Chp 8 products, service & brands building customer value

2. 7 - 2Copyright © 2015 Pearson Education, Inc. Learning Objectives • Define product and describe the major classifications of products and services. • Describe the decisions companies make regarding their individual products and services, product lines, and product mixes.

3. 7 - 3Copyright © 2015 Pearson Education, Inc. Learning Objectives • Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require. • Discuss branding strategy—the decisions companies make in building and managing their brands.

4. 7 - 4Copyright © 2015 Pearson Education, Inc. First Stop: The ESPN Brand • ESPN is a brand experience synonymous with sports entertainment. • ESPN has a variety of entities tied together under its brand. • Television, radio, online, publishing, and event management • Reason for success - Customer-focused • Provide the most seamless, high-quality experience

5. 7 - 5Copyright © 2015 Pearson Education, Inc. Product • Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need • Services: Activities, benefits, or satisfactions offered for sale • Intangible and do not result in ownership of anything

6. 7 - 6Copyright © 2015 Pearson Education, Inc. Products, Services, and Experiences • 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

8. 7 - 8Copyright © 2015 Pearson Education, Inc. Product and Service Classifications • Consumer products: Bought by final consumers for personal consumption • Industrial products: Bought by individuals and organizations for further processing or for use in conducting a business • Materials and parts, capital items, and supplies and services

13. 7 - 13Copyright © 2015 Pearson Education, Inc. Product Line Decisions • Product line: Closely related products that: • Have similar functions and customer groups • Are sold through similar outlets or fall within given price ranges • Product line length - Number of items in the product line • Product line filling • Product line stretching

17. 7 - 17Copyright © 2015 Pearson Education, Inc. Service Profit Chain • Links service firm profits with employee and customer satisfaction • The links include: • Internal service quality • Satisfied and productive service employees • Greater service value • Satisfied and loyal customers • Healthy service profits and growth

20. 7 - 20Copyright © 2015 Pearson Education, Inc. Brand Equity • 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. • With negative brand equity, consumers react less favorably to the brand than to an unbranded version.

21. 7 - 21Copyright © 2015 Pearson Education, Inc. Brand Equity • Consumer perception dimensions include: • Differentiation • Relevance • Knowledge • Esteem • Brand valuation is the estimation of the total financial value of a brand. • Customer equity is the value of customer relationships that the brand creates.

23. 7 - 23Copyright © 2015 Pearson Education, Inc. Brand Positioning and Brand Name Selection • Marketers should establish a mission and vision for the brand when positioning it. • Desirable qualities for a brand name should: • Be based on the product’s benefits and qualities • Be easy to pronounce, recognize, and remember • Be distinctive and extendable • Translate easily into foreign languages • Be capable of registration and legal protection

26. 7 - 26Copyright © 2015 Pearson Education, Inc. Managing Brands • Communicate the brand’s positioning • Manage all brand touch points • Train employees to be customer centered • Audit the brands’ strengths and weaknesses

27. 7 - 27Copyright © 2015 Pearson Education, Inc. Learning Objectives • Define product and describe the major classifications of products and services. • Describe the decisions companies make regarding their individual products and services, product lines, and product mixes.

28. 7 - 28Copyright © 2015 Pearson Education, Inc. Learning Objectives • Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require. • Discuss branding strategy—the decisions companies make in building and managing their brands.

29. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2015 Pearson Education, Inc.Copyright © 2015 Pearson Education, Inc.

Editor's Notes

This chapter addresses the concept of a product and 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.
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.
ESPN is a brand experience—a meaningful part of customers’ lives that goes well beyond the cable networks, publications, and other media entities it comprises. To consumers, ESPN is synonymous with sports entertainment. The various entities tied together under the ESPN brand include television, radio, online, publishing, and event management. What ties it all together? The ESPN brand’s customer-focused mission. It knows that when fans are at home, they’ll watch the big 50-inch flat screen. But during the morning hours, smartphones light up more. During the day, desktops dominate, and in the evening, tablet activity increases. ESPN is on a crusade to know when, where, and under what conditions fans will reach for which device, and to provide the most seamless, high-quality experience for them.
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 also 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.
A company’s market offering often includes both tangible goods and services. At one extreme, the market offer 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, they are creating and managing customer experiences with their brands or company. For example, Starbucks serves up more than just a hot cup of coffee; it sells The Starbucks Experience—one that enriches customers’ lives.
This figure shows the three levels of product that are required by product planners. Each level adds more customer value. 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.
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.
This table illustrates the marketing considerations for different types of consumer products like convenience products, shopping products, specialty products, and unsought products.
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, P&G’s Cover Girl brand is represented by well-known celebrities such as Ellen DeGeneres, P!NK, and Sofia Vergara. Place marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places. Social marketing 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.
Marketers make product and service decisions at three levels. These are individual product decisions, product line decisions, and product mix decisions. Each of these decisions is discussed in greater detail in the following slides.
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. 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. 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 perform sales tasks. Labels help to promote the brand, support its positioning, and connect with customers. The first step in designing 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.
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. First, by line filling. This 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. Second, by line stretching. This 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. And the reason for upward product line stretching is to add prestige to the current product.
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, Campbell Soup Company’s product mix consists of three major product lines: healthy beverages, baked snacks, and simple meals. Each product line consists of several sublines. The simple meals line consists of soups, sauces, and pastas. Each line and subline has many individual items. Altogether, Campbell’s product mix includes hundreds of items.
A company’s product mix has four important dimensions. 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. The 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.
This figure depicts the four special service characteristics a company must consider when designing marketing programs. 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 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.
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. These are 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.
Service marketing requires more than just traditional external marketing using the four Ps. This figure shows that service 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 people to work as a team to provide customer satisfaction. For example, Four Seasons Hotels and Resorts 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 the Four Seasons complete a three-month training regimen, including improvisation exercises, to help them improve their customer-interaction skills.
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 has grown from a single bait-and-tackle store in Binghamton, New York, into a sporting goods mega-retailer in 44 states by offering interactive services that set it apart from ordinary sporting goods stores. 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. Also, 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. Most airlines have stopped offering even the little things for free and now charge extra for everything from luggage to aisle seats. The result is a plane full of resentful customers.
Brands are a key element in the 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.
Ad agency Young & Rubicam’s BrandAsset 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 valuation is the process of estimating 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.
This figure shows that the major brand strategy decisions involve brand positioning, brand name selection, brand sponsorship, and brand development.
Marketers need to position their brands clearly in target customers’ minds. They can position brands at any of three levels. At the lowest level, they can position the brand on product attributes. At the next level, a brand can be better positioned by associating its name with a desirable benefit. In the final level, the strongest brands go beyond attribute or benefit positioning. They are positioned on strong beliefs and values and engage customers on a deep, emotional level. Finding the best brand name begins with a careful review of the product and its benefits, the target market, and proposed marketing strategies. There are a number of desirable qualities for a brand name. It should suggest something about the product’s benefits and qualities, and it should be easy to pronounce, recognize, and remember. The brand name should be distinctive, be extendable, translate easily into foreign languages, and be capable of registration and legal protection.
A manufacturer has four sponsorship options. National brands or manufacturers’ brands are marketed under the manufacturer’s own name. For example, the Samsung Galaxy tablet or Kellogg’s Frosted Flakes. An increasing numbers of retailers and wholesalers have created their own store brands or private brands. For example, Walmart’s private brands account for 25 percent of its sales. To compete with store brands, national brands must sharpen their value propositions. Some companies license names or symbols previously created by other manufacturers, names of well-known celebrities, or characters from popular movies and books. For a fee, any of these can provide an instant and proven brand name. For example, Disney is the world’s biggest licensor with a studio full of hugely popular characters. Co-branding occurs when two established brand names of different companies are used on the same product. Because each brand dominates in a different category, the combined brands create broader consumer appeal and greater brand equity. For example, Pillsbury and Cinnabon joined forces to create Pillsbury Cinnabon cinnamon rolls.
This figure illustrates the four choices that a company has when it comes to developing brands. Line extensions occur when a company extends existing brand names to new forms, colors, sizes, ingredients, or flavors of an existing product category. A company might introduce line extensions as a low-cost, low-risk way to introduce new products. Or it might want to meet consumer desires for variety, use excess capacity, or command more shelf space from resellers. A brand extension extends a current brand name to new or modified products in a new category. It gives a new product instant recognition and faster acceptance. But an extension may also confuse the image of the main brand. Multibranding offers a way to establish different features that appeal to different customer segments, lock up more reseller shelf space, and capture a larger market share. A major drawback of multibranding is that each brand might obtain only a small market share, and none may be very profitable. A company might believe that the power of its existing brand name is waning, so a new brand name is needed. Or it may create a new brand name when it enters a new product category for which none of its current brand names are appropriate.
Companies must manage their brands carefully. First, the brand’s positioning must be continuously communicated to consumers. Major brand marketers often spend huge amounts on advertising to create brand awareness and build preference and loyalty. Today, customers come to know a brand through a wide range of contacts and touch points. These include advertising but also personal experience with the brand, word of mouth, social media, company Web pages, mobile apps, and many others. For example, a former Disney executive says, “A brand is a living entity, and it is enriched or undermined cumulatively over time, the product of a thousand small gestures.” The brand’s positioning will not take hold fully unless everyone in the company lives the brand. Therefore, the company needs to train its people to be customer centered. Many companies go even further by training and encouraging their distributors and dealers to serve their customers well. Finally, companies need to periodically audit their brands’ strengths and weaknesses. The brand audit may turn up brands that need more support, brands that need to be dropped, or brands that must be rebranded or repositioned because of changing customer preferences or new competitors.

Chp 8 products, service & brands building customer value

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Editor's Notes