CHAPTER
8 + 9
Product,
Services and Branding Strategies
New
Product development and Product Life cycle strategies
þ Product:
A product
is anything that you can offer to a market for attention, acquisition, use, or
consumption. The category "products" includes not just tangible
goods, but also intangibles like services (air travel), persons (politicians or
movie stars), places (vacation destinations), ideas (capitalism or human
rights), or some combination of these. It could be:
- Physical Objects: Soap, Salt, Tooth Brush etc.
- Services: Transport, Tourism, Banking etc.
- Events: ICC cricket match, Olympics.
- Persons: Nelson Mandela, Amitabh Bachhan or Tom Cruise.
- Places: Saint-martin Island, Switzerland.
- Organizations: Red Cross, Body Shop etc.
- Ideas: Human rights, Tree plantation, Family Planning, HIV awareness etc.
- Combinations of the above: Restaurant, Air Lines etc.
þ Levels of product:
In
addition to the horizontal product-service continuum, marketers also conceive
of products through a system of concentric levels. Consider the following
illustration:
a) Core product: the basic
good or service the consumer wants. In practice, however, the core is not what
the consumer actually perceives and buys. What is the buyer really buying?
b) Actual product: the core
plus the characteristics marketers add to it to make it more attractive. It
includes features, design, quality, packaging etc.
c) Augmented Product: are the extra benefits around the core benefit
and actual product by offering additional customer service and benefits etc.
þ Product Classifications:
Marketers
further classify actual and augmented products. The two most basic
classifications are consumer and industrial products.
1. Consumer products:
Products
purchased by consumers for their personal consumption are called consumer
products. See table 8.1 (page: 235)
a) Convenience Product:
Consumer products
are those products that the customer usually buys frequently, immediately and
with a minimum of comparison and buying effort.
·
Customer Buying Behavior: Buy frequently & immediately
·
Price: Low priced
·
Promotion: Mass advertising
·
Distribution: Wide spread distribution. Many
purchase locations
·
Examples: i.e. Candy, newspapers
b) Shopping Product:
Consumer
product that the customer in process of selection and purchase characteristically
compares on such bases as suitability, quality, price and style.
·
Customer Buying Behavior: Less frequent & much
planning.
·
Price: Relatively higher price.
·
Promotion: Advertising and personal selling by both
producer and distributor.
·
Distribution: Selective distribution in fewer
outlets.
·
Examples: i.e. Television, furniture etc.
c) Specialty Product:
Consumer
product with unique characteristics or brand identification for which
significant group of buyers is willing to make a special purchase effort.
·
Customer Buying Behavior: Strong brand preference
and loyalty, special purchase effort.
·
Price: High price.
·
Promotion: More targeted Advertising and personal
selling by both producer and distributor.
·
Distribution: Excusive distribution in only one or
very few outlets.
·
Examples: i.e. Luxurious goods like Rolex watch,
Mercedes car, crystal clear diamond etc.
d) Unsought Product:
Consumer
product that the consumer either does not know about or knows about but does
not normally think of buying.
·
Customer Buying Behavior: Little product knowledge.
·
Price: Varies.
·
Promotion: Aggressive Advertising and personal
selling by both producer and distributor.
·
Distribution: Varies.
·
Examples: i.e. Life insurance policy, Red Cross
blood donations.
2.
Industrial products:
If a
consumer buys a stereo to play music in her home, she’s purchased the stereo as
a consumer product. If, however, she buys the stereo to provide music for
patrons of her restaurant, she has bought the stereo as an industrial product.
Industrial
products include materials and parts, which, in turn, include raw materials
(wheat and cotton), manufactured materials (steel and cable), and parts
(computer chips and tires). Industrial products also include capital items
(buildings, large factory equipment, tools, and office furnishings) and
supplies and services (lubricants, paper, and cleaning supplies).
þ Individual Product Decisions:
In an
effort to create successful products, marketers consider carefully the
characteristics they assign to each product.
1.
Product attributes:
Consumers
will not buy a product unless they understand the benefits the product will
afford them. Accordingly, marketers must work hard to define the attributes of
the product, including quality, features, and design.
1.1 Product quality:
Product
quality is an important factor. Product quality involves the dimensions of
performance level and consistency. Performance: will work properly.
Consistency: Defect free product.
1.2 Product features:
Just as
important as product quality are product features. A product can appear with
any number of features. Company can create higher level models by adding more
features.
1.3 Product style and design:
Marketers
also give much thought to product design. Good design can not only make a
product look attractive, it can also improve performance and cut production
costs.
2. Branding:
Just as
frequently, marketers position products according to their brands. Consumers
respond powerfully to the symbolism of brands, their responses shaping the
conclusions they reach about quality and value. A name, term, sign, symbol, or
design, or a combination of these intended to identify the goods or services of
one seller or group of sellers and to differentiate them from those
competitors.
3. Packaging
Packaging
may include one or all of the following: the primary container (like toothpaste tube or cereal box), the secondary package (like the box in
which you buy the toothpaste), and the shipping
package in which the product arrives at the stores (the large cardboard
boxes that carry 100 units of the toothpaste). Increased competition has forced
marketers to use packaging to communicate the benefits of the product. For
example, not only does the tube of Crest toothpaste proclaim the product’s
ability to fight tarter; the box and shipping package do so as well. Companies
can gain advantages over their competitors through innovative packaging.
4. Labeling
Labels are
just as important to marketing as packages. Labels can range from simple tags
attached to the merchandise to complicated graphics emblazoned on the package.
They should at least perform the function of identifying the product or brand,
but marketers often use them to promote its benefits and to describe the
product. (i.e. where it came from, when it was made, and what its contents)
5. Support services
Along with
brands, packages, and labels, marketers use support services to promote their
products. Product support services are the services that augment an actual
product, adding value to the total offer. A frequent example in this series of
lectures is the computer companies Micron and Dell. In addition to first-rate
hardware and software, these firms offer excellent technical support. Customers
with problems can consult a Web site or call an 800 number and speak with a
polite, knowledgeable member of the support staff. As competition in virtually
every market increases, more and more companies are using service as way to
lure customers away from their rivals.
þ
New-Product Development Strategy:
In order to compete effectively in their
markets, companies must regularly offer consumers new products. One way they
can do so is by acquiring companies, patents, or licenses, which allow them to
add pre-existing products or brands to their product lines. The other way — the
way that concerns here — is new-product development (NPD), the process
of researching and developing original product-ideas, improvements or
modifications to current products, or new brands.
New
Product Development: The development of original products, product
improvements, product modifications, and new brands through the firm’s own
R&D efforts.
1. Idea Generation: The
systematic search for new products.
a) Internal
Sources.
b) External
Sources.
2. Idea Screening: Screening
new-product ideas in order to spot good ideas and drop poor ones as soon as
possible.
3. Concept Development and Testing: A detailed
version of the new product idea stated in meaningful consumer terms.
4. Marketing Strategy Development: Designing
an initial marketing strategy for a new product based on the product concept.
5. Business Analysis: A review
of the sales, costs, and profit projections for a new product to find out
whether these factors satisfy the company’s objectives.
6. Product Development: Developing
the product concept into physical product in order to ensure that the product
idea can be turned into a workable product.
7. Test Marketing: The stages
of new product development in which the product and marketing program are
tested in more realistic market settings.
a) Standard
Test Market.
b) Controlled
Test Market.
c) Simulated
Test Market.
8. Commercialization: Introducing
a new product into market.
þ
Product Life-Cycle Strategies
PLC consists of five stages:
product development i.e. introduction, growth, maturity, and decline. As the
figure below suggests each of these stages yield different levels of sales and
profit:
Not all products follow this
cycle. Some die soon after introduction, while others enjoy maturity for years,
decline slightly, then bouncing back into a new phase of growth.
SEE TABLE: 8.2 for further clarifications.
þ
Brand:
˜
Brand equity:
Brand
equity is the relative power a brand possesses in its market. Brands with high
equity enjoy the loyalty of consumers. Coke and Pepsi, for example, have
developed astonishingly high brand equity.
˜
Brand name
selection:
In order
to achieve strong brand equity, companies devote considerable time and energy
to selecting brand names. A successful brand typically tells the consumer
something unique about the product (Rolex);
is easy to pronounce, recognize, and remember
(Omega watches); is distinctive (Titan);
translates easily into foreign languages
(Credence watches).
˜
Brand
sponsor:
Once the
company has selected the brand name it must decide what sort of sponsorship it
will give the brand. Companies that both manufacture and sell their own
products generally stamp those products with their manufacturer’s brand. Many familiar products, like General Mills
cereals and Microsoft softwares, are manufacturer’s brands. To compete with
manufacturers’ brands, retailers, such as Sears and Wal-Mart, often create
their own private brands. Rather
than create original brands, some companies license brand names developed by other businesses. A company with
an established brand name might try co-branding,
placing its brand with that of another firm on the same product.
˜
Brand
strategy:
As a
company develops a brand, it must choose the strategy with which to introduce
it. The brand could be a line extension—that
is, an item such as a new flavor or package size added to an established
product line under the same brand name. A brand could also be a brand extension, a new or modified
product launched under a successful brand name. A company may also practice multibranding, by adding a new brand to
the same category of products. Each of these strategies shares a common danger
like Cannibalisation.
Companies
can avoid this danger by launching an entirely new brand, which they can do through their own ingenuity or by
acquiring a new company.
þ Service:
Services
are a special type of product that does not involve ownership of anything.
Common services include activities (travel or meeting-planning), benefits
(banking or insurance), or support services (such as after-sales service for
other products).
þ
Marketing
strategies for service firms:
Internal Marketing: Internal marketing — training and motivating its
employees to interact with customers effectively.
Interactive Marketing: To ensure that employees achieve such interactions, service
companies must pursue interactive marketing as well, managing the
encounters between employees and customers.
