Chapter 11_ Managing Products and Brands

1/17/13 Chapter 11: Managing Products And Brands

www-rohan.sdsu.edu/~renglish/370/notes/chapt11/index.htm 1/14

Chapter 11: Managing Products AndBrands

I. PRODUCT LIFE CYCLEA way to trace the stages of a product's acceptance from its introduction to itsdemise.One of the most familiar concepts in marketingA prevalent marketing management toolRefers to the life of the product categoryThe time a product category spends in a stage of the product life cycle may varyfrom a few weeks to decades.Does not predict how long a product category will remain in any one stageA tool to help marketers understand

where their product is nowwhat may happenwhich strategies are normally appropriate.



A. Introduction StageSales 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 StageCharacteristics

Sales grow at an increasing rate. Many competitors enter the market.

Large companies may acquire smallpioneering firms.

Profits are healthy

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.

Development costs have been recoveredSales volume has created economies

of scale.

C. Maturity StageSales continue to increase but at a decreasing

rateThe marketplace is approaching

saturation

Annual models of many productsAn emphasis on product style rather

than function

Product lines are widened or extendedmarginal competitors begin dropping

out of the market.



out of the market.

Heavy promotions to both the dealers andconsumers are required.

Prices and profits begin to fall.

D. Decline StageSignaled by a long-run drop in

sales.Falling demand forces many competitors out of the

marketThe rate of decline is governed bya. how rapidly consumer

tastes change orb. how rapidly substitute

products are adopted.

A few small specialty firms may still manufacturethe product.

Strategies

Deletion.Dropping a product from the company’s productline, is the most drastic strategy.

HarvestingCompany retains the product but reduces marketingsupport

To prevent slipping into decline

Promote more frequent use of the product bycurrent customersFind new target markets for the productFind new uses for the productPrice the product below the marketDevelop new distribution channelsAdd new ingredientsDelete old ingredientsMake a dramatic new guarantee

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

There is no exact time that a product takesto move through its life cycle

consumer products usually have shorter lifecycles than business products

Mass communication shortens life cyclesRate of technological change shortensproduct life cycles.

2. Shape of the Product Life Cycle

There are several distinctive life-cycle curvesEach type suggests different marketing strategies

Significant education of thecustomer is required.Extended introductory period.



Sales begin immediatelyLittle learning is required by theconsumerBenefits of purchase are readilyunderstood.

Most often appear in women’s andmen’s clothing styles.Length of the cycles may be yearsor decades.

Rapid sales on introductionEqually rapid decline.



Often novelties and have a shortlife cycle.

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

Product classEntire product category or industrySuch as video game consoles andsoftware.

Product formVariations within the classSuch as the computing capability ofgame consoles.

4. The Life Cycle and Consumers

A product diffuses, or spreads, through the population, a concept called the diffusion ofinnovation.



Innovators 2.5%Eager to try new ideas and productsHave higher incomesBetter educated than noninnovators

EarlyAdopters

13.5%Much more reliant on group normsOriented to the local communityTend to be opinion leaders.

EarlyMajority

34%

Collect more informationEvaluate more brands than early adopters.Rely on friends, neighbors, and opinion leaders forinformation and norms.

LateMajority

34%

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

Laggards 16%

Do not rely on the norms of the group.Independent because they are tradition-boundHave the lowest socioeconomic statusAre suspicious of new productsAlienated from an advancing society

Common reasons for resisting a product in the introduction stage areusage 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

ComplexityThe degree of difficulty involved in understanding andusing a new product.Slows diffusion.

Compatibility

The degree to which the new product is consistent withexisting values and product knowledge, pastexperiences, and current needs.Incompatibility slows diffusion.

Relative advantageThe degree to which a product is perceived to besuperior to existing substitutes.Speeds diffusion

Observability

The degree to which the benefits and other results ofusing a new product can be observed by others andcommunicated to target customers.Speeds diffusionis the degree to which a product can be tried on a



Trialability limited basis.Speeds diffusion

Marketing Implications of the Adoption ProcessTwo types ofcommunication aid thediffusion process

Word-of-mouth communicationMarketing to consumers

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

II. MANAGING THE PRODUCT LIFECYCLE

A. Role of a Product ManagerProduct manager is responsible for marketing products through the successivestages of their life cycles.Product (or brand) manager manages the marketing efforts for a close-knitfamily of products or brands.Three ways to manage:

modify the productmodify the marketreposition the product.

B. Modify the ProductAltering a product’s characteristic to try to increase and extend the product’ssales.

qualityperformanceappearance,

C. Modify the Market Marketmodificationstrategiesinvolve:

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

D. Reposition the ProductProductrepositioning

Changing the place a product occupies in a consumer’s mindrelative to competitive products.Reposition a product by changing one of four marketing mixelements.

Four factors that trigger a repositioning action are:Reacting to aCompetitor’sPosition.

Competitor’s position is adversely affecting sales and marketshare.

Reaching a NewRepositioning a product allows it to reach a new market.



Market.

Catching aRising Trend.

Changing consumer trends can also lead to repositioning aproduct.For example, consumer interest in “functional foods” thatoffer health and dietary benefits beyond nutrition inspiredrepositioning of oatmeal.

Changing theValue Offered.

Tradingup

adding value to the product (or line)Additional featuresHigher quality materials.

Tradingdown

Reducing the number of featuresLower qualityLower price.Reducing the content of packages without changingpackage size and maintaining the package price.

III. BRANDING AND BRANDMANAGEMENT

Branding Decisions

BrandA name, term, symbol, design, or combination thereof that identifies aseller'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 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, Shapesand Color combinations may also qualifyfor trademark protection.

The MARK has to be used continuously tobe protected

Rights to a trademark continue for as longas it is used.

Others are prohibited from using thebrand without permission.

A service mark performs the samefunctions for service businesses.

Lanham Act of 1946 protects Trademarks1. Sets severe penalties for trademark

infringement.2. The injured party can sue for

triple damages and recovery of anyprofit.

Failure to protect trademarks maymake product names generic.All of the products below weretrademarked.Some still are!

aspirinformica®sheetrock®band-aid®kerosenestyrofoam®dry icemagic marker®trampolinedumpster®nylonvaseline®



Generic product name identifies a productby class or type and cannot betrademarked

escalatorping-pong®yo-yo

Benefits of Branding

IdentificationThe brand allows the product to be differentiatedfrom others and serves as an indicator of qualityto consumers

Encourages repeat sales

Facilitates New Product IntroductionBecause a familiar brand is more quicklyaccepted by consumers.

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

Some Branding Concepts

Brand Equity

The value of company and brand names.the added value a given brand name gives to a product beyondthe functional benefits provided.Often represented by the premium a consumer will pay for onebrand over another when the functional benefits provided areidentical

Brand LoyaltyConsistent preference for one brand over all others. Leads to repeatpurchases.

Brand Identityimportant to developing brand loyalty

Master BrandA brand so dominant in consumers' minds that they think of itimmediately when a product category, use situation, product attribute,or customer benefit is mentioned.

A. Brand Personality and Brand EquityBrand Equity has two distinct advantages:

1. Brand equity provides a competitive advantage.2. Consumers are often willing to pay a higher price for a product with brand

equity.

1. Creating Brand EquityBrand equity is created by marketing programsForge strong, favorable, and unique consumer associations and experiences witha brandSequential four-step building process:

1. Develop positive brand awareness and an association in consumer’s minds witha product class or need to give a brand an identity.

2. Establish a brand’s meaning in the minds of consumers.3. Elicit the proper consumer responses to a brand’s identity and meaning.4. Attention to how consumers think and feel about a brand.5. Create a consumer-brand resonance evident in an intense, active loyalty

relationship between consumers and the brand.

2. Valuing Brand Equity



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

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

C. Picking a Good Brand Name

A good brand name should

Describe product benefits.Be memorable, distinctive, andpositive.Fit the company or product image.Have no legal or regulatoryrestrictions.Be simple and emotional.Be carefully checked for priorimpressions or undesirable imagesin different languages and cultures..

D. Branding Strategies

1. Manufacturer Branding.

Multiproduct brandingUse one name for all its products.Called blanket branding strategyCalled family branding strategy.

Makes possible line extensionsSubbranding combines a family brand with a new brand.Allows for brand extension

Using a current brand name to enter a completely different productclass.Too many uses for one brand name can dilute the meaning.



Co-brandingThe use of a combination of brand names to enhance the perceived valueof a productMay be used to identify product ingredients or components.May be used when two organizations wish to collaborate to offer aproduct.Adds value to products that are generally perceived to be homogeneousshopping 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 inthe European Union.Makes Pan-European advertising and promotion programs possible.

2. Private Branding.Often called private labeling or reseller brandingUse the brand name of a wholesaler or retailer.

Manufacturer's Brands vs. Private Brands

Advantages of Manufacturer's Brands

to retailers or wholesalers

Advantages of Private Brands

to retailers or wholesalers

Can enhance retailer's imagecan carry lower inventorymanufacture gets the blame forproblems

Higher gross marginManufacturer can not discontinueties consumer to dealerties salespeople to dealerdealer controls marketing mix

Disadvantages (risks) of Manufacturer Brands

retailers or wholesalers

Disadvantages (risks) of Private brands to

retailers or wholesalers

Lower margins

Higher marketing costsMust buy in large quantitiesDealer gets the blame forproblemsrisk of lower perceived quality

3. Mixed Branding.A compromise between manufacturer and private brandingA firm markets products under its own name and that of a resellerThe segment attracted to the reseller is different from the manufacturer’s ownmarket.

4. Generic Branding.a no-brand product that competes on price.Low cost, no frills



Popular in late 1970's30%-40% cheaper than national brands20%-25% cheaper than store brandsgood market share in some categories

IV. PACKAGING AND LABELINGPackagingcomponent

any container in which it is offered for sale and on which labelinformation is conveyed.

Label

Integral part of the packageTypically identifies

the product or brandWho made itWhere and when it was madeHow it is to be usedPackage contents and ingredients.

A. Creating Customer Value through Packaging and Labeling

Packaging Functions

Contain andProtect Products

1. spoilage2. tampering3. children4. Theft

PackagingPromotesProducts

Facilitate Recycling Convenience and utility of the packagecan differentiate a product from thecompetitionLast opportunity to influence shoppersbefore they buy.Brand Image is often closely linked topackaging

Reduce Environmental DamageFacilitate Storage

Facilitate Use

Wholesalers&Retailerswantpackages that

Are easy toshipstorestock on shelves.

Protect the productPrevent spoilage or breakageExtend shelf life.

Consumers wantpackages that are

Easy to handleEasy to openEasy To reuse

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

1. Communication Benefits.Label information Packaging can also have brand equity benefits, as in the case of L’eggs.

2. Functional Benefits.



ConvenienceProduct protectionStorage.Consumer protection

3. Perceptual Benefits.Create perception in the consumer’s mind.Can connote

statuseconomyproduct quality.

B. Global Trends in Packaging1. Environmental Sensitivity

The amount, composition, and disposal of packaging material continue toreceive much attention.European countries have been trendsetters in packaging guidelines andenvironmental sensitivity.U.S. firms marketing in the EU have responded to these guidelines andultimately benefited consumers outside the EU as well.Firms are using life-cycle analysis (LCA) to examine the environmental effectsof their packaging at every stage from raw material sources and productionthrough distribution and disposal.

2. Health and Safety ConcernsA majority of U.S. and European consumers believe that companies shouldmake sure products and packages are safe, regardless of the cost.New packaging technology to extend shelf life (the time a product can bestored) and prevent spoilage is being developed with special applications forless-developed countries.

C. Labeling

Persuasive labelingFocuses on a promotional theme or logoInformation for the consumer is secondary.

Informational labeling

Helps consumers in making proper productselectionsHelps lower cognitive dissonanceMay include care and use informationmay explain construction figures

Universal Product Codes(UPC)

Introduced in 1974Many Retailers will not stock products without

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



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

Warranty StrategyProduct

WarrantiesA protection and information device for consumers.

WarrantyGuarantees the quality or performance of a good orservice.

Express Warranty made in writingfull warranty has no limits of noncoverage.

limited-coveragewarranty

specifically states the bounds of coverageareas of noncoverage.

Implied Warranty

Unwritten guarantee that a good or service is fit for thepurpose for which it was sold.All sales have an implied warranty under the UniformCommercial Code.Often assign responsibility for product deficiencies to themanufacturer.

Magnuson-MossWarranty

Federal TradeCommission

Improvement Act

Manufacturer that promises a full warranty must meetcertain minimum standards.A limited warranty must be conspicuously promoted by themanufacturerOtherwise a full warranty is assumed.

Chapter 11_ Managing Products and Brands

Documents

product awareness

product benefits

product style

product level

product price

consumersa product

product life cycle1

products product lines