Chapter 07

Part 1: Defining Marketing and the Marketing Process (Chapters 1–2)
7
Part 2: Understanding the Marketplace and Customer Value (Chapters 3–5)
Part 3: Designing a Customer Value–Driven Strategy and Mix (Chapters 6–14)
Part 4: Extending Marketing (Chapters 15–16)
Products, Services, Brands and
Building Customer Value
Chapter Road Map

Objective Outline
OBJECTIVE 1 Define product and describe the major OBJECTIVE 3 Identify the four characteristics that affect
classifications of products and services. What Is a Product? the marketing of services and the additional marketing
230–235 considerations that services require. Services Marketing
242–249
OBJECTIVE 2 Describe the decisions companies make
regarding their individual products and services, OBJECTIVE 4 Discuss branding strategy—the decisions
product lines, and product mixes. Product and Service companies make in building and managing their brands.
Decisions 235–242 Branding Strategy: Building Strong Brands 249–259
Previewing the Concepts

MyMarketingLab™ After examining customer-driven marketing strategy, we now take a deeper look at
the marketing mix: the tactical tools that marketers use to implement their strate-
Improve Your Grade!* gies and deliver superior customer value. In this and the next chapter, we will study
how companies develop and manage products and brands. Then, in the chapters
that follow, we look at pricing, distribution, and marketing communication tools. The
product and brand are usually the first and most basic marketing consideration.
We start with a seemingly simple question: What is a product? As it turns out, the
answer is not so simple.
Before starting into the chapter, let’s look at an interesting brand story. Market-
ing is all about building brands that connect deeply with customers. So, when you
think about top brands, which ones pop up first? Maybe it’s traditional megabrands
such as Coca-Cola, Nike, or McDonald’s. Or maybe a trendy tech brand such as
Google, Facebook, or GoPro. But if we asked you to focus on sports entertainment,
you’d probably name ESPN. When it comes to your life and sports, ESPN probably
has it covered.
*Over 10 million students improved their results using the Pearson MyLabs.
Visit www.pearsonglobaleditions.com/mymarketinglab for simulations,
tutorials, and end-of-chapter problems.
DESIGN SERVICES OF
# 149127 Cust: Pearson Au: Armstrong Pg. No. 228 C/M/Y/K
M07_ARMS6788_12_SE_CH07.indd Title:
228 Marketing: An Introduction 12/e Server: Short / Normal
S4carlisle
Publishing Services 07/04/14 11:54 AM
First Stop
The ESPN Brand: Every Sport Possible—Now
When you think about ESPN, you probably don’t think of it as
a “brand.” You think of it as a cable TV network, a Web site or
mobile app, or perhaps a magazine. ESPN is all of those things.
But more than that, ESPN is a brand experience—a meaning-
ful part of customers’ lives that goes well beyond the cable
networks, publications, and other media entities it comprises.
To consumers, ESPN is synonymous with sports entertainment,
inexorably linked with their sports memories, realities, and
anticipations.
In 1979, entrepreneur Bill Rasmussen took a daring leap and
founded the round-the-clock sports network ESPN (Entertainment
and Sports Programming Network). The rest, as they say, is history.
Despite many early skeptics—a 24-hour sports n etwork?—ESPN
ESPN is more than just a collection of cable networks, online is now a multibillion-dollar sports empire and a “can’t-live-with-
and mobile sites, and publications. The ESPN brand is synonymous out-it” part of the daily routine for hundreds of millions of people
with sports entertainment, inexorably linked with consumers’ sports worldwide.
memories, realities, and anticipations.
Today, ESPN is as much recognized and revered as iconic
© Ian Dagnall/Alamy.
megabrands such as Coca-Cola, Nike, or Google. No matter who
you are, chances are good that ESPN has touched you in some meaningful way. And no matter
what the sport or where, ESPN seems to be everywhere at once. Here’s a brief summary of the
incredible variety of entities tied together under the ESPN brand:
Television: From its original groundbreaking cable network, the ESPN brand has sprouted seven
additional networks—ESPN3D, ESPN2, ESPN Classic, ESPNEWS, ESPNU, ESPN Deportes
(Spanish language), and the Longhorn Network. With its signal now flowing into more than
100 million U.S. households at an industry-topping cost of $4.69
per household per month—TNT is a distant second at
$1.16—ESPN is by far the most-sought cable network.
Additionally, ESPN International serves fans through
The ever-expanding
48 international networks in more than 200 countries
ESPN brand is as much
on every continent. ESPN is the home of the NBA
recognized and revered
Finals, WNBA, Monday Night Football, NASCAR,
as iconic megabrands such
IndyCar, the NHRA, college football and the BCS,
as Coca-Cola, Nike, or Google.
college basketball, tennis’s Grand Slam events,
When it comes to your life
golf’s Masters, the U.S. Open and British Open,
and sports, chances are
World Cup Soccer, the Little League World Series,
good that ESPN plays
and more. This list grows every year as ESPN outbids
a meaningful role.
the major broadcast networks to capture the rights to
major sports events. ESPN has certainly answered the
question of whether cable TV has the mass appeal needed
to support major sports events.
Radio: Sports radio is thriving, and ESPN operates the largest sports
radio network, broadcasting more than 9,000 hours of content annually to 24 million listen-
ers through 700 U.S. affiliates plus 45 Spanish-language ESPN Deportes stations in major
markets. Overseas, ESPN has radio and syndicated radio programs in 11 countries.
Online: ESPN.com is the leading sports Web site, with more than 41 million unique visitors
spending 3.3 billion minutes on the site each month. Its video offerings capture 35 percent
of all sports-related video streams. ESPNRadio.com is the most-listened-to online sports
destination, with 35 original podcasts each week. With literally dozens of global and market-
specific sites, ESPN more than dominates.
With access to content from television, radio, and print, ESPN has a plentiful supply of
material to feed its digital efforts. But ESPN is also leading the game in the exploding mobile
229
DESIGN SERVICES OF
M07_ARMS6788_12_SE_CH07.indd 229 Title: Marketing: An Introduction 12/e Server: Short / Normal
S4carlisle
arena. It employs a “mobile first” strategy, in which it orients all be near an ESPN Zone, which includes a sports-themed restaurant,
of its Web sites around mobile, thus optimizing performance. interactive games, and sports-related merchandise sales. You’ll now
Now, ESPN delivers mobile sports content via all major U.S. find ESPN content in airports and on planes, in health clubs, and
wireless providers—including real-time scores, stats, late- even on gas station video panels. All this translates into annual
breaking news, and video-on-demand. The digital strategy has revenues of $8.5 billion, making ESPN more important to the parent
led to ESPN3, a multi-screen live 24/7 sports network available Walt Disney Company than the Disneyland and Disney World theme
at no cost to 70 million homes that receive their high-speed parks combined.
Internet connection from an affiliated service provider. ESPN3 What ties it all together? The ESPN brand’s customer-focused
viewers can stream ESPN coverage on their computers, tablets, mission: It wants to serve sports enthusiasts “wherever sports are
or smartphones. watched, listened to, discussed, debated, read about, or played.”
Publishing: When ESPN first published ESPN The Magazine in ESPN has a philosophy known as “best available screen.” It knows
1998, critics gave it little chance against mighty Sports Illus- that when fans are at home, they’ll watch the big 50-inch flat screen.
trated. Yet, with its bold look, bright colors, and unconventional But during the morning hours, smartphones light up more. During the
format, the ESPN publication now serves more than 16 million day, desktops dominate, and in the evening, tablet activity increases.
readers each month and continues to grow. By comparison, a ESPN is on a crusade to know when, where, and under what condi-
relatively stagnant Sports Illustrated is struggling to make the tions fans will reach for which device, and to provide the most seam-
shift to a digital world. less, high-quality experience for them.
It’s no surprise, then, that sports fans around the world love their
As if all this weren’t enough, ESPN also manages events, in- ESPN. To consumers everywhere, ESPN means sports. Tech savvy,
cluding the X Games, Winter X Games, ESPN Outdoors (featuring the creative, and often irreverent, the well-managed, ever-extending
Bassmaster Classic), the Skins Games, the Jimmy V Classic, and sev- brand continues to build meaningful customer experiences and rela-
eral football bowl games. It also develops ESPN-branded consumer tionships. If it has to do with your life and sports—large or small—
products and services, including CDs, DVDs, video games, apparel, ESPN covers it for you, anywhere you are, 24/7. Perhaps the company
and even golf schools. If reading all this makes you hungry, you may should rename ESPN to stand for Every Sport Possible—Now.1
s the ESPN story shows, in their quest to create customer relationships, market-
A ers must build and manage products and brands that connect with customers. This
chapter begins with a deceptively simple question: What is a product? After address-
ing this question, we look at ways to classify products in consumer and business markets.
Then we discuss the important decisions that marketers make regarding individual prod-
ucts, 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 Comment What Is a Product?

As you’ll see, this is a deceptively
simple question with a very complex We define a product as anything that can be offered to a market for attention, acquisition, use, or
answer. For example, think back to consumption that might satisfy a want or need. Products include more than just tangible objects,
the opening ESPN story. What is such as cars, computers, or mobile phones. Broadly defined, products also include services,
the ESPN “product”? events, persons, places, organizations, and ideas, or a mixture of these. Throughout this text,
we use the term product broadly to include any or all of these entities. Thus, an Apple iPhone,
a Toyota Camry, and a Caffé Mocha at Starbucks are products. But so are a trip to Las Vegas,
Schwab online investment services, your Facebook page, and advice from your family doctor.
Because of their importance in the world economy, we give special attention to ser-
Product vices. Services are a form of product that consists of activities, benefits, or satisfactions
Anything that can be offered to a offered for sale that are essentially intangible and do not result in the ownership of anything.
market for attention, acquisition, use, or Examples include banking, hotel, airline travel, retail, wireless communication, and home-
consumption that might satisfy a want
repair services. We will look at services more closely later in this chapter.
or need.
Service Products, Services, and Experiences

An activity, benefit, or satisfaction
offered for sale that is essentially Products are a key element in the overall market offering. Marketing mix planning begins
intangible and does not result in the with building an offering that brings value to target customers. This offering becomes the
ownership of anything. basis on which the company builds profitable customer relationships.
230
DESIGN SERVICES OF
S4carlisle
Chapter 7: Products, Services, and Brands: Building Customer Value 231
A company’s market offering often includes 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
combinations are possible.
Today, as products and services become more commoditized, many companies are
moving to a new level in creating value for their customers. To differentiate their offers,
beyond simply making products and delivering services, they are creating and managing
customer experiences with their brands or companies.
Experiences have always been an important part of marketing for some companies.
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 expe-
riences. For example, Starbucks serves up more than just a hot cup of coffee:2
Three decades ago, Howard Schultz hit

on the idea of bringing a European-style
coffeehouse to America. He believed
that people needed to slow down, to
“smell the coffee” and enjoy life a little
more. The result was Starbucks. This
coffeehouse doesn’t sell just coffee, it
sells The Starbucks Experience—one
that enriches customers’ lives. The
smells, the hissing steam, the comfy
chairs—all contribute to the Starbucks
ambience. Starbucks gives customers
what it calls a “third place”—away
from home and away from work—a
place for conversation and a sense of
community. As a result, Starbucks has
transformed coffee from a commodity
to a $4 splurge and the company’s sales
and profits have risen like steam off a
mug of hot java.
Companies that market expe-

Creating customer experiences: Starbucks doesn’t sell just coffee, it sells “The Starbucks riences realize that customers are really
Experience”—what it calls a “third place”—away from home and away from work, a place for buying much more than just products
conversation and a sense of community. and services. They are buying what
© Daily Mail/Rex/Alamy. those offers will do for them. A recent
BMW ad puts it this way: “We realized a long time ago that what you make people feel is
just as important as what you make.”
Levels of Product and Services

Product planners need to think about products and services on three levels (see
Figure 7.1). 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 or
services that consumers seek. A woman 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 an Apple iPad are buying much more than just a tablet
computer. They are buying entertainment, self-expression, productivity, and connectivity
with friends and family—a mobile and personal window to the world.
At the second level, product planners must turn the core benefit into an actual product.
They need to develop product and service features, a design, a quality level, a brand name,
DESIGN SERVICES OF
S4carlisle
232 Part 3: Designing a Customer Value–Driven Strategy and Mix
and packaging. For example, the iPad

is an actual product. Its name, parts,
styling, operating system, features,
packaging, and other attributes have
all been carefully combined to deliver
the core customer value of staying
connected.
Finally, product planners must
build an augmented product around
the core benefit and actual product
by offering additional consumer ser-
vices and benefits. The iPad is more
than just a digital device. It provides
consumers with a complete connectiv-
ity solution. Thus, when consumers
buy an iPad, Apple and its resellers
also might give buyers a warranty on
parts and workmanship, quick repair
services when needed, and a Web site
to use if they have problems or ques-
Core, actual, and augmented product: People who buy an iPad are buying much more tions. Apple also provides access to a
than a tablet computer. They are buying entertainment, self-expression, productivity, and huge assortment of apps and acces-
connectivity—a mobile and personal window to the world. sories, along with an iCloud service
Betsie Van der Meer/Getty Images. that integrates buyers’ photos, music,
documents, apps, calendars, contacts, and other content across all of their devices from
any location.
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 include
other marketable entities such as experiences, organizations, persons, places, and ideas.
Figure 7.1 Three Levels

of Product
Augmented product
Delivery Actual product After-

and sale
credit Brand service
Features
name
Core
customer At the most basic level, the company
value asks, “What is the customer really
Quality buying? For example, people who buy
level Design an Apple iPad are buying more than
just a tablet computer. They are buying
Packaging entertainment, self-expression,
productivity, and connectivity—a mobile
Product and personal window to the world.
support Warranty
DESIGN SERVICES OF
S4carlisle
Consumer Products
Consumer product Consumer products are products and services bought by final consumers for personal
A product bought by final consumers consumption. Marketers usually classify these products and services further based on how
for 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 consumers buy them and, therefore, in how they are marketed (see Table 7.1).
Convenience product Convenience products are consumer products and services that customers usually
A consumer product that customers buy frequently, immediately, and with minimal comparison and buying effort. Examples
usually buy frequently, immediately, include laundry detergent, candy, magazines, and fast food. Convenience products are usu-
and with minimal comparison and ally low priced, and marketers place them in many locations to make them readily available
buying effort. when customers need or want them.
Shopping product Shopping products are less frequently purchased consumer products and services
A consumer product that the customer, that customers compare carefully on suitability, quality, price, and style. When buying
in the process of selecting and shopping products and services, consumers spend much time and effort in gathering infor-
purchasing, usually compares on such mation and making comparisons. Examples include furniture, clothing, major appliances,
attributes as suitability, quality, price, and hotel and airline services. Shopping product marketers usually distribute their products
and style.
through fewer outlets but provide deeper sales support to help customers in their compari-
son efforts.
Specialty product Specialty products are consumer products and services with unique characteristics or
A consumer product with unique brand identifications for which a significant group of buyers is willing to make a special pur-
characteristics or brand identification chase effort. Examples include specific brands of cars, high-priced photography equipment, de-
for which a significant group of buyers signer clothes, gourmet foods, and the services of medical or legal specialists. A Lamborghini
is willing to make a special purchase automobile, for example, is a specialty product because buyers are usually willing to travel
effort.
great distances to buy one. Buyers normally do not compare specialty products. They invest
only the time needed to reach dealers carrying the wanted products.
Unsought product Unsought products are consumer products that the consumer either does not know
A consumer product that the consumer about or knows about but does not normally consider buying. Most major new innova-
either does not know about or knows tions are unsought until the consumer becomes aware of them through advertising. Clas-
about but does not normally consider sic examples of known but unsought products and services are life insurance, preplanned
buying. funeral services, and blood donations to the Red Cross. By their very nature, unsought
products require a lot of advertising, personal selling, and other marketing efforts.
Table 7.1 Marketing Considerations for Consumer Products

Type of Consumer Product
Marketing
Considerations Convenience Shopping Specialty Unsought
Customer buying Frequent purchase; little Less frequent purchase; much Strong brand preference and Little product awareness
behavior planning, little comparison planning and shopping effort; loyalty; special purchase or knowledge (or, if aware,
or shopping effort; low comparison of brands on price, effort; little comparison of little or even negative
customer involvement quality, and style brands; low price sensitivity interest)
Price Low price Higher price High price Varies
Distribution Widespread distribution; Selective distribution in fewer Exclusive distribution in Varies

convenient locations outlets only one or a few outlets
per market area
Promotion Mass promotion by the Advertising and personal More carefully targeted Aggressive advertising
producer selling by both the producer p romotion by both the and personal selling by the
and resellers producer and resellers producer and resellers
Examples Toothpaste, magazines, Major appliances, televisions, Luxury goods, such as Rolex Life insurance and Red
and laundry detergent furniture, and clothing watches or fine crystal Cross blood donations
DESIGN SERVICES OF
S4carlisle
Industrial Products
Industrial product Industrial products are those products purchased for further processing or for use in con-
A product bought by individuals and ducting a business. Thus, the distinction between a consumer product and an industrial
organizations for further processing or product is based on the purpose for which the product is purchased. If a consumer buys
for use in conducting a business. 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
manufactured materials and parts. Raw materials consist of farm products (wheat, cotton,
livestock, fruits, vegetables) and natural products (fish, lumber, crude petroleum, iron ore).
Manufactured materials and parts consist of component materials (iron, yarn, cement,
wires) and component parts (small motors, tires, castings). Most manufactured materials
and parts are sold directly to industrial users. Price and service are the major marketing
factors; branding and advertising tend to be less important.
Capital items are industrial products that aid in the buyer’s production or operations, in-
cluding installations and accessory equipment. Installations consist of major purchases such
as buildings (factories, offices) and fixed equipment (generators, drill presses, large com-
puter systems, elevators). Accessory equipment includes portable factory equipment and tools
(hand tools, lift trucks) and office equipment (computers, fax machines, desks). These types
of equipment have shorter lives than do installations and simply aid in the production process.
The final group of industrial products is supplies and services. Supplies include
operating supplies (lubricants, coal, paper, pencils) and repair and maintenance items
(paint, nails, brooms). Supplies are the convenience products of the
industrial field because they are usually purchased with a minimum
of effort or comparison. Business services include maintenance
and repair services (window cleaning, computer repair) and busi-
ness advisory services (legal, management consulting, advertising).
Such services are usually supplied under contract.
Organizations, Persons, Places, and Ideas

In addition to tangible products and services, marketers have broad-
ened the concept of a product to include other market offerings:
organizations, persons, places, and ideas.
Organizations often carry out activities to “sell” the organiza-
tion itself. Organization marketing consists of activities undertaken
to create, maintain, or change the attitudes and behavior of target
consumers toward an organization. Both profit and not-for-profit
organizations practice organization marketing. Business firms

sponsor public relations or corporate image marketing campaigns
to market themselves and polish their images.
For example, Kaiser Permanente’s long-running “Thrive”
campaign markets the health maintenance organization (HMO)
not just as a health-care company, but as a total health advocate.
Whereas “competitors [stand] for health care,” says the company,
“Kaiser Permanente [stands] for health.” The award-winning
“Thrive” campaign promotes prevention and wellness through
healthy lifestyles that will help Kaiser Permanente members and
their families get healthy, stay healthy, and thrive. Some ads show
people exercising or focus on healthy eating choices (“I scream,
You Scream. We all scream for green beans.”). Another ad
shows a determined, trim, and fit young girl who declares, “I will
Organization marketing: Kaiser Permanente’s “Thrive” campaign not be part of Generation XXL.” Still other ads show how Kaiser
markets the organization as a total health advocate that helps its Permanente accomplishes major health-care breakthroughs behind
members get healthy, stay healthy, and thrive. the scenes so that its members can thrive and enjoy the everyday
© 2007 Kaiser Permanente. moments of their lives to the fullest.3
DESIGN SERVICES OF
S4carlisle
People can also be thought of as products. Person marketing consists of activities

undertaken to create, maintain, or change attitudes or behavior toward particular people.
People ranging from presidents, entertainers, and sports figures to professionals such as
doctors, lawyers, and architects use person marketing to build their reputations. And busi-
nesses, charities, and other organizations use well-known personalities to help sell their
products or causes. For example, P&G’s Cover Girl brand is represented by well-known
celebrities such as Ellen DeGeneres, P!NK, and Sofia Vergara. The skillful use of market-
ing can turn a person’s name into a powerhouse brand. For example, The Food Network’s
celebrity chef Rachael Ray is a one-woman marketing phenomenon, with her own daytime
talk show, cookware and cutlery brands, dog food brand (Nutrish), and even her own brand
of EVOO (extra virgin olive oil, for those not familiar with Rayisms).
Place marketing involves activities undertaken to create, maintain, or change attitudes
or behavior toward particular places. Cities, states, regions, and even entire nations com-
pete to attract tourists, new residents, conventions, and company offices and factories. The
New Orleans city Web site shouts “Go NOLA” and markets annual events such as Mardi
Gras festivities and the New Orleans Jazz and Heritage Festival. Michigan invites visitors
to experience Pure Michigan: unspoiled nature, lakes that feel like oceans, miles of cherry
orchards, glorious sunsets, and nighttime skies scattered with stars. And Brand USA, a
public–private marketing partnership created by a recent act of Congress, promotes the
United States as a tourist destination to international travelers. Its mission is to “represent
the true greatness of America—from sea to shining sea” through country-by-country ads
and promotions and a DiscoverAmerica.com Web site that features destinations, U.S. travel
information and tips, and travel planning tools.4
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 create “healthy, beautiful smiles for life.” Here, however, we narrow our focus to
Social marketing the marketing of social ideas. This area has been called social marketing and consists of
The use of commercial marketing using traditional business marketing concepts and tools to create behaviors that will create
concepts and tools in programs individual and societal well-being.
designed to influence individuals’ Social marketing programs cover a wide range of issues. The Ad Council of America
behavior to improve their well-being (www.adcouncil.org), for example, has developed dozens of social advertising campaigns
and that of society.
involving issues ranging from health care, education, and environmental sustainability to
human rights and personal safety. But social marketing involves much more than just ad-
vertising. It involves a broad range of marketing strategies and marketing mix tools de-
signed to bring about beneficial social change.5
Author Comment Product and Service Decisions

Now that we’ve answered the “What
is a product?” question, we dig into Marketers make product and service decisions at three levels: individual product decisions,
the specific decisions that compa- product line decisions, and product mix decisions. We discuss each in turn.
nies must make when designing and
marketing products and
services. Individual Product and Service Decisions
Figure 7.2 shows the important decisions in the development and marketing of individ-
ual products and services. We will focus on decisions about product attributes, branding,
packaging, labeling, and product support services.
Figure 7.2 Individual Product

Decisions
Don’t forget Figure 7.1.

The focus of all of these Product
decisions is to create Product Branding Packaging Labeling support
core customer value. attributes
services
DESIGN SERVICES OF
S4carlisle
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 Product Quality. Product quality is one of the marketer’s major positioning tools. Quality
The characteristics of a product or affects product or service performance; thus, it is closely linked to customer value and
service that bear on its ability to satisfy satisfaction. In the narrowest sense, quality can be defined as “freedom from defects.” But
stated or implied customer needs. most marketers go beyond this narrow definition. Instead, they define quality in terms of
creating 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
customers come back and our products don’t.”6
Total quality management (TQM) is an approach in which all of the company’s people
are involved in constantly improving the quality of products, services, and business pro-
cesses. For most top companies, customer-driven quality has become a way of doing busi-
ness. 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 choose 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, provides more luxury and “creature comforts,” and lasts longer. 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,
a Viking range, 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.
Product Features. A product can be offered with varying features. A stripped-down model,
one without any extras, is the starting point. The company can then create higher-level
models by adding more features. Features are a competitive tool for differentiating the
company’s product from competitors’ products. Being the first producer 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 ones to add to its product?
It 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? The answers to these questions
provide the company with a rich list of 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.
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. Design
begins with observing customers, understanding their needs, and shaping their product-use
experience. Product designers should think less about technical product specifications and
more about how customers will use and benefit from the product. For example, using smart
DESIGN SERVICES OF
S4carlisle
design based on deep insights into consumer needs, Nest Labs created a home
heating and cooling thermostat that’s not just pretty to look at but also packed
with easy-to-access customer benefits:7
The Nest learning thermostat looks great—its sleek, clean, curved design and neutral
brushed-silver finish create a chameleon effect that grounds Nest within its environ-
ment. But Nest’s beauty is more than just skin deep. Before Nest, programmable ther-
mostats developed in the 1970s were supposed to both improve comfort and conserve
energy. But research showed that 89 percent of owners rarely or never programmed
them. The programmable thermostats were just too complicated. Moreover, the old
programmable units looked clunky and antiquated.
So Nest Labs assembled a corps of Silicon Valley designers who reinvented the
thermostat to fit the needs of today’s smartphone generation. The result is Nest, a
“learning thermostat” that—all by itself—learns from your preferences, behaviors,
and surroundings and then optimizes your heating and cooling schedule to keep you
comfortable while you’re at home while saving energy while you’re away. “Nest re-
Through award-winning, consumer-driven members the temperatures you like and builds a schedule for you,” says the company.
design, Nest Labs created the Nest learning “Teach it well and Nest can lower your heating and cooling bills up to 20 percent.”
thermostat, a sleek device that both looks good Users can also control the device simply via WIFI, at home or away using a laptop,
and is easy, fun, and effective to use. tablet, or smartphone app. Thus, Nest Labs has transformed the lowly home thermo-
Handout/MCT/Newscom. stat into a device that you’re not only proud to hang on your wall but also a cool, con-
nected device that’s easy, fun, and effective to use. Thanks to good design, the nifty
little Nest sold out for months shortly after launch.
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
A name, term, sign, symbol, or of these, that identifies the maker or seller of a product or service. Consumers view a
design, or a combination of these, brand as an important part of a product, and branding can add value to a consumer’s pur-
that identifies the products or services chase. Customers attach meanings to brands and develop brand relationships. As a result,
of one seller or group of sellers and brands have meaning well beyond a product’s physical attributes. For example, consider
differentiates them from those of
Coca-Cola:8
competitors.
In an interesting taste test of Coca-Cola versus Pepsi, 67 subjects were connected to brain-wave-
monitoring machines while they consumed both products. When the soft drinks were unmarked,
consumer preferences were split down the middle. But when the brands were identified, subjects
chose Coke over Pepsi by a margin of 75 percent to 25 percent. When drinking the identified
Coke brand, the brain areas that lit up most were those associated with cognitive control and
memory—a place where culture concepts are stored. That didn’t happen as much when drink-
ing Pepsi. Why? According to one brand strategist, it’s because of Coca-Cola’s long-established
brand imagery—the almost 100-year-old contour bottle, the bright red cans, the cursive font,
and its association with iconic images ranging from the Polar Bears to Santa Claus. Pepsi’s im-
agery isn’t quite as deeply rooted. People apparently don’t link Pepsi to the strong and emotional
American icons associated with Coke. The conclusion? Plain and simple: Consumer preference
isn’t based on taste alone. Coke’s iconic brand associations appear to make a difference.
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 distribu-
tor’s label, and automobile parts—spark plugs, tires, filters—bear brand names that dif-
fer from those of the automakers. Even fruits, vegetables, dairy products, and poultry are
branded—Cuties mandarin oranges, Dole Classic iceberg salads, Horizon Organic milk,
Perdue chickens, and Eggland’s Best eggs.
Branding helps buyers in many ways. Brand names help consumers identify products
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 consumers, Toyota can
offer the different Lexus, Toyota, and Scion brands, each with numerous sub-brands—such
DESIGN SERVICES OF
S4carlisle
as Camry, Corolla, Prius, Matrix, Yaris, Tundra, and Land Cruiser. Finally, a brand name
becomes the basis on which a whole story can be built about a product’s special quali-
ties. For example, the Cuties brand of pint-sized mandarins sets itself apart from ordinary
oranges by promising “Kids love Cuties because Cuties are made for kids.” They are a
healthy snack that’s “perfect for little hands”: sweet, seedless, kid-sized, and easy to peel.9
Building and managing brands are perhaps the marketer’s most important tasks. 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. Tra-
The activities of designing and ditionally, the primary function of the package was to hold and protect the product. In
producing the container or wrapper for recent times, however, packaging has become an important marketing tool as well. In-
a product. creased competition and clutter on retail store shelves means that packages must now per-
form many sales tasks—from attracting buyers, to communicating brand positioning, to
closing the sale. Not every customer will be see a brand’s advertising, social media pages,
or other promotions. However, all consumers who buy and use a product will interact
regularly with its packaging. Thus, the humble package represents prime marketing space.
Companies are realizing the power of good packaging to create immediate consumer
recognition of a brand. For example, an average supermarket stocks about 38,700 items; the
average Walmart supercenter carries 142,000 items. The typical shopper makes 70 percent
of all purchase decisions in stores and passes by some 300 items per minute. In this highly
competitive environment, the package may be the seller’s last and best chance to influence
buyers. So the package itself has become an important promotional medium.10
Poorly designed packages can cause headaches for consumers and lost sales for the
company. Think about all those hard-to-open packages, such as DVD cases sealed with
impossibly sticky labels, packaging with finger-splitting wire twist-ties, or sealed plastic
clamshell containers that cause “wrap rage” and send about 6,000 people to the hospital each
year with lacerations and puncture wounds. Another packaging issue is overpackaging—as
when a tiny USB flash drive in an oversized cardboard and plastic display package is deliv-
ered in a giant corrugated shipping carton. Overpackaging creates an incredible amount of
waste, frustrating those who care about the environment.11
By contrast, innovative packaging can give a company an advantage over competitors
and boost sales. For example, Puma recently replaced the traditional shoebox with an
attractive and functional yet environmentally friendly alternative—the Clever Little Bag:12
In their search for the next generation of

shoe packaging, Puma’s designers spent
21 months road testing 40 shoebox
prototypes, checking on their potential
environmental impact from production
and transport through use and future re-
use. They came up with what Puma calls
the Clever Little Bag with a big impact.
The new container—which consists of a
light cardboard insert that slides seam-
lessly into a colorful, reusable red bag—
uses 65 percent less paper to make and
reduces water, energy, and fuel con-
sumption during manufacturing by
more than 60 percent a year. Because it
takes up less space and weight, the new
container also reduces carbon emissions
during shipping by 10,000 tons a year.
What’s more, everything is 100 percent
recyclable. In all, Puma’s Clever Little
Innovative packaging: Puma’s next-generation shoe packaging—The Clever Little Bag—is Bag is more than just friendly to the en-
more than just friendly to the environment, it’s also very friendly to consumers’ sensibilities and vironment, it’s also very friendly to con-
the company’s bottom line. Pretty clever, huh? sumers’ likes and the company’s bottom
PUMA. line. Pretty clever, huh?
DESIGN SERVICES OF
S4carlisle
In recent years, product safety has also become a major packaging concern. We have all
learned to deal with hard-to-open “childproof” packaging. Due to the rash of product tamper-
ing scares in the 1980s, most drug producers and food makers now put their products in tam-
per-resistant packages. In making packaging decisions, the company also must heed growing
environmental concerns. Fortunately, like Puma, many companies have gone “green” by re-
ducing their packaging and using environmentally responsible packaging materials.
Labeling
Labels 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 prod-
uct or brand, such as the name Sunkist stamped on oranges. 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 might help to pro-
mote the brand, support its positioning, and connect with customers. For many companies,
labels have become an important element in broader marketing campaigns.
Labels and brand logos can support the brand’s positioning and add personality to
the brand. For example, although similar to the familiar red, white, and blue logo that
customers would have seen 60 years ago, Pepsi recently introduced a new, more uplift-
ing smiling logo. “It feels like the same Pepsi we know and love,” says a brand expert,
“but it’s more adventurous, more youthful, with a bit more personality to it.” It presents
a “spirit of optimism and youth,” says a Pepsi marketer.13
In fact, brand labels and lo-
gos can become a crucial element
in the brand– customer connection.
For example, when Gap recently
introduced a more contemporary
redesign of its familiar old logo—
the well-known white text on a blue
square— customers went ballistic
and imposed intense online pres-
sure. Gap reinstated the old logo
after only one week. Similarly,
when American Airlines replaced
its familiar 45-year-old “AA eagle”
BEFORE AFTER logo with a more modern version,
the new logo became a flashpoint
Brand labels and logos: When American Airlines modernized its familiar old “AA eagle” logo, for both brand fans and detractors.
the new logo became a flashpoint for both brand fans and detractors. A
lthough the brand redesign was
Mark Fairhurst/ZUMA Press/Newscom (old); Associated Press (new). probably overdue, fans lamented the
loss of the classic design, whereas
detractors claimed that the millions spent on repainting all of American’s planes should have
been invested in improving the airline’s customer service. Such examples “highlight a power-
ful connection people have to the visual representations of their . . . brands,” says an analyst.14
Along with the positives, there has been a long history of legal concerns about packaging
and labels. 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
important 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 packag-
ing standards, and allowed federal agencies to set packaging regulations in specific industries.
Labeling has been affected in recent times by unit pricing (stating the price per unit
of a standard measure), open dating (stating the expected shelf life of the product), and
nutritional labeling (stating the nutritional values in the product). The Nutritional Labeling
and Educational Act of 1990 requires sellers to provide detailed 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, and high fiber. Sellers must
ensure that their labels contain all the required information.
DESIGN SERVICES OF
S4carlisle
Product Support Services

Customer service is another element of product strategy. A company’s offer usually
includes some support services, which can be a minor part or a major part of the total
offering. 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. For
example, L.L.Bean—the iconic American outdoor apparel and equipment retailer—knows
good marketing doesn’t stop with making the sale. Keeping customers happy after the sale
is the key to building lasting relationships.15
Year after year, L.L.Bean lands in the top ten of

virtually every list of top service companies, in-
cluding J.D. Power’s most recent list of “customer
service champions.” The customer-service culture
runs deep at L.L.Bean. More than 100 years ago,
Leon Leonwood Bean founded the company
on a philosophy of complete customer satisfac-
tion, expressed in the following guarantee: “I don’t
consider a sale complete until the goods are worn
out and the customer [is] still satisfied.” To this
day, customers can return any item, no questions
asked, even decades after purchase.
The company’s customer-service philoso-
phy is perhaps best summed up in founder L.L.’s
answer to the question, What is a customer? His
answer still forms the backbone of the company’s
values: “A customer is the most important per-
son ever in this company—in person or by mail.
Customer service: For more than 100 years, L.L.Bean has been going the extra mile A customer is not dependent on us, we are depen-
for customers. As founder Leon Leonwood Bean put it: “I do not consider a sale complete dent on him. A customer is not an interruption of
until the goods are worn out and the customer [is] still satisfied.” our work, he is the purpose of it. We are not doing
L.L.Bean Inc. a favor by serving him, he is doing us a favor by
giving us the opportunity to do so. A customer is not someone to argue or match wits with.
Nobody ever won an argument with a customer. A customer is a person who brings us his
wants. It is our job to handle them profitably to him and to ourselves.” Adds former L.L.Bean
CEO Leon Gorman: “A lot of people have fancy things to say about customer service, but it’s
just a day-in, day-out, ongoing, never-ending, persevering, compassionate kind of activity.”
The first step in designing support services is to survey customers periodically to assess
the value of current services and obtain ideas for new ones. Once the company has assessed
the quality of various support services to customers, it can take steps to fix problems and
add new services that will both delight customers and yield profits to the company.
Many companies now use a sophisticated mix of phone, e-mail, Internet, and interac-
tive voice and data technologies to provide support services that were not possible before.
For example, AT&T offers a complete set of after-sale services for all of its products, from
wireless to digital TV. Customers can access 24/7 tech support via an AT&T Live Agent,
either by phone or online. In addition, its online support pages offer troubleshooting, virtual
tours, and online live chat. Other companies are adding a more personal service touch. For
example, under its “BMW Genius Everywhere” program, BMW hires young, tech-savvy
employees—often college students—who patrol dealership showrooms with iPods in hand,
offering expert advice to customers. The BMW geniuses don’t sell cars or even try to, but
they do have deep knowledge of BMW models and features that customers find helpful.16
Product line
A group of products that are closely Product Line Decisions
related because they function in a
similar manner, are sold to the same Beyond decisions about individual products and services, product strategy also calls for
customer groups, are marketed through building a product line. A product line is a group of products that are closely related
the same types of outlets, or fall within because they function in a similar manner, are sold to the same customer groups, are mar-
given price ranges. keted through the same types of outlets, or fall within given price ranges. For example,
DESIGN SERVICES OF
S4carlisle
Nike produces several lines of athletic shoes and apparel, and Marriott offers several lines
of hotels.
The major product line decision involves product line length—the number of items in
the product line. The line is too short if the manager can increase profits by adding items;
the line is too long if the manager can increase profits by dropping items. Managers need
to analyze their product lines periodically to assess each item’s sales and profits and under-
stand how each item contributes to the line’s overall performance.
A company can expand its product line in two ways: by line filling or line stretching.
Product line filling involves adding more items within the present range of the line. There are
several reasons for product line filling: reaching for extra profits, satisfying dealers, using
excess capacity, being the leading full-line company, and plugging holes to keep out com-
petitors. However, line filling is overdone if it results in cannibalization and customer confu-
sion. The company should ensure that new items are noticeably different from existing ones.
Product line stretching occurs when a company lengthens its product line beyond its
current range. The company can stretch its line downward, upward, or both ways. Compa-
nies located at the upper end of the market can stretch their lines downward. A company
may stretch downward to plug a market hole that otherwise would attract a new competitor
or to respond to a competitor’s attack on the upper end. Or it may add low-end products
because it finds faster growth taking place in the low-end segments. Companies can also
stretch their product lines upward. Sometimes, companies stretch upward to add prestige
to their current products. Or they may be attracted by a faster growth rate or higher margins
at the higher end.
To broaden its market appeal and boost growth, BMW has in recent years stretched its
line in both directions while at the same time filling the gaps in between:17
Over the past decade, BMW has morphed from a one-brand, five-model carmaker into a pow-
erhouse with three brands, 14 “Series,” and more than 30 distinct models. Not only has the car-
maker stretched its product line downward, with MINI Cooper and its compact 1-Series models,
but it has also stretched it upward with the addition of Rolls-Royce. The company has filled
the gaps in between with Z4 roadsters, 6-Series coupe, X-Series crossovers and sports activity
vehicles, and M-Series high-performance models. Next up: a growing selection of hybrids and
all-electric cars. As a result, BMW has boosted its appeal to the rich, the super-rich, and the
wannabe-rich, all without departing from its pure premium positioning.
Product Mix Decisions

Product mix (or product portfolio) An organization with several product lines has a product mix. A product mix (or product
The set of all product lines and items portfolio) consists of all the product lines and items that a particular seller offers for sale.
that a particular seller offers for sale. Campbell Soup Company’s product mix consists of three major product lines: healthy bev-
erages, baked snacks, and simple meals.18 Each product line consists of several sublines.
For example, the simple meals line consists of soups, sauces, and pastas. Each line and
subline has many individual items. Altogether, Campbell’s product mix includes hundreds
of items.
A company’s product mix has four important dimensions: width, length, depth, and
consistency. Product mix width refers to the number of different product lines the company
carries. For example, Campbell Soup Company has a fairly contained product mix that
fits its mission of “nourishing people’s lives everywhere, every day.” By contrast, GE man-
ufactures as many as 250,000 items across a broad range of categories, from light bulbs to
medical equipment, jet engines, and diesel locomotives.
Product mix length refers to the total number of items a company carries within its
product lines. Campbell Soup carries several brands within each line. For example, its sim-
ple meals line includes Campbell’s soups, Wolfgang Puck soups and broths, Prego tomato
sauce, Pace salsas, and Swanson broths, plus other international brands.
Product mix depth refers to the number of versions offered for each product in the line.
Campbell’s soups come in seven varieties, ranging from Campbell’s Condensed soups and
Campbell’s Chunky soups to Campbell’s Select Harvest soups and Campbell’s Healthy Re-
quest soups. Each variety offers a number of forms and formulations. For example, you can
buy Campbell’s Chunky Hearty Beef Noodle soup, Chunky Chicken & Dumplings soup,
DESIGN SERVICES OF
S4carlisle
and Chunky Steak & Potato soup, in ei-

ther cans or microwavable containers.
Finally, the consistency of the prod-
uct mix refers to how closely related
the various product lines are in end use,
production requirements, distribution
channels, or some other aspect. Camp-
bell Soup Company’s product lines are
consistent insofar as they are consumer
products and go through the same dis-
tribution channels. The lines are less
consistent insofar as they perform dif-
ferent functions for buyers.
These product mix dimensions pro-
vide the handles for defining the com-
pany’s product strategy. The company
can increase its business in four ways. It
can add new product lines, widening its
product mix. In this way, its new lines
The product mix: Campbell Soup Company has a nicely contained product line consistent build on the company’s reputation in its
with its mission of “nourishing people’s lives everywhere, every day.” other lines. The company can lengthen
Campbell Soup Company. its existing product lines to become a
more full-line company. It can add more versions of each product and thus deepen its product
mix. Finally, the company can pursue more product line consistency—or less—depending on
whether it wants to have a strong reputation in a single field or in several fields.
From time to time, a company may also have to streamline its product mix to pare out mar-
ginally performing lines and to regain its focus. For example, as discussed in the previous chap-
ter, P&G pursues a megabrand strategy built around 25 billion-dollar brands in the household
care and beauty and grooming categories. During the past decade, the consumer products giant
has sold off dozens of major brands that no longer fit either its evolving focus or the billion-dollar
threshold, ranging from Jif peanut butter, Crisco shortening, Folgers coffee, Pringles snack chips,
and Sunny Delight drinks to Noxema skin care products, Right Guard deodorant, and Aleve pain
reliever. Such pruning is essential for maintaining a focused, healthy product mix.
SPEED BUMP Linking the Concepts

Slow down for a minute. To get a better sense of how large and complex a company’s product offer-
ing can become, investigate Procter & Gamble’s product mix.
● Using P&G’s Web site (www.pg.com), its annual report, or other sources, develop a list of all the
company’s product lines and individual products. What surprises you about this list of products?
● Is P&G’s product mix consistent? What overall strategy or logic appears to have guided the
development of this product mix?
Author Comment Services Marketing

As noted at the start of this
chapter, services are “products,” too— Services have grown dramatically in recent years. Services now account for close to
intangible ones. So all the product 80 percent of the U.S. gross domestic product (GDP), and the service industry is growing.
topics we’ve discussed so far apply By 2014, it is estimated that more than four out of five jobs in the United States will be
to services as well as to physical in service industries. Services are growing even faster in the world economy, making up
products. However, in this section, we almost 64 percent of the gross world product.19
focus on the special characteristics
Service industries vary greatly. Governments offer services through courts, employ-
and marketing needs that set
services apart. ment services, hospitals, military services, police and fire departments, the postal service,
and schools. Private not-for-profit organizations offer services through museums, charities,
DESIGN SERVICES OF
S4carlisle
Figure 7.3 Four Service Intangibility Inseparability

Characteristics
Services cannot be seen, Services cannot be
tasted, felt, heard, or separated from their
smelled before purchase providers
Although services are “products” in a general

sense, they have special characteristics and Services
marketing needs. The biggest differences
come from the fact that services are
essentially intangible and that they are Variability Perishability
created through direct interactions with
customers. Think about your experiences Quality of services depends Services cannot be stored
with an airline versus Nike or Apple. on who provides them and for later sale or use
when, where, and how
churches, colleges, foundations, and hospitals. In addition, a large number of business or-
ganizations offer services—airlines, banks, hotels, insurance companies, consulting firms,
medical and legal practices, entertainment and telecommunications companies, real estate
firms, retailers, and others.
The Nature and Characteristics of a Service

Service intangibility A company must consider four special service characteristics when designing marketing
Services cannot be seen, tasted, felt, programs: intangibility, inseparability, variability, and perishability (see Figure 7.3).
heard, or smelled before they are Service intangibility means that services cannot be seen, tasted, felt, heard, or
bought. smelled before they are bought. For example, people undergoing cosmetic surgery can-
not see the result before the purchase. Airline passengers have nothing but a ticket and a
promise that they and their luggage will arrive safely at the intended destination, hopefully
at the same time. To reduce uncertainty, buyers look for sig-
nals of service quality. They draw conclusions about quality
from the place, people, price, equipment, and communica-
tions that they can see.
Therefore, the service provider’s task is to make the ser-
vice tangible in one or more ways and send the right signals
about quality. The Mayo Clinic does this well:20
When it comes to hospitals, most patients can’t really judge

“product quality.” It’s a very complex product that’s hard to
understand, and you can’t try it out before buying it. So when
considering a hospital, most people unconsciously search for
evidence that the facility is caring, competent, and trustworthy.
The Mayo Clinic doesn’t leave these things to chance. Rather, it
offers patients organized and honest evidence of its dedication
to “providing the best care to every patient every day.”
Inside, staff is trained to act in a way that clearly signals
Mayo Clinic’s concern for patient wellbeing. For example, doc-
tors regularly follow up with patients at home to see how they
are doing, and they work with patients to smooth out schedul-
ing problems. The clinic’s physical facilities also send the right
signals. They’ve been carefully designed to offer a place of ref-
uge, show caring and respect, and signal competence. Looking
for external confirmation? Go online and hear directly from those
who’ve been to the clinic or work there. The Mayo Clinic now
uses social networking—everything from blogs to Facebook and
YouTube—to enhance the patient experience. For example, on
By providing customers with organized, honest evidence of its the Sharing Mayo Clinic blog (http://sharing.mayoclinic.org), pa-
capabilities, the Mayo Clinic has built one of the most powerful brands tients and their families retell their Mayo experiences, and Mayo
in health care. Its Sharing Mayo Clinic blog lets you hear directly from employees offer behind-the-scenes views. The result? Highly
those who have been to the clinic or who work there. loyal customers who willingly spread the good word to others,
Mayo Clinic. building one of the most powerful brands in health care.
DESIGN SERVICES OF
S4carlisle
Physical goods are produced, then stored, then later sold, and then still later consumed.
Service inseparability In contrast, services are first sold and then produced and consumed at the same time. Service
Services are produced and consumed at inseparability means that services cannot be separated from their providers, whether the pro-
the same time and cannot be separated viders are people or machines. If a service employee provides the service, then the employee
from their providers. becomes a part of the service. And customers don’t just buy and use a service, they play an ac-
tive role in its delivery. Customer coproduction makes provider–customer interaction a special
feature of services marketing. Both the provider and the customer affect the service outcome.
Service variability Service variability means that the quality of services depends on who provides them as
The quality of services may vary well as when, where, and how they are provided. For example, some hotels—say, Marriott—
greatly depending on who provides have reputations for providing better service than others. Still, within a given Marriott hotel, one
them and when, where, and how they registration-counter employee may be cheerful and efficient, whereas another standing just a
are provided. few feet away may be grumpy and slow. Even the quality of a single Marriott employee’s service
varies according to his or her energy and frame of mind at the time of each customer encounter.
Service perishability Service perishability means that services cannot be stored for later sale or use. Some
Services cannot be stored for later sale doctors charge patients for missed appointments because the service value existed only at
or use. that point and disappeared when the patient did not show up. The perishability of services
is not a problem when demand is steady. However, when demand fluctuates, service firms
often have difficult problems. For example, because of rush-hour demand, public transpor-
tation companies have to own much more equipment than they would if demand were even
throughout the day. Thus, service firms often design strategies for producing a better match
between demand and supply. Hotels and resorts charge lower prices in the off-season to
attract more guests. And restaurants hire part-time employees to serve during peak periods.
Marketing Strategies for Service Firms

Just like manufacturing businesses, good service firms use marketing to position themselves
strongly in chosen target markets. FedEx promises to take your packages “faster, farther”;
Angie’s List offers “Reviews you can trust.” At Hampton, “We love having you here.” And
St. Jude Children’s Hospital is “Finding cures. Saving children.” These and other service
firms establish their positions through traditional marketing mix activities. However, because
services differ from tangible products, they often require additional marketing approaches.
The Service Profit Chain

In a service business, the customer and the front-line service employee interact to co-
create the service. Effective interaction, in turn, depends on the skills of front-line service
employees and on the support processes backing these employees. Thus, successful ser-
vice companies focus their attention on both their customers and their employees. They
Service profit chain understand the service profit chain, which links service firm profits with employee and
The chain that links service firm customer satisfaction. This chain consists of five links:21
profits with employee and customer
satisfaction. ● Internal service quality: superior employee selection and training, a quality work en-
vironment, and strong support for those dealing with customers, which results in . . .
● Satisfied and productive service employees: more satisfied, loyal, and hardworking
employees, which results in . . .
● Greater service value: more effective and efficient customer value creation and
service delivery, which results in . . .
● Satisfied and loyal customers: satisfied customers who remain loyal, make repeat
purchases, and refer other customers, which results in . . .
● Healthy service profits and growth: superior service firm performance.
For example, supermarket chain Wegmans—a perennial customer service champion—

has developed a cult-like customer following by putting its employees first. Wegmans
believes that happy, superbly trained employees create a superior customer experience.
The resulting happy customers are tremendously loyal, give the firm more business, and
convince other customers to do the same. That, in turn, results in happy investors. “Our
employees are our number one asset, period,” says a Wegmans executive. “The first ques-
tion [we] ask is ‘Is this the best thing for employees?’”22 Similarly, HSBC, a major multi-
national bank with a reputation for outstanding customer service, is also legendary for its
motivated and satisfied employees (see Marketing at Work 7.1).
DESIGN SERVICES OF
S4carlisle
Marketing at work 7.1
HSBC: Internal Marketing Drives Overall Excellence

Due to their intangible nature, providing services as a form of which enrich the staff’s work experience. The approach adopted
business is a great challenge, but doing so in a volatile economic for training and development of staff at HSBC is special because
climate is even more challenging. Be it about loans, mortgages, it gives the employee control over his or her training programs
current accounts, insurance products, or other services, most through a portal it calls “My Learning.” Using this link, the

bank customers are now better informed and more demand- employee can access all the learning opportunities available to him
ing. So, succeeding in the business of providing financial ser- or her. The bank also has an efficient learning and d evelopment
vices requires more than the basic efforts; a significant level team composed of seasoned training professionals who work
of customer-orientation is in order, especially as competition closely with various units in the organization for the training and
becomes stiffer. This is one of the key areas where HSBC, one development programs of their staff members. The flexibility as-
of the world’s leading banks, scores very high in the percep- sociated with these programs makes them very popular among
tion of financial services customers. The bank operates across the staff. In this existing arrangement, a staff member can attend
80 countries and territories and serves over 60 million customers paper-based training programs, online training opportunities, and
with various needs, and evidence suggests that the organiza- video-based programs. The ultimate aim of the bank is to ensure
tion is growing by the day. It is noteworthy that as big as it is enduring job satisfaction among the staff, as the management sees
in structure, from the top to the bottom of the organization, the this as a worthwhile investment. It is not surprising that the bank
focus of the entire workforce is predominantly and clearly cen- was named one of the top employers in the UK for women in The
tered on customer satisfaction. However, the bank acknowledges Times Top 50 Employers for Women in 2012. Antonio Simoes,
an important factor that is very significant to its success—its who heads HSBC UK, emphasizes the bank’s values when he ex-
employees. presses pride in offering equal employment opportunities to dif-
The belief of the bank is that for the customer to be satis- ferent kinds of men and women, reflective of the company’s own
fied, it is very important to take care of the employees, as they diverse customer base and commitment to gender balance.
are the ones who meet and interact with customers regularly and Another key feature of the bank’s internal marketing pro-
work toward delighting and giving them the utmost satisfaction gram is its flexible benefit packages for employees. Besides
desired in their various transactions. The logic is that sound ex- the competitive regular payments it offers its staff, HSBC’s
ternal marketing that is focused on customer satisfaction should overtime payment is excellent. In response to the views of
be preceded by an excellent practice of internal marketing. This is employees, the bank tailors its benefits packages to the spe-
evident in the bank’s three core group values, which can be sim- cific needs of the staff. For example, benefits can be tailored
ply summarized in this expression: HSBC people
are open, connected, and dependable. To actualize
this philosophy and maintain success in the market-
place, HSBC is strongly committed to its internal
marketing, which is simply about identifying the
needs of the employees and meeting them effec-
tively to create satisfied employees who have the
desired sense of life and professional fulfillment.
The opportunities and motivation for employees
are wide-raging and attractive. As a large financial
organization, the bank is in a position to offer its
employees thousands of different job opportuni-
ties and positions, ranging from customer service
and corporate and commercial banking to IT and

human resource management. Accordingly, the
bank matches these with several benefits and re-
wards, such as competitive salary, a contributory
pension scheme, employee assistance programs,
and flexible working policies. And for some roles, it
also incentivizes staff members with performance- HSBC bank operates in around 80 countries and territories and serves over
related bonus schemes, private health care, and life 60 million customers worldwide, leveraging its employees’ happiness to send out
assurance and insurance. Closely related to this are positive brand messages in the external marketplace.
the bank’s programs for training and development, © Naki Kouyioumtzis. Pearson Education Ltd.
DESIGN SERVICES OF
S4carlisle
to employees’ interests in providing for the future, breakdown a sound marketing strategy, but also about taking care of those
coverage, and child care, among other options. The bank simply who take care of its customers.
calls this “My Choice.” So, to those who wonder why HSBC’s
staff members are so customer-focused—always welcoming Sources: Based on information from “HSBC: About us,” www.hsbc.co.uk/1/2//
customers with smiles and courtesy, and strongly committed to about-us;“HSBC:ForaGreatCareer,StartHere,”www.jobs.hsbc.co.uk/14-en/HSBC
.aspx; “HSBC and You,” www.jobs.hsbc.co.uk/108-en/YouAndHSBC.aspx;
the business of delighting customers—the key answers lie in the
“Managing the Most of the Recruitment Process,” www.jobs.hsbc.co.uk/111-en/
employees’ motivation levels, morale, and career development FeaturesAndPromotions.aspx; “HSBC: Diversity,” www.jobs.hsbc.co.uk/113-en/
paths in the organization. HSBC has proven that winning in the Diversity.aspx; and “HSBC: Employee Handbook,” www.jobs.hsbc.co.uk/SIP_
tough post-recession marketplace is not only about formulating STORAGE/files/5/235.pdf; accessed November 2013.
Service marketing requires more than just traditional external marketing using the
four Ps. Figure 7.4 shows that service marketing also requires internal marketing and
Internal marketing interactive marketing. Internal marketing means that the service firm must orient and
Orienting and motivating customer- motivate its customer-contact employees and supporting service people to work as a team
contact employees and supporting to provide customer satisfaction. Marketers must get everyone in the organization to be cus-
service employees to work as a team to tomer centered. In fact, internal marketing must precede external marketing. For example,
provide customer satisfaction. Four Seasons Hotels and Resorts starts by hiring the right people and carefully orienting
and inspiring them to give unparalleled customer service. The idea is to make certain that
employees themselves believe in the brand so that they can authentically deliver the brand’s
promise to customers.
Interactive marketing Interactive marketing means that service quality depends heavily on the quality of
Training service employees in the fine the buyer–seller interaction during the service encounter. In product marketing, product
art of interacting with customers to quality often depends little on how the product is obtained. But in services marketing,
satisfy their needs. service quality depends on both the service deliverer and the quality of delivery. Service
marketers, therefore, have to master interactive marketing skills. Thus, Four Seasons
selects only people with an innate “passion to serve” and instructs them carefully in
the fine art of interacting with customers to satisfy their every need. All new hires com-
plete a three-month training regimen, including improvisation exercises, to help them
improve their customer-interaction skills.
Today, as competition and costs increase, and as productivity and quality decrease,
more service marketing sophistication is needed. Service companies face three major mar-
keting tasks: They want to increase their service differentiation, service quality, and service
productivity.
Managing Service Differentiation

In these days of intense price competition, service marketers often complain about the
difficulty of differentiating their services from those of competitors. To the extent that
customers view the services of different providers as similar, they care less about the pro-
vider than the price. The solution to price competition is to develop a differentiated offer,
delivery, and image.
Figure 7.4 Three Types of Service Company

Marketing
Internal
errnal External
Exterrn
marketing
ke
eting marketing
marke
et
Service firms must sell the
importance of delighting Then service firms must help
customers to customer-contact employees master the art of
employees. At Four Seasons interacting with customers.
Hotels, the most important At Four Seasons Hotels,
guideline is the golden rule: employees quickly learn that
Employees Customers
C quests paying $1,000 a night
Do unto others….
Interactive “expect to have their minds read.”
k i
marketing
DESIGN SERVICES OF
S4carlisle
The offer can include innovative features

that set one company’s offer apart from com-
petitors’ offers. For example, some retailers
differentiate themselves by offerings that
take you well beyond the products they stock.
Dick’s Sporting Goods has grown from a
single bait-and-tackle store in Binghamton,
New York, into a 510-store, $5.2 billion
sporting goods megaretailer in 44 states by
offering interactive services that set it apart
from ordinary sporting goods stores. Cus-
tomers can sample shoes on Dick’s indoor
footwear track, test golf clubs with an on-
site golf swing analyzer and putting green,
shoot bows in its archery range, and receive
personalized fitness product guidance from
an in-store team of fitness trainers. Such dif-
ferentiated services help make Dick’s “the
ultimate sporting goods destination store for
core athletes and outdoor enthusiasts.”23
Service differentiation: Dick’s Sporting Goods differentiates itself by offering Service companies can differentiate their
services that go well beyond the products it stocks. service delivery by having more able and re-
© Ian Dagnall/Alamy. liable customer-contact people, developing a
superior physical environment in which the service product is delivered, or designing a
superior delivery process. For example, many grocery chains now offer online shopping
and home delivery as a better way to shop than having to drive, park, wait in line, and tote
groceries home. And most banks offer mobile phone apps that allow you to more eas-
ily transfer money and check account balances. Many even allow mobile check deposits.
“Sign, snap a photo, and submit a check from anywhere,” says one Citibank ad. “It’s easier
than running to the bank.”
Finally, service companies also can work on differentiating their images through sym-
bols and branding. Aflac adopted the duck as its advertising symbol. Today, the duck is
immortalized through stuffed animals, golf club covers, and free ringtones and screensavers.
The well-known Aflac duck helped make the big but previously unknown insurance
company memorable and approachable. Other well-known service characters and sym-
bols include the GEICO gecko, Progressive Insurance’s Flo, McDonald’s golden arches,
Allstate’s “good hands,” and the Twitter bird.
Managing Service Quality

A service firm can differentiate itself by delivering consistently higher quality than its com-
petitors provide. Like manufacturers before them, most service industries have now joined
the customer-driven quality movement. And like product marketers, service providers need
to identify what target customers expect in regard to service quality.
Unfortunately, service quality is harder to define and judge than product quality. For
instance, it is harder to agree on the quality of a haircut than on the quality of a hair dryer.
Customer retention is perhaps the best measure of quality; a service firm’s ability to hang
Service differentiation: Service onto its customers depends on how consistently it delivers value to them.
companies can differentiate their images Top service companies set high service-quality standards. They watch service per-
using unique characters or symbols. Do formance closely, both their own and that of competitors. They do not settle for merely
you recognize this familiar symbol? good service—they strive for 100 percent defect-free service. A 98 percent performance
© 2013 Twitter. standard may sound good, but using this standard, the U.S. Postal Service would lose or
misdirect 391,000 pieces of mail each hour, and U.S. pharmacies would misfill more than
72.4 million prescriptions each week.24
Unlike product manufacturers who can adjust their machinery and inputs until everything
is perfect, service quality will always vary, depending on the interactions between employees
and customers. As hard as they may try, even the best companies will have an occasional late
delivery, burned steak, or grumpy employee. However, good service recovery can turn angry
DESIGN SERVICES OF
S4carlisle
customers into loyal ones. In fact, good recovery can win more customer purchasing and loyalty
than if things had gone well in the first place. For example, Southwest Airlines has a proactive
customer communications team whose job is to find the situations in which something went
wrong—a mechanical delay, bad weather, a medical emergency, or a berserk passenger—
then remedy the bad experience quickly, within 24 hours, if possible.25 The team’s commu-
nications to passengers, usually e-mails these days, have three basic components: a sincere
apology, a brief explanation of what happened, and a gift to make it up, usually a voucher in
dollars that can be used on their next Southwest flight. Surveys show that when Southwest
handles a delay situation well, customers score it 14 to 16 points higher than on regular on-
time flights.
These days, social media such as Facebook and Twitter can help companies to root
out and remedy customer dissatisfaction with service. Consider Marriott International:26
John Wolf, Marriott Hotel’s director of public relations, heads a team of Marriott people who
work full-time monitoring the company’s Twitter feed and other social media. The team seeks
out people who are complaining about problems they’ve had at Marriott. “We’d rather know
that there’s an issue than not know it, and we’d rather be given the opportunity to solve the prob-
lem,” Wolf says. This strategy helps Marriott to solve customer problems as they arise and to
recover previously dissatisfied customers. For example, when the team discovered an unhappy
Marriott regular tweeting and blogging about an experience at a Marriott hotel that resulted in a
ruined pair of shoes and big dry cleaning bill, they contacted him directly via Twitter, asking for
his contact information. The next day, the disgruntled customer received a personal call from
Marriott offering an explanation, a sincere apology, and a generous amount of reward points
added to his account to be applied to future stays at Marriott. The result: a once-again happy and
loyal customer who now blogged and tweeted to others about his positive experience.
Managing Service Productivity

With their costs rising rapidly, service firms are under great pressure to increase service
productivity. They can do so in several ways. They can train current employees better or
hire new ones who will work harder or more skillfully. Or they can increase the quantity of
their service by giving up some quality. Finally, a service provider can harness the power
of technology. Although we often think of technology’s power to save time and costs in
manufacturing companies, it also has great—and often untapped—potential to make ser-
vice workers more productive.
However, companies must avoid
pushing productivity so hard that do-
ing so reduces quality. Attempts to
streamline a service or cut costs can
make a service company more ef-
ficient in the short run. But that can
also reduce its longer-run ability to
innovate, maintain service quality, or
respond to consumer needs and de-
sires. For example, some airlines
have learned this lesson the hard way
as they attempt to economize in the
face of rising costs. Passengers on
most airlines now encounter “time-
saving” check-in kiosks rather than
personal counter service. And most
airlines have stopped offering even
the little things for free—such as in-
flight snacks—and now charge extra
for everything from luggage to aisle
Managing service productivity: Companies should be careful not to take things too far. seats. The result is a plane full of re-
For example, in their attempts to improve productivity, some airlines have mangled customer sentful customers. In their attempts to
service. improve productivity, many airlines
AP Photo/Rick Bowmer. have mangled customer service.
DESIGN SERVICES OF
S4carlisle
Thus, in attempting to improve service productivity, companies must be mind-

ful of how they create and deliver customer value. They should be careful not to take
service out of the service. In fact, a company may purposely lower service productivity
in order to improve service quality, in turn allowing it to maintain higher prices and
profit margins.27
SPEED BUMP Linking the Concepts

Let’s pause here for a moment. We’ve said that although services are “products” in a general sense,
they have special characteristics and marketing needs. To get a better grasp of this concept, select
a traditional product brand, such as Nike or Honda. Next, select a service brand, such as Southwest
Airlines or McDonald’s. Then compare the two.
● How are the characteristics and marketing needs of the product and service brands you selected
similar?
● How do the characteristics and marketing needs of the two brands differ? How are these dif-
ferences reflected in each brand’s marketing strategy? Keep these differences in mind as we
move into the final section of the chapter.
Author Comment Branding Strategy: Building Strong Brands

A brand represents everything
that a product or service means Some analysts see brands as the major enduring asset of a company, outlasting the com-
to consumers. As such, brands are pany’s specific products and facilities. John Stewart, former CEO of Quaker Oats, once
valuable assets to a company. For said, “If this business were split up, I would give you the land and bricks and mortar,
example, when you hear someone say and I would keep the brands and trademarks, and I would fare better than you.” A former
“Coca-Cola,” what do you think, feel, CEO of McDonald’s declared, “If every asset we own, every building, and every piece of
or remember? What about
equipment were destroyed in a terrible natural disaster, we would be able to borrow all the
“Target”? Or “Google”?
money to replace it very quickly because of the value of our brand. . . . The brand is more
valuable than the totality of all these assets.”28
Thus, brands are powerful assets that must be carefully developed and managed.
In this section, we examine the key strategies for building and managing product and
service brands.
Brand Equity
Brands are more than just names and symbols. They are a key element in the company’s
relationships with consumers. Brands represent consumers’ perceptions and feelings about
a product and its performance—everything that the product or the service means to con-
sumers. In the final analysis, brands exist in the heads of consumers. As one well-respected
marketer once said, “Products are created in the factory, but brands are created in the mind.”
Adds Jason Kilar, former CEO of the online video service Hulu, “A brand is what people
say about you when you’re not in the room.”29
Brand equity A powerful brand has high brand equity. Brand equity is the differential effect that
The differential effect that knowing the knowing the brand name has on customer response to the product and its marketing. It’s
brand name has on customer response a measure of the brand’s ability to capture consumer preference and loyalty. A brand has
to the product or its marketing. positive brand equity when consumers react more favorably to it than to a generic or un-
branded version of the same product. It has negative brand equity if consumers react less
favorably than to an unbranded version.
Brands vary in the amount of power and value they hold in the marketplace. Some
brands—such as Coca-Cola, Nike, Disney, GE, McDonald’s, Harley-Davidson, and
others—become larger-than-life icons that maintain their power in the market for
years, even generations. Other brands—such as Google, Facebook, Apple, ESPN, and
Wikipedia—create fresh consumer excitement and loyalty. These brands win in the
marketplace not simply because they deliver unique benefits or reliable service. Rather,
DESIGN SERVICES OF
S4carlisle
they succeed because they forge deep connections with customers. People really do
have relationships with brands. For example, to a devoted Converse fan, the brand
stands for much more than just shoes. It stands for a youthful, rebellious lifestyle. The
Converse brand and shoes represent a canvas for self-expression.
Ad agency Young & Rubicam’s BrandAsset Valuator measures brand strength along
four consumer perception dimensions: differentiation (what makes the brand stand out),
relevance (how consumers feel it meets their needs), knowledge (how much consumers
know about the brand), and esteem (how highly consumers regard and respect the brand).
Brands with strong brand equity rate high on all four dimensions. The brand must be dis-
tinct, or consumers will have no reason to choose it over other brands. However, the fact
that a brand is highly differentiated doesn’t necessarily mean that consumers will buy it.
The brand must stand out in ways that are relevant to consumers’ needs. Even a differen-
tiated, relevant brand is far from a shoe-in. Before consumers will respond to the brand,
they must first know about and understand it. And that familiarity must lead to a strong,
positive consumer–brand connection.30
Thus, positive brand equity de-
rives from consumer feelings about
and connections with a brand. Con-
sumers sometimes bond very closely
with specific brands. As perhaps the
ultimate expression of brands devotion,
a surprising number of people—and
not just Harley-Davidson fans—have
their favorite brand tattooed on their
bodies. Whether its contemporary new
brands such as Facebook or Amazon or
old classics like Harley or Converse,
strong brands are built around an ideal
of building trust and improving con-
sumers’ lives in some relevant way (see
Marketing at Work 7.2).
A brand with high brand equity
is a very valuable asset. Brand valu-
ation is the process of estimating the
total financial value of a brand. Mea-
suring such value is difficult. How-
ever, according to one estimate, the
Consumers sometimes bond very closely with specific brands. Perhaps the ultimate
expression of brand devotion: tattooing the brand on your body. brand value of Apple is a whopping
Kristoffer Tripplaar/Alamy.
$182 billion, with IBM at $115 bil-
lion, Google at $107 billion, McDon-
ald’s at $95 billion, Microsoft at $76 billion, and Coca-Cola at $74 billion. Other
brands rating among the world’s most valuable include AT&T, China Mobile, GE,
Walmart, and Amazon.com.31
High brand equity provides a company with many competitive advantages. A pow-
erful brand enjoys a high level of consumer brand awareness and loyalty. Because con-
sumers expect stores to carry the particular brand, the company has more leverage in
bargaining with resellers. Because a brand name carries high credibility, the company
can more easily launch line and brand extensions. A powerful brand also offers the com-
pany some defense against fierce price competition.
Above all, however, a powerful brand forms the basis for building strong and profitable
customer relationships. The fundamental asset underlying brand equity is customer equity—
the value of customer relationships that the brand creates. A powerful brand is important, but
what it really represents is a profitable set of loyal customers. The proper focus of marketing
is building customer equity, with brand management serving as a major marketing tool. Com-
panies need to think of themselves not as portfolios of brands but as portfolios of customers.
DESIGN SERVICES OF
S4carlisle
Marketing at Work 7.2
Breakaway Brands: Connecting with Consumers

and Building Trust
What does Facebook—the contemporary, social media this year’s list share three important common values: connection,
powerhouse—have in common with Foster Farms—a family- convenience, and confidence. The current survey measured brand
owned poultry company? Not much, it would seem. Yet both performance in the aftermath of the Great Recession, an era char-
brands landed in brand consultancy Landor Associates’ most acterized by persistent unemployment, tight finances, and reduced
recent annual Top Ten Breakaway Brands list, a list of top consumer confidence. It’s no surprise, then, that in these less-
brands based on a comprehensive survey that measures brand certain times, consumer relationships with brands are based on
strength. more pragmatic, day-to-day concerns. “From tech brands that
Each year, the Breakway Brands survey identifies the help people stay in touch globally while keeping the phone bill
brands with the greatest percentage gains in brand health and down, to packaged goods brands that offer healthy choices and
business value as a result of superb brand strategy and ex- convenient coffee breaks,” says Landor, “this year’s Breakaway
ecution over the previous three-year period. The survey taps list includes names that were singled out by consumers as those
Young & Rubicam’s BrandAsset Valuator—a database of they turn to and rely on to make life better.”
responses from 15,000 consumers evaluating 2,500 brands When it comes to connection, convenience, and confidence,
measured across 48 metrics—which looks at consumer brand the technology firms on the Breakaway list seem like natu-
measures such as differentiation, relevance, esteem, and rals. Amazon.com cuts through life’s clutter, reliably connects
knowledge. The survey also taps a second set of measures, people to the things they want, sells to them at the click of a
“Economic Value Added” by BrandEconomics, which as- button, and delivers goods direct to their doorsteps, in some
sesses the financial performance of each brand. Combined, urban areas as fast as the same day of purchase. Apple and
the BrandAsset Valuator and Economic Value Added models Samsung make the phones, tablets, other hardware devices that
provide a comprehensive brand valuation based on both con- create reliable anytime, anywhere mobile connections. Netflix
sumer and financial measures. connects customers dependably and instantly to the entertain-
Ideas about what constitutes brand strength, that elusive ment they crave through high-definition streaming for a low
blend of consumer and financial performance, have changed in monthly price.
the past decade. The most recent Breakaway Brands list is dom- Facebook provides a convenient platform that connects peo-
inated by contemporary Internet and high-tech brands—such as ple to others—friends, family, celebrities, organizations—and
Facebook, YouTube, Apple, Samsung, Amazon, and Netflix— keeps them in the know about important happenings. During
which have shattered and redefined their categories or built new the three-year period of the most recent Breakaway Brands as-
categories altogether. However, mixed in with these contem- sessment, total time spent per month on Facebook increased by
porary brands are some decidedly lower-tech brands, such as more than 2,000 percent, from 33.9 billion minutes per month to
Foster Farms, Kobalt Tools, and, of all things, the U.S. Marine 700 billion minutes (that’s 1,330,928 people-years per month!).
Corps, which stand out in the list like a couple of old geezers in Similarly, under the guidance of parent company Google, You-
a glass-and-chrome Apple store. Tube has expanded beyond a mere video hosting site to become
a full-fledged social network that connects 100 million users.
Top Breakaway Brands And as the market leader in international long distance, Skype
1. Facebook 7. YouTube has helped people connect globally while keeping their phone
2. Keurig 8. Netflix bills at a minimum. With slogans such as “Upgrade from a wall
3. Skype 9. USMC post to a first class conversation” and “140 characters doesn’t
4. Amazon 10. Apple equal staying in touch,” Skype has made old-school phone con-
5. Vizio 11. Kobalt Tools nections hip again.
6. Samsung 12. Foster Farms But it’s not just the high-tech brands that are breaking
away through connections, convenience, and confidence.
Missing altogether are some brand titans such as Coca-Cola, Mixed in with the Facebooks, Amazons, and Apples on
McDonald’s, and Disney—huge brands that grace many “top the list are less-glamorous but still-valued brands such as
brands” lists but aren’t growing nearly fast enough to be Keurig and Foster Farms. Keurig’s single-serve home cof-
crowned Breakaway Brands. fee maker connects consumers through “convenience with
Just what do these diverse Breakaway Brands have in common? a conscience.” Users get a good cup of their favorite cof-
According to Landor Associates, the seemingly diverse brands in fee easily and with no waste, and Keurig’s one-use K-Cup
DESIGN SERVICES OF
S4carlisle
packs and filters are BPA free, recyclable, and filled with
fair-trade-certified coffee. Keurig gives you “brewing excel-
lence one cup at a time.”
Similarly, Foster Farms has been quietly and reliably making
people’s lives easier and more convenient since 1939. Its broad
line of poultry products includes frozen chicken parts that don’t
require thawing before cooking, fully cooked poultry products
that require only reheating, and pre-prepared entrées and ap-
petizers. Foster Farms has also built customer trust and con-
fidence—the brand is closely associated with healthy eating,
community service, and environmental responsibility, estab-
lishing itself as the leading brand of locally sourced, all-natural,
hormone- and steroid-free poultry.
So, again, what is it that ties this diverse set of brands to-
gether? It all boils down to building meaningful connections
with consumers and adding value to their lives. Whether it’s
an omnipresent online retailer like Amazon.com, a social me-
dia powerhouse like Facebook, a sustainable poultry processor
like Foster Farms, or a maker of dependable, affordable tools
like Kobalt Tools, consumers trust these brands to connect their
lives and make life easier and better. According to Landor,
brands must be trusted companions:
The Breakaway Brands list reveals a simple but powerful truth: To

flourish in today’s environment, brands must excel at being a trust-
worthy and helpful companion. Connect people. Make their lives
simpler. Give them a deep sense of confidence. Most importantly,
don’t squander that trust. More than ever, to demand brand loyalty
requires that a brand is loyal to its own values and its customers.
After all, [companionship] is a two-way street.
Sources: Based on information from Jennifer Rooney, “Facebook Maintains

Hold as Leading ‘Breakaway Brand’ for 2012,” Forbes, September 4, 2012,
www.forbes.com/sites/onmarketing/2011/09/08/facebook-apple-netflix-top-
2011-breakaway-brands-list/; “Breakaway Brands of 2012,” Landor Asso-
ciates, September 6, 2012, http://landor.com/#!/talk/articles-publications/ Breakaway brands: Strong and trusting brand relationships are
articles/breakaway-brands-of-2012/; Jack Neff, “Just How Well-Defined Is built around connection, convenience, and confidence. With slogans
Your Brand’s Ideal?” Advertising Age, January 16, 2012, p. 4; and www.youtube such as “Upgrade from a wall post to a first class conversation,”
.com/yt/press/index.html, www.facebook.com/facebook/info, and www Skype has made old-school phone connections hip again.
.fosterfarms.com, accessed July, 2013. © Skype and/or Microsoft.
Building Strong Brands

Branding poses challenging decisions to the marketer. Figure 7.5 shows that the major
brand strategy decisions involve brand positioning, brand name selection, brand sponsor-
ship, and brand development.
Brand Positioning
Marketers need to position their brands clearly in target customers’ minds. They can po-
sition brands at any of three levels.32 At the lowest level, they can position the brand on
product attributes. For example, P&G invented the disposable diaper category with its
Pampers brand. Early Pampers marketing focused on attributes such as fluid absorption,
fit, and disposability. In general, however, attributes are the least desirable level for brand
positioning. Competitors can easily copy attributes. More important, customers are not
interested in attributes as such—they are interested in what the attributes will do for them.
A brand can be better positioned by associating its name with a desirable benefit. Thus,
Pampers can go beyond technical product attributes and talk about the resulting contain-
ment and skin-health benefits from dryness. Some successful brands positioned on benefits
are FedEx (guaranteed on-time delivery), Nike (performance), Walmart (low prices), and
Facebook (connections and sharing).
DESIGN SERVICES OF
S4carlisle
Figure 7.5 Major Brand Strategy Decisions
Brand positioning Brand name selection Brand sponsorship Brand development
Attributes Selection Manufacturer’s brand Line extensions

Benefits Protection Private brand Brand extensions
Beliefs and values Licensing Multibrands
Co-branding New brands
Brands are powerful assets that

must be carefully developed and
managed. As this figure suggests,
The strongest brands go beyond attribute or benefit positioning. They are positioned
building strong brands involves on strong beliefs and values, engaging customers on a deep, emotional level. For example,
many challenging decisions. to parents, Pampers mean much more than just containment and dryness. The “Pampers
village” Web site (www.pampers.com) positions Pampers as a “where we grow together”
brand that’s concerned about happy babies, parent–child relationships, and total baby care.
Says a former P&G executive, “Our baby care business didn’t start growing aggressively
until we changed Pampers from being about dryness to helping mom with her baby’s
development.”33
Successful brands engage customers on a deep, emotional level. Advertising agency
Saatchi & Saatchi suggests that brands should strive to become lovemarks, products or
services that “inspire loyalty beyond reason.” Brands ranging from Apple, Google, Disney,
and Coca-Cola to Nike, Trader Joe’s, Facebook, In-N-Out Burger, and Hallmark have
achieved this status with many of their customers. Lovemark brands pack an emotional
wallop. Customers don’t just like these brands, they have strong emotional connections
with them and love them unconditionally.34
When positioning a brand, the marketer should establish a mission for the brand and
a vision of what the brand must be and do. A brand is the company’s promise to deliver
a specific set of features, benefits, services, and experiences consistently to buyers. The
brand promise must be simple and honest. Motel 6, for example, offers clean rooms, low
prices, and good service but does not promise expensive furnishings or large bathrooms.
In contrast, The Ritz-Carlton offers luxurious rooms and a truly memorable experience but
does not promise low prices.
Brand Name Selection

A good name can add greatly to a product’s success. However, finding the best brand name
is a difficult task. It begins with a careful review of the product and its benefits, the target
market, and proposed marketing strategies. After that, naming a brand becomes part sci-
ence, part art, and a measure of instinct.
Desirable qualities for a brand name include the following: (1) It should suggest some-
thing about the product’s benefits and qualities: Beautyrest, Lean Cuisine, Mop & Glo.
(2) It should be easy to pronounce, recognize, and remember: iPad, Tide, Jelly Belly, Face-
book, JetBlue. (3) The brand name should be distinctive: Panera, Flickr, Swiffer, Zappos.
(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 J apanese. (6) It
should be capable of registration and legal protection. A brand name cannot be registered if
it infringes on existing brand names.
Choosing a new brand name is hard work. After a decade of choosing quirky names
(Yahoo!, Google) or trademark-proof made-up names (Novartis, Aventis, Accenture),
today’s style is to build brands around names that have real meaning. For example, names
like Silk (soy milk), Method (home products), Smartwater (beverages), and Blackboard
(school software) are simple and make intuitive sense. But with trademark applications
soaring, available new names can be hard to find. Try it yourself. Pick a product and see
if you can come up with a better name for it. How about Moonshot? Tickle? Vanilla?
Treehugger? Simplicity? Google them and you’ll find that they’re already taken.
Once chosen, the brand name must be protected. Many firms try to build a brand
name that will eventually become identified with the product category. Brand names such
DESIGN SERVICES OF
S4carlisle
as Kleenex, Levi’s, JELL-O, BAND-

AID, Scotch Tape, Formica, and Ziploc
have succeeded in this way. However,
their very success may threaten the
company’s rights to the name. Many
originally protected brand names—
such as cellophane, aspirin, nylon,
kerosene, linoleum, yo-yo, trampo-
line, escalator, thermos, and shredded
wheat—are now generic names that
any seller can use.
To protect their brands, marketers
present them carefully using the word
brand and the registered trademark sym-
bol, as in “BAND-AID® Brand Adhe-
sive Bandages.” Even the long-standing
“I am stuck on BAND-AID ’cause
BAND-AID’s stuck on me” jingle has
now become “I am stuck on BAND-
AID brand ’cause BAND-AID’s stuck
Protecting a brand name: This ad asks people to use the Xerox name only as an adjective
to identify its products and services (such as “Xerox copiers”), not as a verb (“to Xerox”
on me.” Similarly, a recent Xerox ad-
something) or a noun (“I’ll make a Xerox”). vertisement notes that a brand name can
Associated Press.
be lost if people misuse it. The ad asks
people to use the Xerox name only as an adjective to identify its products and services (such
as “Xerox copiers”), not as a verb (“to Xerox” something) or a noun (“I’ll make a Xerox”).
Brand Sponsorship
A manufacturer has four sponsorship options. The product may be launched as a national
brand (or manufacturer’s brand), as when Samsung and Kellogg sell their output under
their own brand names (the Samsung Galaxy tablet or Kellogg’s Frosted Flakes). Or the
manufacturer may sell to resellers who give the product a private brand (also called a store
brand or distributor brand). Although most manufacturers create their own brand names,
others market licensed brands. Finally, two companies can join forces and co-brand a prod-
uct. We discuss each of these options in turn.
National Brands versus Store Brands. National brands (or manufacturers’ brands) have
long dominated the retail scene. In recent times, however, increasing numbers of retailers
Store brand (or private brand) and wholesalers have created their own store brands (or private brands). Store brands
A brand created and owned by a have been gaining strength for more than two decades, but recent tighter economic times
reseller of a product or service. have created a store-brand boom. Studies show that consumers are now buying even more
private brands, which on average yield a 25 percent savings. “[Thrifty] times are good times
for private labels,” says a brand expert. “As consumers become more price-conscious, they
also become less brand-conscious.”35
In fact, store brands are growing much faster than national brands. Over the past
six years, whereas most food categories have been struggling, private labels have grown at
a rate of 6 percent per year. Over the past decade, annual sales of private-brand goods have
increased more than 40 percent in supermarkets and an incredible 96 percent in drug stores.
Private labels now account for almost 18 percent of supermarket dollar sales. Similarly, for
apparel sales, private-label brands—such as Hollister, The Limited, Arizona Jean Company
(JCPenney), and Xhilaration (Target)—now capture a 50 percent share of all U.S. apparel
sales, up from 25 percent a decade ago.36
Many large retailers skillfully market a deep assortment of store-brand merchandise.
For example, Walmart’s private brands account for a whopping 25 percent of its sales:
brands such as Great Value food products; Sam’s Choice beverages; Equate pharmacy,
health, and beauty products; White Cloud brand toilet tissue and diapers; Simple Elegance
laundry products; and Canopy outdoor home products. Its private-label brands alone gen-
erate nearly twice the sales of all P&G brands combined, and Walmart’s Great Value is
DESIGN SERVICES OF
S4carlisle
the nation’s largest single food brand. At the other end of the
grocery spectrum, upscale Whole Foods Market offers an array
of store-brand products under its 365 Everyday Value brand,
from organic Canadian maple syrup and frozen chicken Caesar
pizza to chewy children’s multivitamins and organic whole-
wheat pasta.37
Once known as “generic” or “no-name” brands, today’s
store brands are shedding their image as cheap knockoffs of
national brands. Store brands now offer much greater selection,
and they are rapidly achieving name-brand quality. In fact,
retailers such as Target and Trader Joe’s are out-innovating
many of their national-brand competitors. As a result, con-
sumers are becoming loyal to store brands for reasons besides
price. Recent research showed that 44 percent of grocery shop-
pers believe that store brands are produced in the same factory
as national brands, and 59 percent think that national brands
are more expensive because of advertising costs, not better
The popularity of store brands has soared recently. Walmart’s
store brands account for a whopping 25 percent of its sales, and its
quality.38 In some cases, consumers are even willing to pay
Great Value brand is the nation’s largest single food brand. more for store brands that have been positioned as gourmet or
Photo courtesy of Gary Armstrong.
premium items.
In the so-called battle of the brands between national and private brands, retailers
have many advantages. They control what products they stock, where they go on the shelf,
what prices they charge, and which ones they will feature in local promotions. Retailers
often price their store brands lower than comparable national brands and feature the price
differences in side-by-side comparisons on store shelves. Although store brands can be
hard to establish and costly to stock and promote, they also yield higher profit margins for
the reseller. And they give resellers exclusive products that cannot be bought from com-
petitors, resulting in greater store traffic and loyalty. Fast-growing retailer Trader Joe’s,
which carries 80 percent store brands, largely controls its own brand destiny, rather than
relying on producers to make and manage the brands it needs to serve its customers best.
To compete with store brands, national brands must sharpen their value propositions,
especially when appealing to today’s more frugal consumers. Many national brands are
fighting back by rolling out more discounts and coupons to defend their market share.
In the long run, however, leading brand marketers must compete by investing in new
brands, new features, and quality improvements that set them apart. They must design
strong advertising programs to maintain high awareness and preference. And they must
find ways to partner with major distributors to find distribution economies and improve
joint performance.
For example, in response to the recent surge in private-label sales, consumer product
giant Procter & Gamble has redoubled its efforts to develop and promote new and better
products, particularly at lower price points. “We invest $2 billion a year in research and
development, $400 million on consumer knowledge, and about 10 percent of sales on ad-
vertising,” says P&G’s CEO, Bob McDonald. “Store brands don’t have that capacity.” As a
result, P&G brands such as Tide and Gain still dominate in their categories, with combined
sales of more than $6.5 billion worldwide.39
Licensing. Most manufacturers take years and spend millions to create their own brand
names. However, 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.
Apparel and accessories sellers pay large royalties to adorn their products—from
blouses to ties and linens to luggage—with the names or initials of well-known fashion
innovators such as Calvin Klein, Tommy Hilfiger, Gucci, or Armani. Sellers of children’s
products attach an almost endless list of character names to clothing, toys, school supplies,
linens, dolls, lunch boxes, cereals, and other items. Licensed character names range from
classics such as Sesame Street, Disney, Barbie, Star Wars, Scooby Doo, Hello Kitty, and
Dr. Seuss characters to the more recent Dora the Explorer, Go, Diego, Go!, Angry Birds,
DESIGN SERVICES OF
S4carlisle
and Ben 10. And currently, numerous top-

selling retail toys are products based on tele-
vision shows and movies.
Name and character licensing has grown
rapidly in recent years. Annual retail sales
of licensed products worldwide have grown
from only $4 billion in 1977 to $55 billion
in 1987 and more than $182 billion today.
Licensing can be a highly profitable busi-
ness for many companies. For example,
Disney is the world’s biggest licensor with
a studio full of hugely popular characters,
from the Disney Princesses and Disney
Fairies to heroes from Toy Story and Cars,
to classic characters such as Mickey and
Minnie Mouse. Disney characters reaped
a reported $37.5 billion in worldwide mer-
chandise sales last year. By themselves,
the Disney Princesses made $1.6 billion in
Licensing: Disney is the world’s largest licensor with a studio full of hugely popular North American retail sales and more than
characters, from the Disney Princesses to the heroes from Cars. $3 billion worldwide.40
© AF archive/Alamy.
Co-branding. Co-branding occurs when two established brand names of different
Co-branding companies are used on the same product. Co-branding offers many advantages. Because
The practice of using the established each brand dominates in a different category, the combined brands create broader consumer
brand names of two different appeal and greater brand equity. For example, Pillsbury and Cinnabon joined forces to
companies on the same product. create Pillsbury Cinnabon cinnamon rolls. Benjamin Moore and Pottery Barn teamed
up to create a special collection of Benjamin Moore paint colors designed to perfectly
coordinate with Pottery Barn’s unique furnishings and accents. And Dairy Queen and
the Girl Scouts teamed up to create Girl Scout limited edition cookie-filled Blizzards.
The Thin Mint Blizzard is the most popular DQ limited edition to date, selling more than
10 million in one month.
Co-branding can take advantage of the complementary strengths of two brands. For ex-
ample, the Tim Hortons coffee chain has established co-branded Tim Hortons–Cold Stone
Creamery shops. Tim Hortons is strong in the morning and midday periods, with coffee and
baked goods, soups, and sandwiches. By contrast, Cold Stone Creamery’s ice cream snacks
are strongest in the afternoon and evening, which are Tim Hortons’s nonpeak periods. The
co-branded locations offer customers a reason to visit morning, noon, and night.41
Co-branding also allows a company to expand its existing brand into a category it
might otherwise have difficulty entering alone. For example, Nike and Apple co-branded
the Nike+iPod Sport Kit, which lets runners link their Nike shoes with their iPods to track
and enhance running performance in real time. “Your iPod Nano [or iPod Touch] becomes
your coach. Your personal trainer. Your favorite workout companion.” The Nike+iPod ar-
rangement gives Apple a presence in the sports and fitness market. At the same time, it
helps Nike bring new value to its customers.42
Co-branding can also have limitations. Such relationships usually involve complex
legal contracts and licenses. Co-branding partners must carefully coordinate their advertis-
ing, sales promotion, and other marketing efforts. Finally, when co-branding, each partner
must trust that the other will take good care of its brand. If something damages the reputa-
tion of one brand, it can tarnish the co-brand as well.
Brand Development
A company has four choices when it comes to developing brands (see Figure 7.6). It can
Line extension introduce line extensions, brand extensions, multibrands, or new brands.
Extending an existing brand name to
new forms, colors, sizes, ingredients, or Line Extensions. Line extensions occur when a company extends existing brand names to
flavors of an existing product category. new forms, colors, sizes, ingredients, or flavors of an existing product category. Thus, the
DESIGN SERVICES OF
S4carlisle
Figure 7.6 Brand Development Product category

Strategies Existing New This is a very handy framework
for analyzing brand development
opportunities. For example, what
Line Brand
Brand name
Existing strategy did Toyota use when it
extension extension introduced the Toyota Camry
Hybrid? When it introduced the
Toyota Prius? The Scion?
New Multibrands New brands
Cheerios line of cereals includes Honey Nut, Frosted, Yogurt Burst, MultiGrain, Banana
Nut, and several other variations.
A company might introduce line extensions as a low-cost, low-risk way to introduce
new products. Or it might want to meet consumer desires for variety, use excess capacity,
or simply command more shelf space from resellers. However, line extensions involve
some risks. An overextended brand name might cause consumer confusion or lose some
of its specific meaning. For example, Tide offers so many different versions in its popular
detergent line that consumers might be baffled as to which one to pick. Not to worry—the
Tide Web site provides a four-step selection guide that helps customers “find the Tide that’s
right for you” based on the laundry challenges they face.
At some point, additional extensions might add little value to a line. For instance, the
original Doritos Tortilla Chips have morphed into a U.S. roster of more than 20 different
types of chips and flavors, plus dozens more in foreign markets. Flavors include everything
from Nacho Cheese and Pizza Supreme to Blazin’ Buffalo & Ranch, Fiery Fusion, and
Salsa Verde. Or how about duck-flavored Gold Peking Duck Chips or wasabi-flavored
Mr. Dragon’s Fire Chips (Japan)? Although the line seems to be doing well with global
Brand extension sales of nearly $5 billion, the original Doritos chips seem like just another flavor.43 And
Extending an existing brand name to how much would adding yet another flavor steal from Doritos’ own sales versus those of
new product categories. competitors? A line extension works best when it takes sales away from competing brands,
not when it “cannibalizes” the company’s other items.
Brand Extensions. A brand extension extends a current brand name to new or modified
products in a new category. For example, Kellogg’s has extended its Special K cereal
brand into a full line of cereals plus lines of crackers, fruit crisps, snack and nutrition
bars, breakfast shakes, protein waters, and other health
and nutrition products. Starbucks extended its retail
coffee shops by adding packaged supermarket coffees
and even a single-serve home coffee, espresso, and
latte machine—the Verismo. Furniture retailer IKEA
recently launched a line of prefabricated houses under
the IKEA Aktiv brand (let’s see how that works out!).
And P&G has leveraged the strength of its Mr. Clean
household cleaner brand to launch several new lines:
cleaning pads (Magic Eraser), bathroom cleaning
tools (Magic Reach), and home auto cleaning kits
(Mr. Clean AutoDry). It even launched Mr. Clean–
branded car washes.
A brand extension gives a new product instant
recognition and faster acceptance. It also saves the
high advertising costs usually required to build a new
brand name. At the same time, a brand extension strat-
egy involves some risk. The extension may confuse
the image of the main brand—for example, how about
Brand extensions: P&G has leveraged the strength of its Mr. Clean brand to Zippo perfume or Dr. Pepper marinades? Brand exten-
launch new lines, including Mr. Clean–branded car washes. sions such as Cheetos lip balm, Heinz pet food, and
The Procter & Gamble Company. Life Savers gum met early deaths.44 And if a brand
DESIGN SERVICES OF
S4carlisle
extension fails, it may harm consumer attitudes toward other products carrying the same
brand name. Furthermore, a brand name may not be appropriate to a particular new product,
even if it is well made and satisfying—would you consider flying on Hooters Air or wearing
an Evian water-filled padded bra (both failed)? Thus, before transferring a brand name to
a new product, marketers must research how well the product fits the brand’s associations.
Multibrands. Companies often market many different brands in a given product category.
For example, in the United States, PepsiCo markets at least five brands of soft drinks
(Pepsi, Sierra Mist, Slice, Mountain Dew, and Mug root beer), four brands of sports and
energy drinks (Gatorade, No Fear, Propel, and AMP Energy), five brands of bottled teas
and coffees (Lipton, SoBe, Seattle’s Best, Starbucks, and Tazo), two brands of bottled
waters (Aquafina and SoBe), and two brands of fruit drinks (Tropicana and Ocean Spray).
Each brand includes a long list of sub-brands. For instance, SoBe consists of SoBe Teas &
Elixers, SoBe Lifewater, SoBe Lean, and SoBe Lifewater with Purevia. Aquafina includes
regular Aquafina, Aquafina Flavorsplash, and Aquafina Sparkling.
Multibranding offers a way to establish different features that appeal to different cus-
tomer segments, lock up more reseller shelf space, and capture a larger market share. For
example, although PepsiCo’s many brands of beverages compete with one another on su-
permarket shelves, the combined brands reap a much greater overall market share than any
single brand ever could. Similarly, by positioning multiple brands in multiple segments,
Pepsi’s five soft drink brands combine to capture much more market share than any single
brand could capture by itself.
A major drawback of multibranding is that each brand might obtain only a small mar-
ket share, and none may be very profitable. The company may end up spreading its re-
sources over many brands instead of building a few brands to a highly profitable level.
These companies should reduce the number of brands they sell in a given category and
set up tighter screening procedures for new brands. This happened to GM, which in recent
years has cut numerous brands from its portfolio, including Saturn, Oldsmobile, Pontiac,
Hummer, and Saab. Similarly, as part of its recent turnaround, Ford dropped its Mercury
line, sold off Volvo, and pruned the number of Ford nameplates from 97 to fewer than 20.
Says Ford CEO Alan Mulally, “I mean, we had 97 of [models, for goodness] sake! How
you gonna make ’em all cool? You gonna come in at 8 a.m. and say ‘from 8 until noon I’m
gonna make No. 64 cool? And then I’ll make No. 17 cool after lunch?’ It was ridiculous.”45
New Brands. A company might believe that the power of its existing brand name is
waning, so a new brand name is needed. Or it may create a new brand name when it enters
a new product category for which none of its current brand names are appropriate. For
example, Toyota created the separate Lexus brand aimed at luxury car consumers and the
Scion brand, targeted toward Millennial consumers.
As with multibranding, offering too many new brands can result in a company spreading
its resources too thin. And in some industries, such as consumer packaged goods, consum-
ers and retailers have become concerned that there are already too many brands, with too
few differences between them. Thus, P&G, PepsiCo, Kraft, and other large marketers of
consumer products are now pursuing megabrand strategies—weeding out weaker or slower-
growing brands and focusing their marketing dollars on brands that can achieve the number-
one or number-two market share positions with good growth prospects in their categories.
Managing Brands
Companies must manage their brands carefully. First, the brand’s positioning must be con-
tinuously communicated to consumers. Major brand marketers often spend huge amounts
on advertising to create brand awareness and build preference and loyalty. For example,
worldwide, Coca-Cola spends almost $2.9 billion annually to advertise its many brands,
GM spends $3.3 billion, and P&G spends an astounding $9.3 billion.46
Such advertising campaigns can help create name recognition, brand knowledge, and
perhaps even some brand preference. However, the fact is that brands are not maintained
by advertising but by customers’ brand experiences. Today, customers come to know a
DESIGN SERVICES OF
S4carlisle
brand through a wide range of contacts and touch points.

These include advertising but also personal experience with
the brand, word of mouth and social media, company Web
pages and mobile apps, and many others. The company must
put as much care into managing these touch points as it does
into producing its ads. As one former Disney top execu-
tive put it: “A brand is a living entity, and it is enriched or un-
dermined cumulatively over time, the product of a thousand
small gestures.”47
The brand’s positioning will not take hold fully unless
everyone in the company lives the brand. Therefore, the
company needs to train its people to be customer centered.
Even better, the company should carry on internal brand
building to help employees understand and be enthusiastic
about the brand promise. Many companies go even further
Managing brands requires managing “touch points.” Says a former
by training and encouraging their distributors and dealers to
Disney executive: “A brand is a living entity, and it is enriched or undermined serve their customers well.
cumulatively over time, the product of a thousand small gestures.” Finally, companies need to periodically audit their
Joe Raedle/Getty Images. brands’ strengths and weaknesses. They should ask: Does
our brand excel at delivering benefits that consumers truly
value? Is the brand properly positioned? Do all of our consumer touch points support the
brand’s positioning? Do the brand’s managers understand what the brand means to con-
sumers? Does the brand receive proper, sustained support? The brand audit may turn up
brands that need more support, brands that need to be dropped, or brands that must be
rebranded or repositioned because of changing customer preferences or new competitors.
MyMarketingLab
Go to www.pearsonglobaleditions.com/mymarketinglab to complete
the problems marked with this icon .
End of Chapter Reviewing the Concepts
Chapter Review and Key Terms
Objectives Review
A product is more than a simple set of tangible features. Each a want or need. Products include physical objects but also services,
product or service offered to customers can be viewed on three events, persons, places, organizations, ideas, or mixtures of these
levels. The core customer value consists of the core problem- entities. Services are products that consist of activities, benefits, or
solving benefits that consumers seek when they buy a product. satisfactions offered for sale that are essentially intangible, such as
The actual product exists around the core and includes the qual- banking, hotel, tax preparation, and home-repair services.
ity level, features, design, brand name, and packaging. The aug- Products and services fall into two broad classes based on the
mented product is the actual product plus the various services types of consumers who use them. Consumer products—those
and benefits offered with it, such as a warranty, free delivery, bought by final consumers—are usually classified according
installation, and maintenance. to consumer shopping habits (convenience products, shopping
products, specialty products, and unsought products). Industrial
products—those purchased for further processing or for use in
OBJECTIVE 1 Define product and describe the major
conducting a business—include materials and parts, capital
classifications of products and services. (pp 230–235)
items, and supplies and services. Other marketable entities—such
Broadly defined, a product is anything that can be offered to a mar- as organizations, persons, places, and ideas—can also be thought
ket for attention, acquisition, use, or consumption that might satisfy of as products.
DESIGN SERVICES OF
S4carlisle
OBJECTIVE 2 Describe the decisions companies external marketing but also for internal marketing to motivate
make regarding their individual products and services, employees and interactive marketing to create service delivery
product lines, and product mixes. (pp 235–242) skills among service providers. To succeed, service marketers
must create competitive differentiation, offer high service qual-
Individual product decisions involve product attributes, brand- ity, and find ways to increase service productivity.
ing, packaging, labeling, and product support services. Prod-
uct attribute decisions involve product quality, features, and
style and design. Branding decisions include selecting a brand OBJECTIVE 4 Discuss branding strategy—the
name and developing a brand strategy. Packaging provides decisions companies make in building and managing
many key benefits, such as protection, economy, convenience, their brands. (pp 249–259)
and promotion. Package decisions often include designing
Some analysts see brands as the major enduring asset of a
labels, which identify, describe, and possibly promote the
company. Brands are more than just names and symbols; they
product. Companies also develop product support services
embody everything that the product or the service means to
that enhance customer service and satisfaction and safeguard
consumers. Brand equity is the positive differential effect that
against competitors.
knowing the brand name has on customer response to the prod-
Most companies produce a product line rather than a single
uct or the service. A brand with strong brand equity is a very
product. A product line is a group of products that are related
valuable asset.
in function, customer-purchase needs, or distribution channels.
In building brands, companies need to make decisions
All product lines and items offered to customers by a particular
about brand positioning, brand name selection, brand spon-
seller make up the product mix. The mix can be described by
sorship, and brand development. The most powerful brand
four dimensions: width, length, depth, and consistency. These
positioning builds around strong consumer beliefs and val-
dimensions are the tools for developing the company’s product
ues. Brand name selection involves finding the best brand
strategy.
name based on a careful review of product benefits, the target
market, and proposed marketing strategies. A manufacturer
OBJECTIVE 3 Identify the four characteristics that
has four brand sponsorship options: it can launch a national
affect the marketing of services and the additional
brand (or manufacturer’s brand), sell to resellers that use a
marketing considerations that services require.
private brand, market licensed brands, or join forces with
(pp 242–249)
another company to co-brand a product. A company also
Services are characterized by four key aspects: they are intangi- has four choices when it comes to developing brands. It can
ble, inseparable, variable, and perishable. Each characteristic introduce line extensions, brand extensions, multibrands, or
poses problems and marketing requirements. Marketers work new brands.
to find ways to make the service more tangible, increase the Companies must build and manage their brands carefully.
productivity of providers who are inseparable from their prod- The brand’s positioning must be continuously communicated
ucts, standardize quality in the face of variability, and improve to consumers. Advertising can help. However, brands are not
demand movements and supply capacities in the face of service maintained by advertising but by customers’ brand experi-
perishability. ences. Customers come to know a brand through a wide range
Good service companies focus attention on both custom- of contacts and interactions. The company must put as much
ers and employees. They understand the service profit chain, care into managing these touch points as it does into produc-
which links service firm profits with employee and customer ing its ads. Companies must periodically audit their brands’
satisfaction. Services marketing strategy calls not only for strengths and weaknesses.
Key Terms
Objective 1 Objective 2 Service perishability (p 244)
Product (p 230) Product quality (p 236) Service profit chain (p 244)
Service (p 230) Brand (p 237) Internal marketing (p 246)
Consumer product (p 233) Packaging (p 238) Interactive marketing (p 246)
Convenience product (p 233) Product line (p 240)
Shopping product (p 233) Product mix (product portfolio) (p 241) Objective 4
Specialty product (p 233) Brand equity (p 249)
Unsought product (p 233) Objective 3 Store brand (private brand) (p 254)
Industrial product (p 234) Service intangibility (p 243) Co-branding (p 256)
Social marketing (p 235) Service inseparability (p 244) Line extension (p 256)
Service variability (p 244) Brand extension (p 257)
DESIGN SERVICES OF
S4carlisle
Discussion and Critical Thinking
Discussion Questions
7-1. What is a product? How do consumer products differ expand its product line. (AACSB: Written and Oral
from industrial products? (AACSB: Written and Oral Communication)
Communication; Reflective Thinking) 7-5. What is a product mix? Name and describe the four im-
7-2. Name and briefly describe the important decisions in portant dimensions of a product mix. (AACSB: Written
developing and marketing individual products and ser- and Oral Communication)
vices. (AACSB: Written and Oral Communication) 7-6. In terms of the four special characteristics of services,
7-3. What is a brand? How does branding help both buyers how do the services offered by a locally owned store
and sellers? (AACSB: Written and Oral Communication) differ from those of a global retailer? (AACSB: Writ-
7-4. What is a product line? Discuss the various product ten and Oral Communication; Reflective Thinking)
line decisions marketers make and how a company can
Critical Thinking Exercises

7-7. Increasingly, many countries are adopting graphic 7-8. List the names of the store brands found in three retail
warnings on tobacco product packaging. In some coun- food chains in your country. Identify the private-label
tries this has caused a great deal of controversy. Study brands of another retailer of your choice and compare
the case in your own country and include in your report the price and quality of one of the products to those of a
a discussion of whether such labels would reduce the comparable national brand. (AACSB: Written and Oral
number of smokers in the country. (AACSB: Written Communication; Reflective Thinking)
and Oral Communication; Reflective Thinking)
Minicases and Applications
Online, Mobile, and Social Media Marketing Mobile Hotspot

You’ve heard of mobile Wi-Fi hotspots, but one is truly mobile— however, leaving car manufacturers to include whatever they
your car. Automobile manufacturers Audi, Ford, Nissan, and think customers want in their vehicles. The industry’s argument
General Motors are equipping cars with 10-inch screens and is that these new gadgets are safer than the handheld ones driv-
Internet access. Cadillac’s XTS includes an iPad-like touch- ers are already using in their cars. Automakers claim that there
screen and voice commands so you can keep in touch with will be even fewer buttons than currently found in cars, possibly
your friends on Facebook. In 2014 General Motors will offer resulting in greater safety for drivers and passengers.
4G mobile broadband technology in all of its brands, transform-
ing these vehicles into virtual smartphones. The government is 7-9. Describe the core, actual, and augmented levels of prod-
concerned that Web access will cause a spike in accidents due to uct associated with an automobile. What level does the
increased driver distraction and wants the devices to only work mobile Wi-Fi system represent? Explain. (AACSB:
when the car is in park. Such guidelines are only suggestions, Written and Oral Communication; Reflective Thinking)
DESIGN SERVICES OF
S4carlisle
Marketing Ethics Octopus Affair

In Hong Kong, Octopus handles around 11 million elec- for there to be greater transparency in handling the personal
tronic financial transactions per day. In 2010, it found itself data of customers.
embroiled in a controversy involving the resale of custom-
er’s details to third parties. Octopus’s CEO, Prudence Chan, 7-10. What facilitated Octopus’s sale of the personal details of
initially denied that personal data was being sold to third its customers without seeking their permission? Should a
parties for direct marketing exercises. When she was ques- brand be allowed to do that? (AACSB: Written and Oral
tioned again, she claimed that she had not had access to Communication; Reflective Thinking; Ethical under-
critical information at the time. It was later revealed that standing and reasoning)
Octopus had netted HK$44 million (about $5.68 million) 7-11. How has this scandal affected the brand? With the growth
over a period of four and half years in the resale of per- of electronic transfers of cash, the market is likely to
sonal data belonging to 1.97 million customers. There were grow; should there be tighter controls? (AACSB: Writ-
immediate calls for Octopus’s monopoly to be broken and ten and Oral Communication; Reflective Thinking)
Marketing by the Numbers Beauty Balm Cannibalization

The newest product in the cosmetic beauty market is BB cream, 7-12. What brand development strategy is Clinique undertak-
which combines multiple skin care benefits into one product. ing? (AACSB: Written and Oral Communication; Re-
BB stands for “beauty balm,” and it is heralded as a “world- flective Thinking)
wide phenomenon” and a “multitasking miracle” by compa- 7-13. Assume Clinique expects to sell 3 million ounces of
nies in the industry. But rather than creating new demand, this BB cream within the first year after introduction but
all-in-one product could cannibalize sales of existing products expects that half of those sales will come from buyers
such as moisturizers, sunscreens, anti-aging creams, primers, who would otherwise purchase Clinique’s moisturizer
and foundations offered by cosmetic manufacturers. With BB (that is, cannibalized sales). Assuming that Clinique
cream sales reaching $9 million in the United States in less than normally sells 10 million ounces of moisturizer per year
a year and promising to go much higher, skin care and cosmetic and that the company will incur an increase in fixed
products maker Clinique does not want to miss out on this op- costs of $2 million during the first year of production
portunity. It is introducing a new BB cream product under the for the BB cream, will the new product be profitable for
Clinique brand name. Although the new BB cream will garner a the company? Refer to the discussion of cannibalization
higher price for the manufacturer ($10.00 per ounce for the BB in Appendix 3: Marketing by the Numbers for an expla-
cream versus $8.00 per ounce for the moisturizer product), it nation of how to conduct this analysis. (AACSB: Writ-
also comes with higher variable costs ($6.00 per ounce for the ten and Oral Communication; Analytical Thinking)
BB cream versus $3.00 per ounce for the moisturizer product).
Video Case Life Is Good

You’re probably familiar with the Life is good apparel brand. After viewing the video featuring Life is good, answer the
The company features its cheerful logo prominently on every- following questions:
thing from T-shirts to dog collars and seems to exude a positive
vibe. While this company has found considerable success in 7-14. What are people buying when they purchase a Life is
selling its wares based on a happy brand image, consumers still good product?
aren’t getting the complete image that the Life is good founders 7-15. What factors have contributed to the Life is good brand
intended. This video illustrates the challenges a company faces image?
in balancing the customer’s role with that of the company in 7-16. What recommendations would you make to Life is
determining a brand’s meaning. good regarding brand development strategies?
DESIGN SERVICES OF
S4carlisle
Company Cases 7 Zipcar / 16 Warby Parker / 10 Corning

See Appendix 1 for cases appropriate for this chapter. Case 7, revolutionary price point—and distributes a free pair of glasses
Zipcar: “It’s Not about Cars—It’s about Urban Life.” to a person in need for every pair purchased. Case 10: Corn-
A new company, a new concept, and a brand that transcends ing: Feeding Innovation through the Supply Chain. As an
function. Case 16, Warby Parker: Eyewear with a Purpose. innovator in glass products, Corning relies on relationships with
Warby Parker makes high-quality, fashionable eyeglasses at a suppliers and customers to develop new technologies.
MyMarketingLab
Go to www.pearsonglobaleditions.com/mymarketinglab for the following
Assisted-graded writing questions:
7-17. A product’s package must satisfy many criteria, such as sustainability,

convenience, safety, efficiency, functionality, and marketing. Research “packaging
awards” and develop a presentation analyzing an award-winning product
packaging effort. Describe the organization hosting the award competition,
the criteria for selecting winners, and one of the award-winning packages.
(AACSB: Written and Oral Communication; Information Technology)
7-18. Suggest ways automobile makers can use social media through new digital
devices in today’s cars to safely create customer engagement and customer-
managed relationships. (AACSB: Written and Oral Communication; Information
Technology; Reflective Thinking)
7-19. MyMarketingLab Only–comprehensive writing assignment for this chapter.
DESIGN SERVICES OF
S4carlisle

Chapter 07

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 07

Uploaded by

Copyright:

Available Formats

Part 1: Defining Marketing and the Marketing Process (Chapters 1–2)

Products, Services, Brands and

Building Customer Value

Chapter Road Map

Previewing the Concepts

Author Comment What Is a Product?

Service Products, Services, and Experiences

Three decades ago, Howard Schultz hit

Companies that market expe-

Levels of Product and Services

and packaging. For example, the iPad

Product and Service Classifications

Figure 7.1 Three Levels

Delivery Actual product After-

Table 7.1 Marketing Considerations for Consumer Products

Price Low price Higher price High price Varies

Distribution Widespread distribution; Selective distribution in fewer Exclusive distribution in Varies

Organizations, Persons, Places, and Ideas

People can also be thought of as products. Person marketing consists of activities

Author Comment Product and Service Decisions

Figure 7.2 Individual Product

Don’t forget Figure 7.1.

Product and Service Attributes

In their search for the next generation of

Product Support Services

Year after year, L.L.Bean lands in the top ten of

Product Mix Decisions

and Chunky Steak & Potato soup, in ei-

SPEED BUMP Linking the Concepts

Author Comment Services Marketing

Figure 7.3 Four Service Intangibility Inseparability

Although services are “products” in a general

The Nature and Characteristics of a Service

When it comes to hospitals, most patients can’t really judge

Marketing Strategies for Service Firms

The Service Profit Chain

For example, supermarket chain Wegmans—a perennial customer service champion—

Marketing at work 7.1

HSBC: Internal Marketing Drives Overall Excellence

Managing Service Differentiation

Figure 7.4 Three Types of Service Company

The offer can include innovative features

Managing Service Quality

Managing Service Productivity

Thus, in attempting to improve service productivity, companies must be mind-

SPEED BUMP Linking the Concepts

Author Comment Branding Strategy: Building Strong Brands

Marketing at Work 7.2

Breakaway Brands: Connecting with Consumers

The Breakaway Brands list reveals a simple but powerful truth: To

Sources: Based on information from Jennifer Rooney, “Facebook Maintains

Building Strong Brands

Figure 7.5 Major Brand Strategy Decisions

Brand positioning Brand name selection Brand sponsorship Brand development

Attributes Selection Manufacturer’s brand Line extensions

Brands are powerful assets that

Brand Name Selection

as Kleenex, Levi’s, JELL-O, BAND-

and Ben 10. And currently, numerous top-

Figure 7.6 Brand Development Product category

New Multibrands New brands

brand through a wide range of contacts and touch points.

End of Chapter Reviewing the Concepts

Chapter Review and Key Terms