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A. Services Differentiation: main service differentiators are ordering ease, delivery,
installation, customer training, customer consulting, maintenance and repair, and
returns.
a. Ordering Ease: describes how easy it is for the customer to place an
order with the company.
b. Delivery: refers to how well the product or service is brought to the
customer, including speed, accuracy, and care throughout the process.
c. Installation: refers to the work done to make a product operational in
its planned location.
d. Customer Training: helps the customer’s employees use the vendor’s
equipment properly and efficiently.
e. Customer Consulting: includes data, information systems, and advice
services the seller offers to buyers.
f. Maintenance and Repair: programs help customers keep purchased
products in good working order; critical in business-to-business
settings
g. Returns: inconvenient, embarrassing, or difficult for the consumer to
complete; bad for providers when returned merchandise is not in
re-sellable condition, lacks proper proof of purchase, or is returned to
the wrong store
a. Controllable returns result from problems or errors made by the
seller or customer and can mostly be eliminated with improved
handling or storage, better packaging, and improved transportation
and forward logistics by the seller or its supply chain partners.
b. Uncontrollable returns result from the need for customers to
actually see, try, or experience products in person to determine
suitability and can’t be eliminated by the company in the short run.
c. One basic strategy is to eliminate the root causes of controllable
returns while developing processes for handling uncontrollable
returns.
I. Design, the totality of features that affect the way the product looks, feels, and
functions, offers a potent way to differentiate and position a company’s products
and services.
A. Design Leaders: the emotional power of design and the importance to consumers
of look and feel as well as function, so design is exerting a stronger influence in
categories where it once played a small role.
B. Power of Design: In a visually oriented culture, transmitting brand meaning and
positioning through design is critical.
C. Approaches to Design: a well-designed product is easy to manufacture and
distribute. To the customer, it is pleasant to look at and easy to open, install, use,
repair, and dispose of. The designer must take all these goals into account.
II. Luxury Products face some unique issues
A. Characterizing Luxury Brands
i. Higher priced; often about social status and who a customer was—or
perhaps wanted to be
ii. Luxury for many has become more about style and substance,
combining personal pleasure and self-expression
iii. Common denominators of luxury brands are quality and uniqueness
iv. Winning formula for many is craftsmanship, heritage, authenticity, and
history, often critical to justifying a sometimes extravagant price.
B. Growing Luxury Brands: luxury brands that successfully extended their brands
vertically across a range of price points are usually the most immune to economic
downturns
a. Clear differentiation must exists between these brands, minimizing the
potential for consumer confusion and brand cannibalization.
b. Each also must live up to the core promise of the parent brand, reducing
chances of hurting the parent’s image.
c. Horizontal extensions into new categories can also be tricky for luxury
brands.
d. Much of the growth in luxury brands in recent years has been
geographical.
C. Marketing Luxury Brands
a. Globalization, new technologies, financial crises, shifting consumer
cultures, and other forces require luxury brand marketers to be skillful and
adept at their brand stewardship to succeed.
b. Luxury brand marketers have been issued the following guidelines:
i. Maintain a premium image for luxury brands; control the image.
ii. Create many intangible brand associations and an aspirational
image.
iii. Align all aspects of the marketing program for luxury brands must
to ensure high-quality products and services and pleasurable
purchase and consumption experiences.
iv. Besides brand names, other brand elements—logos, symbols,
packaging, signage—can be important drivers of brand equity for
luxury products.
v. Secondary associations from linked personalities, events,
countries, and other entities can boost luxury-brand equity as well.
vi. Luxury brands must carefully control distribution via a selective
channel strategy.
vii. Luxury brands must employ a premium pricing strategy, with
strong quality cues and few discounts and markdowns.
viii. Brand architecture for luxury brands must be managed carefully.
ix. Competition for luxury brands must be defined broadly because it
often comes from other categories.
x. Luxury brands must legally protect all trademarks and aggressively
combat counterfeits.
c. Trend for luxury brands is to wrap personal experiences around the
products.
d. Some luxury marketers have struggled to find the appropriate online
selling and communication strategies for their brand
e. Success depends on getting the right balance of classic and contemporary
imagery and continuity and change in marketing programs and activities.
III. Environmental Issues: many firms are considering ways to reduce the negative
environmental consequences of conducting business, and some are changing the
manufacture of their products or the ingredients that go into them.
IV. Product and Brand Relationships: each product can be related to other products to
ensure that a firm is offering and marketing the optimal set of products.
A. The Product Hierarchy: Six Levels
a. Need family—The core need that underlies the existence of a product
family.
b. Product family—All the product classes that can satisfy a core need
with reasonable effectiveness.
c. Product class—A group of products within the product family
recognized as having a certain functional coherence, also known as a
product category.
d. Product line—A group of products within a product class that are
closely related because they perform a similar function, are sold to the
same customer groups, are marketed through the same outlets or channels,
or fall within given price ranges. A product line may consist of different
brands, a single family brand, or an individual brand that has been line
extended.
e. Product type—A group of items within a product line that share one of
several possible forms of the product.
f. Item (also called stock-keeping unit or product variant)—A distinct unit
within a brand or product line distinguishable by size, price, appearance,
or some other attribute.
B. Product Systems and Mixes
a. Product system is a group of diverse but related items that function in a
compatible manner
b. Product mix (aka product assortment) is the set of all products and items a
particular seller offers for sale.
i. The width of a product mix refers to how many different product
lines the company carries.
ii. The length of a product mix refers to the total number of items in
the mix
iii. The depth of a product mix refers to how many variants are offered
of each product in the line.
iv. The consistency of the product mix describes how closely related
the various product lines are in end use, production requirements,
distribution channels, or some other way.
c. These four product mix dimensions permit the company to expand its
business in four ways.
i. It can add new product lines, thus widening its product mix.
ii. It can lengthen each product line.
iii. It can add more product variants to each product and deepen its
product mix.
iv. It can pursue more product line consistency.
C. Product Line Analysis: product line managers need to know the sales and profits
of each item in their line to determine which items to build, maintain, harvest, or
divest and they need to understand each product line’s market profile and image
a. Sales and Profits: Every company’s product portfolio contains products
with different margins. Companies should recognize that different items
will allow for different margins and respond differently to changes in level
of advertising.
b. Market Profile and Image: The product line manager must review how the
line is positioned against competitors’ lines.
a. A product map shows which competitors’ items are competing
against company X’s items.
b. The map also reveals possible locations for new items.
c. Another benefit of product mapping is that it identifies market
segments.
c. Product line analysis provides information for two key decision areas:
product line length and product mix pricing.
D. Product Line Length
a. One objective is to create a product line to induce up-selling.
b. A different objective is to create a product line that facilitates cross-selling
c. Companies seeking high market share and market growth will generally
carry longer product lines
d. Those emphasizing high profitability will carry shorter lines consisting of
carefully chosen items.
e. Product lines tend to lengthen over time.
f. A company lengthens its product line in two ways: line stretching and line
filling.
A. Line Stretching occurs when a company lengthens its product line beyond its
current range, whether down-market, up-market, or both ways.
a. Down-Market Stretch: A company positioned in the middle market may
want to introduce a lower-priced line for any of three reasons:
i. The company may notice strong growth opportunities.
ii. The company may wish to tie up lower-end competitors who might
otherwise try to move up-market.
iii. The company may find the middle market stagnating or declining.
b. Marketers face a number of naming choices in deciding to move a brand
down-market
i. Use the parent brand name on all its offerings.
ii. Introduce lower-priced offerings using a sub-brand name
iii. Introduce the lower-priced offerings under a different name
(expensive to implement and means brand equity will have to be
built from scratch, but the equity of the parent brand name is
protected)
c. Risks associated with down-market stretching
i. Not pricing low enough
ii. Cannibalizing sales
iii. Consumers not understanding how different offerings are
compartmentalized/differences between them.
d. Up-Market Stretch: enter the high end of the market to achieve more
growth, realize higher margins, or simply position themselves as full-line
manufacturers.
i. Some companies use their own names
ii. Some companies create new names
iii. Some brands have used modifiers to signal a quality improvement
e. Two-Way Stretch: companies serving the middle market might stretch
their line in both directions.
f. Line Filling: lengthening the product line by adding more items within the
present range; overdone if it results in cannibalization and confusion
g. Line Modernization, Featuring, and Pruning: product lines regularly need
to be modernized.
i. A piecemeal approach allows the company to see how customers
and dealers take to the new style and is less draining on the
company’s cash flow
ii. The downside is it lets competitors see changes and start
redesigning their own lines
iii. Sometimes a company finds one end of its line selling well and the
other end selling poorly.
iv. Using sales and cost analysis, product line managers must
periodically review the line for deadwood that depresses profits
v. Multi-brand companies all over the world try to optimize their
brand portfolios
B. Product Mix Pricing: the firm searches for a set of prices that maximizes profits
on the total mix.
a. Product Line Pricing
b. Optional-Feature Pricing
c. Captive-Product Pricing
d. Two-Part Pricing (fixed fee plus a variable usage fee)
e. By-Product Pricing
f. Product-Bundling Pricing
i. Pure bundling
ii. Mixed bundling
C. Co-Branding and Ingredient Branding
a. Co-Branding: also called dual branding or brand bundling—two or more
well-known brands are combined into a joint product or marketed together
in some fashion.
i. Same-company co-branding
ii. Joint-venture co-branding
b. Co-Branding Advantages:
i. Product can be convincingly positioned by virtue of the multiple
brands.
ii. Co-branding can generate greater sales from the existing market
and open opportunities for new consumers and channels.
iii. It can also reduce the cost of product introduction because it
combines two well-known images and speeds adoption.
iv. Co-branding may be a valuable means to learn about consumers
and how other companies approach them.
c. Co-Branding Disadvantages:
i. Risks and lack of control in becoming aligned with another brand
in consumers’ minds
ii. Consumer expectations of co-brands are likely to be high, so
unsatisfactory performance could have negative repercussions for
both brands.
iii. If the other brand enters a number of co-branding arrangements,
overexposure may dilute the transfer of any association. It may
also result in a lack of focus on existing brands.
iv. Consumers may feel less sure of what they know about the brand.
d. For co-branding to succeed, the two brands must separately have brand
equity—adequate brand awareness and a sufficiently positive brand image.
e. The most important requirement is a logical fit between the two brands, to
maximize the advantages of each while minimizing disadvantages.
i. Consumers are more apt to perceive co-brands favorably if they are
complementary and offer unique quality, rather than being overly
similar and redundant.
ii. Managers must enter co-branding ventures carefully, looking for
the right fit in values, capabilities, and goals and an appropriate
balance of brand equity.
iii. There must be detailed plans to legalize contracts, make financial
arrangements, and coordinate marketing programs.
f. Ingredient Branding: special case of co-branding that creates brand equity
for materials, components, or parts that are necessarily contained within
other branded products.
i. For host products whose brands are not that strong, ingredient
brands can provide differentiation and important signals of quality
ii. An interesting take on ingredient branding is self-branded
ingredients that companies advertise and even trademark
iii. Ingredient brands try to create enough awareness and preference
for their product so consumers will not buy a host product that
doesn’t contain it.
iv. Many manufacturers make components or materials that enter final
branded products but lose their individual identity.
g. What are the requirements for successful ingredient branding?
i. Consumers must believe the ingredient matters to the performance
and success of the end product. Ideally, this intrinsic value is easily
seen or experienced.
ii. Consumers must be convinced that not all ingredient brands are the
same and that the ingredient is superior.
iii. A distinctive symbol or logo must clearly signal that the host
product contains the ingredient. Ideally, this symbol or logo
functions like a “seal” and is simple and versatile, credibly
communicating quality and confidence.
iv. A coordinated “pull” and “push” program must help consumers
understand the advantages of the branded ingredient. Channel
members must offer full support such as consumer advertising and
promotions and—sometimes in collaboration with manufacturers
—retail merchandising and promotion programs.
V. Packaging, Labeling, Warranties, and Guarantees
A. Packaging: a fifth P; part of product strategy, it includes all the activities of
designing and producing the container for a product.
a. Packaging is important because it is the buyer’s first encounter with the
product.
i. Draws the consumer in and encourages product choice
ii. Acts as a “five-second commercial” for the product
iii. Affects consumers’ later product experiences when they open it
and use what’s inside
iv. Packaging may be an important part of a brand’s equity
b. Several factors contribute to the growing use of packaging as a marketing
tool.
i. Self-service (more choices; less explanation)
ii. Consumer auence (increases willingness to pay for
the convenience, appearance, dependability, and prestige of better
packages).
iii. Company and brand image (recognition of the company or
brand)
iv. Innovation opportunity (make products more convenient
and easier to use)
c. Packaging must achieve a number of objectives:
i. Identify the brand.
ii. Convey descriptive and persuasive information.
iii. Facilitate product transportation and protection.
iv. Assist at-home storage.
v. Aid product consumption.
d. Packaging color is important because color carries different meanings in
different cultures and market segments.
e. Packaging updates and redesigns can occur frequently to keep the brand
contemporary, relevant, or practical.
f. After the company designs its packaging, it must test it.
B. Labeling: A label performs several functions
a. It identifies the product or brand
b. The label might describe the product: who made it, where and when, what
it contains, how it is to be used, and how to use it safely.
c. The label might promote the product through attractive graphics.
d. In 1914, the Federal Trade Commission Act held that false, misleading, or
deceptive labels or packages constitute unfair competition.
e. The Fair Packaging and Labeling Act, passed by Congress in 1967, set
mandatory labeling requirements, encouraged voluntary industry
packaging standards, and allowed federal agencies to set packaging
regulations in specific industries.
f. The Food and Drug Administration (FDA) has required processed-food
producers to include nutritional labeling that clearly states the amounts of
protein, fat, carbohydrates, and calories contained in products, as well as
vitamin and mineral content as a percentage of the recommended daily
allowance.
g. The FDA has also taken action against potentially misleading uses of such
descriptions as “light,” “high fiber,” and “low fat.”
C. Warranties and Guarantees
a. Warranties are formal statements of expected product performance by
the manufacturer.
i. Products under warranty can be returned to the manufacturer or
designated repair center for repair, replacement, or refund.
ii. Whether expressed or implied, warranties are legally enforceable.
iii. Extended warranties and service contracts can be extremely
lucrative for manufacturers and retailers.
b. Many sellers offer either general or specific guarantees.
i. Guarantees reduce the buyer’s perceived risk.
ii. They suggest that the product is of high quality and the company
and its service performance are dependable.
iii. They can be especially helpful when the company or product is not
well known or when the product’s quality is superior to that of
competitors.
