Ch07.pdf - Product and Service Decisions PDF

What Is a Product? • A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. • A service is an activity, benefit, or satisfaction offered for sale; it is intangible and does not result in ownership of anything. Copyrig...

What Is a Product? • A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. • A service is an activity, benefit, or satisfaction offered for sale; it is intangible and does not result in ownership of anything. Copyright © 2017 Pearson Education, Ltd. 7-5 A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Broadly defined, products include services, events, persons, places, organizations, and ideas, or a mixture of these. Services are 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. 5 Products, Services, and Experiences • Market offerings include both tangible goods and services. • Companies create and manage customer experiences with their brands or companies. • To differentiate their offers from that of the competitors Copyright © 2017 Pearson Education, Ltd. 7-6 A company’s market offering often includes both tangible goods and services. At one extreme, the market offering may consist of a pure tangible good and at the other extreme a pure service. Between these two extremes, however, many goods-and-services combinations are possible. 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, firms are creating and managing customer experiences with their brands or companies. 6 Figure 7.1 - Three Levels of Product Copyright © 2017 Pearson Education, Ltd. 7-7 Core customer value deals with what is bought by the customer. For example, people who buy an Apple iPad are buying much more than just a tablet computer. They are buying entertainment, self-expression, productivity, and connectivity with friends and family—a mobile and personal window to the world. At the second level, product planners must turn the core benefit into an actual product. They need to develop product and service features, a design, a quality level, a brand name, and packaging. For example, the iPad is an actual product. Its name, parts, styling, operating system, features, packaging, and other attributes have all been carefully combined to deliver the core customer value of staying connected. Finally, product planners must build an augmented product around the core benefit and actual product by offering additional consumer services and benefits. For example, when consumers buy an iPad, Apple and its resellers also might give buyers a warranty on parts and workmanship, quick repair services when needed, and a Web site to use if they have problems or questions. Apple also provides access to a huge assortment of apps and accessories. 7 Product and Service Classifications • Consumer products are bought by final consumers for personal consumption. • Industrial products are bought by individuals and organizations for further processing or for use in conducting a business. • Materials and parts, capital items, and supplies and services. • ‫المواد واﻷجزاء والعناصر الرئيسية واللوازم والخدمات‬ Copyright © 2017 Pearson Education, Ltd. 7-8 Products and services fall into two broad classes based on the types of consumers who use them: consumer products and industrial products. Consumer products are bought by final consumers for personal consumption. Consumer products include convenience products, shopping products, specialty products, and unsought products. These products differ in the ways consumers buy them and, therefore, in how they are marketed. This is explained by the table on the next slide. Industrial products are those products purchased for further processing or for use in conducting a business. The three groups of industrial products and services are materials and parts, capital items, and supplies and services. Materials and parts include raw materials as well as manufactured materials and parts. Raw materials consist of farm products and natural products. Manufactured materials and parts consist of component materials and parts. Capital items are industrial products that aid in the buyer’s production or operations, including installations and accessory equipment. Installations consist of major purchases such as buildings and fixed equipment. The final group of industrial products is supplies and services. Supplies include operating supplies and repair and maintenance items. Supplies are the convenience products of the industrial field because they are usually purchased with a minimum of effort or comparison. 8 Table 7.1 - Marketing Considerations for Convenience and Shopping Products Marketing Considerations Convenience Shopping Customer buying behavior Frequent purchase; little planning, little comparison or shopping effort; low customer involvement Less frequent purchase; much planning and shopping effort; comparison of brands on price, quality, and style Price Low price Higher price Distribution Widespread distribution; convenient locations Selective distribution in fewer outlets Promotion Mass promotion by the producer Advertising and personal selling by both the producer and resellers Examples Toothpaste, magazines, and laundry detergent Major appliances, televisions, furniture, and clothing Copyright © 2017 Pearson Education, Ltd. 7-9 This table illustrates the marketing considerations for convenience and shopping products. 9 Table 7.1 - Marketing Considerations for Specialty and Unsought Products‫غير مطلوبة‬ Marketing Considerations Specialty Unsought Customer buying behavior Strong brand preference and loyalty; special purchase effort; little comparison of brands; low price sensitivity Little product awareness or knowledge (or, if aware, little or even negative interest) Price High price Varies Distribution Exclusive distribution in only one or Varies a few outlets per market area Promotion More carefully targeted promotion by both the producer and resellers Aggressive advertising and personal selling by the producer and resellers Examples Luxury goods, such as Rolex watches or fine crystal Life insurance and Red Cross blood donations Copyright © 2017 Pearson Education, Ltd. 7 - 10 This table illustrates the marketing considerations for specialty and unsought products. 10 Product and Service Decisions Individual Product Decisions Product Line Decisions Product Mix Decisions Copyright © 2017 Pearson Education, Ltd. 7 - 12 Marketers make product and service decisions at three levels: individual product decisions, product line decisions, and product mix decisions. Each of these decisions is discussed in greater detail in the following slides. 12 Figure 7.2 - Individual Product and Service Decisions Copyright © 2017 Pearson Education, Ltd. 7 - 13 Developing a product or service involves defining the benefits that it will offer. The characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs is known as product quality, one of the marketer’s major positioning tools. Total quality management (TQM) is an approach in which all of the company’s people are involved in constantly improving the quality of products, services, and business processes. A product can be offered with varying features. Another way to add customer value is through distinctive product style and design. 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 a brand as an important part of a product, and branding can add value to a consumer’s purchase. Brand names help consumers identify products that might benefit them. Brands also say something about product quality and consistency. Packaging involves designing the container or wrapper for a product. Increased competition means that packages must now perform many sales tasks—from attracting buyers to communicating brand positioning to closing the sale. Labels help to identify and describe the product or brand as well as promote the brand, support its positioning and engage customers. The first step in designing product support services is to survey customers periodically. Once the company has assessed the quality of various support services, it can take steps to fix problems and add new services that will both delight customers and yield profits to the company. 13 Product Line Decisions • A product line is closely related products that: • Have similar functions and customer groups • Are sold through similar outlets or fall within given price ranges • Product line length is the number of items in the product line. Copyright © 2017 Pearson Education, Ltd. 7 - 14 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. For example, Nike produces several lines of athletic shoes and apparel. The major product line decision involves product line length, which is the number of items in the product line. A company can expand its product line in two ways: line filling and line stretching. Line filling involves adding more items within the present range of the line. There are several reasons for product line filling. These reasons include reaching for extra profits, satisfying dealers, using excess capacity, being the leading full-line company, and plugging holes to keep out competitors. Line stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line downward, upward, or both ways. A reason for downward product line stretching is to plug a market hole that would attract a potential competitor. The reason for upward product line stretching is to add prestige to the current product. 14 Product Mix Decisions Width • Number of different product lines the company carries Length • Total number of items a company carries within its product lines Depth • Number of versions offered for each product in the line Consistency • Relativity of the various product lines in end use, production requirements, distribution channels, or some other aspect Copyright © 2017 Pearson Education, Ltd. 7 - 15 A company’s product mix has four important dimensions: width, length, depth, and consistency. The mix width refers to the number of different product lines the company carries. Product mix length refers to the total number of items a company carries within its product lines. Product mix depth refers to the number of versions offered for each product in the line. Finally, the consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other aspect. A company can increase its business in four ways. It can add new product lines, widening its product mix. The company can lengthen its existing product lines to become a more full-line company. It can add more versions of each product and thus deepen its product mix. Finally, the company 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. 15 Figure 7.3 - Four Service Characteristics Copyright © 2017 Pearson Education, Ltd. 7 - 17 This figure depicts the four special service characteristics a company must consider when designing marketing programs: intangibility, inseparability, variability, and perishability. 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. They draw conclusions about quality from the place, people, price, equipment, and communications that they can see. Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. Customer coproduction makes provider–customer interaction a special feature of services marketing. Both the provider and the customer affect the service outcome. Service variability means that the quality of services depends on who provides them as well as when, where, and how they are provided. For example, within a Marriott hotel, one registration-counter employee may be cheerful and efficient, whereas another standing just a few feet away may be grumpy and slow. Service perishability means that services cannot be stored for later sale or use. Some doctors charge patients for missed appointments because the service value existed only at that point and disappeared when the patient did not show up. 17 Service Profit Chain • Links service firm profits with employee and customer satisfaction • The chain consist of five links: • • • • • Internal service quality Satisfied and productive service employees Greater service value Satisfied and loyal customers Healthy service profits and growth Copyright © 2017 Pearson Education, Ltd. 7 - 18 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. This chain consists of five links: internal service quality, satisfied and productive service employees, greater service value, satisfied and loyal customers, and healthy service profits and growth. For example, the supermarket chain Wegmans believes that happy, superbly trained employees create a superior customer experience. 18 Figure 7.4 - Three Types of Services Marketing Copyright © 2017 Pearson Education, Ltd. 7 - 19 Services marketing requires more than just traditional external marketing using the four Ps. This figure shows that services marketing also requires internal marketing and interactive marketing. Internal marketing means that the service firm must orient and motivate its customer-contact employees and supporting service employees to work as a team to provide customer satisfaction. For example, Zappos starts by hiring the right people and carefully orienting and inspiring them to give unparalleled customer service. Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter. In services marketing, service quality depends on both the service deliverer and the quality of delivery. All new hires at Zappos —at all levels of the company— complete a four-week customer-loyalty training regimen. 19 Services marketing requires more than just traditional external marketing using the four Ps. This figure shows that services marketing also requires internal marketing and interactive marketing. Internal marketing means that the service firm must orient and motivate its customer-contact employees and supporting service employees to work as a team to provide customer satisfaction Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter. In services marketing, service quality depends on both the service deliverer and the quality of delivery. Copyright © 2017 Pearson Education, Ltd. 7 - 20 20 Marketing Tasks for Service Companies Managing service differentiation • Developing a differentiated offer, delivery, and image Managing service quality • Delivering consistently higher quality than the competitors Managing service productivity • Training current employees or hiring new ones • Increasing the quantity of service by giving up some quality • Harnessing the power of technology Copyright © 2017 Pearson Education, Ltd. 7 - 21 Service companies face three major marketing tasks: They want to increase their service differentiation, service quality, and service productivity. In these days of intense price competition, service marketers often complain about the difficulty of differentiating their services from those of competitors. The solution to price competition is to develop a differentiated offer, delivery, and image. For example, Dick’s Sporting Goods’ customers can sample shoes on Dick’s indoor footwear track, test golf clubs with an on-site golf swing analyzer and putting green, shoot bows in its archery range, and receive personalized fitness product guidance from an in-store team of fitness trainers. A service firm can differentiate itself by delivering consistently higher quality than its competitors provide. Service providers need to identify what target customers expect in regard to service quality. As hard as they may try, even the best companies will have an occasional late delivery, burned steak, or grumpy employee. However, good service recovery can turn angry customers into loyal ones. With their costs rising rapidly, service firms are under great pressure to increase service productivity. They can do so in several ways. 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 giving up some quality. Finally, a service provider can harness the power of technology. However, companies must avoid pushing productivity so hard that doing so reduces quality. For example, many airlines in their attempts to improve productivity, have mangled customer service. 21 Brand Equity • The differential effect that knowing the brand name has on customer response to the product or its marketing • With positive brand equity, consumers react more favorably to the brand than to an unbranded version of the same product. Copyright © 2017 Pearson Education, Ltd. 7 - 23 Brands are a key element in a company’s relationships with consumers. Brands represent consumers’ perceptions and feelings about a product and its performance. A powerful brand has high brand equity. Brand equity is the differential effect that knowing the brand name has on customer response to the product and its marketing. 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. 23 Brand Equity • Consumer perception dimensions: • • • • Differentiation Relevance Knowledge Esteem • Brand value is the total financial value of a brand. • Customer equity is the value of customer relationships that the brand creates. Copyright © 2017 Pearson Education, Ltd. 7 - 24 Ad agency Young & Rubicam’s Brand Asset Valuator measures brand strength along four consumer perception dimensions: differentiation, relevance, knowledge, and esteem. Brands with strong brand equity rate high on all four dimensions. A brand with high brand equity is a very valuable asset. Brand value is the total financial value of a brand. High brand equity provides a company with many competitive advantages. A powerful brand enjoys a high level of consumer brand awareness and loyalty. A powerful brand forms the basis for building strong and profitable customer relationships. The fundamental asset underlying brand equity is customer equity. This refers to the value of customer relationships that the brand creates. The proper focus of marketing is building customer equity, with brand management serving as a major marketing tool. According to one estimate, the brand value of Google is a whopping $159 billion and Apple is at $148 billion. 24 Major Brand Strategy Decisions Brand positioning Brand name selection • Attributes • Benefits • Beliefs and values • Selection • Protection Brand sponsorship Brand development • Manufacturer’s brand ‫عﻼة‬ ‫مصنعة للشركة‬ • Private brand ‫عﻼمة خاصة‬ • Licensing ‫الترخيص‬ • Co-branding ‫العﻼمات المشتركة‬ • • • • Line extensions Brand extensions Multibrands New brands Copyright © 2017 Pearson Education, Ltd. 7 - 25 Brands are powerful assets that must be carefully developed and managed. As this figure suggests, building strong brands involves many challenging decisions. This figure shows that the major brand strategy decisions involve brand positioning, brand name selection, brand sponsorship, and brand development. 25 Brand Positioning and Brand Name Selection • Marketers should establish a mission and vision for the brand when positioning it. • Desirable qualities for a brand name should be • • • • • Based on the product’s benefits and qualities Easy to pronounce, recognize, and remember Distinctive and extendable Easily translated into foreign languages Capable of registration and legal protection Copyright © 2017 Pearson Education, Ltd. 7 - 26 Marketers need to position their brands clearly in target customers’ minds. They can position brands at any of three levels. At the lowest level, they can position the brand on product attributes. At the next level, a brand can be better positioned by associating its name with a desirable benefit. In the final level, the strongest brands go beyond attribute or benefit positioning. They are positioned on strong beliefs and values and engage customers on a deep, emotional level. Finding the best brand name begins with a careful review of the product and its benefits, the target market, and proposed marketing strategies. There are a number of desirable qualities for a brand name. It should suggest something about the product’s benefits and qualities, and it should be easy to pronounce, recognize, and remember. The brand name should be distinctive, be extendable, translate easily into foreign languages, and be capable of registration and legal protection. 26 Brand Sponsorship National brands • Marketed under the manufacturer’s own name Store brands • Created and owned by a reseller of a product or service Licensing • Use names and symbols created by other companies or wellknown movie characters or celebrities for a fee Co-branding • Use the established brand names of two different companies on the same product Copyright © 2017 Pearson Education, Ltd. 7 - 27 A manufacturer has four sponsorship options: National brands or manufacturers’ brands are marketed under the manufacturer’s own name. The Samsung Galaxy tablet or Kellogg’s Frosted Flakes are examples of national brands. An increasing numbers of retailers and wholesalers have created their own store brands or private brands To compete with store brands, national brands must sharpen their value propositions, especially when appealing to today’s more frugal consumers. Some companies license names or symbols previously created by other manufacturers, the names of well-known celebrities, or characters from popular movies and books. For a fee, licensing any of these can provide an instant and proven brand name. For example, consider the Kodak brand with its familiar red and yellow colors, which has retained its value even after the company went bankrupt and discontinued its consumer products. Co-branding occurs when two established brand names of different companies are used on the same product. Because each brand dominates in a different category, the combined brands create broader consumer appeal and greater brand equity. For example, Taco Bell and Doritos teamed up to create the Doritos Locos Taco. 27 Managing Brands • • • • Communicate the brand’s positioning Manage all brand touch points Train employees to be customer centered Audit the brand’s strengths and weaknesses Copyright © 2017 Pearson Education, Ltd. 7 - 28 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. 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, social media, company Web pages, mobile apps, and many others. The brand’s positioning will not take hold fully unless everyone in the company lives the brand. Therefore, the company needs to train its people to be customer centered. Many companies go even further by training and encouraging their distributors and dealers to serve their customers well. Finally, companies need to periodically audit their brands’ strengths and weaknesses. The brand audit may turn up brands that need more support, brands that need to be dropped, or brands that must be rebranded or repositioned because of changing customer preferences or new competitors. 28