Chapter 8

PRODUCTS, SERVICES, AND BRANDS: BUILDING

CUSTOMER VALUE

MARKETING STARTER: CHAPTER 8

The ESPN Brand: Every Sport Possible—Now

Synopsis
Few people think of ESPN as a brand. But the ESPN name is synonymous with sports entertainment,
inexorably linking consumers to their sports memories, realities, and anticipations. As such, ESPN is a
brand experience. It’s a meaningful part of customers’ lives. No matter who you are, chances are good that
the ESPN brand has touched you in some meaningful way. The far-reaching brand encompasses a
multibillion-dollar sports empire with hundreds of products reaching sports fans around the world. The
ESPN media empire includes television (dozens of cable networks and production of sports programming
for every major sport), radio (operating the largest sports radio network), digital (encompassing various
sports Web sites including ESPN.com and ESPN360.com), and publishing (ESPN The Magazine and ESPN
Books), as well as event management (X Games, Winter X Games, Bassmaster Classic, and others) and
consumer products. But more than just a collection of products, ESPN has coordinated all these efforts
under a strategy that supports its core brand identity. Sports fans around the world love their ESPN. That
creates fanatical loyalty, regardless of which product a sports fan might be accessing. This affinity for the
brand makes ESPN networks and media vehicles among the most attractive in the world for advertisers. If
it has to do with sports, ESPN covers it and delivers it to customers anywhere and anytime.

Discussion Objective
This discussion will explore the essence and strength of the ESPN brand and the impact of ESPN on the
lives of its customers. Students might not think of ESPN as a brand at first, although they’ll quickly realize
that it’s every bit as much an iconic brand as Nike or Coca-Cola. ESPN provides a great example of how to
build and manage a powerhouse brand. Because this brand is so popular with students, the challenge will be
to keep the discussion focused and moving.

Starting the Discussion

To kick things off, show the pervasiveness of the ESPN brand. Go to the ESPN Sports Center YouTube
channel and show the latest segment of “In Case You Missed It” (www.youtube.com/user/espn?
blend=1&ob=4, middle of the page), which provides highlights of the past week in sports from various
ESPN programs. The 3-minute segment illustrates the breadth of ESPN’s sports coverage. At the time of
this writing, the channel also aired a composite of clips submitted by viewers showing their own personal
“sports moments,” demonstrating the one-to-one connection between the ESPN brand and customers. If
time permits, give a focused tour of ESPN.com, briefly highlighting the major sports, then spending more
time on obscure sports under the “More Sports” tab (http://espn.go.com/sports/). It features an exhaustive
list of sports, including horse racing, poker, lacrosse, rugby, mixed martial arts, cricket, action sports, and
Bassmaster. However, ESPN is more than just a collection of media. It’s a brand experience. Even the
obscure sports seem familiar when offered under the good old ESPN brand. Use the following questions to
direct the discussion.
Discussion Questions
1. When you think of ESPN, what comes to mind? (Given students’ likely passion for ESPN, there
should be no shortage of responses. In response to the first question, they will probably bring up
various ESPN media, specific programs like SportsCenter, and the breadth of sports ESPN’s
covers. Touring the ESPN YouTube channel and the ESPN Web site during this discussion will
help illustrate the breadth and depth of the ESPN sports empire.)
2. What does ESPN mean to you? How would it affect your life if ESPN disappeared for the next
month or two? (These two questions will let you dig deeper into the essence of the ESPN brand.
More than just a collection of media and programs, many people feel a deep connection with
ESPN. The brand is inexorably linked with their sports memories, realities, and anticipations. The
familiar ESPN logo evokes lots of memories, feelings, and expectations. As noted in the story, if it
has to do with your life and sports, there’s a good chance that ESPN is involved.)
3. What’s involved in managing a brand like ESPN. Is ESPN a well-managed brand? (Use this
question to transition into the concepts of Chapter 8. The chapter notes that brands are powerful
assets that must be carefully developed and managed. ESPN is an excellent example of a well-
managed, powerfully positioned brand. Keep ESPN in mind as you move through the various
product, service, and branding topics discussed in the chapter.)

CHAPTER OVERVIEW
Use Power Point Slide 8-1 Here

In this and the next chapter, we look at how companies develop and manage products and
brands. The product is usually the first and most basic marketing consideration.

This chapter begins with a deceptively simple question: What is a product? After
addressing this question, we look at ways to classify products in consumer and business
markets.

Then we discuss the important decisions that marketers make regarding individual
products, product lines, and product mixes.

Next, we look into the critically important issue of how marketers build and manage
brands.

Finally, we examine the characteristics and marketing requirements of a special form of

product—services.

CHAPTER OBJECTIVES
Use Power Point Slide 8-2 Here

1. Define product and the major classifications of products and services.

2. Describe the decisions companies make regarding their individual products
and services, product lines, and product mixes.
3. Identify the four characteristics that affect the marketing of a service and the
additional marketing considerations that services require.

4. Discuss branding strategy—the decisions companies make in building and

managing their brands.
CHAPTER OUTLINE
p. 222 INTRODUCTION

You may not think of ESPN as a “brand.” Instead, you may

think of it as multiple cable television networks, a magazine,
or perhaps a Web site. ESPN is all of those things. But more
than that, ESPN is a brand experience—a meaningful part of
customers’ lives. To consumers, ESPN is synonymous with
sports entertainment, inexorably linked with their sports
memories, realities, and anticipations. p. 223
Ad: ESPN
Today, ESPN is as much recognized and revered as iconic
megabrands like Coca-Cola, Nike, or Google. To fans
around the world, ESPN means sports. Tech savvy, creative,
and often irreverent, the well-managed, ever-extending brand
continues to build meaningful customer experiences and
relationships. If it has to do with your life and sports—large
or small—ESPN covers it for you, anywhere you are, 24/7.

 Assignments, Resources
Use Web Resources 1 and 2 here
 Opening Vignette Questions
1. What “product” is ESPN really selling?
2. Who would you consider to be their top target
markets?
3. How would you compare the ESPN “brand” to
that of other sports networks?
p. 224 WHAT IS A PRODUCT? Chapter Objective 1

PPT 8-3 A product is anything that can be offered to a market for p. 224
attention, acquisition, use, or consumption that might satisfy Key Terms:
a want or need. Product, Service

Broadly defined, “products” also include services, events,

persons, places, organizations, ideas, or mixes of these.

Services are a form of product that consists of activities, p. 225

benefits, or satisfactions offered for sale that are essentially Photos: The Olive
intangible and do not result in the ownership of anything. Garden, Blackberry

p. 224 Products, Services, and Experiences

PPT 8-4
A company’s market offering often includes both tangible
goods and services.
At one extreme, the offer may consist of a pure tangible
good, such as soap or toothpaste. p. 226
Figure 8.1: Three
At the other extreme are pure services, for which the offer Levels of Products
consists primarily of a service.

To differentiate their offers, marketers are creating and

managing customer experiences with their brands or
company.

 Assignments, Resources
Use Discussing the Concepts 1 here
Use Web Resources 3 here
 Troubleshooting Tip
Students will most likely have difficulty under-
standing the levels of products exhibited in Figure
8.1; no one in class is likely to have thought of a
product in that level of detail before. This is a critical
piece of information the students will need, however,
so it is worth going through several products and
services to get at the core benefit, actual product, and
augmented product in each so that they can see how
to apply this concept.

p. 225 Levels of Product and Services

p. 225
PPT 8-5 Product planners need to think about products and services Photo
on three levels. Core, Actual, and
Augmented Product
1. Core customer value, which addresses the question,
What is the buyer really buying?
2. Actual product.
3. Augmented product, which is created around the core
benefit and actual product by offering additional
consumer services and benefits.

When developing products, marketers first must identify the

core customer value that consumers seeks from the product.
They must then design the actual product and find ways to
augment it in order to create this customer value and the
most satisfying customer experience. p. 226
Figure 8.1
p. 226 Product and Service Classifications Three Levels of
Product
PPT 8-6 There are two main classifications of products: consumer
products and industrial products.
Consumer Products
PPT 8-7
Consumer products are products and services bought by
final consumers for personal consumption.
p. 226
Consumer products include (see Table 8.1): Key Terms:
PPT 8-8 Consumer Product,
• Convenience products are consumer products and Convenience
services that customers usually buy frequently, Product, Shopping
immediately, and with a minimum of comparison and Product, Specialty
PPT 8-9 buying effort. Product
• Shopping products are less frequently purchased
consumer products and services that customers p. 227
compare carefully on suitability, quality, price, and Table 8.1:
PPT 8-10 style. Marketing
• Specialty products are consumer products and Considerations for
services with unique characteristics or brand Consumer Products
identification for which a significant group of buyers
PPT 8-11 is willing to make a special purchase effort.
• Unsought products are consumer products that the
consumer either does not know about or knows about p. 227
but does not normally think of buying. Key Term:
p. 227 Unsought Product,
PPT 8-12 Industrial Products Industrial Product

Industrial products are those purchased for further

processing or for use in conducting a business.
PPT 8-13
The three groups of industrial products and services are:

• Materials and parts include raw materials and

manufactured materials and parts.
• Capital items are industrial products that aid in the
buyer’s production or operations, including
installations and accessory equipment.
• Supplies and services include operating supplies and
p. 228 maintenance and repair services.

PPT 8-14 Organizations, Persons, Places, and Ideas

Organization marketing consists of activities undertaken to

create, maintain, or change the attitudes and behavior of
PPT 8-15 target consumers toward an organization. p. 228
Photos: Rachael
Person marketing consists of activities undertaken to create,
maintain, or change attitudes or behavior toward particular Ray, Bobby Flay
people.
PPT 8-16
Place marketing involves activities undertaken to create,
maintain, or change attitudes or behavior toward particular
places. p. 229
Key Term: Social
Social marketing is the use of commercial marketing Marketing
concepts and tools in programs designed to bring about
social change.

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

p. 229 Chapter Objective 2

PRODUCT AND SERVICE DECISIONS
PPT 8-17 Individual Product and Service Decisions p. 229
Figure 8.2:
PPT 8-18 Product and Service Attributes Individual Product
Decisions
Developing a product or service involves defining the
benefits that it will offer. These benefits are communicated
and delivered by product attributes such as quality, features,
and style and design.

PPT 8-19 Product Quality is creating customer value and satisfaction.

p. 230
Key Term: Product
Total quality management (TQM) is an approach in which all Quality
the company’s people are involved in constantly improving
the quality of products, services, and business processes.

Product quality has two dimensions: level and consistency.

The quality level means performance quality or the ability of

a product to perform its functions. Quality conformance
means quality consistency, freedom from defects, and
consistency in delivering a targeted level of performance.

PPT 8-20 Product Features are a competitive tool for differentiating

the company’s product from competitors’ products.

The company should periodically survey buyers who have

used the product and ask these questions: How do you like
the product? Which specific features of the product do you
like most? Which features could we add to improve the
product?

PPT 8-21 Product Style and Design is another way to add customer
value.

Style describes the appearance of a product. Design

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

Branding
p. 231
A brand is a name, term, sign, symbol, or design, or a Key Term: Brand
PPT 8-22 combination of these, that identifies the maker or seller of a
product or service.

Branding helps buyers in many ways.

• Brand names help consumers identify products that

might benefit them.
• Brands say something about product quality and
consistency.

Branding gives the seller several advantages. p. 231

Ad: OXO Good
• The brand name becomes the basis on which a whole Grips
story can be built about a product.
• The brand name and trademark provide legal
protection for unique product features.
• The brand name helps the seller to segment markets.
p. 232
Packaging Key Term:
Packaging
PPT 8-23 Packaging involves designing and producing the container
or wrapper for a product.
p. 232
p. 233 Ad: Amazon
Labeling

Labels perform several functions.

• The label identifies the product or brand.

• The label describes several things about the product. p. 233
• The label promotes the brand. Ad: Pepsi
Labeling also raises concerns. As a result, several federal and
state laws regulate labeling.

The most prominent is the Fair Packaging and Labeling Act

of 1966.

Labeling has been affected in recent times by:

• Unit pricing (stating the price per unit of standard

measure)
• Open dating (stating the expected shelf life of the
product)
• Nutritional labeling (stating the nutritional values in
the product)
p. 233
PPT 8-24
Product Support Services
p. 234
The first step is to survey customers periodically to assess Ad: Nordstrom
the value of current services and to obtain ideas for new
ones.

Next, the company can take steps to fix problems and add
new services that will both delight customers and yield
profits to the company.

 Assignments, Resources
Use Discussing the Concepts 3 here
Use Individual Assignment 1 here

p. 234 Product Line Decisions

PPT 8-25 A product line is a group of products that are closely related p. 234
because they function in a similar manner, are sold to the Key Term: Product
same customer groups, are marketed through the same types Line
of outlets, or fall within given price ranges.

PPT 8-26 Product line length is the number of items in the product
line.

Product line filling involves adding more items within the

p. 235
present range of the line.
Ad: Marriott
Product line stretching occurs when a company lengthens its
product line beyond its current range.
Companies located at the upper end of the market can stretch
their lines downward.

Companies located at the lower end of the market can stretch

their product lines upward.

Companies located in the middle range of the market can

stretch their lines in both directions.

p. 235 Product Mix Decisions

PPT 8-27 Product mix (or product portfolio) consists of all the
product lines and items that a particular seller offers for sale. p. 235
Key Term: Product
A company’s product mix has four dimensions: width, Mix (Product
length, depth, and consistency. Portfolio)

1. Product mix width refers to the number of different

product lines the company carries.
2. Product mix length refers to the total number of items
the company carries within its product lines.
3. Product mix depth refers to the number of versions
offered of each product in the line.
4. Product mix consistency refers to how closely related
the various product lines are in end use, production
requirements, distribution channels, or some other
way.

The company can increase its business in four ways.

1. It can add new product lines, widening its product

mix.
2. It can lengthen its existing product lines.
3. It can add more versions of each product, deepening
its product mix.
4. It can pursue more product line consistency.

 Assignments, Resources
Use Applying the Concepts 1 here
Use Individual Assignment 2 here
Use Web Resources 4 here
Use Video Case here
p. 236 SERVICES MARKETING Chapter Objective 4

PPT 8-28 Services account for close to 79 percent of U.S. gross

domestic product.

Services make up 64 percent of gross world product.

Nature and Characteristics of a Service

A company must consider four service characteristics when p. 236

designing marketing programs: intangibility, inseparability, Key Term: Service
variability, and perishability (see Figure 8.5). Intangibility

PPT 8-29 1. Service intangibility means that services cannot be p. 237

seen, tasted, felt, heard, or smelled before they are Figure 8.3: Four
bought. Service
2. Service inseparability means that services cannot be Characteristics
separated from their providers, whether the providers
are people or machines. Because the customer is also p. 237
present as the service is produced, provider-customer Key Term: Service
interaction is a special feature of services marketing. Inseparability
3. Service variability means that the quality of services
depends on who provides them as well as when, p. 237
where, and how they are provided. Ad: Mayo Clinic
4. Service perishability means that services cannot be
p. 238 stored for later sale or use. p. 283
Key Terms: Service
PPT 8-30 Marketing Strategies for Service Firms Variability, Service
Perishability
PPT 8-31 The Service-Profit Chain

In a service business, the customer and front-line service

employee interact to create the service.
p. 238
The service-profit chain consists of five links: Key Term: Service-
Profit Chain
1. Internal service quality—superior employee selection
and training, a quality work environment, and strong
support for those dealing with customers, which
results in... p. 239
2. Satisfied and productive service employees—more Photo: Four Seasons
satisfied, loyal, and hardworking employees, which
results in...
3. Greater service value—more effective and efficient
customer value creation and service delivery, which
results in...
4. Satisfied and loyal customers—satisfied customers
who remain loyal, repeat purchase, and refer other
customers, which results in...
5. Healthy service profits and growth—superior service
firm performance

Service marketing requires internal marketing and p. 240

interactive marketing. (Figure 8.6) Photo: Zappos.com

PPT 8-32 Internal marketing means that the service firm must orient
and motivate its customer-contact employees and supporting p. 240
service people to work as a team to provide customer Key Terms: Internal
satisfaction. Marketing,
Interactive
PPT 8-33 Interactive marketing means that service quality depends Marketing
heavily on the quality of the buyer-seller interaction during
the service encounter.
p. 241
Service companies face three major marketing tasks: They Figure 8.4
want to increase their service differentiation, service quality, Three Types of
and service productivity. Service Marketing
p. 241
PPT 8-34 Managing Service Differentiation

Service companies can differentiate their service delivery by

having more able and reliable customer-contact people, by
developing a superior physical environment in which the
service product is delivered, or by designing a superior
delivery process.

Service companies can work on differentiating their images

through symbols and branding.
p. 241
PPT 8-35 Managing Service Quality Ad: Petsmart

Service quality is harder to define and judge than product

quality.

Service quality will always vary, depending on the p. 242

interactions between employees and customers. Photo: Southwest

Good service recovery can turn angry customers into loyal

ones.
PPT 8-36 Managing Service Productivity

Service firms are under great pressure to increase service

productivity.
• They can train current employees better or hire new
ones who will work harder or more skillfully.
• They can increase the quantity of their service by
giving up some quality.
• They can harness the power of technology.

 Assignments, Resources
Use Real Marketing 8.2 here
Use Discussing the Concepts 6 here
Use Focus on Ethics here
Use Additional Project 4 here
Use Think-Pair-Share 5 here
Use Outside Example 2 here
 Troubleshooting Tip
• The service characteristics of intangibility,
inseparability, variability, and perishability are
usually picked up fairly easily, but again, various
examples from day-to-day life may help. For
instance, everyone has had to cancel at least one
doctor’s appointment in his or her life—that
beautifully illustrates the problem of perishability.
Female students will understand inseparability by
talking about the hair salons they use. Ask: If the
hairdresser you used left, would you easily switch to
another person at the salon? Many students today
travel heavily, so talking about airline personnel can
illustrate service variability. Intangibility is the
easiest characteristic to appreciate, as most students
will have suffered through having to choose between
several universities from whom they had received
acceptances.

p. 243 BRANDING STRATEGY: BUILDING STRONG Chapter Objective 3

BRANDS

Some analysts see brands as the major enduring asset of a

company.

PPT 8-37 Brand Equity is the differential effect that knowing the p. 243
brand name has on customer response to the product and its Key Term: Brand
marketing. Equity

Young & Rubicam’s Brand Asset Evaluator measures brand

strength along four consumer perception dimensions:

1. Differentiation (what makes the brand stand out)

2. Relevance (how consumers feel it meets their needs)
3. Knowledge (how much consumers know about the
brand)
4. Esteem (how highly consumers regard and respect the
brand)

Brand valuation is the process of estimating the total

financial value of a brand.

High brand equity provides a company with many p. 244

competitive advantages. Ad: Converse

• High level of consumer brand awareness and loyalty

• More leverage in bargaining with resellers
• More easily launch line and brand extensions
• Defense against fierce price competition
• Forms the basis for building strong and profitable
customer relationships

The fundamental asset underlying brand equity is customer

equity—the value of the customer relationships that the
brand creates.
p. 244
p. 244 Building Strong Brands Figure 8.5: Major
Brand Strategy
PPT 8-38 Brand Positioning Decisions

PPT 8-39 Marketers can position brands at any of three levels. p. 239
Ad: Amtrak
1. They can position the brand on product attributes.
2. They can position the brand with a desirable benefit.
3. They can position the brand on beliefs and values.
PPT 8-40 Brand Name Selection

Desirable qualities for a brand name include the following:

1. It should suggest something about the product’s

benefits and qualities.
2. It should be easy to pronounce, recognize, and
remember.
3. The brand name should be distinctive.
4. It should be extendable.
5. The name should translate easily into foreign
languages.
6. It should be capable of registration and legal
protection.

Brand Sponsorship
PPT 8-41
A manufacturer has four sponsorship options.

1. The product may be launched as a manufacturer’s

brand (or national brand).
2. The manufacturer may sell to resellers who give it a
private brand (also called a store brand or distributor
brand).
3. The manufacturer can market licensed brands.
4. Two companies can join forces and co-brand a
product.

National Brands Versus Store Brands

p. 247
National brands (or manufacturers’ brands) have long Key Term: Store
dominated the retail scene. In recent times, an increasing Brand (Private
number of retailers and wholesalers have created their own Brand)
store brands (or private brands).

Recent tougher economic times have created a store-brand

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

In the battle of the brands between national and private

brands, retailers have many advantages.

• Retailers often price their store brands lower than

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

Licensing p. 249
Ad: SpongeBob
Name and character licensing has grown rapidly in recent SquarePants
years. Annual retail sales of licensed products in the United
States and Canada have grown from only $4 billion in 1977
to $55 billion in 1987 and more than $192 billion today.
Co-branding p. 249
Key Term: Co-
Co-branding occurs when two established brand names of branding
different companies are used on the same product.

Co-branding offers many advantages.

• The combined brands create broader consumer

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

Co-branding also has limitations.

• Such relationships involve complex legal contracts

and licenses.
• Co-branding partners must carefully coordinate their
advertising, sales promotion, and other marketing
efforts.
• Each partner must trust the other will take good care
of its brand.
p. 249 Brand Development

A company has four choices when it comes to developing pp. 250

brands (see Figure 8.4). Key Terms: Line
Extension, Brand
PPT 8-42 1. Line extensions occur when a company extends Extension,
existing brand names to new forms, colors, sizes, Multibranding, New
ingredients, or flavors of an existing product Brands
category.
2. Brand extensions extend a current brand name to
new or modified products in a new category. p. 250
3. Multibranding introduces additional brands in the Figure 8.6: Brand
same product category. Development
4. New brands Strategies

The megabrand strategy weeds out weaker brands and

focuses their marketing dollars only on brands that can p. 250
achieve the number-one or number-two market share Ad: P&G
positions in their categories.
p. 251 Managing Brands p. 252
Ad: Disney
The brand experience is customers coming to know a brand
through a wide range of contacts and touchpoints.
Companies need to periodically audit their brands’ strengths
and weaknesses.

 Assignments, Resources
Use Real Marketing 8.1 here
Use Discussing the Concepts 4 and 5 here
Use Applying the Concepts 2 and 3 here
Use Marketing by the Numbers here
Use Additional Projects 1, 2, and 3 here
Use Small Group Assignment 1 here
 Troubleshooting Tip
Students’ eyes can glaze over at the concepts of
brand equity and brand sponsorship. Asking
questions such as the students’ perceptions of well-
known brands such as Starbucks, Coke, Nike, and the
like will help them understand what brand equity is
all about. You can also tie in the discussion of the
three levels of product with this idea of brand equity.
Finally, by using different products with different
brand sponsorships—several examples from Sears,
auto companies, department store private labels, and
various licensed properties from Disney or Warner
Brothers will do—you can bring students to an
understanding of this important concept.

END OF CHAPTER MATERIAL

Discussing the Concepts

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

Answer:

A product is anything that can be offered to a market for attention, acquisition, use, or
consumption that might satisfy a want or need. Products include more than just
tangible objects. Broadly defined, “products” also include services, events, persons,
places, organizations, ideas, or mixes of these. A product can be thought about on
three levels (see Figure 8.1). Each level adds more customer value. The most basic
level is the core customer value, which addresses the question, What is the buyer
really buying? When designing products, marketers must first define the core,
problem-solving benefits or services that consumers seek. At the second level,
product planners must turn the core benefit into an actual product. They need to
develop product and service features, design, a quality level, a brand name, and
packaging. Finally, product planners must build an augmented product around the
core benefit and actual product by offering additional consumer services and benefits.

1. Compare and contrast industrial products from consumer products. (AACSB:

Communication; Reflective Thinking)

Answer:

Industrial products are those purchased for further processing or use in

conducting a business. Thus, the distinction between a consumer product and an
industrial product is based on the purpose for which the product is bought. If a
consumer buys a lawn mower for use around home, the lawn mower is a
consumer product. If the same consumer buys the same lawn mower for use in a
landscaping business, the lawn mower is an industrial product.

2. Explain the importance of product quality and discuss how marketers use quality
to create customer value. (AACSB: Communication)

Answer:

Product quality is one of the marketer’s major positioning tools. Quality has a
direct impact on product or service performance. Thus, it is closely linked to
customer value and satisfaction. In the narrowest sense, quality can be defined as
“freedom from defects.” But most customer-centered companies go beyond this
narrow definition. Instead, they define quality in terms of creating customer value
and satisfaction. Product quality has two dimensions—level and consistency. In
developing a product, the marketer must first choose a quality level that will
support the product’s positioning. Here, product quality means performance
quality—the ability of a product to perform its functions. Beyond quality level,
high quality also can mean high levels of quality consistency. Here, product
quality means conformance quality—freedom from defects and consistency in
delivering a targeted level of performance. All companies should strive for high
levels of conformance quality.

3. Compare and contrast the four brand sponsorship options available to a

manufacturer. Provide an example of each. (AACSB: Communication; Reflective
Thinking)

Answer:

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

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

4. Discuss the brand development strategies marketers use to develop brands.

Provide an example of each strategy. (AACSB: Communication; Reflective
Thinking)

Answer:

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

5. Describe the four characteristics of services that marketers must consider when
designing marketing programs. How do the services offered by a massage
therapist differ from those offered by a grocery store regarding these
characteristics? (AACSB: Communication, Reflective Thinking)

Answer:

The four special characteristics of services are: intangibility, inseparability,

variability, and perishability. Service intangibility means that services cannot be seen,
tasted, felt, heard, or smelled before they are bought. Service inseparability means
that services cannot be separated from their providers, whether the providers are
people or machines. Service variability means that the quality of services depends on
who provides them as well as when, where, and how they are provided. Service
perishability means that services cannot be stored for later sale or use. Services
offered by a massage therapist are more intangible, inseparable, variable, and
perishable than those offered by a grocery store because a massage therapist offers
more of a pure service than does a store that sells merchandise. Compared to the
services offered by a store, it is more difficult to evaluate the quality of the service
provided by a therapist prior to the visit. The customer must be present for the
massage to be performed, and the time spent creating the service cannot be stored for
later purchase if the customer misses an appointment.

Applying the Concepts

1. What do Betty Crocker, Pillsbury, Cheerios, and Hamburger Helper have in

common? They are all familiar brands that are part of the General Mills product mix.
Visit the General Mills Web site (www.generalmills.com) and examine its list of
brands. Name and define the four dimensions of a company’s product mix and
describe General Mills’ product mix on these dimensions. (AACSB: Communication;
Reflective Thinking; Use of IT)

Answer:

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

2. Branding is not just for products and services—states are getting in on the action, too,
as you learned from reading about place marketing in the chapter. One of the most
recent examples of state branding comes from Michigan with its “Pure Michigan”
campaign, resulting in millions of dollars of tourism revenue. Other famous place
branding campaigns include “Virginia is for Lovers,” “Florida—the Sunshine State,”
and “What Happens in Vegas Stays in Vegas.” In a small group, come up with a
brand identity proposal for your state. Present your idea to the rest of the class and
explain the meaning you are trying to convey. (AACSB: Communication; Reflective
Thinking)

Answer:

This should be a fun exercise for students. Other current state branding examples
include:

Rhode Island—“The biggest little state in the Union”

Arizona—“The Grand Canyon State”
“I Love New York”
West Virginia—“Open for Business”
South Dakota—“Great Faces, Great Places”
Hawaii—“Aloha spirit”
New Hampshire—“Live Free or Die”

3. A product’s package is often referred to as a “silent salesperson” and is the last

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

Answer:

Students’ responses will vary but they should evaluation each brand along the four
dimensions of the VIEW model.

Focus on Technology

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

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

Answer:

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

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

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

Answer:

Players can pay for virtual goods through PayPal, prepaid cards purchased from retail
stores, through a wireless provider, or swap them with other players on a number of
third-party Web sites. This fast-growing e-commerce segment is not without
problems, however, as it is vulnerable to cyber criminals (see Ben Worthen (July 21,
2010), “Fraudsters Like Virtual Goods,” the Wall Street Journal, p. B5).

The currency used in Entropia Universe is the PED, which stands for Project Entropia
Dollars. The ratio of PEDs to U.S. dollars is 10:1. Linden Dollars are used in Second
Life and 250 Linden dollars equals $1. Facebook offers 100 credits for $1. For a list
of fictional currencies in computer games, see
http://en.wikipedia.org/wiki/List_of_fictional_currencies#Fictional_currency_in_com
puter_games.

Focus on Ethics
“Meet us before you need us”—that’s the motto of a cemetery in Denver. Facing
decreasing demand as more Americans choose cremation, cemeteries across the country
are marketing to the living in hopes they’ll become customers later. Although funeral
homes and cemeteries have long urged customers to purchase before they needed the
service, it’s the new marketing that is drawing criticism. Some activities are low-key,
such as poetry workshops, art shows, and nature walks, but some are downright lively.
One cemetery staged a fireworks show and sky divers. Other festivities include concerts,
outdoor movies, and clowns. Cemetery directors pine for the old days when, more than a
century ago, cemeteries were a place for social gatherings where families visited and
picnicked near a loved one’s grave. Although many of the new activities are staged in the
evening, some occur during the day, so directors must use discretion to avoid interrupting
a funeral.

1. What types of products are burial plots and pre-purchased funeral services? Explain
your choice. (AACSB: Communication; Reflective Thinking)

Answer:

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

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

Communication; Ethical Reasoning)

Answer:

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

Marketing by the Numbers

What is a brand’s worth? It depends on who is measuring it. For example, in 2009
Google was valued to be worth $100 billion by one brand valuation company but only
$32 billion by another. Although this variation is extreme, it is not uncommon to find
valuations of the same brand differ by $20 to $30 billion. Interbrand and BrandZ publish
global brand value rankings each year, but a comparison of these two companies’ 2009
ranking reveals an overlap of only six of the top ten brands.
1. Compare and contrast the methodologies used by Interbrand (www.interbrand.com)
and BrandZ (www.brandz.com) to determine brand value. Explain why there is a
discrepancy in the rankings from these two companies. (AACSB: Communication;
Reflective Thinking; Analytical Reasoning)

Answer:

The methodologies of the two companies are very similar in that they use financial
data that are publically available. The two companies do not examine the same group
of brands, however. For example, BrandZ includes Walmart in its rankings, but
Interbrand does not because the company operates under different brand names
internationally. So even brands valued the same monetarily would have different
ranks due to the pool of brands ranked being different.

The key difference between Interbrand and BrandZ, however, is that Interbrand relies
entirely on financial data, whereas BrandZ factors in a brand contribution and a brand
multiplier derived from proprietary consumer data. Perhaps that is why Google is
valued much higher using BrandZ’s methodology. It appears in most cases that
BrandZ’s valuations are higher than Interbrand’s for most brands.

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

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

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

BrandZ rankings:
www.brandz.com/output/

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

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

Answer:

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

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

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

Company Case Notes

Las Vegas: What’s Not Happening in Vegas

Synopsis

This case chronicles the ups and downs of the city of Las Vegas as a tourist destination.
Las Vegas thrived for decades as “Sin City,” the destination for vices of all types. For a
brief period in the 1980s and 1990s, the city changed its positioning to that of a family
resort destination in hopes of expanding its target audience. That strategy met with
mediocre results and the new image did not resonate well with the traditional Vegas
crowd.

After September 11, 2001, Las Vegas hit the skids as tourism declined everywhere. This
led to one of the most successful campaigns by the Las Vegas Convention and Visitor’s
Authority (LVCVA), “What Happens Here Stays Here.” Having returned to its roots as
the unabashed destination for vice, Vegas thrived for years setting visitor records. Real
estate boomed and new luxury properties opened fast and often.

This case focuses on the next chapter, that of the recession of 2008–2009. In its wake,
Las Vegas suffered more than just about any other tourist destination. The LVCVA has
tried various tactics, including a “value” approach for hard working Americans. But
putting Vegas back on the map has proven to be a slow and arduous process.

Teaching Objectives

The teaching objectives for this case are to:

1. Define what Las Vegas as a brand means to consumers.

2. Identify the three levels of the Las Vegas product offering.
3. Analyze the effectiveness of ad campaigns on brand building.
4. Provide suggestions and recommendations for successfully maintaining a well-
known brand.
Discussion Questions

1. Given all the changes in the branding strategy for Las Vegas over the years, has
the Vegas brand had a consistent meaning to consumers? Is this a benefit or a
detriment in as the city moves forward?

Brand meaning is a very comprehensive concept. One way to examine this

concept based on the textbook is to apply the concept of brand positioning.
Students should not only consider brand positioning, they should also consider
which of the three suggested levels Las Vegas means for consumers is most
derived, attributes, benefits, or beliefs and values.

Through this analysis, students should recognize that at the core, Las Vegas has
always meant “indulgence” to consumers. In its early days, it established itself as
a destination for vices of all types. People would go to do things that they would
not do where they lived. The results of the brief stint as a family destination
should provide support for the core meaning of Las Vegas. The “family” brand
didn’t work well. When the LVCVA returned to its roots with “What Happens
Here Stays Here,” tourism numbers spiked. Following that campaign, Las
Vegas’s expansion into luxury dining, shopping, and accommodations carried the
indulgence meaning from the shady vices to more acceptable ones. But it is all
about indulgence. This message resonates with visitors.

The fact that this brand meaning has been so entrenched for so long presents a
challenge. As the recession hit, that brand meaning did not sync well with
frugality and fiscal responsibility. Therefore, the “value” campaign only had a
minimal impact. This brings up the issue of whether or not the LVCVA can get
through to consumers during hard times, or they just have to wait it out until
people loosen up their wallets.

2. What is Las Vegas selling? What are visitors really buying? Discuss these
questions in terms of the core benefit, actual product, and augmented product
levels.

Level 1: The core benefit—indulgence; the ability to completely let one’s

inhibitions and limits go.

Level 2: Actual product features

• Gambling
• Drinking
• Sex
• Shows
• Dining
• Shopping
Level 3: Augmented product: Las Vegas as a city is a unique product.
Consequently, its ability to provide service is entirely dependent upon the
corporations and organizations that do business there.

3. Will the most recent ad campaign work? Why or why not?

To respond to this question, students need to consider, based on the brand

meaning that Las Vegas has for consumers, whether or not the LVCVA can send
a message that will resonate with consumers during hard economic times. If the
answer to that is “yes,” then the question is, what is that message? Clearly, the
“value” positioning did not work as it only took the LVCVA five months to pull
the plug on the “Vegas Bound” campaign.

If the answer to the question is “no”, then the alternative is to simply wait out the
economic downturn. The LVCVA’s return to “What Happens Here Stays Here,”
seems to recognize this latter strategy. The brand is what it is. The LVCVA has
recognized that it must continue to reinforce and build upon that brand meaning.
As the economy rebounds, visitors will return in greater numbers. There is
already some evidence of that in the end of this case. It may be some time before
Las Vegas experiences the high levels of visitors that it did just a few years ago.
But the LVCVA is thinking long-term. That is a good strategy in maintaining a
brand.

4. What recommendations would you make to the managers at the LVCVA for Las
Vegas’s future?

This question should yield a variety of responses and should encourage

discussion/debate amongst students. The responses to this question should vary
depending on responses to previous questions. For example, in responding to
question 3, if students believe that the current campaign will not work, then they
should offer up some new suggestions for the direction that the LVCVA should
take. If they responded that they think the current campaign will work, then their
only suggestion here may be to “stay the course.”

Teaching Suggestions

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

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

ADDITIONAL PROJECTS, ASSIGNMENTS, AND
EXAMPLES

Projects

1. What is your all-time favorite brand? What do you most like about the product and/or
brand name? What (if anything) do you dislike? What image does the brand have in
your mind? How loyal are you toward the brand? Why? (Objective 2)
2. Go to the supermarket and take a look at the brand extensions that exist for Coke. Do
you think this makes sense or not? When is brand extension a good strategy? When is
it a poor one? (Objective 2)
3. Consider Starbucks coffee. Consumers sometimes bond very closely with their
preferred brands. What type of brand equity do you believe they have established
over the years? How did this happen? (Objective 3)
4. What do you like about your bank? How would you compare the services you receive
from your bank to other competing banks and to your “ideal” bank? What is good
about the service you currently receive? Review the service using the material from
the chapter. What specifics about the service make it very good from a marketing
standpoint? (Objective 4)

Small Group Assignments

1. Read the chapter-opening vignette on ESPN. Form students into groups of three to
five. Each group should then answer the following questions and share those answers
with the class. (Objective 1 and 3)

a. What “product” is ESPN really selling?

b. Who would you consider to be their top target markets?
c. How would you compare the ESPN “brand” to that of other sports networks?

2. Form students into groups of three to five. Each group should review Table 8.1
(Marketing Considerations for Consumer Products) on page 227. Each group should
then answer the following questions and share those answers with the class.
(Objective 1)
a. Make a list of five specialty products with which you are familiar (not covered in
the book). Discuss the promotion methods used to reach customers and typical
customer buyer behavior.
b. Make a list of five unsought products with which you are familiar, but have little
or no interest in purchasing. Discuss promotion methods that you would employ
to successfully market these products.

Individual Assignments
1. Review the gaming industry in Mississippi. How has that industry positioned itself in
the overall gaming market? How have they attempted to build customer value? How
successful do you believe they have been in this effort? (Objective 2)
2. Take a look at Saab automobiles (www.saabusa.com). Discuss the product width,
length, depth, and consistency of the company. (Objective 2)

Think-Pair-Share

Consider the following questions, formulate an answer, pair with the student on your
right, share your thoughts with one another, and respond to questions from the instructor.

1. Define “product.” (Objective 1)

2. Your text states “The product is a key element in the overall market offering.”
What does this mean? (Objective 1)
3. When a buyer purchases a product, what are they really buying? (Objective 1)
4. What is the difference between shopping goods and specialty goods? (Objective
1)
5. How do products and services really differ? (Objective 4)

Outside Examples
1. In many parts of the world, birth control is an unsought product. Assume you
have been given the task of promoting birth control in a region of the world where
it has traditionally been unused. How would you attempt to make inroads?
(Objective 1)

Possible Solution:

This is a very difficult and touchy subject in many societies. Remember, unsought
products are consumer products that the consumer either does not know about or
knows about but does not normally think of buying. It would be important to
bring the actual existence of birth control products to the attention of residents. It
is important to promote the use of birth control in a manner consistent with its
intended use—birth control. Point out the positives associated with the product—
population control, prevention of unwanted pregnancies, prevention of sexually
transmitted diseases. Birth control should not be encouraged by promoting
increased sexual activity. Lack of basic knowledge and resistance to the product
can many times be overcome with careful promotion.

2. Restaurants embody many of the fundamental service characteristics discussed in the

chapter. Everyone is familiar with fast food and McDonald’s. Visit a local
McDonald’s (or other fast food establishment) and discuss the basic characteristics of
service you experienced. (Objective 4)

Possible Solution:
Service characteristics are many times difficult for students to fully comprehend. The
services we are dealing with in this situation pertain to the interaction between
restaurant employees and the customer (student). Listed below are basic service
characteristics and what students may encounter at McDonald’s:
• Service intangibility means that services cannot be seen, tasted, felt, heard, or
smelled before they are bought. You cannot keep the service you receive at
McDonald’s and they are useable only at that moment.
• Service inseparability means that services cannot be separated from their
providers, whether the providers are people or machines. Because the customer is
also present as the service is produced, provider-customer interaction is a special
feature of services marketing. You receive service at McDonald’s only when you
visit, only when you drive through or walk up to the counter.
• Service variability means that the quality of services depends on who provides
them as well as when, where, and how they are provided. The way you were
served may well have varied from how the customer before you was served. If
you were to visit again tomorrow, the service you receive may again be different.
It is not standardized.
• Service perishability means that services cannot be stored for later sale or use. If
you had not visited McDonald’s, you would never have experienced the service
encounter. It would not have existed for you.

Web Resources

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

2. http://espn.com/
Go to ESPN’s Web site to learn about how it delivers its brand 24/7.

3. www.rim.com/
Take a look at the home of Blackberry. What are consumers really buying?

4. www.saabusa.com