0264 · 3.3.1Product

Brand image and customer loyalty

0:00Two snacks can contain similar ingredients, yet customers may recognise one immediately and happily pay more for it. The difference can come from its reputation, presentation and usefulness. Even a successful product eventually faces changing tastes and competition. By the end of this video, you will understand how businesses build demand and extend a product’s appeal. The marketing mix combines product, price, place and promotion to meet customer needs. A product is a good or service offered by a business to satisfy customer needs.

0:29Decisions about it include its features, packaging and identity. We will focus on how those decisions attract customers, support sales and help a business respond as demand changes. Customers choose products because they expect benefits, such as convenience, enjoyment or reliability. A business therefore needs to understand what buyers value. Imagine a student choosing a drinks container for school. A secure lid, an attractive design and a trusted name could all influence that choice, even when several containers hold the same amount.

0:59A brand is a name, symbol or design that identifies a product as made by a particular business. Brand image is the image or identity that customers associate with a brand. The business can influence those associations through design, quality and customer experience. Its reputation develops from what customers repeatedly see, hear and experience. Amber Foods produces oat bars. Its distinctive wrapper helps shoppers recognise the product quickly among competing snacks.

1:27Consistently enjoyable purchases build trust because customers expect a similar experience next time. That reduces the uncertainty of choosing, which can make the familiar product more attractive. A positive reputation can support a higher price because customers value the reassurance associated with that name. Loyalty develops when customers repeatedly choose the same business’s products. For Amber Foods, returning buyers provide a more dependable source of sales. However, its reputation needs support from the experience customers actually receive.

1:59An established name can also make introducing another product easier. Customers who already trust Amber Foods may be willing to try its new breakfast biscuit. Familiarity reduces the difficulty of attracting attention and encouraging an initial purchase. The new item must still meet expectations if the business wants customers to buy it again.

Packaging functions and customer value

2:18Packaging is the container or wrapping used to protect and present a product. Its roles include protection, freshness, information, convenience, attraction and environmental responsibility. These functions matter at different moments, from transport to purchase and use. A package that looks appealing also needs to work effectively for the customer. Protection reduces damage during transport, storage and handling. A strong container around fragile biscuits helps the business deliver a product customers can enjoy.

2:46Sealing suitable food packaging also helps preserve freshness by limiting exposure to air or moisture. This benefits customers because the contents remain usable for longer under the stated storage conditions. Information helps buyers make suitable choices and use the contents correctly. Ingredients, instructions and required legal details can appear clearly on the label. Convenience comes from features such as handles, resealable openings or easy pouring. These features make carrying or using the purchase easier, which can improve customer satisfaction.

3:19Colour, shape and design attract attention and support the brand image. A carefully presented gift box, for example, can communicate a feeling of quality before anyone opens it. Environmental responsibility can involve less material, reusable containers or suitable recyclable packaging. Such choices can reduce waste and appeal to environmentally concerned customers, although materials and redesign may increase business costs.

New product development

3:42Developing new products means creating new goods or services, or substantially improving existing ones, for customers. Businesses do this to attract new buyers, increase sales, spread risk and keep up with competitors. These benefits depend on identifying needs customers genuinely want satisfied. A technically impressive idea still needs enough willing buyers to succeed commercially. Harbour Rest provides overnight accommodation. Adding rooms suitable for families could attract customers whose needs its existing rooms cannot meet.

4:12An additional service, such as breakfast delivery, could increase sales to current guests. The business gains because it can earn money from more purchases during each visit. Offering several products spreads risk because a fall in demand for one may be offset by demand for another. Harbour Rest could benefit from business travellers when family bookings weaken. Keeping up with competitors also helps protect customer interest. If nearby accommodation offers features guests increasingly expect, suitable improvements can help the business retain bookings.

4:43However, the business pays research and development costs before it knows whether the idea will succeed. Designing a room layout or testing a new service takes money and time. Market research also creates costs because collecting useful customer information requires resources. These expenses reduce the money available for other business activities. New products can fail because customers may dislike the result or find competing offers more attractive. The business then risks losing the money spent on development and introduction.

5:12Employees may also need training to deliver an unfamiliar service effectively. Managers must judge whether the expected additional sales justify these costs and risks.

Product life cycle stages

5:21Revenue is the income a business receives from selling goods or services, and profit is total revenue minus total costs. These ideas help explain why the early period after a launch can be financially difficult. A product may already attract buyers while the business is still recovering its development and introduction costs. The product life cycle is the stages a product goes through from its introduction to its decline. Its main stages are introduction, growth, maturity and decline.

5:50The diagram follows sales over time, so the curve’s height represents the level of sales. Its steepness shows how quickly that level is changing. During introduction, sales are low and usually grow slowly because many potential customers are still unfamiliar with the product. Heavy promotion may be needed to build awareness and encourage trial. Development and launch costs can be substantial compared with early revenue. The business therefore usually makes a loss during this stage.

6:16Growth occurs when sales rise quickly as awareness and acceptance increase. Existing buyers may recommend the product, while wider availability allows more customers to purchase it. Profit starts as revenue grows sufficiently to exceed total costs. Competitors may notice the opportunity and introduce their own alternatives. At maturity, sales are at their highest and stop rising. Many potential customers already know the product, so attracting additional buyers becomes harder. Competition is often strong because several businesses are pursuing the same customers.

6:48Promotion may focus on maintaining loyalty and explaining why this particular offer remains attractive. Decline occurs when sales fall over time. Changing tastes, improved alternatives or new technology can reduce customer demand. A business may reduce promotional spending if the expected additional sales cannot justify the expense. Managers might eventually withdraw the product, although the appropriate decision depends on its remaining customers and costs. The stages describe a useful pattern, and their duration varies between products.

7:19Fashion items can move through them quickly, while familiar household products may remain at maturity for many years. Businesses use actual sales information to judge what is happening. Customer research then helps explain the reasons behind the pattern. This diagram has two dots to interpret as a worked example. Start with the vertical axis, which tells us that the curve measures sales. The blue dot sits on the steepest part of the curve, inside the growth stage.

7:44Sales are rising quickly there, so the number of buyers is growing fast. At the blue dot, the business can keep its price steady because demand is rising without discounts. Promotion can shift from building awareness towards persuading customers to choose this product over new rivals. Wider distribution also helps the extra buyers find it. These choices let the business turn fast-rising sales into growing profit. The red dot sits high on a nearly flat section near the end of maturity.

8:12Its height shows that sales are high, while the flat curve around it means the rate of increase has almost stopped. Decline is the next stage on the diagram, so the business should act before sales start to fall. Next, connect the red dot to a business decision. The business could use advertising to remind customers about the product and defend its position against competitors. Pressure from similar alternatives may also encourage competitive pricing.

8:37The graph provides evidence about demand, while information about costs and competitors helps determine the exact response. Price decisions depend partly on the product’s position and customer preferences. At introduction, a business might use a low price to encourage trial or charge more for a distinctive innovation. During maturity or decline, discounts may help attract purchases, but they reduce revenue per item. The life cycle supports judgement alongside evidence about the particular market.

Extension strategies

9:04Extension strategies are ways to lengthen the product life cycle before decline. The main options are new markets, new uses, adapting the product or packaging, and increased advertising or sales promotion. They aim to create additional reasons or opportunities to buy. A successful strategy can lift sales during late maturity and postpone the expected fall. Entering new markets means selling an existing product to additional groups of customers or different geographical areas.

9:31Cedar Works makes reusable drinks containers. It could approach sports clubs after mainly selling to students. The business gains access to additional buyers, so sales can grow even when demand from its original customers has levelled off. However, reaching those buyers can require additional research, delivery arrangements and promotion. Cedar Works bears these costs before knowing whether clubs will place enough orders. Unfamiliar customers may also expect different features or purchase arrangements.

9:59The advantage is strongest when the existing product already suits the needs of the new group. Finding new uses encourages customers to use an existing product for additional purposes. Cedar Works could show suitable containers being reused as small flower vases. The business can gain extra demand while keeping the basic design unchanged. Customers benefit when an item they recognise offers another practical purpose. The difficulty is persuading enough buyers that the additional use is worthwhile.

10:27Demonstrations and instructions cost the business money, while unsuitable claims could damage trust. Managers need evidence that the suggested purpose is safe and practical. A useful new purpose can broaden demand, but customer interest determines its commercial value. Adapting the product changes its features, while adapting packaging changes how it is protected or presented. A wider opening could make a drinks container easier to clean. Customers gain greater convenience, and the business gains a stronger reason for buyers to choose it.

10:57A refreshed package can also attract attention without changing the contents. Redesign, testing and replacement materials create costs for the business. Existing customers may prefer the familiar version, which puts some repeat purchases at risk. Packaging changes work best when presentation or convenience is an important obstacle to buying. More substantial feature changes can be appropriate when customer needs have developed. Advertising is paid communication that informs or persuades customers about a product.

11:26Increased advertising can remind previous buyers about a familiar offer and reach customers who have overlooked it. The business benefits if additional purchases exceed the campaign’s cost. However, repeated messages may have little effect when customers already know the product and want different features. Sales promotion provides short-term incentives to encourage purchases. A temporary discount can encourage customers to try Cedar Works containers or buy sooner. Buyers gain a lower purchase price, while the business may gain an immediate increase in sales.

11:57However, discounts reduce revenue per item, and some customers may simply bring forward purchases they already intended to make. Every extension strategy uses resources, and its effect may be temporary. The strongest choice addresses the reason demand has stopped growing. Improved packaging can help when buyers find the current version inconvenient. If customers have moved towards an entirely different solution, managers may need to develop a new product instead.

Choosing and justifying strategies

12:24Willow Gear makes pencil cases and is a small business with twelve employees. Its product is in late maturity and is well known among local students. Customers have requested compartments for charging cables. The business has six thousand dollars available and aims to increase sales to students. Adding those compartments would cost twenty-five hundred dollars because the business can use its existing equipment. Thirty-five hundred dollars would remain available for other needs.

12:49Increased advertising is another option, but awareness among its target customers is already high. Consider this information and justify an extension strategy that would help Willow Gear achieve its aim. I recommend adapting the product by adding compartments for charging cables. Customers have specifically requested this feature, so the change addresses an identified reason to purchase an updated version. Using existing equipment keeps the adaptation within the six thousand dollar budget, with thirty-five hundred dollars to spare.

13:17Increased advertising is weaker because local students already recognise the product and have requested greater usefulness. Adapting the pencil cases therefore offers a stronger route to additional student sales. In Paper One Short Answer and Data Response, stimulus material could support questions about packaging, brand image or a life cycle diagram. Paper Two Case Study can require a justified choice using business information. Explain means set out purposes or reasons, say why and how, supported with relevant evidence.

13:48When a question says justify, support a case with evidence or argument. Keep the diagram’s measurement clear when interpreting evidence. A high, flat section represents substantial sales with little further growth. Profit depends on both revenue and total costs, while brand image depends on customers’ associations and experiences. An extension strategy should address a particular cause of slowing demand, with its costs included in the judgement. Remember that brand image is the image or identity that customers associate with a brand.

14:18The container or wrapping used to protect and present a product is called packaging. Together, reputation and presentation help customers recognise an offer and judge its usefulness. New products can attract additional demand, but development costs and uncertain acceptance create risks for the business. The product life cycle is the stages a product goes through from its introduction to its decline. Introduction leads into growth, followed by maturity and eventually decline.

14:45Extension strategies are ways to lengthen the product life cycle before decline. Choose between them by connecting customer needs, available money and likely additional sales.