15.6: Product Strategy

15.6.1: Developing Products

Learning Objective

Outline the steps involved in new product development, understanding the logic behind them

Key Points

• Product development is the process of identifying consumer needs within a market and innovating towards developing a product to fulfill those needs.
• Internal and external factors impacting production and demand should all be considered during the product development period.
• The eight steps of Koen provide useful context on how organizations develop products. Market research, brainstorming, screening, prototyping, testing, process engineering, and distribution are all key phases in development.
• Another useful concept is the idea of a minimum viable product (MVP). Due to the cost of mass production and perfecting a product, MVP allows rapid prototyping and testing to ensure a demand exists.

Key Terms

scale

To grow and expand rapidly.

conceptualizing

To conceive an idea for something.

New Product Opportunities

The process of identifying consumer needs within a market, and innovating towards developing a product to fulfill those needs, is referred to as new product development. When developing new products, the most important thing to keep in mind is that the product itself must successfully fill an existing need in the market, transforming a market opportunity into a tangible and marketable product.

Cost, time of development, price points, ability to scale, distribution, legalities, and competition should all be considered during the product development period. Through assessing the opportunity, risks, costs and external environment, organizations can ensure they focus on developing and investing in the products with the highest potential.

How To Develop Products

There are a number of useful frameworks for product development and product design, each of which focus on a full process of identifying market needs, ideating upon solutions, conceptualizing these solutions, and ultimately prototyping the new product for testing. One of the more well-known approaches is called eight stages of Koen:

Eight Stages of Koen

1. Idea generation – Using market research, SWOT assessments, industry trends, trade shows, and data gathering techniques, organizations identify the existing opportunities in the market. Ideas to fill these consumer needs are brainstormed. When brainstorming, any and all ideas are valid and should be considered thoroughly.
2. Idea screening – Once all of the ideas are on the board, the screening process can begin. Screening revolves around identifying which products best align with the target market and the need being filled, along with the technical feasibility and potential profitability of producing it.
3. Idea development and testing – In this phase, the organization focuses on identifying marketing and engineering needs for production. The idea, concept, and brand identity of the new product should be considered, and technical aspects such as patents, features, and cost saving should be considered. 3D printing is an excellent advantage for prototyping as well, and consumers can be invited to test 3D printed models of the product.
4. Business analysis – At this point, estimated selling prices, volume and profitability should be projected, researched, and confirmed.
5. Beta testing and market testing – After producing and testing the prototype, an organization can now package and send this to small focus groups, trade shows and user testing sessions. This initial run through will allow comments from real consumers and criticisms to be addressed before mass marketing.
6. Technical implementation – Assuming the beta testing goes well, the technical aspects of larger scale manufacturing must be organized. This includes building in quality management, resource estimations, technical spec sheets, engineering planning, department scheduling, sourcing, logistics, and all the other various inputs specific products may need for production.
7. Commercialization – The product is finally ready for commercialization. At this point, the organization can officially launch the product, advertise, fill distribution pipelines, and refine the process.
8. New product pricing – Once the product has been on the shelves for a some time, sufficient data can be collected to identify the financial impacts of this new product. Differentiating between segments, price points, consumer groups, and competitive markets can yield useful strategic information for the firm.

Pyramid of Production Systems

Refining production for a new product requires consideration of a variety of factors, including productivity, quality, economics, flexibility, and sustainability.

Refining production for a new product requires consideration of a variety of factors, including productivity, quality, economics, flexibility and sustainability.

Through executing these eight steps, organizations can effectively mitigate risk while capturing new and interesting opportunities in the external markets.

Minimum Viable Product

Another useful concept to learn in regards to product development is referred to as the minimum viable product (MVP). A minimum viable product is the least investment of time and resources required to bring the product to market for testing. Often an MVP project will be developed rapidly and distributed in one or two locales, representative of the general market population. This mitigates risk and exposure while ensuring the organization can confirm the demand for a given product at a given price point.

15.6.2: Developing Services

Learning Objective

Explain how services are a key aspect of the goods industry

Key Points

• It is important to remember that all products – whether they are goods, services, blankets, diapers, or plate glass – possess peculiarities that require adjustments in the marketing effort.
• Behind every product is a series of supporting services, such as warranties and money-back guarantees.
• An industrial customer might be keenly interested in related services such as prompt delivery, reliable price quotations, credit, test facilities, demonstration capabilities, liberal return policies, engineering expertise, and so forth.

Key Term

credit

A privilege of delayed payment extended to a buyer or borrower on the seller’s or lender’s belief that what is given will be repaid.

Example

• The price of your merchandise or service tells the customer a lot about what they can expect from your business. This is why in some instances, salons and other services are able to charge a premium. Although they are delivering a product/service that is similar to competitors, the higher price suggests theirs has greater value.

Service products are reflected by a wide variety of industries: utilities, barbers, travel agencies, health spas, consulting firms, medical care and banking, to name but a few. They account for nearly 50% of the average consumer’s total expenditures, 70% of the jobs, and two-thirds of the GNP. Clearly, the service sector is large and is growing. It is important to remember that all products—whether they are goods, services, blankets, diapers, or plate glass—possess peculiarities that require adjustments in the marketing effort. However, offering an exceptional product at the right price, through the most accessible channels, promoted extensively and accurately, should work for any type of product.

Service Development

Dog walking is a service industry that has developed in recent years.

Moreover, behind every product is a series of supporting services, such as warranties and money-back guarantees. In many instances, such services may be as important as the product itself. In fact, at times it is difficult to separate the associated services from the product features. Consequently, companies must constantly monitor the services offered by the company and its competitors. Based on the results of data-gathering devices such as customer surveys, consumer complaints, and suggestion boxes, the product manager can determine the types of services to offer, the form the service will take, and the price charged.

An industrial customer might be keenly interested in related services such as prompt delivery, reliable price quotations, credit, test facilities, demonstration capabilities, liberal return policies, engineering expertise, and so forth. Although there are a wide range of supportive services, the following are most prevalent:

1. Credit and financing: With the increased acceptance of debt by the consumer, offering credit and/or financing has become an important part of the total product. For certain market segments and certain products, the availability of credit may make the difference between buying or not buying the product.
2. Warranty: There are several types of durable products, retail stores, and even service products where warranties are expected. These warranties can provide a wide array of restitution, with a very limited warranty at one end of the continuum and extended warranties at the other.
3. Money-back guarantees: The ultimate warranty is the money-back guarantee. To the customer, a money-back guarantee reduces risk almost totally. There are certain market segments (e.g., low risk takers) that perceive this service as very important. Obviously this service is effective only if the product is superior and the product will be returned by only a few people.
4. Delivery, installation, and training: Firms that sell products that tend to be physically cumbersome or located far from the customer might consider delivery to be an integral part of the new product. Very few major appliance stores, lumber yards, or furniture stores could survive without provisions for this service. Similarly, there are products that are quite complicated and/or very technical, and whose average consumer could neither learn how to install or use it without assistance from the manufacturer. Both professional and home computer companies have been forced to provide such services.

15.6.3: Classifying Consumer Products

Learning Objective

Categorize consumer product into three groups: convenience, shopping, specialty

Key Points

• A convenience good is one that requires a minimum amount of effort on the part of the consumer.
• Goods that consumers want to be able to compare, such as automobiles, appliances, and homes,are categorized as shopping goods.
• Specialty goods are products so unique that consumers will go to any lengths to seek out and purchase them.

Key Terms

wholesaler

a person or company that sells goods wholesale is a middleman that buys its merchandise from a third party supplier and resells the merchandise to retail businesses or the end consumer. A wholesaler normally does not sell to other wholesalers.

reseller

a company or individual that purchases goods or services with the intention of reselling them rather than consuming or using them

Examples

• In its online product catalog, retailer Sears divides its products into “departments”, then presents products to potential shoppers according to (1) function or (2) brand. Each product has a Sears item-number and a manufacturer’s model-number. Sears uses the departments and product groupings with the intention of helping customers browse products by function or brand within a traditional Raj department-store structure.
• Intangible Data Products can further be classified into Virtual Digital Goods (“VDG”) that are virtually located on a computer OS and accessible to users as conventional file types, such as JPG and MP3 files. Open Source Code, GNU Linux, or even Android, may manipulate and/or convert base Virtual Digital Goods (“VDG”) into process-oriented Real Digital Goods (“RDG”), as part of an application process or manufactured service that may be viewed on Personal Data Assistant (“PDA”) or other hand-held tangible devices or OS computer.

Classifying Consumer Products

A classification long used in marketing separates products targeted at consumers into three groups:

1. Convenience
2. Shopping
3. And specialty

Convenience Goods

A convenience good is one that requires a minimum amount of effort on the part of the consumer. Extensive distribution is the primary marketing strategy. The product must be available in every conceivable outlet and must be easily accessible in these outlets. Vending machines typically dispense convenience goods, as do automatic teller machines. These products are usually of low unit value, they are highly standardized, and, frequently, they are nationally advertised. Yet, the key is to convince resellers (i.e., wholesalers and retailers) to carry the product. If the product is not available when, where, and in a form desirable by the consumer, the convenience product will fail. From the consumer’s perspective, little time, planning, or effort go into buying convenience goods. Consequently, marketers must establish a high level of brand awareness and recognition. This is accomplished through extensive mass advertising; sales promotion devices, such as coupons and point-of-purchase displays; and effective packaging. The fact that many of our product purchases are often on impulse is evidence that these strategies work. Availability is also important. Consumers have come to expect a wide spectrum of products to be conveniently located at their local supermarkets, ranging from packaged goods used daily (e.g., bread and soft drinks) to products purchased rarely or in an emergency, such as snow shovels, carpet cleaners, and flowers.

Convenience Goods

Convenience goods are typically found in convenience stores, such as the one pictured here.

Shopping Goods

In contrast, consumers want to be able to compare products categorized as shopping goods. Automobiles, appliances, furniture, and homes are in this group. Shoppers are willing to go to some lengths to compare values, and, therefore, these goods need not be distributed so widely. Although many shopping goods are nationally advertised, often, it is the ability of the retailer to differentiate itself that creates the sale. The differentiation could be equated with a strong brand name, such as Sears Roebuck, effective merchandising, aggressive personal selling, or the availability of credit. Discounting, or promotional price-cutting, is a characteristic of many shopping goods because of retailers’ desire to provide attractive shopping values. In the end, product turn over is slower, and retailers have a great deal of their capital tied-up in inventory. This, combined with the necessity to price discount and provide exceptional service, means that retailers expect strong support from manufacturers with shopping goods.

Specialty Goods

Specialty goods represent the third product classification. From the consumer’s perspective, these products are so unique that they will go to any lengths to seek out and purchase them. Almost without exception, price is not a principle factor affecting the sales of specialty goods. Although these products may be custom-made (e.g., a hairpiece) or one-of-a-kind (e.g., a statue), it is also possible that the marketer has been very successful in differentiating the product in the mind of the consumer. Crisco shortening, for instance, may be a unique product in the mind of a consumer, and the consumer would pay any price for it. Such a consumer would not accept a substitute and would be willing to go to another store or put off their pie baking until the product arrives. Another example might be the strong attachment some people feel toward a particular hair stylist or barber. A person may wait a long time for that individual and might even move with that person to another hair salon. It is generally desirable for a marketer to lift the product from the shopping to the specialty class. With the exception of price cutting, the entire range of marketing activities are required to accomplish this goal.

15.6.4: Classifying Business Products

Learning Objective

Explain the different marketing strategies of various types of indistrial goods

Key Points

• Forests, mines, and quarries provide extractiveproducts to producers.
• Manufactured products are those that have undergone some processing. Semi-manufactured goods are raw materials that have received some processing but require more before they are useful to the purchaser.
• Parts are manufactured items that are ready to be incorporated into other products.
• Process machinery (sometimes called installations) refers to major pieces of equipment used in the manufacture of other goods.
• Equipment is made up of portable factory equipment (e.g., fork lift trucks, fire extinguishers) and office equipment (e.g., computers, copier machines).
• Supplies and service do not enter the finished product at all, but are nevertheless consumed in conjunction with making the product.

Key Terms

lathe

A machine tool used to shape a piece of material, or workpiece, by rotating the workpiece against a cutting tool.

process

A series of events to produce a result, especially as contrasted to product.

Although consumer products are more familiar to most individuals, business and industrial goods represent very important product categories as well. In the case of some manufacturers, business products are their entire focus. Industrial products can either be categorized from the perspective of the producer and how they shop for the product, or the perspective of the manufacturer and how they are produced and how much they cost. The latter criteria offers a more insightful classification for industrial products.

Forests, mines, and quarries provide extractive products to producers. Although there are some farm products that are ready for consumption when they leave the farm, most farm and other extractive products require some processing before purchase by the consumer. A useful way to divide extractive products is into farm products and natural products, since they are marketed in slightly different ways.

Extractive Products

Quarries are examples of business that provide extractive products for other businesses.

Manufactured products are those that have undergone some processing. The demands for manufactured industrial goods are usually derived from the demands for ultimate consumer goods. There are a number of specific types of manufactured industrial goods.

Semi-manufactured goods are raw materials that have received some processing but require more before they are useful to the purchaser. Lumber and crude oil are examples of these types of products. Since these products tend to be standardized, there is a strong emphasis on price and vendor reliability.

Parts are manufactured items that are ready to be incorporated into other products. For instance, the motors that go into lawn mowers and steering wheels on new cars are carefully assembled when they arrive at the manufacturing plant. Since products such as these are usually ordered well in advance and in large quantities, price and service are the two most important marketing considerations.

Process machinery (sometimes called installations) refers to major pieces of equipment used in the manufacture of other goods. This category would include the physical plant of a manufacturer (boilers, lathes, blast furnaces, elevators, and conveyor systems). The marketing process would incorporate the efforts of a professional sales force, supported by engineers and technicians, and a tremendous amount of personalized service.

Equipment is made up of portable factory equipment (e.g., fork lift trucks, fire extinguishers) and office equipment (e.g., computers, copier machines). Although these products do not contribute directly to the physical product, they do aid in the production process. These products may be sold directly from the manufacturer to the user, or a middleman can be used in geographically dispersed markets. The marketing strategy employs a wide range of activities, including product quality and features, price, service, vendor deals, and promotion.

Supplies and service do not enter the finished product at all, but are nevertheless consumed in conjunction with making the product. Supplies would include paper, pencils, brooms, soap, etc. These products are normally purchased as convenience products with a minimum of effort and evaluation. Business services include maintenance (e,g., office cleaning), repairs (e.g., plumbing), and advisory (e.g., legal). Because the need for services tends to be unpredictable, they are often contracted for a relatively long period of time.

15.6.5: Marketing Classes of Products

Learning Objective

Categorize products into consumer goods, industrial goods, goods, services

Key Points

• When we purchase products for our own consumption with no intention of selling these products to others, we are referring to consumer goods.
• Industrial goods are purchased by an individual or organization in order to modify them or simply distribute them to the ultimate consumer in order to make a profit or meet some other objective.
• Consumer goods can be classified as convenience, shopping, or specialty goods.
• Service products are characterized as being intangible, produced and consumed simultaneously, lacking standardization, and having high buyer involvement.
• All intermediaries that buy finished or semi-finished products and resell them for profit are part of the reseller market. This market includes approximately 383,000 wholesalers and 1,300,000 retailers that operate in the United States, with the exception of products obtained directly from the producer, all products are sold through resellers. Since resellers operate under unique business characteristics, they must be approached carefully. Producers are always cognizant of the fact that successful marketing to resellers is just as important as successful marketing to consumers.

Key Terms

intangible

incapable of being perceived by the senses; incorporeal

Consumer

Someone who acquires goods or services for direct use or ownership rather than for resale or use in production and manufacturing.

marketing

The promotion, distribution and selling of a product or service; includes market research and advertising.

Example

• Industrial market example: A steel mill might purchase computer software, pencils, and flooring as part of the operation and maintenance of its business. Likewise, a refrigerator manufacturer might purchase sheets of steel, wiring, and shelving in order to produce its final product. These purchases occur in the industrial market. Evidence suggests that industrial markets function differently from consumer markets, and that the buying process is particularly different.

The two most commonly used methods of classifying products are: (1) Consumer goods versus industrial goods, and (2) goods products (i.e., durables and non-durables) versus service products.

Consumer Goods and Industrial Goods

The traditional classification of products is to dichotomize all products as being either consumer goods or industrial goods. When we purchase products for our own consumption with no intention of selling these products to others, we are referring to consumer goods . Conversely, industrial goods are purchased by an individual or an organization in order to modify them or simply distribute them to the ultimate consumer in order to make a profit or meet some other objective.

Olympus Camera

This Olympus camera is considered to be a consumer good.

Classification of Consumer Goods

A classification long used in marketing separates products targeted at consumers into three groups: (1) Convenience goods, (2) shopping goods and (3) specialty goods.

A convenience good is one that requires a minimum amount of effort on the part of the consumer. Extensive distribution is the primary marketing strategy. The product must be available in every conceivable outlet and must be easily accessible in these outlets. These products are usually of low unit value, they are highly standardized, and frequently they are nationally advertised.

Consumers desire to compare products categorized as shopping goods. Automobiles, appliances, furniture, and homes are in this group. Shoppers are willing to go to some lengths to compare values; therefore, these goods need not be distributed so widely. Although many shopping goods are nationally advertised, often it is the ability of the retailer to differentiate itself that creates the sale. Discounting, or promotional price-cutting, is a characteristic of many shopping goods because of retailers’ desire to provide attractive shopping values.

Specialty goods represent the third product classification. From the consumer’s perspective, these products are so unique that they will go to any lengths to seek out and purchase them. Almost without exception, price is not a principle factor affecting the sales of specialty goods.

Classification of Industrial Goods

Although consumer products are more familiar to most readers, industrial goods represent a very important product category. For some manufacturers, industrial goods are the only product sold. The methods of industrial marketing are somewhat more specialized. Industrial products can either be categorized from the perspective of the producer and how they shop for the product, or the perspective of the manufacturer and how they are produced and how much they cost. The latter criteria offers a more insightful classification for industrial products.

Forests, mines, and quarries provide extractive products to producers. Most extractive products require some processing before purchase by the consumer. Manufactured products are those that have undergone some processing. The demand for manufactured industrial goods are usually derived from the demand for ultimate consumer goods.

Goods Versus Services

Service products are reflected by a wide variety of industries—utilities, barbers, travel agencies, health spas, consulting firms, medical facilities and banks are but a few. They account for nearly 50 percent of the average consumer’s total expenditures and 70 percent of jobs. Like goods products, service products are quite heterogeneous. Nevertheless, there are several characteristics that are generalized to service products.

Intangible: With the purchase of a good, one has something that can be seen, touched, tasted, worn or displayed. This is not true with a service. Although one pays money and consumes the service, there is nothing tangible to show for it.

Simultaneous Production and Consumption: Service products are characterized as those that are being consumed at the same time they are being produced. In contrast, goods products are produced, stored, and then consumed. A result of this characteristic is that the provider of the service is often present when consumption takes place.

Little Standardization: Because service products are so closely related to the people providing the service, ensuring the same level of satisfaction from time to time is quite difficult.

High Buyer Involvement: With many service products, the purchaser may provide a great deal of input into the final form of the product. For example, in the case of a cruise, a good travel agent would provide a large selection of brochures and pamphlets describing the various cruise locations, options provided in terms of cabin location and size, islands visited, food, entertainment, prices, and whether there are facilities for children.

It should be noted that these four characteristics associated with service products vary in intensity from product to product. In fact, service products are best viewed as being on a continuum in respect to these four characteristics.

15.6.6: Using a Product Life Cycle Framework

Learning Objective

Explain the five stages of the product life cycle

Key Points

• A company has to be good at both developing new products and managing them in the face of changing tastes, technologies, and competition.
• It should be noted that the predictive capabilities of the product lifecycle are dependent upon several factors, both controllable and uncontrollable, and that no two companies may follow the same exact pattern or produce the same results.
• Some argue that the competitive situation is the single most important factor influencing the duration of height of a product lifecycle curve.
• Almost all new products can expect fewer than 5, 10, or 15 years of market protection.
• Usually the improvements brought about by non-product tactics are relatively short-lived, and basic alterations to product offerings provide longer benefits.

Key Terms

patent

A declaration issued by a government agency declaring someone the inventor of a new invention and having the privilege of stopping others from making, using or selling the claimed invention; a letter patent.

distinctiveness

Something which distinguishes something from anything else

obsolete

no longer in use; gone into disuse; disused or neglected (often by preference for something newer, which replaces the subject).

Example

• Product life-cycle predictions are dependent upon controllable and uncontrollable factors. For example, differences in the competitive situation during each of these stages may dictate different marketing approaches.

The Product Lifecycle

A company has to be good at both developing new products and managing them in the face of changing tastes, technologies, and competition. Evidence suggests that every product goes through a lifecycle with different phases of sales and profits. As such, the manager must find new products to replace those that are in the declining stage of the product lifecycle and learn how to manage products optimally as they move from one stage to the next. The five stages of the product life cycle and their components can be defined as follows:

1. Product development: the period during which new product ideas are generated, operationalized, and tested prior to commercialization.
2. Introduction: the period during which a new product is introduced. Initial distribution is obtained and promotion is obtained.
3. Growth: the period during which the product is accepted by consumers and the trade. Initial distribution is expanded, promotion is increased, repeat orders from initial buyers are obtained, and word-of-mouth advertising leads to more and more new users.
4. Maturity: the period during which competition becomes serious. Towards the end of this period, competitors’ products cut deeply into the company’s market position.
5. Decline: the product becomes obsolete and its competitive disadvantage result in decline in sales and, eventually, deletion.

It should be noted that the predictive capabilities of the product lifecycle are dependent upon several factors, both controllable and uncontrollable, and that no two companies may follow the same exact pattern or produce the same results. For example, differences in the competitive situation during each of these stages may dictate different marketing approaches. Some argue that the competitive situation is the single most important factor influencing the duration of height of a product lifecycle curve. A useful way of looking at this phenomenon is in terms of competitive distinctiveness.

Product Lifecycle

The product lifecycle.

Often, new products may, upon introduction, realistically expect a long period of lasting distinctiveness or market protection—through such factors as secrecy, patent protection, and the time and cash required to develop competitive products. However, almost all new products can expect fewer than 5, 10, or 15 years of market protection.

Of course, changes in other elements of the marketing mix may also affect the performance of the product during its lifecycle. For example, a vigorous promotional program or a dramatic lowering of price may improve the sales picture in the decline period, at least temporarily. The black-and-white TV market illustrated this point. Usually the improvements brought about by non-product tactics are relatively short-lived, and basic alterations to product offerings provide longer benefits. Whether one accepts the S-shaped curve as a valid product-sales pattern or as a pattern that holds only for some products (but not for others), the product lifecycle concept can still be very useful. It offers a framework for dealing systematically with product management issues and activities. Thus, the marketer must be cognizant of the generalizations that apply to a given product as it moves through the various stages. This process begins with product development and ends with the deletion (discontinuation) of the product.

15.7: Product Packaging and Branding

15.7.1: A Brief Definition of Brand

A brand refers to a name, term, symbol, or any other type of feature that defines or identifies a seller’s product or service.

Learning Objective

Explain the history and importance of branding

Key Points

• The word “brand” is derived from the Old Norse brand meaning “to burn,” which refers to the practice of producers burning their mark (or brand) onto their products.
• During the Industrial Revolution, the production of many household items, such as soap, was moved from local communities to centralized factories where they were branded with a logo or insignia, extending the meaning of “brand” to that of trademark.
• All of a brand’s elements (i.e., logo, color, shape, letters, images) work as a psychological trigger or stimulus that causes an association to all other thoughts we have about a brand.
• Brands provide external cues to taste, design, performance, quality, value, and prestige if they are developed and managed properly.
• Brands convey positive or negative messages about a product. They also indicated the company or service to the consumer, which is a direct result of past advertising, promotion, and product reputation.
• A brand can convey up to six levels of meaning: Attributes, Benefits, Values, Culture, Personality and User.

Key Term

brand

A name, symbol, logo, or other item used to distinguish a product, service, or its provider.

Example

• Campbell Soup, Coca-Cola, Juicy Fruit gum, Aunt Jemima, and Quaker Oats were among the first products to be “branded. “

Defining a Brand

A brand consists of any name, term, design, style, words, symbols or any other feature that distinguishes the goods and services of one seller from another. A brand also distinguishes one product from another in the eyes of the customer. All of its elements (i.e., logo, color, shape, letters, images) work as a psychological trigger or stimulus that causes an association to all other thoughts we have about this brand. Tunes, celebrities, and catchphrases are also oftentimes considered brands.

Coca-Cola Brand Logo

The Coca-Cola logo is an example of a widely-recognized trademark and global brand.

History

The word “brand” is derived from the Old Norse ‘brand’ meaning “to burn,” which refers to the practice of producers burning their mark (or brand) onto their products. Italians are considered among the first to use brands in the form of watermarks on paper in the 1200s. However, in mass-marketing, this concept originated in the 19^th century with the introduction of packaged goods.

During the Industrial Revolution, the production of many household items, such as soap, was moved from local communities to centralized factories to be mass-produced and sold to the wider market. Illiteracy was still prevalent and packing crates were handled by stevedores who couldn’t read. Factories branded their logo or insignia on the barrels used and the logo of the companies to which the cargo was being shipped. This allowed the products to be delivered to the proper location. The meaning of “brand” extended to that of the trademark symbol, and communicated to retailers and their customers that mass produced products should be trusted as much as local competitors. Campbell Soup, Coca-Cola , Juicy Fruit gum, Aunt Jemima, and Quaker Oats were among the first U.S. products to be “branded. “

Connotations

A successful brand can create and sustain a strong, positive, and lasting impression in the mind of a consumer. Brands provide external cues to taste, design, performance, quality, value and prestige if they are developed and managed properly. Brands convey positive or negative messages about a product, along with indicating the company or service to the consumer, which is a direct result of past advertising, promotion, and product reputation.

A brand can convey up to six levels of meaning:

• Attributes: The Mercedes-Benz brand, for example, suggests expensive, well-built, well-engineered, durable, high-prestige automobiles.
• Benefits: attributes must be translated into functional and emotional benefits.
• Values: Mercedes stands for high performance, safety, and prestige.
• Culture: Mercedes represents German culture, organized, efficient, high quality.
• Personality: the brand projects a certain personality.
• User: the brand suggests the kind of consumer who buys and uses the product.

15.7.2: Brand Categories

Similar goods and services are classified in brand categories.

Learning Objective

Define a brand

Key Points

• Brand categories, or generic classification of products, group similar goods and services.
• A brand is a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers.
• Brand awareness refers to the customer’s ability to recall and recognize the brand under different conditions, using memory associations to link to the brand name, logo, jingles, and so forth.

Key Terms

Brand Equity

the value of having a well-known name, logo, or other identifier

Brand categories

A generic classification of products or services.

Example

• Coke, Pepsi, Sprite, and all other soda brand products fall into the same brand category of soft drinks.

Brand Categories

A brand is a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers.

Branding began as a functional marketing tool. Italians are considered among thefirst to use brands in the form of watermarks on paper in the 1200s. People in the Middle Ages were illiterate. Medieval guilds — candle makers, goldsmiths,cobblers; carpenters, painters and masons; bakers and fishmongers — created symbols to be etched or stamped into their work, products or crates which represented and certified the quality of a guild’s work.

Brand categories are generic classifications of products or services. Similar and competing products (or services) all fall into the same brand category. For example, all the different perfumes fall into the brand category of perfume because they all satisfy the same consumer need.

Brand awareness refers to the customer’s ability to recall and recognize the brand under different conditions, using memory associations to link to the brand name, logo, jingles, and so forth. It consists of both brand recognition and brand recall. It helps the customers understand to which product or service category the particular brand belongs and what products and services are sold under the brand name. It also ensures that customers know which of their needs are satisfied by the brand through its products (Keller). Brand awareness is of critical importance, since customers will not consider your brand if they are not aware of it .

Brand logo

Brand awareness refers to thecustomer’s ability to recall and recognize the brand under different conditions,using memory associations to link to the brand name, logo, jingles, and so forth.

There are various levels of brand awareness that require different levels and combinations of brand recognition and recall. Top-of-Mind is the goal of most companies. Top-of-Mind Awareness occurs when your brand is what pops into a consumer’s mind when asked to name brands in a product category. For example, when someone is asked to name a type of facial tissue, the common answer is Kleenex, which is a top-of-mind brand. Aided Awareness occurs when a consumer is shown or reads a list of brands, and expresses familiarity with your brand only after they hear or see it as a type of memory aid. Strategic Awareness occurs when your brand is not only top-of-mind to consumers, but also has distinctive qualities that stick out to consumers as making it better than the other brands in your market. The distinctions that set your product apart from the competition are also known as the Unique Selling Points or USP.

15.7.3: The Benefits of a Good Brand

Good branding gives a company several advantages including establishing a positive reputation and building an image attractive to consumers.

Learning Objective

Explain the components of a strong brand

Key Points

• Branding develops an image of a company’s products in the minds of consumers, attributing goods with certain unique qualities or characteristics that, if done effectively, are attractive to the target audience.
• A brand widely known in the market has brand recognition and builds up positive sentiment which further strengthens the company position amongst competitors.
• Benefits of a strong brand include: being able to command higher prices, speeding up new product acceptance, enabling market share penetration by advertising, and resisting price erosion.

Key Terms

good

an object produced for market

brand image

The set of emotional and sensory perceptions a consumer associates with a particular product or service in their mental construct of a brand.

Example

• Disney has brand recognition worldwide; its castle logo with Walt Disney’s signature, as well as its characters (like Mickey Mouse) are instantly recognizable.

Benefits of a Strong Brand

A brand is the personality that identifies a product, service or company (name, term, sign, symbol, design, or combination thereof); it also represents a relationship to key constituencies: customers, staff, partners, investors etc. Proper branding can yield higher product sales, and higher sales of products associated with the brand (or brand association). For example, a a customer who loves Pillsbury biscuits (and trusts the brand) is more likely to try other products the company offers, such as chocolate chip cookies.

Some people distinguish the psychological aspect of brand associations (e.g., thoughts, feelings, perceptions, images, experiences, beliefs, attitudes, etc.) that become tied to the brand from the experiential aspect—the sum of all points of contact with the brand, otherwise known as brand experience. Brand experience is a brand’s action perceived by a person. The psychological aspect, sometimes referred to as the brand image, is a symbolic construct created within the minds of people, consisting of all the information and expectations associated with a product, service, or company providing them .

Brands

Good branding gives a company several advantages, including establishing a positive reputation and building an image attractive to consumers.

The branding process seeks to develop or align the expectations behind the brand experience, creating an impression that a product or service associated with a brand possesses certain qualities or characteristics that set it apart from other (e.g., competitor) products or services. A brand is therefore one of the most valuable elements in an advertising theme, as it demonstrates the uniqueness of what the brand owner is able to offer in the marketplace. Orientation of the whole organization towards its brand is called brand orientation. Brand orientation is developed in response to market intelligence. Brand strength analysis describes efforts to determine the strength a brand has compared with its competitors. The art of creating and maintaining a brand is called brand management.

Careful brand management seeks to make the product or services appealing and/or relevant to the target audience. Brands should reflect more than mere differential of product cost versus selling price. They should represent the sum of all valuable qualities of a product to the consumer.

A brand which is widely known in the marketplace acquires brand recognition. When brand recognition builds to the point of a critical mass of positive sentiment in the marketplace, it is said to have achieved brand franchise. Brand recognition is most successful when a brand is recognized independent of the company’s name, but rather through visual signifiers like logos, slogans, and colors. For example, Disney has been successful branding with their particular script font, originally created for Walt Disney’s “signature” logo, and which it now uses in the logo for the website GO.com.

Consumers may view branding as an aspect of products or services, as it often serves to denote certain attractive qualities or characteristics. From the perspective of brand owners, branded products or services also command higher prices. Where two products resemble each other, but one of the products has no associated branding (such as a generic, store-branded product), people may often select the more expensive branded product on the basis of the quality or reputation of the brand or brand owner. Benefits of good brand recognition include facilitating of new product acceptance, enabling market share penetration by advertising, and resisting price erosion.

15.7.4: Developing a Brand

Developing a brand successfully requires a company to analyze the characteristics and values a customer base desires.

Learning Objective

Explain how companies can develop their brand

Key Points

• Brands have intrinsic attributes (functional characteristics and design of the products) and extrinsic attributes (packaging, pricing, marketing tactics) that develops the brand image and personality.
• A well-developed brand creates value beyond the actual product.
• Every design shown and communication made to the consumer are related to branding.

Key Terms

advertising

communication whose purpose is to influence potential customers about products and services.

marketing

Marketing is the process of communicating the value of a product or service to customers.

Examples

• Extrinsic attributes of a brand include Oreo cookie packaging, celebrity spokespersons, and marketing slogans.
• Extrinsic attributes of a brand include oreo cookie packaging, celebrity spokespersons, and marketing slogans.

Developing a Brand

The goal when developing a brand is to create value. You do that by emulating the characteristics and values that your customers desire. Branding is present throughout everything your company touches—it is not just a logo. Every design shown and communication made to the consumer are examples of branding.

Branding Attributes

Brands have intrinsic and extrinsic attributes. Intrinsic attributes refer to functional characteristics of the brand: its shape, performance, and physical capacity (e.g. Gillette razors shave unwanted hair and are able to do so more closely than most products in their product class because of their curved shape). Should any of these attributes be changed, they will not function in the same way or be the same product.

Examples of extrinsic attributes are features like the price of the Gillette razors, their packaging, the Gillette brand name, and mechanisms that enable consumers to form associations that give meaning to the brand. For example, it can appear more desirable because David Beckham, who is a brand himself, advertizes it.

Some refer to a brand’s function as the creation and communication of a multidimensional character of a product—one that is not easily copied and damaged by competitors’ efforts.

Brands have different elements, namely brand personality (functional abilities), brand skill (its fundamental traits—e.g. Chanel No 5 is seen as sexy) and brand relationships (with buyers) or brand magic. These elements are what give the brand added value.

Marketing and advertising are about selling your products and services. Branding is about selling everything associated with your organization . The consumer perception of brands is brand knowledge: brand awareness, recognition and recall, and brand image denote how consumers perceive a brand based on quality and attitudes towards it and what stays in their memory.

Branding

Branding is about selling everything associated with your organization.

This suggests that brand associations are anything linked in memory to a brand. “The essence of branding is promising and delivering” (Low and Lamb Jr, 2000). The successful organizations realize that the employees are influential to brand strategy. Aaker referred to studies using different methods and larger samples, which point out that “consumers noted for high-preference brands, 82% related to employee behavior; for low-preference brands, 90% related to influence of employee behavior (attitudes, competence, and personalization of the service).” Therefore, a part of brand strategy must focus on building brand association among employees at all levels. “If the employees are aligned with the brand strategy, including the promise, then they will deliver a consistent expression of the brand to their customers at every touch point.”

Brand Development Index or (BDI) measures the relative sales strength of a brand within a specific market (e.g. Pepsi brand in 10 – 50 year olds). It is a measure of the relative sales strength of a given brand in a specific market area.

15.7.5: Brand Management Strategies

Through effective brand management, organizations can build a loyal following of engaged consumers.

Learning Objective

Assess the variety of brand management strategies companies employ, and identify the potential advantages and disadvantages of each one

Key Points

• Brand management can enable high levels of awareness, engagement, retention and loyalty from users, which translates into significant organizational value.
• There are a wide variety of brand management strategies, each of which has some pros and cons organizations will want to consider on a case by case basis.
• Some examples of brand management strategies include iconic branding, individual branding, multi-product branding, sub-branding, and co-branding.
• Modern day branding incorporates a number of new tactics that organizations must be aware of to succeed. The social media landscape empowers companies to engage with consumers in a meaningful way (if properly managed).
• Through understanding both the organization’s culture and the target market(s), organizations must make informed strategic and tactical decisions regarding how to build a brand.

Key Terms

engagement

In marketing, this is the degree to which individuals follow, discuss, comment on, and participate with a brand.

loyalty

In business, this is a customer’s propensity to buy from the same organization again as a result of a meaningful brand relationship.

retention

In general, this is the process of remembering something. In business, however, it refers to the ability of an organization to keep its current customers.

Brand management is a wide and varied study of the various approaches organizations can take to maximize consumer awareness, engagement, retention, and loyalty. Brand management strategies are constantly evolving, and the various potential distribution channels between organizations and their consumers is also rapidly changing. The rise of social networks is an incredible opportunity for meaningful engagement with current and prospective customers, and free outlets like Youtube enable viral distribution of assets for virtually no cost (indeed, sometime for a profit!).

The reason for brand management is relatively simple. Through creating a lasting impression and meaningful relationship with users, organizations can retain customers and create brand loyalty. Brand loyalty simply means that customers, when making a purchase to fulfill a given need, will default to their brand of choice. Brand of choice is something every organization wants to be, as the cost of maintaining loyal customers is much lower than the cost of acquiring new ones.

Brand Management Strategies

Loyal customers are cheaper, and happy customers are likely to talk about the company in a positive light. As a result, building brand is a key to success in an enormous number of industries. There are many approaches to this, both traditional and modern, and understanding both the strategy and the potential tactical channels available is integral to making smart branding decisions:

• Individual Branding – This has proven highly beneficial for a number of large organizations that offer a wide variety of goods. Proctor and Gamble (P&G) is a classic example of this working successfully. P&G own the brands Dawn, Joy, Crest, Scope, Gain, Tide, Fixodent, Pepto-Bismol, Swiffer, Ivory, Olay, Old Spice, and the list goes on and on. Many of these products actually compete head to head. This strategy allows minimal risk of the parent company being hurt by an individual brand, and allows a sense of competition between brands. It also allows P&G to capture a variety of demographics simultaneously by positioning each brand to large consumer groups.
• Multi-product Branding – The inverse of individual branding in some ways, multi-product branding allows companies like Samsung, Apple, Sony, and Virgin to focus consumer loyalty on the broader parent brand. Through doing so, all investments in branding boost the brand across all product spheres. This creates some efficiency in promoting brand, but also attaches all of the risk and positioning to that one single brand name.
• Sub-branding – Something of a cross between individual and multi-product branding, sub-branding allows an organization to create relatively large sub-brands for given product groups. A good example is Honda and Acura, one is positioned in a higher price bracket yet both are Honda. 
• Co-branding – As the name suggests, often companies collaborate on projects and pursue branding together. For example, Bose is often co-branded with various vehicle manufacturers. Similarly, Google is often co-branded with Samsung products. This allows each organization to benefit from each other’s loyal consumer base.
• Iconic Branding (Attitude) – A bit less clear than the strategies above, iconic branding is all about building a persona. This persona tends to arise through stories, establishing a counter-culture, and building a community. Nike’s brand is iconic, for example. By promoting the ‘Just Do It’ mentality, they sell a perspective alongside their products. Red Bull takes a similar approach, going so far as to sponsor amazing feats of athleticism and daring to demonstrate the values they represent. This type of branding is complex and extremely difficult to accomplish, but can build a powerful and loyal following.

Tactics and Developments in Brand Management

Social media has changed the landscape for branding, and at this point encompasses a critical and necessary series of channels to leverage when pursuing any of the above branding strategies. Distributing messaging and displaying the core values of the organization is both easier and more difficult than ever. In just a click of a button, organizations can make a huge impression on the general public. However, the  digital landscape is noisy; being heard can be extremely challenging.

Along similar lines is social proofing. Companies like Amazon offer consumers the ability to rate a product or service, which ultimately establishes a brand quality level many others consumers will trust and see as more objective. Social proofing can have an enormous impact on the perception of an organizations brand.

Brand Touch-point Wheel

As a supplement to the various strategies listed above, these touch-points indicate where the tactics of these strategies will come into play. Understanding where the organization will be in direct communication with a prospective consumer is imperative to ensuring messaging is clean, consistent, and clear across the board.

As a supplement to the various strategies listed above, these touch-points indicate where the tactics of these strategies will come into play. Understanding where the organization will be in direct communication with a prospective consumer is imperative to ensuring messaging is clean, consistent and clear across the board.

15.7.6: Packaging and Labeling

Packaging refers to the physical appearance of a product when a consumer sees it, and labels are an informative component of packaging.

Learning Objective

Explain the important features of packaging

Key Points

• The role of packaging in marketing has become quite significant as it is one of the ways companies can get consumers to notice products.
• A common use of packaging is marketing. The packaging and labels can be used by marketers to encourage potential buyers to purchase the product.
• Packaging is also used for convenience and information transmission. Packages and labels communicate how to use, transport, recycle, or dispose of the package or product.
• Labels serve to capture the attention of shoppers as well as provide useful information regarding the product.
• Labels are attached on the product package to provide information such as manufacturer of the product, date of manufacture, date of expiry, its ingredients, how to use the product, and its handling.

Key Term

Packaging

Physical appearance of a good prepared for retail sale

Example

• The packaging of perfumes, for instance, attempts to appeal to the sensibilities of its target consumer. For instance, a perfume geared towards younger females may have colorful, feminine packaging, but a perfume for older professional women may have more subdued and sophisticated packaging.

Packaging

With the increased importance placed on self-service marketing, the role of packaging is becoming quite significant. For example, in a typical supermarket a shopper passes about 600 items per minute, or one item every tenth of a second. Thus, the only way to get some consumers to notice the product is through displays, shelf hangers, tear-off coupon blocks, other point-of-purchase devices, and, last but not least, effective packages. Considering the importance placed on the package, it is not surprising that a great deal of research is spent on motivational research, color testing, psychological manipulation, and so forth, in order to ascertain how the majority of consumers will react to a new package. Based on the results of this research, past experience, and the current and anticipated decisions of competitors, the marketer will initially determine the primary role of the package relative to the product. Should it include quality, safety, distinction, affordability, convenience, or aesthetic beauty?

Various Packaging Designs, including labeling

Packaging refers to the physical appearance of a product when a consumer sees it, and labels are an informative component of packaging.

Common uses of packaging include:

• Physical protection: The objects enclosed in the package may require protection from, among other things, mechanical shock, vibration, electrostatic discharge, compression, temperature, etc.
• Information transmission: Packages and labels communicate how to use, transport, recycle, or dispose of the package or product. With pharmaceuticals, food, medical, and chemical products, some types of information are required by governments. Some packages and labels also are used for track and trace purposes.
• Marketing: The packaging and labels can be used by marketers to encourage potential buyers to purchase the product. Package graphic design and physical design have been important and constantly evolving phenomenon for several decades. Marketing communications and graphic design are applied to the surface of the package and (in many cases) the point of sale display, examples of which are shown here:.
• Convenience: Packages can have features that add convenience in distribution, handling, stacking, display, sale, opening, re-closing, use, dispensing, reuse, recycling, and ease of disposal.
• Barrier protection: A barrier from oxygen, water vapor, dust, etc., is often required. Permeation is a critical factor in design. Some packages contain desiccants or oxygen absorbency to help extend shelf life. Modified atmospheres or controlled atmospheres are also maintained in some food packages. Keeping the contents clean, fresh, sterile and safe for the intended shelf life is a primary function.
• Security: Packaging can play an important role in reducing the security risks of shipment. Packages can be made with improved tamper resistance to deter tampering and also can have tamper-evident features to help indicate tampering. Packages can be engineered to help reduce the risks of package pilferage.

Labeling

A label is a carrier of information about the product. The attached label provides customers with information to aid their purchase decision or help improve the experience of using the product. Labels can include:

• Care and use of the product
• Recipes or suggestions
• Ingredients or nutritional information
• Product guarantees
• Manufacturer name and address
• Weight statements
• Sell by date and expiration dates
• Warnings

Symbols Used in Labels

Many types of symbols for package labeling are nationally and internationally standardized. For consumer packaging, symbols exist for product certifications, trademarks, and proof of purchase. Some requirements and symbols exist to communicate aspects of consumer use and safety. For example, the estimated sign notes conformance to EU weights and measures accuracy regulations. Examples of environmental and recycling symbols include the recycling symbol, the resin identification code, and the “green dot.”

Labeling Laws

žIn some countries, many products, including food and pharmaceuticals, are required by law to contain certain labels such as ingredients, nutritional information, or usage warning information (FDA). For example, a law label is a legally required tag or label on new items describing the fabric and filling regulating the United States mattress, upholstery, and stuffed article industry. The purpose of the law label is to inform the consumer of the hidden contents, or “filling materials” inside bedding & furniture products. Laws requiring these tags were passed in the United States to inform consumers as to whether the stuffed article they were buying contained new or recycled materials. The recycling logo,, needed to be displayed on the label. The Fair Packaging and Labeling Act (FPLA) is a law that applies to labels on many consumer products that states the products identity, the company that manufactures it, and the net quantity of contents.

Labels Indicating Recycled Material

Laws were passed in the United States to inform consumers as to whether the stuffed articles they were buying contained new or recycled materials.