978-0134492513 Chapter 8 Lecture Notes Part 2

p. 225

PPT 8-21

p. 225

PPT 8-22

PPT 8-23

PPT 8-24

p. 226

PPT 8-25

PPT 8-26

Describe the decisions companies make regarding their

individual products, and services, product lines, and

product mixes.

PRODUCT AND SERVICE DECISIONS

Individual Product and Service Decisions

Product and Service Attributes

Developing a product or service involves defining the

benefits that it will offer. These benefits are communicated

and delivered by product attributes such as quality, features,

and style and design.

Product quality is the characteristics of a product or service

that bear on its ability to satisfy stated or implied customer

needs.

Total quality management (TQM) is an approach in which all

the company’s people are involved in constantly improving

the quality of products, services, and business processes.

Product quality has two dimensions: level and consistency.

The quality level means performance quality or the ability of

a product to perform its functions. Quality conformance

means quality consistency, freedom from defects, and

consistency in delivering a targeted level of performance.

Product features are a competitive tool for differentiating

the company’s product from competitors’ products.

The company should periodically survey buyers who have

used the product and ask these questions: How do you like

the product? Which specific features of the product do you

like most? Which features could we add to improve the

product?

Product style and design is another way to add customer

value.

Style describes the appearance of a product. Design

contributes to a product’s usefulness as well as to its looks.

Branding

Learning Objective

2

p. 225

Figure 8.2:

Individual Product

Decisions

p. 225

Key Term: Product

quality

p. 226

Photo: Chick-fil-A

p. 226

PPT 8-27

p. 227

PPT 8-28

p. 228

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.

Branding helps buyers in many ways.

Brand names help consumers identify products that

might benefit them.

Brands say something about product quality and

consistency.

Branding gives the seller several advantages.

The brand name becomes the basis on which a whole

story can be built about a product.

The brand name and trademark provide legal

protection for unique product features.

The brand name helps the seller to segment markets.

Packaging

Packaging involves designing and producing the container

or wrapper for a product.

Labeling and Logos

Labels perform several functions.

The label identifies the product or brand.

The label describes several things about the product.

The label promotes the brand.

Labeling also raises concerns. As a result, several federal and

state laws regulate labeling.

The most prominent is the Fair Packaging and Labeling Act

of 1966.

Labeling has been affected in recent times by:

Unit pricing (stating the price per unit of standard

measure)

p. 226

Key Term: Brand

p. 227

Photo: Branding

with Joshua Bell

p. 227

Key Term:

Packaging

p. 228

Photo: Amazon

p. 229

Photo: Gap

p. 230

Photo: Brand logo

makeovers

p. 231

PPT 8-29

Open dating (stating the expected shelf life of the

product)

Nutritional labeling (stating the nutritional values in

the product)

Product Support Services

The first step in designing customer support services is to

survey customers periodically to assess the value of current

services and to obtain ideas for new ones.

Next, the company can take steps to fix problems and add

new services that will both delight customers and yield

profits to the company.

p. 231

Photo: Lexus

Assignments, Resources

Use Discussion Question 8-3 here

Use Critical Thinking Exercise 8-6 here

Use Real Marketing 8.1 here

Use Individual Assignment 1 here

p. 232

PPT 8-30

PPT 8-31

p. 232

Product Line Decisions

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.

Product line length is the number of items in the product

line.

Product line filling involves adding more items within the

present range of the line.

Product line stretching occurs when a company lengthens its

product line beyond its current range.

Companies located at the upper end of the market can stretch

their lines downward.

Companies located at the lower end of the market can stretch

their product lines upward.

Companies located in the middle range of the market can

stretch their lines in both directions.

Product Mix Decisions

p. 232

Key Term: Product

line

p. 232

PPT 8-32

p. 233

Product mix (or product portfolio) consists of all the

product lines and items that a particular seller offers for sale.

A company’s product mix has four dimensions: width,

length, depth, and consistency.

1. Product mix width refers to the number of different

product lines the company carries.

2. Product mix length refers to the total number of items

the company carries within its product lines.

3. Product mix depth refers to the number of versions

offered of each product in the line.

4. Product mix consistency refers to how closely related

the various product lines are in end use, production

requirements, distribution channels, or some other

way.

The company can increase its business in four ways.

1. It can add new product lines, widening its product

mix.

2. It can lengthen its existing product lines.

3. It can add more versions of each product, deepening

its product mix.

4. It can pursue more product line consistency.

Review Learning Objective 2: Describe the decisions

companies make regarding their individual products and

services, product lines, and product mixes.

Photo: BMW

p. 232

Key Term: Product

mix (product

portfolio)

p. 233

Photo: Colgate

Assignments, Resources

Use Individual Assignment 2 here

Use Video Case here

p. 234

PPT 8-33

PPT 8-34

Identify the four characteristics that affect the marketing

of services and the additional marketing considerations

that services require.

SERVICES MARKETING

Services account for almost 80 percent of U.S. gross

domestic product.

The types of service industries include: government, private

not-for-profit organizations, and business services. Services

make up almost 63 percent of gross world product.

Learning Objective

3

p. 234

PPT 8-35

p. 235

PPT 8-36

PPT 8-37

p. 236

The Nature and Characteristics of a Service

A company must consider four service characteristics when

designing marketing programs: intangibility, inseparability,

variability, and perishability (see Figure 8.3).

1. Service intangibility means that services cannot be

seen, tasted, felt, heard, or smelled before they are

bought.

2. Service inseparability means that services cannot be

separated from their providers, whether the providers

are people or machines. Because the customer is also

present as the service is produced, provider-customer

interaction is a special feature of services marketing.

3. Service variability means that the quality of services

depends on who provides them as well as when,

where, and how they are provided.

4. Service perishability means that services cannot be

stored for later sale or use.

Marketing Strategies for Service Firms

The Service-Profit Chain

In a service business, the customer and front-line service

employee interact to create the service.

The service-profit chain consists of five links:

1. Internal service quality: superior employee selection

and training, a quality work environment, and strong

support for those dealing with customers, which

results in…

2. Satisfied and productive service employees: more

satisfied, loyal, and hardworking employees, which

results in…

3. Greater service value: more effective and efficient

customer value creation and service delivery, which

results in…

4. Satisfied and loyal customers: satisfied customers

who remain loyal, repeat purchase, and refer other

customers, which results in…

5. Healthy service profits and growth: superior service

firm performance

p. 234

Key Term: Service

intangibility

p. 234

Figure 8.3: Four

Service

Characteristics

p. 235

Key Terms: Service

inseparability,

Service variability,

Service

perishability

p. 235

Photo: Mayo Clinic

p. 235

Key Term:

Service-profit chain

p. 236

PPT 8-38

PPT 8-39

PPT 8-40

p. 238

PPT 8-41

p. 239

PPT 8-42

p. 240

PPT 8-43

Service marketing requires internal marketing and

interactive marketing. (Figure 8.4)

Internal marketing means that the service firm must orient

and motivate its customer-contact employees and supporting

service people to work as a team to provide customer

satisfaction.

Interactive marketing means that service quality depends

heavily on the quality of the buyer-seller interaction during

the service encounter.

Service companies face three major marketing tasks: They

want to increase their service differentiation, service quality,

and service productivity.

Managing Service Differentiation

Service companies can differentiate their service delivery by

having more able and reliable customer-contact people, by

developing a superior physical environment in which the

service product is delivered, or by designing a superior

delivery process.

Service companies can work on differentiating their images

through symbols and branding.

Managing Service Quality

Service quality is harder to define and judge than product

quality.

Service quality will always vary, depending on the

interactions between employees and customers.

Good service recovery can turn angry customers into loyal

ones.

Managing Service Productivity

Service firms are under great pressure to increase service

productivity.

They can train current employees better or hire new

ones who will work harder or more skillfully.

They can increase the quantity of their service by

p. 236

Figure 8.4

Three Types of

Service Marketing

p. 236

Key Terms: Internal

marketing,

Interactive

marketing

p. 238

Photo: REI

p. 239

Photo: Airlines

giving up some quality.

They can harness the power of technology.

Review Learning Objective 3: Identify the four

characteristics that affect the marketing of services and the

additional marketing considerations that services require.

Assignments, Resources

Use Critical Thinking Exercise 8-7 and 8-8 here

Use Real Marketing 8.2 here

Use Marketing Ethics here

Use Company Case here

Use Additional Project 4 here

Use Think-Pair-Share 5 here

Use Outside Example 2 here

Troubleshooting Tip

The service characteristics of intangibility,

inseparability, variability, and perishability are

usually picked up fairly easily, but again, various

examples from day-to-day life may help. For

instance, everyone has had to cancel at least one

doctor’s appointment, which illustrates the problem

of perishability. Female students will understand

inseparability by talking about the hair salons they

use. Ask: If the hairdresser you used left, would you

easily switch to another person at the salon? Many

students today travel heavily, so talking about airline

personnel can illustrate service variability.

Intangibility is the easiest characteristic to appreciate

as most students had to choose between several

universities that offered them admission.

p. 240

PPT 8-44

PPT 8-45

Discuss branding strategythe decisions companies make

in building and managing their brands.

BRANDING STRATEGY: BUILDING STRONG

BRANDS

Some analysts see brands as the major enduring asset of a

company.

Brand Equity and Brand Value

Brand equity is the differential effect that knowing the

brand name has on customer response to the product and its

marketing.

Learning Objective

4

p. 240

Key Term: Brand

equity

p. 241

PPT 8-46

PPT 8-47

p. 243

PPT 8-48

Young & Rubicam’s Brand Asset Evaluator measures brand

strength along four consumer perception dimensions:

1. Differentiation (what makes the brand stand out)

2. Relevance (how consumers feel it meets their needs)

3. Knowledge (how much consumers know about the

brand)

4. Esteem (how highly consumers regard and respect the

brand)

Brand valuation is the process of estimating the total

financial value of a brand.

High brand equity provides a company with many

competitive advantages.

High level of consumer brand awareness and loyalty

More leverage in bargaining with resellers

More easily launch line and brand extensions

Defense against fierce price competition

The basis for building strong and profitable customer

relationships

The fundamental asset underlying brand equity is customer

equity—the value of the customer relationships that the

brand creates.

Building Strong Brands

Brand Positioning

Marketers can position brands at any of three levels.

1. They can position the brand on product attributes.

2. They can position the brand with a desirable benefit.

3. They can position the brand on beliefs and values.

Brand Name Selection

Desirable qualities for a brand name include the following:

1. It should suggest something about the product’s

benefits and qualities.

2. It should be easy to pronounce, recognize, and

remember.

p. 241

Photo: Nike

p. 241

Figure 8.5: Major

Brand Strategy

Decisions

p. 242

Photo: Disney

p. 243

Ad: Kleenex

p. 243

PPT 8-49

p. 243

p. 244

3. It should be distinctive.

4. It should be extendable.

5. It should translate easily into foreign languages.

6. It should be capable of registration and legal

protection.

Brand Sponsorship

A manufacturer has four sponsorship options.

1. The product may be launched as a

manufacturer’s brand (or national brand).

2. The manufacturer may sell to resellers who give it a

private brand (also called a store brand or

distributor brand).

3. The manufacturer can market licensed brands.

4. Two companies can join forces and co-brand a

product.

National Brands Versus Store Brands

National brands (or manufacturers’ brands) have long

dominated the retail scene. In recent times, an increasing

number of retailers and wholesalers have created their own

store brands (or private brands).

Recent tougher economic times have created a store-brand

boom. Private label brands now capture more than 29

percent of all supermarket sales.

In the battle of the brands between national and private

brands, retailers have many advantages.

Retailers often price their store brands lower than

comparable national brands.

Store brands yield higher profit margins for the

reseller.

Store brands give resellers exclusive products that

cannot be bought from competitors.

Licensing

Name and character licensing has grown rapidly in recent

years. Annual retail sales of licensed products in the United

States and Canada have grown from only $4 billion in 1977

to $55 billion in 1987 and more than $182 billion today.

p. 243

Key Term: Store

brand (private

brand)

p. 244

Photo: Kroger

p. 245

p. 246

PPT 8-50

p. 248

Co-branding

Co-branding occurs when two established brand names of

different companies are used on the same product.

Co-branding offers many advantages.

The combined brands create broader consumer

appeal and greater brand equity.

Co-branding also allows a company to expand its

existing brand into a category it might otherwise have

difficulty entering alone.

Co-branding also has limitations.

Such relationships involve complex legal contracts

and licenses.

Co-branding partners must carefully coordinate their

advertising, sales promotion, and other marketing

efforts.

Each partner must trust the other will take good care

of its brand.

Brand Development

A company has four choices when it comes to developing

brands (see Figure 8.6).

1. Line extensions occur when a company extends

existing brand names to new forms, colors, sizes,

ingredients, or flavors of an existing product

category.

2. Brand extensions extend a current brand name to

new or modified products in a new category.

3. Multibranding introduces additional brands in the

same product category.

4. New brands

The megabrand strategy weeds out weaker brands and

focuses their marketing dollars only on brands that can

achieve the number-one or number-two market share

positions in their categories.

Managing Brands

Key Term:

Co-branding

p. 245

Photo: SpongeBob

SquarePants

p. 246

Figure 8.6: Brand

Development

Strategies

p. 246

Key Terms: Line

extension, Brand

extension

p. 247

Ad: Nest

The brand experience involves customers coming to know a

brand through a wide range of contacts and touchpoints.

Companies need to periodically audit their brands’ strengths

and weaknesses.

Review Learning Objective 4: Discuss branding

strategythe decisions companies make in building and

managing their brands.

Assignments, Resources

Use Discussion Questions 8-4 and 8-5 here

Use Marketing by the Numbers here

Use Additional Projects 1, 2, and 3 here

Use Small Group Assignment 1 here

Troubleshooting Tip

Students’ eyes can glaze over at the concepts of brand

equity and brand sponsorship. Asking about the

students’ perceptions of well-known brands such as

Starbucks, Coke, and the like will help them

understand what brand equity is all about. You can

also tie in the discussion of the three levels of product

with this idea of brand equity. Finally, by using

different products with different brand sponsorships

—several examples from Sears, auto companies,

department store private labels, and various licensed

properties from Disney or Warner Brothers will do—

you can bring students to an understanding of this

important concept.