Product, Services, and Branding Strategy
中国经济管理大学
Product, Services, and Branding Strategy
Product, Services, and Branding Strategy
Previewing the Concepts—Chapter Objectives
1. Define product and the major classifications of products and services.
2. Describe the roles of product and service branding, packaging, labeling, and product support services.
3. Explain the decisions companies make when developing product lines and mixes.
4. Identify the four characteristics that affect the marketing of a service.
5. Discuss the additional marketing considerations that services require.
Just the Basics
Chapter Overview
In many ways, this chapter provides the information required to truly understand marketing. It focuses on the definition of what products and services are, and it provides details about branding.
After defining what a product is, the chapter goes on to detail the necessary attributes of products and services, as well as the branding, packaging, labeling, and product support decisions that marketers must make. There is information regarding product line and product mix decisions, and how to effectively manage both.
The section on branding provides a description of brand equity and the steps a company can take to build strong brands. Brand decisions such as positioning, name selection, sponsorship, and brand development are illustrated through use of examples.
Services marketing is differentiated from product marketing in that services are intangible, inseparable from the provider, highly variable, and perishable. Because of this, services marketers face additional challenges that product marketers do not. The service-profit chain, which links service firm profits with employee and customer satisfaction, has five key links that include internal service quality; satisfied and productive service employees; greater service value; satisfied and loyal customers; and healthy service profits and growth.
Finally, the social issues that affect product decisions are detailed, as well as the requirements for international product and services marketing.
Chapter Outline
1. Introduction
a. Cosmetics companies sell billions of dollars’ worth of potions, lotions, and fragrances to consumers around the world. In one sense, these products are no more than mixtures of oils and chemicals, but cosmetics companies know they sell much more than a mixture of ingredients—they sell promises to the people who use them.
b. The success of cosmetics brands affirms that products really are more than physical items. The cosmetic’s image, promises and positioning, ingre-dients, name and package, the company that makes it, the stores that sell it —all become part of the total product.
c. This chapter looks at the question What is a product? and then classifies products into consumer and business markets.
Use Key Terms Product, Brand here.
Use Chapter Objectives 1 here.
2. What is a product?
a. A product is defined as anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or a want. Broadly defined, products include physical objects, services, events, persons, places, organizations, ideas, or mixes of these entities.
b. Services are a form of product that consist of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.
Use Key Term Service here.
Products, Services, and Experiences
c. Product is a key element in the market offering. Marketing-mix planning begins with formulating an offering that brings value to target customers and satisfies their needs.
d. A company’s marketing offer can provide both tangible goods and services. At one extreme, the offer may consist of a pure tangible good, while at the other extreme are pure services. Many goods and services combinations are available between these two extremes.
Let’s Discuss This
Soap is an example of a pure tangible good; no soap manufacturer offers any services to go along with hand soap. A doctor’s visit is a pure service. Discuss several offers that are a combination of products and services.
e. Many companies are looking to deliver memorable experiences to differentiate their products and services. Whereas products and services are external, experiences are personal and take place in the minds of individual consumers. Companies that market experiences realize that consumers are really buying what the offers will do for them, not just the products and services themselves.
Use Marketing at Work 7-1 here.
Levels of Products and Services
f. Products and services should be thought of on three levels (see Figure 7-1). Each level adds more customer value.
1. The most basic level is the core benefit, which addresses what the consumer is really buying. It defines the core, problem-solving benefits or services that consumers seek.
2. The second level is where the core benefit is turned into an actual product. The product’s actual features, design, quality level, brand name, and packaging are developed.
3. The third level is the augmented product, which brings in additional consumer services and benefits around the core benefits and actual product.
Use Figure 7-1 here.
Product and Service Classifications
g. Products and services fall into two broad classes based on the types of consumers that use them: consumer products and industrial products.
h. Consumer products are bought by final consumers for personal con-sumption; they are generally classified by how consumers go about buying them.
1. Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a mini-mum of comparison and buying effort. Convenience products are generally low priced, and marketers place them in many locations to make them readily available when customers need them.
2. Shopping products are less frequently purchased. Customers carefully compare them on suitability, quality, price, and style. Consumers spend much more time and effort in gathering information and making comparisons. Shopping products are usually distributed through fewer outlets, but marketers provide deeper sales support to help customers in their comparison efforts.
3. Specialty products have unique characteristics or brand iden-tification for which a significant group of buyers is willing to make a special purchase effort. Buyers do not normally compare specialty products. They invest the time needed to reach dealers carrying these products, but no more.
4. Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying. Most major innovations are unsought until the consumer becomes aware of them, but the classic example of this type of product is insurance. Unsought products require a lot of adver-tising, personal selling, and other marketing efforts.
Use Key Terms Consumer Product, Convenience Product, Shopping Product, Specialty Product, and Unsought Product here.
Use Table 7-1 here.
i. Industrial products are those purchased for further processing or for use in conducting a business. There are three groups of industrial products and services.
1. Materials and parts include raw materials and manufactured materials and parts.
2. Capital items are industrial products that aid in a buyer’s production or operations, including installations and accessory equipment.
3. Supplies and services include operating supplies and repair and maintenance items. These are generally considered the conve-nience products of the industrial field.
Use Key Term Industrial Product here.
j. Organizations also carry out activities to sell the organization itself. Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization. Both profit and not-for-profit organizations market them-selves. Corporate image advertising is a major tool companies use to market themselves to various publics.
k. Person marketing consists of activities undertaken to create, maintain, or change attitudes or behavior toward particular people.
l. Place marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places.
m. Ideas can also be marketed. This area has been called social marketing, which is defined as the use of commercial marketing concepts and tools in programs designed to influence individuals’ behavior to improve their well-being and that of society.
Use Key Term Social Marketing here.
Use Marketing at Work 7-2 here.
3. Product and Service Decisions
a. There are three levels of decision making for products and services: individual decisions, product line decisions, and product mix decisions.
Individual Product and Service Decisions
b. Product benefits are communicated and delivered by product attributes such as quality, features, and style and design.
Use Figure 7-2 here.
1. Product quality is one of the marketer’s major positioning tools. In the narrowest sense, quality can be defined as “freedom from defects,” but most companies define quality in terms of customer satisfaction.
i. Total quality management (TQM) is an approach in which all the company’s people are involved in constantly improving the quality of products, services, and business processes. This approach has recently drawn some criticism, because too many companies viewed TQM as a cure-all and created token total quality programs that applied the principles superficially.
ii. Today, many companies are using a “return on quality” approach, viewing quality as an investment and holding quality efforts accountable for bottom-line results.
iii. Product quality has two dimensions: level and consistency. The quality level means performance quality or the ability of a product to perform its functions. Quality consistency means freedom from defects and consistency in delivering a targeted level of performance.
Use Key Term Product Quality here.
2. A product can be offered with varying features. Features are a competitive tool for differentiating the company’s product from competitors’ products.
i. The company should periodically survey buyers who have used the product to ask How do you like the product? Which specific features of the product do you like most? Which features could we add to improve the product? The company can then assess each feature’s value to customers versus its cost to the company.
3. A way to add value is through distinctive product style and design.
i. Style describes the appearance of a product.
ii. Design goes to the heart of a product. Good design contributes to a product’s usefulness as well as its looks.
iii. Good style and design can attract attention, improve product performance, cut production costs, and give the product a strong competitive advantage.
Applying the Concept
Over the last several years, cell phones have evolved from being quite large and clunky to being extremely small. Discuss how these style and design changes have benefited consumers. Do you think the penetration of this kind of technology was accelerated because of these changes?
4. 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 brands as an important part of the product.
i. Branding helps buyers by identifying products that might help them, and it also tells them something about product quality.
ii. Branding helps sellers also. The brand name becomes the basis on which a whole story can be built about a product’s special qualities. The brand name and trademark can provide legal protection for unique product features that otherwise might be copied by competitors.
5. Packaging involves designing and producing the container or wrapper for a product. The package includes a product’s primary container, and may include a secondary package that is thrown away when the product is about to be used. There can also be a shipping package, and labeling is also part of packaging.
i. Many factors have made packaging an important marketing tool. Clutter on retail shelves means that packages must now perform sales tasks such as attracting attention, describing the product, and making the sale.
ii. Poorly designed packages can create problems for consumers and lost sales for the company.
iii. The packaging concept states what the package should be or do for the product. Then decisions need to be made on specific elements of the package, such as size, shape, materials, color, text, and brand mark.
iv. Product safety has also become a major packaging concern. Many companies have also reduced their packaging and begun using environmentally responsible materials.
Use Key Term Packaging here.
Use Marketing at Work 7-3 here.
Use Discussing the Issues 2 here.
6. Labels can range from simple tags to complex graphics that are part of the package. Labels identify the product or brand; they could describe several things about the product; and they might promote the product through attractive graphics.
i. Several federal and state laws regulate labeling. One act requires that labels include unit pricing, open dating, and nutritional labeling. Others set mandatory labeling requirements and allow federal agencies to set packaging regulations in specific industries.
7. Customer service is another element of product strategy. A company usually includes some support services in its offer.
i. Again, the first step is to survey customers periodically to assess the value of current services and to obtain ideas for new ones.
ii. The company then has to assess the cost of providing these services.
iii. Many companies are using a mix of phone, email, fax, Internet, and interactive voice and data technologies to provide support services.
Use Chapter Objectives 2 here.
Product Line Decisions
c. 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.
Use Key Term Product Line here.
d. The major product line decisions involve product line length, which is the number of items in the product line.
1. The line is too short if the manager can increase profits by adding items. The line is too long if the manager can increase profits by dropping items.
2. The length of the product line is influenced by the company’s objectives and resources.
3. A company can lengthen its product line by either line stretching or by line filling.
i. Line stretching occurs when a company lengthens its product line beyond its current range. The line can be stretched downward, upward, or both ways.
ii. Product line filling is the process of adding more items within the present range of the line.
Product Mix Decisions
e. A product mix (or product assortment) consists of all the product lines and items that a particular seller offers for sale.
Use Key Term Product Mix (or Product Assortment) here.
Use Chapter Objectives 3 here.
f. A company’s product mix has four important dimensions: width, length, depth, and consistency.
1. Product mix width refers to the number of different product lines the company carries.
2. Product mix length refers to the total number of items the company carries within its product lines.
3. Product mix depth refers to the number of versions offered of each product in the line.
4. Product mix consistency refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.
g. The company can increase its business in four ways. It can add new product lines, widening its product mix. It can lengthen its existing product lines to become a more full-line company. It can add more versions of each product and deepen its product mix. Or it 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.
Use Speed Bump: Linking the Concepts here.
Use Discussing the Issues 3 here.
Use Under the Hood/Focus on Technology here.
4. Branding Strategy: Building Strong Brands
a. Some analysts see branding as the major enduring asset of a company, outlasting the company’s specific products and facilities. Thus, brands are powerful assets that must be carefully developed and managed.
Brand Equity
b. Brands represent consumers’ perceptions and feelings about a product and its performance—everything that the product or service means to consumers. Brands exist in the minds of consumers.
c. Brand equity is the positive differential effect that knowing the brand name has on customer response to a product or service. A measure of a brand’s equity is the extent to which customers are willing to pay more for the brand.
Use Key Term Brand Equity here.
Use Discussing the Issues 1 here.
d. A brand with strong brand equity is a valuable asset. Brand valuation is the process of estimating the total financial value of a brand. Measuring value is difficult.
e. A powerful brand enjoys a high level of consumer brand awareness and loyalty. Because consumers expect stores to carry the brand, the company has more leverage in bargaining with resellers.
f. A powerful brand forms the basis for building strong and profitable customer relationships. The fundamental asset underlying brand equity is customer equity—the value of the customer relationships that the brand creates. What a powerful brand represents is a set of loyal customers.
Building Strong Brands
g. Figure 7-3 shows that the major brand strategy decisions involve brand positioning, brand name selection, brand sponsorship, and brand development.
Use Figure 7-3 here.
h. Marketers need to position their brands clearly in target customers’ minds. You can position brands at any of three levels.
1. The lowest level is positioning the brand on product attributes. But competitors can easily copy attributes, and customers aren’t interested in attributes as such; they are interested in what the attributes will do for them.
2. A brand can be positioned by associating its name with a desirable benefit.
3. The strongest brands are positioned on strong beliefs and values. These brands pack an emotional wallop.
Use Discussing the Issues 4 here.
i. When positioning a brand, the marketer should establish a mission for the brand and a vision of what that brand must be and do. A brand is the company’s promise to deliver a specific set of features, benefits, services, and experiences consistently to the buyers.
j. A good brand name adds greatly to a product’s success. Desirable qualities for a brand name include the following:
1. It should suggest something about the product’s benefits and qualities.
2. It should be easy to pronounce, recognize, and remember.
3. It should be distinctive.
4. It should be extendable.
5. It should translate easily into foreign languages.
6. It should be capable of registration and legal protection.
Use Application Questions 2 here.
k. A manufacturer has four sponsorship options, including: launching a manufacturer’s or national brand; selling to a reseller who gives it a private brand (also called store brand or distributor brand); licensing a brand; or joining forces with another company and co-brand.
1. Manufacturer’s brands have long dominated in retail, but an increasing number of retailers and wholesalers have created their own private brands.
i. Private brands can be hard to establish and costly to stock and promote, however they also yield higher profit margins for the retailer.
Let’s Discuss This
How many different brands is Sears known for? Name as many private brands that Sears uses as you can.
ii. Most retailers charge manufacturers’ slotting fees, which are payments demanded by retailers before they will accept new products and find “slots” for them on the shelves.
iii. Taken as a single brand, private-label products are the number one, two, or three brand in more than 40% of all grocery product categories. They capture more than a 20% share of sales in U.S. supermarkets, drug chains, and mass merchandise stores. Private-label apparel captures a 35% share of all U.S. apparel sales.
Use Key Term Private Brand (or Store Brand) here.
Use Discussing the Issues 5 here.
2. Some companies license names or symbols previously created by other manufacturers, names of well-known celebrities, or char-acters from popular movies and books.
i. Name and character licensing has grown rapidly. Annual retail sales of licensed products in the United States and Canada have grown from only $4 billion in 1977 to $55 billion in 1987 and more than $71 billion today.
3. Co-branding occurs when two established brands of different companies are used on the same product. In most co-branding situations, one company licenses another company’s well-known brand to use in combination with its own.
i. Co-branding has many advantages. The combined brands create broader consumer appeal and greater brand equity. Co-branding allows a company to expand its existing brand into a category it might otherwise have difficulty entering alone.
ii. Co-branding also has limitations, which usually involve complex legal contracts and licenses. Co-branding partners must carefully coordinate their advertising, sales promo-tion, and other marketing efforts. Each partner must trust the other will take good care of its brand.
Use Key Term Co-branding here.
4. A company has four choices when it comes to developing brands (see Figure 7-4). It can introduce line extensions, brand extensions, multibrands, or new brands.
Use Figure 7-4 here.
i. Line extensions occur when a company introduces additional items in a given product category under the same brand name, such as new flavors, forms, colors, ingre-dients, or package sizes.
a. The vast majority of all new-product activity consists of line extensions.
b. A company could introduce line extensions as a low-cost, low-risk way to introduce new products. Or it might want to meet consumer needs for variety, to use excess capacity, or simply to command more shelf space from resellers.
c. Line extensions involve some risks. An over-extended brand name might lose its specific meaning, or heavily extended brands can cause customer confusion or frustration. Sales of an extension could come at the expense of other items in the line.
ii. A brand extension involves the use of a successful brand name to launch new or modified products in a new category.
a. A brand extension gives a new product instant recognition and faster acceptance.
b. But the extension may confuse the image of the main brand. If a brand extension fails, it may harm attitudes toward the other products carrying the same brand name.
Use Application Questions 1 here.
iii. Multibranding offers a way to establish different features and appeal to different buying motives.
a. A major drawback of multibranding is that each brand might obtain only a small market share, and none may be very profitable. The company may end up spreading its resources over many brands instead of building a few brands to a highly profitable level.
iv. New brands can be created when a company believes that the power of its existing brand name is waning, thus a new one is needed. Or a company can create a new brand name when it enters a new product category for which none of the company’s current brand names is appropriate.
a. Offering too many brands can result in a company spreading its resources too thin.
Use Key Terms Line Extension, Brand Extension here.
Managing Brands
l. Companies must carefully manage their brands.
1. Customers come to know a brand through a wide range of contacts and touchpoints. These include advertising, but also personal experience with the brand, word of mouth, personal interactions with company people, telephone interactions, company web pages, and many others. Any of these experiences can have a positive or negative impact on brand perceptions and feelings.
2. The brand’s positioning will not take hold fully unless everyone lives the brand. Companies carry on internal brand building to help employees understand, desire, and deliver on the brand promise.
m. Brand managers do not have enough power or scope to do all the things necessary to build and enhance their brands.
1. Many companies are appointing brand equity managers to maintain and protect their brands’ images, associations, and quality, and to prevent short-term actions by overeager brand managers from hurting the brand.
n. Companies need to periodically audit their brands’ strengths and weaknesses. The brand audit may turn up brands that need to be repositioned because of changing customer preferences or new competitors. Some cases may call for a complete “rebranding” of a product, service, or company. However, building a new image and re-educating customers can be a huge undertaking.
Use Focus on Ethics here.
5. Services Marketing
a. Service jobs accounted for 55% of all U.S. jobs in 1970, but today they account for 82% of total employment. Services are growing even faster in the world economy, making up a quarter of the value of all international trade.
b. Service industries include governments, private not-for-profit organi-zations, and businesses that offer services.
Nature and Characteristics of a Service
c. A company must consider four special service characteristics when designing marketing programs: intangibility, inseparability, variability, and perishability. These characteristics are outlined in Figure 7-5.
Use Figure 7-5 here.
1. 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, drawing conclusions from the place, people, price, equipment, and communications that they can see.
2. Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. Because the customer is also present as the service is produced, provider-customer interaction is a special feature of services marketing.
3. Service variability means that the quality of services depends on who provides them as well as when, where, and how they are provided.
4. Service perishability means that services cannot be stored for later sale or use.
Use Key Terms Service Inseparability, Service Intangibility, Service Variability, and Service Perishability here.
Use Chapter Objectives 4 here.
Use Discussing the Issues 6 here.
Marketing Strategies for Service Firms
d. In a service business, the customer and front-line service employees interact to create the service. Thus, service providers must interact effectively with customers to create superior value during service encounters.
1. The service-profit chain links service firm profits with employee and customer satisfaction. This chain consists of five links:
i. Internal service quality.
ii. Satisfied and productive service employees.
iii. Greater service value.
iv. Satisfied and loyal customers.
v. Healthy service profits and growth.
Use Key Term Service-Profit Chain here.
Use Chapter Objectives 5 here.
Use Marketing at Work 7-4 here.
2. Figure 7-6 shows that service marketing also requires internal marketing and interactive marketing.
i. Internal marketing means that the service firm must effectively train and motivate its customer-contact employees and supporting service people to work as a team to provide customer satisfaction. Internal marketing precedes external marketing.
ii. Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter.
Use Key Terms Interactive Marketing, Internal Marketing here.
Use Figure 7-6 here.
3. The solution to price competition is to develop a differentiated offer, delivery, and image.
i. The offer can include innovative features that set one company’s offer apart from competitors’ offers.
ii. Service companies can differentiate their service delivery by having more able and reliable customer-contact people, by developing a superior physical environment in which the service is delivered, or by designing a superior delivery process.
iii. Service companies can work on differentiating their images through symbols and branding.
4. One of the major ways a service firm can differentiate itself is by delivering consistently higher quality than its competitors do.
i. Service quality is harder to define and judge than is product quality. Customer retention is probably the best measure of quality—a service firm’s ability to hang onto its customers depends on how consistently it delivers value to them.
ii. Service quality will always vary, depending on the interactions among employees and customers.
iii. Good service recovery can turn angry customers into loyal ones. In fact, good recovery can win more customer pur-chasing and loyalty than if things had gone well in the first place.
5. Service firms are under great pressure to increase service productivity.
i. They can do this by training current employees better or by hiring new ones who will work harder or more skillfully.
ii. Companies must avoid pushing productivity so hard that doing so reduces quality.
6. Additional Product Considerations
Product Decisions and Social Responsibility
a. The government may prevent companies from adding products through acquisitions if the effect threatens to lessen competition.
b. Companies dropping products must be aware that they have legal obligations to their suppliers, dealers, and customers who have a stake in the dropped product.
c. Manufacturers must comply with specific laws regarding product quality and safety. Product liability suits are now occurring in federal and state courts at the rate of almost 110,000 per year, with a median jury award of $1.8 million and individual awards often running into the tens of millions of dollars.
International Product and Services Marketing
d. International product and service marketers face special challenges. On the one hand, companies would like to standardize their offerings. This helps a company to develop a consistent worldwide image and lowers manu-facturing costs and eliminates duplication of research and development, advertising, and product design efforts.
e. On the other hand, consumers around the world differ in their cultures, attitudes, and buying behaviors. And markets vary in their economic conditions, competition, legal requirements, and physical environments. Companies must usually respond to these differences by adapting their product offerings.
f. Service companies wanting to operate in other countries are not always welcomed with open arms. In some cases, rules and regulations affecting international service firms reflect the host country’s traditions. In others, they appear to protect the country’s own fledgling service industries from large global competitors with greater resources. In still other cases, the restrictions seem to have little purpose other than to make entry difficult for foreign service firms.
g. Despite such difficulties, the trend toward growth of global service companies will continue.
Use Application Questions 3 here.
Travel Log
Discussing the Issues
1. Brand equity is the positive differential effect that knowing the brand name has on customer response to the product or service. Name three firms that you feel have high brand equity. How does having high brand equity help them compete against rival companies?
Student responses will vary based on the companies they select. Having strong brand equity means having a high level of consumer brand awareness and loyalty. Consumers expect stores to carry the brand, which gives the company more leverage in bargaining with resellers. Additionally, because the brand name carries high credibility, the company can more easily launch line and brand extensions.
2. Visit a grocery store and look at the packages for competing products in two or three different product categories. Which packages are the best? Why? What functions do the packages perform?
Instructors should encourage students to think about what makes one package “better” than another. Students can be asked to delve deeper into the topic by thinking about how the packaging for those products with poorly rated packaging could be improved. Packages can perform many functions from storage, to sales tasks—attracting attention, describing the product, and making the sale.
3. Visit the Kraft Foods company website (www.kraft.com/index.html) and examine its list of different brands. Evaluate the company’s product mix on the dimensions of width, length, depth, and consistency.
Product mix length refers to the total number of items the company carries within its product lines. Product line depth refers to the number of versions offered of each product in the line. Product mix width refers to the number of different product lines the company carries. Product mix consistency refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.
4. Consider how Cheerios cereal has been positioned in terms of product attributes, desired benefits, and strong beliefs and values.
Positioning on product attributes for Cheerios would include the crunchy taste and the natural ingredients that make up the cereal. Desired benefit positioning might include the cereal being helpful in lowering cholesterol levels and staying crunchy in milk. The belief and value positioning for Cheerios can play on its long history with themes of nostalgia and tradition.
5. What issues should a manufacturer of canned green beans consider when deciding between selling the product as a manufacturer’s brand, store brand, licensed brand, or co-branded product?
There are many issues to consider in this decision, among them are the resources they have to promote a manufacturer’s brand, the demand for private label green beans from the retail stores and consumers, the profitability of licensing versus directly selling through private labels or national brands, and the potential partners that they could co-brand with. Students could also be asked about the advantages and disadvantages of these brand sponsorship options.
6. Discuss how the services offered by a dry cleaning company are different from the products offered by an auto parts store in terms of intangibility, inseparability, variability, and perishability.
The dry cleaner’s services (compared to the auto parts) cannot be seen, tasted, felt, heard, or smelled before they are bought (intangibility); their offering cannot be separated from the people providing the service (inseparability); their quality will depend on who provides the cleaning service as well as when, where, and how it is provided (variability); and finally they cannot build up an inventory and store it for later sale or use (perishability).
Application Questions
1. Consider the following brand extensions and evaluate how well the brand’s associations fit the new product: Kodak extending from film into batteries, Winnebago motor homes extending into tents, Fisher-Price toys extending into children’s eyeglass frames, Harley-Davidson motorcycles extending into cigarettes, and Dunkin’ Donuts extending into cereal. What about the proposed brand extensions work or do not work for you?
Instructors should focus student attention on how well the original brand’s associations fit the new product. Students should consider what fit means in this context (examples include image fit, usage occasion fit, and ingredient fit).
2. Develop a list of five characteristics that a good brand name should possess. Come up with three good brand names and three poor brand names of actual products currently sold based on the characteristics in your list. Imagine you are opening up a pizza restaurant. What would be a good name for the restaurant based on the characteristics in your list?
The name for the retail pizza outlet is analogous to brand naming. Good brand names should suggest something about the product’s benefits and qualities; be easy to pronounce, recognize, and remember; be distinctive; be extendable; and should translate easily into foreign languages. All but the last issue are appropriate to consider in naming the pizza restaurant.
3. Describe a product you feel must be customized or adapted to sell in different markets around the world and one you feel can sell in a standardized format. Discuss what it is about the two products that requires customization in one case, but not in the other. Can you articulate your reasons into general principles a company might use when considering the need to customize?
Issues that students may suggest include the ability of a product in a single form to satisfy consumers in different parts of the world. Products lacking this quality should consider customization. Another issue deals with governmental regulation; if governmental regulations are relatively homogeneous across different countries, then a standardized product is more feasible. Markets vary in their economic conditions, competition, legal requirements, and physical environments. These factors, depending upon the specific product, may suggest customization.
Under the Hood/Focus on Technology
The Hilton hotel’s product mix is represented by nine different hotel brands located around the world. Visit the web pages of three of Hilton’s hotel brands (www.hilton.com, www.hamptoninn.com, and www.conradhotels.com) and respond to the following questions.
1. How are these three hotel brands positioned relative to each other?
Conrad Hotels is positioned as the premiere luxury brand, Hilton is positioned as the middle tier brand, and Hampton Inn is positioned as the low-cost brand.
2. Discuss Hilton’s various hotel brands with respect to the concepts of product line stretching and product line filling.
Product line stretching occurs when a company lengthens its product line beyond its current range. A company can stretch its line downward, upward, or both ways.
Product line filling is adding more items within the present range of the line. Hilton appears to have used both stretching and filling strategies. In terms of stretching, they appear to have stretched in both directions from the core Hilton property product. Additionally, some of the hotel chains compete with each other and thus the addition of these brands might be considered more of a filling strategy.
3. Why does Hilton use different brand names for each hotel? Do you agree or disagree with this approach?
Hilton is essentially using a multibranding strategy by offering multiple hotel lines using different names. This aids in being able to uniquely position one brand from the other. As such, different market segments are more easily targeted. A disadvantage is that the other brands are unable to leverage off the good Hilton hotel image.
Focus on Ethics
Companies have an interest in protecting their brand names whether in the physical world or the cyber world. The term cybersquatting has been used to refer to an individual registering a domain name that is identical or confusingly similar to a distinctive, famous trademark. For example, consider the website www.amazom.com compared to www.amazon.com. Cybersquaters typically did this with the goals of either using the similar web address to bring traffic to their own website or with the hope of selling the domain name back to the company for a substantial profit. Cybersquatting was made illegal in the United States by the 2000 Anti-Cybersquatting Consumer Protection Act. Under this law, individuals who are found to have registered a domain name in “bad faith” are subject to fines up to $100,000 per domain name.
1. Why should companies care about cybersquatters?
Cybersquatters have the potential to damage a company’s image, or worse, harm its relationship with customers. Brand name development is expensive and should be protected.
2. Some people feel that domain names should be on a “first come, first served” basis with no company or individual having a claim on unregistered domain names. How do you feel about that perspective?
Student responses will vary. Although some uses are legitimate (e.g., a person whose last name is Ford setting up a “Ford.com” type of website), those individuals who are just taking the domain name in order to profit from the good name of others seems unethical.
3. How does protecting one’s brand name in cyberspace compare with trademark protection?
The ideas are actually very similar. Both may require legal action, both require the company to monitor how others use their brand name, and both can have negative consequences for the firm if not protected properly.
Great Ideas
Barriers to Effective Learning
1. Students will most likely have difficulty understanding the levels of products exhibited in Figure 7-1; no one in class is likely to have thought of a product in that level of detail before. This is a critical piece of information the students will need, however, so it is worthwhile going through several products and services to get at the core benefit, actual product, and augmented product in each so that they can see how to apply this concept.
2. Many students have trouble with the concepts of product line and product mix. Using examples from Procter & Gamble tends to help tremendously here, because they have very deep product lines and a very varied product mix.
3. Students’ eyes can glaze over at the concepts of brand equity and brand sponsorship. Asking questions such as the students’ perceptions of well-known brands such as Starbucks, Coke, Nike, and the like will help them understand what brand equity is all about. You can also tie in the discussion of the three levels of product with this idea of brand equity. Finally, by using different products with different brand sponsorships—several examples from Sears, auto companies, department store private labels, and various licensed properties from Disney or Warner Brothers will do—you can bring students to an understanding of this important concept.
4. The service characteristics of intangibility, inseparability, variability, and perishability are usually picked up fairly easily, but again, various examples from day-to-day life help. For instance, everyone has had to cancel at least one doctor’s appointment in his or her life—that beautifully illustrates the problem of perishability. Girls will understand inseparability by talking about the beauty salons they use. Ask: If the hairdresser you used left, would you easily switch to another person at the salon? Most students today travel heavily, so talking about airline personnel can illustrate service variability. Intangibility is the easiest characteristic to appreciate, as most students will have suffered through having to choose between several universities from whom they’d received acceptances.
Student Projects
1. In small groups, discuss how you select a restaurant when you want to celebrate a key event. List and explain the core, actual, and augmented service that you would like a chosen restaurant to provide.
2. List five brand names that exhibit the characteristics listed in the text. List five brand names that violate many or most of these characteristics. Are there any differences in their success in the market?
3. List three companies each that use manufacturer’s brand sponsorship, private brands, and licensed brands.
Classroom Exercise/Homework Assignment
The ServiceMaster Company wants to keep your lawn the envy of your neighbors, keep your property free of bugs, and your house clean and tidy. Yet very few people have actually heard of ServiceMaster. But almost everyone has heard of many of their brands, including Terminix bug control, Merry Maids housecleaning, and TruGreen ChemLawn lawn service. Go to their website at www.servicemaster.com and review their product and service offerings.
1. What type of product mix does ServiceMaster offer?
ServiceMaster’s tag line is “Schedule any home service, and leave the work to us.” They have focused on providing any kind of service that will keep your home safe, neat, and clean. Their product mix is fairly broad, yet concentrated.
2. What is the core product, actual product, and augmented product for TruGreen ChemLawn?
Most suburbanites want a gorgeous lawn that will help them show off their homes to their best advantage. The core product here, then, would be a desire to look good to neighbors. The actual product would be the fertilizers and pest control applied to the lawn. Finally, the augmented product would be the service provided in applying the chemicals and the guarantees the company provides for healthy-looking lawns.
3. How has ServiceMaster fared in selecting brand names for their products? Do they meet the criteria of suggesting the product’s benefits and qualities, being easy to pronounce, and being distinctive?
Merry Maids certainly meets the criteria. Terminix may or may not; certainly you can see that something might die, but what? TruGreen ChemLawn is a little long for a name (ServiceMaster acquired and then merged these two formerly competing companies), but a consumer would have no doubt about what this division provides. ServiceMaster also provides disaster recovery under this brand name, but very few consumers know about this service, and it can be tough to find on the website. It also doesn’t suggest the product’s benefits or qualities.
Classroom Management Strategies
At this point, the textbook is well on its way to delving deeply into the topics it presented in earlier chapters. This chapter will challenge the students to think more deeply about the concepts of products, services, and branding strategy.
1. The first major section of this chapter, What Is a Product?, should take 10 minutes. The primary focus should be on the classification of products and services, which will aid in the comprehension of the next section.
2. Product and Service Decisions should be covered in 20 minutes. The individual product decisions have the most material, and by and large students will never have focused before this on how important such issues as packaging and labeling are. Bringing in several products to discuss these attributes is generally helpful. Students will generally be confused about the product line and product mix decisions, and so a careful discussion of these topics is beneficial.
3. Branding Strategy should also take 20 minutes. Branding decisions are closely tied in with positioning discussed in the last chapter, but now would also be a good time to cover such areas as naming and sponsorship. Again, confusion can enter the student’s mind regarding line extensions, brand extensions, multibrands, and new brands, so examples of each are very helpful.
4. Services marketing can be covered in 10 minutes. The special characteristics of services, outlined in Figure 7-5, are very important to understanding the differences between products and services. The service-profit chain seems a difficult concept to students until they work through the fact that each link in the chain leads to the next.
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