Chapter 8

PRODUCT, SERVICES AND

BRANDING STRATEGY

MARKETING STARTER: CHAPTER 8

GoPro: Be A Hero!

Synopsis
You likely have heard of GoPro, the small but fast-growing company that makes tiny, wearable
HD video cameras. Few brands can match the avid enthusiasm and intense loyalty that GoPro
has created in the hearts and minds of its customers. A growing army of GoPro customers—
many of them extreme sports enthusiasts—are now strapping amazing little GoPro cameras to
their bodies, or mounting them on anything from the front bumpers of race cars to the heels of
skydiving boots, in order to capture the extreme moments of their lives and lifestyles. Then, they
can’t wait to share those emotion-packed GoPro moments with friends. GoPro’s rich
understanding of what makes its customers tick is serving the young company well. Its
enthusiastic customers are among the most loyal and engaged of any brand. For example,
GoPro’s Facebook fan base is more than 6.6 million and growing fast. All that customer
engagement and enthusiasm has made GoPro the fastest-growing camera company in the world.
GoPro knows that deep down, it offers customers much more than just durable little video
cameras. More than that, it gives them a way to share action-charged moments and emotions
with friends.

Discussion Objective
A focused 10-minute discussion of the GoPro story will help students appreciate the many levels of factors
that affect how customers feel about, buy, and consume products. The goal is to explore the reasons why
customers buy GoPro cameras, and what the product adds to their lives. Beyond making a durable little
video camera, GoPro has fostered an almost fanatically loyal fan base by challenging customers to shoot
the most extreme footage possible and then share it with friends across social media channels. It is likely
that some of your students will know about GoPro cameras and a few may have their own stories to share
with the class. You will want to capitalize on these students’ testimonials as you explore the GoPro brand
together.

Starting the Discussion

Start this discussion by asking students what GoPro is really selling its customers. Of course, the company
makes micro-sized video cameras that can survive almost anything. But what are the unique customer
insights that have fueled GoPro’s explosive growth? What does GoPro understand about its customers
better than the competition? Tour the GoPro website at www.gopro.com. Peruse the tabs across the top,
concentrating on the extreme videos and photos submitted by its loyal fans. How does the company
encourage its customers to “be a hero?” The goal is to show that GoPro’s allure results from much more
than just the functional attributes of its product—it’s all about the customers and how the cameras help
them capture their most exciting life experiences. As the discussion progresses, search for GoPro on
www.youtube.com and check out some of the more extreme applications that fans have discovered for this
device. Use the questions below to guide the discussion.
Discussion Questions
1. Beyond a small, durable video camera, what is GoPro really selling its customers? How does this
product enable users to highlight the best moments of their lives? (To start with, the camera is
extremely tough and versatile. It can capture high-quality video under almost any conditions. But
ultimately, the GoPro camera enables its fans to experience and document the adventures that
 touch and thrill them. In turn, users deeply care about sharing these moments with friends and
fellow enthusiasts through social media channels, which has only intensified their passion for the
GoPro brand.)
2. GoPro’s company slogan is “Be a Hero.” How does GoPro encourage customers to do so?
(Customers become heroes through four essential steps in their storytelling and emotion-sharing
journeys: capture, creation, broadcast, and recognition. Capture is what the cameras do—shooting
pictures and videos. Creation is the editing and production process that turns raw footage into
compelling videos. Broadcast involves distributing the video content to an audience. Recognition
is the payoff for the content creator. Recognition might come in the form of YouTube views or
LIKES and SHARES on Facebook. More probably, it’s the enthusiastic oohs and ahs that their
videos evoke from friends and family. The company’s slogan sums up pretty well the consumer’s
deeper motivations: GoPro—Be a Hero.)
3. One industry expert has noted, “Some of the most amazing companies of the coming few years
will be businesses that understand how to wrap technology beautifully around human needs so that
it matters to people.” How does this quote apply to GoPro? (This brand is all about what its
cameras let customers do. GoPro users don’t just want to take videos. More than that, they want to
tell the stories and share the adrenalin-pumped emotions of the extreme moments in their
lifestyles. As GoPro notes, “Enabling you to share your life through incredible photos and video is
what we do. We help people capture and share their lives’ most meaningful experiences with
others—to celebrate them together.”)
4. How does the chapter-opening GoPro story relate to the major concepts in the consumer behavior
chapter? (The GoPro story highlights the depth of factors that affect how consumers think, feel,
and act toward brands. GoPro really understands what makes consumers tick and, as a result,
delivers an exceptional brand experience to loyal consumers. Keep the GoPro example active as
you discuss characteristics affecting consumer behavior, types of buying decision behavior, the
buyer decision process, and other chapter topics.)

CHAPTER OVERVIEW

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

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. Discuss branding strategy—the decisions companies make in building and
managing their brands.

4. Identify the four characteristics that affect the marketing of a service and the
additional marketing considerations that services require.

CHAPTER OUTLINE

p. 242 INTRODUCTION
PPT 8-5
You likely have heard of GoPro, the small but fast-growing p. 244
company that makes tiny, wearable HD video cameras. Ad: GoPro
Few brands can match the avid enthusiasm and intense
loyalty that GoPro has created in the hearts and minds of its
customers, many of whom are extreme sports hobbyists.
Its customers are among the most loyal and engaged of any
brand. Intense customer engagement and excitement has
made GoPro the fastest-growing camera company in the
world.
GoPro knows that deep down, it offers customers much
more than just durable little video cameras. It gives them a
way to share action-charged moments and emotions with
friends.
 Assignments, Resources
Use Web Resources 1 and 2 here

p. 245 WHAT IS A PRODUCT? Chapter Objective 1

PPT 8-8
A product is anything that can be offered to a market for p. 245
attention, acquisition, use, or consumption that might Key Terms:
satisfy a want or need. Product,
Service
 Broadly defined, “products” also include services, events,
persons, places, organizations, ideas, or mixes of these.

PPT 8-10 Services are a form of product that consists of activities,

benefits, or satisfactions offered for sale that are essentially
intangible and do not result in the ownership of anything.

p. 245 Products, Services, and Experiences p. 245

PPT 8-11 Photos: iPad,
PPT 8-12 A company’s market offering often includes both tangible McDonald’s
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 Discussing the Concepts 1 here
Use Web Resources 3 here
 Troubleshooting Tip
Students will most likely have difficulty under-
standing 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.

p. 246 Levels of Product and Services (5 level) :

PPT 8-15 1.Core benefit
PPT 8-16 p. 246
2.Actual product: the characteristics of the product (bao bi
Figure 8.1: Three
sp) levels of products
3.Expected product (ky vong sp): a set of attributes and
p. 246
conditions buyer normally expect Photo: iPhone
 4.Augmented product: Additional customer
5.Potential product: the changes of characteristics of the
company in the future are taken into account
PPT 8-18
Product planners need to think about products and services
on three levels.

1. Core customer value, which addresses the question,

What is the buyer really buying?
p. 246
2. Actual product.
PPT 8-19
3. Augmented product, which is created around the
core benefit and actual product by offering
additional consumer services and benefits.
p. 247
When developing products, marketers first must identify the
core customer value that consumers seeks from the product.
They must then design the actual product and find ways to
p. 247
augment it in order to create this customer value and the
Key Terms:
most satisfying customer experience.
Consumer product,
p. 247 Convenience
Product and Service Classifications
product,
PPT 8-20 Shopping product,
There are two main classifications of products: consumer
Specialty product,
products and industrial products.
Unsought product
Consumer Products
PPT 8-21 p. 247
Consumer products are products and services bought by Table 8.1:
final consumers for personal consumption. Marketing
considerations for
PPT 8-22 consumer products
Consumer products include (see Table 8.1):
(sản phẩm tiêu dùng)
 Convenience products are consumer products and
PPT 8-23 services that customers usually buy frequently,
immediately, and with a minimum of comparison
and buying effort.
 Shopping products are less frequently purchased
p. 248 consumer products and services that customers
PPT 8-25 compare carefully on suitability, quality, price, and p. 248
style. Key Term:
 Specialty products are consumer products and Industrial product
services with unique characteristics or brand
identification for which a significant group of p. 248
PPT 8-26 buyers is willing to make a special purchase effort. Figure 8.2:
 Unsought products are consumer products that the Individual products
PPT 8-27 consumer either does not know about or knows
about but does not normally think of buying.

PPT 8-28 Industrial Products (sản phẩm công nghiệp)

Industrial products are those purchased for further
p. 249 processing or for use in conducting a business.
PPT 8-29 p. 249
The three groups of industrial products and services are: Ad: Kobe Bryant,
 Materials and parts include raw materials and
manufactured materials and parts. p. 249
 Capital items are industrial products that aid in the Photos: Haier
PPT 8-30 buyer’s production or operations, including
installations and accessory equipment.
 Supplies and services include operating supplies and p. 250
maintenance and repair services. Photos: Hong Kong,
PPT 8-32 Shanghai
Organizations, Persons, Places, and Ideas
p. 250
p. 250 Organization marketing consists of activities undertaken to Key Term: Social
PPT 8-34 create, maintain, or change the attitudes and behavior of Marketing
target consumers toward an organization.

Person marketing consists of activities undertaken to create,

maintain, or change attitudes or behavior toward particular
people.

Place marketing involves activities undertaken to create,

maintain, or change attitudes or behavior toward particular
places.

Social marketing is the use of commercial marketing

concepts and tools in programs designed to bring about
social change.

 Assignments, Resources
Use Discussing the Concepts 2 here
Use Focus on Technology here
Use Small Group Assignment 2 here
Use Think-Pair-Share 1, 2, 3, and 4 here
Use Outside Example 1 here

p. 250 Chapter Objective 2

PRODUCT DECISIONS
PPT 8-38 Individual Product Decisions p. 251
Figure 8.3:
Product Attributes
PPT 8-39 Individual product
Developing a product or service involves defining the decisions
benefits that it will offer. These benefits are communicated
and delivered by product attributes such as quality, features,
PPT 8-40 and style and design.

Product Quality is creating customer value and

p. 251 satisfaction. p. 251
Key Term: Product
Total quality management (TQM) is an approach in which quality
all the company’s people are involved in constantly
improving the quality of products, services, and business
PPT 8-42 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.
p. 251
p. 251 Product Features are a competitive tool for differentiating Photo: Green tea–
PPT 8-43 the company’s product from competitors’ products. flavored Coke

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?

p. 252
p. 252 Product Style and Design is another way to add customer Photo: Samsung,
PPT 8-45 value. LG

Style describes the appearance of a product. Design

contributes to a product’s usefulness as well as to its looks.

p. 252
Branding
PPT 8-46 p. 252
Key Term: Brand
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.

PPT 8-47 Branding helps buyers in many ways.

  Brand names help consumers identify products that
might benefit them.
 Brands say something about product quality and
consistency.
p. 253
PPT 8-48 Branding gives the seller several advantages. Figure 8.4:
Advantages of
 The brand name becomes the basis on which a branding
whole story can be built about a product.
 The brand name and trademark provide legal p. 253
protection for unique product features. Photo: Muji
 The brand name helps the seller to segment markets.

p. 254 Packaging p. 254

PPT 8-53 Key Term:
Packaging involves designing and producing the container Packaging
or wrapper for a product.
Bao bì: 2P: p. 254
p. 254 - Protection Photo: Heinz,
PPT 8-55 - Promotion I LOHAS
Thiết kế, đánh giá bao bì theo VIEW: Visibility
(màu sắc, kiểu dáng) – Information (thông tin) – emotion
(tác động đến thiện cảm) – workability =reuse
Thiết kế theo 3RS: reduce (giảm nguyên liệu làm ảnh
hưởng đến môi trường) – recycle – reuse
Thiết kế theo 6RS: Rethink – Refuse – Responsibility

Labeling

Labels perform several functions.

p. 255
PPT 8-57
 The label identifies the product or brand.
PPT 8-58 p. 257
 The label describes several things about the
Photo: Scion
product.
 The label promotes the brand.

Labeling also raises concerns. As a result, several federal

and state laws regulate labeling.

Product Support Services

The first step is to survey customers periodically to assess

the value of current services and to obtain ideas for new
 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 Discussing the Concepts 3 here
Use Individual Assignment 1 here

p. 255 Product Line Decisions

PPT 8-61
A product line is a group of products that are closely p. 255
related because they function in a similar manner, are sold Key Term: Product
to the same customer groups, are marketed through the Line
same types of outlets, or fall within given price ranges.

PPT 8-64 Product line length is the number of items in the product p. 256
line. Photo: Brands

PPT 8-69 Product line filling involves adding more items within the p. 256
present range of the line. Figure 8.5
Reasons for product
PPT 8-67 Product line stretching occurs when a company lengthens line decisions
its product line beyond its current range.
p. 257
p. 257 Companies located at the upper end of the market can Ad: Eversoft
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.

p. 257 Product Mix Decisions

PPT 8-70 p. 257
Product mix (or product portfolio) consists of all the Key Term: Product
product lines and items that a particular seller offers for mix (Product
sale. Portfolio)
PPT 8-71
A company’s product mix has four dimensions: width,
length, depth, and consistency. p. 258
Photo: Colgate
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
PPT 8-72 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.

The company can increase its business in four ways.

PPT 8-73
1. It can add new product lines, widening its product
mix.
2. It can lengthen its existing product lines.
3. It can add more versions of each product, deepening
its product mix.
4. It can pursue more product line consistency.

 Assignments, Resources
Use Applying the Concepts 1 here
Use Individual Assignment 2 here
Use Web Resources 4 here
Use Video Case here

p. 258 BRANDING STRATEGY: BUILDING STRONG Chapter Objective 3

PPT 8-77 BRANDS

Some analysts see brands as the major enduring asset of a

company.

p. 259 Brand Equity is the differential effect that knowing the p. 259
PPT 8-78 brand name has on customer response to the product and its Key Term: Brand
marketing. equity

PPT 8-85 Brand valuation is the process of estimating the total

financial value of a brand.

PPT 8-86 High brand equity provides a company with many

competitive advantages.

 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
PPT 8-87 The fundamental asset underlying brand equity is customer
equity—the value of the customer relationships that the
brand creates. p. 262
Figure 8.6: Major
PPT 8-88 Building Strong Brands brand strategy
decisions
p. 262 Brand Positioning
PPT 8-90 p. 262
Marketers can position brands at any of three levels. Photo: Baby

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.

p. 263 Brand Name Selection

PPT 8-97 p. 263
Desirable qualities for a brand name include the following: Photo: Modern
Toilet
PPT 8-95 1. It should suggest something about the product’s
benefits and qualities.
2. It should be easy to pronounce, recognize, and
remember.
3. The brand name should be distinctive.
4. It should be extendable.
5. The name should translate easily into foreign
languages. p. 266
6. It should be capable of registration and legal Photo: Citibank
protection.

p. 266 Brand Sponsorship

PPT 8-106
A manufacturer has four sponsorship options.

PPT 8-107 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.

p. 267 Manufacturer’s Brands versus Private Brands p. 267

PPT 8-108 Key Term: Private
 In recent times, an increasing number of retailers and Brand (store brand)
wholesalers have created their own private brands (or
store brands).

Recent tougher economic times have created a store-brand

boom. Private label brands now capture more than 22
percent of all unit sales.

PPT 8-109 In the battle of the brands between national and private
brands, retailers have many advantages.

 Retailers often price their store brands lower than

comparable national brands.
 Store brands yield higher profit margins for the
reseller.
 Store brands give resellers exclusive products that
cannot be bought from competitors.

p. 267 Licensing
PPT 8-110
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
to $55 billion in 1987 and more than $192 billion today.

p. 268 Co-branding
PPT 8-111 p. 268
Co-branding occurs when two established brand names of Key Term: Co-
different companies are used on the same product. branding
PPT 8-112
Co-branding offers many advantages.

 The combined brands create broader consumer

appeal and greater brand equity.
 Co-branding also allows a company to expand its
existing brand into a category it might otherwise
PPT 8-113 have difficulty entering alone.

Co-branding also has limitations.

 Such relationships involve complex legal contracts

and licenses.
 Co-branding partners must carefully coordinate their
advertising, sales promotion, and other marketing
efforts.
p. 268  Each partner must trust the other will take good care
PPT 8-115 of its brand.

Brand Development p. 268

PPT 8-116 Figure 8.7: Brand
A company has four choices when it comes to developing Development
brands (see Figure 8.4). Strategy
PPT 8-117
PPT 8-118 1. Line extensions occur when a company extends p. 268
existing brand names to new forms, colors, sizes, Key Terms: Line
ingredients, or flavors of an existing product extension
category.
p. 269 2. Brand extensions extend a current brand name to p. 268
new or modified products in a new category. Photo: Coca-cola
3. Multibranding introduces additional brands in the
same product category. p. 270
4. New brands Photos: Armani,
P&G

The megabrand strategy weeds out weaker brands and

focuses their marketing dollars only on brands that can
achieve the number-one or number-two market share
positions in their categories.

p. 270 Managing Brands

PPT 8-120 p. 270
The brand experience is customers coming to know a brand Photos: Softbank
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 Discussing the Concepts 4 and 5 here
Use Applying the Concepts 2 and 3 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 well-
known 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 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.

p. 271 SERVICES MARKETING Chapter Objective 4

PPT 8-129
The Nature and Characteristics of a Service
PPT 8-130
A company must consider four service characteristics when p. 271
designing marketing programs: intangibility, inseparability, Key Term: Service
PPT 8-131 variability, and perishability (see Figure 8.5). Intangibility

1. Service intangibility means that services cannot be p. 271

p. 271 seen, tasted, felt, heard, or smelled before they are Figure 8.8: Four
PPT 8-132 bought. Service
characteristics

p. 272
PPT 8-133 2. Service inseparability means that services cannot p. 273
be separated from their providers, whether the Key Terms: Service
providers are people or machines. Because the inseparability,
customer is also present as the service is produced, Service variability,
provider-customer interaction is a special feature of Service
p. 273 services marketing. perishability
3. Service variability means that the quality of
PPT 8-134 services depends on who provides them as well as
when, where, and how they are provided.
4. Service perishability means that services cannot be
stored for later sale or use.

PPT 8-135 Marketing Strategies for Service Firms

The Service-Profit Chain p. 273

Key Term: Service-
In a service business, the customer and front-line service profit chain
employee interact to create the service.
 The service-profit chain consists of five links:
1. Internal service quality—superior employee p. 274
selection and training, a quality work environment, Photo: Four Seasons
and strong support for those dealing with customers,
which results in...
2. Satisfied and productive service employees—more
satisfied, loyal, and hardworking employees, which
results in...
3. Greater service value—more effective and efficient
customer value creation and service delivery, which
results in...
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 marketing and

interactive marketing. (Figure 8.9)
p. 274
PPT 8-138 Internal marketing means that the service firm must orient Key Terms: Internal
and motivate its customer-contact employees and marketing,
supporting service people to work as a team to provide Interactive
customer satisfaction. marketing

Interactive marketing means that service quality depends p. 274

PPT 8-139 heavily on the quality of the buyer-seller interaction during Figure 8.9:
the service encounter. Three types of
service marketing
Service companies face three major marketing tasks: They
PPT 8-140 want to increase their service differentiation, service
quality, and service productivity.

Managing Service Differentiation

p. 274
PPT 8-141 Service companies can differentiate their service delivery p. 241
by having more able and reliable customer-contact people, Photo: Westin Hotel
by developing a superior physical environment in which the
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
p. 275
PPT 8-143 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

p. 276
PPT 8-144 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 Discussing the Concepts 6 here
Use Focus on 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.
END OF CHAPTER MATERIAL

Discussing the Concepts

1. Define product and the three levels of product. (AACSB: Communication)

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. 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. Finally, product planners must build an augmented product around the
core benefit and actual product by offering additional consumer services and benefits.

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:

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. Compare and contrast the four brand sponsorship options available to a manufacturer
and give an example of each. (AACSB: Communication; Reflective Thinking)

Answer:

A manufacturer has four sponsorship options. The product may be launched as a

national brand (or manufacturer’s brand), as when Sony and Hitachi sell their output
under their own brand names (Sony Bravia HDTV or Hitachi products). Or the
manufacturer may sell to resellers who give the product a private brand (also called a
store brand or distributor brand). Examples of private-labels include Hollister, The
Limited, and Arizona Jean Company (JCPenney) for clothing, and Hong Kong’s
Watsons brand for food and health and beauty products, respectively. Although most
manufacturers create their own brand names, others market licensed brands. Apparel
and accessories sellers pay large royalties to adorn their products—from blouses to
ties and linens to luggage—with the names or initials of well-known fashion
innovators such as Calvin Klein, Tommy Hilfiger, Gucci, or Armani. Sellers of
children’s products attach an almost endless list of character names to clothing, toys,
school supplies, linens, dolls, lunch boxes, cereals, and other items. Finally, two
companies can join forces and co-brand a product, which occurs when two
established brand names of different companies are used on the same product. For
example, financial services firms often partner with other companies to create co-
branded credit cards, such as when American Express and Singapore Airlines joined
forces to create the KrisFlyer PPS Club membership credit card.

5. Discuss the brand development strategies marketers use to develop brands. Give an
example of each strategy. (AACSB: Communication; Reflective Thinking)

Answer:

A company has four choices when it comes to developing brands (see Figure 8.4). It
can introduce line extensions, brand extensions, multibrands, or new brands. Line
extensions occur when a company extends existing brand names to new forms, colors,
sizes, ingredients, or flavors of an existing product category. Examples include
microwave Quaker oatmeal, Skippy low fat peanut butter, and Kleenex facial tissue
with lotion. A brand extension extends a current brand name to new or modified
products in a new category. Examples include Apple’s iPhone, Quaker oatmeal
 breakfast squares, and Arm & Hammer carpet deodorizer. With multibranding,
companies introduce additional brands in the same category. For example, Procter &
Gamble markets many different brands in each of its product categories. Finally, a
company might believe that the power of its existing brand name is waning and a new
brand name is needed. Or it may create a new brand name when it enters a new
product category for which none of the company’s current brand names are
appropriate.

6. Describe the four characteristics of services that marketers must consider when
designing marketing programs. According to these characteristics, how do the
services offered by a massage therapist differ from those offered by a grocery store?
(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 massage therapist are more intangible, inseparable, variable, and
perishable than those offered by a grocery store because a massage therapist offers
more of a pure service than does a store that sells merchandise. Compared to the
services offered by a store, it is more difficult to evaluate the quality of the service
provided by a therapist prior to the visit. The customer must be present for the
massage to be performed, and the time spent creating the service cannot be stored for
later purchase if the customer misses an appointment.

Applying the Concepts

1. What do Betty Crocker, Old El Paso, Cheerios, and Yoplait have in common? They
are all familiar brands that are part of the general Mills product mix. Visit the general
Mills Web site (www.generalmills.com) and examine its list of brands. Name and
define the four dimensions of a company’s product mix and describe General Mills’
product mix based on these dimensions. (AACSB: Communication; reflective
Thinking; use of IT)

Answer:

A company’s product mix has four important dimensions: width, length, depth, and
consistency. Product mix width refers to the number of different product lines the
company carries. General Mills has identified thirteen broad product lines: baking,
breads, cereals, fruit snacks, grain snacks, ice cream, meals, organic, pasta,
pizza/rolls, soup, vegetable, and yogurt. Product mix length refers to the total number
 of items the company carries within its product lines. The length of General Mills’
product mix varies from 1 in the ice cream and yogurt categories to 10 in the baking
and cereal categories. Product mix depth refers to the number of versions offered of
each product in the line. As with product mix length, General Mills’ product mix
depth varies by category. For example, the company offers 12 different Cheerios
cereals, such as Honey Nut Cheerios, Fruity Cheerios, and Multigrain Cheerios, and
several flavors and versions of its brand of yogurt, Yoplait. Finally, the consistency of
the product mix refers to how closely the various product lines are related in end use,
production requirements, distribution channels, or some other way. Within each
major product category, General Mills’ product lines are fairly consistent in that they
are all convenience products (food) and go through the same distribution channels
(grocery stores).

2. Branding is not only for products and services; countries are getting in on the action
too, as you learned from reading about place marketing earlier in the chapter. In a
small group, develop a brand identity proposal for your country. Present your idea to
the rest of the class and explain the meaning you are trying to convey. (AACSB:
Communication; reflective Thinking)

Answer:

This should be a fun exercise for students. Other country branding examples include:
Singapore – Uniquely Singapore
Malaysia – Truly Asia
Philippines – Wow Philippines
India – Incredible !ndia

3. A product’s package is often considered a “silent salesperson.” It is the last marketing

front before consumers make a selection in the store. One model that is used to
evaluate a product’s package is the view model: visibility, information, emotion, and
workability. Visibility refers to the package’s ability to stand out among competing
products on the store shelf. Information is the type and amount of information
included on the package. Some packages try to stimulate an emotional response to
influence buyers. Finally, all product packages perform the basic function of
protecting and dispensing the product. Select two competing brands in a product
category and evaluate each brand’s packaging on these dimensions. Which brand’s
packaging is superior? Suggest ways to improve the other brand’s packaging.
(AACSB: Communication; reflective Thinking)

Answer:

Students’ responses will vary but they should evaluate each brand along the four
dimensions of the VIEW model.
Focus on Technology

Who would pay $330,000 for a virtual space station? Or $100,000 for an asteroid space
resort? How about $99,000 for a virtual bank license? Players of Entropia Universe, a
massive multiplayer online game (MMOg), did. Those players are making money, and so
are the game developers. There’s a new business model—called “freemium”—driving
the economics of these games. Under this model, users play for free but can purchase
virtual goods with real money. Worldwide sales of virtual goods were $2.2 billion in
2009 and are predicted to reach $6 billion by 2013. Most virtual goods are inexpensive—
costing about $1—such as the tractor you can buy in Farmville or a weapon in World of
Warcraft. That doesn’t seem like much, but when you consider that Zynga’s Frontierville
had 5 million players within one month of launch, we’re talking real money!

1. How would you classify virtual goods—a tangible good, an experience, or a service?
Discuss the technological factors enabling the growth of virtual goods. (AACSB:
Communication; Reflective Thinking)

Answer:

A virtual good is not tangible even though it represents a tangible good. A virtual
good could also be a virtual service, such as a bank or hotel, and exhibits the same
characteristics of services in the “real world” (intangibility, inseparability, variability,
and perishability). The best classification of a virtual good, however, is that it is an
experience. Consumers buying experiences are buying much more than products and
services; they are buying what those offers will do for them. Most of these games
provide entertainment for users, and the virtual products purchased while playing
them enhances their entertainment.

The technological factors enabling the growth of virtual goods include personal
computers and all the advances that go along with them (such as graphics), the
Internet (specifically the World Wide Web), wireless mobile technology, social
networking Web sites, credit cards, online payment systems (such as PayPal), and
third-party Web markets where virtual goods can be bought and sold.

2. How do players purchase virtual goods? Identify three virtual currencies and their
value in U.S. dollars. (AACSB: Communication; Reflective Thinking)

Answer:

Players can pay for virtual goods through PayPal, prepaid cards purchased from retail
stores, through a wireless provider, or swap them with other players on a number of
third-party Web sites. This fast-growing e-commerce segment is not without
problems, however, as it is vulnerable to cyber criminals (see Ben Worthen (July 21,
2010), “Fraudsters Like Virtual Goods,” the Wall Street Journal, p. B5).
 The currency used in Entropia Universe is the PED, which stands for Project Entropia
Dollars. The ratio of PEDs to U.S. dollars is 10:1. Linden Dollars are used in Second
Life and 250 Linden dollars equals $1. Facebook offers 100 credits for $1. For a list
of fictional currencies in computer games, see
http://en.wikipedia.org/wiki/List_of_fictional_currencies#Fictional_currency_in_com
puter_games.

Focus on Ethics

“Meet us before you need us”—that’s the motto of a cemetery in Denver. Facing
decreasing demand as more Americans choose cremation, cemeteries across the country
are marketing to the living in hopes that they will become customers in the future.
Although funeral homes and cemeteries have long urged customers to pre-purchase
funeral services before they are needed, it’s the new marketing that is drawing criticism.
Some activities are low-key, such as poetry workshops, art shows, and nature walks, but
some are downright lively. One cemetery staged a fireworks show and skydiving. Other
festivities include concerts, outdoor movies, and the employment of clowns for
entertainment. Cemetery directors pine for the old days when, more than a century ago,
cemeteries were a place for social gatherings where families visited and picnicked near a
loved one’s grave. Although many of the new activities are staged in the evening, some
occur during the day, and directors must therefore use discretion to avoid interrupting a
funeral.
1. What types of products are burial plots and pre-purchased funeral services? Explain
your choice. (AACSB: Communication; Reflective Thinking)

Answer:

Burial plots and pre-purchased funeral services are types of consumer products called
unsought products, which the consumer either does not know about or does not
normally think of buying.

2. Are these marketing activities appropriate for this product? (AACSB:

Communication; Ethical Reasoning)

Answer:

By their very nature, unsought products require a lot of advertising, personal selling,
and other marketing efforts. However, students might think these marketing activities
are inappropriate for this product and that cemetery directors are not being sensitive
to their current customers’ (that is the families of those buried in the cemetery)
feelings. Also, it might seem kind of creepy to host these activities in a cemetery.
Cemetery directors using these tactics see it differently. They feel that people will go
to places they’re familiar with, so when the time comes for them to need this product,
they will remember the good times they had at these events and choose that cemetery.
Marketing by the Numbers

What is a brand’s worth? It depends on who is measuring it. For example, in 2009
Google was valued to be worth $100 billion by one brand valuation company but only
$32 billion by another. Although this variation is extreme, it is not uncommon to find
valuations of the same brand differ by $20 to $30 billion. Interbrand and BrandZ publish
global brand value rankings each year, but a comparison of these two companies’ 2009
ranking reveals an overlap of only six of the top ten brands.

1. Compare and contrast the methodologies used by Interbrand (www.interbrand.com)

and BrandZ (www.brandz.com) to determine brand value. Explain why there is a
discrepancy in the rankings from these two companies. (AACSB: Communication;
Reflective Thinking; Analytical Reasoning)

Answer:

The methodologies of the two companies are very similar in that they use financial
data that are publically available. The two companies do not examine the same group
of brands, however. For example, BrandZ includes Walmart in its rankings, but
Interbrand does not because the company operates under different brand names
internationally. So even brands valued the same monetarily would have different
ranks due to the pool of brands ranked being different.
The key difference between Interbrand and BrandZ, however, is that Interbrand relies
entirely on financial data, whereas BrandZ factors in a brand contribution and a brand
multiplier derived from proprietary consumer data. Perhaps that is why Google is
valued much higher using BrandZ’s methodology. It appears in most cases that
BrandZ’s valuations are higher than Interbrand’s for most brands.

Visit the Web sites below to see the rankings and learn more about the respective
methodologies.

Interbrand rankings:
www.interbrand.com/best_global_brands.aspx

Interbrand methodology:
www.interbrand.com/best_global_brands_methodology.aspx?langid=1000

BrandZ rankings:
www.brandz.com/output/

BrandZ methodology:
www.brandz.com/output/Videos.aspx

2. In 2008, BrandZ ranked Toyota the number-one brand of automobiles, valuing the
brand at more than $35 billion. In 2010, however, it valued the Toyota brand under
 $22 billion. Discuss reasons for the drop in Toyota’s brand value. (AACSB:
Communication; Reflective Thinking)

Answer:

As described previously, BrandZ uses a combination of earnings and consumer

perceptions. Toyota, just as all automobile companies, experienced decreased
earnings during the recession, so the earnings element of the valuation decreased. In
fact, all automotive brands in the top 100 list experienced decreases in brand value
from 2009 to 2010, with luxury brands, such as BMW and Porsche, hit hardest. In
2009, though, Toyota experienced other difficulties in addition to a weak economy
due to product recalls and almost non-stop news coverage of accelerator problems,
which eroded consumers’ trust in the brand.

It will be interesting to see BP’s value and ranking in 2011 given the oil spill in the
Gulf of Mexico and the negative publicity surrounding it. BP, valued over $17 billion,
ranked 34th in the 2010 BrandZ ranking, which was a new entrant in the top 100
brands. Given the severity of the oil spill and negative publicity regarding BP’s
handling of it, the brand may not make it into the top 100 rankings next year.

Company Case Notes

Garnier and Revlon: In Need of a Makeover

Synopsis

This case is about the ups and downs of Garnier and Revlon in its brand building efforts
and marketing in Asia. Due to the competition and rapid growth of domestic products and
labels in mass-market cosmetic space, L’Oréal’s Garnier brand bowed out of the Chinese
hair care market. In China, Revlon had not been able to successfully distinguish its luxury
products from the mass-market cosmetics. The company sold its products at both highend
makeup stores as well as mid-tier retailers such as local supermarkets and community
stores. Without distinct product differentiation, Revlon lost a chunk of their market share
because to consumers who wanted a luxury product, being sold to by mid-tier retailers is
suggestive that the brand is not of high quality.

Teaching Objectives

The teaching objectives for this case are to:

1. Appreciate the importance of a strong brand image.

2. Explain what L’Oréal and Revlon should do next.
 3. Discuss the market conditions in which these brands should enter China.

Discussion Questions

1. Although Garnier and Revlon pulled out of China, what differences in positioning
do you think warrant them leaving the market?

One key factor is the development of local manufacturers, who are becoming
more and more sophisticated but are offering products at lower price points than
brand such as Garnier and Revlon. Chinese consumers are becoming more and
more savvy and are not willing to pay a premium just for a Western brand logo.
They expect the price points to match the benefits. Therefore, the local
manufacturers’ offerings of sophisticated products at lower price points prove to
be more appealing than brands such as Garnier and Revlon, which has led to
these brands losing market share.
L’Oréal operates nine different brands in the market. So investing in a wide range
of brands is not always very cost effective. On top of that, Garnier is a very small
brand. It ranks 25th in China’s overall beauty market. On the other hand, L’Oréal
Paris is the leading beauty brand in China and Maybelline ranks at the top in
China’s color cosmetics. Given the high level of brand recognition for these
brands, it make more sense to invest in Maybelline and L’Oréal Paris.
For Revlon, the competition is even more steep, because it’s not only having to
compete with the local manufacturers, but also leading multinational brands such
as Maybelline and L’Oréal Paris. In addition to that, Revlon has a very small
presence in China, ranking 57th in the overall beauty market.

2. Explain what you think should be L’Oréal’s next step.

For L’Oreal, the decision to pull Garnier was primarily to remove the dead
weight in a year of slower China growth for the company, but the importance of
the China market is clear to the company. China is still the brand’s third-largest
market, and L’Oreal products account for around 17 percent of China’s total
cosmetics industry, according to Euromonitor.

L’Oreal should still proceed with the rest of its portfolio in China, including
Maybelline, L’Oréal Paris, and Lancôme, as well as assess the travel market and
Chinese beauty brands to increase its market share.

3. Under what conditions do you think Revlon and Garnier should enter the Chinese
market again?

Students answers will vary.

Teaching Suggestions
This is a good case to assign to teams, with each team providing its own analysis of the
brand, both past and present. Instructors could even assign specific questions to each
team, or the same questions to all teams. Each team can make a brief 5 to 10 minute
presentation on their findings pertaining to the Shanghai Tang brand and its strategies.

This case could also be used with Chapter 2 (marketing strategy).

ADDITIONAL PROJECTS, ASSIGNMENTS, AND

EXAMPLES

Barriers to Effective Learning

1. The first major barrier to effective learning experienced by the students is in

understanding Figure 8.1. This figure illustrates the three levels of product. Most
students have never thought about a product in this way. To be able to match
consumer demands, however, the understanding of product is extremely
important. To explain this material, the instructor can construct an example (take
a computer, a car, an article of clothing, or a diamond ring) and show how the
consumer has different expectations of the product at the three different levels.
Follow this by having the students generate their own example to confirm that
they understand the concept.

2. The next area that may present some difficulties if not approached correctly is
how organizations, persons, places, and ideas can be marketed in a way similar to
products. This section is best presented through examples. It might be wise to
assign brief reports to selected students in advance of the presentation of this
material. Using a famous landmark, a city, a celebrity (such as Tiger Woods), a
nonprofit organization, or a social cause, have the students present an illustration
of marketing efforts.

3. The third area of concern for student understanding deals with the product mix
decisions. To promote active learning, however, it is useful to have students
construct an example that illustrates the concepts. How can product mix
information be used in the competitive environment? What could be told about a
competitor based on their product mix? Are any vulnerabilities observable?

4. The next area for emphasized study to overcome learning difficulties is in dealing
with the concept of brand equity and quality. It is important to recognize the huge
investment that firms have made in their brand names and the maintenance of
quality within the brand. Ask the students what their favorite brands are and why.
Would they buy the products if the brand name were not there? This is a good
place to discuss the various types of brand designations (manufacturer’s brand or
 private brand). Most students will have feelings about the differences between
brands. Once it is determined that there is basic understanding of the brand
concepts, move on to the advantages of branding strategies in Figure 8.4. This
figure helps the students to understand how organizations view branding and
brand development. Be sure to discuss the difficulties of branding and brand
extension (use examples from the soft drink or beer industry as possibilities).

5. For a proper understanding of services it is very important for the students to

understand the components of Figure 8.5. The characteristics seem simple
enough; however, experience has shown that many students do not really
understand how these concepts are at the core of the service offering. Be sure to
cover the examples (do not just depend on the students reading them) and
reinforce with student-generated examples. A speaker from a service-oriented
firm can also help.

6. Lastly, be sure to cover carefully Figure 8.6 and Real Marketing 8.2. Students,
though they use them constantly, have little understanding of services. This
understanding is important because many will go into the service field (no matter
what their major might be). After the basic terms have been covered, have the
students talk about service providers that they like and dislike. One common
dislike is their family doctor’s office. How could they make this service provider
more responsive? Would any additional costs be incurred because of their
suggestions? If so, how would this be dealt with? Have they had any difficulties
in their service requirements from the university or college? What type of services
can be improved? What are their expectations? What service field might they like
to go into? Any of these areas are likely to produce good discussions. Guest
speakers can also be obtained if time is available.

Student Projects

1. Take a product of your choice and analyze it using the diagram found in Figure
8.1. Be sure to carefully outline each of the three major levels.
2. Take a walk through a grocery store. In a singled location such as this, can you
find items that meet the qualifications for each of the four types of consumer
products?
3. Select three basic grocery products that you have around your home (laundry
detergent, cold cereal, milk, deodorant, etc.). Identify the functions of the package
and label for each.
4. Identify three popular brands. Rate each brand (1 = poor, 5 = excellent) on the six
qualities for a good brand name and provide support for your rating.
5. Identify at least three examples of line or brand extensions of successful brands
that have failed. Why do you think they failed?
6. Consider air flight service. How is this service affected by each of the four service
characteristics listed in Figure 8.5? What strategies has the industry used to
overcome these issues?
Interactive Assignments

Small Group Assignment

Form students into groups of three to five. Each group should read the opening vignette
to the chapter on Kelvinator. Each group should then answer the following questions:

What does product quality mean for a brand such as Kelvinator?

a) Discuss the brand equity of Kelvinator versus other refrigerator brands such as
Toshiba, Panasonic and Samsung.
b) What are some possible line or brand extensions for Kelvinator? Do you think
that Kelvinator has as much latitude in this area as more mainstream brands such
as Toshiba and Samsung?

Each group should share its findings with the class.

Think-Pair-Share

1. 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:
a. What is a product?
b. What is a service?
c. What is an experience? How is it similar and dissimilar to a product or
service?
d. How is the augmented product different from the core product?
e. What is an example of a convenience, shopping, specialty, and unsought
good?
f. Provide examples of the four different types of product attributes.
g. Define product line, and discuss the main issues companies must consider
in relation to product lines.
h. What is brand equity?
i. What is the difference between a manufacturer’s brand and a private
brand?
j. Give an example of co-branding.
k. What is the difference between a product line extension and a brand
extension?
l. Apply the four characteristics of a service to a car wash.
m. What is interactive marketing?

Outside Example

More and more, companies are focusing on delivering an experience to customers in

addition to a core product or service. Infiniti, a brand of Nissan, focuses on delivering
customer value by providing a meaningful and memorable experience for customers. The
original creed of the company was, “Love cars, love people, love life.” This doesn’t
sound much like an auto company, does it? But that creed seems to still be in effect
today, and customers feel it.

A woman who recently bought an Infiniti had a Zen-like experience like that described in
Nissan’s original creed. She wanted an Infiniti because of its good looks and drove
almost 90 miles to the closest Infiniti dealer. What she experienced there not only
encouraged her to buy her vehicle from them, but to also have it serviced at that dealer.

Remember that dealer was 90 miles away from her home; that would normally be
considered a major inconvenience. Would you drive that far to get your car serviced?
What if, in doing so, you were given a free loaner car of a higher and more expensive
model than the one you had purchased? If your car was washed and vacuumed even
though it was only in there for an oil change? If you were given a long-stemmed red rose
on leaving the dealership after your car was serviced? Many Infiniti dealers go above and
beyond what constitutes normal service for automobiles in this country.

1. Does it make sense for Infiniti and Nissan, its parent, to provide such a high level
of service to its customers? Why or why not?
2. What would be the best way for Infiniti to communicate this level of service to
those it wishes to target?
3. Nissan, Infiniti’s parent company, is not mentioned in Infiniti’s customer
communications. Why do you think that this is so?
4. Visit an Infiniti dealership and interview a sales or service associate. Ask about
the perks and amenities provided to customers to enhance the service experience.
How has Infiniti overcome the issues related to the four service characteristics?

Web Resources

1. http://247.prenhall.com
This is the link to the Prentice Hall support link.

2. www.lg.com/
Experience the world of LG including the latest 3D TVs, LED monitors, appliances
and other electronics.

3. www.loreal.com/
L’Oréal Group International web site.

4. www.shanghaitang.com/
Discover the modern elegance of Shanghai Tang lifestyle.