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Chapter 11: Managing Products And Brands

Chapter 11: Managing Products And Brands

I. PRODUCT LIFE CYCLE

A way to trace the stages of a product's acceptance from its introduction to its demise. One of the most familiar concepts in marketing A prevalent marketing management tool Refers to the life of the product category The time a product category spends in a stage of the product life cycle may vary from a few weeks to decades. Does not predict how long a product category will remain in any one stage A tool to help marketers understand where their product is now what may happen which strategies are normally appropriate.

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A. Introduction Stage
Sales grow slowly Profit is minimal or negative Create awareness Stimulate trial High production costs Limited product models Frequent product modification Penetration pricing Skimming pricing Little competition High failure rate, High marketing costs Promotion strategy focuses on primary demand for the product category developing product awareness Informing about product benefits. Intensive personal selling to retailers and wholesalers is required.

B. Growth Stage
Characteristics Sales grow at an increasing rate. Many competitors enter the market. Large companies may acquire small Profits are healthy pioneering firms. Promotion emphasis heavy brand advertising Differences between brands. Gaining wider distribution is a key goal Toward the end of this stage prices normally fall profits reach their peak. Sales volume has created economies Development costs have been recovered of scale.

C. Maturity Stage
Sales continue to increase but at a decreasing rate Annual models of many products Product lines are widened or extended
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The marketplace is approaching saturation An emphasis on product style rather than function marginal competitors begin dropping out of the market.
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out of the market.

Heavy promotions to both the dealers and consumers are required.

Prices and profits begin to fall.

D. Decline Stage
Signaled by a long-run drop in Falling demand forces many competitors out of the sales. market The rate of decline is governed by a. how rapidly consumer A few small specialty firms may still manufacture tastes change or the product. b. how rapidly substitute products are adopted. Strategies Dropping a product from the companys product Deletion. line, is the most drastic strategy. Company retains the product but reduces marketing Harvesting support Promote more frequent use of the product by current customers Find new target markets for the product Find new uses for the product Price the product below the market To prevent slipping into decline Develop new distribution channels Add new ingredients Delete old ingredients Make a dramatic new guarantee

E. Some Dimensions of the Product Life Cycle

1. Length of the Product Life Cycle There is no exact time that a product takes consumer products usually have shorter life to move through its life cycle cycles than business products Rate of technological change shortens Mass communication shortens life cycles product life cycles. 2. Shape of the Product Life Cycle There are several distinctive life-cycle curves Each type suggests different marketing strategies

Significant education of the customer is required. Extended introductory period.

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Sales begin immediately Little learning is required by the consumer Benefits of purchase are readily understood.

Most often appear in womens and mens clothing styles. Length of the cycles may be years or decades.

Rapid sales on introduction Equally rapid decline.

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Often novelties and have a short life cycle.

3. The Product Level: Multiple life cycles (class and form) may exist. Entire product category or industry Product class Such as video game consoles and software. Variations within the class Product form Such as the computing capability of game consoles. 4. The Life Cycle and Consumers
A product diffuses, or spreads, through the population, a concept called the diffusion of innovation.

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Innovators 2.5% Early Adopters 13.5%

Eager to try new ideas and products Have higher incomes Better educated than noninnovators Much more reliant on group norms Oriented to the local community Tend to be opinion leaders. Collect more information Evaluate more brands than early adopters. Rely on friends, neighbors, and opinion leaders for information and norms. Adopt because most of their friends have already done so. For them, adoption is the result of pressure to conform. Are older than the others Tend to be below average in income and education. Do not rely on the norms of the group. Independent because they are tradition-bound Have the lowest socioeconomic status Are suspicious of new products Alienated from an advancing society

Early Majority

34%

Late Majority

34%

Laggards

16%

Common reasons for resisting a product in the introduction stage are usage barriers product is incompatible with existing habits value barriers product provides no incentive to change risk barriers physical, economic, or social psychological barriers cultural differences or image. Product Characteristics and the Rate of Adoption The degree of difficulty involved in understanding and Complexity using a new product. Slows diffusion. The degree to which the new product is consistent with existing values and product knowledge, past Compatibility experiences, and current needs. Incompatibility slows diffusion. The degree to which a product is perceived to be Relative advantage superior to existing substitutes. Speeds diffusion The degree to which the benefits and other results of using a new product can be observed by others and Observability communicated to target customers. Speeds diffusion is the degree to which a product can be tried on a
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Trialability

limited basis. Speeds diffusion Marketing Implications of the Adoption Process Word-of-mouth communication Marketing to consumers

Two types of communication aid the diffusion process

The effectiveness of different messages and appeals depends on the type of adopter targeted.

II. MANAGING THE PRODUCT LIFE CYCLE

A. Role of a Product Manager
Product manager is responsible for marketing products through the successive stages of their life cycles. Product (or brand) manager manages the marketing efforts for a close-knit family of products or brands. Three ways to manage: modify the product modify the market reposition the product.

B. Modify the Product

Altering a products characteristic to try to increase and extend the products sales. quality performance appearance,

C. Modify the Market Market

modification strategies involve: Product repositioning Finding new users. Increasing use among existing users. Creating new use situations.

D. Reposition the Product

Changing the place a product occupies in a consumers mind relative to competitive products. Reposition a product by changing one of four marketing mix elements. Four factors that trigger a repositioning action are: Competitors position is adversely affecting sales and market share. Repositioning a product allows it to reach a new market.
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Reacting to a Competitors Position. Reaching a New

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Market. Catching a Rising Trend. Changing consumer trends can also lead to repositioning a product. For example, consumer interest in functional foods that offer health and dietary benefits beyond nutrition inspired repositioning of oatmeal. adding value to the product (or line) Trading Additional features up Higher quality materials. Reducing the number of features Lower quality Trading Lower price. down Reducing the content of packages without changing package size and maintaining the package price.

Changing the Value Offered.

III. BRANDING AND BRAND MANAGEMENT

Branding Decisions A name, term, symbol, design, or combination thereof that identifies a Brand seller's products and differentiates them from competitors' products. Brand nameThat part of the brand that can be spoken.. Brand markThe element of the brand that cannot be spoken, such as symbols Trade name commercial, legal name under which a company does business. Trademarks Legal term indicating the owner's exclusive right to use the brand or part of the brand. Phrases, Abbreviations, Symbols, Shapes Failure to protect trademarks may and Color combinations may also qualify make product names generic. for trademark protection. All of the products below were The MARK has to be used continuously to trademarked. be protected Some still are! Rights to a trademark continue for as long aspirin as it is used. formica sheetrock Others are prohibited from using the band-aid brand without permission. kerosene A service mark performs the same styrofoam functions for service businesses. dry ice Lanham Act of 1946 protects Trademarks magic marker 1. Sets severe penalties for trademark trampoline infringement. dumpster 2. The injured party can sue for nylon triple damages and recovery of any vaseline profit.
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Generic product name identifies a product by class or type and cannot be trademarked

escalator ping-pong yo-yo

Identification Encourages repeat sales

Benefits of Branding The brand allows the product to be differentiated from others and serves as an indicator of quality to consumers

Because a familiar brand is more quickly accepted by consumers. product counterfeiting has been a growing problem. Counterfeit products can steal sales from the original manufacturer or hurt the companys reputation. Some Branding Concepts The value of company and brand names. the added value a given brand name gives to a product beyond the functional benefits provided. Brand Equity Often represented by the premium a consumer will pay for one brand over another when the functional benefits provided are identical Consistent preference for one brand over all others. Leads to repeat Brand Loyalty purchases. Brand Identityimportant to developing brand loyalty A brand so dominant in consumers' minds that they think of it Master Brand immediately when a product category, use situation, product attribute, or customer benefit is mentioned. Facilitates New Product Introduction

A. Brand Personality and Brand Equity

1. 2.

Brand Equity has two distinct advantages: Brand equity provides a competitive advantage. Consumers are often willing to pay a higher price for a product with brand equity. 1. Creating Brand Equity Brand equity is created by marketing programs Forge strong, favorable, and unique consumer associations and experiences with a brand Sequential four-step building process: Develop positive brand awareness and an association in consumers minds with a product class or need to give a brand an identity. Establish a brands meaning in the minds of consumers. Elicit the proper consumer responses to a brands identity and meaning. Attention to how consumers think and feel about a brand. Create a consumer-brand resonance evident in an intense, active loyalty relationship between consumers and the brand. 2. Valuing Brand Equity
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1. 2. 3. 4. 5.

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Brand equity is a financial advantage for the brand owner. Established brands are considered intangible assets. Can appreciate in value when effectively managed Can lose value when not managed properly.

B. Licensing
Licensing is a contractual agreement whereby a company allows another firm to use its brand name, patent, trade secret, or other property for a royalty or a fee... Licensing also assists companies in entering global markets with minimal risk.

C. Picking a Good Brand Name

Describe product benefits. Be memorable, distinctive, and positive. Fit the company or product image. Have no legal or regulatory restrictions. Be simple and emotional. Be carefully checked for prior impressions or undesirable images in different languages and cultures..

A good brand name should

D. Branding Strategies

1. Manufacturer Branding. Use one name for all its products. Multiproduct branding Called blanket branding strategy Called family branding strategy. Makes possible line extensions Subbranding combines a family brand with a new brand. Allows for brand extension Using a current brand name to enter a completely different product class. Too many uses for one brand name can dilute the meaning.
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Co-branding The use of a combination of brand names to enhance the perceived value of a product May be used to identify product ingredients or components. May be used when two organizations wish to collaborate to offer a product. Adds value to products that are generally perceived to be homogeneous shopping goods. multibranding giving each product a distinct name. Use when each brand is intended for a different market segment. Has become more complex in the global marketplace. Promotional costs are higher with multibranding. Euro-branding, Use the same brand name for the same product across all countries in the European Union. Makes Pan-European advertising and promotion programs possible. 2. Private Branding. Often called private labeling or reseller branding Use the brand name of a wholesaler or retailer. Manufacturer's Brands vs. Private Brands Advantages of Advantages of Manufacturer's Brands Private Brands to retailers or wholesalers to retailers or wholesalers Higher gross margin Can enhance retailer's image Manufacturer can not discontinue can carry lower inventory ties consumer to dealer manufacture gets the blame for ties salespeople to dealer problems dealer controls marketing mix Disadvantages (risks) of Disadvantages (risks) of Manufacturer Brands Private brands to retailers or wholesalers retailers or wholesalers Higher marketing costs Must buy in large quantities Lower margins Dealer gets the blame for problems risk of lower perceived quality

3. Mixed Branding. A compromise between manufacturer and private branding A firm markets products under its own name and that of a reseller The segment attracted to the reseller is different from the manufacturers own market. 4. Generic Branding. a no-brand product that competes on price. Low cost, no frills
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Popular in late 1970's 30%-40% cheaper than national brands 20%-25% cheaper than store brands good market share in some categories

IV. PACKAGING AND LABELING

Packaging component any container in which it is offered for sale and on which label information is conveyed. Integral part of the package Typically identifies the product or brand Who made it Where and when it was made How it is to be used Package contents and ingredients.

Label

A. Creating Customer Value through Packaging and Labeling

Packaging Functions 1. spoilage Packaging 2. tampering Contain and Promotes children Protect Products 3. Products 4. Theft Facilitate Recycling Convenience and utility of the package can differentiate a product from the Reduce Environmental Damage competition Facilitate Storage Last opportunity to influence shoppers before they buy. Facilitate Use Brand Image is often closely linked to packaging Are easy to Wholesalers ship & store Retailers stock on shelves. want Protect the product packages that Prevent spoilage or breakage Extend shelf life. Consumers want Easy to handle packages Easy to open that are Easy To reuse Packaging is often used to segment markets, particularly by offering different sizes for different segments. 1. Communication Benefits. Label information Packaging can also have brand equity benefits, as in the case of Leggs. 2. Functional Benefits.
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Convenience Product protection Storage. Consumer protection

3. Perceptual Benefits. Create perception in the consumers mind. Can connote status economy product quality.

B. Global Trends in Packaging

1. Environmental Sensitivity The amount, composition, and disposal of packaging material continue to receive much attention. European countries have been trendsetters in packaging guidelines and environmental sensitivity. U.S. firms marketing in the EU have responded to these guidelines and ultimately benefited consumers outside the EU as well. Firms are using life-cycle analysis (LCA) to examine the environmental effects of their packaging at every stage from raw material sources and production through distribution and disposal. 2. Health and Safety Concerns A majority of U.S. and European consumers believe that companies should make sure products and packages are safe, regardless of the cost. New packaging technology to extend shelf life (the time a product can be stored) and prevent spoilage is being developed with special applications for less-developed countries.

C. Labeling
Persuasive labeling Focuses on a promotional theme or logo Information for the consumer is secondary.

Helps consumers in making proper product selections Informational labeling Helps lower cognitive dissonance May include care and use information may explain construction figures Universal Product Codes Introduced in 1974 (UPC) Many Retailers will not stock products without Nutrition Labeling and Education Act of 1990 Requires detailed nutritional information on most food packages Establishes standards for health claims on food packaging.

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V. PRODUCT WARRANTY
A warranty is a statement indicating the liability of the manufacturer for product deficiencies. There are various types of product warranties with different implications for manufacturers and customers. Warranties are important in light of increasing product liability claims. This issue is hotly contested between companies and consumer advocates. Warranty Strategy Product A protection and information device for consumers. Warranties Guarantees the quality or performance of a good or Warranty service. Express Warranty made in writing full warranty has no limits of noncoverage. limited-coverage specifically states the bounds of coverage warranty areas of noncoverage. Unwritten guarantee that a good or service is fit for the purpose for which it was sold. All sales have an implied warranty under the Uniform Implied Warranty Commercial Code. Often assign responsibility for product deficiencies to the manufacturer. Magnuson-Moss Manufacturer that promises a full warranty must meet Warranty certain minimum standards. Federal Trade A limited warranty must be conspicuously promoted by the Commission manufacturer Improvement Act Otherwise a full warranty is assumed.

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