differentiation

Developing a differentiated offer, delivery, and image

Managing service quality

Delivering consistently higher quality than the competitors

Managing service productivity

Training current employees or hiring new ones

Increasing the quantity of service by giving up some quality

Harnessing the power of technology

Service companies face three major marketing tasks: They want to increase their service differentiation, service quality, and service productivity.

In these days of intense price competition, service marketers often complain about the difficulty of differentiating their services from those of competitors. The solution to price competition is to develop a differentiated offer, delivery, and image. For example, Dick’s Sporting Goods’ customers can sample shoes on Dick’s indoor footwear track, test golf clubs with an on-site golf swing analyzer and putting green, shoot bows in its archery range, and receive personalized fitness product guidance from an in-store team of fitness trainers.

A service firm can differentiate itself by delivering consistently higher quality than its competitors provide. Service providers need to identify what target customers expect in regard to service quality. As hard as they may try, even the best companies will have an occasional late delivery, burned steak, or grumpy employee. However, good service recovery can turn angry customers into loyal ones.

With their costs rising rapidly, service firms are under great pressure to increase service productivity. They can do so in several ways. They can train current employees better or hire new ones who will work harder or more skillfully. Or they can increase the quantity of their service by giving up some quality. Finally, a service provider can harness the power of technology.

However, companies must avoid pushing productivity so hard that doing so reduces quality. For example, many airlines in their attempts to improve productivity, have mangled customer service.

Learning Objective 7-3 Summary

Services characteristics: intangible, inseparable, variable, and perishable

Service profit chain - internal and interactive marketing

Competitive differentiation, service quality, and service productivity

Services are characterized by four key aspects: they are intangible, inseparable, variable, and perishable. Each characteristic poses problems and marketing requirements. Marketers work to find ways to make the service more tangible, increase the productivity of providers who are inseparable from their products, standardize quality in the face of variability, and improve demand movements and supply capacities in the face of service perishability.

Good service companies focus attention on both customers and employees. They understand the service profit chain, which links service firm profits with employee and customer satisfaction. A services marketing strategy calls not only for external marketing but also for internal marketing to motivate employees and interactive marketing to create service delivery skills among service providers. To succeed, service marketers must create competitive differentiation, offer high service quality, and find ways to increase service productivity.

Learning Objective 7-4

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

Brand Equity (1 of 2)

The differential effect that knowing the brand name has on customer response to the product or its marketing

With positive brand equity, consumers react more favorably to the brand than to an unbranded version of the same product.

Brands are a key element in a company’s relationships with consumers. Brands represent consumers’ perceptions and feelings about a product and its performance. A powerful brand has high brand equity. Brand equity is the differential effect that knowing the brand name has on customer response to the product and its marketing.

A brand has positive brand equity when consumers react more favorably to it than to a generic or unbranded version of the same product. It has negative brand equity if consumers react less favorably than to an unbranded version.

Brand Equity (2 of 2)

Consumer perception dimensions:

Differentiation

Relevance

Knowledge

Esteem

Brand value is the total financial value of a brand.

Customer equity is the value of customer relationships that the brand creates.

Ad agency Young & Rubicam’s Brand Asset Valuator measures brand strength along four consumer perception dimensions: differentiation, relevance, knowledge, and esteem. Brands with strong brand equity rate high on all four dimensions.

A brand with high brand equity is a very valuable asset. Brand value is the total financial value of a brand. High brand equity provides a company with many competitive advantages. A powerful brand enjoys a high level of consumer brand awareness and loyalty.

A powerful brand forms the basis for building strong and profitable customer relationships. The fundamental asset underlying brand equity is customer equity. This refers to the value of customer relationships that the brand creates. The proper focus of marketing is building customer equity, with brand management serving as a major marketing tool.

According to one estimate, the brand value of Google is a whopping $159 billion and Apple is at $148 billion.

Major Brand Strategy Decisions (1 of 2)

Brands are powerful assets that must be carefully developed and managed. As this figure suggests, building strong brands involves many challenging decisions.

This figure shows that the major brand strategy decisions involve brand positioning, brand name selection, brand sponsorship, and brand development.

Major Brand Strategy Decisions (2 of 2)

Nickelodeon has developed a stable full of hugely popular characters.

Nickelodeon has developed a stable full of hugely popular characters—such as SpongeBob Square Pants—that generate billions of dollars of retail sales each year through licensing.

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