Priciples of Marketing

by Philip Kotler and Gary Armstrong

Chapter 8
Products, Services, and Brands
Building Customer Value

PEARSON
Objective Outline

What is a Product?
Define product and the major classifications of
1
products and services.

Product and Service Decisions

Describe the decisions companies make regarding
2 their individual products and services, product lines,
and product mixes.
Objective Outline

Services Marketing
Identify the four characteristics that affect the
3
marketing of services and the additional marketing
considerations that services require.

Branding: Building Strong Brands

4 Discuss branding strategy ─ the decisions companies
make in building and managing their brands.
What Is a Product?
 We define a product as anything that can be offer
ed to a market for attention, acquisition, use, or c
onsumption that might satisfy a want or need.
 Services are a form of product that consists of act
ivities, benefits, or satisfactions offered for sales t
hat are essentially intangible and do not result in t
he ownership of anything.
Products, Services, and Experiences
 Products are a key element in the overall market offering.
 Marketing mix planning begins with building an offering
that brings value to target customers.
 This offering becomes the basis on which the company b
uilds profitable customer relationships.

• Today, as products and services become more commoditized, many

companies are moving to a new level in creating value for their
customers.
• To differentiate their offers, beyond simply making products and
delivering services, they are creating and managing customer
experiences with their brands or company.
Levels of Product and Services
 Product planners need to think about products an
d services on three levels.
Most basic level ─ core customer
What is the buyer really buying?

Second level ─ actual product

They need to develop product and service features, a design,

a quality level, a brand name, and packaging.

Third level ─ augmented product

Around the core benefit and actual product by offering
additional consumer services and benefits
Product and Service Classifications

Two
classes

Consum Industri
er al
products products
Consumer Products
 Consumer products are products and services bought by
final consumers for personal consumption.
 Consumer products include convenience products, shoppi
ng products, specialty products, and unsought products.

They
They are
areconsumer
consumer products
products that
withcustomers,
unique in
They
Theyare consumer
are consumer products
productsand services that
that the consumer
Specialty
Unsought
Convenience
Shopping the process of
characteristics selecting
or brand and purchasing,
identification forusually
which
customers
either usually
does not buy
know frequently,
about or immediately,
knows about but
products
product
products compares on such attributes as suitability,
adoes
and significant
withnot
minimalgroup
normally of buyersbuying.
comparison
consider is willing
and buyingto make
quality,
a specialprice, and style.
purchase effort.
effort.
Industrial Products
 Industrial Materials and Parts
products are those products purchased for furt
her processing or raw
They include for use in conducting
materials as well asamanufactured
business.
 Thus,materials and parts.
the distinction between a consumer product and an
industrial product is based on the purpose for which the p
Capital Items
roduct is purchased.
Theygroups
 The three are industrial products
of industrial that aidand
products in the buyer’sare m
services
aterialsproduction or capital
and parts, operations, including
items, installations
and supplies and
and service
s. accessory equipment.

Supplies and Services

They include operating supplies (lubricants, coal,

paper, pencils) and repair and maintenance items
(paint, nails, brooms).
Organizations, Persons, Places, and
Ideas
Organization Marketing Ideas
• It also
consists
can of
be activities Person
[Link] to Marketing
create,
• In maintain,
one sense, or• change
It consists
all marketing thetheofmarketing
is activities of
undertaken
an idea, to
attitudes itand
whether behavior
is the create,
general ofidea maintain,
target or your
of brushing change attitudes
teeth or the
consumers
specific ideatoward an or
that Crest behavior toward
organization.
toothpastes createparticular people.
“healthy, beautiful
• smiles
Both profit and not-for-profit
for life.”
organizations
• Here, however,practice
we narroworganization
our focus to the marketing of social
marketing.
ideas (called social marketing).
• Social marketing is the use ofPlace commercial
Marketingmarketing
concepts and tools •in programs
It involvesdesigned
activitiestoundertaken
influence to
individuals’ behavior create,
improvemaintain,
their well-being
or change and that of
attitudes
society. or behavior toward particular places.
Product and Service Decisions
 Marketers make product and service decisions at three lev
els:

Product mix decisions

IndividualProduct
productline
decisions
decisions
Individual Product and Service Dec
isions
Product and Service Attributes
Total Quality Management
(TQM)
• In developing a product, the marketer must first
choose a quality level that will
Ansupport thein which all of
approach
Product Quality
product’s positioning. the company’s people are
• Here, product quality means involved in constantly
performance
quality ─ the product’s abilityimproving theits
to perform quality of
It is the characteristics
functions. of a products, services, and
product or a service that bear on business processes.
its ability to satisfy stated or
implied customer
• Beyond [Link], high quality also can mean high
quality
levels of quality consistency. Product quality has two
dimensions: level
• Here, product quality means conformance and─
quality
consistency.
freedom from defects and consistency in delivering a
targeted level of performance.
Product and Service Attributes
 Products Features.
• The company can then create higher-level models by ad
ding more features.
• Features are a competitive tool for differentiating the co
mpany’s product from competitors’ products.
• Being the first producer to introduce a valued new featur
e is one of the most effective ways to compete.
Product and Service Attributes
 Product Style and Design.
• Another way to add customer value is through distinctiv
e product style and design.
• Design is more than skin deep ─ it goes to the very heart
of a product.
• Good design contributes to a product’s usefulness as wel
l as to its looks.
Branding
 A brand is a name, term, sign, symbol, or design, or a co
mbination of these, that identifies the products or services
of one seller or group of sellers and differentiates them fr
om those of competitors.
 Brand names help consumers identify products that might
benefit them.
 Brands also say something about product quality and con
sistency ─ buyers who always buy the same brand know t
hat they will get the same features, benefits, and quality e
ach time they buy.
Packaging
 Packaging involves designing and producing the contain
er or wrapper for a product.
 In this highly competitive environment, the package may
be the seller’s last and best chance to influence buyers.
 Thus, for many companies, the package itself has become
an important promotional medium.
Labeling
 The label identifies the product or brand.
 The label might also describe several things about the pro
duct ─ who made it, where it was made, when it was mad
e, its contents, how it is to be used, and how to use it safel
y.
 The label might help to promote the brand, support its pos
itioning, and connect with customers.
Product Support Services
 The first step in designing support services is to survey cu
stomers periodically to assess the value of current service
s an obtain ideas for new ones.
 Once the company has assessed the quality of various sup
port services to customers, it can take steps to fix proble
ms and add new services that will both delight customers
and yield profits to the company.
Product Line Decisions
 A product line is a group of products that are closely rela
ted because they function in a similar manner, are sold to
Reasons for using product
the same customer groups, are marketed through the sam
line filling
e types of outlets, or fall within given price ranges.
 The• major product
Reaching line profits
for extra decision involves product line len
gth•─ Satisfying
the number dealers
of items in the product line.
• Using excess capacity
 Managers
• Beingneed to analyze their product lines periodically
the leading full-line
to assess each item’s sales and profits and understand ho
company
w each item contributes
• Plugging to the
holes to keep out line’s overall performance.
competitors
Product Line Decisions
 Product Line Stretching.
• The company can stretch its line downward, upward, or
both ways.

Downward
Upward
• Companies located at the upper end of the market can stretch
• Companies
their lines downward. Both their
can also stretch Directions
product lines upward.
• A
Tocompany
broaden its
Sometimes, may market
stretchappeal
companies and
downward
stretch boost togrowth,
to plug
upward BMW
a market
add tohas
hole
prestige in
that
their
recent years
otherwise
current stretched
would
products. attractitsa line
newincompetitor
both directions whiletoatathe
or respond
• Or
same time
competitor’s
they may filling theongaps
attack
be attracted theby inabetween.
upper [Link] rate or higher
faster
• margins
Or it mayatadd
the low-end
higher [Link] because it finds faster growth
taking place in the low-end segments.
Product Mix Decisions
 A product mix (or product portfolio) consists o
f all the product lines and items that a particular s
eller offers for sale.
 A company’s product mix has four important dim
ensions: width, length, depth, and consistency.
Product Mix Decisions

●
Refers to the number of different product lines
Product mix width the company carries.
• The company can increase its business in four ways.
• It can add new product lines, widening its product mix
• It can lengthen its Refers
existing
●
to theproduct linesofto
total number become
items a
a company
Product mix length carries within its product lines
more full-line company.
• It can add more versions of each product and thus
deepen its product mix.
• It can pursue moreRefers
product
●
to theline
number of versions─
consistency offered
or for
less
Product mix depth each product in the line
─ depending on whether it wants to have a strong
reputation in a single field or in several fields.
Consistency of the ●
Refers to how closely related the various product lines are in end use,
production requirements, distribution channels, or some other way.
product mix
Services Marketing
 Services have grown dramatically in recent years.
 Services now account for close to 65 percent of t
he U.S. gross domestic product (GDP).
 Services are growing even faster in the world eco
nomy, making up 64 percent of the gross world p
roduct.
The Nature and Characteristics of a Servic
e
Service Intangibility
Services cannot be seen, tasted, felt, heard, or smelled before
they areService
bought Perishability
Services cannot be stored for later sale or use
Service Inseparability
• To reduce uncertainty, buyers
Services cannot be separatedlook fortheir
from signals of service
providers, whether
• The perishability of
the providers are people or quality.
machines.
• They draw conclusions
services is not aabout
problem
quality from
when thedemand
place, people,
is steady.
Service variability
price, •equipment,
However,and when demand
Quality of services dependscommunications
on whofluctuates,
provides that theyascan
service
them firmsas
well
when, where, and how theysee. often have difficult
are provided
problems.
Marketing Strategies for Service Firms
 Just like manufacturing businesses, the consumer and the
front-line service employee interact to co-create the servi
ce.
 These and other service firms establish their positions thr
ough traditional marketing mix activities.
 However, because services differ from tangible products,
they often require additional marketing approaches.
The Service Profit Chain
 The service profit chain is the chain that links service fir
m profits with employee and customer satisfaction.
 This chain consists of five links:
Internal service
quality

Satisfied and
productive service
employees

Greater
service value

Satisfied and
loyal customers

Healthy service
profits and growth
The Service Profit Chain
 Internal marketing means that the service firm must ori
ent and motivate its customer-contact employees and sup
porting service people to work as a team to provide custo
mer satisfaction.
 Interactive marketing means that service quality depend
s heavily on the quality of the buyer-seller interaction dur
ing the service encounter.
Managing Service Differentiation
 The solution to price competition is to develop a
differentiated offer, delivery, and image.
 The offer can include innovative features that set
one company’s offer apart from competitors’ offe
rs.
 Service companies can differentiate their service
delivery by having more able and reliable custom
er-contact people, developing a superior physical
environment in which the service product is deliv
ered, or designing a superior delivery process.
Managing Service Quality
 A service firm can differentiate itself by delivering consis
tently higher quality than its competitors provide.
 Top service companies set high service-quality standards.
They watch service performance closely, both their own a
nd that of competitors.
 Good service recovery can turn angry customers into loya
l ones.
 In fact, good recovery can win more customer purchasing
and loyalty than if things had gone well in the first place.
Managing Service Productivity
 They can train current employees better or hire new ones
who will work harder or more skillfully.
 Or they can increase the quantity of their service by givin
g up some quality.
 A service provider can harness the power of technology.
 Attempts to streamline a service or cut costs can make a s
ervice company more efficient in the short run.
 But that can also reduce its longer-run ability to innovate,
maintain service quality, or respond to consumer needs an
d desires.
Branding Strategy: Building Strong Brand
s
 Some analysts see brands as the major enduring a
sset of a company, outlasting the company’s speci
fic products and facilities.
Brand Equity
Brand Equity

• It’s the differential effect that knowing the brand name has on
consumer response to the product and its marketing.
• It’s a measure of the brand’s ability to capture consumer
preference and loyalty.

A brand has positive brand equity when consumers react

more favorably to it than to a generic or unbranded
version of the same product.

It has negative brand equity if consumers react less

favorably than to an unbranded version.
Brand Equity
Consumer
Consumer
 Ad agency Young & Rubicam’s BrandAsset Valuator mea
perception
perception
dimensions
dimensions
sures brand strength along four consumer perception dim
ensions: Esteem
Esteem (how
(how
highly
highly consumers
consumers

Brand Valuation
regard
regard and
and
respect
respect the
the
brand)
brand)
Customer
• It is the process of estimatingEquity
the total financial
• A powerful
value of a brand. brand also offers the company some
• defense
High brand against fierce
equity price competition
provides a company with many
• The fundamental
competitive asset underlying brand equity is
advantages.
• customer
A powerful equitybrand─ enjoys
the value of customer
a high relationships
level of consumer
Differentiatio
Differentiatio
that
brandthe brand
consumers creates.
Knowledge
Knowledge (how
awareness
much
much
(how
consumers and loyalty. nn (what
(what makes
makes
know
know about
about the
the the
the brand
brand
brand)
brand) stand
stand out)
out)

Relevance
Relevance (how(how
consumers
consumers feelfeel
itit meets
meets their
their
needs)
needs)
Building Strong Brands
Brand Positioning
 Marketers can position brands at any of three lev
els.
 At lowest level, they can position the brand on pr
oduct attributes.
 A brand can be better positioned by associating it
s name with a desirable benefit.
Brand Name Selection
 Desirable qualities for a brand name include the followin
g:
1. It should suggest something about the product’s benefits an
d qualities, such as Beautyrest.
2. It should be easy to pronounce, recognize, and remember, s
uch as iPad.
3. The brand name should be distinctive, such as Panera.
4. It should be extendable ─ [Link] began as an online
bookseller but chose a name that would allow expansion int
o other categories.
5. The name should translate easily into foreign languages.
6. It should be capable of registration and legal protection.
Brand Sponsorship
 A manufacturer has four sponsorship options.

Private brand
（ store brand or distributor
brand ）
National brand
（ or manufacturer’s Co-brand
brand ）
Licensed brand
Brand Sponsorship
 National Brands versus Store Brands.
• The Store brand (or private brand) is a brand created and o
wned by a reseller of a product or service.
• In the so-called battle of the brands between
national and private brands, retailers have many
advantages.
• They control what products they stock, where they
go on shelf, what prices they charge, and which
ones they will feature in local promotions.
• Retailers often price their store brands lower than
comparable national brands and feature the price
differences in side-by-side comparisons on store
shelves.
Brand Sponsorship
 Licensing.
• However, some companies license names or symbols pre
viously created by other manufacturers, names of well-k
nown celebrities, or characters from popular movies and
books.
• For a fee, any of these can provide an instant and proven
brand names.
• Name and character licensing has grown rapidly in recen
t years.
• It can be a highly profitable business for many companie
s.
Brand Sponsorship
 Co-branding.
• It occurs when two established brand names of different
companies are used on the same product.

• Co-branding offers
can also haveadvantages.
many limitations.
Such relationships
• Because each brandusually involve
dominates in a complex
different legal contracts
category, the
and licenses.
combined brands create broader consumer appeal and greater
• brand
Co-branding
equity. partners must carefully coordinate their
advertising,
• It sales promotion,
can take advantage and other marketing
of the complementary efforts.
strengths of two
• brands.
Finally, when co-branding, each partner must trust that the
other
• It alsowill takea good
allows care to
company of expand
its [Link] existing brand into a
• category
If something damages
it might the reputation
otherwise of oneentering
have difficulty brand, italone.
can
tarnish the co-brand as well.
 Brand Development
• A major drawback of
• A brand extension gives a
multibranding is that
Multibrands New Brands new each productbrandinstant
might obtain
•a way
A company might believe that • theA
recognition company
power might
and faster
• Brand Extensions
It offers
Line Extensions to only a small market
its existing brand name acceptance.
ofcurrent introduce
is waning, line
so none may be
• establish
It extends different
a
• It occurs when a company share, and
new brand name is •
[Link] also extensions
saves the as a low-
high
features
brand name
extends that appeal
to new
existing to
brand very
cost,profitable.
low-risk way to
different • Or it may create a new advertising
brand name costs
when
• Inintroduce usually
names tocustomer
or modified new forms, colors, required
this situation,
new these
products.
segments,
products initaenters
lock up
new a new product category
more forto buildshould
companies a newreduce
sizes, ingredients, or flavors • Or
brand [Link] might want to
reseller
category. which
shelf space, none
and of its current brand names
the number of brands
of an existing product • And ifmeet
a consumer
brand extensiondesires
capture are appropriate.
a larger market they sell in a use
given
category. fails, for
it variety,
may harm excess
share. category
capacity, and
or set up
simply
consumer
tighter attitudes
screening toward
commandcarrying
otherprocedures
products more shelf
the
space name. for new
from resellers.
samebrands.
brand
Managing Brands

• The brand’s positioning must be

continuously communicated to
consumers.
• Major brand marketers often spend
• The brand audit may turn up brands that
huge amounts on advertising to
need more support, • The
brands thatcompany should carry on
need to be
create brand awareness and build
internal
dropped, or brands that must brand building to help
be rebranded
preference loyalty.
or repositioned because ofemployees
changing understand and the
enthusiastic
customer preferences or new about the brand
competitors.
promise.
• Many companies go even
further by training and
encouraging their distributors
and dealers to serve their
customers well.
The End