MGT301 - Principles of Marketing - Lecture Handout 20

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Lesson overview and learning objectives:

In last Lesson we discussed the concept of the marketing mix elements. We had a detailed view about the classification of the product today we will continue with same topic i.e. Product.


A. Individual product decisions

We will focus on the important decisions in the development and marketing of individual products and services. These decisions are about product attributes, branding, packaging, labeling, and product support services. Companies have to develop strategies for the items of their product lines. Marketers make individual product decisions for each product including: product attributes decisions, brand, packaging, labeling, and product-support services decisions. Product attributes deliver benefits through tangible aspects of the product including features, and design as well as
through intangible features such as quality and experiential aspects. A brand is a way to identify and differentiate goods and services through use of a name or distinctive design element, resulting in long-term value known as brand equity. The product package and labeling are also important elements in the product decision mix, as they both carry brand equity through appearance and affect product performance with functionality. The level of product-support services provided can also have a major effect on the appeal of the product to a potential buyer.

Individual product decisions

Individual product decisions

a) Product Attributes

Developing a product or service involves defining the benefits that it will offer. These benefits are communicated to and delivered by product attributes such as quality, features, style and design.

i. Product Quality

Quality is one of the marketer's major positioning tools. 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 position in the target market. Here, product quality means performance quality—the ability of a product to perform its functions 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 levels of conformance quality.

ii. 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 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 needed and 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? The company 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 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 little in relation to costs should be dropped; those that
customers value highly in relation to costs should be added.

iii. Product Style and Design

Another way to add customer value is through distinctive product style and design. Some companies have reputations for outstanding 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 style and design can attract attention, improve product performance, cut production costs, and give the product a strong competitive advantage in the target market

b) Branding


Perhaps the most distinctive skill of professional marketers is their ability to create, maintain, protect, and enhance brands of their products and services. A brand is a name, term, sign, symbol, or design, or a combination of these, that
identifies the maker or seller of a product or service. Consumers view a brand as an important part of a product, and branding can add value to a product. For example, most consumers would perceive a bottle of White Linen perfume
as a high-quality, expensive product. But the same perfume in an unmarked bottle would likely be viewed as lower in
quality, even if the fragrance were identical. Branding has become so strong that today hardly anything goes unbranded. Branding helps buyers in many ways. Brand names help consumers identify products that might benefit them. Brands also tell the buyer something about product quality. 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 brand name becomes the basis on which a whole story can be built about a product's special qualities. The seller's brand name and trademark provide legal protection for unique product features that otherwise might be copied by competitors. Branding also helps the seller to segment markets.

i. Brand:

A brand is a name, sign, symbol, or design, or a combination of these that identifies the maker or seller of a product or service.

ii. Brand equity

is the value of a brand, based on the extent to which it has high brand loyalty, name awareness, perceived quality, strong brand associations, and other assets such as patents, trademarks, and channel relationships. Powerful brand names command strong consumer preference and are powerful assets. Perhaps the most distinctive skill of professional marketers is their ability to create, maintain, protect, and enhance brands. Measuring the actual equity of a brand name is difficult. However, the advantages of having it include:

  1. High consumer awareness and loyalty.
  2. Easier to launch brand extensions because of high brand credibility.
  3. A good defense against fierce price competition.
  4. It is believed to be the company’s most enduring asset. Customer equity tends to aid marketing planning in assuring loyal customer lifetime value.

iii. Selecting The Brands Name:

Selecting a brand name is an important step. The brand name should be carefully chosen since a good name can add greatly to a product’s success. Desirable qualities of a good brand name include:

  1. It should suggest something about the product’s benefits and qualities.
  2. It should be easy to pronounce, recognize, and remember.
  3. It should be distinctive.
  4. It should translate easily into foreign languages.
  5. It should be capable of registration and legal protection. Once chosen, the brand name must be protected.

iv. Sponsorship options for Branding:

A manufacturer has four sponsorship options:

  1. A manufacturer’s brand (or national brand) is a brand created and owned by the producer of a product or service (Examples include IBM and Kellogg).
  2. A private brand (or middleman, distributor, or store brand) is a brand created and owned by a reseller of a product or service.
  3. A licensed brand (a company sells it’s output under another brand name).
  4. Co-branding occurs when two companies go together and manufacture one product (General Mills and Hershey’s make Reese’s’ Peanut Butter Puffs cereal).

Combined brands create broader customer appeal and greater brand equity.
It may allow a company to expand its existing brand into a category it might otherwise have difficulty entering alone. But at the same time there are certain disadvantages of combine branding like:

  • Complex legal contracts and licenses are involved.
  • Coordination efforts are often difficult.
  • Trust is essential between partners. It is often hard to come by.

At one time manufacturer’s brands were the most popular and profitable. Today, however, an increasing number of private brands are doing well. Though hard to establish and maintain, private brands can yield higher profit margins. “The battle of the brands” (the competition between manufacturer’s and private brands) causes resellers to have advantages, and they charge manufacturer’s slotting fees (payments demanded by retailers from producers before they will accept new products and find “slots” for them on the shelves). As store brands are improving in quality, they are posing a stronger threat to the manufacturer’s brands. This is especially true in supermarkets.

v. Branding Strategy:

A company has four choices when it comes to brand strategy. It can:

  1. Introduce line extensions. Existing brand names are extended to new forms, sizes, and flavors of an existing product category. A company might introduce line extensions as a low-cost, low-risk way of introducing new products in order to:
    • Meet consumer desires for variety.
    • Meet excess manufacturing capacity.
    • simply command more shelf space.
      Risks include:
    1. An overextended brand might lose its specific meaning.
    2. Can cause consumer frustration or confusion.
  2. Introduce brand extensions. Existing brand names are extended to new or modified product categories. Advantages include:
    • Helps a company enter new product categories more easily.
    • Aids in new product recognition.
    • Saves on high advertising cost.
  3. Introduce multibrands. New brand names are introduced in the same product category. Advantages include:
    • They gain more shelf space.
    • Offering several brands to capture “brand switchers.” The company can establish flanker or fighter brands to protect its major brand.
    • It helps to develop healthy competition within the organization.
      Drawbacks include:
    1. Each brand may only obtain a small market share and be unprofitable.
  4. Introduce new brands. New brand names in new categories are introduced. Advantage include:
    • Helps move away from a brand that is failing.
    • Can get new brands in new categories by corporate acquisitions. Some companies are now pursuing mega brand strategies.
      Drawbacks can include:
    1. Spreading resources too thin.

c) Packaging

Packaging involves designing and producing the container or wrapper for a product. The package may include the product's primary container (the tube holding Colgate toothpaste); a secondary package that is thrown away when the product is about to be used (the cardboard box containing the tube of Colgate); and the shipping package necessary to store, identify, and ship the product (a corrugated box carrying six dozen tubes of Colgate toothpaste). Labeling, printed information appearing on or with the package, is also part of packaging.
Traditionally, the primary function of the package was to contain and protect the product. In recent times, however, numerous factors have made packaging an important marketing tool. Increased competition and clutter on retail store shelves means that packages must now perform many sales tasks—from attracting attention, to describing the product, to making the sale. Companies are realizing the power of good packaging to create instant consumer recognition of the company or brand. Developing a good package for a new product requires making many decisions. First, the company must establish the packaging concept, which states what the package should be or do for the product. Should it mainly offer product protection, introduce a new dispensing method, suggest certain qualities about the product, or something else? Decisions then must be made on specific elements of the package, such as size, shape, materials, color, text, and brand mark. These elements must work together to support the product's position and marketing strategy. The package must be consistent with the product's advertising, pricing, and distribution.

d) Labeling

Labels may range from simple tags attached to products to complex graphics that are part of the package. They perform several functions. At the very least, the label identifies the product 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 promote the product through attractive graphics.

e) Product Support Services

Customer service is another element of product strategy. A company's offer to the marketplace usually includes some services, which can be a minor or a major part of the total offer. Later in the chapter, we will discuss services as products in themselves. Here, we discuss product support services— services that augment actual products. More and more companies are using product support services as a major tool in gaining competitive advantage.
A company should design its product and support services to profitably meet the needs of target customers. The first step is to survey customers periodically to assess the value of current services and to obtain ideas for new ones. For example, Cadillac holds regular focus group interviews with owners and carefully watches complaints that come into its dealerships. From this careful monitoring, Cadillac has learned that buyers are very upset by repairs that are not done correctly the first time.
Once the company has assessed the value of various support services to customers, it must next assess the costs of providing these services. It can then develop a package of services that will both delight customers and yield profits to the company.

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