Types of service process

Elements of branding
Brand levels of meaning
Product mix dimension

Lesson 4.1: The Product differentiation ALTERNATIVES FORMS OF BUSINESS MODEL

1. Personnel Selection and Training
What is product? 2. User Interface
 Any item or service you sell to serve a 3. Points of Contact
customer’s need or want. 4. Tangible mementos
 They can be physical or virtual, hybrid 5. Subscription
GOODS- refer to tangible products that CRITICAL PART OF BUSINESS MODELING
consumers can actually observe with their  Balancing act between the target
senses; they are objects with physical number of consumers.
manifestations and attributes that can be  The profit margin goal per unit sold
detected by the senses.  The acceptability of the resulting price
SERVICES-refer to intangible offerings that are What is a BUSINESS PLAN
abstract in nature and cannot be observed with  Serves as the road map for bringing the
the senses; in fact, a key characteristic of product idea to life and specifies the
services is that the act of delivery itself is the details that would help to make the
product. selected business model work.
IMPORTANT ELEMENTS OF A BUSINESS PLAN
FACTORS THAT DIFFERENTIATE SERVICES FROM 1. Statement of opportunity-refers to the
GOODS identified market opportunity that the
1. While customers get to own goods, proposed business seeks to address.
they do not gain ownership of a service. 2. Environmental Analysis- key issues and
This is because, obviously, there really trends in the environment both macro
is not anything to own. & micro that should be noted when
2. The customer is typically an active assessing the business proposal.
participant in the production of the 3. Market estimates and Market
service. segments- refers to the estimated size
3. The product experience is typically a of the total potential market along with
composite of a number of factors. descriptions of the different possible
4. There is a greater variability in the market segments and their estimated
inputs and the outputs of a service. sizes
5. It is typically difficult for customers to 4. Competitive Analysis-pertains to a
evaluate the quality of the service itself. roundup of the existing competition
6. Time is a significant factor for assessing along with existing substitutes and
service quality. potential substitutes together with their
strengths and weaknesses.
5. Business Strategy-refers to the details
of the proposed business including the
product concept, the logistics required
for its mobilization, the organization
structure needed, and the methods for
product distribution among other
things.
What is a Brand?
o A mark of distinction that can
be sensed usually in the form of
names or terms, signs or
symbols, design elements, or
Building up the Service Experience even a combination of these,
Service Elements to build an Excellent Customer and is utilized for the purpose
Experience of identifying and distinguishing
1. Personnel Selection and Training the goods or services of one
2. User Interface provider from another
3. Points of Contact FUNCTIONS OF BRAND
4. Tangible mementos 1. It identifies the product or service,
New Product Strategy enabling consumers to accept, reject, or
What is a BUSINESS MODEL communicate their opinions about it to
 Refers to the mode by which the others.
product concept seeks to make money 2. It communicates messages to the
so that it can have a sustainable markets and to the public at large,
operation. whether the messages are intentionally
 Should therefore involve a way of or unintentionally generated.
making money that best fits the nature 3. It functions as a legal property,
of the product idea allowing its owners to invest in building
up the value of the brand.
ORIGIN OF BRANDS
BRAND is a term derives from the Old Norse PROGRESSIVE LEVELS OF BRAND EQUITY
word(ancient North Germanic
Language) brandr or "to burn," and refers to the  Brand awareness- "I am familiar with
practice of branding livestock, which dates back this brand."
more than 4,000 years to the Indus Valley.  Brand acceptability "I like this brand."
 Brand preference "I prefer this brand."
 Brand loyalty “I will die if I do not get
this brand”
STEPS IN DEVELOPING A BRAND
1. Develop the brand strategy
2. Develop the creative theme
3. Create the name
4. Test the name
5. Screen for trademark availability
What is a product portfolio?
 Collection of all the products or service
offered by a company, each with a
ELEMENTS OF BRANDING different growth rate and market
 VISUAL CUES-distinctive visual
identifiers other than the actual logo
(Example: red and green bands that
wrap around the outside of 711 store)
 SHAPES-actual shape or form of the
product or packaging(Example pinched
contour of a bottle of Yakult)
 COLORS- a yellow cab store is quickly
distinguishable from afar because of its
bold yellow signs with black letterings
 SOUND-advertising jingles, or even very
short intro sounds such as those heard
upon starting up a computer.
 SCENTS-establishments such as Rustan's
and Shangri-La Hotel have a signature
fragrances that help to create
distinctive atmospheres in there
premises.
 TASTES- includes special recipes or
secret ingredients such as Bonchon's
distinctive fried chicken formulation
TIPS ON MAKING A GREAT LOGO DESIGN
1. Keep it simple
2. Make it relevant
3. Incorporate Traditions
4. Aim for distinction
5. Commit's to memory
6. Think small
7. Focus on one thing
A BRANDS LEVEL OF MEANING
1. Attributes
2. Benefits
3. Values
4. Culture
5. Personality
6. User
BRAND EQUITY & VALUATION
BRAND EQUITY -refers to the value of the
brand, usually this value would be expressed in
the form of peso.
BRAND VALUATION-the process used to
calculate the value of a brand or the amount of
money another party is prepared to pay for it
 Price elasticity and inelasticity
Price immune to Price elasticity of demand
Approaches in setting the price
Pricing a new product
Psychological, Discriminatory & Product mix pricing
Trade Discount, VAT and Senior Discount (For the computation- VAT
only)

Price Elasticity and Inelasticity

ELASTICITY- refers to the degree of sensitivity of

a market to changes in a product’s price.

INELASTICITY- refers to a market’s reluctance to

let go of a product even if its price goes up or,
contrariwise, inertia against buying more of a
product just because its price goes down.

PRICE ELASTICITY OF DEMAND

PRICING A NEW PRODUCT

 MARKET SKIMMING-
• Involves setting the price high in order
to milk the segments with higher
disposable incomes, with the price
gradually being reduced over time to
milk the next income tiers, and so on.
• Works particularly well for products
that have built up a lot of anticipation
from the market which do not have any
clear substitutes at the moment.
 MARKET PENETRATION
GOODS IMMUNE TO Price Elasticity of Demand • Involves setting the price even lower
 VEBLEN GOODS- Goods that become than planned, if only to attract as much
more sought after the higher their of the market into trying it and
prices become, often in the case of hopefully becoming loyal to it before
high-end luxury goods. increasing the price.
• Works best for products that have the
 GIFFEN GOODS- Goods that end up
being preferred despite its price potential to be staples if only they
increase because substitute goods manage to evoke market trial.
prices are also rising well, to the point PSYCHOLOGICAL PRICING
that the former becomes more ODD-NUMBER PRICING
attractive than substitutes.  Prices that end in non-rounded odd
PRICE ELASTIC VS. PRICE INELASTIC numbers, such as 9.95 or 99.50, are said
PRICE ELASTIC- The market is said to be price to give the consumers the perception
elastic if the rate of change in quantity Q is that the prices are not as expensive as
greater than the rate of change in price P. they actually are.
PRICE INELASTIC- The market is said to be price
inelastic if the rate of change in quantity Q FREE PRICING
tends to be less than the rate of change in price  It is a way of bundling product—
P. especially complementary items—and
passing off one of the two (or more)
items as “free”.
DISCRIMINATORY PRICING
CUSTOMER -SEGMENT PRICING
o If your product is being offered in both
an upscale distribution point as well as
a retailer for a broader consumer
market, then you may be able to offer a
different price to each
PRODUCT-FORM PRICING
o In the commercial airline industry,
other than legroom and food, much of
the price premium that is being charged
for business class is simply
discrimination between the passengers
for these different classes.
IMAGE PRICING
 o Upscale products practically demand
higher prices, otherwise their credibility
may be ruined.
LOCATION PRICING
o Many Metro Manila-based
manufacturers have a Metro Manila
price and a provincial price, which is a
form of discrimination that is based on
the physical location of the buyers.
TIME PRICING
o Many bakeshop make it a point to sell
all of its remaining stock at 50 percent
off once the clock hits 8 p.m, which is a
form of discrimination since there is no
difference between selling the stocks at
7:59 p.m. and a minute later.

PRODUCT MIX PRICING

PRODUCT LINE PRICING

o If you have a line of products, chances
are that many of these try to target
distinct markets by being placed at
different price points.
OPTIONAL FEATURE PRICING
o Since it is difficult to sell complete
packages to consumers, it may be
easier to sell them a basic stripped-
down model first, then everything else
becoming optional add-ons.
CAPTIVE PRODUCT PRICING
o Companies that are in the business of
selling supplies are willing to sell a
certain product at a loss because they
end up having the customer as a captive
market for the consumables on which
they really make their money
BY-PRODUCT PRICING
o In case the production of your product
generates by-products and you manage
to find a way to make money out of
these by-products, then this becomes
an opportunity for realigning the price
of your primary product.
PRODUCT BUNDLING PRICING
o Bundling the slower moving products
together with star performers can be a
strategic option. The bundle will be Lesson 4.3- Distribution Channels
offered at a discount, making the
package attractive to consumers What is distribution channel?
 are the set of interdependent
organizations that are involved in the
process of making a product or service
available for use or for consumption by
the consumer or individual user
 Can include wholesalers, sales
personnel and territory managers,
authorized distributors, and retail
stores.
 Also involves the contractual
relationships between these entities, if
any, as well as the selection of actual
points of distribution
TERMS AND RESPONSIBILITIES FOR  Companies that exist to serve
DISTRIBUTORS as Internet-based distribution
Price Policies- Ideally, a firm will want to have points for a number of
control over how its products are priced down manufacturers and dealers .
the line, all the way to the retail level.  A promising concept since
 On the other hand, there are firms that online buying is steadily
are okay with allowing their distributors growing in the local market
to set their prices down the line. Disadvantage: Online resellers may demand for
Condition of Sales- Involves key transactional quite a bit of margin from the suppliers.
details between the firm and the distributor 2. WHOLESALERS
pertaining to the transfer of goods, such as  Companies that buy your
terms of payment for goods received, credit products in bulk, typically
terms, and guarantees for matters such as taking ownership and therefore
defective products. transferring the risks involved
Territorial Rights- The scope of coverage for with ownership into their
sales by the distributor needs to be made as hands.
clear as possible in order to minimize the Disadvantage: Wholesalers ask for territorial
possibility of territorial disputes between fellow exclusivity and long credit terms, allowing them
distributors. to practically make money without having to
Services and Responsibilities- Specifies the have an initial outlay.
duties and responsibilities of both the firm and 3. COMPANY SALESFORCE
its distributor.  In-house sales team
 Firms may be held responsible for  Manageable when lean, such as
ensuring that proper levels of stocks are when a firm is just starting up
always made available to the distributor Disadvantages:
with penalties to be imposed to the (1) Complexity can escalate quickly as the team
firm should stocks fall below required grows in number; and
levels. (2) If mismanaged, it can devolve into idle
 Distributors, on the other hand, may be individuals with no motivation to pursue their
made responsible for matters such as targets.
meeting sales targets and submitting 4. VALUE ADDED RESELLERS
sales reports with penalties to be  Firms that put together
imposed for non-compliance. products from different
FUNCTIONS OF DISTRIBUTION CHANNELS suppliers in order to come up
1. Gather information about customers with systems or solutions that
2. Communicate and promote product appeal to markets with specific
3. Reach proper market needs.
4. Negotiate with buyers  Serves as a sort of one-stop
5. Take orders shop and firms that supply to
6. Finance inventory-keeping VARs hope to become exclusive
7. Finance consumer purchases suppliers for particular system
8. Assume risks of channel work components.
9. Move physical products  Very common in the technology
10. Provide payment facilities industries where solutions to
11. Oversee transfer of ownership complex problems often
Consignment
Types of Distributorship
require mix-and-match
CONSIGNMENT Types of Retailer
methodologies.
o Lowest form of distributor arrangement 5. PROFESSIONAL SALES AGENCIES
o In this arrangement, you simply ask a  Sales teams that are for hire
distributor to stock your goods for you,  Take on the selling of products
so there is no transfer of ownership. in exchange for commission
schemes
Disadvantages: Advantages:
o You still carry the risks should the goods -their sales organizations are already in
not sell sufficiently and your working place so it is just nearly a matter of
capital will be tied up until such time plug-and-play for the firm.
the goods actually sell. 6. SPECIALTY DEALERS
o Distributors may not have much of a  Distributors that specialize in
compelling reason to actively push your either particular product
products—unless they are given a very categories or in the specialized
generous profit margin. needs of very distinct target
TYPE OF DISTRIBUTORSHIP markets
1. COMPANY SELLERS
 Disadvantages: It is also expected for  TV remains as the most powerful tool
businesses to have highly trained and for reaching a national audience with
highly educated staff who can easily reasonable cost efficiency.
answer customer queries.  Regional programming is designed to
TYPES OF RETAILERS attract regional advertising from local
1. SPECIALTY STORE-Stores that have very businesses, while nationwide
narrow width in terms of product mix programming is designed to appeal to
but each of the product lines that they large-scale advertisers that seek
offer have extensive length and depth. national audiences.
2. DEPARTMENT STORE- Stores that are Terms Related to TV ads
typically large because they offer a  Free TV” ‒ the term for publicly aired
broad width of product categories, such broadcasts
as shoes, clothes, fashion accessories,  Rate Cards” ‒ the equivalent of the
home furnishings, snacks, etc. suggested retail price for media
3. SUPERMARKET- Stores that have an  Primetime ‒ the hours with the highest
extensive variety of low margin, high viewership
volume goods that mostly consist of ABS-CBN, GMA, IBC and TV5 Advertising Rates
food staples. for every Commercial
4. CONVENIENCE STORE- Stores that can  The Philippines three biggest television
be sari-sari stores or store chains. Offer networks ABS-CBN, GMA, IBC and TV5
a very shallow depth in their product reportedly have these as their published
mix mainly because shelf space is rate card for 2013. A published rate
limited, so there is no room for offering card is simply the Advertising Rate for
variety. every TV commercial (TVC). A 30-second
5. DISCOUNT STORE- Stores that that offer ad on primetime on ABS-CBN costs
big discounts for everyday items. P824,374; P695,500 on GMA 7,
6. SUPER STORES-Stores that are P543,137 on IBC 13 and P444,000 on
characterized by gigantic selling spaces TV5.
as well as bulk selling Importance of Advertising on Television
7. SHOW ROOMS- For high-markup  TV ads are best at appealing to viewer
durable goods, such as automobiles or emotions.
even condominium units,that command  TV ads are not good at providing in-
premium prices due to prestige. depth knowledge about a product.
WHAT IS PROMOTIONS MIX?  TV is good for generating awareness
 refers to the portfolio of media that and building a liking for a product.
may be employed to deliver messages Advertising on Radio
to the market in order to achieve
 The most popular media next to TV,
business objectives.
radio is primarily regional in nature that
 composed of advertising, sales
caters to local markets .
promotions, public relations and
 AM radio is associated with news and
personal selling.
information (mostly due to its lower
 A tool for communicating your product.
fidelity) while FM radio is generally
The Nature of Advertising
associated with music (due to its higher
 The term “advertising” is generally
audio quality).
associated with one-to-many, one-way
 Primetime for radio is defined as
communications.
morning or evening rush hour, when
 In ancient times, examples of
commuters are stuck in traffic and are
advertising would include visual
listening to their car radios or to the
signage's for shops, wall paintings, and
radios in public transport on their way
even printed posters in ancient China.
to or from work.
 Broadcast ads have their origins in the
 Radio ad spots range from 15 second
early days of live radio, when radio
quips to 60 second extended ads. There
shows first sought sponsorship from
are also special executions that can be
large companies.
in the form of full 3-minute songs.
 Today, the three biggest traditional
media channels for advertising are  Since radio ads are limited to a purely
print, radio, and television, which are aural (audio) experience, the best
known as the tri-media. strategy for radio ads would be to focus
Advertising on Television on purely informational but very
concise messages.
 Though on the decline in recent years,
Advertising on Print
TV still remains a formidable force for
mass communications and is still one of  Print media generally refers to printed
the most efficient ways to reach a very publications such as newspapers and
wide audience. magazines.
  Only around 15 percent of the
population still regularly reads
newspapers, while an even smaller
group of about 9 percent reads
magazines.
 Readers of broadsheets in particular are
heavily skewed toward educated and
higher-income groups, a fact which
keeps it attractive as a medium for
advertising regardless of its shrinking
readership figures.
Advertising on Print
 Magazines have now evolved into
highly niched reading materials,
meaning they specialize in particular
interests, such as running, golf,
badminton, automobiles, and even
weddings.
 Being niched publications offer
advantages because readers tend to be
highly interested and motivated buyers.
 The key advantage of print is that it
allows for detail, information, and
knowledge transfer. If your
communication objective is to inform
and to educate, then print is practically
an essential medium in your arsenal.
BELOW THE LINE STRATEGIES
 If there is a key difference between
above-the-line and below-the-line
communications (BTW), it may be
about how the former tends to be
very impersonal while the latter can
be intimate and personal.
 Compared to tri-media, below-the-
line communications are about
brand activation or, in other words,
getting the consumers to actually
act and do something with one’s
product—whether it is learning to
use it, discussing the product with
other users, or actually buying it.
 Communication tools for BTW
campaign are promotional
programs, public relations, and,
increasingly, social media.
 Below the line tools are all about
pinpoint communications.
TYPES OF CONSUMER PROMOTION TOOLS
 Product samples
 Coupons
 Price Packs
 Premiums
 Advertising Specialties
 Point of Purchase promotions
 Contest and Games
 Patronage Rewards