MANAGING PRODUCTS AND BRANDS

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Irwin/McGraw-Hill

C H A P T E R T W E L V E

MANAGING PRODUCTSAND BRANDS

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2000MARKETING, 6/eMARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS

AFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO:

• Explain the product life cycle (PLC) concept and relate a marketing strategy to each stage.

• Recognize the differences in PLCs for various products and their implications for marketing

decisions.

• Understand alternative approaches to managing a product’s PLC.

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AFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO

• Describe elements of brand personality and

brand equity and the criteria for the good

brand name.

• Explain the rationale for alternative branding

strategies employed by companies.

• Understand the benefits of packaging and

warranties in the marketing of a product.

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PP12PP12--AA Gatorade: The Active ThirstAA Gatorade: The Active Thirst--QuencherQuencher• The Gatorade brand commands more than 80% of the $1.5

billion U.S. sports drink market.

• Today Gatorade is the official sports drink of Major League Baseball, the National Football League, the National Basketball Association and the National Hockey League.

• Gatorade sales have been built via more flavors, multiple package sizes and forms, including glass and plastic bottles and aluminum cans.

• Distribution has been expanded to include convenience stores and supermarkets followed by vending machines and fountain service.

• Consistent advertising has effectively conveyed the product’s benefits and links with athletic competition.

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PP12PP12--BB The Product Life Cycle ConceptBB The Product Life Cycle Concept

• Products, like people, have been viewed

as having a life cycle.

• The concept of the product life cycle

describes the stages a new product goes

through in the marketplace:

introduction, growth, maturity, and

decline.

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PP12PP12--1 How stages of the product life cycle relate to a firm’s 1 How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actionsmarketing objectives and marketing mix actions

Marketing objective

Marketing objective Gain

AwarenessGain Awareness Stress

differentiationStress differentiation Maintain

brand loyaltyMaintain brand loyalty Harvesting,

deletionHarvesting, deletion

CompetitionCompetition NoneNone GrowingGrowing ManyMany ReducedReduced

ProductProduct OneOne More versionsMore versions Full product line

Full product line Best sellersBest sellers

PricePrice Skimming or penetration

Skimming or penetration Gain share, dealGain share, deal Defend share,

profitDefend share, profit Stay profitableStay profitable

PromotionPromotion Inform, educateInform, educate Stress competitive differences

Stress competitive differences

Reminder oriented

Reminder oriented Minimal

promotionMinimal promotion

Place(distribution)

Place(distribution) LimitedLimited More outletsMore outlets Maximum

outletsMaximum outlets Fewer outletsFewer outlets

Stage of the product life cycle

Sale

s re

venu

eor

pro

fit Introduction Growth Maturity Decline

+0–

Total industrysales revenue

Total industry profit

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PP12PP12--2 Product Life Cycle for the stand alone FAX machine for 2 Product Life Cycle for the stand alone FAX machine for business use: 1970business use: 1970--19991999

1970 1975 1980 1982 1984 1986 1988 1990 1992 1994 1996 1997 1998 1999

$7.0

6.0

5.0

4.0

3.0

2.0

1.0

Sal

es (

$bil

lio

n)

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PP12PP12--CC Will the Internet bury the Familiar Fax?CC Will the Internet bury the Familiar Fax?

• Technical substitution often causes the decline stage in the PLC.

• Will the Internet and E-mail replace FAX machines?

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PP12PP12--DD Some Dimensions of the PLCDD Some Dimensions of the PLC----LengthLength

1. Consumer products have shorterPLCs than industrial products.

2. Mass communication informs

consumers faster and shortens PLCs.

3. Products affected by technological

change tend to have shorter PLCs.

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PP12PP12--EE Some Dimensions of the PLCEE Some Dimensions of the PLC----ShapeShape

1. High learning product

2. Low learning product

3. Fashion product

4. Fad product

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PP12PP12--3 Alternative Product Life Cycles3 Alternative Product Life Cycles

TimeTime

B. Low learning product

Time

A. High learning product

Time

D. Fad productC. Fashion product

Sales

Sales

Sales Sales

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PP12PP12--BB Product life cycle for wine coolersProduct life cycle for wine coolersMillionsof Dollars

$1500

$1000

$500

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Source: Figure drawn from Wine and Liqour Handbook statistics.

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PP12PP12--C Recording industry product form life cyclesC Recording industry product form life cycles

Source: Figure drawn from Recording Industry Association of America statistics.

Mill

ions

of

unit

s so

ld

650600550500450400350300250200150100500

1989

1991

1993

1995

1987

1977

1979

1981

1983

1985

1975

1973

Albums

Cassettes

Compactdisks

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PP12PP12--FF Some Dimensions of the PLCFF Some Dimensions of the PLC----Product LevelProduct Level

1. Product brand -- the specific version of a

product offered by a particular company

2. Product class -- refers to the entire product

category or industry such as video games

3. Product form -- pertains to variations

within the product class

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PP12PP12--4a Video game life cycles by product class, product form, 4a Video game life cycles by product class, product form, and brandand brand

1987 1989 1991 1993 1995 1997 1999 (est.)

8-bit machines16-bit machines

32-/64-bit machines

Product form

Product classTotal

A. Video game life cycle by product class and product form (worldwide)40

30

20

10

0

Wo

rld

wid

e sa

les

(mill

ion

s o

f u

nit

s)

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PP12PP12--4b Video game life cycles by product class, product form, 4b Video game life cycles by product class, product form, and brandand brand

$4

3

2

1

01994 1995 1996 1997 1998 1999 (est.)

NintendoSonySega

B. Advanced video game life cycle by brand (United States)

U.S

. sal

es, i

ncl

ud

ing

har

dw

are

and

so

ftw

are

($ b

illio

n)

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PP12PP12--GG Factors Affecting the Diffusion of an InnovationGG Factors Affecting the Diffusion of an Innovation

1. Usage barriers -- the product is not compatible

with existing habits.

2. Value barriers -- the product provides no

incentive to change…not that much better.

3. Risk barriers -- risk can be physical, social or

economic/financial.

4. Psychological barriers -- which can be the result

of cultural differences or image.

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PP12PP12--5 Five categories and profiles of product adopters5 Five categories and profiles of product adopters

Laggards:Fear of debt, neighbors and friends are information sources

Laggards:Fear of debt, neighbors and friends are information sources

Early adopters:Leaders in social setting, slightly above average education

Early adopters:Leaders in social setting, slightly above average education

Late majority:Skeptical, below average social status

Late majority:Skeptical, below average social status

Innovators:Venturesome, higher educated, use multiple information sources

Innovators:Venturesome, higher educated, use multiple information sources

Early majority:Deliberate, many informal social contacts

Early majority:Deliberate, many informal social contacts

Time

Innovators2.5%

Early adopters13.5%

Early majority34%

Late majority34%

Laggards16%

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PP12PP12--HH Concept CheckHH Concept Check

1. Advertising plays a major role in the _____stage of the PLC, and _____ plays a majorrole in maturity.

2. How do high learning and low learning products differ?

3. What does the life cycle for a fashion

product look like? ??

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PP12PP12--II The Product (Brand) ManagerII The Product (Brand) Manager• Product Managers: manage the marketing efforts for

a close-knit family of products or brands.

• Responsibilities of the Product/Brand Manager:

• developing and executing a marketing program for the product line described in an annual marketing plan;

• approving ad copy, media selection, and package design; and

• a role in planning, implementing, and controlling marketing strategy.

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PP12PP12--JJ Product ModificationJJ Product Modification• Product Modification involves altering a product’s

characteristic, such as its quality, performance, or appearance, to try to increase and extend the product’s sales.

• Changing a product’s characteristics to give the sense of a revised product can be accomplished by:

• new features

• new package

• new scents, etc.

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PP12PP12--KK Market ModificationKK Market Modification

Market Modification strategies are utilized

when a company tries to:

1. Increase a product’s use among

existing customers,

2. create new use situations, or

3. find new customers.

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PP12PP12--LL Repositioning the ProductLL Repositioning the Product

• Product repositioning is changing the place a

product occupies in a consumer’s mind relative to

competitive products.

• A firm can reposition a product by changing one or

more of the four marketing mix elements (product,

place/distribution, price, promotion).

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PP12PP12--MM Four Factors that trigger product repositioningMM Four Factors that trigger product repositioning

Product Repositioning can be triggered by:

• reacting to a competitor’s position

• reaching a new market

• catching a rising trend

• changing the value offered

– trading up

– trading down…..can be via downsizing

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PP12PP12--NN Concept CheckNN Concept Check

1. How does a product manager help manage

a product’s life cycle?

2. What does “creating new use situations”

mean in managing a product’s life cycle?

3. Explain the difference between trading up

and trading down in repositioning.

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PP12PP12--OOa OOa BrandingBranding

• Branding involves an organization using a name, phrase, design, symbols,or combination of these to identify its products and distinguish them from those of competitors.

• A brand name is any word, “device” (design, sound, shape, or color), or combination of these used to distinguish a seller’s goods or services.

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PP12PP12--OOb OOb Branding Branding -- continuedcontinued

• A trade name is a commercial, legal name under which a company does business. For example, the Campbell Soup Company is the trade name of that firm.

• A trademark identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others from using it.

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PP12PP12--6 Examples of well6 Examples of well--known trademarks, brand names, and known trademarks, brand names, and trade namestrade names

Brand name thatcan be spokenBig Mac hamburgerLevi’s jeansTeflon plasticBetty Crocker cakemix

Macintosh computer

Brand name thatcannot be spoken

Trade name/legal name/of organizationCampbell Soup Co.Compaq Corp.Ford Motor Co.Kellogg Co.Ralston Purina Co.

Trademark, brand name, or trade nameregistered with the U.S. Patent and Trademark Office

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PP12PP12--E Definition of Brand EquityE Definition of Brand Equity

Brand Equity is . . . .Brand Equity is . . . .

The added value a given brand provides a product beyond the functional benefits provided..

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PP12PP12--F Four criteria for picking a good brand nameF Four criteria for picking a good brand name

Fit the company or product imageFit the company or product image

A good brand name should . . . .

A good brand name should . . . .

Describe product benefitsDescribe product benefits

Be memorable, distinctive, and positive

Be memorable, distinctive, and positive

Have no legal restrictionsHave no legal restrictions

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PP12PP12--7 Alternative branding strategies7 Alternative branding strategies

Multiproductbranding strategy

Sunbeam makes:Sunbeam ironsSunbeam toastersSunbeamcrockware

Toro makes:Torosnowblowers

Toro lawn mowers

Toro garden hoses

Multiproductbranding strategy

Sunbeam makes:Sunbeam ironsSunbeam toastersSunbeamcrockware

Toro makes:Torosnowblowers

Toro lawn mowers

Toro garden hoses

Multibrandingstrategy

Anheuser-Busch makes:

BudweiserBuschMichelobWurtburgerHofbrau

Procter & Gamble makes:

TideCheerIvory SnowOxydol

Multibrandingstrategy

Anheuser-Busch makes:

BudweiserBuschMichelobWurtburgerHofbrau

Procter & Gamble makes:

TideCheerIvory SnowOxydol

Private branding strategy

A&P has:Ann Pagecanned goodsAnn Parkerbakery goodsEight O’Clockcoffee

Sears has:Kenmore appliancesCraftsman tools

Private branding strategy

A&P has:Ann Pagecanned goodsAnn Parkerbakery goodsEight O’Clockcoffee

Sears has:Kenmore appliancesCraftsman tools

Mixed branding strategy

Michelin makes:

Michelin tiresSears tires

Epson makes printers as:

EpsonIBM

Mixed branding strategy

Michelin makes:

Michelin tiresSears tires

Epson makes printers as:

EpsonIBM

Generic branding strategy

Dog foodPeanut butterGreen beansPaper towelsAspirinCola

Generic branding strategy

Dog foodPeanut butterGreen beansPaper towelsAspirinCola

Branding strategyBranding strategy

Manufacturer branding strategyManufacturer branding strategy

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PP12PP12--G Line and Brand ExtensionG Line and Brand Extension

Line extension . . . .Line extension . . . .

The use of a current brand to enter a new market segment in its product class

The use of a current brand to enter a new market segment in its product class

Brand extension . . . .Brand extension . . . .

The use of a current brand name to enter a completely different product class

The use of a current brand name to enter a completely different product class

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PP12PP12--PP Other Branding StrategiesPP Other Branding Strategies• Private Branding is when a manufacturer’s product is

sold under the brand name of a wholesaler or retailer.

• Mixed Branding is a compromise between private and manufacturer branding. It is where a firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different than their own market.

• Generic Branding is when there is no branding, no identification other than the contents of the product.

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PP12PP12--QQ PackagingQQ Packaging• Packaging is the component of a product that refers

to any container in which it is offered for sale and on which information is communicated.

• To a great extent, the customer’s first exposure to a product is the package.

• Packaging is expensive and an important part of marketing strategy.

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PP12PP12--RR Benefits of PackagingRR Benefits of PackagingBenefits of Packaging:

• communication benefits -- the information on the package that is communicated to the consumer, such as directions on how to use, composition of the product, warnings and other information necessary to satisfy legal requirements of product disclosure.

• functional benefits -- such as convenience, protection, or storage.

• perceptual benefits -- which can connote status, economy, and/or product quality.

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PP12PP12--H Warranty formsH Warranty forms

Limited-coverage warrantyLimited-coverage warranty

Full warrantyFull warranty

Express warrantyExpress warranty

Implied warrantyImplied warranty

Extent of coverage

Extent of coverage

Extent of formality

Extent of formality

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PP12PP12--SS Concept CheckSS Concept Check

1. How does a generic brand differ from aprivate brand?

2. Explain the role of packaging in terms of

perception.

3. What is the difference between

an expressed and an impliedwarranty?