Lecture 11

Learning Objectives  What are the characteristics of products?  How can a company build and manage its product mix and product lines?  How can a company make better brand decisions?  How can packaging and labeling be used as marketing tools?

The Product & The Product Mix Product ○ Physical goods ○ Services ○ Experiences ○ Events ○ Persons ○ Places ○ Properties ○ Organizations ○ Information ○ Ideas

Product Levels Product Levels based on Customer value hierarchy Core benefit Basic product Expected product Augmented product Potential Product

Example  Level 1: Core Benefit – Rest & Sleep  Level 2: Basic Product – Bed, Bathroom, Towels, Desk, Dresser, Closet  Level 3: Expected Product – Clean Bed, Fresh Towels, Working Lamps  Level 4: Augmented Product – Exceed Customer Expectations  Level 5: Potential Product – All Possible Augmentation

Product hierarchy Need family (Thirst Quenching) Product family (Beverages) Product class (Tea, Water, Juice) Product line (Tea Mixture, Tea Bag, Etc.) Product type (Tea Bag) Item (ONE Tea Bag)

Product system is a group of diverse but related items that function in a compatible manner e.g. television, cable Product system is a group of diverse but related items that function in a compatible manner e.g. television, cable Product mix Is the set of all products and items that a particular seller offers for sale to buyers Product mix

Product classifications Durability and Tangibility Classification: Durability and Tangibility Classification: ○ Nondurable goods Nondurable goods ○ Durable goods Durable goods ○ Services Services

Product classifications Consumer-Goods Classification: ○ Convenience goods (frequently, immediately and with little effort) Convenience goods (frequently, immediately and with little effort) Staples Impulse goods Emergency goods ○ Shopping goods Shopping goods Homogeneous shopping goods Homogeneous shopping goods Heterogeneous shopping goods Heterogeneous shopping goods ○ Specialty goods Specialty goods ○ Unsought goods Unsought goods

Product mix has a certain: ○ Width Width ○ Length Length ○ Depth Depth ○ Consistency Consistency

Product-line decisions Product-line analysis ○ Sales and Profits Sales and Profits Four types of product classes: Four types of product classes: ○ Core product Core product ○ Staples Staples ○ Specialties Specialties ○ Convenience items Convenience items

Product-line length Line Stretching ○ Downmarket Stretch Downmarket Stretch The company may notice strong growth opportunities as mass retailers attract a growing number of shoppers The company may notice strong growth opportunities as mass retailers attract a growing number of shoppers The company may wish to tie up lower-end competitors who might otherwise try to move upmarket The company may wish to tie up lower-end competitors who might otherwise try to move upmarket The company may find that the middle market is stagnating or declining The company may find that the middle market is stagnating or declining ○ Upmarket Stretch Upmarket Stretch ○ Two-Way Stretch Two-Way Stretch

Class Exercise  Kmart has entered into branding and distribution agreements with celebrities like Kate Smith for women’s apparel and Martha Stewart in house wares, gardening supplies, etc. Is this an upmarket stretch, a downmarket stretch or a two-way stretch for Kmart? Kmart has entered into branding and distribution agreements with celebrities like Kate Smith for women’s apparel and Martha Stewart in house wares, gardening supplies, etc. Is this an upmarket stretch, a downmarket stretch or a two-way stretch for Kmart?

Line Filling ○ Just-noticeable difference Just-noticeable difference Line Modernization, featuring, and pruning Line Modernization, featuring, and pruning

Brand decisions What is brand? ○ Attributes ○ Benefits ○ Values ○ Culture ○ Personality ○ User

Commonly used research approaches to determine brand meaning Word associations Personifying the brand Personifying the brand Laddering up the brand essence Laddering up the brand essence ○ Brand essence Brand essence ○ Laddering up Laddering up

Building Brand Identity Brand bonding ○ Brands are not built by advertising but by the brand experience Brands are not built by advertising but by the brand experience ○ Everyone in the company lives the brand Everyone in the company lives the brand ○ Three ways to carry on internal branding – Employees must Three ways to carry on internal branding – Employees must Understand Desire, and Deliver on the brand promise

Brand Equity Brand awareness Brand acceptability Brand preference ○ Aaker’s five levels of customer attitude: Aaker’s five levels of customer attitude: The customer will change brands, especially for price reasons. No brand loyalty. The customer will change brands, especially for price reasons. No brand loyalty. Customer is satisfied. No reason to change brands. Customer is satisfied. No reason to change brands. Customer is satisfied and would incur cost by changing brand. Customer is satisfied and would incur cost by changing brand. Customer values the brand and sees it as a friend. Customer values the brand and sees it as a friend. Customer is devoted to the brand.

Value of Brand Equity ○ Brand valuation Brand valuation ○ Competitive advantages of high brand equity: Competitive advantages of high brand equity: The company will have more leverage in bargaining with distributors and retailers because customers expect them to carry the brand. The company will have more leverage in bargaining with distributors and retailers because customers expect them to carry the brand. The company can charge a higher price than its competitors because the brand has higher perceived quality. The company can charge a higher price than its competitors because the brand has higher perceived quality. The company can more easily launch extensions because the brand name carries high credibility. The company can more easily launch extensions because the brand name carries high credibility. The brand offers some defense against price competition. The brand offers some defense against price competition.

 Managing Brand Equity Managing Brand Equity

Branding Challenges  Branding Decision: To Brand or Not to Brand? Branding Decision: To Brand or Not to Brand?

Branding gives the seller several advantages: Branding gives the seller several advantages: ○ Brand name makes it easier for the seller to process orders and track down problems Brand name makes it easier for the seller to process orders and track down problems ○ Seller’s brand name and trademark provide legal protection of unique product features Seller’s brand name and trademark provide legal protection of unique product features ○ Branding gives the seller the opportunity to attract a loyal and profitable set of customers. Branding gives the seller the opportunity to attract a loyal and profitable set of customers. ○ Branding helps the seller segment markets. Branding helps the seller segment markets. ○ Strong brands help build corporate image, making it easier to launch new brands and gain acceptance by distributors and consumers. Strong brands help build corporate image, making it easier to launch new brands and gain acceptance by distributors and consumers.

Brand-Sponsor Decisions ○ Manufacturer brand Manufacturer brand ○ Distributor brand Distributor brand ○ Licensed brand name Licensed brand name ○ Slotting fee Slotting fee ○ Brand ladder Brand ladder ○ Brand parity Brand parity

Brand-Name Decision ○ Four available strategies: Four available strategies: Individual names Blanket family names Separate family names for all products Corporate name combined with individual product names Corporate name combined with individual product names

Desirable qualities for a brand name ○ It should suggest something about the product’s benefits It should suggest something about the product’s benefits ○ It should suggest the product or service category It should suggest the product or service category ○ It should suggest concrete, “high imagery” qualities It should suggest concrete, “high imagery” qualities ○ It should be easy to spell, pronounce, recognize, and remember It should be easy to spell, pronounce, recognize, and remember ○ It should be distinctive It should be distinctive ○ It should not carry poor meanings in other countries and languages It should not carry poor meanings in other countries and languages

Brand building tools ○ Public relations and press releases Public relations and press releases ○ Sponsorships Sponsorships ○ Clubs and consumer communities Clubs and consumer communities ○ Factory visits Factory visits ○ Trade shows Trade shows ○ Event marketing Event marketing

○ Public facilities Public facilities ○ Social cause marketing Social cause marketing ○ High value for the money High value for the money ○ Founder’s or a celebrity personality Founder’s or a celebrity personality ○ Mobile phone marketing Mobile phone marketing

Brand Strategy Decision Functional brand Image brand Experimental brands Experimental brands ○ Line Extensions Line Extensions Branded variants ○ Brand extensions Brand extensions Brand dilution

○ Multibrands, New Brands, and Co-Brands Multibrands, New Brands, and Co-Brands Multibrand -Flanker BandsFlanker Bands Co-branding (Dual branding) -Ingredient co-brandingIngredient co-branding -Same-company co-brandingSame-company co-branding -Joint venture co-brandingJoint venture co-branding -Multisponsor co-brandingMultisponsor co-branding

Packaging and Labeling Packaging Package ○ Primary Package Primary Package ○ Secondary Package Secondary Package ○ Shipping Package Shipping Package Factors which have contributed to the growing use of packaging as a marketing tool Factors which have contributed to the growing use of packaging as a marketing tool ○ Self-Service Self-Service ○ Consumer affluence Consumer affluence ○ Company and brand image Company and brand image ○ Innovation opportunity Innovation opportunity

Labeling ○ Functions Functions Identification Grading Description ○ Consumerists have lobbied for: Consumerists have lobbied for: Open dating Unit pricing Grade labeling Percentage labeling