Manage the Product Chapter Nine

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 9-2

Product Lines Product Line: A firm’s total product offerings designed to satisfy a single need of the target market Product Line Length: The number of separate items within the same category 9-3

The Product Mix Product Mix: A firm’s total products offered for sale (Proctor & Gamble) Product Mix Width: The number of different product lines the firm makes 9-4

9-5 Figure 9.1 Steps to Manage Products Step 1 Step 3 Step 2

9-6 Figure Objectives for Single & Multiple Products

1a-Objectives and Strategies for Individual Products Objectives and strategies for individual products: Successful introduction of new products Taking regional products national Breathing new life into mature products while maintaining brand personality 9-7

1b-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 Upward, downward, or two-way line stretch Filling out or contracting a product line Cannibalization is a risk: loss of sales when a new (similar) item is introduced (iPhone 5S) 9-8

1b-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 Product lines in mix usually have some things in common 9-9

Quality as a Product Objective: The Science of TQM Product quality is often an objective A philosophy of total quality management (TQM) can help achieve quality objectives 9-10

Quality Guidelines ISO 9000: Standards for quality management ISO 14000: Environmental management Six Sigma methodology: Process allowing no more than 3.4 defects per million (getting it right % of the time) 9-11

The Product Life Cycle: A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death).  A familiar concept in marketing and a useful marketing management tool.  The PLC concept can be used to analyze a brand, product form or product category.  Some critics have challenged the basis & value of the PLC. 2-Design Product Strategies The Product Life Cycle 5

9-13 Figure 9.4 The Product Life Cycle

9-14 Figure 9.5 Marketing Mix Strategies Through the PLC

Introductory Stage  High failure rates  Little competition  Frequent product modification  Limited distribution  High marketing and production costs  Negative profits with slow sales increases  Promotion based on awareness & information  Communication challenge is to stimulate primary demand 5

Growth Stage  Increasing rate of sales  Entrance of competitors  Market consolidation  Initial healthy profits  Aggressive advertising of the differences between brands  Wider distribution 5

Maturity Stage  Sales increase at a decreasing rate  Saturated markets  Annual models appear  Lengthened product lines  Service and repair assume important roles  Heavy promotions to consumers and dealers  Marginal competitors drop out  Niche marketers emerge 5

Decline Stage  Long-run drop in sales  Large inventories of unsold items  Elimination of all nonessential marketing expenses  “Organized abandonment” 5

3-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 9-19

What’s in a Name or Symbol? A “good” brand name: Maintains relationships with customers Positions a product by: Portraying an image, or Describing how the product works Is easy to say, spell, read, and remember Fits the target market, product benefits, customer’s culture, and legal requirements 9-20

Trademarks Trademark The legal term for a brand name, brand mark, or trade character The trademark symbol used in the U.S. ® Trademarks legally registered by a government obtain protection for exclusive use in that country 9-21

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 Brand equity results in brand loyal consumers and attachment 9-22

Why Brands Matter Brand storytelling: Marketers seek to engage consumers with compelling stories about brands Characteristics of world class brands Brand extensions: 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 9-23

9-24 Figure 9.6 Branding Strategies

Branding Strategies Individual brands vs. family brands Individual brand: A unique brand for each item in the product line Family brand: A brand that a group of products or brands share Campbell’s provides an umbrella under which multiple products can be marketed 9-25

Branding Strategies National vs. store brands Store brands (private label brands) are exclusive to a given retailer Generic brands 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 9-26

Branding Strategies Co-branding: Two brands combine to create a new product Provides greater recognition or other strengths than either could achieve alone Ingredient branding is increasing 9-27

Brand Metrics Approaches to measuring brand equity: Customer mind-set metrics Product-market outcomes metrics Financial market metrics Revenue premium metric 9-28

9-29 Figure 9.7 Functions of Packaging

9-30 Figure 9.7 Functions of Packaging Functions of packaging: A cover or container for a product Helps create a competitive advantage for the brand Provides protection during transit Facilitates consumer’s handling of the product Communicates the brand’s personality via the use of color, words, shapes, designs, and pictures Supplies important information, such as nutritional information, ingredients, benefits, recipes, directions, warnings, toll-free phone numbers, and the UPC code

Designing Effective Packaging Effective packaging considers: Packaging of other brands in same product category Package should standout and be different from the competition Store brands attempt to mimic other brands as close as legally possible 9-31

Designing Effective Packaging Effective packaging also considers: Choice of packaging material and image it projects Environmental impact of packaging Shape, color and graphic information to be portrayed Takes into account labeling regulations Federal Fair Packaging & Labeling Act of 1966 Nutrition Labeling & Education Act of