POM Chapter 8

Principles of
Marketing Global
Edition
Kotler and Armstrong
Chapter 8:
Products,
Services, and
Brands
Building Customer Value
Copyright © 2016 Pearson Education, 8-1

Products, Services, and
Brands

Brands
Learning Objectives
• Objective 1: Define product and describe the

major classifications of products and services.
• Objective 2: Describe the decisions companies

make regarding their individual products and
services, product lines, and product mixes.

Brands
Learning Objectives
• Objective 3: Identify the four characteristics that

affect the marketing of services and the additional
marketing considerations that services require.
• Objective 4: Discuss branding strategy—the

decisions companies make in building and managing
their brands.

Brands
Learning Objective 1
• Define product and describe the major classifications

of products and services.
What Is a Product?

What Is a
Product?
Product is anything that can be offered in a
market for attention, acquisition, use, or
consumption that might satisfy a need or
want.
Service is a product that consists of activities,

benefits, or satisfactions and that is essentially
intangible and does not result in the
ownership of anything.

What Is a
Product?
Products, Services, and Experiences
Products and services are becoming more

commoditized.
Companies are now creating and managing

customer experiences with their brands or
company.
For example, Apple’s highly successful retail stores
don’t just sell the company’s products. They
create an engaging Apple brand experience

What Is a
Product?
Levels of Product and
Services
FIGURE | 8.1
Three Levels of
Product Copyright © 2016 Pearson Education, 8-8
What Is a
Product?
Product and Service
Classifications
Consumer products
Industrial
products
What Is a
Product?
Product and Service Classifications
Consumer products are products and

services bought by final consumers for
personal consumption.
• Convenience products
• Shopping products
• Specialty products
• Unsought products

What Is a
Product?
Convenience products are consumer products

and services that the customer usually buys
frequently, immediately, and with a
minimum comparison and buying effort.
• Newspapers
• Candy
• Fast food

What Is a
Product?
Shopping products are less frequently

purchased consumer products and services
that the customer compares carefully on
suitability, quality, price, and style.
• Furniture
• Cars
• Appliances

What Is a
Product?
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.
• Medical services
• Designer clothes
• High-end electronics

What Is a
Product?
Unsought products are consumer products

that the consumer does not know about or
knows about but does not normally think of
buying.
• Life insurance
• Funeral services
• Blood donations

What Is a
Product?
Industrial products are those products

purchased for further processing or for use in
conducting a business.
• Materials and parts
• Capital items
• Supplies and services

What Is a
Product?
Materials and parts include raw materials and

manufactured materials and parts.
(wheat, cotton, livestock, fruits, vegetables)
Capital items are industrial products that aid in the
buyer’s production or operations.
(generators, large computer systems, elevators)
Supplies and services include operating supplies, repair and
maintenance items, and business services.
(lubricants, coal, paper, pencils)
What Is a
Product?
Organizations, Persons, Places, and
Ideas
• Organization marketing
• Person marketing
• Place marketing
• Social marketing

What Is a
Product?
Organization marketing consists of activities

undertaken to create, maintain, or change
the attitudes and behavior of target
consumers toward an organization.
GE’s long-running “Imagination at Work”

What Is a
Product?
Person marketing consists of activities

undertaken to create, maintain, or change the
attitudes or behavior of target consumers
toward particular people.

What Is a
Product?
Place marketing consists of activities

undertaken to create, maintain, or change
attitudes and behavior toward particular
places.
Social marketing uses commercial marketing

concepts to influence individuals’ behavior
to improve their well-being and that of
society.
Brands
• Define product and describe the major classifications

of products and services.
Experiences Levels of Product and
Services Product and Service

Brands
• Describe the decisions companies make regarding

their individual products and services, product lines,
and product mixes.

Product and Service
Decisions
Individual Product and Service
Decisions
FIGURE | 8.2 Individual Product

Decisions

Product and Service
Decisions
Decisions
Communicate and deliver benefits by

product and service attributes.
• Quality
• Features
• Style and design

Product and Service
Decisions
Decisions
Product quality can be defined as “no defects.
Product quality refers to the characteristics of

a product or service that bear on its ability
to satisfy stated or implied customer needs.
Siemens defines quality this way: “Quality is

when our customers come back and our
products don’t.”

Product and Service
Decisions
Decisions
• Total quality management

• Return-on-quality
• Quality level-performance quality
• Performance quality-the product’s
ability to perform its functions.
• Conformance quality
• freedom from defects and consistency
in delivering a targeted level of
performance.
Product and Service
Decisions
Individual Product and Service Decisions
Product can be offered with varying
features.
A stripped-down model, one without any extras,

is the starting point.
Product Features
• Competitive tool for differentiating a product
from competitors’ products
• Assessed based on the value to the
customer versus its cost to the company
Product and Service
Decisions
Decisions
Style describes the

appearance of
the product.
Design contributes to a
product’s usefulness
as well as to its
looks.

Product and Service
Decisions
Decisions
Brand is the name, term, sign, or design

or a combination of these, that
identifies the maker or seller of a
product or service.

Product and Service
Decisions
Decisions
Packaging involves
designing and producing
the container or
wrapper for a product.
Labels identify the
product or brand,
describe attributes, and
provide promotion.

Product and Service
Decisions
Decisions
Product support
services
augment actual
products.

Product and Service
Decisions
Product Line Decisions
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.
Nike produces several lines of athletic

shoes and apparel, and Marriott offers
several lines of hotels.

1
Product and Service Decisions
• 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
1
Product line length is the number of items in the

product line.
• Line stretching
• Line filling

• 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.
• line filling is overdone if it results in cannibalization
(eating up sales of the company’s own existing
products) 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. For example, Mercedes has
stretched downward with the CLA line to draw in younger,
first time buyers.
• Companies can also stretch their product lines upward.
Sometimes, companies stretch upward to add prestige to
their current products or to reap higher margins.
• P&G did that with brands such as Cascade dishwashing
detergent and Dawn dish soap by adding “Platinum” versions
at higher price points.
Product and Service
Decisions
Product Mix
Decisions
Product mix
consists of all
the product lines
and items that a
particular seller
offers for sale.
• Width
• Length
• Depth
• Consistency 8-38
Copyright © 2016 Pearson Education,
Brands
• Describe the decisions companies make regarding

their individual products and services, product lines,
and product mixes.
Decisions Product Line Decisions
Product Mix Decisions

Brands
• Identify the four characteristics that affect the

marketing of services and the additional

Services
Marketing
Types of Service Industries
• Government
• Private not-for-profit
organizations
• Business organizations

6
Services
Marketing
Nature and Characteristics of a
Service
FIGURE | 8.3 Four Service
Characteristics

7
Services
Marketing
Marketing Strategies for Service Firms
In addition to traditional marketing strategies,

service firms often require additional strategies.
• Service-profit chain
• Internal marketing
• Interactive marketing

8
Services
Marketing
Service-profit chain links service firm

profits with employee and customer
satisfaction.
• Internal service quality
• Satisfied and productive service
employees
• Greater service value
• Satisfied and loyal customers
• Healthy service profits and growth
9
Services
Marketing
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.

Services
Marketing
Interactive marketing means that service

quality depends heavily on the quality of the
buyer- seller interaction during the service
encounter.
• Service differentiation
• Service quality
• Service productivity

Services
Marketing
Marketing Strategies for Service
Firms
Managing service
differentiation
creates a
competitive
advantage.
• Offer (innovative
features)
• Delivery (people,
process)
8-48
• Image (McDonald’s Copyright © 2016 Pearson Education,
Services
Marketing
Managing service quality enables a service firm

to differentiate itself by delivering
consistently higher quality than its
competitors provide.
• it is harder to agree on the quality of a haircut
than on the quality of a hair dryer.
• Customer retention is perhaps the best
measure of quality.
Copyright © 2016 Pearson Education, 8-
443
Services
Marketing
Managing service productivity refers to the cost

side of marketing strategies for service firms.
• Employee hiring and training
• Service quantity and quality

Brands
• Identify the four characteristics that affect the

marketing of services and the additional
Nature and Characteristics of a
Service Marketing Strategies for
Service Firms
Brands
• Discuss branding strategy—the decisions

companies make in building and managing their
brands.

Branding Strategy: Building Strong Brands
John Stewart, former CEO of Quaker Oats, once said,
• “If this business were split up, I would give you the
land and bricks and mortar, and I would keep the
brands and trademarks, and I would fare better than
you.”
A former CEO of McDonald’s declared,
• “If every asset we own, every building, and every
piece of equipment were destroyed in a terrible
natural disaster, we would be able to borrow all the
money to replace it very quickly because of the value
of our brand. .. . The brand is more valuable than the
totality of all these assets”.
Branding Strategy: Building Strong
Brands
Brand Equity and Brand Value
• Brand equity is the differential effect that
knowing the brand name has on customer
response to the product or its marketing.
• Brand has positive brand equity when
consumers react more favorably to it than to
a generic or unbranded version of the same
product.
• It has negative brand equity if consumers
react less favorably than to an unbranded
version.
Brand Equity and Brand Value
Ad agency Young & Rubicam’s Brand Asset
Valuator 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), and
4. Esteem (how highly consumers regard
and respect the brand).
Brands
• Brand value is the total financial value of a brand.
• Apple is a whopping $246 billion, with
• Google at $174 billion,
• Microsoft at $115 billion,
• IBM at $94 billion,
• AT&T at $92 billion, and
• Verizon at $86 billion.
• Other brands rating among the world’s most valuable
include McDonald’s, Facebook, Alibaba, and Amazon.
• Customer equity—the value of customer
relationships that the brand creates.
Brands
Building Strong
Brands
FIGURE | 8.5 Major Brand Strategy Decisions

Brands Building Strong Brands
Brand Positioning
Marketers can position brands at any of three levels.
• Attributes (quality, style, and innovative features)
• Benefits- cooking and cleaning, better energy savings,
or more stylish kitchens. FedEx (guaranteed on-time
delivery), Walmart (save money), and Instagram
(capturing and sharing moments).
• Beliefs and values (Whirlpool’s “Every Day, Care”)

Brands
Building Strong Brands
Brand Name Selection

1. Suggests benefits and qualities-Snapchat
2. Easy to pronounce, recognize, and remember-
iPad, Tide
3. Distinctive-Panera, Swiffer, Zappos, Nest
4. Extendable-Amazon
5. Translatable for the global economy-Microsoft’s
Bing search engine in China is bi ying
6. Capable of registration and legal protection-

Brands
Building Strong
Brands
Brand Sponsorship
• Manufacturer’s brand (Samsung Galaxy Tablet)
• Private brand/Store brand: Metro
• Licensed brand- (royalty)
• Co-brand: Nike+iPod Sport Kit

Brands
Building Strong
Brands
FIGURE | 8.6 Brand Development
Strategies

Branding Strategy: Building Strong Brands
• Line extension Extending an existing brand name

to new forms, colors, sizes, ingredients, or flavors
of an existing product category. Sprite
• Brand extension Extending an existing brand name
to new product categories. Nest
• Multibrands: Companies often market many
different brands in a given product category.
PepsiCo
• New Brands: A company might believe that the
power of its existing brand name is waning, so a
new brand name is needed. Lexus

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Principles of

Copyright © 2016 Pearson Education, 8-1

Copyright © 2016 Pearson Education, 8-2

• Objective 1: Define product and describe the

• Objective 2: Describe the decisions companies

Copyright © 2016 Pearson Education, 8-3

• Objective 3: Identify the four characteristics that

• Objective 4: Discuss branding strategy—the

Copyright © 2016 Pearson Education, 8-4

• Define product and describe the major classifications

Copyright © 2016 Pearson Education, 8-5

Service is a product that consists of activities,

Copyright © 2016 Pearson Education, 8-6

Products and services are becoming more

Companies are now creating and managing

Copyright © 2016 Pearson Education, 8-7

Consumer products are products and

Copyright © 2016 Pearson Education, 8-10

Convenience products are consumer products

Copyright © 2016 Pearson Education, 8-11

Shopping products are less frequently

Copyright © 2016 Pearson Education, 8-12

Specialty products are consumer products

Copyright © 2016 Pearson Education, 8-13

Unsought products are consumer products

Copyright © 2016 Pearson Education, 8-14

Industrial products are those products

Copyright © 2016 Pearson Education, 8-16

Materials and parts include raw materials and

Copyright © 2016 Pearson Education, 8-18

Organization marketing consists of activities

Copyright © 2016 Pearson Education, 8-19

Person marketing consists of activities

Copyright © 2016 Pearson Education, 8-20

Place marketing consists of activities

Social marketing uses commercial marketing

• Define product and describe the major classifications

Products, Services, and

Experiences Levels of Product and

Services Product and Service

• Describe the decisions companies make regarding

Copyright © 2016 Pearson Education, 8-23

FIGURE | 8.2 Individual Product

Copyright © 2016 Pearson Education, 8-24

Communicate and deliver benefits by

Copyright © 2016 Pearson Education, 8-25

Product quality can be defined as “no defects.

Product quality refers to the characteristics of

Siemens defines quality this way: “Quality is

Copyright © 2016 Pearson Education, 8-26

• Total quality management

A stripped-down model, one without any extras,

Style describes the

Copyright © 2016 Pearson Education, 8-29

Brand is the name, term, sign, or design

Copyright © 2016 Pearson Education, 8-30

Copyright © 2016 Pearson Education, 8-31

Copyright © 2016 Pearson Education, 8-32

Nike produces several lines of athletic