Chapter 8 Products, Services, and Branding Idil Yaveroglu Lecture Notes

Product vs. Service Product Service 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.

Product?

Consider Apple What goods and services do they offer? How do they differentiate through experience? What is their core, actual and augmented product offering?

Types of Consumer Products Convenience Frequent purchases bought with minimal buying effort and little comparison shopping Low price Widespread distribution Mass promotion by producer Eg. Toothpaste, candy, milk Shopping Less frequent purchases More shopping effort for comparisons Higher than convenience good pricing Selective distribution in fewer outlets Advertising and personal selling Eg. Shoes, clothing,

Types of Consumer Products Specialty Strong brand preference and loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity High price Exclusive distribution Carefully targeted promotions Eg. Luxury products, Unsought Little product awareness and knowledge (or if aware, sometimes negative interest) Pricing varies Distribution varies Aggressive advertising and personal selling by producers and resellers

Unsought Product

Product and Service Classifications Consumer products Industrial products Materials and parts Capital items Supplies and services Organization, Person, Places and Ideas http://www.youtube.com/ watch?v=EZWy1_KLtuc

Product and Service Decisions -Quality -Features -Quality and Design A name, term, sign, symbol, or design that identifies the product -Contain and protect -Promote the product -Differentiate the product -Serves to identify the product -Describes the product -Promotes the product

Differentiating by Packaging

Product Mix Decisions Product mix - the number of product lines offered by a company. Product line - A group of closely-related product items. Product mix width - the number of product lines a company markets Product line depth - the number of brands within each product line

P&G’s Product Lines and Mix Width of the product mix Laundry Baby Care Deodorants Hair Care Household Oral Care Cosmetics …. Cleaners Depth of the product lines

HOW DOES AN EXTENSIVE PRODUCT LINE BENEFIT BOTH CONSUMERS AND RETAILERS?

Product Mix Decisions Benefits of multiple product lines (greater width) Diversifies risk Capitalizes on established reputations Protection from competition Increased growth and profits Greater market impact Economical resource usage

Product Line Depth Advantages of Greater Product Depth Attracts buyers with different preferences Increases sales/profits by further market segmentation Capitalizes on economies of scale Evens out seasonal sales patterns

Branding Decisions Brands: A name, term, symbol, design, or combination thereof that identifies a seller’s products and differentiates them from competitors’ products. used to simplify choices and reduce purchase risk for consumers Brand Mark: The elements of a brand that cannot be spoken. Brand equity - marketplace value of a brand based on reputation and goodwill Brand equity is the positive differential effect that knowing the brand name has on customer response to the product or service

Brand Equity Facts Coca Cola’s assets are worth $15 billion. Its market value however is worth $101 billion. Microsoft’s assets are worth $7 billion and its market value is $61 billion.

Brand Equity Facts Coca Cola charges 30-40% more than RC Cola – and still outsells it almost 10 to 1. Tylenol charges $6.99 for 100 tablets while Advil charges $4.99 – still Tylenol is the leader. Of the leading brands in 20 product categories in the year 1925, 17 – or 85% of them were still the market leader in 2000.

Brand Equity Leaders in 1925 Nabisco Wrigley Gillette Ivory Coca-Cola Campbell’s Lipton

Brand Equity Leaders in 2000 Nabisco Wrigley Gillette Ivory Coca-Cola Campbell’s Lipton

Brand Positioning Three levels of positioning: Product attributes Least effective Benefits Beliefs and values Taps into emotions

http://www.youtu be.com/watch?v= sTw4CTZzz9Q

http://www.youtube.com/watch?v=NwCn-D5xFdc http://www.youtube.com/watch?v=9dUUbLYtUCo http://www.youtube.com/watch?v=ROEfC5-OA4w

Brand Name Selection Good Brand Names: Suggest something about the product or its benefits (Die Hard Batteries, Craftsman Tools, Easy- Off Cleaners, Silk and Shine Shampoo) Are easy to say, recognize and remember (Tide, Delta, Pampers etc) Are distinctive Are extendable (in case you want to extend to other categories) Translate well into other languages Can be registered and legally protected

Brand Sponsorship Manufacturer brands Private (store) brands Costly to establish and promote Higher profit margins Licensed brands Name and character licensing has grown Co-branding

Brand Development Line extensions Brand extensions Multibrands Minor changes to existing products Brand extensions Successful brand names help introduce new products Levis Tailored Classics, Swiss Army, Multibrands Multiple product entries in a product category (P&G) New brands New product category Product Category/ Existing New Existing Brand Name Line Extension Brand Extension New Brand Name Multibrands New Brands

Advantages of Extensions Facilitate New Product Acceptance Improve brand image Reduce risk perceived by consumers Increase the probability of gaining distribution and trial Increase efficiency of promotional expenditures Reduce costs of introductory and follow up marketing programs Avoid cost of developing a new brand Permit consumer variety seeking

Disadvantages of Brand Extensions Can confuse or frustrate consumers Can fail and hurt parent brand image Can succeed but cannibalize sales of parent brand Can succeed but diminish identification with any one category Can dilute brand meaning Can cause the company to forgo the chance to develop a new brand

McDonalds “Made for you” Service (2000) Expanded menu which included pizza, breakfast bagels, Arch Deluxe sandwich New Tastes Menu (2001) McDonalds ketchup (2000) – Germany McCafe (2001) – Portugal and Austria McTreat McSnack Spot

Examples of Category Extensions Successful Category Extensions Unsuccessful Category Extensions Ivory shampoo and conditioner Vaseline Intensive Care skin lotion Hershey chocolate milk Jell-O pudding Pops Visa traveler’s checks Sunkist Orange Soda Colgate toothbrushes Mars Ice Cream Bars Aunt Jemima pancake syrup Honda Lawn movers Campbell’s tomato sauce LifeSavers chewing gum Cracker Jack cereal Harley Davidson wine coolers Bic perfumes Ben-Gay aspirin Kleenex diapers Clorox Laundry detergent Levi’s Tailored classics Domino’s fruit flavored bubble gum Smucker’s ketchup Fruit of the Loom Laundry detergent