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.

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• B. Growth Stage
  Characteristics
  Sales grow at an increasing rate.	Many competitors enter the market.
  Large companies may acquire small pioneering 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 recovered	Sales volume has created economies of scale.

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• C. Maturity Stage
  Sales continue to increase but at a decreasing rate	The marketplace is approaching saturation
  Annual models of many products	An emphasis on product style rather than function
  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.

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

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• E. Some Dimensions of the Product Life Cycle
  1. Length of the Product Life Cycle
  There is no exact time that a product takes to move through its life cycle	consumer products usually have shorter life cycles than business products
  Mass communication shortens life cycles	Rate of technological change shortens 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.
  Sales begin immediately Little learning is required by the consumer Benefits of purchase are readily understood.
  Most often appear in women’s and men’s clothing styles. Length of the cycles may be years or decades.
  Rapid sales on introduction Equally rapid decline. Often novelties and have a short life cycle.
  3. The Product Level:
  Multiple life cycles (class and form) may exist.
  Product class	Entire product category or industry Such as video game consoles and software.
  Product form	Variations within the class 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.
  Innovators 2.5% Eager to try new ideas and products Have higher incomes Better educated than noninnovators Early Adopters 13.5% Much more reliant on group norms Oriented to the local community Tend to be opinion leaders. Early Majority 34% Collect more information Evaluate more brands than early adopters. Rely on friends, neighbors, and opinion leaders for information and norms. Late Majority 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 others Tend to be below average in income and education. Laggards 16% 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
  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 Complexity The degree of difficulty involved in understanding and using a new product. Slows diffusion. Compatibility The degree to which the new product is consistent with existing values and product knowledge, past experiences, and current needs. Incompatibility slows diffusion. Relative advantage The degree to which a product is perceived to be superior to existing substitutes. Speeds diffusion Observability The degree to which the benefits and other results of using a new product can be observed by others and communicated to target customers. Speeds diffusion Trialability is the degree to which a product can be tried on a limited basis. Speeds diffusion Marketing Implications of the Adoption Process Two types of communication aid the diffusion process Word-of-mouth communication Marketing to consumers The effectiveness of different messages and appeals depends on the type of adopter targeted.

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• 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 product’s characteristic to try to increase and extend the product’s sales. quality performance appearance,
  C. Modify the Market Market
  modification strategies involve:	Finding new users. Increasing use among existing users. Creating new use situations.
  D. Reposition the Product
  Product repositioning	Changing the place a product occupies in a consumer’s mind relative to competitive products. Reposition a product by changing one of four marketing mix elements.
  Four factors that trigger a repositioning action are:
  Reacting to a Competitor’s Position.	Competitor’s position is adversely affecting sales and market share.
  Reaching a New Market.	Repositioning a product allows it to reach a new 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.
  Changing the Value Offered.	Trading up	adding value to the product (or line) Additional features Higher quality materials.
  	Trading down	Reducing the number of features Lower quality Lower price. Reducing the content of packages without changing package size and maintaining the package price.

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• III. BRANDING AND BRAND MANAGEMENT

  Branding Decisions Brand A name, term, symbol, design, or combination thereof that identifies a seller's products and 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 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 and Color combinations may also qualify for trademark protection. The MARK has to be used continuously to be protected Rights 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 Sets severe penalties for trademark infringement. The injured party can sue for triple damages and recovery of any profit. Generic product name identifies a product by class or type and cannot be trademarked Failure to protect trademarks may make product names generic. All of the products below were trademarked. Some still are! aspirin formica® sheetrock® band-aid® kerosene styrofoam® dry ice magic marker® trampoline dumpster® nylon vaseline® escalator ping-pong® yo-yo Benefits of Branding Identification The brand allows the product to be differentiated from others and serves as an indicator of quality to consumers Encourages repeat sales Facilitates New Product Introduction 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 company’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 beyond the functional benefits provided. 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 a product category, use situation, product attribute, or customer benefit is mentioned. A. Brand Personality and Brand Equity 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 consumer’s minds with a product class or need to give a brand an identity. Establish a brand’s meaning in the minds of consumers. Elicit the proper consumer responses to a brand’s 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 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 A good brand name should 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.. D. Branding Strategies 1. Manufacturer Branding. Multiproduct branding Use one name for all its products. 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. 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 Manufacturer's Brands to retailers or wholesalers Advantages of Private Brands to retailers or wholesalers Can enhance retailer's image can carry lower inventory manufacture gets the blame for problems Higher gross margin Manufacturer can not discontinue ties consumer to dealer ties salespeople to dealer dealer controls marketing mix Disadvantages (risks) of Manufacturer Brands retailers or wholesalers Disadvantages (risks) of Private brands to retailers or wholesalers Lower margins Higher marketing costs Must buy in large quantities 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 manufacturer’s own market. 4. Generic Branding. a no-brand product that competes on price. Low cost, no frills Popular in late 1970's 30%-40% cheaper than national brands 20%-25% cheaper than store brands good market share in some categories

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• IV. PACKAGING AND LABELING
  Packaging component	any container in which it is offered for sale and on which label information is conveyed.
  Label	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.
  A. Creating Customer Value through Packaging and Labeling
  Packaging Functions Contain and Protect Products spoilage tampering children Theft Packaging Promotes Products Facilitate Recycling Convenience and utility of the package can differentiate a product from the competition Last opportunity to influence shoppers before they buy. Brand Image is often closely linked to packaging  Reduce Environmental Damage Facilitate Storage Facilitate Use Wholesalers & Retailers want packages that Are easy to ship store stock on shelves. Protect the product Prevent spoilage or breakage Extend shelf life. Consumers want packages that are Easy to handle Easy to open 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 L’eggs.
  2. Functional Benefits.
  Convenience Product protection Storage. Consumer protection
  3. Perceptual Benefits.
  Create perception in the consumer’s 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. Informational labeling   Helps consumers in making proper product selections Helps lower cognitive dissonance May include care and use information may explain construction figures Universal Product Codes (UPC) Introduced in 1974 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 Warranties A protection and information device for consumers. Warranty Guarantees the quality or performance of a good or service. Express Warranty made in writing full warranty has no limits of noncoverage. limited-coverage warranty specifically states the bounds of coverage areas of noncoverage. Implied Warranty 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 Commercial Code. Often assign responsibility for product deficiencies to the manufacturer. Magnuson-Moss Warranty Federal Trade Commission Improvement Act Manufacturer that promises a full warranty must meet certain minimum standards. A limited warranty must be conspicuously promoted by the manufacturer Otherwise a full warranty is assumed.