MANAGING PRODUCTS, SERVICES, AND BRANDS

Product Life Cycle Sales Growth Stage Maturity Stage Decline Stage Introductory Stage Growth Stage Maturity Stage Decline Stage Sales Profits Dollars Time

Full-Scale Launch of New Products Introductory Stage Full-Scale Launch of New Products High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits Promotion focuses on awareness and information Intensive personal selling to channels Notes: During the introductory stage, sales normally increase slowly. Marketing costs are high due to higher dealer margins required to obtain adequate distribution and the cost of consumer incentives to try a product. Production costs are high. Promotion strategy focuses on developing product awareness and informing consumers about the product’s potential benefits. Intensive personal selling is often required. Promotion of convenience products may require heavy consumer sampling and couponing. Shopping and specialty products demand educational advertising and personal selling to the final consumer.

Growth stage Increasing rate of sales Entrance of competitors Offered in more sizes, flavors, options Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Promotion emphasizes brand ads Goal is wider distribution Prices normally fall Development costs are recovered Notes: In the growth stage, sales grow at an increasing rate, many competitors enter the market, and larger companies may acquire small pioneering firms. Profits rise rapidly, peak, and begin declining as competition increases. Aggressive brand advertising and communication of the differences between brands is the preferred promotion strategy. Adequate distribution is a major key to establish a strong market position and product success.

Many consumer products are in Maturity Stage Many consumer products are in Maturity Stage Declining sales growth Saturated markets Extending product line Stylistic product changes Heavy promotions to dealers and consumers Marginal competitors drop out Prices and profits fall Niche marketers emerge On Line: McDonald’s What is McDonald’s doing to successfully compete in the maturity stage? Notes: The maturity stage begins when sales increase at a decreasing rate, and the market approaches saturation. This is normally the longest stage of the PLC. Annual models may appear during the maturity stage for shopping and specialty products. Product lines are lengthened to appeal to additional market segments. Service and repair help manufacturers distinguish their products from others. Heavy promotion is required to maintain market share. For example, consider the competitive “wars” between Coke and Pepsi, Budweiser and Miller, and McDonalds against Burger King and Wendy’s. As prices and profits continue to fall, marginal competitors drop out of the market. Niche marketers that target narrow, well-defined segments of a market emerge.

Rate of decline depends on adoption of substitute products Decline Stage Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses Notes: The rate of decline depends on how rapidly consumer tastes change or substitute products are adopted. A strategy for declining products includes elimination of nonessential marketing expenses, and the eventual product withdrawal as sales decline. Rate of decline depends on change in tastes or adoption of substitute products

How stages of the product life cycle relate to firm’s marketing objectives & marketing mix actions INTRODUCTION GROWTH MATURITY DECLINE Product Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models Limited Wholesale/ retail distributors Expanded dealers. Long- term relations Extensive. Margins drop. Shelf space Phase out unprofitable outlets Awareness. Stimulate demand.Sampling Aggressive ads. Stimulate demand Advertise. Promote heavily Phase out promotion Higher/recoup development costs Fall as result of competition & efficient produc- tion. Prices fall (usually). Prices stabilize at low level. Distribution Strategy Promotion Strategy Pricing Strategy

MANAGING THE PRODUCT LIFE CYCLE Modifying the Product Alter product quality Enhance performance Change appearance Modifying the Market Finding New Users Increase use Create new use situations

EXTENDING THE PRODUCT LIFE CYCLE- Repositioning Reacting to a Competitor’s Position-never compete head on Catching a Rising Trend-baby aspirin is now low dose aspirin to reduce heart attacks Changing the Value Offered Trading Up-add bells & whistles to raise price Trading Down- remove bells & whistles to lower price Downsizing-reduce contents but maintain price

# If we conclude that reacting to a price change is cheaper than losing the sales, then it may be a good business decision. 

FIGURE 11-3 Alternative product life cycles Why the different shapes?

Marketing strategy in which significant customer education is required and there is an extended introductory period. HIGH LEARNING PRODUCT

Low-learning Product Sales begin immediately because little learning is required by the consumer, and the benefits of purchase are readily understood.

Fashion Product: Products are introduced, decline, and then seem to return Fad Product: Products experience rapid sales on introduction and then an equally rapid decline.

Innovators: Venturesome; higher educated; use multiple information systems; someone who helps to open up a new line of research or technology or art

Early Adopters Leaders in social settings; slightly above average education; the second group of consumers to purchase new products

Early Majority: Deliberate; many informal social contacts; the third group of adopters, who are more risk averse in purchase decisions than innovators and early adopters

Late Majority: Skeptical; below average social status; the adopters who are willing to try new products when there is little or no risk associated with the purchase, when the purchase becomes an economic necessity, or when there is social pressure to purchase

Laggards Fear of debt; neighbors and friends are information sources; Consumers who like to avoid change and rely on traditional products until they are no longer available.

Brand Manager: Manages the marketing efforts for a close-knit family of products or brands.

Percentage of Adopters Five categories of product adopters Percentage of Adopters Time Innovators 2.5% Early Adopters 13.5% Late Majority 34% Laggards 16%

Five Profiles of Product Adopters

The elements of a brand that BRANDING Brand Name Mark Equity That part of a brand that can be spoken, including letters, words, and numbers. The elements of a brand that cannot be spoken. The value brand names give to a product beyond the functional benefits provided. i.e.-why you pay more

Value of Brand Equity Listed as an intangible asset when computing company worth. Makes brand name companies sell for more than unbranded companies Can command larger licensing fees because the product is a definite seller Can sell the use brand name on non-core products like Ralph Lauren paint or Harley Davidson clothing

BRANDING AND BRAND MANAGEMENT No Brand Manufacturer’s Brand Private Brand Individual Brand Family Brand Individual Brand Family Brand Multi-brand multi-product multi-brand multi-product

Branding Strategies Multi- product brand Mixed Toro makes snow blowers, Toro lawn mowers and Toro garden hoses Proctor and Gamble makes Tide, Cheer, Ivory Snow and Bold Michelin makes Michelin tires and Sears tires

BRANDING AND BRAND MANAGEMENT Picking a Good Brand Name Suggest the Product Benefits Be Memorable, Distinctive, and Positive Fit the Company or Product Image Have No Legal or Regulatory Restrictions Be Simple and Emotional International: Be Nonmeaningful

CREATING CUSTOMER VALUE THROUGH PACKAGING AND LABELING Functions of Packaging Contain and Protect Inform – nutrition and instructions for use Facilitate Storage, Use, and Convenience Create perception of item- Gold bow on perfume bottle

Product Life Cycle The product life cycle describes the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline.

Private Brand Often called store brand, a private brand is a manufacturer brand of product sold under the name of the retailer.

Manufacturer Brand Manufacturer brands are often called national brands and are carry the brand name of a maker of the goods.