We have mentioned brand names a few times. We said that a brand name can be a good way of differentiating a product. Brands which are well known and trusted can serve as a shortcut for consumers trying to choose between competing offers.
If two products are similar, customers are more likely to buy the product with the brand name they know, rather than the one they have not heard of.
An interesting example of how important brand image is can be seen from taste tests carried out by Coca-Cola and Pepsi Cola. Respondents were asked to decide which of the two cola drinks the cola drinks they preferred.
When they were allowed to see the brand of the drink there was a marked preference for Coca-Cola — 65 per cent preferred it. However, when the respondents were blindfolded the distinction between the two brands was reduced significantly. In this test 51 per cent of testers preferred Pepsi.
The differences between the two sets of results suggest that customers ‘taste’ both the drink and the brand image. The brand image adds value to the product or service in the mind of the customer. When they see the familiar Coca-Cola package and logo, value is added on an emotional level.
Branding can provide benefits for both buyers and sellers. Customers beneﬁt because they can immediately identify specific products that they do and do not like.
Without brands, product selection would be quite random, with customers having to read the packaging every time to find out about each product and how it matched with what they wanted. This beneﬁt of branding is the reason so many companies use an existing brand name for a new product. They hope that the values which attach to the brand name will attach to the new product in the mind of the customer and make them more likely to purchase it.
Sellers also beneﬁt because branding makes repeat purchasing easier for customers, which in turn may lead to brand loyalty, something all companies try to engender. Creating brand loyalty also permits companies to charge a premium price for a product.
For example, the manufacturers of Nurofen, a pain-relieving product, charge more than the manufacturers of generic products which use the same active ingredient (ibuprofen).
However, these benefits do not come free. Brand owners will spend large amounts of money on advertising their brands. For example, Coca-Cola spends over £12m a year in the UK on advertising, and Andrex (toilet tissue) over £8m.
One of the outcomes of this high spending for Andrex is that the brand is linked to the advertising symbol used — a Golden Labrador puppy. The attributes of the puppy — softness, gentleness — are attached to the product itself.
This outcome also allows Andrex to link its name with a charity, Guide Dogs for the Blind. This works well, as this type of dog is a popular choice of guide dog in the UK.
Today’s great brands have their own identity. If you ask someone to describe a brand they will usually use adjectives to describe its qualities. Branding is to do with the way customers perceive products, not just about the name or the symbol associated with a brand.
Last week we looked at how to identify the different attributes within a product and how to use this knowledge to develop a product which will be attractive to customers.
This week we finish off looking at products features, then we look at the product life cycle and its impact on features.
The augmented product features additional benefits and customer services that have been built around the actual product. These are often added to differentiate it from other offerings. These extra benefits are unlikely to represent the reason for purchase, but may be the reason for choosing one product over another.
For example, a customer might decide to use a particular bank because it offers a higher interest rate on their savings account or because bills can be paid from the account using the Internet or telephone. Another reason might be that it offers more interest if money is left in the account for longer than 12 months. Alternatively, the name and reputation of the bank might give the customer more reassurance than other banks do that their money is safe and problems will be rectified.
So far we have been talking about products as though they were fixed and immutable. We have discussed the three levels of a product — core, actual and augmented — and allocated different aspects of the product to each of them.
However, products are not immutable. What differentiates a product from its competitors in one year may not do so in another. A product which has been developed and introduces a unique feature will eventually be copied by competitors, or even improved on and surpassed.
The transitory nature of the uniqueness of product features means that it is important to develop a brand name which customers will trust even if the product itself changes over time.
For example, clothes may be fashionable only for one season, yet the designer houses that produce the clothes retain their relevance for the customer over a number of seasons and years. In this case, it is the designer name which is the brand and which encourages customers to carry on buying the clothes.
When a product with a new feature is introduced, competitors look at what has changed and whether it is successful. If it is, they will introduce that feature into their own products. Customers will then start to see a range of products with this particular feature and, if they perceive it as worthwhile, they will start to expect all products to have it. Once this happens, the feature ceases to differentiate the product.
In other words, it moves from the augmented level to the actual product level.
For example, in the USA all new cars come with airbags, usually for the driver and the passenger, and some manufacturers are now introducing side airbags as well. In the early 1990s very few manufacturers fitted airbags, yet now they have almost become a requirement. Not to have airbags would preclude manufacturers from competing at all.
So products will change and develop over time in response to customers’ needs and competitors’ activity, and some products will disappear altogether. They may be replaced by new and better products, or just withdrawn from the market. The Rubik’s cube puzzle was popular at one time.
However, once the puzzle was solved, there was little point in buying another one. The slide rule was bought by most schoolchildren (or their parents) up to about 30 years ago, but has since been replaced by the pocket calculator. It is still possible to buy slide rules, but they are much less popular now.
One way of examining the particular phases most products go through is to use the idea of a product life-cycle. This also demonstrates the likely financial implications as a product moves through the various stages of the cycle:
Phase 1 — introduction. Customers are wary because new products are often costly or have teething problems, so people may prefer to stay with familiar products rather than take risks. Sales are slow and restricted to those who want — and can afford — to try out innovations.
Phase 2 — growth. People begin to understand the benefits; the product has been tested and is more reliable and more available. Sales start to grow and competitors may enter the market, creating even more interest in and awareness of the product.
Phase 3 — maturity. At this stage, almost everyone who wants the product has got it; cautious people are buying now and others are updating their models. In the case of fast-moving goods, sales have settled down to a steady number of regular purchasers, with few people discovering the product for the first time.
Phase 4 - decline. Overall sales are declining, price wars may have broken out and new products are coming along as substitutes. There are too many competitors and firms may start to leave the marketplace.
With a fashionable product such as the Rubik’s cube this whole cycle can happen in the space of one or two years. With products which are less susceptible to fashion trends, such as Coca-Cola or garden fertiliser, the cycle may stretch over many decades.
Products can be given a facelift from time to time with new packaging or a promotional campaign to try to keep them in the mature stage of their cycle. These efforts remind customers and potential customers that the goods are still on the market and reassure them about quality and reliability.
Often products are phased out when income ceases to cover variable costs, or when sales fall below an acceptable level. This can happen in both the private and public sectors and when it does, it is more beneficial to invest the money in developing further new products.
However, there are examples of products which have entered a new growth phase: the glassware company Waterford Crystal nearly failed completely, but was rejuvenated by means of a successful marketing strategy.
In some instances, products have an expected or a natural life; for example, it is widely accepted that for mass-produced cars the life- cycle of a particular model is five years, after which customers expect new models. However, a loss-making product may continue to be supported if it serves a purpose in the overall product portfolio of the organisation.
Last week we looked at the whole area of customer needs, and started by looking at products, their features and benefits.
This week we continue this look in more detail, particularly at how we can identify the different attributes within a product and how to use this knowledge to develop a product which will be attractive to customers.
If we look at the difference between features and benefits, what we generally find is that features are what an organisation provides and benefits are what a customer sees. The organisation has to incorporate particular elements, systems, processes or technologies that will allow the customer to receive a particular beneﬁt.
How the organisation goes about solving a particular problem may be of limited interest to the customer as long as the outcome is what they are looking for. It does not matter to the hairdresser’s customer whether the hairdresser uses a database, a card index or their own memory, as long as they are conﬁdent that the hairdresser knows them and what their needs are. The feature is only of importance if it delivers the required beneﬁt.
This idea of looking at features and beneﬁt can be applied to products and services that are internal to an organisation. Not all employees are in the front line of product provision. You may provide a product which enables those in contact with external customers to carry out their jobs more efficiently, or you may be even further removed from external customers.
However, the concept of features and benefits is just as important to internal customers as to external ones. Much of what is ‘sold’ internally is likely to be intangible: a service rather than a physical product.
However, we should still think through what benefits are being offered to internal customers. In a company manufacturing textiles, the technical department may keep a library of information on all competing products. This feature provides different benefits to different departments.
For the research and development department, access to the library of information allows it to develop new textiles which are superior to those of the competition. It allows the marketing department to compare the strengths and weaknesses of its own product with those of competitors.
This will help in developing its advertising campaigns. The technical department must be aware of how the other areas are using the information so that it can be sure that its information is held in a way that is usable by all.
A closer look of products
Any product, whether a tangible good or an intangible service, should be assessed in terms of its features and benefits, in order to ensure that it is providing what a customer wants or needs. Looking at features and benefits is a useful way of keeping customers’ needs in mind.
The core product
The core product describes the fundamental reason for wanting to buy the item. In a market where there is a choice of products this is unlikely to be a unique beneﬁt offered by any one product. Instead, it will be a generic description of the core beneﬁt of a number of competitive offerings. For example, the basic beneﬁt of a savings account is that it is a safe place to keep ‘extra’ money or money that is not needed immediately.
This refers back to our discussion of features and benefits. What we are. interested in when identifying the core product is the basic beneﬁt to the customer. Is a ﬁlm distributor in the business of selling films or entertainment? People do not need films, but they may feel a need for entertainment. A ﬁlm may meet this need, whether at the cinema or on video or DVD, depending on the particular circumstances of the customer.
The actual product
The actual product describes the key features a customer expects from a product. These are often the minimum required for a product to have any chance of survival in a competitive environment. The actual features expected of a savings account might be access conditions (instant or with a notice period), rate of interest and number of branches.
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