Product, Services, and Branding Strategy

Transcription

1 Product, Services, and Branding Strategy Chapter 8 Learning Goals 1. Understand products and the major classifications of products and services 2. Learn the decisions companies make regarding their products and services 3. Understand branding strategy 4. Identify the four characteristics that affect the marketing of a service 5. Realize additional product issues 1 1

2 Definitions 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. 2 What is a Product? Products, Services, and Experiences Product is a key element in the market offering. A company s market offering often includes both tangible goods and services. At one extreme, the offer may consist of a pure tangible good, such as soap, toothpaste, etc. At the other extreme are pure services, for which the offer consists primarily of a service, such as a doctor s exam or financial services. Between these extremes, many goods-and-services combinations are possible. To differentiate their offers, companies are staging, marketing, and delivering memorable customer experiences (e.g. movies, Starbucks) Levels of Product and Services Product planners need to think about products and services on three levels: i. The most basic level is the core benefit, which addresses the question what is the buyer really buying? ii. At the second level, product planners must turn the core benefit into an actual product. They need to develop product features, design, quality level, a brand name and packaging. iii.finally, they must build an augmented product around the core benefit and actual product by offering additional customer services and benefits. (e.g. warranty, instructions,etc.) Product and Service Classifications Consumer products are products and services bought by final consumers for personal consumption. Industrial products are those purchased for further processing or for use in conducting a business. 3 2

3 What is a Product? Types of Consumer Products Convenience Shopping Specialty Unsought They are consumer products that the customer usually buys frequently, immediately, and with a minimum of comparison and buying effort Low price Widespread distribution Mass promotion by producer Examples: Soap, candy, newspapers, fast food 4 Types of Consumer Products Convenience Shopping Specialty Unsought What is a Product? 5 Consumer products that the customer, in the process of selection and purchase, characteristically compares on such bases as suitability, quality, price, and style. Less frequent purchases More shopping effort for comparisons. Higher than convenience good pricing Selective distribution in fewer outlets Advertising and personal selling Examples: Furniture, clothing, used cars, major appliances, hotel and airline services 3

4 Types of Consumer Products Convenience Shopping Specialty Unsought What is a Product? Consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Strong brand preference and loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity High price Exclusive distribution Carefully targeted promotions Examples: Specific brands and types of cars, designer clothes, and the services of medical or legal specialists 6 Types of Consumer Products Convenience Shopping Specialty Unsought What is a Product? Consumer product that the consumer either does not know about or knows about but does not normally think of buying. Little product awareness and knowledge (or if aware, sometimes negative interest) Pricing varies Distribution varies Aggressive advertising and personal selling by producers and resellers Examples: Life insurance, preplanned funeral services, blood donations to the Red Cross 7 4

5 Product and Service Classifications Industrial products are those purchased for further processing or for use in conducting a business. Thus, the distinction between a consumer product and an industrial product is based on the purpose for which the product is bought. They are divided in three groups: Materials and parts (raw materials wheat, cotton, fruits, fish, crude petroleum, iron ore manufactured materials & parts iron, cement, wires, small motors, tires) Capital items are industrial products that aid in the buyer s production or operations, including installations and accessory equipment (factories, offices, computer systems, elevators, fax machines, desks, etc.). Supplies and services (lubricants, coal, paper, pencils, paint, brooms, window cleaning, computer repair, etc). 8 Product and Service Classifications In addition to tangible products and services, in recent years marketers have broadened the concept of a product to include other market offerings - organizations, persons, places, and ideas Organizational marketing consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization. It makes use of corporate image advertising as a major tool companies use to market themselves to various publics. Person marketing consists of activities undertaken to create, maintain, or change attitudes or behavior toward particular people. It applies to political candidates, entertainment sports figures, and professionals Place marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places. It relates to tourism. Social marketing promotes ideas and is defined as the design, implementation, and control of programs seeking to increase the acceptability of a social idea, cause, or practice among a target group (e.g. public health campaigns to reduce smoking, alcoholism, drug abuse, etc.) 9 5

6 Marketers make product and services decisions at three levels: individual, product line, and product mix decisions Key Decisions Individual Product Product Line Product Mix Product and Service Decisions Developing a product or service involves defining the benefits that it will offer. These benefits are communicated and delivered by product attributes such as quality, features, and style and design. Product attributes Product quality refers to the ability of a product to perform its functions; it includes the product s overall durability, reliability, precision, ease of operation and repair, and other valued attributes. Product features: A product can be offered with varying features. A model may be offered without any extras, i.e. cars. Style describes the appearance of a product. Styles can be eye-catching, but it does not necessarily make the product perform better. Design goes to the heart of a product. Good design contributes to a product s usefulness as well as to its looks (i.e. ergonomic design of an office-desk). Branding Packaging Labeling Product support services 10 Goal 2: Learn decisions companies make regarding products Key Decisions Individual Product Product Line Product Mix Product and Service Decisions Branding: A brand is a name, term, sign, symbol, or design, or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. Branding, also helps the seller to segment markets. For example, Kellogg's can offer Frosties, Special K, All Bran, and many other cereal brands, not just one general product for all consumers. Packaging: It involves the activities of designing and producing the container or wrapper for a product. The package includes a product s primary container (the tube holding Colgate Total toothpaste). It may also include a secondary package that is thrown away when the product is about to be used (the cardboard box containing the tube of Colgate). Traditionally, the primary function of the package was to contain and protect the product. In recent times, packaging performs several sales tasks such as attracting attention, describing the product, and making the sale. Labeling: The label identifies the product or brand. It might also describe several things about the product and finally it might promote the product through attractive graphics. Product support services: Customer support services by phone, , fax, internet, and in-person. 11 Goal 2: Learn decisions companies make regarding products 6

7 Key Decisions Individual Product Product Line Product Mix Product and Service Decisions Beyond decisions about individual products and services, product strategy also calls for building a product line. Product line refers to a group of products that are closely related because they may: function in a similar manner be sold to the same customer groups, be marketed through the same types of outlets fall within given price ranges The major product line decision involves product line length the number of items in the product line (e.g. BMW 3-series, 5- series, & 7-series models) Line stretching: adding products that are higher or lower priced than the existing line Line filling: adding more items within the present price range (e.g. Sony filled its Walkman line by adding solar-powered and waterproof Walkmans, the CD walkman and the Meomy Stick Walkman, which enables users to download tracks straight from the Net. 12 Goal 2: Learn decisions companies make regarding products Key Decisions Individual Product Product Line Product Mix Product and Service Decisions An organization with several product lines has a product mix. Product mix (also known as product assortment) Consists of all the product lines and items that a particular seller offers for sale Example: Avon s product mix consists of five major product lines: beauty products, wellness products, jewelry and accessories, gifts, and inspirational products. Product mix width: Number of different product lines carried by company Product mix depth: Number of different versions of each product in the line Product mix consistency Refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. For example, P&G s product lines are consistent insofar as they are consumer products that go through the same distribution channels. 13 Goal 2: Learn decisions companies make regarding products 7

8 Branding Strategy Brands are powerful assets that must be carefully developed and managed. In this section, we examine the key strategies for building and managing brands. A powerful brand has high brand equity, which is the positive differential effect that knowing the brand name has on customer response to the product or service. A measure of a brand s equity is the extent to which customers are willing to pay more for the brand. Brand valuation is the process of estimating the total financial value of a brand. Measuring such value is difficult. However, according to one estimate, the brand value of Coca-Cola is almost $67 billion, Microsoft is $61 billion and IBM is $54 billion. Brands with strong equity have many competitive advantages: High consumer awareness Strong brand loyalty Helps when introducing new products Less susceptible to price competition 14 Key Decisions Brand Positioning Brand Name Selection Brand Sponsorship Brand Development Brand Strategy Marketers need to position their brands clearly in target customers minds. They can position brands at any of three levels: Product attributes (i.e. Crest: good taste) Least effective; competitors can easily copy attributes Benefits: a brand can be better positioned by associating its name with a desirable benefit, i.e. Crest cavity prevention or teeth whitening. Beliefs and values: usually used by the strongest brands Taps into emotions i.e. Crest marketers talk about how cavity prevention and better ingredients give healthy, beautiful smiles for life 15 8

9 Key Decisions Brand Positioning Brand Name Selection Brand Sponsorship Brand Development Brand Strategy 16 Good Brand Names: Suggest something about the product or its benefits (i.e. Craftsman) Are easy to say, recognize and remember (i.e. Crest) Are distinctive (i.e. Lexus) Are extendable (i.e. Amazon.com) Translate well into other languages Can be registered and legally protected Key Decisions Brand Positioning Brand Name Selection Brand Sponsorship Brand Development Brand Strategy 17 A manufacturer has four sponsorship options: a) Manufacturer brands (i.e. Kellogg s, IBM, etc) b) Private (store) brands: a brand created and owned by a reseller of a product or service. Costly to establish and promote Higher profit margins c) Licensed brands Name and character licensing has grown (i.e. Disney s characters on children's clothes) d) Co-branding The practice of using the established brand names of two different companies on the same product. For example, Ford and Eddie Bauer cobranded a sport utility vehicle the Ford Explorer, Eddie Bauer edition. 9

10 Key Decisions Brand Positioning Brand Name Selection Brand Sponsorship Brand Development: a company has four choices when it comes to developing brands. Brand Strategy Line extensions Using a successful brand name to introduce additional items in a given product category under the same brand name, such as new flavors, forms, colors, or package sizes. (e.g. fat-free yogurt, yogurt flavors) Brand extensions Using a successful brand name to launch a new or modified product in a new category. (i.e. Barbie Doll to Barbie home furnishings, Barbie cosmetics, Barbie electronics, etc.) Multibrands Companies often introduce additional brands in the same category. (P&G markets many different brands in each of its product categories). New brands New product category i.e. Honda Acura for its luxury car. 18 Services Marketing Services Account for 74% of U.S. gross domestic product. Service industries include business organizations, government, and private not-for-profit organizations such as museums, charities, churches, colleges, and hospitals

11 Characteristics of Services Intangibility: services cannot be seen, tasted, felt, heard, or smelled before they are bought. Consumers look for service quality signals Inseparability: services are produced and consumed at the same time and cannot be separated from their providers. Services can t be separated from providers (i.e. doctor patient) Variability: the quality of services may vary greatly, depending on who provides the service and when, where, and how. Employees and other factors result in variability (i.e. personnel in a Hotel or restaurant) Perishability: services cannot be stored for later sale or use. Services can t be inventoried for later sale (i.e. seats on a plane, or in a theater) 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. Thus, service marketing requires more than just traditional external marketing. It also requires: Internal Marketing is the marketing by a service firm to train and effectively motivate its customercontact employees and all the supporting service people to work as a team to provide customer satisfaction. Marketers must get everyone in the organization to be customer-centered. Interactive Marketing is the marketing by a service firm that recognizes that perceived service quality depends heavily on the quality of buyer-seller interaction. In services marketing, service quality depends on both the service deliverer and the quality of the delivery. 20 Service Firm Marketing Strategies Today, as competition and costs increase, and as productivity and quality decrease, more service marketing sophistication is needed. Service companies face three major marketing tasks: they want to increase their competitive differentiation, service quality, and productivity: Managing Service Differentiation: One challenge is the difficulty of differentiating their services from those of competitors. The solution to intense price competition is to develop a differentiated offer, delivery, and image. The offer can include innovative features that set one company s offer apart from competitors offers. For example, some hotels offer car rental, banking, and business center services. Managing Service Quality: one of the major ways a service firm can differentiate itself is by delivering consistently higher quality than its competitors do. Top service companies set high quality standards. They watch service performance closely, both their own and that of competitors. They do not settle for merely good service; they aim for 100% defect-free service. A 98% performance standard may sound good, but using this, FedEx packages would be lost each day. Managing Service Productivity: With their costs rising rapidly, service firms are under pressure to increase service productivity. 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. However, companies must avoid pushing productivity so hard that doing so reduces quality

12 Product Decisions and Social Responsibility Product decisions have attracted much public attention. Marketers should consider carefully public policy issues and regulations involving: Acquiring and dropping products Patent protection Product quality and safety Product warranties REVIEW QUESTION: Define services and briefly discuss the characteristics of services. 22 Goal 5: Realize additional product issues 12