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Product Characteristics and Classifications
Many people think a product is a tangible offering, but a
product is anything that can be offered to a market to satisfy a
need or want, including physical goods, services, experiences,
events, persons, places, properties, organizations, information and
ideas.
Product Levels: The Customer – Value Hierarchy:- In planning its
market offering, the marketer needs to address five product levels.
Each level adds more customer value, and the five constitute a
Customer - Value Hierarchy.
1.
2.
The fundamental level is the Core Benefit i.e. the service or
benefit the customer is really buying. Ex:- A hotel guest is buying
‘Rest and Sleep’. The purchaser of a drill is buying ‘holes’. Marketers
must see themselves as benefit providers.
At the second level, the marketer must turn the core benefit into a
Basic Product. Thus, a hotel room includes a bed, bathroom,
towels, desk, dresser and closet.
3.
4.
5.
At the third level, the marketer prepares an Expected Product, a set of
attributes and conditions buyers normally expect when they purchase this
product. Hotel guests expect a clean bed, fresh towels, working lamps, and
a relative degree of quietness and privacy.
At the fourth level, the marketer prepares an Augmented Product that
exceeds customer expectations. In developed countries, brand positioning
and competition take place at this level, whereas, in developing and
emerging markets such as India, competition takes place mostly at the
expected product level.
At the fifth level stands the Potential Product, which encompasses all
the possible augmentations and transformations the product or offering
might undergo in the future. Here is where companies search for new ways
to satisfy customers and distinguish their offering.
Differentiation arises and competition increasingly occurs on the basis
of product augmentation, which also leads the marketer to look at the
user’s total Consumption System: the way the user performs the tasks of
getting and using products and related services. Each augmentation
adds cost, however, and augmented benefits soon become expected
benefits and necessary point of parity. Ex:- Today’s hotel guests expect
cable T.V. with a remote control and phone lines and preferable a Wy-Fy
internet access. This means competitors must search for still other features
and benefits.
Some companies raise the price of their augmented product,
where as others offer a ‘Stripped – Down’ version at a much lower price.
Ex:- the ITC – Welcome group of hotels in India, has four sets of properties
under four different brands. The group’s Super – Deluxe hotels are
organized under the brand ITC Hotels; Five – Star hotels are under the
brand Welcome Hotels; Budget hotels in smaller towns and cities under the
brand Fortune Hotels; and Palaces, Forts and Havelis under the brand
Welcome Heritage.
Product Classifications:- Marketers have traditionally classified products on
the basis of durability, tangibility, and use (Consumer or Industrial). Each
product type has an appropriate marketing – mix strategy.
A.
Durability And Tangibility:- Marketers classify products into three
groups according to durability and tangibility.
1.
Nondurable Goods are tangible goods normally consumed in one or a few
uses, such as soft drinks and soap. These goods are purchased frequently, so
the appropriate strategy is to make them available in many locations,
charge only a small markup and advertise heavily to induce trial and build
preference.
2.
Durable Goods are tangible goods that normally survive many uses
like refrigerators, automobiles, machine tools, clothing. Durable
products normally require more personal selling and service,
command a higher margin and require more seller guarantees.
3.
Services are intangible, inseparable, variable and perishable
products, and hence they require more quality control, supplier
credibility, and adaptability. Ex:- Hair cuts, Legal Advice, Insurance
Policies, Appliance Repairs. Etc.
B.
Consumer – Goods Classification:- The vast array of goods
consumers buy are classified on the basis of shopping habits. They
are distinguished among convenience, shopping, specialty and
unsought goods.
Convenience Goods are purchased frequently, immediately and
with a minimum of effort. Ex:- Soft Drinks, Soaps, Newspapers.
Convenience goods can be further divided in Staples,
Impulse Goods & Emergency Goods.
1.
Staples are those goods, which consumers purchase on a regular
basis. Ex:- Close up Toothpaste, Detol Hand wash, Britannia Marie
biscuits. Etc.
Impulse Goods are purchased without any planning or search
effort. Ex:- Chocolates, Candy Bars, Potato Chips. Etc.
Emergency Goods are purchased when a need is urgent. Ex:Umbrellas and Rain Coats with the advent of monsoons, pullover,
sweaters and shawls with the advent of winter.
Manufacturers of Impulse and Emergency goods should place
them in those outlets where consumers are likely to experience an
urge or compelling need to make a purchase.
2.
Shopping Goods are goods that the consumer characteristically
compares on the basis of suitability, quality, price or style. Ex:Furniture, Clothing, Used cars and All major appliances.
Shopping goods are further divide into Homogeneous
Shopping Goods and Heterogeneous Shopping Goods.
Homogeneous Shopping Goods are similar in quality but different
enough in price to justify shopping comparisons.
Heterogeneous Shopping Goods differ in product features and
services that may be more important than price. The seller of
heterogeneous shopping goods carries a wide assortment to satisfy
individual tastes and must have well – trained salespeople to inform and
advise customers.
3.
Specialty Goods have unique characteristics or brand identification for
which a sufficient number of buyers are willing to make a special
purchasing effort. Ex:- Cars, Stereo components, Photographic
Equipments. Etc. Specialty goods don’t require comparisons. Buyers invest
time only to reach dealers carrying the wanted products. Dealers don’t need
convenient locations, although they must let prospective buyers know their
location. Ex:- A Mercedes is a specialty good because interested buyers will
travel far to buy one.
4.
Unsought Goods are those the consumer doesn’t know about or does not
normally think of buying, such as smoke detectors. The classic examples of
unsought goods are Life Insurance, Encyclopedias, and Reference Books.
Unsought goods require advertising and personal – selling support.
C. Industrial – Goods Classification:- Industrial goods can be
classified in terms of their relative cost and how they enter the
production process, i.e. materials and parts, capital items, and
supplies and business services.
Materials and Parts are goods that enter the
manufacturer’s product completely. They fall into two classes: Raw
Materials, and Manufactured Materials and Parts. Raw
Materials fall into two major groups: Farm Products (Wheat,
Cotton, Fruits and vegetables) and Natural Products (Fish,
Lumber, Crude Petroleum, Iron Ore etc.).
Farm Products are supplied by many producers, who
turn them over to marketing intermediaries, who provide assembly,
grading, storage, transportation and selling services. They are
perishable and seasonal in nature and this gives rise to special
marketing practices, whereas their commodity character results in
relatively little advertising and promotional activity, with some
exceptions. At times, commodity groups will launch campaigns to
promote their product. Ex:- National Egg Co-ordination Committee
(NECC) regularly undertakes an intensive promotion campaign.
Natural Products are limited in supply. They usually
have great bulk and low unit value and must be moved from
producer to user. Fewer and larger producers often market them
directly to industrial users. As manufacturers depend on these
materials, long – term supply contracts are common. Price and
delivery reliability are the major factors influencing the selection of
suppliers.
Manufactured Materials and Parts fall into two
categories: Component Materials (iron, yarn, cement, wires, etc.)
and Component Parts (small motors, tires, castings, etc.).
Component materials are usually fabricated further – pig iron is
made into steel, and yarn is woven into cloth. Price and supplier
reliability are key purchase factors.
Component Parts enter the finished product with not
further change in form. Most manufactured materials and parts are
sold directly to industrial users. Price and service are major
marketing considerations, and branding and advertising tend to be
less important.
Capital Items are long – lasting goods that facilitate
developing or managing the finished product. They include two
groups: Installations and Equipments.
Installations consist of buildings (factories, offices) and
have Equipments (generators, drill presses, mainframe computers,
elevators). Installations are major purchases. They are usually
bought directly from the producer, whose sales force includes
technical personnel, and a long negotiation period precedes the
typical sale. Producers must be willing to design to specification and
to supply post-sale services. Advertising is much less important than
personal selling. Ex:- BHEL, L&T etc.
Equipments include portable factory equipments and
tools (hand tools, lift trucks) and office equipments (personal
computers, desks). These types of equipment don’t become part of a
finished product. They have a shorter life than installations but a
longer life than operating supplies. Although some equipment
manufacturers sell direct, more often there are intermediaries as the
market is geographically dispersed, the buyers are numerous, and
the orders are small. Quality, features, price and service are major
considerations. The sales force tend to be more important than
advertising, although advertising can be used effectively.
Supplies and Business Services are short – term goods
and services that facilitate developing or managing the finished
product. Supplies are of two kinds: Maintenance & Repair Items
(paint, nails, brooms, etc.) and Operating Supplies (lubricants,
coal, writing paper, pencils, etc.). Together they go under the name
of MRO goods. They are normally marketed through intermediaries
because of their low unit value and the great number and geographic
dispersion of customers. Price and service are important
considerations, because suppliers are standardized and brand
preference is not high. Business Services include Maintenance
and repair Services (maintenance of air conditioners, repair of
photocopying machines, etc.) and Business Advisory Services
(legal, management consulting, advertising, etc.). Maintenance and
repair services are usually supplied under contract by small
producers or are available from the manufacturers of the original
equipment. Business advisory services are usually purchased on the
basis of the supplier’s reputation and staff.
Product And Brand relationships:- Each product can be related to other
products to ensure that a firm is offering and marketing the optimal set of
products.
The Product Hierarchy:- The product hierarchy stretches from basic needs to
particular items that satisfy those needs. We can identify six levels of the
product hierarchy, using life insurance as an example:1. Need Family:- The core need that underlies the existence of a product
family. Ex:- Security.
2. Product Family:- All the product classes that can satisfy a core need with
reasonable effectiveness. Ex:- Savings and Income.
3. Product Class:- A group of products within the product family recognized
as having a certain functional coherence. Also known as a product category.
Ex:- Financial Instruments.
4. Product Line:- A group of products within a product class that are closely
related because they perform a similar function, are sold to the same
customer groups, are marketed through the same outlets or channels, or
fall within given price ranges. A product line may consist of different
brands, or a single family brand, or individual brand that has been line
extended . Ex:- Life Insurance.
5. Product Type:- A group of items within a product line that share one of
several possible forms of the product. Ex:- Term Life insurance.
6. Item:- A distinct unit within a brand or product line distinguishable by
size, price, appearance or some other attribute. Ex:- LIC’s renewable term
life insurance.
Branding
Brand:- The American Marketing Association defines a brand as “A
name, term, sign, symbol or design, or a combination of them,
intended to identify the goods or the services of one seller or
group of sellers and to differentiate them from those of
competitors.”
A brand is thus a product or service whose dimensions
differentiate it in some way from other products or services designed
to satisfy the same need. The differences may be functional,
rational, or tangible related to product performance of the brand.
In other words, a brand is an assurance or guarantee
that the product will perform as the customer thinks it should ,
which means, that the brand has already shaped the expectations
of the customers about itself. The brand embodies some values
that remain consistent over a period of time.
The customer expects these values to be delivered to him
during each encounter he has with the brand. Hence, the company
must realize that building a brand is not a short term activity.
Consistency is the most valued quality of a brand.
Branding has been around for centuries as a means to
distinguish the goods of one producer from those of another. Ex:- In the
fine arts, branding began with artists signing their works. Brand today play
a number of important roles that improve consumers’ lives and enhance
the financial value of firms.
The role of Brands:- Brands identify the source or maker of a product and
allow consumers – either individuals or organizations – to assign
responsibility for its performance to a particular manufacturer or
distributor. Consumers may evaluate the identical product differently
depending on how it is branded. They learn about brands through past
experiences with the product. As consumers’ lives become more
complicated, rushed and time starves, the ability of a brand to simplify
decision making and reduce risk is invaluable.
Brands also perform valuable functions for firms:1.
They simplify product handling or tracing.
2. A brand also offers the firm legal protection for unique features or aspects
of the product. – The brand name can be protected through registered
trademarks; manufacturing processes can be protected through patents;
and packaging can be protected through copyright and proprietary designs.
These intellectual property rights ensure that the firm can safely invest in
the brand and reap the benefits of a valuable asset.
3.
4.
Brands, signal a certain level of quality so that satisfied buyers
can easily choose the product again. Brand loyalty provides
predictability and security of demand for the firm, and it creates
barriers to entry that make it difficult for other firms to enter the
market. This loyalty also can translate into customer willingness to
pay a higher price often 20% to 25% more than competition brands.
To firms, brands represent enormously valued piece of legal
property that can influence consumer behavior, be bought and sold,
and provide the security of sustained future revenues to their
owners.
The Scope of Branding:- Branding is endowing products and services
with the power of a brand. It is all about creating differences
between products. Marketers need to teach consumers ‘who’ the
product is – by giving it a name and other brand elements to identify
it – as well as ‘what’ the product does and ‘why’ consumers should
care. Branding creates mental structures that help consumers
organize their knowledge, about products and services in a way that
clarifies their decision making and in the process, provides value to
the firm.
For Branding strategies to be successful and brand value
to be created, consumers must be convinced there are meaningful
differences among brands in the product or service category.
Ex:- Gillette, Merk, etc. These have been leaders in their product
categories for decades, due in part, to continual innovation. Gucci,
Nike, adidas and others have become leaders in their product
categories by understanding consumer motivations and decisions
and creating relevant and appealing images around their products.
Marketers can apply branding virtually anywhere a
consumer has a choice. It is possible to brand a physical good
(Maggi Noodles, Lux soap, Tata Indica/Indigo automobile), a
service (ICICI band, Jet airways, Blue Dart courier service), a store
(Big Bazar, Pantaloon, Shopper’s stop), a person (Aamir Khan,
Sachin Tendulkar), a Place (the state of Goa, the city of Bangalore or
the country India), an organization (UNICEF, Automobile
Association of India), or an Idea (Family Planning, Blood Donation,
freedom of speech).
Brand Equity:- Brand equity is the added value endowed on products and
services. It may be reflected in the way consumers think, feel, and act
with respect to the brand, as well as in the prices, market share, and
profitability the brand commands for the firm.
Customer – based brand equity is the differential effect that
brand knowledge has on consumer response to the marketing of that
brand. There are three key ingredients of customer – based brand equity.
First, brand equity arises from differences in consumer
response. If no differences occur, then the brand name product is
essentially a commodity or generic version of the product. Here
competition will probably be based on price.
Second, differences in response are a result of consumer’s
knowledge about the brand. Brand knowledge consists of all the
thoughts, feelings, images, experiences, beliefs, and so on that become
associated with the brand. In particular, brands must create strong,
favorable, and unique brand associations with customers. Ex:- Volvo, H.P,
Harley – Davidson.
Third, the differential response by consumers that makes up
brand equity is reflected in perceptions, preferences, and behavior
related to all aspects of the marketing of a brand. Stronger brands lead to
greater revenue.
The challenge for marketers in building a strong brand is
therefore ensuring that customers have the right type of experiences
with products, services and their marketing programs to create the
desired brand knowledge.
Some Key Benefits of Brand Equity: Improved perceptions of product performance.
 Greater loyalty.
 Less vulnerability to competitive marketing actions.
 Less vulnerability to marketing crises.
 Larger margins.
 More inelastic consumer response to price increases.
 More elastic consumer response to price decreases.
 Greater trade cooperation and support.
 Increased marketing communications effectiveness.
 Possible licensing opportunities.
 Additional brand extension opportunities.
Brand Elements:- Brand elements are those trademark able devices that
identify and differentiate the brand. Most strong brands employ
multiple brand elements. Nike has the distinctive ‘swoosh’ logo, the
empowering ‘just do it’ slogan, and the ‘Nike’ name based on the
winged goddess of victory.
Brand Element Choice Criteria:- There are six main criteria for
choosing brand elements. The first three – Memorable,
Meaningful, and Likable – are ‘Brand building’. The latter three –
Transferable, Adaptable, and Protectable – are ‘Defensive’ and
deal with how to leverage and preserve the equity in a brand element
in the face of opportunities and constraints.
1. Memorable:- How easily is the brand element recalled and
recognized? Is this true at both purchase and consumption? Short
brand names such as Lux, LG, Taj are memorable brand elements.
2. Meaningful:- Is the brand element credible and suggestive of the
corresponding category? Does it suggest something about a product
ingredient or the type of person who might use the brand? Ex:- Fair
& Lovely fairness cream, Close –Up toothpaste, Mother’s Recipe
pickles. Etc.
3.
4.
5.
Likable:- How aesthetically appealing is the brand element? Is it likable
visually, verbally, and in other ways? Concrete brand names such as
Scorpio, Splendor etc. evoke much imagery.
Transferable:- Can the brand element be used to introduce new products
in the same or different categories? Although initially an online book seller,
Amazon.com was smart enough not to call itself “Books ‘R’ Us.” The
Amazon is famous as the world’s biggest river, and the name suggests the
wide variety of goods that could be shipped, an important descriptor of the
diverse range of products the company now sells.
Adaptable:- How adaptable and updatable is the brand element? Lifebuoy,
launched in the year 1895, with its brick red color and the cresylic perfume,
underwent several changes over the years. The biggest change took place in
the year 2002, when the brand was re-launched with new formulations,
colour, fragrance, and packaging to make the brand contemporary. With
the re-launch, Lifebuoy made a conscious shift in its positioning from the
victorious male concept of health to a warmer and more versatile benefit of
health for the entire family. Although the product formulation, packaging,
and other brand elements have changed to synchronize with the changing
consumer perceptions and preferences, the brand continues to maintain its
core value proposition of ‘health’.
6.
Protectable:- How legally protectable is the brand element? How
competitively protectable? Names that become synonymous with product
categories – such as Kleenex, Surf, Scotch Tape, Xerox, Fiberglass – should
retain their trademark rights and not become generic.
Co – Branding and Ingredient Branding:Co – Branding:- In Co – branding – also known as dual branding or brand
building – two or more well – known brands are combined into a joint
product or marketed together in some fashion. One form is same –
company co – branding, as when Gillette India jointly promotes its
Gillette Mach 3 Turbo saving system and Gillette Shaving Gel. Eureka
Forbes jointly promotes its water purifier Aquagrard and vacuum cleaner
Euroclean.
Another form is joint venture co – branding, as in the case of
Indian Oil and Citibank co – branded credit cards.
Further there is multiple-sponsor co-branding, such as
Taligent, a one-time technological alliance of Apple, IBM, and Motorola.
Finally, there is retail co-branding where two retail
establishments, such as fast-food restaurants, use the same location as a
way to optimize both space and profits.
The main advantage of co-branding is that a product may be
convincingly positioned by virtue of the multiple brands. Cobranding a can generate greater sales from the existing target market
as well as opening additional opportunities for new consumers and
channels. It can also reduce the cost of product introduction,
because it combines two well-known images and speeds adoption.
Ex:- Well adopted by the automobile industry.
The potential disadvantages of co-branding are the risks and lack
of control in becoming aligned with another brand in the minds of
consumers. Consumer expectations about the level of involvement
and commitment with co-brands are likely to be high, so
unsatisfactory performance could have negative repercussions for
both brands.
For co-branding to succeed, the two brands must separately have
brand equity – adequate brand awareness and a sufficiently positive
brand image. Research studies show that consumers are more apt to
perceive co-brands favorably if the two brands are complementary
rather than similar.
Ingredient Branding:- Ingredient branding is a special case of cobranding. It creates brand equity for materials, components, or parts
that are necessarily contained within other branded products. Ex:Intel Processors, Lucus automobile parts.
Ingredient brands try to create enough awareness and
preference for their product so consumers will not buy a ‘host’
product that doesn’t contain the ingredient.
Measuring Brand Equity:- There are two basic approaches to
measuring brand equity.
Indirect Approach assesses potential sources of brand equity by
identifying and tracking consumer brand knowledge structures.
Direct approach assesses the actual impact of brand knowledge
on consumer response to different aspects of the marketing.
The two general approaches are complementary, and marketers
can employ both. For brand equity to perform a useful strategic
function and guide marketing decisions, marketers need to fully
understand:1.
The sources of brand equity and how they affect outcomes of
interest, as well as,
2.
How these sources and outcomes change, if at all, over time.
Brand audits are important for the former; brand tracking for
the later.
A Brand Audit is a consumer-focused series of procedures to assess
the health of the brand, uncover its sources of brand equity,
and suggest ways to improve and leverage its equity. Marketers
should conduct a brand audit whenever they are considering
important shifts in strategic direction. Conducting brand audits
on a regular basis, like annually, allows marketers to keep their
fingers on the pulse of their brands so they can manage them
more proactively and responsively. Audits are particularly useful
background for managers for setting up their marketing plans.
Brand Tracking Studies collect quantitative date from consumers
on a routine basis over time to provide marketers with
consistent, baseline information about how their brands and
marketing programs are performing on key dimensions.
Tracking studies are a means of understanding where, how much,
and in what ways brand value is being created, to facilitate day
– to – day decision making.