1. Product, Services, and Branding Strategy A Global Perspective 8 Philip Kotler Gary Armstrong Swee Hoon Ang Siew Meng Leong Chin Tiong Tan Oliver Yau Hon-Ming PowerPoint slides adapted by Peggy Su 8-1

2. 8-2 Learning Objectives After studying this chapter, you should be able to: 1.Define product and the major classifications of products and services. 2.Describe the decisions companies make regarding their individual products and services, product lines, and product mixes. 3.Discuss branding strategy—the decisions companies make in building and managing their brands. 4.Identify the four characteristics that affect the marketing of a service and the additional marketing considerations that services require.

3. 8-3 Chapter Outline 1.What is a Product? 2.Product and Service Decisions 3.Branding Strategy: Building Strong Brands 4.Services Marketing

4. 8-4Copyright © 2009 Pearson Education South Asia Pte Ltd What is a Product? Products, Services, and Experiences A product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want. E.g. soap, toothpaste © Bradley Johnson

5. 8-5Copyright © 2009 Pearson Education South Asia Pte Ltd What is a Product? Products, Services, and Experiences Service is a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in ownership. E.g., Doctor’s exam, legal advice

6. 8-6Copyright © 2009 Pearson Education South Asia Pte Ltd Products, Services, and Experiences Experiences represent what buying the product or service will do for the customer. E.g., Disney, Lego, Toys “R” Us What Is a Product? © Bradley Johnson © Audry Drapier

7. 8-7Copyright © 2009 Pearson Education South Asia Pte Ltd What is a Product? Levels of Products and Services Core benefits Actual product Augmented product

8. 8-8Copyright © 2009 Pearson Education South Asia Pte Ltd What is a Product? Levels of Product and Services Core benefits represent what the buyer is really buying. Actual product represents the design, brand name, and packaging that delivers the core benefit to the customer. Augmented product represents additional services or benefits of the actual product.

9. 8-9Copyright © 2009 Pearson Education South Asia Pte Ltd What is a Product? Product and Service Classifications Consumer products Industrial products

10. 8-10Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Product and Service Classifications Consumer products are products and services for personal consumption. Classified by how consumers buy them Convenience product Shopping products Specialty products Unsought products

11. 8-11Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Product and Service Classifications Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort. Newspapers Candy Fast food

12. 8-12Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Product and Service Classifications Shopping products are consumer products and services that the customer compares carefully on suitability, quality, price, and style. Furniture Cars Appliances

13. 8-13Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Product and Service Classifications Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Designer watches Branded fashion wear High-end electronics

14. 8-14Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Product and Service Classifications Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying. Life insurance Funeral services Blood donations

15. 8-15Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Product and Service Classifications Industrial products are products purchased for further processing or for use in conducting a business. Classified by the purpose for which the product is purchased Materials and parts Capital items Raw materials

16. 8-16Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Product and Service Classifications Materials and parts include raw materials and manufactured materials and parts usually sold directly to industrial users. Wheat Wood Iron Cement

17. 8-17Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Product and Service Classifications Capital items are industrial products that aid in the buyer’s production or operations. Buildings Elevators Computers

18. 8-18Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Organizations, Persons, Places, and Ideas Organization marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward an organization.

19. 8-19Copyright © 2009 Pearson Education South Asia Pte Ltd What Is a Product? Organizations, Persons, Places, and Ideas Person marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward particular people. Andy Lau Stephanie Sun Siti Nuraliza

20. 8-20 What Is a Product? Organizations, Persons, Places, and Ideas Place marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward particular places. Tourism, e.g. the Great Wall of China, Walt Disney World.

21. 8-21 Organizations, Persons, Places, and Ideas Social marketing is the use of commercial marketing concepts and tools in programs designed to influence individuals’ behavior to improve their well-being and that of society. Public health campaigns Tourism What Is a Product?

22. 8-22Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Individual Product and Service Decisions Product attributes Branding Packaging Labeling Product support services

23. 8-23Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Individual Product and Service Decisions Product attributes are the benefits of the product or service. Quality Features Style and design

24. 8-24Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Individual Product and Service Decisions Quality in terms of The product or service is the lack of defects. The customer is the value and satisfaction provided by the product or service.

25. 8-25Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Individual Product and Service Decisions Product quality includes level and consistency. Quality level is the level of quality that supports the product’s positioning. Performance quality is the ability of a product to perform its functions. Quality consistency is the freedom from defects and the delivering of a targeted level of performance.

26. 8-26Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Individual Product and Service Decisions Product features are a competitive tool for differentiating a product from competitors’ products. Assessed based on the value to the customer versus the cost to the company.

27. 8-27Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Individual Product and Service Decisions Product style and design add value to customer value. Style describes the appearance of the product. Design contributes to a product’s usefulness as well as to its looks.

28. 8-28Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Individual Product and Service Decisions Brand is the name, term, sign, or design, or a combination of these, that identifies the maker or seller of a product or service.

29. 8-29 Product and Service Decisions Individual Product and Service Decisions Packaging involves designing and producing the container or cover for a product. Label identifies the product or brand, describes attributes, and provides promotion.

30. 8-30 Product and Service Decisions Product support services augment actual products. Companies must continually: Assess the value of current services to obtain ideas for new ones. Assess the costs of providing these services. Develop a package of services to satisfy customers and provide profit to the company.

31. 8-31 Product and Service Decisions Product Line Decisions 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.

32. 8-32 Product and Service Decisions Product Line Decisions Product line length is the number of items in the product line. Line stretching Line filling

33. 8-33 Product and Service Decisions Product Line Decisions Product line stretching is when a company lengthens its product line beyond its current range. Downward Upward Combination of both

34. 8-34Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Product Line Decisions Downward product line stretching is used by companies at the upper end of the market to plug a market hole or respond to a competitor’s attack. Upward product line stretching is by companies at the lower end of the market to add prestige to their current products.

35. 8-35 Product and Service Decisions Product Line Decisions Combination line stretching is used by companies in the middle range of the market to achieve both goals of upward and downward line stretching.

36. 8-36Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Product Line Decisions Product line filling occurs when companies add more items within the present range of the line. More profits Satisfying dealers Excess capacity Plugging holes to fend off competitors

37. 8-37Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Product Mix Decisions Product mix consists of all the products and items that a particular seller offers for sale. Width Length Depth Consistency

38. 8-38Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Product Mix Decisions Product mix width is the number of different product lines the company carries. Product mix length is the total number of items the company carries within its product lines.

39. 8-39Copyright © 2009 Pearson Education South Asia Pte Ltd Product and Service Decisions Product Line Decisions Product line depth is the number of versions offered of each product in the line. Consistency is how closely the various product lines are in end use, production requirements, or distribution channels.

40. 8-40Copyright © 2009 Pearson Education South Asia Pte Ltd Branding Strategy: Building Strong Brands Brand represents the consumer’s perceptions and feelings about a product and its performance. It is the company’s promise to deliver a specific set of features, benefits, services, and experiences consistently to the buyers.

41. 8-41Copyright © 2009 Pearson Education South Asia Pte Ltd Branding Strategy: Building Strong Brands Brand equity is the positive differential effect that knowing the brand name has on customer response to the product or service. Provides competitive advantage: Consumer awareness and loyalty Benefits Beliefs and value

42. 8-42Copyright © 2009 Pearson Education South Asia Pte Ltd Customer equity is the value of the customer relationships that the brand creates. Brand valuation is the process of estimating the total financial value of the brand. Branding Strategy: Building Strong Brands

43. 8-43Copyright © 2009 Pearson Education South Asia Pte Ltd Brand strategy decisions include: Brand positioning Brand name selection Brand sponsorship Brand development Branding Strategy: Building Strong Brands

44. 8-44Copyright © 2009 Pearson Education South Asia Pte Ltd Brand Positioning Brand strategy decisions include: Product attributes Product benefits Product beliefs and values Branding Strategy: Building Strong Brands

45. 8-45Copyright © 2009 Pearson Education South Asia Pte Ltd Brand Name Selection Desirable qualities Suggests benefits and qualities Easy to pronounce, recognize, and remember Distinctive Extendable Translatable for the global economy Branding Strategy: Building Strong Brands

46. 8-46Copyright © 2009 Pearson Education South Asia Pte Ltd Brand Sponsorship Manufacturer’s brand Private brand Licensed brand Co-brand Branding Strategy: Building Strong Brands

47. 8-47Copyright © 2009 Pearson Education South Asia Pte Ltd Brand Sponsorship Private brands provide retailers with advantages. Product mix control Slotting fees for manufacturers’ brands Higher margins Exclusivity Branding Strategy: Building Strong Brands

48. 8-48Copyright © 2009 Pearson Education South Asia Pte Ltd Brand Development Line extensions Brand extensions Multibrands New brands Branding Strategy: Building Strong Brands

49. 8-49Copyright © 2009 Pearson Education South Asia Pte Ltd Brand Development Line extensions occur when a company extends existing brand names to new forms, colors, sizes, ingredients, or flavors of an existing product category. Branding Strategy: Building Strong Brands

50. 8-50Copyright © 2009 Pearson Education South Asia Pte Ltd Brand Development Brand extensions extend a brand name to a new or modified product in a new category. Branding Strategy: Building Strong Brands

51. 8-51Copyright © 2009 Pearson Education South Asia Pte Ltd Brand Development Multibrands are additional brands in the same category. Branding Strategy: Building Strong Brands

52. 8-52Copyright © 2009 Pearson Education South Asia Pte Ltd Brand Development New brands are used when existing brands are inappropriate for new products in new product categories or markets. Branding Strategy: Building Strong Brands 1970s-1990s Sony's Trinitron Color TV © Ged Carroll 2000 and beyond Sony’s BRAVIA widescreen LCD TV © Nate Grigg

53. 8-53Copyright © 2009 Pearson Education South Asia Pte Ltd Managing Brands Requires: Continuous brand communication Customer-centered training Brand checks Branding Strategy: Building Strong Brands

54. 8-54Copyright © 2009 Pearson Education South Asia Pte Ltd Companies must manage their brands carefully. First, the brand’s positioning must be continuously communicated to consumers. Major brand marketers often spend huge amounts on advertising to create brand awareness and build preference and loyalty. For example, Verizon spends more than $3.7 billion annually to promote its brand. McDonald’s spends more than $1.2 billion. Such advertising campaigns can help create name recognition, brand knowledge, and perhaps even some brand preference. However, the fact is that brands are not maintained by advertising but by customers’ brand experiences.

55. 8-55Copyright © 2009 Pearson Education South Asia Pte Ltd Today, customers come to know a brand through a wide range of contacts and touch points. These include advertising but also personal experience with the brand, word of mouth, company Web pages, and many others. The company must put as much care into managing these touch points as it does into producing its ads. “Managing each customer’s experience is perhaps the most important ingredient in building loyalty.

56. 8-56 Services have grown dramatically in recent years. Services now account for close to 80 percent of the U.S. gross domestic product (GDP). And the service industry is growing. By 2014, it is estimated that nearly four out of five jobs in the United States will be in service industries. Services are growing even faster in the world economy, making up 64 percent of the gross world product.

57. 8-57 Services Marketing Types of Service Industries Government Private not-for-profit organizations Business services. Service industries vary greatly.  Governments offer services through courts, employment services, hospitals, military services, police and fire departments, the postal service, and schools.  Private not-for-profit organizations offer services through museums, charities, churches, colleges, foundations, and hospitals.  A large number of business organizations offer services— airlines, banks, hotels, insurance companies, consulting firms, medical and legal practices, entertainment and telecommunications companies, real-estate firms, retailers, and others

58. 8-58 Services Marketing Nature and Characteristics of a Service Intangibility Inseparability Variability Perishability

59. 8-59Copyright © 2009 Pearson Education South Asia Pte Ltd Services Marketing Nature and Characteristics of a Service Intangibility refers to the fact that services cannot be seen, tasted, felt, heard, or smelled before they are purchased. Inseparability refers to the fact Services are produced and consumed at the same time and cannot be separated from their providers.

60. 8-60Copyright © 2009 Pearson Education South Asia Pte Ltd Physical goods are produced, then stored, later sold, and still later consumed. In contrast, services are first sold and then produced and consumed at the same time. In services marketing, the service provider is the product. 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.

61. 8-61Copyright © 2009 Pearson Education South Asia Pte Ltd Services Marketing Nature and Characteristics of a Service Variability refers to the fact that service quality depends on who provides it as well as when, where, and how it is provided. Perishability refers to the fact that services cannot be stored for later sale or use.

62. 8-62 Services Marketing Marketing Strategies for Service Firms In addition to traditional marketing strategies, service firms often require additional strategies: Service-profit chain Internal marketing Interactive marketing

63. 8-63 Services Marketing Marketing Strategies for Service Firms Service-profit chain: In a service business, the customer and the front-line service employee interact to create the service. Effective interaction, in turn, depends on the skills of front-line service employees and on the support processes backing these employees. Thus, 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.

64. 8-64 This chain consists of five links: Internal service quality: superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which results in.. Satisfied and productive service employees: more satisfied, loyal, and hardworking employees, which results in... Greater service value: more effective and efficient customer value creation and service delivery, which results in... Satisfied and loyal customers: satisfied customers who remain loyal, repeat purchase, and refer other customers, which results in... Healthy service profits and growth: superior service firm performance.

65. 8-65 Therefore, reaching service profits and growth goals begins with taking care of those who take care of customers. Four Seasons Hotels and Resorts, a chain legendary for its outstanding customer service, is also legendary for its motivated and satisfied employees. Similarly, customer-service all-star Zappos.com, the online shoe, clothing, and accessories retailer, knows that happy customers begin with happy, dedicated, and energetic employees

66. 8-66 Services Marketing Marketing Strategies for Service Firms Internal marketing means that the service firm must orient and motivate its customer contact employees and supporting service people to work as a team to provide customer satisfaction. Internal marketing must precede external marketing. For example, Four Seasons Hotels and Resorts starts by hiring the right people and carefully orienting and inspiring them to give unparalleled customer service.

67. 8-67 Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter. In product marketing, product quality often depends little on how the product is obtained. But in services marketing, service quality depends on both the service deliverer and the quality of delivery. Service marketers, therefore, have to master interactive marketing skills. Thus, Four Seasons selects only people with an innate “passion to serve” and instructs them carefully in the fine art of interacting with customers to satisfy their every need. All new hires complete a three-month training schedule, including improvisation exercises to help them improve their customer interaction skills. Service differentiation Service quality Service productivity

68. 8-68 Services Marketing Marketing Strategies for Service Firms Managing service differentiation creates a competitive advantage from the offer, delivery, and image of the service. Offer can include distinctive features. Delivery can include more able and reliable customer contact people, environment, or process. Image can include symbols and branding.

69. 8-69 Services Marketing Marketing Strategies for Service Firms Managing service quality provides a competitive advantage by delivering consistently higher quality than its competitors. Service quality always varies depending on interactions between employees and customers.

70. 8-70 Services Marketing Marketing Strategies for Service Firms Service recovery can turn disappointed customers into loyal customers. Empower employees Responsibility Authority Incentive

71. 8-71 Services Marketing Marketing Strategies for Service Firms Managing service productivity refers to the cost side of marketing strategies for service firms. Employee recruiting, hiring, and training strategies Service quantity and quality strategies