Building customer value
A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. A service is an activity, benefit or satisfaction offered for sale that is essentially intangible and does not result in the ownership of anything. Products are key in the overall market offering. The market offer might exist of only pure tangible goods, pure services and everything in between. Product planners need to consider three levels when deciding on services and products. The first one is the core customer value level. Secondly, the core benefit must be turned into an actual product. Finally, an augmented product must be built around the actual product by offering services.
Consumer and industrial products
Products and services fall into two broad classes: consumer products and industrial products. Consumer products are products bought by final consumers for personal consumption.
- Convenience products are a type of consumer product that consumers usually buy frequently, immediately and with minimal comparison and buyer effort.
- Shopping products are consumer products that the customer, in the process of selecting and purchasing, usually compares on such attributes as suitability, quality, price and style.
- Speciality products are a type of consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.
- Unsought products are consumer products that the consumer either doesn’t know about, or knows about but does not normally consider buying.
Industrial products are products bought by individuals and organisations for further processing or for use in conducting a business. Materials and parts include raw materials (farm products, natural products) and manufactured parts (component materials and parts).
Organisation marketing consists of activities to create, maintain or change the attitudes and the behaviour of target customers. Corporate image advertising campaigns can be used to improve the image of a firm. Person marketing consists of activities to change attitudes of specific people. Place marketing involves activities to create, maintain or change attitudes towards particular places. Social marketing is the use of commercial marketing concepts and tools in programmes designed to influence individuals’ behaviour to improve their well-being and that of society.
Decisions regarding products and services are made at three levels:
- Individual product and service decisions
Developing a product or service involves defining the benefits. Product quality are the characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs. Total quality management (TQM) is an approach where the whole company is involved in constantly improving the overall quality. Product quality is based on the quality level and consistency. Other product and service attributes are product features and the product style (appearance) and the design (heart of the product).
A brand is a name, term, sign, symbol, design or a combination of these that identifies the products or services of one sell or group of sellers and differentiates them from those of competitors. Packaging involves the activities of designing and producing the container or wrapper for a product. Innovative packaging can give a competitive advantage. The final product and service decisions include labels that help identifying a product or brand and supporting services of the product.
- Product line decisions
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. Major decisions include the product line length, which can be adjusted by product line filling (adding more items within present range) and line stretching (lengthen beyond current range).
- Product mix decisions
A product mix (product portfolio) is the set of all product lines and items that a particular seller offers for sale. Product mix width is the number of different product lines, while length refers to the total number of items within the product lines. The product mix depth refers to the number of versions offered for each product in the line.
Firms must decide upon four service characteristics when designing marketing programmes. Service intangibility: services cannot be seen, tasted, felt, heard or smelled before they are bought. Service inseparability: service are produced and consumed at the same time and cannot be separated from their providers. Service variability: the quality of services may greatly vary depending on who provides them and when, where and how. Service perishability: services cannot be stored for later sale or use.
The service profit chain is the chain that links service firm profits with employee and customer satisfaction. This chain consists of five links: internal service quality, satisfied and productive service employees, greater service value, satisfied and loyal customers and ultimately healthy service profits and growth. Service marketing is more than traditional external marketing, it also consists of internal and interactive marketing. Internal marketing involves orienting and motivating customer contact employees and supporting service people to work as a team to provide customer satisfaction. Interactive marketing involves training services employees in the fine art of interacting with customers to satisfy their needs.
Service marketers need to manage service differentiation, making sure that they stand out amongst competitors. They also need to manage service quality, which can be harder to define than product quality. Lastly, they need to manage service productivity by ensuring employees are skilful and implementing the powers of technology.
Brand equity is the differential effect that knowing the brand name has on customer response to the product or its marketing. Brand equity can be a powerful asset. Brand valuation is the process of estimating the total financial value of a brand. In order to build a strong brand, there are some major brand strategy decisions to be made. Brand positioning involves positioning the brand in the mind of the consumer. Brand name selection is important in order to select a good name. The brand name should say something about the service benefits and should be easy to pronounce and remember. It needs to be distinctive and extendable, easily translated and should be capable of legal protection.
Brand sponsorship can be done via four ways. A product can be launched as a national (manufacturer) brand or as a private brand or store brand. Another way is via licensed brands or a co-brand with another company. A store brand is a brand created and owned by a reseller of a product or service. Licensing involves lending the brand name to other manufacturers. Co-branding is the practice of using the established brand names of two different companies on the same product.
When developing brands, companies have four choices. Line extensions occur when extending an existing brand name to new forms, colours, sizes, ingredients or flavours of an existing product category. A brand extension extends a current brand name to new product categories. Multibrands means offering more than one brand in the same category. New brands can be created when believed that the power of existing brands is fading.