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Chapter 8: Products, Services and Brands: Building Customer Value

What is a Product?Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.Includes:-Goods- Services- Persons- Places- Organizations- Ideas- Combinations of the above

Three Levels Of Product

Core benefit level; the customers purchase a product because of the functional benefit the product offers. Actual Product level; they take into account how the products attributes, features, quality, styling, packaging. Augmented Product level; customers consider the value they receive from a vendor after sales support, warranty, promise of free delivery or installation.

Product as a Good Goodsare items that can be seen and touched, such as books, shoes, cars, and drills. Goods result in ownership.

Product as a Service Although services are products in a generalsense, they have special characteristics and marketing needs. The biggest differences come from the fact that they are created through direct interaction with customers. A SERVICE DOES NOT RESULT IN OWNERSHIP.The Nature and Characteristics of a ServiceA company must consider four special service characteristics when designing marketing programs: IntangibilityInseparability VariabilityPerishability The Nature & Characteristics of a Service1) Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled before they are bought.

For example, people undergoing cosmetic surgery cannot see the result before the purchase. Airline passengers have nothing but a ticket and a promise that they and their luggage will arrive safely at the intended destination, hopefully at the same time. 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.

Therefore, the service providers task is to make the service tangible in one or more ways and send the right signals about quality. One analyst calls this evidence management, in which the service organization presents its customers with organized, honest evidence of its capabilities.Evidence Management at Atlantis Hotel- Dubai

The Nature & Characteristics of a Service2) Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. If a service employee provides the service, then the employee becomes a part of the service. Because the customer is also present as the service is produced, provider-customer interaction is a special feature of services marketing. Both the provider and the customer affect the service outcome.Service Inseparability

The Nature & Characteristics of a Service3) 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, some hotelssay, Marriotthave reputations for providing better service than others. Still, within a given Marriott hotel, one registration-counter employee may be cheerful and efficient, whereas another standing just a few feet away may be unpleasant and slow. Even the quality of a single Marriott employees service varies according to his or her energy and frame of mind at the time of each customer encounter.Service Variability

The Nature & Characteristics of a Service4) Service perishability means that services cannot be stored for later sale or use. The perishability of services is not a problem when demand is steady. However, when demand fluctuates, service firms often have difficult problems. For example, because of rush-hour demand, public transportation companies have to own much more equipment than they would if demand were even throughout the day. Thus, service firms often design strategies for producing a better match between demand and supply. Hotels and resorts charge lower prices in the off-season to attract more guests. And restaurants hire part-time employees to serve during peak periods.Service Perishability

Types of ProductsThe classification of products is essential to business because it provides one of the factors for determining the strategies needed to move them through the marketing system. The two major classes are (I) consumer products and (II) business products.I. Consumer ProductsConsumer products are products purchased for personal, family, or household use. They are often grouped into four subcategories on the basis of consumer buying habits:1) Convenience products2) Shopping products3) Specialty products 4) Unsought products

Consumer Products

II. Business / Industrial ProductsBusiness products are products that companies purchase to produce their own products or to operate their business. Unlike consumer products, business products are classified on the basis of their use rather than customer buying habits. These products are divided into six subcategories: InstallationsAccessory EquipmentRaw MaterialsComponent Parts and Processed MaterialsMaintenance, Repair, and Operating SuppliesBusiness Services

1) InstallationsInstallations are major capital items that are typically used directly in the production process of products. Some installations, such as conveyor systems, robotics equipment, and machine tools, are designed and built for specialized situations. Other installations, such as stamping machines, large commercial ovens, and computerized axial tomography scan machines, are built to a standard design but can be modified to meet individual requirements.

2) Accessory Equipment

Products that fall into the subcategory of accessory equipment are less expensive and have shorter lives than installations. Examples include hand tools, computers, desk calculators, and forklifts. While some types of accessory equipment, such as hand tools, are involved directly in the production process, most are only indirectly involved.

3) Raw Materials

Raw materials are products that are purchased in their raw state for the purpose of processing them into consumer or business products. Examples are iron ore, crude OIL, diamonds, copper, timber, wheat, and leather. Some (e.g., wheat) may be converted directly into another consumer product (cereal). Others (e.g., timber) may be converted into an intermediate product (lumber) to be resold for use in another industry (construction).

4) Component Parts and Processed Materials

Component parts are items that are purchased to be placed in the final product without further processing. Processed materials, on the other hand, require additional processing before being placed in the end product. Many industries, including the auto industry, rely heavily on component parts. Automakers use such component parts as batteries, sunroofs, windshields, and spark plugs. They also use several processed materials, including steel and upholstery fabric.

5) Maintenance, Repair, and Operating Supplies

Maintenance, repair, and operating (MRO) supplies are frequently purchased expense items. They contribute indirectly to the production of the end product or to the operations of the business. MRO supplies include computer paper, light bulbs, lubrication oil, cleaning supplies, and office supplies.

6) Business Services

Business services refer to the services purchased by companies to assist in the operation of the firm. They include financial, marketing research, promotional, legal, and janitorial services. The decision to hire an outside business to perform needed services is often predicated on how frequently the service is needed, the specialized knowledge required, and the relative costs of providing the service internally versus contracting with an outside firm.

BrandingA brand is a name, term, sign, symbol, design, or a combination of these, that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors.A brand name carries many associations in peoples minds that make up its image.

PackagingPackaging refers to the activities of designing and producing the container or wrapper for a product. Traditionally, the primary function of the package was to hold and protect the product. In recent times, however, numerous factors have made packaging an important marketing tool as well. Increased competition and clutter on retail store shelves means that packages must now perform many sales tasksfrom attracting attention, to describing the product, to making the sale.

LabelingLabels range from simple tags attached to products to complex graphics that are part of the packaging. They perform several functions. At the very least, the label identifies the product or brand. The label might also help to promote the brand, support its positioning, and connect with customers. For many companies, labels have become an important element in broader marketing campaigns.

Product - Support ServicesStep 1. Survey customers to determine satisfaction with current services and any desired new services.

Step 2. Assess costs of providing desired services.

Step 3. Develop a package of services to delight customers and yield profits.Companies should design its support services to profitably meet the needs of target customers. How?

Brand StrategyLine ExtensionExisting brand names extended to new forms, sizes, and flavors of an existing product category.Brand ExtensionExisting brand names extended to new product categories.MultibrandsNew brand names introduced in the same product category.New BrandsNew brand names in new product categories.

Product Line LengthNumber of Items in the Product LineProduct Line DecisionsStretchingLengthen beyond current range

FillingLengthen within current range

DownwardUpwardProduct Line DecisionsProduct Line Length. This refers to the number of products in the line. The line is too short if adding items increases profits; too long if dropping items increases profits. Company objectives of full-line offerings may decrease strict profit criterion on length.Product Line Stretching. This occurs when a company lengths is product line beyond its current range. Downward stretch offers items to lower end of the market. Upward stretch introduces items to high end of market. Two-way stretch extends the line both upward and downward.Product Line Filling. This adds items within the existing product range of the line.

Product Line DecisionsThis CTR relates to the material on pp. 255-257.

Product Line Decisions

A company lengthens its product line in two ways: by line stretching and line filling.Line stretching occurs when a company lengthens its product line beyond its current category:Down-market Stretch: a company positioned in the middle market may want to introduce a lower price line i.e. Mercedes successfully introduced its C-Class cars at $30.000 without injuring its ability to sell other Mercedes cars for $100.000 and up. Up-market Stretch: a company enters the high social class segment for more market growth, higher margins, as full line manufacturers e.g. Toyota Lexus.Two-way Stretch: a company serving the middle market might decide to stretch their line in both lower and high social class i.e. Holiday Inn Worldwide performed five different segments the upscale Crown Plaza, the traditional Holiday Inn, the budget Holiday Inn Express, and the business-oriented Holiday Inn Select and Holiday Inn Suites Line filling occurs when a company adds more items within the present category. The motives are to overcome the missing items in the line, reach the incremental profits, utilize excess capacity, plug holes to keep out competitors.

Down-market Stretch: Mercedes S- ClassC - Class

Head & Shoulders Line Filling

Product Mix & Product Line Product Mix: All the products a given company produces form the product mix.Product Line : A product line would be a group of these products associated by category (or function). A company could have one line or several lines, but all the products within this line or lines would form the Product Mix.

Product Line Depth & Product Mix WidthProduct Line Depth: the number of products items in a specific product line.Product Mix Width: The number of product lines an organization offers.

Benefits of Increasing Product Line Depth

Benefits of Increasing Product Mix Width