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Marketing 3104: Exam 1 Material Chapter 11: Managing Successful Products and Brands (PowerPoint called: Product Strategy)

L1: Charting the Product Life Cycle 1. Product Life Cycle: describes the stages a new product goes through in the marketplace; introduction, growth, maturity, and decline stages. a. Introduction Stage: occurs when a product is introduced to intended target market, sales grow slowly, and profit is minimal. The marketing objective for the company at this stage is to create consumer awareness and stimulate trial i. Trial: the initial purchase of a product by a consumer. Companies spend a lot of money in this stage trying to stimulate trial. ii. Primary Demand: is the desire for the product class rather than for a specific brand, since its a new product. Advertising and promotion expenditures in this stage are made to stimulate primary demand at first iii. Selective Demand: the preference for a specific brand. Company attention is focused on this as more competitors launch their own products. iv. In this stage, pricing can be high or low 1. Skimming Strategy: is a high initial price might be used to help the company recover costs developments 2. Penetration Pricing: a company can price low and it will discourage competitive entry v. Examples are pocket video cameras and electric powered cars b. Growth Stage: this stage is characterized by rapid increases in sales, in this stage competitors appear. With more competitors and more aggressive pricing is that profit usually peaks in this stage. Emphasis is on stimulating selective demand; product benefits are compared with those of competitors offerings for the purpose of gaining market share. i. Repeat Purchasers: people who tried the product were satisfied and bought again. There is a growing proportion of these in this stage ii. Changes appear in the product now; to help differentiate a companys brand from competitors and improved version or new features are added iii. Examples are smart phones and digital cameras c. Maturity Stage: here there is a slowing of total industry sales or product class revenue, competitors are leaving the market, consumers are abandoning product, sales increase at a decreasing rate. i. Marketing attention now is directed toward holding market share through further product differentiation and finding new buyers ii. Examples of this are soft drinks and DVD players d. Decline Stage: occurs when sales drop. A product enters this stage not because of any wrong strategy but because of environmental changes, like technology. A company will use one of these 2 strategies to handle a declining product i. Deletion: product deletion is dropping the product from the companys product line; its the most drastic strategy. ii. Harvesting: when a company retains the product but reduces marketing costs. The product continues to be offered, but they dont spend time or money advertising 2. Four Aspects of the Product Life Cycle: a. Length of product life cycle: consumer products have shorter life cycles than business products. Mass communication and technology tends to shorten life cycles. b. Shape of the product life cycle: the sales curve of products dont always follow the generalized life cycle, different products have different sales curves i. High Learning Product: one that requires customer education so there is an extended introductory period. Ex. Computers in the 1980s, people had to learn how to use them. (curve has long time in intro then normal after)

ii. Low Learning Product: little learning is required, product can be easily imitated by competitors so the marketers try to broaden distribution quickly ex. Gillettes fushion razor (curve grows fast, and looks the most even across graph) iii. Fashion Product: a style of the times, these life cycles appear in clothes, they are introduced, they decline, and then they seem to return. Ex. Hosiery (curve goes up and down up and down like a rollercoaster) iv. Fad Product: experience raid sales on introduction then and equally rapid decline, they have the shortest life cycles (line is so short, and is really up highly steep in the introductory period) c. The Product Level: Class and Form. Some product life cycles show a total industry or product class sales curve, but you should distinguish them; i. Product Class: refers to the entire product category or industry, such as prerecorded music ii. Product Form: pertains to variations within the product class, like going further into prerecorded music and saying cassette types, compact discs, etc. d. The Life Cycle and Consumers: not all consumers rush to buy a product in the introductory stage, and the shapes of the life cycle curves show most sales occur after the product has been on the market for some time. Diffusion of Innovation: So a product Diffuses, or spreads, through the population. But some like a product early. i. The following are 5 different types of consumers called Product Adopters; 1. Innovators: buys them first, they make up 2.5% of consumers. They are venturesome, higher educated and use multiple information sources. 2. Early Adopters: are next, they are leaders in social settings, slightly above average education, make up 13.5% of consumers. 3. Early Majority: they are deliberate, many informal social contacts, they make up 34%. 4. Late Majority: they are skeptical, below average social status, 34% of consumers 5. Laggards: they are last to buy, they have fear of debt, and they use neighbours and friends as information sources For any product to be a success, it must be purchased by innovators and early adopters so it can catch on to the rest. ii. Several factors affect whether a consumer will adopt a new product or not 1. Usage Barriers: the product is not compatible with existing habits 2. Value Barriers: the product provides no incentive to change 3. Risk Barriers: physical, economic, or social 4. Psychological Barriers: cultural differences or image Companies try to get over these barriers with things like warranties, money back guarantees, extensive usage instructions, demonstrations, and free samples to stimulate trial. o 71% of consumers consider a sample to be the best way to evaluate a new product L2: Managing the Product Life Cycle This section describes the role of the product manager who is usually responsible for managing its products through the stages of their life cycles, and the 3 ways the product manager does that. 1. Role of a Product Manager: the product manager, also called a brand manager, manages the marketing efforts for a close knit family of products or brands. They are responsible for managing existing products through the stages of the life cycle, some also have to develop new products, and approve ads or package designs for product marketing etc. a. They also engage in extensive data analysis about their products/brands. They take the sales, market share, and profit trends data and do 2 measures; i. Category Development Index (CDI) ii. Brand Development Index (BDI) These indexes help identify strong and weak market segments so they can provide direction for marketing efforts

Now here are the three ways a product manager manages a product through its life cycle 1. Modifying the Product: a way to manage a product through its life cycle a. Product Modification: involves altering a products characteristic, such as its quality, performance, or appearance, to increase the products value to customers and increase sales. Its to give a sense of a revised product. i. Product Bundling: the sale of two or more separate products in one package. Ex. Nokia has a mobile that plays music, takes pictures, surfs the Internet, has a big screen for watching TV and playing video games 2. Modifying the Market: a way to manage a product through its life cycle a. Market Modification: this strategy is when a company tries to find new customers, increase a products use among existing customers, or create new use situations i. Finding New Customers: ex. Harley Davidson has tailored a marketing programme to encourage women to take up biking ii. Increasing a Products Use: promoting more frequent usage. Ex. Florida Orange Company advocates/advertises drinking orange juice throughout the day not only for breakfast. iii. Creating a New Use Situation: finding new uses for an existing product. Ex. Dockers pants (jcp) originally intended as a single pant for every situation, but now they promote different looks for different usage situations; work, weekend, golf, dress etc. 3. Repositioning the Product: way to manage a product through its life cycle, a company decides to use this strategy bolster sales a. Product Repositioning: changes the place a product occupies in a consumers mind relative to competitive products. A firm can reposition a product by changing one or more of the marketing mix elements. b. Here are 4 factors that trigger the need for a repositioning action; i. Reacting to a Competitors Position: maybe a competitors well-established position is negatively affecting sales and market share, you might want to reposition ii. Reaching a New Market: ex. Unilever introduced iced tea in Britain to bad sales, they viewed it as leftover hot tea that cooled. So Unilever repositioned it as a cold soft drink and made the tea carbonated and sales improved. iii. Catching a Rising Trend: consumer trends are always changing so you should reposition your product. Ex. People are more health conscious now so most food/drink companies offer low calorie versions of their product iv. Changing the Value Offered: when repositioning, a company can decide to change the value it offers buyers and trade up or down 1. Trading Up: involves adding value to the product through additional features or higher quality materials ex. Stores can add designer sections 2. Trading Down: involves reducing the number of features, quality, or price. Firms do this when they are downsizing (which they are criticized for) a. Downsizing: reducing the package content without changing package size/price b. Ex of trading down; airlines have added more seats which reduces legroom, and limited snack service

L3: Branding and Brand Management 1. Branding: when an organization uses a name, phrase, design, symbols, or combination of these to identify its products and distinguish them from those of competitors. Its a basic decision in marketing products. 2. Brand Name: is any word, device (design, sound, shape, or colour), or combination of these used to distinguish a sellers goods or services a. Can be spoken: like Gatorade b. Can be unspoken, with a Logo: like the bitten apple on Apple products

3. Trade Name: a commercial, legal name under which a company does business. Ex. The CocaCola Company 4. 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 a. Done through the US Patent and Trademark Office and protected under the Lanham Act b. A well known trademark can help a company develop brand loyalty and help sell c. Product Counterfeiting: low cost copies of popular brands. This is a serious problem because they steal sales of around $200 billion annually i. Stop Counterfeiting in Manufactured Goods Act of 2006: US passed it to counteract the counterfeiting, and it makes counterfeiters subject to 20-year prison sentences and $15 million in fines. 5. Brand Personality and Brand Equity: a. Brand Personality: a set of human characteristics associated with a brand name. Successful brands have this. Ex. Harley Davidson traits linked to masculinity and defiance b. Brand Equity: the added value a brand name gives to a product beyond the functional benefits provided. It has two main advantages below; i. It provides a competitive advantage ii. Consumers are often willing to pay a higher price for a product with brand equity 6. Creating Brand Equity: marketers know that brand equity is not easily or quickly achieved. Rather, it arises from a sequential building process consisting of four steps a. Step 1: develop positive Brand Awareness and an association of the brand in consumers minds with a product class b. Step 2: marketer establish a brands meaning in the minds of customers. Meaning arises from what a brand stands for and has two dimensions i. Brand Performance: a functional, performance related dimension ii. Brand Imagery: an abstract, imagery related dimension c. Step 3: elicit the proper consumer responses to a brands identity and meaning i. Consumer Judgments: thinking focuses on a brands perceived quality credibility and superiority relative to other brands ii. Consumer Feelings: relates to the consumers emotional reaction to a brand d. Step 4: create a Consumer-Brand Connection evident in an intense, active loyalty relationship 7. Valuing Brand Equity: brands are assets (like just the name of the company itself). Successful brand names have an economic value I the sense that they are intangible assets. Brands can appreciate in value when effectively marketed, or they can lose value when gone wrong. Companies buy and sell brands. a. Brand Licensing: is a contractual agreement whereby one company (licensor) allows its brand name or trademark to be used with products or services offered by another company (licensee) for a royalty or fee. Ex. Disney licenses its characters for toys, apparel, and games. b. Picking a good brand name is important and companies will spend a lot of money to identity and test a new brand name. There are 5 main criteria for choosing a name; i. The name should suggest the product benefits; ex. Easy Off (an oven cleaner) ii. The name should be memorable, distinctive, and positive iii. The name should fit the company or product image; ex. Sharp (a name that can apply to audio and video equipment) iv. The name should have no legal or regulatory restrictions v. The name should be simple and should be emotional 8. Branding Strategies. Companies can have several different branding strategies, here are 4; a. Multiproduct Branding Strategy: a company uses one name for all its products in a product class. i. Corporate branding: Ex. Microsoft, Sony, Samsung have the same trade name and brand name ii. Family branding: ex. Church&Dwight uses the Arm&Hammer family brand name for all its products featuring baking soda as the primary ingredient

iii. An advantage is that consumers who have a good experience with the product will think favorable to other items in the product class with the same name 1. Product Line Extensions: the practice of using a current brand name to enter a new market segment in its product class. Ex. Campbell Soup does soup line extensions with many different types of soup. a. Good: They have lower ad costs because the same name is used on all products which raises the level of brand awareness. b. Bad: sales of an extension may come at the expense of other items in the companys product line iv. Subbranding: some multiproduct branding companies do this which combines a corporate or family brand with a new brand, to distinguish a part of its product line from others. Ex. Gatorade G2, Porsche Carrera v. Brand Extension: the practice of using a current brand name to enter a different product class, strong brand equity allows for this. 1. Ex. Hondas good name for cars has extended easily to snow blowers, lawn mowers, etc. 2. However, to many uses for one brand name can dilute the meaning of a brand for consumers vi. Co-Branding: the pairing of two brand names of two manufactures on a single product ex. Pillsbury cookies using Hersheys morsels b. Multibranding Strategy: This involves giving each product a distinct name. This is useful when each brand is intended for a different market segment. i. Ex. Disney uses the Miramax and Touchstone Pictures names for films directed at adults and its Disney name for childrens films ii. Some companies array their brands on the basis of price quality segments iii. Others introduce new product brands as defensive moves to counteract completion 1. Fighting Brands: their chief purpose is to confront competitor brands. Ex. Ford launched its Fusion brand to halt the defection of Ford owners who were buying competitors midsize cars iv. Advertising and promotion costs tend to be higher with multibranding, because the company must generate awareness among consumers and retailers for each new brand name v. Advantages to this strategy are that each brand is unique to each market segment and there is no risk that a product failure will affect other products in the line c. Private Branding Strategy: (sometimes called Private Labeling or Reseller Branding), its when a company manufactures products but sells them under the brandname of a wholesaler or retailer. Ex. Is like the Great Value @Wal-Mart, or Kroger brands i. Its popular because it produces high profits for manufacturers and resellers ii. Consumers buy them; 1 out 5 items purchased at supermarkets, drugstores, and mass merchandisers have a private brand d. Mixed Branding Strategy: where a firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different from its own market i. Ex. Elizabeth Arden is sold through department stores and a line of skin care products at Wal-Mart with the skinsimple brand name.
Branding Strategy

Multiproduct Branding: Toro makes; Toro snow blowers Toro lawn mowers Toro garden hoses Toro sprinkler systems

Multibranding: Procter & Gamble makes; Tide Cheer Ivory Snow Bold

Private Branding: Sears has its own; Kenmore appliances Craftsman tools DieHard batteries

Mixed Branding: Michelin makes; Michelin & Sears tires Epson makes; Epson & IBM Printers

L4: Packaging and Labeling Products Packaging: refers to the component of a product that any container in which it is offered for sale and on which label information is conveyed Label: is an integral part of the package and typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and package contents and ingredients Packaging & labeling are expensive and a very important part of the marketing strategy because its the customers first exposure to the product 1. Creating Customer Value and Competitive Advantage through Packaging and Labeling: a. Communication Benefits: a major benefit of packaging is the label information on it conveyed to the consumer. Ex. The nutritional/dietary information on food packages b. Functional Benefits: packaging often plays a functional role, such as storage, convenience, protection, or product quality i. The convenience dimension of packaging is increasingly important. Ex. They are making squeeze bottles for salad dressing ii. Consumer protection is important, including the development of tamper resistant containers ex. Today companies use safety seals or pop tops c. Perceptual Benefits: a third component of packaging and labeling is the perception created in the consumers mind. Package and label shape, color, and graphics distinguish one brand from another, covey a brands positioning, and build brand equity. 2. Packaging and Labeling Challenges and Responses: package and label designers face 4 challenges; a. The Continuing Need to Connect with Customers: packages and labels must be continually updated to connect with customers, so the challenge lies in creating aesthetic and functional design features that attract/connect with customers b. Environmental Concerns: because of widespread worldwide concern about the growth of solid waste and the shortage of viable landfill sites, the amount, composition, and disposal of packaging material continues to receive much attention c. Health, Safety, and Security Issues: there are growing concerns about these in relation to package materials. i. Ex. Child proof caps on pharmaceutical products are now common ii. Shelf Life: the time a product can be stored, is extended by new packaging technology and materials that prevent spoilage d. Cost Reduction: cost of packaging material (like paper, plastics, and glass) is rising so companies are constantly challenged to find innovative ways to cut packaging costs 3. Product Warranty: a final component for product consideration is the warranty a. Warranty: a statement indicating the liability of the manufacturer for product deficiencies i. Express Warranties: written statements of liabilities ii. Limited Coverage Warranty: specifically states the bounds of coverage and, more important, areas of noncoverage iii. Full Warranty: has no limits of noncoverage iv. Implied Warranties: which assign responsibility for product deficiencies t the manufacturer