Product: The Online Offer

Chapter 9 Objectives
 After reading Chapter 9, you will be able to:
 Define product and describe how it
contributes to customer value.
 Discuss how attributes, branding, support
services, and labeling apply to online
products.
 Outline some of the key factors in e-
marketing enhanced product development.

© 2014 Pearson Education, Inc. 2

The Google Story
 In 1998, co-founders Brin and Page delivered an
innovative new search strategy that ranked
results on popularity as well as keywords.
 Today, Google performs a bilion searches a day
in 181 countries, speaks 146 languages and is the
most-visited U.S. Web site.
 Had revenues of $37.9B and 25.7% in net income
in 2011 and continues to grow in sales, new
markets, and new products offered.

© 2014 Pearson Education, Inc. 3

The Google Story, Cont.
 Uses a media e-business model to generate revenue
from several B2B markets:
 Licensing of its search services.
 Sales of advertising to Web advertisers, 96% of its
revenues from advertising.
 Google’s product mix includes 24 search products, 3
advertising products, 20 applications, and many
enterprise products.
 Pays close attention to user value, keeps costs low,
and delivers eyeballs to advertisers.
 What types of products do you think Google will launch
next?
 http://www.youtube.com/watch?v=EjN5avRvApk
© 2014 Pearson Education, Inc. 4
MANY PRODUCTS CAPITALIZE ON
INTERNET PROPERTIES
 A product is a bundle of benefits that satisfies needs
of organizations or consumers.
 Includes goods, services, ideas, people, and places.
 Products such as search engines are unique to the Internet
while others simply use the Internet as a new distribution
channel.
 Organizations use research to determine what is
important to customers when creating new products.
 The marketing mix 4 Ps and CRM work together to
produce relational and transactional outcomes with
consumers.

© 2014 Pearson Education, Inc. 5

Marketing Mix & CRM Strategies &
Tactics

© 2014 Pearson Education, Inc. 6

Creating Customer Value
Online
 Customer value = benefits – costs
 Value is the entire product experience
 Value is defined wholly by the mental beliefs and
attitudes held by customers
 Value involves customer expectations
 Value is applied at all price levels
 Internet can increase benefits and lower costs
but it can also work in reverse

© 2014 Pearson Education, Inc. 7

PRODUCT BENEFITS
 The Internet created a new set of consumer
desired benefits. Users expect:
 effective web navigation,
 quick download speeds,
 clear site organization,
 attractive and useful site design,
 secure transactions,
 privacy,
 free information or services, and
 user-friendly Web browsing and e-mail reading.
© 2014 Pearson Education, Inc. 8
PRODUCT BENEFITS, Cont.
 Product decisions must be made that deliver
benefits to customers.
 Attributes
 Branding
 Support Services
 Labeling
 Packaging

© 2014 Pearson Education, Inc. 9

PRODUCT BENEFITS: Attributes
 Attributes include overall quality and specific
features.
 Product features can include color, taste, style,
size, and speed of service.
 Benefits also are the same features from a user
perspective (that is what will the attribute do to
solve problems or meet needs and wants? e.g.
Facebook)

© 2014 Pearson Education, Inc. 10

PRODUCT BENEFITS: Attributes, Cont.
 The Internet increases customer benefits in ways
that have revolutionized marketing.
 Move from atoms to bits; media, music, software, and other
digital products can be presented on the Web.
 Mass customization is possible for:
Tangible products (laptops can be sold at rock-
bottom prices)
 Intangible products goods (tremendous flexibility)
 User personalization of the shopping experience can
be achieved.

© 2014 Pearson Education, Inc. 11

PRODUCT BENEFITS: Branding
 A brand includes a name, symbol, or other identifying
information.
 When a firm registers the information with the U.S.

Patent Office, it becomes a trademark and is legally

protected from imitation.
 A trademark is a brand name.
 A trademark or service mark includes any word,
phrase, symbol or design, or any combination of used
or intended to be used to identify and distinguish the
goods / services of one party from those of others and
to indicate the source of the goods / services
© 2014 Pearson Education, Inc. 12
PRODUCT BENEFITS: Branding, Cont.
 A brand represents a promise or value proposition to
its customers.
 Delivering on this promise builds trust, lowers risk, and
helps customers by reducing stress of making product
switching decisions.
 A brand is a way for companies to differentiate
themselves from competitors.
 Customers and prospects become aware of brands
and develop beliefs and attitudes based on every
brand contacts, also called touch points through:
 One–way media; e.g. advertising & packaging
 Two–way communication; e.g. conversations with
customer service on phone, email…
© 2014 Pearson Education, Inc. 13
PRODUCT BENEFITS: Branding, Cont.
A Great Brand Intersects with Popular Culture
 Brand equity
 Brand equity is the
intangible value of a brand,
measured in dollars.
 A great brand taps into
popular culture and
touches consumers “Sweet
Spot”
 Popular culture trends in  Skype sweet spot
entertainment, sports… brought internet
telephony to the global
 Thus, many firms use
masses.
celebrities as spokes-people  LinkedIn hit the spot
and sponsor sporting events. for business networking.
© 2014 Pearson Education, Inc. 14
PRODUCT BENEFITS: Branding, Cont.
Brand Relationships and Social Media
 Five possible levels of
brand relationship
intensity Highest
intensity Tell others about the brand
Advocacy
 Advocacy
Communicate with each other
 Community Community

 Connection Connection
Communicate with company
between purchases
 Identity Display the brand proudly
Identity
 Awareness Is on the list of
Awareness possibilities

© 2014 Pearson Education, Inc. 15

PRODUCT BENEFITS: Branding, Cont.
Brand Relationships and Social Media
 The explosion of social media sites escalates the
brand relationship process with peer-to-peer
communication about brands.
 Ernst & Young found that 63% of entertainment
and media CEOs used social media for brand
buildings.
 Forrester Research identified 3 roles for social
media in branding:
 Build trust.
 Differentiate the brand.
 Nurture consumers to build brand loyalty.
© 2014 Pearson Education, Inc. 16
PRODUCT BENEFITS: Branding, Cont.
Branding Decisions for Web Products
 Online companies must answer the question: What
brand names, to online products, should be
applied?
1. Firms can use existing brand names (Amazon)
or create new brands on the Internet.
 Some firms may use different names offline and online
for several reasons
 To avoid risk if the new product or channel should fail.
 Sports Illustrated created thriveonline.com.
 To reposition the offline brand if the new product or
channel succeeds (e.g. NBC & MSNBC)
 Differentiation the online version brand from the offline
 Wired magazine changed its online version name to
Hotwired.
© 2014 Pearson Education, Inc. 17
PRODUCT BENEFITS: Branding, Cont.
Branding Decisions for Web Products, Cont.
2. Creating New Brands for Internet Marketing
 Good brand names should:
 Suggest something about the product (MySpace.com)

 Differentiate the product from competitors.

 Be suitable for legal protection.

 On the Internet, a good brand name should be short,

memorable, easy to spell, and translate well into other
languages
 Dell Computer at dell.com vs Hammacher

Schlemmer hammacher.com the gift retailer.

© 2014 Pearson Education, Inc. 18
PRODUCT BENEFITS: Branding, Cont.
Branding Decisions for Web Products, Cont.
3. Co-Branding: Occurs when two different
companies form an alliance to work together
and put their brand names on a product:
• Sports Illustrated co-brands with CNN as
CNNSI.
• Yahoo! Has joined with TV Guide and Gist
to provide TV listings.
• Microsoft and NBC formed msnbc.com
• EarthLink (the 6th largest ISP) joined with
Sprint (the telephone company) in 1998 to
provide ISP services, with a new name
Earthlink-Sprint name and logo.
© 2014 Pearson Education, Inc. 19
PRODUCT BENEFITS: Branding, Cont.
Branding Decisions for Web Products, Cont.
4. Internet Domain Names
 Much time and money is spent developing powerful,
unique brand names
 A URL (Uniform Resource Locator) is a website address.
 Also called IP (internet protocol) address and domain
name.
 Domain names contain several levels hostnames, sub-
domains, top-level domains
 http:// indicates that the browser should expect data
using the hypertext protocol.
 “www” is no longer necessary and most sites register
their name with and without it.
 The top-level may be .com or a country name, such
as .sa for Saudi Arabia or .uk for the United Kingdom.
© 2014 Pearson Education, Inc. 20
PRODUCT BENEFITS: Branding, Cont.
Branding Decisions for Web Products, Cont.
 Internet Domain  Largest Top-Level
Names, Cont. Domain Names
 The Internet Corporation
for Assigned Names and
Numbers (ICANN) is a
non-profit corporation
that makes decisions
about protocol and
names.
 .xxx and .post are two
recently-approved
extensions.
 GoDaddy and other sites
provide domain
registration services at low
cost (12.99 $ a year).

© 2014 Pearson Education, Inc. 21

PRODUCT BENEFITS: Branding, Cont.
Branding Decisions for Web Products, Cont.
4. Internet Domain Names, Cont.
 More than 97% of words in the dictionary have already
been registered as domain names.
 Organizations should purchase alternative or related
names and spellings.
 Coca-Cola owns cocacola.com, coca-cola.com and
coke.com, among others.
 Picking the right domain name can make a huge
difference in:
 Directing people correctly to a site.
 Building consistency in marketing communications.
 E.g. Time Warner’s Pathfinder, www.pathfinder.com
© 2014 Pearson Education, Inc. 22
PRODUCT BENEFITS: Support Services
 Customer support, during and after purchases, is a
critical component in the value proposition.
 Customer service reps help customers with
installation, maintenance, product guarantees, service
warranties, etc. to increase customer satisfaction.
 Click-and-brick organization’s combine online and
offline service to maximize the customer experience
and minimize downtime and frustrations.
 CompUSA, Inc. combines online and offline channels to
increase customer support.
 Customer service as a product benefit is an important
part of customer relationship management (CRM)
© 2014 Pearson Education, Inc. 23
PRODUCT BENEFITS: Labeling
 Labels identify
 Brand names
 Sponsoring firms
 Product ingredients
 Provide instructions
 Create product recognition
 Labeling has digital equivalents in the online world.
 Online labels provide information about product usage
and features.
 Online labels also provide extensive legal information
about copyright use on their webpage (Microsoft).
 Online firms may add the Better Business Bureau logo or
TRUSTe privacy shield.
© 2014 Pearson Education, Inc. 24
E-MARKETING ENHANCED PRODUCT
DEVELOPMENT
 Developers are forced to combine digital text,
graphics, video, and audio, and use new Internet
delivery systems.
 They must also integrate front-end customer
service operations with back-end data collection.
 Factors that affect product development and
product mix strategies with new technologies are:
1. Customer Co-design via Crowdsourcing
2. Internet Properties Spawn Other Opportunities
3. New-Product Strategies for E-Marketing

© 2014 Pearson Education, Inc. 25

E-MARKETING ENHANCED PRODUCT
DEVELOPMENT, Cont.
1. Customer Co-design via Crowdsourcing
 The Internet has produced several successful &
unusual business partnerships for both business &
consumer collaboration.
 Partners form synergistic clusters to help design
customer products that deliver value
 The Internet allows collaboration electronically
among consumers and across international borders.

© 2014 Pearson Education, Inc. 26

E-MARKETING ENHANCED PRODUCT
DEVELOPMENT, Cont.
1. Customer Co-design via Crowdsourcing (Cont.)
 Software developers often seek customer input as
they develop new products
 Such as allowing users to download beta version
products, test them, and provide feedback (LEGO
software for creating virtual Designs)
 Good marketers look for customer feedback to
improve products.
 Some set up sites to gather customer ideas and input:
Dell’s ideastorm.com.
 Sometimes this feedback comes undesirable because
of video posting sites and “word of mouse”.
© 2014 Pearson Education, Inc. 27
E-MARKETING ENHANCED PRODUCT
DEVELOPMENT, Cont.
1. Customer Co-design via Crowdsourcing (Cont.)
 Research suggests that customer interaction in the
early and late stages of development increase product
success
 Today, some organizations allow customers to create
Web site content on their sites (Amazon: reviews)
 Many firms allow customers to assist in website
creation
 Blogs set up to gather customer ideas and input.
 Community bulletin boards
 RSS (really simple syndication)
 XML
© 2014 Pearson Education, Inc. 28
E-MARKETING ENHANCED PRODUCT
DEVELOPMENT, Cont.
2. Internet Properties Spawn Other Opportunities
 The Internet spawns new and unusual product
opportunities (GPS)
 The Internet is the great information equalizer
which means
 Fierce competition
 Lots of product imitation
 Short product life cycles
 Firms are forced to create, develop, and release
innovations in a matter of days or hours, rather
than months.
© 2014 Pearson Education, Inc. 29
E-MARKETING ENHANCED PRODUCT
DEVELOPMENT, Cont.
3. New-Product Strategies for E-Marketing
 Many new products, such as YouTube, Yahoo!, and
Twitter, were introduced by “one-pony” firms (that
introduce one successful online product and build the
firm around that product)
 Other firms have added internet products to an
already successful product mix (Microsoft).
 Product mix strategies can help marketers integrate
offline and online strategies.
 Companies can choose among six categories of new-
product strategies, based on marketing objectives,
risk tolerance, resource availability, etc.
© 2014 Pearson Education, Inc. 30
E-MARKETING ENHANCED PRODUCT
DEVELOPMENT, Cont.
3. New-Product Strategies (Cont.):
Product Mix Strategies
1. Discontinuous innovations are new-to-the-world
products. The highest-risk strategy.
 Shopping agents, Search engines, Social networking
 A Disruptive innovation changes the existing
market in a strong way
 Digital music downloads disrupted the CD Market.
2. New-product lines when firms take an existing brand
name and create new products in a completely different
category
 Microsoft Internet Explorer (Netscape was already
available)
© 2014 Pearson Education, Inc. 31
E-MARKETING ENHANCED PRODUCT
DEVELOPMENT, Cont.
New-Product Strategies (Cont.):
Product Mix Strategies
3.Additions to existing product lines when
organizations add a new flavor, size or other variation to
a current product line.
 The USA Today (slightly different version than hard
copy)
 Google (many different product lines)
4.Improvements or revisions of existing products
line – “new and improved”
 Web2Mail.com
 Hotmail
 Yahoo web mail
© 2014 Pearson Education, Inc. 32
E-MARKETING ENHANCED PRODUCT
DEVELOPMENT, Cont.
New-Product Strategies (Cont.): Product Mix
Strategies
5.Repositioned products current products that are
targeted to different markets or promoted for new users
 Yahoo (from search engine to portal to Life Engine)
 MSNBC (younger viewers)
6.Me-too lower-cost products (price advantage)
introduced to compete with existing brands by offering a
price advantage, the least-risky strategy
 EarthNet (dropped prices against AOL)

© 2014 Pearson Education, Inc. 33

A Word About Return On Investment
(ROI)
 Marketers need a way to measure the success of
a company; ROI has been the generally accepted
method.
 This type of assessment is especially important
when introducing new products, online or
offline.
 Many experts are requiring a break-even point
within 3 months of inception to okay an online
project.

© 2014 Pearson Education, Inc. 34

All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior written permission of the
publisher. Printed in the United States of America.

Copyright © 2014 Pearson Education, Inc.

Publishing as Prentice Hall

© 2014 Pearson Education, Inc. 9-35