Manage the Product Chapter Nine © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

9-2 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Chapter Objectives  Explain the different product objectives and strategies a firm may choose  Understand how firms manage products throughout the product life cycle  Discuss how branding strategies create product identity  Explain how packaging and labeling contribute to product identity  Describe how marketers structure organizations for new and existing product management

9-3 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Time at General Corporation  How should General Mills position the Fiber One cereal brand in order to reinforce a consistent and desirable brand meaning? Option 1: Own the position of “Fiber Superiority” Option 1: Own the position of “Fiber Superiority” Option 2: Own the position of “Great Tasting High Fiber” Option 2: Own the position of “Great Tasting High Fiber” Option 3: Own the position of “Digestive Health” Option 3: Own the position of “Digestive Health”

9-4 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Product Planning: Using Objectives to Decide Strategy  Firms that plan well succeed Product planning is part of the firm’s tactical marketing plan Product planning is part of the firm’s tactical marketing plan  Planning is guided by product management and is more important than ever Products are created, grow, reach maturity, and decline at faster and faster rates of speed Products are created, grow, reach maturity, and decline at faster and faster rates of speed  Product planning includes developing strategies and objectives Effective product-related objectives must be measurable, clear, unambiguous and feasible Effective product-related objectives must be measurable, clear, unambiguous and feasible

9-5 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Objectives and Strategies for Individual Products  Objectives and strategies for individual products implement: Successful introduction of new products Successful introduction of new products Taking regional products national Taking regional products national Breathing new life into mature products while maintaining brand personality Breathing new life into mature products while maintaining brand personality

9-6 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Objectives and Strategies for Multiple Products  Product line: Firm’s total product offering designed to satisfy a single need or desire of target customers  Product line strategies: Full-line vs. limited-line strategies Full-line vs. limited-line strategies Upward, downward, or two-way line stretch Upward, downward, or two-way line stretch Filling out or contracting a product line Filling out or contracting a product line  Cannibalization is a risk

9-7 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Objectives and Strategies for Multiple Products  Product mix strategies: The total set of products a firm offers for sale  Product mix strategies: Width of product mix must be considered Width of product mix must be considered Product lines in mix usually have some things in common Product lines in mix usually have some things in common

9-8 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Quality as a Product Objective: The Science of TQM  Product quality is often an objective and it includes: The overall ability of a product to satisfy customer’s expectations The overall ability of a product to satisfy customer’s expectations  Total quality management (TQM): Company-wide dedication to the development, maintenance, and continuous improvement of all aspects of the company’s operations Company-wide dedication to the development, maintenance, and continuous improvement of all aspects of the company’s operations Uniform ISO quality standards exist to offer guidance Uniform ISO quality standards exist to offer guidance

9-9 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Quality Guidelines  ISO 9000: Voluntary standards for quality management Voluntary standards for quality management  ISO 14000: Concentrates on environmental management Concentrates on environmental management  Six Sigma methodology: Process allowing no more than 3.4 defects per million (getting it right % of the time) Process allowing no more than 3.4 defects per million (getting it right % of the time)

9-10 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Dimensions of Product Quality  Degree of pleasure  Product safety  Ease of use  Satisfies needs  Durable  Reliable  Precision  Versatile These factors contribute to the level and consistency of product quality

9-11 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Marketing Throughout the Product Life Cycle  Product life cycle: The way products go through four distinct stages from birth to death— introduction, growth, maturity, and decline

9-12 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Introduction and Growth Stages  Introduction: Slow growth occurs for newly introduced product Goal: to get first-time buyers to try product Goal: to get first-time buyers to try product The firm does not usually make a profit during this stage The firm does not usually make a profit during this stage  Growth: The product is accepted and sales rapidly increase Goal: is to encourage brand loyalty Goal: is to encourage brand loyalty Firms introduce product variations to attract market segments and increase market share Firms introduce product variations to attract market segments and increase market share Advertising is heavy to counter new competition Advertising is heavy to counter new competition

9-13 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Maturity and Decline Stages  Maturity: Sales peak, profit margins narrow Goal: Attract new users Goal: Attract new users Competition grows intense Competition grows intense New features are added to the product New features are added to the product Price reductions and reminder advertising are used Price reductions and reminder advertising are used  Decline: sales decrease as customer needs change Goal: Remain profitable, decide whether to keep or phase out product Goal: Remain profitable, decide whether to keep or phase out product Market begins to shrink, profits decline, fewer products Market begins to shrink, profits decline, fewer products

9-14 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Creating Product Identity: Branding Decisions  Brand: A name, term, symbol, or any other unique element that identifies one firm’s product and sets it apart from the competition Brand marks (Nike Swoosh) and trade characters (Keebler Elves) are part of the branding process Brand marks (Nike Swoosh) and trade characters (Keebler Elves) are part of the branding process

9-15 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. What’s in a Name or Symbol?  A “good” brand name: Maintains relationships with customers Maintains relationships with customers Positions a product by: Positions a product by:  Portraying an image, or  Describing how the product works Is easy to say, spell, read, and remember Is easy to say, spell, read, and remember Fits the target market, product benefits, customer’s culture, and legal requirements Fits the target market, product benefits, customer’s culture, and legal requirements

9-16 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Trademarks  Trademark: The legal term for a brand name, brand mark, or trade character Trademarks legally registered by a government obtain protection for exclusive use in that country Trademarks legally registered by a government obtain protection for exclusive use in that country ® is the trademark symbol used in the U.S. ® is the trademark symbol used in the U.S. Common-law protection occurs when the firm has used the name and established it over a period of time Common-law protection occurs when the firm has used the name and established it over a period of time

9-17 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Why Brands Matter  Brand equity: A brand’s value to its organization over and above the value of the generic version of the product  Brand equity provides competitive advantage Brands with strong equity capture can hold onto a larger share of the market Brands with strong equity capture can hold onto a larger share of the market Brands with strong equity sell at prices with higher profit margins Brands with strong equity sell at prices with higher profit margins  Brand equity results in brand loyal consumers and attachment

9-18 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Why Brands Matter  Brand meaning: The beliefs and associations a consumer has about the brand The beliefs and associations a consumer has about the brand  Brand storytelling: Marketers seek to engage consumers with compelling stories about brands Marketers seek to engage consumers with compelling stories about brands  Brand extensions: New products sold with the same brand name New products sold with the same brand name  Sub-branding: Creating a secondary brand within a main brand that can help differentiate a product line Creating a secondary brand within a main brand that can help differentiate a product line

9-19 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Branding Strategies  Individual brands vs. family brands: Family brands provide an umbrella under which multiple products can be marketed Family brands provide an umbrella under which multiple products can be marketed  National vs. store brands: Store brands (private label brands) are exclusive to a given retailer Store brands (private label brands) are exclusive to a given retailer  Generic brands

9-20 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Branding Strategies  Licensing: One firm sells the right to another to use a legally protected brand name for a specific purpose and for a specific period of time One firm sells the right to another to use a legally protected brand name for a specific purpose and for a specific period of time  Co-branding: Two brands combine to create a new product Two brands combine to create a new product Provides greater recognition or other strengths than either could achieve alone Provides greater recognition or other strengths than either could achieve alone Ingredient branding is increasing Ingredient branding is increasing

9-21 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Brand Metrics  Approaches to measuring brand equity: Customer mind-set metrics Customer mind-set metrics Product-market outcomes metrics Product-market outcomes metrics Financial market metrics Financial market metrics Revenue premium metric Revenue premium metric

9-22 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Creating Product Identity: The Package and Label  Packaging: Protects the product Protects the product Facilitates product use and storage Facilitates product use and storage Supplies important marketing communication Supplies important marketing communication  Universal Product Code (UPC): Set of black bars or lines printed on the side/bottom of most items sold in stores; creates a national system of product identification Set of black bars or lines printed on the side/bottom of most items sold in stores; creates a national system of product identification

9-23 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Designing Effective Packaging  Effective packaging considers: Packaging of other brands in same product category Packaging of other brands in same product category Choice of packaging material and image it projects Choice of packaging material and image it projects Environmental impact of packaging Environmental impact of packaging Shape and color influences on image Shape and color influences on image Graphic information to be portrayed Graphic information to be portrayed

9-24 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Labeling Regulations  Federal Fair Packaging and Labeling Act of 1966: Aims at making labels more helpful to consumers by providing useful information Aims at making labels more helpful to consumers by providing useful information  Nutrition Labeling and Education Act of 1990 and FDA Require food labels to state how much fat, trans fat, saturated fat, cholesterol, calories, carbohydrates, protein, and vitamins are in each product serving Require food labels to state how much fat, trans fat, saturated fat, cholesterol, calories, carbohydrates, protein, and vitamins are in each product serving

9-25 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Organizing for Effective Product Management  Management of existing products A single marketing manager typically handles the entire marketing function in small firms A single marketing manager typically handles the entire marketing function in small firms Larger firms may have a number of managers who perform different functions Larger firms may have a number of managers who perform different functions  Brand managers  Product category managers  Market managers

9-26 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Organizing for New-Product Development  Venture teams: Specialists in different areas who work together to focus on new-product development Specialists in different areas who work together to focus on new-product development  “Skunk works”: Small and isolated group in remote location that function with minimal supervision Small and isolated group in remote location that function with minimal supervision

9-27 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Made at General Mills  David chose option 2 Why do you think that David chose to position Fiber One as a great-tasting, fiber product? Why do you think that David chose to position Fiber One as a great-tasting, fiber product?

9-28 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Keeping It Real: Fast-Forward to Next Class Decision Time at 76ers  Meet Lara Price, Sr. VP of Business Operations for the Philadelphia 76ers  The 76ers are a professional basketball team within the NBA  The decision to be made: What method should be used to compile more detailed information about the customer base?

9-29 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America