WEEK 9

Product Characteristics and Classifications

Product Levels: The Customer-Value Hierarchy:

• The fundamental level is the core benefit: the service or benefit the customer is
really
buying. A hotel guest is buying rest and sleep. The purchaser of a drill is buying
holes.
Marketers must see themselves as benefit providers.
• At the second level, the marketer must turn the core benefit into a basic
product. Thus a
hotel room includes a bed, bathroom, towels, desk, dresser, and closet.
• At the third level, the marketer prepares an expected product, a set of
attributes and
conditions buyers normally expect when they purchase this product. Hotel guests
minimally expect a clean bed, fresh towels, working lamps, and a relative degree of
quiet.
• At the fourth level, the marketer prepares an augmented product that exceeds
customer
expectations. In developed countries, brand positioning and competition take place
at this
level. In developing and emerging markets such as India and Brazil, however,
competition
takes place mostly at the expected product level.
• At the fifth level stands the potential product, which encompasses all the
possible
augmentations and transformations the product or offering might undergo in the
future.

Product Classifications:
1. DURABILITY AND TANGIBILITY Products fall into three groups according to
durability and tangibility:
a. • Nondurable goods are tangible goods normally consumed in one or a few uses,
such as beer and shampoo.
b. • Durable goods are tangible goods that normally survive many uses:
refrigerators, machine tools, and clothing.
c. • Services are intangible, inseparable, variable, and perishable products that
normally require more quality control, supplier credibility, and adaptability.
Examples include haircuts, legal advice, and appliance repairs.

2. • CONSUMER-GOODS CLASSIFICATION Consumer goods can be classified based on

shopping habits: among convenience, shopping, specialty, and unsought goods.
a. • The consumer usually purchases convenience goods frequently, immediately, and
with
minimal effort. Examples include soft drinks, soaps, and newspapers.
b. • Shopping goods are those the consumer characteristically compares on such
bases as
suitability, quality, price, and style. Examples include furniture, clothing, and
major
appliances.
c. • Specialty goods have unique characteristics or brand identification for which
enough buyers
are willing to make a special purchasing effort. Examples include cars, stereo
components,
and men’s suits.
• Unsought goods are those the consumer does not know about or normally think of
buying,
such as smoke detectors. Classic examples of known but unsought goods are life
insurance,
cemetery plots, and gravestones.

3. INDUSTRIAL-GOODS CLASSIFICATION Industrial goods are classified in terms of

their relative cost and how they enter the production process: materials and parts,
capital items, and supplies and business services.
a. • Materials and parts are goods that enter the manufacturer’s product
completely. — Raw materials fall into two major groups: farm products (wheat,
cotton, livestock, fruits, and vegetables) and natural products (fish,
lumber, crude petroleum, iron ore).
b. • Natural products are limited in supply. They usually have great bulk and low
unit value and must be moved from producer to user. Fewer and larger producers
often market them directly to industrial users.
c. • Manufactured materials and parts fall into two categories: component materials
(iron, yarn, cement, wires) and component parts (small motors, tires, castings).
d. • Capital items are long-lasting goods that facilitate developing or managing
the finished product. They include two groups: installations and equipment.
Installations consist of buildings (factories, offices) and heavy equipment
(generators, drill presses, mainframe computers, elevators).
e. • Equipment includes portable factory equipment and tools (hand tools, lift
trucks) and office equipment (personal computers, desks).
f. • Supplies and business services are short-term goods and services that
facilitate developing or managing the finished product. Supplies are of two kinds:
maintenance and repair items (paint, nails, brooms) and operating
supplies (lubricants, coal, writing paper, pencils).
g. • Business services include maintenance and repair services (window cleaning,
copier repair) and business advisory services (legal, management consulting,
advertising).

Product and Services Differentiation.

The Product Hierarchy

• Need family—The core need that underlies the existence of a product family.
Example: security.
• Product family—All the product classes that can satisfy a core need with
reasonable
effectiveness. Example: savings and income.
• Product class—A group of products within the product family recognized as having
a certain
functional coherence, also known as a product category. Example: financial
instruments.
• Product line—A group of products within a product class that are closely related
because they
perform a similar function, are sold to the same customer groups, are marketed
through the
same outlets or channels, or fall within given price ranges. A product line may
consist of
different brands, or a single family brand, or individual brand that has been line
extended.
Example: life insurance.
• Product type—A group of items within a product line that share one of several
possible forms of
the product. Example: term life insurance.
• Item (also called stock-keeping unit or product variant)—A distinct unit within a
brand or
product line distinguishable by size, price, appearance, or some other attribute.
Example:
Prudential renewable term life insurance.
Product Systems and Mixes.

WEEK 10.

Developing Pricing Strategies and Programs.

SETTING THE PRICE

STEP 1: SELECTING THE PRICING OBJECTIVE
Five major objectives are: survival, maximum current profit, maximum
market share, maximum market skimming, and product-quality
leadership.

STEP 2: DETERMINING DEMAND

Each price will lead to a different level of demand and have a different
impact on a company’s marketing objectives. The normally inverse
relationship between price and demand is captured in a demand curve:
The higher the price, the lower the demand.

STEP 3: ESTIMATING COSTS

The company wants to charge a price that covers
its cost of producing, distributing, and selling the
product, including a fair return for its effort and
risk. Yet when companies price products to cover their
full costs, profitability isn’t always the net result.

STEP 4: ANALYZING COMPETITOR’S PRICES AND

OFFERS
Within the range of possible prices identified by
market demand and company costs, the firm must
take competitors’ costs, prices, and possible reactions
into account. If the firm’s offer contains features not
offered by the nearest competitor, it should evaluate
their worth to the customer and add that value to the
competitor’s price.

STEP 5: SELECTING A PRICING METHOD

The three major considerations in price setting:

1. Costs set a floor to the price.

2. Competitors’ prices and the price of
substitutes provide an orienting point.
3. Customers’ assessment of unique features
establishes the price ceiling.

MARKUP PRICING
rumus unit cost, markup price, target return price, break even volume,

STEP 6: SELECTING THE FINAL PRICE

Pricing methods narrow the range from which the
company must select its final price. In selecting that
price, the company must consider additional factors,
including the impact of other marketing activities,
company pricing policies, gain-and-risk-sharing
pricing, and the impact of price on other parties.
ADAPTING THE PRICE
-Geographical Pricing (Cash, Countertrade,
Barter)
-Price Discounts And Allowances
-Promotional Pricing
-Differentiated Pricing

WEEK 11

CREATING BRAND EQUITY

THE ROLE OF BRANDS

1. BRANDS’ ROLE FOR CONSUMERS
➤ A brand is a promise between the firm and the consumer. It is a means to set
consumers’ expectations and reduce their risk.
➤ Consumers learn about brands through past experiences with the product and its
marketing program, finding out which brands satisfy their needs and which do not.
➤ For some consumers, brands can even take on human-like characteristics.
2. BRANDS’ ROLE FOR FIRMS
➤ First, they simplify product handling by helping organize inventory and
accounting
records. A brand also offers the firm legal protection for unique features or
aspects of
the product.
➤ A credible brand signals a certain level of quality so satisfied buyers can
easily choose
the product again.
➤ Although competitors may duplicate manufacturing processes and product designs,
they cannot easily match lasting impressions left in the minds of individuals and
organizations by years of favorable product experiences and marketing activity. In
this
sense, branding can be a powerful means to secure a competitive advantage.
➤ To firms, brands represent enormously valuable pieces of legal property that can
influence consumer behavior, be bought and sold, and provide their owner the
security of sustained future revenue

THE SCOPE OF BRANDING

➤ Branding is the process of endowing products and services with the power of a
brand.
It’s all about creating differences between products.
➤ For branding strategies to be successful and brand value to be created, consumers
must
be convinced there are meaningful differences among brands in the product or
service
category. Brand differences often relate to at- tributes or benefits of the product
itself.
➤ Successful brands are seen as genuine, real, and authentic in what they sell as
well as
who they are. A successful brand makes itself an indispensable part of its
customers’
lives.
➤ Marketers can apply branding virtually anywhere a consumer has a choice. It’s
possible
to brand a physical good, a service, a store, a person, a place, an organization,
or an
idea.
DEFINING BRAND EQUITY
➤ Brand equity is the added value endowed to products and
services with consumers. It may be reflected in the way
consumers think, feel, and act with respect to the brand, as well
as in the prices, market share, and profitability it commands.

➤ Customer-based brand equity is thus the differential effect

brand knowledge has on consumer response to the marketing of
that brand.
There are three key ingredients of customer-based brand equity.
➤ Brand equity arises from differences in consumer response.
➤ Differences in response are a result of consumers’ brand knowledge,
all the thoughts, feelings, images, experiences, and beliefs associated
with the brand.
➤ Brand equity is reflected in perceptions, preferences, and behavior
related to all aspects of the marketing of a brand.

➤ A brand promise is the marketer’s vision of what the brand must be and
do for consumers.

BRAND EQUITY MODELS

➤ BRANDASSET VALUATOR — There are four key components—or
pillars—of brand equity, according to BAV
➤ Energized differentiation
➤ Relevance
➤ Esteem
➤ Knowledge

➤ BRANDZ — BrandDynamics employs a set of simple scores that summarize a brand’s

equity
and are relatable directly to real world financial and business outcomes.

BRAND ELEMENT CHOICE CRITERIA

➤ Memorable — How easily do consumers recall and recognize the brand element, and
when
—at both purchase and consumption?
➤ Meaningful — Is the brand element credible? Does it suggest the corresponding
category
and a product ingredient or the type of person who might use the brand?
➤ Likable — How aesthetically appealing is the brand element? A recent trend is for
playful
names that also offer a readily available URL, especially for online brands like
Flickr,
Instagram, Pinterest, Tumblr, Dropbox, and others.
➤ Transferable — Can the brand element introduce new products in the same or
different
categories? Does it add to brand equity across geographic boundaries and market
segments?
➤ Adaptable — How adaptable and updatable is the brand element? Logos can easily be
updated.
➤ Protectable — How legally protectable is the brand element? How competitively
protectable? When names are in danger of becoming synonymous with product
categories

WEEK 12
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