PRODUCTS, SERVICES, AND

BRANDS: BUILDING
CUSTOMER VALUE
Chapter 8
 Chapter 8 Outline
 What is a Product?
 Levels of Product and Services
 Product and Service Classifications
 Organizations, Persons, Places, and Ideas
 Product and Service Decisions
 Services Marketing
 Nature and Characteristics of a Service
 Marketing Strategies for Service Firms
 Branding Strategy: Building Strong Brands
 Brand Development
 What is a Product?

‫؟‬
A Product is anything that can be offered in a market for
attention, acquisition, use, or consumption that might
satisfy a need or want.

 Products include tangible objects such as cars, computers,

or mobile phones and services, events, persons, places,
organizations, ideas, or a mixture of these.

 A Service is a product that consists of activities, benefits or

satisfaction that is essentially intangible and does not
result in the ownership of anything. Example: Banking,
hotel, airline travel.
 What is a Product?

 To differentiate their offers beyond simply making

products and delivering services, companies are
creating and managing customer experience with
their brands or company. .
 Experiences represent what buying the product or
service will do for the customer.
 Levels of Product and Services

 Product planners need to think about products and

services on three levels and each level adds more
customer value.

 1. Core customer value represents what the buyer

is really buying..
 Marketers must define the core, problem-solving
benefits or services that customers seek.
.
 Levels of Product and Services

 2. Actual product represents the design, brand

name, and packaging that delivers the core benefit
to the customer.

 3. Augmented product represents additional

services or benefits of the actual product.
. 
 Class Exercise
 Think of a product and list the following:
 The core customer value the product offers
 The actual product
 The augmented product
 Product and Service Classifications

 Consumer products are products and services

bought by the final consumer for personal
consumption.
. 

 Consumer products are classified by how

consumers buy them:
1. Convenience products are consumer products that
customers usually buy frequently, immediately, and
with minimal comparison and buying effort. Example:
Newspapers ,Candy , and Fast food.
 Product and Service Classifications

2. Shopping products- Consumer products that the

customer, in the process of selecting and purchasing,
usually compares on such attributes as suitability,
quality, price, and style. Examples: Furniture, Cars, and
Appliances.
 Product and Service Classifications

3. Specialty products- Consumer products and

services with unique characteristics or brand
identification for which a significant group of
buyers is willing to make a special purchase
effort. Examples: Medical services, Designer
clothes ,High-end electronics.
 Product and Service Classifications

4. Unsought products- Consumer products that a

consumer does not know about or knows about but
does not normally think of buying. Examples: Life
insurance ,Funeral services.
.
5. Industrial products- Products purchased for further
processing or for use in conducting a business.
 Classified by the purpose for which the product is purchased.
Examples: Materials and parts ,Capital items, Raw materials.
 Organizations, Persons, Places, and Ideas

 Organization marketing consists of activities

undertaken to create, maintain, or change
attitudes and behavior of target consumers toward
an organization.
 Person marketing consists of activities undertaken
to create, maintain, or change attitudes and
behavior of target consumers towards particular
people.
 Organizations, Persons, Places, and
Ideas
 Place marketing consists of activities undertaken
to create, maintain, or change attitudes and
behavior of target consumers toward particular
places.
 Social marketing is the use of commercial
marketing concepts and tools in programs
designed to influence individuals’ behavior to
improve their well-being and that of society.
 Product and Service Decisions
 Marketers make product and service decisions on
three levels:
 1. Individual Product Decisions
 2. Product line Decisions
 3. Product Mix Decisions
 1. Individual Product Decisions

Product or service attributes communicate and

deliver the benefits: Quality, Features, Style
And, Design.
 Product quality-The characteristics of a product or
service that bear on its ability to satisfy stated or
implied customer needs.
 Product features are a competitive tool for
differentiating a product from competitors’
products
 1. Individual Product Decisions
 Style describes the appearance of the product.
 A sensational style may grab attention but it does
not necessarily make the product perform better.
 Design contributes to a product’s usefulness as
well as to its looks.
 Product designers should think less about technical
product specifications and more about how
customers will use and benefit from the product.
 1. Individual Product Decisions
 Brand is the name, term, sign, or design—or a
combination of these—that identifies the maker or
seller of a product or service.
 Packaging involves designing and producing the
container or wrapper for a product.
 Labels identify the product or brand, describe
attributes, and provide promotion.
 2. Product line Decisions

 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. Example: Nike produces
several lines of athletic shoes and apparel.
 2. Product line Decisions
 The major product line decision involves product
line length.
 Product line length is the number of items in the
product line.
 Product line filling occurs when companies add
more items within the present range of the line.
 Product line stretching occurs when a company
lengthens it product line beyond its current range.
 3. Product Mix Decisions

 Product mix consists of all the products and items

that a particular seller offers for sale.
 Example: The Campbell Soup Company’s product
mix consists of three major product lines: healthy
beverages, baked snacks, and simple meals.
 Services Marketing
 Types of service industries:
 Government- Offer services through courts,
employment services, hospitals, military services, police
and fire departments, the postal service, and schools.
 Private not-for-profit organizations- Offer services
through museums, charities, religious institutions, colleges,
foundations, and hospitals.
 Business organizations-Offer services-airlines, banks,
hotels, insurance companies, medical and legal services,
and entertainment.
Nature and Characteristics of a
Service
 Intangibility refers to the fact that services cannot
be seen, tasted, felt, heard, or smelt before they
are purchased.
 Inseparability refers to the fact that services
cannot be separated from their providers.
 Variability refers to the fact that service quality
depends on who provides the services as well as
when, where, and how they are provided.
 Perishability refers to the fact that services cannot
be stored for later sale or use.
Marketing Strategies for Service Firms

 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
 Branding Strategy: Building Strong
Brands
 Brand Positioning
Brand strategy decisions include:
 Product attributes-At the lowest level, companies can
position the brand on product attributes.
 Product benefits-A brand can be better positioned by
associating its name with a desirable benefit. Examples:
Nike (performance), Lexus (quality)
 Product beliefs and values-The strongest brands go
beyond attribute and benefit positioning and are
positioned on strong beliefs and values, engaging
customers on a deep, emotional level. Examples: Google,
Coca Cola, Facebook, Apple.
 Branding Strategy: Building Strong
Brands
 Brand Name Selection
 Desirable qualities for a brand name include:
1. It should suggest something about the product’s benefits and
qualities. Examples: Beautyrest, Die Hard, Intensive Care.
2. It should be easy to pronounce, recognize, and remember: Tide,
Silk, iPod Touch, JetBlue.
3. The brand name should be distinctive: Lexus, BMW.
4. It should be extendable: Amazon.com began as an online
bookseller but chose a name that would allow expansion into
other categories.
5. The name should translate easily into foreign languages.
Before changing its name to Exxon, Standard Oil of New Jersey
rejected the name Enco, which it learned meant a stalled engine
when pronounced in Japanese
 Branding Strategy: Building Strong
Brands
 Brand Sponsorship
 A manufacturer has four sponsorship options:
 National Brand (or manufacturer’s brand)
Manufacturer sell their output under their own
brand names. Examples: Samsung and Apple.
 Store Brand ( or private brand) A brand created
and owned by a reseller of a product or service.
 Branding Strategy: Building Strong
Brands
 Brand Sponsorship
 3. Licensing- Some companies license names or
symbols previously created by other manufacturers,
names of well-known celebrities, or characters from
popular movies and books.
 For a fee, any of these can provide an instant and
proven brand name.
 4. Co-branding-The practice of using the
established brand names of two different
companies on the same product.
 Brand Development
 Line extensions-Extending an existing brand name
to new forms, colors, sizes, ingredients, or flavors of
an existing product category.
 Brand extension extends a current brand name to
new or modified products in a new category.
 Mulitbrands- Companies often market many
different brands in a given product category.
 New Brands- Create a new brand.
 References
 Kotler, Philip and Gary Armstrong, Principles of
Marketing, 15th edition, Pearson Education Limited,
2014.
NEW-PRODUCT DEVELOPMENT
AND PRODUCT LIFE-CYCLE
STRATEGIES
Chapter 9
 Chapter 9 Outline
 New-Product Development Strategy
 The New-Product Development Process
 Product Life-Cycle Strategies
 New-Product Development Strategy

 A company can obtain new products in two ways:

 1) Acquisition
 2) New product development
 1) Acquisition: a company can buy a whole new
company, a patent, or a license to produce someone
else's product.
 2) New product development: This means that original
products, product improvements, and product
modifications, and new brands that the company
develops through its own R & D efforts.
 New-Product Development Strategy
 New products are important—to both customers and
the marketers who serve them.
 For companies, new products are a key source of
growth.
 For customers, they bring new solutions and variety to
their lives.
 Yet, innovation can be very costly and very risky. New
products face tough odds.
 According to one estimate, 90 percent of all new
products in America fail.
 Each year, companies lose an estimated $20 billion to
$30 billion on failed food products alone.
The New-Product Development Process
 A company must carry out strong new-product planning and set up a
systematic, customer-driven new-product development process for
finding, and growing new products.
 The following are the steps in the new-product development
process:
 1) Idea generation
 2) Idea screening
 3) Concept development
 4) Marketing strategy development
 5) Business analysis
 6) Product development
 7) Test marketing
 8) Commercialization
The New-Product Development Process
 1) Idea generation: which is the systematic search for
new-product ideas.
 Two major sources of new-product ideas are:
 1) Internal sources: The company can find new ideas
through formal R & D.
 Companies can also pick the brains of its own people–
from executives to salespeople to scientists, engineers,
and manufacturing staff.
 Many companies have developed successful internal
social networks and intrapreneurial programs that
encourage employees to develop new-product ideas.
The New-Product Development Process

 2) External sources: Companies can get new-

product ideas from a number of external sources.
 For example: distributors and suppliers can help
generate new-product ideas.
 Competitors are another source. Companies can
watch competitors’ ads to get clues about their own
products.
 Perhaps the most important external source for
generating new ideas are the company’s customers.
The New-Product Development Process

 The firm can analyze customer questions and

complaints to find new product that better solve
consumer problems.
 A company can also invite customers to share
suggestions and ideas.
 For example: LEGO continuously asks its customers
for new-product ideas and input.
The New-Product Development Process

 Crowdsourcing (open-innovation new-product

idea programs): companies are inviting broad
communities of people such as customers,
employees, independent scientists and researchers,
and even the public at large—into the new-product
development innovation process.
 Using sources both internal and external can
produce powerful new ideas.
The New-Product Development Process

 2) Idea screening: The purpose of idea generation

is to create a large number of ideas.
 The objective of the remaining steps in the new-
product development process is to reduce the
number of ideas.
 The first idea-reducing step is idea screening which
helps identify good ideas and get rid of poor ones as
soon as possible.
The New-Product Development Process
 3) Concept development and testing: An good or
attractive idea must then be developed into a product
concept.
 It is important to differentiate between a product idea,
product concept , and a product image.
 A product idea is an idea for a possible product that
the company can see itself offering to the market.
 A product concept is a detailed version of the idea
stated in meaningful consumer terms.
 A product image is the way consumers perceive an
actual or potential product.
The New-Product Development Process
 Concept testing: calls for testing new product concepts
with groups of target consumers.
 4) Marketing Strategy development: this stage or step
involves designing an initial marketing strategy for
introducing the product to the market.
 The marketing strategy statement is made up of three
parts:
 1) The first part describes the target market
 2) The second involves the planned value proposition
 3) The third part deals with the sales, market-share,
and profit goals of the first few years.
The New-Product Development Process

 5) Business analysis: involves a review of sales,

costs, and profit projection for a new product to find
out if they satisfy the company’s objective.
 To estimate sales, the company could look at the
sales history of similar products and administer
market surveys.
 After preparing the sales forecast, management
can estimate the expected costs, profits for the
product, including marketing, R & D, operations,
accounting, and finance costs.
The New-Product Development Process

 6) Product development: Here, R & D or

engineering develops the product concept into a
physical product.
 The product development step involves a large
increase in investment.
 The products undergo tough tests to make sure that
they perform safely and effectively, or that
consumers will find value in them.
The New-Product Development Process

 6) Test Marketing: If the product passes both the

concept test and the product test, the next step is
test marketing.
 In this stage, the product and its proposed
marketing program are introduced into realistic
marketing settings.
 Test marketing allows marketers the opportunity to
market a product before a costly full introduction.
The New-Product Development Process
 7) Commercialization: Test marketing gives decision makers
in the company the information needed to make a final
decision about whether to launch the new product.
 If the company decided to proceed with commercialization
that is introducing the new product into the market, it will
face high costs.
 For example: the company may need to build or rent a
manufacturing facility.
 And in the case of a major new consumer product, the
company may spend hundreds of millions of dollars for
advertising, sales promotion, and other marketing efforts.
 Product Life-Cycle Strategies
 The product life cycle (PLC) which is the course that
a product ‘s sales and profits take over its lifetime.
 The product life cycle (PLC) has five distinct stages.
They are:
 1. Product development
 2. Introduction
 3. Growth
 4. Maturity
 5. Decline
Product Life-Cycle Strategies
Product Life Cycle
 Product Life-Cycle Strategies
 1) Product development stage: begins when the
company finds and develops a new-product idea.
 During this stage, sales are zero, and the company’s
investment costs are high.
 2) Introduction stage: starts when a new product is first
launched.
 Introduction take time, and sales growth is usually slow.
 In this stage, as compared to other stages, profits are
negative or low because of the low sales and high
distribution and promotion expenses.
 Product Life-Cycle Strategies
 A lot of money is need to attract distributors and
build their inventories.
 Promotion spending is relatively high to inform
consumers of the new product and get them to buy
it.
 3) Growth stage: If the product satisfies the market,
it will enter a growth stage.
 During this stage, sales will start increasing quickly.
 Product Life-Cycle Strategies
 The early adopters will continue to buy, and later
buyers will start following their leads, especially if
the word of mouth is positive.
 Attracted by the opportunities for profit, new
competitors will enter the market.
 The competitors will introduce new product features,
and the market will expand.
 Profit increases during the growth stage as
promotion costs are spread over a large volume
and as unit manufacturing costs decrease.
 Product Life-Cycle Strategies
 4) Maturity stage: At some point, a product’s sale
growth will slow down, and it will enter the maturity
stage.
 The maturity stage usually lasts longer than any
other stage, and creates challenges for marketing
managers.
 Most products are in the maturity stage of the
product life cycle, and therefore marketing
managers spend most of their time dealing with
mature products.
 Product Life-Cycle Strategies
 The decrease in sales growth during the maturity stage
of the product life cycle results in many producers with
many products to sell.
 This overcapacity leads to greater competition.
 During the maturity stage, competitors begin to:
 Reduce their prices.
 Increase their adverting and sales promotions.
 Increase their product development budgets to find
better versions of the product.
 This leads to lower profits.
 Product Life-Cycle Strategies
 Product managers should consider modifying the
market, product offering, and marketing mix
during the maturity stage.
 1) Modifying the market: involves companies trying
to increase consumption by finding new users and
new market segments for its brands.
 2) Modifying the product: involves changing the
characteristics of the product such as its quality
features, style, packaging, or technology to retain
current users or attract new users.
 Product Life-Cycle Strategies
 3) Modifying the marketing mix: involves
improving sales by changing one or more marketing
mix elements.
 5) Decline stage: Sales may drop to zero, or they
may drop to a low level for many years. This is the
decline stage of the product life cycle.
 Sales decline for several reasons including
technological advances, shifts in consumer tastes,
and increases competition.
 Product Life-Cycle Strategies
 As sales decline, some companies leave the market.
 The remaining companies may prune or reduce their
product offerings.
 Reference
 Kotler, Philip and Gary Armstrong, Principles of
Marketing, 15th edition, Pearson Education Limited,
2014.