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Chapter 11: Managing Products And Brands

I. PRODUCT LIFE CYCLEo A way to trace the stages of a product's acceptance from its introduction to its demise.o One of the most familiar concepts in marketingo A prevalent marketing management toolo Refers to the life of the product categoryo The time a product category spends in a stage of the product life cycle may vary from a few weeks to

decades.o Does not predict how long a product category will remain in any one stageo 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 StageSales grow slowly Profit is minimal or negativeCreate awareness Stimulate trial

High production costs Limited product models

Frequent product modification Penetration pricingSkimming pricing Little competitionHigh failure rate, High marketing costs

Promotion strategy focuses on primary demand for the product categorydeveloping product awareness Informing about product benefits.

Intensive personal selling to retailers and wholesalers is required.

B. Growth StageCharacteristics

Sales grow at an increasing rate. Many competitors enter the market.Large companies may acquire small pioneering

firms. Profits are healthy

Promotion emphasisheavy brand advertising Differences between brands.

Gaining wider distribution is a key goalToward the end of this stage

prices normally fall profits reach their peak.

Development costs have been recovered Sales volume has created economies of

scale.

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C. Maturity StageSales continue to increase but at a decreasing rate The marketplace is approaching saturation

Annual models of many products An emphasis on product style rather thanfunction

Product lines are widened or extended marginal competitors begin dropping 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 sales. Falling demand forces many competitors out of themarketThe rate of decline is governed by

a. how rapidly consumer tastes changeor

b. how rapidly substitute products areadopted.

A few small specialty firms may still manufacture theproduct.

Strategies

Deletion. Dropping a product from the companys product line,is the most drastic strategy.

Harvesting Company retains the product but reduces marketingsupport

To prevent slipping into decline

o Promote more frequent use of the product by currentcustomers

o Find new target markets for the producto Find new uses for the producto Price the product below the market

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o Develop new distribution channelso Add new ingredientso Delete old ingredientso Make a dramatic new guarantee

E. Some Dimensions of the Product Life Cycle1. Length of the Product Life Cycle

There is no exact time that aproduct takes to movethrough its life cycle

consumer products usually have shorter life cycles thanbusiness products

Mass communicationshortens life cycles Rate of technological change shortens product life cycles.

2. Shape of the Product Life Cycleo There are several distinctive life-cycle curveso Each type suggests different marketing strategies

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o Significant education of thecustomer is required.

o Extended introductory period.

o Sales begin immediatelyo Little learning is required by the

consumer o Benefits of purchase are readily

understood.

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o Most often appear in womensand mens clothing styles.

o Length of the cycles may beyears or decades.

o Rapid sales on introductiono Equally rapid decline.o Often novelties and have a short

life cycle.

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3. The Product Level:Multiple life cycles (class and form) may exist.

Product classo Entire product category or industryo Such as video game consoles and software.

Product formo Variations within the classo Such as the computing capability of game consoles.

4. The Life Cycle and ConsumersA product diffuses, or spreads, through the population, a concept called the diffusion of innovation.

Product Strategy

Defines what the organization does and why it exists. It Involves creating a product offering that is a bundle of physical (tangible),service (intangible), and symbolic (perceptual) attributes designed to satisfy customers needs and wants . It Strives to overcomecommoditization.

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Product Life Cycle

Introduction Growth Maturity Decline

Post

Mortem

Loss/profit

Time

$ SS aa llee ss

PP r r oo f f iitt

Progression of product life stages (sales & time)

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Innovators represent the first 2.5 percent of all individuals who ultimately adopt a new product. They are more venturesome than lateradopters, more likely to be receptive to new ideas, and tend to have high incomes, which reduces the risk of a loss arising from an earlyadoption.

Early adopters represent the next 13 to 14 percent who adopt. They are more a part of the local scene, are often opinion leaders, serve asvital links to members of the early majority group (because of their social proximity), and participate more in community organizationsthan do later adopters.

The early majority includes 34 percent of those who adopt. These individuals display less leadership than early adopters, tend to be activein community affairs (thereby gaining respect from their peers), do not like to take unnecessary risks, and want to be sure that a new

product will prove successful before they adopt it. The Late majority represents another 34 percent. Frequently, these individuals adopt a new product because they are forced to do so for

either economic or social reasons. They participate in community activities less than the previous groups and only rarely assume aleadership role.

Laggards comprise the last 16 percent of adopters. Of all the adopters, they are the most local. They participate less in communitymatters than members of the other groups and stubbornly resist change. In some cases, their adoption of a product is so late it has already

Diffusion of Innovations

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been replaced by another new product.

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Innovators 2.5%

o Eager to try new ideas and productso Have higher incomeso Better educated than noninnovators

EarlyAdopters 13.5%

o Much more reliant on group normso Oriented to the local communityo Tend to be opinion leaders.

Early Majority 34%

o Collect more informationo Evaluate more brands than early adopters.o Rely on friends, neighbors, and opinion leaders for information

and norms.

LateMajority 34%

o Adopt because most of their friends have already done so.o For them, adoption is the result of pressure to conform.o Are older than the otherso Tend to be below average in income and education.

Laggards 16%

o Do not rely on the norms of the group.o Independent because they are tradition-boundo Have the lowest socioeconomic statuso Are suspicious of new productso Alienated from an advancing societyo

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Common reasons for resisting a product in the introduction stage are

usage barriers product is incompatible with existing habitsvalue barriers product provides no incentive to change

risk barriers physical, economic, or socialpsychological barriers cultural differences or image.

Product Characteristics and the Rate of Adoption

Complexity

o The degree of difficulty involved in understanding and using a newproduct.

o Slows diffusion.

Compatibility

o The degree to which the new product is consistent with existingvalues and product knowledge, past experiences, and currentneeds.

o Incompatibility slows diffusion.

Relative advantage

o The degree to which a product is perceived to be superior toexisting substitutes.

o Speeds diffusion

Observability

o The degree to which the benefits and other results of using a newproduct can be observed by others and communicated to targetcustomers.

o Speeds diffusion

Trialabilityo is the degree to which a product can be tried on a limited basis.o Speeds diffusion

Marketing Implications of the Adoption Process

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Two types of communicationaid the diffusion process

o Word-of-mouth communicationo Marketing to consumers

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

New Product Development:

The development of original products, product improvements, product modifications, and new brands through the firms own R&D efforts Or New products canalso come from acquisition of other companies, patents, or licenses

New Product DevelopmentProcess

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Idea Generation-Sales force, Customers, Employees, R&D specialists, The competition, Suppliers, Retailers, Independent inventors.

Screening-Screening separates ideas with commercial potential from those that cannot meet company objectives. Business Analysis-The business analysis consists of assessing the new products market potential, growth rate, likely competitive strengths, and compatibility of theproposed product with organizational resources.

Development-Converting an idea into a physical product Requires interaction among many of the firms departme nts. Prototypes may go through many changes. Test Marketing-Introduction of a trial version of a new product supported by a complete marketing campaign to a selected city of television coverage. Commercialization- is stage, the firm establishes marketing strategies,

and funds outlays for production and marketing.

Attributes Associated with a Product Offering

II. MANAGING THE PRODUCT LIFE CYCLE

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

modify the product modify the market reposition the product.

B. Modify the Producto Altering a products characteristic to try to increase and extend the products sales.

quality performance appearance,

C. Modify the Market Market

modificationstrategies involve:

o Finding new users.o Increasing use among existing users.o Creating new use situations.

D. Reposition the Product

Product repositioningo Changing the place a product occupies in a consumers mind relative to

competitive products.o Reposition a product by changing one of four marketing mix elements.

Four factors that trigger a repositioning action are:Reacting to a

CompetitorsPosition.

o Competitors position is adversely affecting sales and market share.

Reaching a NewMarket.

o Repositioning a product allows it to reach a new market.

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Catching a RisingTrend.

o Changing consumer trends can also lead to repositioning a product.o For example, consumer interest in functional foods that offer health and

dietary benefits beyond nutrition inspired repositioning of oatmeal.

Changing the ValueOffered.

Trading up

o adding value to the product (or line)o Additional featureso Higher quality materials.

Tradingdown

o Reducing the number of featureso Lower qualityo Lower price.o Reducing the content of packages without changing

package size and maintaining the package price.

III. BRANDING AND BRAND MANAGEMENT What is Brand? A brand is a persons gut feeling about a product, service or organization. l A brand defines the relationship customers have with us.l A brand is a promise we make to our customers

and to ourselves.

l A brand is shaped by each experience customers have with the firm.A brand differentiates the product from similar offerings.

Traditional view: A brand is a name, term, sign, symbol, or design which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

Recent views:

Brand is what is experienced and valued by customers in everyday social life. Brand is the culture of the product- shared, taken-for granted brand stories, images and associations.

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Brand is the emotional file we have for a product or a service or entity. A brand is a sellers promise to deliver consistently a specific set of featur es, benefits and services to buyers. For customer brand is an experience

Role of Brand: Signify quality

Create barriers to entry Serve as a competitive advantage Secure price premium

How Brand works?

Level-1: Identification-Brand name and logo ensure the product can be recognized and distinguished from the competition.

Level-2: Security- You get what you expect.

Level-3: Added value- individual laddered benefits.

Level-4: Transformation-the brand actually invokes change in the consumer.

Brand: A b rand i s a mixture of attributes, tangible and intangible, symbolized in a trademark, which, if managed properly, c reates v alue and influence.

Branding:

The purpose of branding is to transform a product. Transforming a commodity like product into customer satisfying value added propositions isthe essence of branding.

BRANDING IS A:

A physical product is combined with something else- symbols, images and feelings to produce an idea or concept. The two grow with and live onone another in a mutually enhancing partnership.

Branding is emotional product development.

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Two routes of brand building:

1. from product advantage- intangible values2. from values-products

Promotion is the vehicle that allows us to access the consumers mind, to create a perceptual inventory of imagery, symbols and feeling s that cometo define the perceptual entity we call a Brand.

Branding Decisions

Brand A name, term, symbol, design, or combination thereof that identifies a seller's productsand differentiates them from competitors' products.

Brand name That part of the brand that can be spoken..Brand mark The element of the brand that cannot be spoken, such as symbolsTrade name commercial, legal name under which a company does business.

TrademarksLegal term indicating the owner's exclusive right to use the brand or part of the brand.Phrases, Abbreviations, Symbols, Shapes and Color

combinations may also qualify for trademark protection.The MARK has to be used continuously to be protectedRights to a trademark continue for as long as it is used.

Others are prohibited from using the brand without permission.A service mark performs the same functions for service

businesses.Lanham Act of 1946 protects Trademarks

o Failure to protect trademarks may makeproduct names generic.

o All of the products below weretrademarked.

o Some still are!

o aspirino formica o sheetrock o band-aid

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67. Sets severe penalties for trademark infringement.68. The injured party can sue for triple damages and recovery of any

profit.

Generic product name identifies a product by class or type andcannot be trademarked

o keroseneo styrofoam o dry iceo magic marker o trampolineo dumpster o nylono vaseline o escalator o ping-pong o yo-yo

Benefits of Branding

Identification The brand allows the product to be differentiated from others andserves as an indicator of quality to consumers

Encourages repeat salesFacilitates New Product Introduction Because a familiar brand is more quickly accepted by consumers.

o product counterfeiting has been a growing problem.o Counterfeit products can steal sales from the original manufacturer or hurt the companys reputation.

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Some Branding Concepts

Brand Equity

o The value of company and brand names.o the added value a given brand name gives to a product beyond the functional benefits

provided.o Often represented by the premium a consumer will pay for one brand over another when

the functional benefits provided are identical

Brand Loyalty Consistent preference for one brand over all others. Leads to repeat purchases.Brand Identity important to developing brand loyalty

Master Brand A brand so dominant in consumers' minds that they think of it immediately when aproduct category, use situation, product attribute, or customer benefit is mentioned.A. Brand Personality and Brand Equity

Brand Equity has two distinct advantages:

92. Brand equity provides a competitive advantage.93. Consumers are often willing to pay a higher price for a product with brand equity.

1. Creating Brand Equityo Brand equity is created by marketing programso Forge strong, favorable, and unique consumer associations and experiences with a brando Sequential four-step building process:

97. Develop positive brand awareness and an association in consumers minds with a product class or need to give abrand an identity.

98. Establish a brands meaning in the minds of consumers. 99. Elicit the proper consumer responses to a brands identity an d meaning.100. Attention to how consumers think and feel about a brand.101. Create a consumer-brand resonance evident in an intense, active loyalty relationship between consumers and

the brand.

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

B. Licensingo 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...o Licensing also assists companies in entering global markets with minimal risk.

C. Picking a Good Brand Name

A good brand name should

o Describe product benefits.o Be memorable, distinctive, and positive.o Fit the company or product image.o Have no legal or regulatory restrictions.o Be simple and emotional.o Be carefully checked for prior

impressions or undesirable images indifferent languages and cultures..

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D. Branding Strategies

1. Manufacturer Branding.

Multiproduct branding

o Use one name for all its products.o Called blanket branding strategyo Called family branding strategy.

o Makes possible line extensionso Subbranding combines a family brand with a new brand.o 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.

o Co-branding The use of a combination of brand names to enhance the perceived value of a product

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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.

Multibrandingo giving each product a distinct name.

o Use when each brand is intended for a different market segment.o Has become more complex in the global marketplace.o Promotional costs are higher with multibranding.o 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.o Often called private labeling or reseller brandingo Use the brand name of a wholesaler or retailer.

Manufacturer's Brands vs. Private BrandsAdvantages of

Manufacturer's Brandsto retailers or wholesalers

Advantages of Private Brands

to retailers or wholesalers

o Can enhance retailer's imageo can carry lower inventoryo manufacture gets the blame for problems

o Higher gross margino Manufacturer can not discontinueo ties consumer to dealer o ties salespeople to dealer o dealer controls marketing mix

Disadvantages (risks) of Manufacturer Brands

retailers or wholesalers

Disadvantages (risks) of Private brands to

retailers or wholesalers

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o Lower margins

o Higher marketing costso Must buy in large quantitieso Dealer gets the blame for problemso risk of lower perceived quality

3. Mixed Branding.o A compromise between manufacturer and private brandingo A firm markets products under its own name and that of a reseller o The segment attracted to the reseller is different from the manufacturers own market.

4. Generic Branding.o a no-brand product that competes on price.o Low cost, no frillso Popular in late 1970'so 30%-40% cheaper than national brandso 20%-25% cheaper than store brandso good market share in some categories

IV. PACKAGING AND LABELING

Packaging componento any container in which it is offered for sale and on which label

information is conveyed.

Label

o Integral part of the packageo Typically identifies

the product or brand Who made it Where and when it was made How it is to be used

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Package contents and ingredients.

A. Creating Customer Value through Packaging and LabelingPackaging Functions

Contain andProtectProducts

153. spoilage

154. tamper ing

155. children

156. Theft

PackagingPromotesProducts

Facilitate Recycling o Convenience and utility of the package can differentiate aproduct from the competition

o Last opportunity to influence shoppers before they buy.o Brand Image is often closely linked to packaging

Reduce Environmental DamageFacilitate Storage

Facilitate Use

Wholesalers&Retailerswantpackages that

o Are easy to ship store stock on shelves.

o Protect the producto Prevent spoilage or breakageo Extend shelf life.

Consumers wantpackagesthat are

o Easy to handleo Easy to openo Easy To reuse

Packaging is often used to segment markets, particularlyby offering different sizes for different segments.

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1. Communication Benefits.o Label informationo Packaging can also have brand equity benefits, as in the case of Leggs.

2. Functional Benefits.o Convenienceo Product protectiono Storage.o Consumer protection

3. Perceptual Benefits.o Create perception in the consumers mind. o Can connote

status economy product quality.

B. Global Trends in Packaging1. Environmental Sensitivity

o The amount, composition, and disposal of packaging material continue to receive much attention.o European countries have been trendsetters in packaging guidelines and environmental sensitivity.o U.S. firms marketing in the EU have responded to these guidelines and ultimately benefited consumers

outside the EU as well.o 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 Concernso A majority of U.S. and European consumers believe that companies should make sure products and packages

are safe, regardless of the cost.o New packaging technology to extend shelf life (the time a product can be stored) and prevent spoilage is

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being developed with special applications for less-developed countries.

C. Labeling

Persuasive labelingo Focuses on a promotional theme or logoo Information for the consumer is secondary.

Informational labeling

o

o Helps consumers in making proper product selectionso Helps lower cognitive dissonanceo May include care and use informationo may explain construction figures

Universal Product Codes (UPC)o Introduced in 1974o Many Retailers will not stock products without

Nutrition Labeling and Education Act of 1990o Requires detailed nutritional information on most food packageso Establishes standards for health claims on food packaging.

V. PRODUCT WARRANTYo A warranty is a statement indicating the liability of the manufacturer for product deficiencies.o There are various types of product warranties with different implications for manufacturers and customers.o Warranties are important in light of increasing product liability claims.o This issue is hotly contested between companies and consumer advocates.

Warranty Strategy

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Product Warrantieso A protection and information device for consumers.

Warrantyo Guarantees the quality or performance of a good or service.

Express Warrantyo made in writing

full warrantyo has no limits of noncoverage.

limited-coveragewarranty

o specifically states the bounds of coverageo areas of noncoverage.

Implied Warranty

o Unwritten guarantee that a good or service is fit for the purpose for whichit was sold.

o All sales have an implied warranty under the Uniform Commercial Code.o Often assign responsibility for product deficiencies to the manufacturer.

Magnuson-MossWarranty

Federal TradeCommission

Improvement Act

o Manufacturer that promises a full warranty must meet certain minimumstandards.

o A limited warranty must be conspicuously promoted by the manufacturer o Otherwise a full warranty is assumed.