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Chapter 8 PRODUCTS, SERVICES, AND BRANDS: BUILDING CUSTOMER VALUE MARKETING STARTER: CHAPTER 8 Nike: Building Deep-Down Brand-Customer Relationships Synopsis Marketing is all about creating brands that connect with customers, and few marketers have done that as well as Nike. During the past several decades, Nike has built the Nike swoosh into one of the world’s best-known brand symbols. During the 1980s, Nike revolutionized sports marketing. It powered its way through the early 1990s, aggressively adding products in a dozen new sports, including baseball, golf, skateboarding, wall climbing, bicycling, and hiking. In the late 1990s, however, Nike stumbled and its sales slipped. Nike needed to rekindle the brand’s meaning to consumers. To turn things around, Nike returned to its roots: new-product innovation and a focus on customer relationships. This time, Nike shifted toward cutting-edge digital and social marketing tools to interact with customers to build brand experiences and community. Nike is now building communities of customers who talk not just with the company about the brand, but with each other as well. Thanks to efforts like Nike+, along with a host of other new digital and social media approaches, Nike has built a new kinship and sense of community with and between the brand and its customers. The company’s outstanding success results from much more than just making and selling good sports gear. It’s based on a deep-down connection between the iconic Nike brand and its customers.

Discussion Objective This discussion will explore the essence and strength of the Nike brand, and the company’s ability to forge kinship and a sense of community with sport lovers everywhere. Indeed, Nike has always blurred the line between brand and experience. As the Nike story demonstrates, in the quest to create customer relationships, marketers must build and manage products and brands that connect with customers. Because the Nike brand is so popular with students, the challenge will be to keep the discussion focused and moving.

Starting the Discussion To kick things off, demonstrate the pervasiveness of the Nike brand with a visit to www.nike.com. Here, you and the students can browse the company’s latest innovations in football, basketball and running gear, then check out Nike+ community. This section offers customers a range of social media tools to boost their personal fitness, talk with fellow sports enthusiasts, and best of all, to connect with the Nike brand on a new level. Challenge the students to articulate Nike’s branding strategy. Use the following questions to direct the discussion.

Discussion Questions When you think of the Nike brand, what comes to mind? How is it distinct from other athletic shoe and apparel makers in the marketplace (Given students’ likely passion for Nike, there should be no shortage of responses. In response to the first question, they will probably bring up the products they personally use, in addition to various celebrity athletes who endorse Nike. Touring the Nike YouTube channel and the Nike Web site during this discussion will help illustrate the breadth and depth of the Nike sports empire.) 1.

How has Nike managed to build such a strong sense of community with its customers, and how has that challenge changed over the past three decades? (Here, it will be helpful to talk about the personal bond the company has always worked to establish between winning athletes and winning products. Discuss how Nike started out as a ―counterculture‖ company and wound up part of the ―establishment‖ by the 1990s, fighting off new upstart companies. The role of technology and social media will figure prominently in this discussion, as well.

2.

What’s involved in managing a brand like Nike? Is Nike a well-managed brand? (Use this question to transition into the concepts of Chapter 8. The chapter notes that brands are powerful assets that must be Copyright©2014 Pearson Education

carefully developed and managed. Nike provides an excellent example of a well-managed, powerfully positioned brand. Keep Nike in mind as you move through the various product, service, and branding topics discussed in the chapter.)

CHAPTER OVERVIEW Use Power Point Slide 8-1 Here In this and the next chapter, we look at how companies develop and manage products and brands. The product is usually the first and most basic marketing consideration. This chapter begins with a deceptively simple question: What is a product? After addressing 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 products, product lines, and product mixes. Next, we look into the critically important issue of how marketers build and manage brands. Finally, we examine the characteristics and marketing requirements of a special form of product—services.

CHAPTER OBJECTIVES Use Power Point Slide 8-2 Here 1. Define product and the major classifications of products and services. 2. Describe the decisions companies make regarding their individual products and services, product lines, and product mixes. 3. Identify the four characteristics that affect the marketing of a service and the additional marketing considerations that services require. 4. Discuss branding strategy—the decisions companies make in building and managing their brands.

Copyright©2014 Pearson Education

CHAPTER OUTLINE p. 224

INTRODUCTION During the past several decades, Nike has built its ―swoosh‖ into one of the world’s best-known brand symbols. During the 1980s, Nike revolutionized sports marketing. It powered its way through the early 1990s, aggressively adding products in a dozen new sports. By the late 1990s, however, Nike needed to rekindle the brand’s meaning to consumers.

p. 225 Ad: Nike

To turn things around, Nike returned to its roots: newproduct innovation and a focus on customer relationships. This time, Nike shifted toward cutting-edge digital and social marketing tools to interact with customers to build brand experiences and community. Thanks to efforts like Nike+, along with a host of other digital approaches, Nike has built a new kinship and sense of community with and between the brand and its customers.

p. 226 PPT 8-3

 Assignments, Resources Use Web Resources 1 and 2 here  Opening Vignette Questions 1. What ―product‖ is Nike really selling? 2. How does Nike successfully promote bonding between athletes and its products? 3. How would you compare the Nike ―brand‖ to that of other athletic apparel makers? Chapter Objective 1 WHAT IS A PRODUCT? A product is anything that can be offered to a market for p. 226 attention, acquisition, use, or consumption that might satisfy Key Terms: Product, Service a want or need. Broadly defined, ―products‖ also include services, events, persons, places, organizations, ideas, or mixes of these. Services are a form of product that consists of activities, p. 227 benefits, or satisfactions offered for sale that are essentially Photo: Starbucks intangible and do not result in the ownership of anything.

p. 227 PPT 8-4

Products, Services, and Experiences Copyright©2014 Pearson Education

A company’s market offering often includes both tangible goods and services. At one extreme, the offer may consist of a pure tangible good, such as soap or toothpaste. At the other extreme are pure services, for which the offer consists primarily of a service. To differentiate their offers, marketers are creating and managing customer experiences with their brands or company.  Assignments, Resources Use Discussion Question 1 here Use Web Resources 3 here  Troubleshooting Tip Students will most likely have difficulty understanding the levels of products exhibited in Figure 8.1; no one in class is likely to have thought of a product in that level of detail before. This is a critical piece of information the students will need, however, so it is worth going through several products and services to get at the core benefit, actual product, and augmented product in each so that they can see how to apply this concept. Levels of Product and Services p. 227 PPT 8-5

Product planners need to think about products and services p. 228 on three levels. Figure 8.1: Three Levels of Products: 1. Core customer value, which addresses the question: Core, Actual, and What is the buyer really buying? Augmented Product 2. Actual product. 3. Augmented product, which is created around the core benefit and actual product by offering additional consumer services and benefits. 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 in order to create this customer value and the most satisfying customer experience. Product and Service Classifications

p. 228 Copyright©2014 Pearson Education

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There are two main classifications of products: consumer products and industrial products. Consumer Products

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Consumer products are products and services bought by p. 228-229 final consumers for personal consumption. Key Terms: Consumer Product, Consumer products include (see Table 8.1): Convenience Product, Shopping  Convenience products are consumer products and Product, Specialty services that customers usually buy frequently, Product immediately, and with a minimum of comparison and buying effort. p. 229  Shopping products are less frequently purchased Table 8.1: consumer products and services that customers Marketing compare carefully on suitability, quality, price, and Considerations for style. Consumer Products  Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. p. 227  Unsought products are consumer products that the Key Term: consumer either does not know about or knows about Unsought Product, but does not normally think of buying. Industrial Product

p. 229 PPT 8-12

Industrial Products

PPT 8-13

The three groups of industrial products and services are:

Industrial products are those purchased for further processing or for use in conducting a business.

  

Materials and parts include raw materials and manufactured materials and parts. Capital items are industrial products that aid in the buyer’s production or operations, including installations and accessory equipment. Supplies and services include operating supplies and maintenance and repair services.

p. 230

Organizations, Persons, Places, and Ideas

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Organization marketing consists of activities undertaken to p. 230 create, maintain, or change the attitudes and behavior of Ad: IBM Smarter target consumers toward an organization. Planet Copyright©2014 Pearson Education

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Person marketing consists of activities undertaken to create, maintain, or change attitudes or behavior toward particular people. p. 231 Place marketing involves activities undertaken to create, Key Term: Social maintain, or change attitudes or behavior toward particular Marketing places. Social marketing is the use of commercial marketing concepts and tools in programs designed to bring about social change.  Assignments, Resources Use Discussion Question 2 here Use Marketing Technology here Use Small Group Assignment 2 here Use Think-Pair-Share 1, 2, 3, and 4 here Use Outside Example 1 here

p. 231

PRODUCT AND SERVICE DECISIONS

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Individual Product and Service Decisions

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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.

PPT 8-19

Product Quality is creating customer value and satisfaction.

Chapter Objective 2 p. 231 Figure 8.2: Individual Product Decisions

p. 231 Key Term: Product Total quality management (TQM) is an approach in which all the company’s people are involved in constantly Quality improving the quality of products, services, and business processes. Product quality has two dimensions: level and consistency. The quality level means performance quality or the ability of a product to perform its functions. Quality conformance means quality consistency, freedom from defects, and consistency in delivering a targeted level of performance.

PPT 8-20 Product Features are a competitive tool for differentiating Copyright©2014 Pearson Education

the company’s product from competitors’ products. 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? PPT 8-21 Product Style and Design is another way to add customer value. Style describes the appearance of a product. Design contributes to a product’s usefulness as well as to its looks. p. 233 Key Term: Brand

Branding PPT 8-22

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. Branding helps buyers in many ways.  

Brand names help consumers identify products that might benefit them. Brands say something about product quality and consistency.

Branding gives the seller several advantages.   

The brand name becomes the basis on which a whole story can be built about a product. The brand name and trademark provide legal protection for unique product features. The brand name helps the seller to segment markets.

p. 233 Key Term: Packaging involves designing and producing the container Packaging or wrapper for a product. p. 232 Ad: Puma Labeling Packaging

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p. 232 Ad: OXO Good Grips

Labels perform several functions. 

The label identifies the product or brand. Copyright©2014 Pearson Education

 

The label describes several things about the product. The label promotes the brand.

p. 235 Ad: Gap

Labeling also raises concerns. As a result, several federal and state laws regulate labeling. The most prominent is the Fair Packaging and Labeling Act of 1966. Labeling has been affected in recent times by:   

p. 235 PPT 8-24

Unit pricing (stating the price per unit of standard measure) Open dating (stating the expected shelf life of the product) Nutritional labeling (stating the nutritional values in the product)

Product Support Services The first step is to survey customers periodically to assess p. 235 the value of current services and to obtain ideas for new Photo: Nordstrom ones. Next, the company can take steps to fix problems and add new services that will both delight customers and yield profits to the company.  Assignments, Resources Use Discussion Question 3 here Use Individual Assignment 1 here

p. 236

Product Line Decisions

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A product line is a group of products that are closely p. 236 related because they function in a similar manner, are sold to Key Term: Product the same customer groups, are marketed through the same Line types of outlets, or fall within given price ranges.

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Product line length is the number of items in the product line. Product line filling involves adding more items within the present range of the line. Copyright©2014 Pearson Education

Product line stretching occurs when a company lengthens its product line beyond its current range. Companies located at the upper end of the market can stretch their lines downward. Companies located at the lower end of the market can stretch their product lines upward. Companies located in the middle range of the market can stretch their lines in both directions. Product Mix Decisions p. 236 PPT 8-27

p. 237 Product mix (or product portfolio) consists of all the Ad: Campbell Soup product lines and items that a particular seller offers for sale. A company’s product mix has four dimensions: width, length, depth, and consistency. 1. Product mix width refers to the number of different product lines the company carries. 2. Product mix length refers to the total number of items the company carries within its product lines. 3. Product mix depth refers to the number of versions offered of each product in the line. 4. Product mix consistency refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. p. 236 Key Term: Product It can add new product lines, widening its product Mix (Product Portfolio) mix. It can lengthen its existing product lines. It can add more versions of each product, deepening its product mix. It can pursue more product line consistency.

The company can increase its business in four ways. 1. 2. 3. 4.

p. 237

 Assignments, Resources Use Individual Assignment 2 here Use Web Resources 4 here Use Video Case here SERVICES MARKETING Copyright©2014 Pearson Education

Chapter Objective 3

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Services account for close to 65 percent of U.S. gross domestic product. Services make up 64 percent of gross world product.

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p. 238 Key Term: Service A company must consider four service characteristics when Intangibility designing marketing programs: intangibility, inseparability, variability, and perishability (see Figure 8.3). p. 238 Figure 8.3: Four 1. Service intangibility means that services cannot be Service seen, tasted, felt, heard, or smelled before they are Characteristics bought. 2. Service inseparability means that services cannot p. 238 be separated from their providers, whether the Key Term: Service providers are people or machines. Because the Inseparability customer is also present as the service is produced, provider-customer interaction is a special feature of p. 238 Ad: Mayo Clinic services marketing. 3. Service variability means that the quality of services depends on who provides them as well as p. 238 Key Term: Service when, where, and how they are provided. 4. Service perishability means that services cannot Variability, p. 239 be stored for later sale or use. Key Term: Service Perishability Marketing Strategies for Service Firms

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The Service-Profit Chain

p. 238

The Nature and Characteristics of a Service

In a service business, the customer and front-line service p. 239 employee interact to create the service. Key Term: ServiceProfit Chain The service-profit chain consists of five links: 1. Internal service quality: superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which results in... 2. Satisfied and productive service employees: more p. 240 satisfied, loyal, and hardworking employees, which Photo: Zappos.com results in... 3. Greater service value: more effective and efficient customer value creation and service delivery, which results in... Copyright©2014 Pearson Education

4. Satisfied and loyal customers: satisfied customers who remain loyal, repeat purchase, and refer other customers, which results in... 5. Healthy service profits and growth: superior service firm performance Service marketing requires internal interactive marketing. (Figure 8.4) PPT 8-32

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p. 242 PPT 8-34

marketing

and

Internal marketing means that the service firm must orient and motivate its customer-contact employees and supporting service people to work as a team to provide customer satisfaction.

p. 241 Key Terms: Internal Marketing, Interactive Marketing

Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during p. 241 the service encounter. Figure 8.4 Service companies face three major marketing tasks: They Three Types of want to increase their service differentiation, service quality, Service Marketing and service productivity. Managing Service Differentiation Service companies can differentiate their service delivery by having more able and reliable customer-contact people, by p. 241 developing a superior physical environment in which the Ad: Aflac service product is delivered, or by designing a superior delivery process. Service companies can work on differentiating their images through symbols and branding. Managing Service Quality

PPT 8-35 Service quality is harder to define and judge than product quality. Service quality will always vary, depending on the interactions between employees and customers. Good service recovery can turn angry customers into loyal ones. Managing Service Productivity PPT 8-36 Copyright©2014 Pearson Education

p. 243 Photo: United

Service firms are under great pressure to increase service productivity.   

They can train current employees better or hire new ones who will work harder or more skillfully. They can increase the quantity of their service by giving up some quality. They can harness the power of technology.

 Assignments, Resources Use Real Marketing 8.2 here Use Discussion Question 6 here Use Marketing Ethics here Use Additional Project 4 here Use Think-Pair-Share 5 here Use Outside Example 2 here  Troubleshooting Tip  The service characteristics of intangibility, inseparability, variability, and perishability are usually picked up fairly easily, but again, various examples from day-to-day life may help. For instance, everyone has had to cancel at least one doctor’s appointment in his or her life—that beautifully illustrates the problem of perishability. Female students will understand inseparability by talking about the hair salons they use. Ask: If the hairdresser you used left, would you easily switch to another person at the salon? Many students today travel heavily, so talking about airline personnel can illustrate service variability. Intangibility is the easiest characteristic to appreciate, as most students will have suffered through having to choose between several universities from whom they had received acceptances.

p. 244

BRANDING STRATEGY: BUILDING STRONG BRANDS

Chapter Objective 4

Some analysts see brands as the major enduring asset of a company. PPT 8-37

Brand Equity is the differential effect that knowing the p. 244 brand name has on customer response to the product and its Key Term: Brand Equity marketing. Copyright©2014 Pearson Education

Young & Rubicam’s Brand Asset Evaluator measures brand strength along four consumer perception dimensions: 1. Differentiation (what makes the brand stand out) 2. Relevance (how consumers feel it meets their needs) 3. Knowledge (how much consumers know about the brand) 4. Esteem (how highly consumers regard and respect the brand) Brand valuation is the process of estimating the total financial value of a brand. High brand equity provides a company with many p. 244 competitive advantages. Ad: Converse     

High level of consumer brand awareness and loyalty More leverage in bargaining with resellers More easily launch line and brand extensions Defense against fierce price competition Forms the basis for building strong and profitable customer relationships

The fundamental asset underlying brand equity is customer equity—the value of the customer relationships that the brand creates. p. 245

Building Strong Brands

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Major Brand Strategy Decisions, see Figure 8.5

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Marketers can position brands at any of three levels.

p. 245 Figure 8.5: Major Brand Strategy Decisions

1. They can position the brand on product attributes. 2. They can position the brand with a desirable benefit. 3. They can position the brand on beliefs and values. PPT 8-40

Brand Name Selection Desirable qualities for a brand name include the following: 1. It should suggest something about the product’s benefits and qualities. 2. It should be easy to pronounce, recognize, and remember. Copyright©2014 Pearson Education

p. 248 Ad: Xerox

3. The brand name should be distinctive. 4. It should be extendable. 5. The name should translate easily into foreign languages. 6. It should be capable of registration and legal protection. Brand Sponsorship PPT 8-41 A manufacturer has four sponsorship options. 1. The product may be launched as a manufacturer’s brand (or national brand). 2. The manufacturer may sell to resellers who give it a private brand (also called a store brand or distributor brand). 3. The manufacturer can market licensed brands. 4. Two companies can join forces and co-brand a product. National Brands Versus Store Brands National brands (or manufacturers’ brands) have long dominated the retail scene. In recent times, an increasing number of retailers and wholesalers have created their own store brands (or private brands). Recent tougher economic times have created a store-brand boom. Private label brands now capture more than 29 p. 248 Key Term: Store percent of all supermarket sales. Brand (Private In the battle of the brands between national and private Brand) brands, retailers have many advantages. p. 249  Retailers often price their store brands lower than Photo: Walmart comparable national brands.  Store brands yield higher profit margins for the reseller.  Store brands give resellers exclusive products that cannot be bought from competitors. Licensing Name and character licensing has grown rapidly in recent years. Annual retail sales of licensed products in the United States and Canada have grown from only $4 billion in 1977 Copyright©2014 Pearson Education

to $55 billion in 1987 and more than $182 billion today. Co-branding Co-branding occurs when two established brand names of different companies are used on the same product. Co-branding offers many advantages.  

p. 250 Key Term: CoThe combined brands create broader consumer branding appeal and greater brand equity. Co-branding also allows a company to expand its p. 250 existing brand into a category it might otherwise have Photo: Dairy Queen and Girl Scouts difficulty entering alone.

Co-branding also has limitations.    p. 250

Such relationships involve complex legal contracts and licenses. Co-branding partners must carefully coordinate their advertising, sales promotion, and other marketing efforts. Each partner must trust the other will take good care of its brand.

Brand Development A company has four choices when it comes to developing brands (see Figure 8.6).

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p. 251 1. Line extensions occur when a company extends Figure 8.6: Brand existing brand names to new forms, colors, sizes, Development ingredients, or flavors of an existing product Strategies category. 2. Brand extensions extend a current brand name to new or modified products in a new category. 3. Multibranding introduces additional brands in the same product category. 4. New brands p. 250 The megabrand strategy weeds out weaker brands and Key Term: Line focuses their marketing dollars only on brands that can Extension achieve the number-one or number-two market share p. 251 positions in their categories. Key Terms: Brand Extension, Copyright©2014 Pearson Education

Multibranding p. 252 Key TermNew Brands

p. 251 Ad: P&G p. 252

Managing Brands p. 252 The brand experience is customers coming to know a brand Ad: Disney through a wide range of contacts and touchpoints. Companies need to periodically audit their brands’ strengths and weaknesses.  Assignments, Resources Use Real Marketing 8.1 here Use Discussion Questions 4 and 5 here Use Critical Thinking Exercise 1 here Use Marketing by the Numbers here Use Additional Projects 1, 2, and 3 here Use Small Group Assignment 1 here  Troubleshooting Tip Students’ eyes can glaze over at the concepts of brand equity and brand sponsorship. Asking questions such as the students’ perceptions of wellknown brands such as Starbucks, Coke, Nike, and the like will help them understand what brand equity is all about. You can also tie in the discussion of the three levels of product with this idea of brand equity. Finally, by using different products with different brand sponsorships—several examples from Sears, auto companies, department store private labels, and various licensed properties from Disney or Warner Brothers will do—you can bring students to an understanding of this important concept.

END OF CHAPTER MATERIAL Discussion Questions Copyright©2014 Pearson Education

1. Name and describe the types of consumer products and give an example of each. How does the marketing differ for each product type? (AACSB: Communication; Reflective Thinking) Answer: Consumer products are products and services bought by final consumers for personal consumption. Marketers usually classify these products and services further based on how consumers go about buying them. Consumer products include convenience products, shopping products, specialty products, and unsought products. These products differ in the ways consumers buy them and, therefore, in how they are marketed. Convenience products are consumer products and services that customers usually buy frequently, immediately, and with minimal comparison and buying effort. Examples include laundry detergent, candy, magazines, and fast food. Convenience products are usually low priced, and marketers place them in many locations to make them readily available when customers need or want them. Shopping products are less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price, and style. When buying shopping products and services, consumers spend much time and effort in gathering information and making comparisons. Examples include furniture, clothing, used cars, major appliances, and hotel and airline services. Shopping products marketers usually distribute their products through fewer outlets but provide deeper sales support to help customers in their comparison efforts. Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Examples include specific brands of cars, high-priced photographic equipment, designer clothes, and the services of medical or legal specialists. Unsought products are consumer products that the consumer either does not know about or knows about but does not normally consider buying. Classic examples of known but unsought products and services are life insurance, preplanned 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. 2. Compare and contrast industrial products and consumer products. (AACSB: Communication; Reflective Thinking) Answer: Industrial products are those purchased for further processing or use in conducting a business. Thus, the distinction between a consumer product and an industrial product is based on the purpose for which the product is bought. If a consumer buys 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. 3. Explain the importance of product quality and discuss how marketers use quality to create customer value. (AACSB: Communication) Answer: Copyright©2014 Pearson Education

Product quality is one of the marketer’s major positioning tools. Quality has a direct impact on product or service performance. Thus, it is closely linked to customer value and satisfaction. In the narrowest sense, quality can be defined as ―freedom from defects.‖ But most customer-centered companies go beyond this narrow definition. Instead, they define quality in terms of creating customer value and satisfaction. 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 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. 4. What is a brand? How does branding help both buyers and sellers? (AACSB: Communication) Answer: 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. 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 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. And branding helps the seller to segment markets. For example, Toyota Motor Corporation can offer the major Lexus, Toyota, and Scion brands, each with numerous sub-brands—such as Camry, Corolla, Prius, Matrix, Yaris, Tundra, Land Cruiser, and others—not just one general product for all consumers. 5. What is a product line? Discuss the various product line decisions marketers make and how a company can expand its product line. (AACSB: Communication) Answer: A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. For example, 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 understand how each item contributes to the line’s overall performance. Copyright©2014 Pearson Education

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 competitors. However, line filling is overdone if it results in cannibalization and customer confusion. 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. Companies 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 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. 6. Describe the four characteristics of services that marketers must consider when designing marketing programs. How do the services offered by a doctor’s office differ from those offered by a bank? (AACSB: Communication, Reflective Thinking) Answer: The four special characteristics of services are: intangibility, inseparability, variability, and perishability. Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled before they are bought. Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. Service variability means that the quality of services depends on who provides them as well as when, where, and how they are provided. Service perishability means that services cannot be stored for later sale or use. Services offered by a doctor’s office are more intangible, inseparable, variable, and perishable than those offered by a bank because a doctor offers more of a pure service than does a bank that provides financial services. Compared to the services offered by a bank, it is more difficult to evaluate the quality of the service provided by a doctor prior to the visit. The customer must be present for the medical service to be performed, and the time spent creating the service cannot be stored for later purchase if the customer misses an appointment.

Critical Thinking Exercise

1. Find five examples of service-provider attempts to reduce service intangibility. (AACSB: Communication; Reflective Thinking) Answer: Students’ responses will vary, but several examples can be found in just the insurance industry alone—Allstate (You’re in Good Hands), Hartford (The Rock), and State Farm Copyright©2014 Pearson Education

(Like a Good Neighbor). Other examples include Merrill Lynch’s tagline ―Bullish on America‖ (a bull represents a strong market). Banks and law firms often have large, prestigious-looking buildings, and use spokespersons to lend credibility.

Marketing Technology: Mobile Hotspot You’ve heard of mobile Wi-Fi hotspots, but one is truly mobile—your car. Automobile manufacturers Audi, Ford, Nissan, and General Motors are equipping cars with 10-inch screens and Internet access. Cadillac’s new XTS includes an iPad-like touchscreen and voice commands so you can keep in touch with your friends on Facebook. The government is concerned that Web access will cause a spike in accidents due to increased driver distraction and wants the devices to only work when the car is in park. Such guidelines are only suggestions, however, leaving car manufacturers to include whatever they think customers want in their vehicles. The industry’s argument is that these new gadgets are safer than the handheld ones drivers are already using in their cars. Automakers claim that there will be even fewer buttons than currently found in cars, possibly resulting in greater safety for drivers and passengers. 1. Describe the core, actual, and augmented levels of product associated with an automobile. What level does the mobile Wi-Fi system represent? Explain. (AACSB: Communication; Reflective Thinking) Answer: A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Products include more than just tangible objects. Broadly defined, ―products‖ also include services, events, persons, places, organizations, ideas, or mixes of these. A product can be thought about on three levels (see Figure 8.1). 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. The core customer value of an automobile is transportation. At the second level, product planners must turn the core benefit into an actual product. They need to develop product and service features, design, a quality level, a brand name, and packaging. Internet access is a feature offered by automobile makers. If there is some Internet service aspect of the mobile hotspot, this would be a feature as well. Finally, product planners must build an augmented product around the core benefit and actual product by offering additional consumer services and benefits. This would include delivery/credit, product support, aftersale service, and a warranty. Maintenance or repair of the Wi-Fi system is characterized by this level of product. 2. Debate the pros and cons of including Wi-Fi Internet access in automobiles. Should the Internet access feature be included in automobiles? (AACSB: Communication; Reflective Thinking) Answer: Copyright©2014 Pearson Education

There are several advantages for having Internet access in an automobile, such as live traffic updates, access to emergency services, Internet entertainment, navigation assistance, and restaurant reviews to name just a few. Of course, the biggest negative of in-car Internet access is the safety issue resulting from distracted driving. While the government suggests that the systems should only be able to work if the car is in park, automobile manufacturers do not have to follow this guideline. It appears that at least one manufacturer, Audi, does not. Another disadvantage of in-car Internet is that drivers often see driving time as time to unwind and be unconnected. Privacy concerns may be an issue as well.

Marketing Ethics: Outsourced Instructors Have you taken an online course in high school or college? Many students have, but some traditional brick-and-mortar universities are venturing into uncharted territory by outsourcing the teaching function to online providers. Missouri State University is offering its introductory journalism class through Florida-based Poynter Institute, a non-profit journalism training group. Instructional outsourcing is popping up on campuses throughout the country, and most are serviced by for-profit companies such as Academic Partnerships, StraighterLine, and Smarthinking. These partnerships translate into bigger profit margins for both the university and the instructional partner. 1. What is the product offered by a university? Discuss the levels of product offered and how these might change in the next 10 to 20 years as result of changing technology. (AACSB: Communication; Reflective Thinking) Answer: A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Products include more than just tangible objects, and education is an example of an intangible product. A product can be thought about on three levels. 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? In this case, students are buying the opportunity to learn. When designing products, marketers must first define the core, problem-solving benefits or services that consumers seek. At the second level, product planners must turn the core benefit into an actual product. They need to develop product and service features, design, a quality level, a brand name, and packaging. In this case, schools are modifying the actual product by outsourcing instructional activities. Finally, product planners must build an augmented product around the core benefit and actual product by offering additional consumer services and benefits. Witness the trendy dormitories, dining halls, and student activity centers that have been constructed on campuses throughout the country. Other services and benefits include health care, career services, and entertainment. Technology is drastically changing the product offering by many schools as this topic illustrates, and it appears that it will continue to do so over the next decades. However, Copyright©2014 Pearson Education

college is more than knowledge acquisition and is unlikely to cease to exist as we know it for a very long time; indeed, it seems some students attend college more for the augmented product than for the core or actual product! 2. From the point of view of both the school and the students, discuss the pros and cons of outsourcing instructors for courses or even entire degrees. Should technology be used in this way to deliver this type of product? (AACSB: Communication; Reflective Thinking; Ethical Reasoning) Answer: Students’ responses will vary. Some example pros and cons are listed below. From school’s point of view: Pros—reduced costs (especially in terms of faculty payroll), consistency across multi-section courses, professionally produced and delivered course content, and high quality instruction. Cons—diminished interaction between students and professors, lack of control over curriculum, faculty fear and discontent, and perception of school being a ―diploma mill.‖ From student’s point of view: Pros—convenience, consistency across sections so they don’t have to worry about who is teaching, perhaps courses will be easier, professionally-produced and delivered course content, and flexibility in scheduling. Cons—diminished interaction between students and professors, online courses usually more expensive for students, and no choice regarding instructional delivery method. See Didi Tang, ―Universities Turn to Outsourced Instructors,‖ USA Today, (June 29, 2011), p. 1B (available at: www.usatoday.com/money/perfi/college/2011-06-28-instructionoutsourcing_n.htm).

Marketing by the Numbers: What’s a Brand Worth? What is a brand worth? It’s not just about dollars and cents. Interbrand, a leading brand valuation company, ranks the top 100 global brands annually and considers brand strength in addition to financial performance. The top global brand for years has been Coca-Cola, valued at almost $72 billion in 2011, followed by IBM, Microsoft, Google, GE, McDonald’s, Intel, Apple, and Disney. In addition to financial data, Interbrand measures the role the brand plays in that financial outcome by comparing demand to that of an unbranded product in the same category. Non-financial factors are examined to assess a brand’s strength. Internal brand strength factors include clarity, commitment, protection, and market responsiveness of the company regarding Copyright©2014 Pearson Education

the brand. External factors include authenticity, relevance, differentiation, consistency, presence, and understanding of the brand among consumers in the marketplace. 1. Access the most recent ranking of the Top 100 Brands at www.interbrand.com. Create a chart representing the number of brands from the countries listed. Which country has the most brands in the top 100 ranking? What is the second leading country? (AACSB: Communication; Analytical Reasoning) Answer: The 2011 rankings can be found at www.interbrand.com/en/best-global-brands/best-globalbrands-2008/best-global-brands-2011.aspx, but more recent rankings may be available. In 2011, almost half of the top 100 brands in 2011 are from the United States (49 brands) followed by Germany in a distant second (10 brands), Japan and France (7 brands each), Switzerland and the United Kingdom (5 brands each), Italy and the Netherlands (3 each), Canada, Spain, South Korea, and Sweden (2 each), and Finland, Mexico, and Taiwan (1 brand each). Students might create a bar chart or a pie chart to represent this information. 2. Click on the ―Best Global Brands‖ dropdown menu at the Interbrand Web site (www.interbrand.com) and select ―Interactive Charts.‖ Click on an industry sector on the chart labeled ―Brands by Sector.‖ What are the top brands in that sector? Click on one of the brands and examine the change in its brand value over time. What percentage change in value did that brand experience in the last year data are available? Research that brand and write a report explaining why that brand’s value changed over time. (AACSB: Communication; Reflective Thinking; Use of IT) Answer: Interactive charts can be found at: www.interbrand.com/en/best-global-brands/BGB-Interactive-Charts.aspx. Students’ answers will vary depending on which sector they click on. Instructors might want to assigned specific sectors. For example, clicking on ―Electronics‖ reveals the brand value of 14 brands, with Intel and Apple being the leaders, respectively. Clicking on ―Intel‖ reveals Intel’s brand value over 11 years. In 2011, Intel was valued at $35,217, 000. In 2010 it value was $32,015,000 so it experienced a 10% increase in value from 2010 to 2011. The percentage change in value is calculated as follows: % change in value = ($35,217,000 - $32,015,000) ÷ $32,015,000 = 0.100 = 10% Students can search their selected brand at the Interbrand site and find considerable information that might help them explain the change in the brand’s value. There are other interactive charts in addition to the brands by sector chart that can be ting to use interesting in a class discussion. Copyright©2014 Pearson Education

Company Case Notes Zipcar: “It’s Not About Cars—It’s About Urban Life” Synopsis Zipcar is to the rental car business what Apple is to tablets. Zipcar took the age old car rental concept and turned it on its ear, creating a model for renting cars by the hour called ―car sharing.‖ Customers pay an annual membership. Then, they reserve and pick up a car from a neighborhood location when they need it. They can keep it for a couple of hours or for a couple of weeks. They don’t have to worry about parking, insurance, maintenance, or even gas. Zipcar takes all the hassle out of renting, or even owning. But the real story here is not the features of the company, but the image of the brand. Zipcar has successfully captured a loyal following of customers who identify with the Zipcar lifestyle – city dwellers who would rather focus on forwarding their education, profession, talents, and social life rather than worry about mundane things like taking care of a car.

Teaching Objectives The teaching objectives for this case are to: 1. 2. 3. 4.

Understand the basics of brand image. Analyze the different ways a brand can be positioned. Understand the importance of creating customer-brand relationships. To consider the advantages small brands can have over market leaders.

Discussion Questions

1. Evaluate Zipcar based on benefit-oriented positioning. While there are numerous benefits that will support this answer, the easiest way to sum it up is from the bulleted list right in the middle of the case:  I don’t want the hassle of owning a car.  I want to save money.  I take public transit, but need a car sometimes.  Once in a while I need a second car.  I need a big car for a big job.  I want a cute car to match my new shoes.  I want to impress my boss. 2. Describe the beliefs and values associated with Zipcar’s brand image. This should revolve around Zipcar’s initial positioning as an environmentally conscious green brand. The focus here was on how using Zipcar reduces carbon emissions because people drive 44 percent fewer miles as a Zipster than as a car owner. Copyright©2014 Pearson Education

3. Comparing the positioning based on benefits to positioning based on beliefs and values. Which is stronger? There are two ways of looking at this question. On the one hand, the text specifies that “The strongest brands go beyond attribute or benefit positioning. They are positioned on strong beliefs and values.” The reasoning behind this is that when consumers identify with a brand because it reinforces beliefs and values that are important to them, the form a deeper emotional connection. However, as the case points out, “it wasn’t long before Griffith realized that if Zipcar was going to grow, it needed to move beyond just being green.” Essentially, he knew that there weren’t enough potential customers around who were deeply passionate about saving the planet. While that type of positioning was more likely to build stronger emotional bonds, it didn’t have broad enough appeal. So, Griffeth took Zipcar in the direction of benefit positioning. At the same time, he did not turn away from environmental friendliness. Thus, Zipcar is a brand that is positioned based on both benefits and beliefs/values, combining both strategies for the best of both worlds. 4. Based on what you know about the Zipcar brand, how will the company perform in the future relative to bigger, more experienced competitors? As Hertz, Avis, and Thrifty develop their own car-sharing operations, Zipcar should benefit in a couple of ways. First, it has an advantage as a lifestyle brand. It has developed a community of customers that give the brand appeal beyond the features and benefits. More than that, competition from the big auto renters should help to build primary demand. There is plenty of room for growth in the market for car-sharing. The big companies with deep pockets will move help to establish and promote the concept. That will only serve Zipcar in the coming years as more and more people become familiar with that concept. Then, there is the possibility that any of those companies may find that for them, the car-sharing business simply isn’t profitable. They could end up selling fleets, locations, and customers to Zipcar.

Teaching Suggestions Ask students some basic questions to get them thinking about the potential for Zipcar. Ask them if they own their own car. How many miles per month do they drive? What is the length of time in hours for each car trip or errand? Then ask them how much it costs them to own that car including car payment, gas, insurance, maintenance, and all other car-related expenses. Based on the numbers in the case ($60 annual fee plus about $10 an hour for every hour they would need to drive in a month), does selling your car and joining Zipcar make financial sense? How much would your driving patterns be reduced by joining Zipcar? How much would walking/biking increase? This case could also be used with the marketing environment chapter (Chapter 3) and the segmentation chapter (Chapter 7). Copyright©2014 Pearson Education

ADDITIONAL PROJECTS, ASSIGNMENTS, AND EXAMPLES Projects 1. What is your all-time favorite brand? What do you most like about the product and/or brand name? What (if anything) do you dislike? What image does the brand have in your mind? How loyal are you toward the brand? Why? (Objective 2) 2. Go to the supermarket and take a look at the brand extensions that exist for Coke. Do you think this makes sense or not? When is brand extension a good strategy? When is it a poor one? (Objective 2) 3. Consider Starbucks coffee. Consumers sometimes bond very closely with their preferred brands. What type of brand equity do you believe they have established over the years? How did this happen? (Objective 4) 4. What do you like about your bank? How would you compare the services you receive from your bank to other competing banks and to your “ideal” bank? What is good about the service you currently receive? Review the service using the material from the chapter. What specifics about the service make it very good from a marketing standpoint? (Objective 3)

Small Group Assignments 1. Read the chapter-opening vignette on Nike. Form students into groups of three to five. Each group should then answer the following questions and share those answers with the class. (Objective 1 and 4) a. What ―product‖ is Nike really selling? b. How does Nike successfully promote bonding between athletes and its products? c. How would you compare the Nike ―brand‖ to that of other athletic apparel makers? 2. Form students into groups of three to five. Each group should review Table 8.1 (Marketing Considerations for Consumer Products) on page 229. Each group should then answer the following questions and share those answers with the class. (Objective 1) a. Make a list of five specialty products with which you are familiar (not covered in the book). Discuss the promotion methods used to reach customers and typical customer buyer behavior. b. Make a list of five unsought products with which you are familiar, but have little or no interest in purchasing. Discuss promotion methods that you would employ to successfully market these products.

Individual Assignments

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1. Review the gaming industry in Mississippi. How has that industry positioned itself in the overall gaming market? How have they attempted to build customer value? How successful do you believe they have been in this effort? (Objective 2) 2. Take a look at Saab automobiles (www.saabusa.com). Discuss the product width, length, depth, and consistency of the company. (Objective 2)

Think-Pair-Share Consider the following questions, formulate an answer, pair with the student on your right, share your thoughts with one another, and respond to questions from the instructor. 1. Define ―product.‖ (Objective 1) 2. Your text states ―The product is a key element in the overall market offering.‖ What does this mean? (Objective 1) 3. When a buyer purchases a product, what are they really buying? (Objective 1) 4. What is the difference between shopping goods and specialty goods? (Objective 1) 5. How do products and services really differ? (Objective 3)

Outside Examples 1. In many parts of the world, birth control is an unsought product. Assume you have been given the task of promoting birth control in a region of the world where it has traditionally been unused. How would you attempt to make inroads? (Objective 1) Possible Solution: This is a very difficult and touchy subject in many societies. Remember, unsought products are consumer products that the consumer either does not know about or knows about but does not normally think of buying. It would be important to bring the actual existence of birth control products to the attention of residents. It is important to promote the use of birth control in a manner consistent with its intended use—birth control. Point out the positives associated with the product—population control, prevention of unwanted pregnancies, prevention of sexually transmitted diseases. Birth control should not be encouraged by promoting increased sexual activity. Lack of basic knowledge and resistance to the product can many times be overcome with careful promotion. 2. Restaurants embody many of the fundamental service characteristics discussed in the chapter. Everyone is familiar with fast food and McDonald’s. Visit a local McDonald’s (or other fast food establishment) and discuss the basic characteristics of service you experienced. (Objective 3) Possible Solution: Service characteristics are many times difficult for students to fully comprehend. The services we are dealing with in this situation pertain to the interaction between restaurant Copyright©2014 Pearson Education

employees and the customer (student). Listed below are basic service characteristics and what students may encounter at McDonald’s:  Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled before they are bought. You cannot keep the service you receive at McDonald’s and they are useable only at that moment.  Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. Because the customer is also present as the service is produced, provider-customer interaction is a special feature of services marketing. You receive service at McDonald’s only when you visit, only when you drive through or walk up to the counter.  Service variability means that the quality of services depends on who provides them as well as when, where, and how they are provided. The way you were served may well have varied from how the customer before you was served. If you were to visit again tomorrow, the service you receive may again be different. It is not standardized.  Service perishability means that services cannot be stored for later sale or use. If you had not visited McDonald’s, you would never have experienced the service encounter. It would not have existed for you.

Web Resources 1. http://247.prenhall.com This is the link to the Prentice Hall support link. 2. http://nike.com/ Go to Nike’s Web site to learn about how it connects with its loyal customers. 3. www.rim.com/ Take a look at the home of Blackberry. What are consumers really buying? 4. www.saabusa.com This will take you to Saab’s homepage.

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