Chapter 8 (Marketing) PDF

8 Products, Services, and Brands Building Customer Value OBJECTIVES OUTLINE ­OBJECTIVE 8-1 Define product and describe the major classifications of products and services. OBJECTIVE 8-2 Describe the dec...

8 Products, Services, and Brands Building Customer Value OBJECTIVES OUTLINE ­OBJECTIVE 8-1 Define product and describe the major classifications of products and services. OBJECTIVE 8-2 Describe the decisions companies make regarding their individual products and services, product lines, and product mixes. OBJECTIVE 8-3 Explore the four characteristics that affect the marketing of services and the additional marketing considerations that services require. OBJECTIVE 8-4 Discuss branding strategy—the decisions companies make in building and managing their brands. CHAPTER After examining customer value–driven market- To dig a little deeper into the question of “What is a prod- ing strategy, we now take a deeper look at the uct?,” we begin by looking at one of Dubai’s most popular tea PREVIEW marketing mix: the tactical tools that marketers cafés, the FiLLi Café, which introduced a different way of having use to implement their strategies, engage customers, and deliver tea and changed the tea-drinking habits of many in the United superior customer value. In this and the next chapter, we study how Arab Emirates. While the city was home to many premium coffee companies develop and manage products, services, and brands. houses, its tea-drinking segment was only catered to by kiosk- Then, in the chapters that follow, we look at pricing, distribution, and style tea cafeterias where people would grab a cup of tea on the marketing communication tools. The product and brand are usually go. Tea was not served in a café-style venue where people could the first and most basic marketing consideration. We start with a have tea and talk at leisure. FiLLi Café was the first to offer the tea seemingly simple question: What is a product? As it turns out, the café as a “product,” engaging customers and creating value for answer is not so simple. them throughout the entire tea-drinking experience. FILLI CAFÉ: A Tea Revolution S tarting with a single café and now having grown his now-famous zafran tea recipe. Sprinkling a few saffron into a chain of stylish stores across the country with flakes into boiling milk should be a simple and easy recipe plans to go international, FiLLi Café has been a real for a refreshing cup of tea, but the more sophisticated for- trendsetter in the UAE. Today, FiLLi Café shines mula developed by Rafih creates a uniquely aromatic fla- bright among the many international cafés in the UAE and vored tea that has remained unmatched by those who have is a much-sought-after destination among tea drinkers for tried to replicate it. FiLLi’s zafran tea has been the main its signature zafran tea. (“Zafran” is the Arabic, Hindi, and driver of its growth and has played a vital role in its expan- Persian word for saffron.) sion. With the opening of more stores, FiLLi began adding FiLLi Café was founded in 2004 by Rafih FiLLi, a more items to its menu, but the zafran tea remains its an- young entrepreneur from India who had come to the UAE chor and the main crowd puller. to work in the retail sector but has since become one of The idea that led to FiLLi Café came to Rafih when he the most successful entrepreneurs in the country through took over a cafeteria that was run by his father. The cafeteria M08_KOTL9364_19_GE_C08.indd 246 15/02/23 10:53 AM  CHAPTER 8 | Products, Services, and Brands: Building Customer Value 247 was located near a beach, where many people would visit and have a casual cup of tea. Rafih did not just want to sell an ordinary cup of tea; he wanted to make it special and different. He decided to give a twist to the regular cup and came up with his own concoction of saffron- infused tea. The concept of saffron tea was not an instant hit. It took time for the market to accept a tea that was so flavorful. The custom- ers who visited the café in its early days were intrigued by the different taste of the tea and wanted to know where the different flavor of the tea came from. Rafih initially tried many recipes, experimenting with different ratios and combi- nations of the ingredient to create the perfect mix. To popularize zafran tea, Rafih conducted extensive sampling, which began attracting reg- More than just tea, FiLLi Café in the UAE sells a “Tea n’ Talk” experience of enjoying ular visitors to the café and generated a lot of an aromatic cup of saffron tea while lounging with friends or family. word-of-mouth publicity. People soon started Rawpixel.com/Shutterstock thronging to the café and queued up to get their delicious cup of zafran tea. Unable to meet the growing demand from a single outlet, FiLLi decided to open more cafés in other parts of the city. brand and enjoys high customer loyalty, with more than 35 FiLLi Café did not want to be just another tea shop, nor percent of guests returning every month. did it want to compete with the premium cafés that primarily Although Rafih prides himself on the unique tea sold coffee. Dubai is home to many international café chains brewed at FiLLi Café, he says that just having a good prod- that offer a luxurious, high-end destination for the rich to uct is not enough. Even the best products need the right visit and spend extravagantly. However, there were no cafés planning, branding, and marketing support. The FiLLi that catered to middle-class tea-drinking consumers. Tea was Café logo was designed to promote the “Tea n’ Talk” con- always seen as a beverage bought on the go from roadside cept and the orange color was used to emphasize the yel- shops instead of enjoying it while sitting in a café. Rafih low and orange hues of saffron. At the center of the orange sought to fill this gap with the launch of FiLLi café. Rafih circle is an image of Rafih FiLLi surrounded by the words wanted to create a café hangout environment and decided to “Tea n’ Talk” at the top and “Since 1991” at the bottom, price higher than the tea sold at regular tea shops but lower tracing the origins of the brand to Rafih’s father and his than the price levels in coffee houses. This was a turning cafeteria. point in the history of tea cafés in the UAE, as it became a As FiLLi Café grew, it started to add more food items successful idea that was copied by many. like sandwiches, burgers, and wraps to its menu. All items The first FiLLi Café was launched by focusing on the in its menu follow a signature recipe and are prepared after middle class in a busy commercial and residential neigh- experimenting with different tastes. The vibrant menu borhood. The store’s fashionable décor matched interna- changes with the season and expertly combines local and tional standards while the prices charged were one-third international flavors. Central to the FiLLi experience is that of similar coffee houses. Rafih replicated a coffee-café good taste, be it tea or any of its several other food items. model with a focus on tea and decided to position FiLLi This experience is enhanced by an ambient, fun, relaxed, Café as a “Tea n’ Talk Café,” a destination where custom- and cozy environment. Be it a morning cup of tea, a break ers could sit for hours, enjoy- from work, a tea stop after work, ing aromatic cups of tea in an or a late-night meet-up with The FiLLi brand is about a lot more than friends, FiLLi welcomes its pa- environment where they could talk comfortably with friends just making good tea. At its core, FiLLi trons to unwind and have a good and family. For regular visitors, offers an ambient atmosphere where time. The cafés are designed in a the café has now become a sec- patrons can unwind with friends and warm and friendly way that of- ond home and a hangout spot. fers flexibility and freedom to the aromatic cups of tea. FiLLi is seen as a contemporary customers to use the space as it M08_KOTL9364_19_GE_C08.indd 247 15/02/23 10:53 AM  248   PART 3 | Designing a Customer Value–Driven Strategy and Mix suits their moods, from stretching their legs to folding them home deliveries only. However, as the city of Dubai was quick on the comfortable sofas. to control the spread of the coronavirus and reopen its public By 2020, there were around 30 outlets of FiLLi Café in the spaces, the café was happy to welcome its customers back in- UAE, and it aimed to have 100 more across the country. During side. The brand has its eyes set on growing globally, and plans the COVID-19 pandemic, when in-dining was not allowed, are underway to open outlets in Saudi Arabia, Bahrain, Qatar, the brand had to stop welcoming customers into its hangout and Mumbai as well as the United Kingdom and the United lounges and focus on selling through take-out services and States.1 AS THE FILLI CAFÉ STORY SHOWS, in their quest to create customer rela- tionships, marketers must build and manage products and brands that connect with customers. This chapter begins with a deceptively simple question: What is a product? After addressing this question, we look at ways to classify products in consumer and business markets. Then we discuss the important decisions that marketers make re- garding individual products, product lines, and product mixes. Next, we examine the characteristics and marketing requirements of a special form of product—services. Finally, we look into the critically important issue of how marketers build and manage product and service brands. Author As you’ll see, this Comment deceptively simple ­What Is a Product? question has a very complex answer. OBJECTIVE 8-1 Define product and describe the major classifications of products For example, think back to the and services. opening story. What is the FiLLi Café’s “product”? We define a product as anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Products include more than just tangible objects, such as cars, clothing, or smartphones. Broadly defined, products also Product include services, solutions, events, persons, places, organizations, and ideas or a mixture Anything that can be offered to a of these. Throughout this text, we use the term product broadly to include any or all these market for attention, acquisition, use, entities. Thus, an Apple iPhone, a Toyota Camry, and a Caffé Mocha at Starbucks are or consumption that might satisfy a want products. But so are a trip to Las Vegas, an investment solution from Charles Schwab, or need. transportation services by an Uber driver, your Instagram account, and advice from your family doctor. Because of their importance in the world economy, we give special attention to ser- Service vices. Services are a form of product that consists of activities, benefits, or satisfac- An activity, benefit, or satisfaction offered tions offered for sale that are essentially intangible and do not result in a customer’s the for sale that is essentially intangible ownership of anything. Examples include banking, hotel, airline travel, retail, wireless and does not result in a customer’s communication, and home-repair services. We will look at services more closely later in ownership of anything. this chapter. 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 builds profitable customer relationships. A company’s market offering may include both tangible goods and services. At one extreme, the market offer may consist of a pure tangible good, such as soap, toothpaste, or salt; no services accompany the product. At the other extreme are pure services, for which the market offer consists primarily of a service. Examples include a doctor’s exam and financial services. Between these two extremes, however, many goods-and-services com- binations 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, they are creating and managing M08_KOTL9364_19_GE_C08.indd 248 15/02/23 10:53 AM  CHAPTER 8 | Products, Services, and Brands: Building Customer Value    249 Customer experience customer experiences with their brands or companies. Customer experiences are market A market offering with a strong sensory offerings with a strong sensory or emotional component that play out over time. Great or emotional component that plays out experiences involve a careful management of a customer’s journey with the company, for the customer over time. from beginning to end. The company’s core product or service may be just one part of the experience. Experiences have always been an important part of marketing for some compa- nies. Disney has long manufactured dreams and memories through its movies and theme parks—it wants theme park cast members to deliver a thousand “small wows” to every customer. And Nike has long declared, “It’s not so much the shoes but where they take you.” Today, however, all kinds of firms are recasting their traditional goods and services to create experiences. For example, Airbnb doesn’t just arrange room rentals, it creates travel experiences for people looking to escape their humdrum daily surroundings:2 You don’t just rent a room through Airbnb, you buy into a “live-like-a-local” experience. “Airbnb has al- ways been about unique experiences,” says an Airbnb marketer. “Every hotel room in every hotel chain is the same. Airbnb is a home, and our stays are as dif- ferent as the individual host.” The travel company takes its experiences mantra to extremes with its “Airbnb Night At” program by which it transforms iconic locations into unforgettable one-night experi- ences. The brand has curated one-nighters in fun and extraordinary places ranging from Dracula’s castle in Transylvania for Halloween, inside the Oscar Mayer “Wienermobile,” and a stay in a cable car suspended high above the Swiss Alps to an underwater night’s sleep with the sharks at a Paris aquarium and a sleepover in a VIP suite overlooking the home court in Chicago’s United Center, home of the Chicago Bulls (complete with layup lessons from Bulls icon Scottie Pippen). It even partnered with Mattel to cre- Creating customer experiences: Airbnb’s “Night At” program ate a Malibu Barbie Dreamhouse stay for Barbie’s transforms iconic locations into unforgettable one-night experiences, 60th birthday. Although these “Night At” adventures everything from an underwater night’s sleep with the sharks at a Paris are extremes, they emphasize Airbnb’s position- aquarium (above) to a sleepover at Dracula’s castle in Transylvania for ing as a creator of out-of-the-ordinary travel experi- Halloween. ences. “By casting ‘experiences’ as synonymous with Chesnot/Getty Images ‘travel,’” notes an industry analyst, “Airbnb is extend- ing its brand identity.” Levels of Product and Services Product planners need to think about products and services on three levels (see Figure 8.1). Each level adds more customer value. The most basic level is the core customer value, which addresses the question: What is the buyer really buying? When designing products, marketers must first define the core, problem-solving benefits, services, or experiences that consumers seek. A person buying lipstick buys more than lip color. Charles Revson of Revlon saw this early: “In the factory, we make cosmetics; in the store, we sell hope.” And people who buy a classic Airstream travel trailer are buying much more than just a stylish camper:3 With its shiny, riveted aluminum travel trailers and touring coaches, Airstream combines clean, modern designs with a throwback-to-the-1950s retro look. Airstream checks all the required boxes for quality, reliability, and finish. Its classic silver bullet–like trailers, carefully handcrafted and meticulously finished by passionate craftspeople, are renowned for being handed down across generations. More than 75 percent of the Airstreams built over nearly 100 years are still on the road today. But people who buy an Airstream are buying more than just a quality trailer. They are buying a shared dream of where the trailer might take them. Airstream highlights the “shared passion between the employees who build our trailers, the owners who explore with them, and the young generation who hope to someday experience an adventure as great as the African Caravan.” Airstream owners come from all kinds of backgrounds, but M08_KOTL9364_19_GE_C08.indd 249 15/02/23 10:53 AM  250 PART 3 | Designing a Customer Value–Driven Strategy and Mix FIGURE 8.1 Three Levels of Product Augmented Product Delivery Actual Product After- and sale credit Brand service Features name Core At the most basic level, the company Customer asks, “What is the customer really Value buying?” For example, people who buy Quality level Design a classic Airstream travel trailer are buying much more than a trailer. They’re buying a vision of where the Packaging trailer will take them. Product support Warranty they share the company’s aspirational commit- ment to “high adventure and faraway lands” and the desire to “lead caravans wherever the four winds blow... over twinkling boulevards, across trackless deserts... to the traveled and untrav- eled corners of the earth.” No matter who they are, they share a deep sense of identification with the core of the Airstream brand. 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 packag- ing. For example, an Airstream trailer is an actual product. Its name, styling, features, parts, surface finish, and other attributes have all been carefully Core product: People who buy a stylish Airstream trailer are buying much combined to deliver the core customer values of more than just a stylish camper. They are buying a shared dream of where style and the pursuit of high adventure. the trailer will take them. Finally, product planners must build an aug- Courtesy of AIRSTREAM mented product around the core benefit and actual product by offering additional consumer services and benefits. Thus, when consumers buy an Airstream, the company and its dealers give buyers a warranty and quick repair services when needed. On the Airstream Owners Hub, customers can shop for acces- sories ranging from an OXO Airstream Drawer Storage Bundle and an Airstream Roof Locker Dish Rack by YouCopia to an Airstream-branded license plate frame and plastic pink flamingos to complete the retro look. In addition, owners can access financial ser- vices and learn about the on-the-road lifestyle at the Airstream Academy. Consumers see products as complex bundles of benefits that satisfy their needs. When developing products, marketers first must identify the core customer value that consumers seek from the product. They must then design the actual product and find ways to augment it to create customer value and a full and satisfying brand experience. Product and Service Classifications Products and services fall into two broad classes based on the types of consumers who use them: consumer products and industrial products. Broadly defined, products also in- clude other marketable entities such as experiences, organizations, persons, places, and ideas. M08_KOTL9364_19_GE_C08.indd 250 15/02/23 10:53 AM  CHAPTER 8 | Products, Services, and Brands: Building Customer Value    251 Consumer Products Consumer product Consumer products are products and services bought by final consumers for personal A product bought by final consumers for consumption. Marketers usually classify these products and services further based on how personal consumption. consumers go about buying them. Consumer products include convenience products, shop- ping products, specialty products, and unsought products. These products differ in the ways Convenience product consumers buy them and, therefore, in how they are marketed (see Table 8.1). ­ consumer product that customers A Convenience products are consumer products and services that customers usually usually buy frequently, immediately, and buy frequently, immediately, and with minimal comparison and buying effort. Examples with minimal comparison and buying include laundry detergent, soft drinks, and fast food. Convenience products are usually effort. low priced, and marketers place them in many locations to make them readily available when customers need or want them. Shopping product Shopping products are less frequently purchased consumer products and services A consumer product that the customer, in that customers compare carefully on suitability, quality, price, and style. When buying the process of selecting and purchasing, shopping products and services, consumers spend much time and effort in gathering in- usually compares on such attributes as formation and making comparisons. Examples include furniture, clothing, major appli- suitability, quality, price, and style. ances, and hotel services. Shopping product marketers usually distribute their products through fewer brick-and-mortar and online outlets but provide deeper sales support to Specialty product help customers in their comparison efforts. A consumer product with unique Specialty products are consumer products and services with unique characteris- characteristics or brand identification for tics or brand identifications for which a significant group of buyers is willing to make which a significant group of buyers is a special purchase effort. Examples include specific brands of cars, high-priced photog- willing to make a special purchase effort. raphy equipment, designer clothes, gourmet foods, and the services of medical or legal specialists. A Lamborghini luxury automobile, for example, is a specialty product because Unsought product buyers are usually willing to travel great distances to buy one. Buyers normally do not A consumer product that the consumer compare specialty products. They invest only the time needed to reach and interact with either does not know about or knows ­brick-and-mortar and online dealers carrying the wanted brands. about but does not normally consider Unsought products are consumer products that a consumer either does not know buying. about or knows about but does not normally consider buying. Most major new innovations Table 8.1 | Marketing Considerations for Consumer Products Type of Consumer Product Marketing Considerations Convenience Shopping Specialty Unsought Customer buying Frequent purchase; little Less frequent purchase; Strong brand prefer- Little product aware- behavior planning, little com- much planning and ence and loyalty; special ness or knowledge (or, parison or shopping shopping effort; com- purchase effort; little if aware, little or even effort; low customer parison of brands on comparison of brands; negative interest) involvement price, quality, and style low price sensitivity Price Low price Higher price Highest price Varies Distribution Widespread distribution Selective distribution in Exclusive distribution in Varies in convenient physical specialized physical and only one or a few outlets and online stores online stores per market area and in a few highly specialized online stores Promotion Mass promotion by the Advertising and personal More carefully targeted Aggressive advertising producer selling by both the pro- promotion by both the and personal selling ducer and resellers producer and resellers by the producer and resellers Examples Toothpaste and laundry Major appliances, tele- Luxury goods, such as Life insurance and Red detergent visions, furniture, and Rolex watches or fine Cross blood donations clothing crystal M08_KOTL9364_19_GE_C08.indd 251 15/02/23 10:53 AM  252   PART 3 | Designing a Customer Value–Driven Strategy and Mix are unsought until consumers become aware of them through marketing. Classic examples of known but unsought products and services are life insurance, preplanned funeral ser- vices, and blood donations to the Red Cross. By their very nature, unsought products re- quire a lot of promoting, personal selling, and other marketing efforts. Industrial Products Industrial product Industrial products are those products purchased for further processing or for use in A product bought by individuals and conducting a business. Thus, the distinction between a consumer product and an indus- organizations for further processing or trial product is based on the purpose for which the product is purchased. If a consumer for use in conducting a business. buys a lawn mower for use around home, the lawn mower is a consumer product. If the same consumer buys the same lawn mower for use in a landscaping business, the lawn mower is an industrial product. 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 manu- factured materials and parts. Capital items are industrial products that aid in the buyer’s pro- duction or operations, including installations, machines on the factory floor, and accessory equipment. Capital items typically involve heavy investments and are used over many years. The final group of industrial products is supplies and services. Supplies include operating sup- plies and repair and maintenance items. Business services include maintenance and repair services and business advisory services. These services are typically intangible in nature. Organizations, Persons, Places, and Ideas In addition to tangible products and services, marketers have broadened the concept of a product to include other market offerings: organizations, persons, places, and ideas. Organizations often carry out activities to “sell” the organization itself. Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behavior of target customers toward an organization. Both profit and not-for-profit orga- nizations practice organization marketing. Businesses sponsor corporate marketing cam- paigns to market themselves, their images, and their ideals. For example, outdoor apparel and gear marketer Patagonia does little or no advertising for specific products. Instead, its marketing promotes the company’s environmental purpose and values, whether it’s print ads promoting responsible consumption or an activist social media campaign to save the world’s public lands. According to Patagonia’s European mar- keting director, when someone buys something from Patagonia, “we want to make sure... they understand why we exist as a company, how we have chosen to bring that product into existence, what they need to use that product for and how they will—with our support—care for that garment.” Patagonia’s marketing is about more than just selling products. It’s about “building a movement” based on the values it shares with its communities.4 People can also be thought of as products. Person marketing consists of activities under- taken to create, maintain, or change attitudes or behavior toward particular people. People ranging from presidents, entertainers, and sports figures to professionals such as doctors, law- yers, and architects use person marketing to build their reputations. And businesses, charities, and other organizations use well-known personalities to help sell their products or causes. For example, tennis superstar and entrepreneur Serena Williams earned $45 million last year from endorsements for brands ranging from Nike and Gatorade to Beats by Dre, Pepsi, and Chase Bank. Williams herself has become a marketable brand. She recently launched a fashion line—S by Serena—inspired by her own personal model of femininity, strength, and authen- ticity. “I want to be the brand,” she says, “instead of just being the face.”5 Place marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places. Cities, states, regions, and even entire nations compete to attract tourists, new residents, conventions, and company offices and factories. For example, Detroit’s city website celebrates Detroit as “America’s Great Comeback City” and promotes the best places to eat, things to do, and events to attend. Tourism Ireland tells travelers to “Fill your heart with Ireland—discover heart-warming moments and spectacular sights.” It tells businesses, “Ireland, right place right time—our people and your business, a winning combination.” And Tourism Australia partnered with six state and territorial tourism boards to market and fill the six “Best Jobs in the World”: Chief Funster (New South Wales), Outback Adventurer (Northern Territory), Park Ranger (Queensland), Wildlife Caretaker (South Australia), Lifestyle Photographer (Victoria), and Taste Master (Western Australia). More than 330,000 people from 196 countries submitted more than 600,000 applications in response.6 M08_KOTL9364_19_GE_C08.indd 252 15/02/23 10:53 AM  CHAPTER 8 | Products, Services, and Brands: Building Customer Value 253 Ideas can also be marketed. In one sense, all marketing is the marketing of an idea, whether it is the general idea of brushing your teeth or the specific idea that Crest tooth- pastes “improve the health of your smile.” Here, however, we narrow our focus to the Social marketing marketing of social ideas. This area has been called social marketing and consists of using The use of traditional business marketing traditional business marketing concepts and tools to encourage behaviors that will create concepts and tools to encourage individual and societal well-being. behaviors that will create individual and Many companies engage in social marketing to support ideas they believe in. societal well-being. Microsoft’s “Make What’s Next” campaign encourages girls to enter tech and science fields. The company promotes the program with inspirational ads, social media videos and events, and a dedicated website. The website also offers an experiential tool called Career Explorer, powered by professional networking site LinkedIn, that shows girls how to pursue their passions and skills in specific areas. “When we encourage girls to pursue science, technology, engineering, and math (STEM),” says Microsoft, “we double the po- tential to solve problems. If she stays in STEM, she could be the one to change the world.”7 Social marketing programs cover a wide range of issues. Master Group Pakistan, a leading provider of mattresses and foam furniture, is a strong believer in the concept of giving back to society. Their brand, Master MoltyFoam, launched an initiative for installing so-called “billbeds” or billboards—of which there is an abundance in urban Pakistan—that advertise MoltyFoam during the day and can be flipped over and be converted into a foam bed at night by any of the half a million homeless people sleeping on the streets in major cities. A very large number of these homeless are inter-city or intra-city travelers who come to bigger cities from far-flung rural locations to bring their family or friends to hospitals or clinics for facilities that are not available in their villages. For laborers who work for meager wages during the day, rural workers who come to cities with their sick loved ones, and other homeless people, this initiative provides them with a comfortable surface to sleep on. This campaign won the Cannes Lions Award as well as national accolades for its societal marketing program. Another initiative by MoltyFoam, “Beti Bojh Nahi” (“a daughter is not a burden”) focused on empowering women and enabling them to earn their own liveli- hoods through vocational training. The regional traditions of giving a dowry for a daugh- ter’s marriage and spending lavishly on weddings place huge financial burdens on families from lower income strata. This is often a source of social stigma for the family as well as the daughter, and the latter is sometimes forced to remain single due to lack of marriage funds. MoltyFoam’s initiative funds wedding ceremonies and after the wedding, to help them earn a better living for their families, it provides vocational training such as sewing classes and field work classes—if the daughters have some basic education, teacher training may be offered to them as well.8 Social marketing involves much more than just advertising. It involves a broad range of marketing strategies and marketing mix tools designed to bring about beneficial social change.9 Author Now that we’ve answered Comment the “What is a product?” Product and Service Decisions question, we dig into the specific OBJECTIVE 8-2 Describe the decisions companies make regarding their individual decisions that companies must products and services, product lines, and product mixes. make when designing and marketing products and services. Marketers make product and service decisions at three levels: individual product deci- sions, product line decisions, and product mix decisions. We discuss each in turn. Individual Product and Service Decisions Figure 8.2 shows the important decisions in the development and marketing of indi- vidual products and services. We will focus on decisions about product attributes, branding, FIGURE 8.2 packaging, labeling and logos, and product support services. Individual Product Decisions Don’t forget Figure 8.1. The focus of all of these Labeling Product decisions is to create Product Branding Packaging and support core customer value. attributes logos services M08_KOTL9364_19_GE_C08.indd 253 15/02/23 10:53 AM  254   PART 3 | Designing a Customer Value–Driven Strategy and Mix Product and Service Attributes Developing a product or service involves defining the benefits that it will offer. These ben- efits are communicated and delivered by product attributes such as quality, features, and style and design. Product quality Product Quality. Product quality is one of the marketer’s major positioning tools. The characteristics of a product Quality affects product or service performance; thus, it is closely linked to customer value or service that bear on its ability to and satisfaction. In the narrowest sense, quality can be defined as “no defects.” But most consistently and reliably satisfy stated or marketers go beyond this narrow definition. Instead, they define quality in terms of creat- implied customer needs. ing customer value and satisfaction. The American Society for Quality defines quality as the characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs. Similarly, Siemens defines quality this way: “Quality is when our custom- ers come back and our products don’t.”10 Companies can take any of several approaches to product quality. Total quality manage- ment (TQM) is an approach in which all the company’s people are involved in constantly improving the quality of products, services, and business processes. For most top compa- nies, customer-driven quality has become a way of doing business. Today, companies are taking a return-on-quality approach, viewing quality as an investment and holding quality efforts accountable for bottom-line results. Product quality has two dimensions: level and consistency. In developing a product, the marketer must first decide on a quality level that will support the product’s positioning. Here, product quality means performance quality—the product’s ability to perform its functions. For example, a Rolls-Royce provides higher performance quality than a Chevrolet: It has a smoother ride, lasts longer, and provides more artisanship, custom design, luxury, and “creature comforts.” Companies rarely try to offer the highest possible performance quality level; few customers want or can afford the high levels of quality offered in products such as a Rolls-Royce automobile or a Rolex watch. Instead, companies choose a quality level that matches target market needs and the quality levels of competing products. Beyond quality level, high quality also can mean high levels of quality consistency. Here, product quality means conformance quality—freedom from defects and consistency in delivering a targeted level of performance. All companies should strive for high lev- els of conformance quality. In this sense, a Chevrolet can have just as much quality as a ­Rolls-Royce. Although a Chevy doesn’t perform at the same level as a Rolls-Royce, it can just as consistently deliver the quality that customers pay for and expect. B&B Hotels—the fast-growing economy hotel chain with a presence in France, Italy, Germany, and Spain—doesn’t aspire to provide a luxury Four Seasons experience, but it consistently delivers on its promise to give customers the best price guarantee. Its locally owned and operated hotels provide an honest stay and reliable service. For con- sistently meeting and exceeding customer quality expectations, B&B Hotels received the German Customer Award in 2018. In 2019, it was awarded the top score and first-class ratings in the categories of recommen- dation, trust, and quality in the “Germany Test” conducted by Focus-Money, a European financial tester. Due to its own dis- tinctive designs, useful additional services, and free SKY-TV, B&B Hotels continues to be one of the most successful hotel chains in the budget segment. 11 Product Features. A product can be offered with varying fea- tures. A stripped-down model, one without any extras, is the starting point. The company can then create h ­ igher-level models by adding more features. Features are a competitive tool for dif- ferentiating the company’s product from competitors’ products. Being the first seller to introduce a valued new feature is one of the most effective ways to compete. How can a company identify new features and decide which Conformance quality: By consistently meeting and exceeding ones to add? It should periodically survey buyers who have used customer quality expectations, B&B Hotels earned the German the product and ask these questions: How do you like the prod- Customer Award for highest customer satisfaction among the uct? Which specific features of the product do you like most? nation’s economy hotels. Which features could we add to improve the product? The an- Peter Titmuss/Alamy Stock Photo swers to these questions provide the company with a rich list of M08_KOTL9364_19_GE_C08.indd 254 15/02/23 10:53 AM  CHAPTER 8 | Products, Services, and Brands: Building Customer Value    255 feature ideas. The company can then assess each feature’s value to customers versus its cost to the company. Features that customers value highly in relation to costs should be added. A persistent challenge with asking customers what attributes they want is that cus- tomers typically want a lot of everything, all at a low price. Satisfying that demand does not make financial sense for companies. Therefore, companies often employ market re- search tools such as conjoint analysis to reveal what trade-offs customers are willing to make in terms of sacrificing some of one attribute for more of another and their willingness to pay more for higher performance on an attribute. Product Style and Design. Another way to add customer value is through distinctive product style and design. Design is a larger concept than style. Style simply describes the appearance of a product. Styles can be eye catching or yawn producing. A sensational style may grab attention and produce pleasing aesthetics, but it does not necessarily make the product perform better. Unlike style, design is more than skin deep—it goes to the very heart of a product. Good design contributes to a product’s usefulness as well as to its looks. Good design doesn’t start with brainstorming new ideas and making prototypes. Instead, it begins with observing customers, understanding their needs, and shaping their product-use experience. Product designers should think less about technical product speci- fications and more about how customers will use and benefit from the product. For ex- ample, consider PopSockets:12 PopSockets, those back-of-the-phone buttons you see everywhere, didn’t start in a big-company design lab. They began when a philosophy professor’s iPhone earbuds kept getting tangled up in his pocket and he needed something to wrap his cord around. He observed that many others experienced this same problem, along with a boatload of other frustrations in handling and using their smartphones. So he invested his life savings, taught himself how to use 3-D design software, and set out to create a solution. After 100 tries, he came up with PopSockets. The collapsible, silver-dollar-size buttons in colorful, trendy designs are useful for a lot more than just cord storage. They’re also handy for gripping the device, propping it up at an angle for ­hands-free use, and preventing drops and breaks by selfie takers. And now available in a dizzying and customizable variety of textures, colors, patterns, and images, they have evolved into fashion statements. Thanks to user-centered design, PopSockets has now sold more than 100 million of those doorknob-shaped gadgets. Branding Perhaps the most distinctive skill of professional marketers is their ability to build and Brand manage brands. A brand is a name, term, sign, symbol, or design or a combination of A name, term, sign, symbol, or design, these that identifies the maker or seller of a product or service. Consumers view a brand or a combination of these that identifies as an important part of a product, and branding can add value to a consumer’s purchase. the products or services of one seller or Customers attach meanings to brands and develop brand relationships. As a result, brands group of sellers and differentiates them have meaning well beyond a product’s physical attributes. from those of competitors. A classic stunt by former bargain footwear retailer Payless dramatically illustrated the power of brands in shaping consumer perceptions:13 As part of a viral advertising campaign to shift consumer percep- tions of its brand, Payless and its marketing agency DCX Growth Accelerator created a fake luxury brand—Palessi. They put the fake name on a former Armani store in an upscale shopping mall, stocked the store with footwear that usually sold at Payless for $19.99 to $39.99, and invited 60 VIP fashion influencers to the made-up brand’s launch party. With no idea that they were looking at discount wares, the fashionistas praised the design and fabrication of the Palessi shoes and paid as much as $645 for the footwear. “It’s just stunning. Elegant, sophisticated,” said one shopper of a normally ­low-budget stiletto heel. Payless rang up the sales but later gave the influencers their money back along with free shoes. The influencers’ reactions, along with the priceless “gotcha moments” when they learned they’d A classic stunt by former bargain footwear retailer Payless been pranked, were captured in campaign ad videos. According to dramatically illustrated the power of brands in shaping Payless’s then-chief marketer, “the campaign aimed to remind shop- perceptions. Fashion influencers paid as much as $645 for pers that Payless strikes the right balance of stylistic relevance and “Palessi” shoes that normally sold for less than $40. affordability.” Said an analyst, “The stunt indicates how powerful Collective Brands Inc. branding is in today’s society.” M08_KOTL9364_19_GE_C08.indd 255 15/02/23 10:53 AM  256   PART 3 | Designing a Customer Value–Driven Strategy and Mix Branding has become so strong that today hardly anything goes unbranded. Salt is packaged in branded containers, common nuts and bolts are packaged with a distributor’s label, and automobile parts—spark plugs, tires, filters—bear brand names that differ from those of the automakers. Even fruits, vegetables, dairy products, and poultry are branded— Cuties mandarin oranges, Dole Classic salads, Wonderful Pistachios, Perdue chickens, Eggland’s Best eggs, and Avocados From Mexico. Branding helps buyers in many ways. Brand names help consumers identify prod- ucts that might benefit them. Brands also say something about product quality and consistency—buyers who always buy the same brand know that they will get the same features, benefits, and quality each time they buy. Branding also gives the seller several advantages. The seller’s brand name and trademark provide legal protection for unique product features that otherwise might be copied by competitors. Branding helps the seller to segment markets. For example, rather than offering just one general product to all con- sumers, Toyota can offer the different Lexus and Toyota brands, each with numerous sub- brands—such as Avalon, Camry, Corolla, Prius, Yaris, Siena, Tundra, and Land Cruiser. Finally, a brand name becomes the basis on which a whole story can be built about a product’s special qualities. For example, the goal of Avocados From Mexico—a ­not-for-profit organization that represents both Mexican avocado growers and U.S. im- porters and packers—is to convince U.S. consumers that avocados are a must-have snack (“No Guac. No Game!”). It wants consumers to know that the Avocados From Mexico brand stands for great avocados that make for good times, good food, and good health. To promote the brand, the organization spends $20 million a year on advertising. As a result of such brand building, U.S. avocado sales have seen double-digit growth during the past few years, and the Avocados From Mexico brand now accounts for nearly 90 percent of all U.S. avocado sales.14 We will discuss branding strategy in more detail later in the chapter. Packaging Packaging Packaging involves designing and producing the container or wrapper for a product. Designing and producing the container Traditionally, the primary function of the package was to hold and protect the product. or wrapper for a product. Companies paid little attention to packaging, doing what they needed to do to protect the protect at the lowest possible cost. Poorly designed packages have caused plenty of headaches for consumers and lost sales for companies. Think about all those hard-to-open packages, such as packaging with finger-splitting wire twist-ties or sealed plastic clamshell containers that cause “wrap rage” and send thousands of people to the hospital each year with lacerations and puncture wounds. Another challenge is overpackaging—as when a tiny USB flash drive in an oversized cardboard and plastic display package is delivered in a giant corrugated shipping carton. Overpackaging creates an incredible amount of waste, frustrating those who care about the environment. This situation has shifted dramatically in recent times. Packaging has emerged as a po- tential driver of customer satisfaction and even competitive advantage. Increased competi- tion and clutter on retail store shelves means that packages must now perform many sales tasks—from attracting buyers to communicating brand positioning to closing the sale. Not every customer will see a brand’s advertising, social media pages, or other marketing con- tent. However, all consumers who evaluate, buy, and use a product will interact regularly with its packaging. Thus, the humble package represents a prime marketing opportunity. Companies realize the power of good packaging to create immediate consumer rec- ognition of a brand. For example, an average supermarket stocks anywhere from 15,000 to 60,000 items; the average Walmart supercenter carries 142,000 items. And according to recent studies, 55 percent of shoppers decide what brand to buy while shopping, and 81 percent say they have tried something new because of the packaging. In this highly ­competitive environment, the package may be the seller’s best and last chance to influence buyers. So the package itself becomes an important promotional medium.15 Innovative packaging can give a company an advantage over competitors and boost sales. Distinctive packaging may also become an important part of a brand’s identity. For example, an otherwise plain brown carton imprinted with the familiar curved arrow from the Amazon.com logo—variously interpreted as “a to z” or even a smiley face—leaves no doubt as to who shipped the package sitting at your doorstep. Similarly, at a time when the potato chip aisle was saturated with brands featuring chips in rows of conventional plastic and foil bags, P&G created Pringles. It packaged the iconic brand in a now-familiar tubular can that stood out like a beacon on store shelves while at the same time protecting the contents from breakage and reducing storage and transportation costs. Now owned M08_KOTL9364_19_GE_C08.indd 256 15/02/23 10:53 AM  CHAPTER 8 | Products, Services, and Brands: Building Customer Value    257 by Kellogg’s, Pringles are offered in 25 flavors just in the United States alone and dozens more flavors across the more than 140 countries where the brand is sold.16 With today’s technologies, packaging can even help brands interact directly with customers. Increasingly, brands are adopting smart packaging, such as using QR codes and other technologies to connect packaging to the internet. Scanning these codes connects consumers—in stores, at home, or anywhere else—with important prod- uct information or with brand experiences ranging from tutorials or recipe ideas to branded features, interactive games and sweepstakes, or ingredients and recycling information. Smart packaging offers many advantages. For example, British dairy brand Yeo Valley Organic uses Smart packaging: British dairy brand Yeo Valley Organic uses “always on” connected packaging across its full range of 90 organic products. “always on” connected packaging developed by con- nected experience agency Sharp End across its full range Courtesy of Sharp End of 90 organic products. Shoppers who scan the QR codes printed on Yeo Valley’s packaging are taken to a web page introducing the brand’s “Put Nature First” campaign, where they can also find product information and recipes or ac- cess informational and entertaining features. “The flexibility of QR codes is we can change the message remotely without needing to reprint the packaging,” explains Yeo Valley Organic‘s managing director. “The communication potential is phenomenal. We can talk about anything from the recyclability of our packaging to how to use our products in reci- pes. And we can tailor every QR code specifically to a product.” Connected packaging can also provide data on who buys and uses a product, creating further opportunities to build direct brand–consumer relationships.17 Product safety has also become a major packaging concern in recent years. Consider P&G’s Tide PODS single-dose laundry detergent packets. To deter children from acci- dentally eating the colorful and candy-looking but toxic packets, P&G spent three years perfecting a Child-Guard Pack and Child Guard Tub. These packaging innovations likely saved P&G’s Tide PODS and other unit-dose brands in the face of bad publicity related to children eating the visually enticing PODS.18 Labeling and Logos Labels and logos range from simple tags attached to products to complex graphics that are part of the packaging. They perform several functions. At the very least, the label identifies the product or brand. The label might also describe several things about the product—who made it, where it was made, when it was made, its contents, how it is to be used, and how to use it safely. Finally, the label and logo help to promote the brand and engage customers. For many companies, labels and logos have become important elements in broader marketing campaigns. Logos must be redesigned from time to time. Companies have always taken great care to craft simple, easily recognized logos that quickly identify their brands and trigger posi- tive consumer associations. However, in today’s digital world, brand logos are being asked to do much more. A logo is no longer just a static symbol placed on a printed page, package, TV ad, billboard, or store display. Instead, today’s logos must also be capable of meeting the demands of an ever-more-diverse set of media. Text that comes through clearly in a print ad or billboard may be too small to read on a smartphone. A color that can be presented easily in the digital medium may be challenging to create on a physical medium like paper. Thus, many brands are adapting their logos to be easily reproducible and interpretable across diverse media. Further, companies may also use new logos to signal a positioning shift, to increase the brand’s appeal to diverse audiences, or to connect more strongly with emerg- ing generations of customers who may consider a brand and its logo to be dated. From Audi and Uber to GM and Burger King, it’s out with the old and in with the new: Most logo changes focus on creating simpler, brighter, more modern designs that present better on digital screens and platforms. Burger King’s new logo presents a simpler, friendlier, more modern retro vibe in a fresh identity—it’s warmer and more appetizing. Uber replaced a blocky logo unveiled only two years earlier—dubbed the “smushed eyeball” by some observers—with a simpler one consisting of its name in white on a black background. The new logo is more easily recognized and works much better with expanded services such as Uber Eats. GM’s new logo M08_KOTL9364_19_GE_C08.indd 257 15/02/23 10:53 AM  258   PART 3 | Designing a Customer Value–Driven Strategy and Mix is more modern and vibrant but also signals the carmaker’s com- mitment to an all-electric-vehicle future. The brighter blue color evokes “the clear skies of a zero-emissions future,” and the white space around the lowercase “m” suggests the shape of an electrical plug. The old IHOP logo had white letters on a blue field with a downward-curving red banner containing the word “restaurant.” Now, IHOP’s letters are blue on a white field, a design that stands out better against the white backgrounds on most web, mobile, and social media sites. The new logo also replaces the old frown- like “restaurant” banner with an upward curving red line under the “o” and the “p,” creating a smiley face that adds a burst of happiness to the brand. Many logos today are wordless, using only a brand symbol with no mention of the brand name at all. Think Apple, Twitter, Nike, and Airbnb. Carmaker Audi recently redesigned its logo, dropping the red Audi wordmark altogether. It turned its signa- ture four 3D interlocking chrome rings to flat black and let the rings themselves become the logo. The new logo seems plainer but is also less restrictive and more interactive across today’s digi- tal formats, from screens inside the car to Audi’s website, mobile apps, and even wearables. Companies need to move carefully when changing their brand logos because customers often form strong connections to existing visual representations of their brands. Consider, for example, the feelings evoked by the logos of companies such as Google, Coca-Cola, Twitter, Apple, and Nike. Moreover, such changes often require a huge investment. For example, IHOP’s seemingly simple logo redesign requires sweeping changes that Brand logo makeovers: Many companies are redesigning their touch almost every aspect of the company’s operations. Just think logos to keep them in sync with the rapidly evolving digital times. of all the places you see IHOP’s logo—from its advertising, web, rvlsoft/Shutterstock, General Motors, International House of Pancakes, LLC, and Audi of America and social media activities to the signs on and in its restaurants and the graphics on its corporate letterhead. These comprehen- sive changes call for significant investments of time and money. There is also a long history of legal concerns related to labels and packaging. The Federal Trade Commission Act of 1914 held that false, misleading, or deceptive labels or packages constitute unfair competition. Labels can mislead customers, fail to describe key ingredients, or fail to include needed safety warnings. As a result, several federal and state laws regulate labeling. The most prominent is the Fair Packaging and Labeling Act of 1966, which set mandatory labeling requirements, encouraged voluntary industry packaging standards, and allowed federal agencies to set packaging regulations in specific indus- tries. The Nutritional Labeling and Educational Act of 1990 requires sellers to provide de- tailed nutritional information on food products, and recent sweeping actions by the Food and Drug Administration (FDA) regulate the use of health-related terms such as low fat, light, high fiber, and organic. Sellers must ensure that their labels contain all the required information. Product Support Services Customer service is another element of product strategy. A company’s offer usually in- cludes some support services, which can be a minor part or a major part of the total of- fering. Later in this chapter, we will discuss services as products in themselves. Here, we discuss services that augment actual products. Support services are an important part of the customer’s overall brand experience. Good marketing doesn’t end with making a sale. Keeping customers happy after the sale is the key to building lasting relationships. Keeping existing customers is as important to company growth as bringing in new customers. Cloud infrastructure company Rackspace Technology illustrates this principle in its business-to-business marketing:19 Rackspace Technology is a market leader in cloud-based storage and computing technology. It offers its business customers a range of services related to developing cloud-based strate- gies, deploying cloud-based applications, gaining insights from cloud data, and ensuring data and cloud infrastructure security. Rackspace regularly wins industry awards for what it calls the “Fanatical Experience” it provides its customers. The company notes: “We at Rackspace M08_KOTL9364_19_GE_C08.indd 258 15/02/23 10:53 AM  CHAPTER 8 | Products, Services, and Brands: Building Customer Value    259 Technology ar