1. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill C H A P T E R T W E L V E MANAGING PRODUCTS AND BRANDS

2. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: Explain the product life cycle (PLC) concept and relate a marketing strategy to each stage. Recognize the differences in PLCs for various products and their implications for marketing decisions. Understand alternative approaches to managing a product’s PLC.

3. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO Describe elements of brand personality and brand equity and the criteria for the good brand name. Explain the rationale for alternative branding strategies employed by companies. Understand the benefits of packaging and warranties in the marketing of a product.

4. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-AA Gatorade: The Active Thirst-Quencher The Gatorade brand commands more than 80% of the $1.5 billion U.S. sports drink market. Today Gatorade is the official sports drink of Major League Baseball, the National Football League, the National Basketball Association and the National Hockey League. Gatorade sales have been built via more flavors, multiple package sizes and forms, including glass and plastic bottles and aluminum cans. Distribution has been expanded to include convenience stores and supermarkets followed by vending machines and fountain service. Consistent advertising has effectively conveyed the product’s benefits and links with athletic competition.

5. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-BB The Product Life Cycle Concept Products, like people, have been viewed as having a life cycle. The concept of the product life cycle describes the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline.

6. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-1 How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions PP12-1 How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions Marketing objective Gain Awareness Stress differentiation Maintain brand loyalty Harvesting, deletion Competition None Growing Many Reduced Product One More versions Full product line Best sellers Price Skimming or penetration Gain share, deal Defend share, profit Stay profitable Promotion Inform, educate Stress competitive differences Reminder oriented Minimal promotion Place (distribution) Limited More outlets Maximum outlets Fewer outlets Stage of the product life cycle Sales revenue or profit IntroductionGrowthMaturityDecline +0–+0– Total industry sales revenue Total industry profit

7. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-2 Product Life Cycle for the stand alone FAX machine for business use: 1970-1999 19701975198019821984198619881990199219941996199719981999 $7.0 6.0 5.0 4.0 3.0 2.0 1.0 Sales ($billion)

8. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-CC Will the Internet bury the Familiar Fax? Technical substitution often causes the decline stage in the PLC. Will the Internet and E-mail replace FAX machines?

9. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-DD Some Dimensions of the PLC--Length 1.Consumer products have shorter PLCs than industrial products. 2.Mass communication informs consumers faster and shortens PLCs. 3.Products affected by technological change tend to have shorter PLCs.

10. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-EE Some Dimensions of the PLC--Shape 1.High learning product 2.Low learning product 3.Fashion product 4.Fad product

11. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-3 Alternative Product Life Cycles Time B. Low learning product Time A. High learning product Time D. Fad productC. Fashion product Sales

12. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-BProduct life cycle for wine coolers Millions of Dollars $1500 $1000 $500 19821983198419851986198719881989199019911992199319941995199619971998 Source: Figure drawn from Wine and Liqour Handbook statistics.

13. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-C Recording industry product form life cycles Source: Figure drawn from Recording Industry Association of America statistics. Millions of units sold 650 600 550 500 450 400 350 300 250 200 150 100 50 0 19891991 1993 19951987 1977 19791981 19831985 19751973 Albums Cassettes Compact disks

14. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-FF Some Dimensions of the PLC--Product Level 1.Product brand -- the specific version of a product offered by a particular company 2.Product class -- refers to the entire product category or industry such as video games 3.Product form -- pertains to variations within the product class

15. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-4a Video game life cycles by product class, product form, and brand 1987198919911993199519971999 (est.) 8-bit machines 16-bit machines 32-/64-bit machines Product form Product class Total A. Video game life cycle by product class and product form (worldwide) 40 30 20 10 0 Worldwide sales (millions of units)

16. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-4b Video game life cycles by product class, product form, and brand $4 3 2 1 0 199419951996199719981999 (est.) Nintendo Sony Sega B. Advanced video game life cycle by brand (United States) U.S. sales, including hardware and software ($ billion)

17. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-GG Factors Affecting the Diffusion of an Innovation 1.Usage barriers -- the product is not compatible with existing habits. 2.Value barriers -- the product provides no incentive to change…not that much better. 3.Risk barriers -- risk can be physical, social or economic/financial. 4.Psychological barriers -- which can be the result of cultural differences or image.

18. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-5 Five categories and profiles of product adopters Laggards: Fear of debt, neighbors and friends are information sources Laggards: Fear of debt, neighbors and friends are information sources Early adopters: Leaders in social setting, slightly above average education Early adopters: Leaders in social setting, slightly above average education Late majority: Skeptical, below average social status Late majority: Skeptical, below average social status Innovators: Venturesome, higher educated, use multiple information sources Innovators: Venturesome, higher educated, use multiple information sources Early majority: Deliberate, many informal social contacts Early majority: Deliberate, many informal social contacts Time Innovators 2.5% Early adopters 13.5% Early majority 34% Late majority 34% Laggards 16%

19. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-HH Concept Check 1.Advertising plays a major role in the _____ stage of the PLC, and _____ plays a major role in maturity. 2.How do high learning and low learning products differ? 3.What does the life cycle for a fashion product look like? ?

20. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-II The Product (Brand) Manager Product Managers: manage the marketing efforts for a close-knit family of products or brands. Responsibilities of the Product/Brand Manager: developing and executing a marketing program for the product line described in an annual marketing plan; approving ad copy, media selection, and package design; and a role in planning, implementing, and controlling marketing strategy.

21. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-JJ Product Modification Product Modification involves altering a product’s characteristic, such as its quality, performance, or appearance, to try to increase and extend the product’s sales. Changing a product’s characteristics to give the sense of a revised product can be accomplished by: new features new package new scents, etc.

22. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-KK Market Modification Market Modification strategies are utilized when a company tries to: 1.Increase a product’s use among existing customers, 2.create new use situations, or 3.find new customers.

23. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-LL Repositioning the Product Product repositioning is changing the place a product occupies in a consumer’s mind relative to competitive products. A firm can reposition a product by changing one or more of the four marketing mix elements (product, place/distribution, price, promotion).

24. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-MM Four Factors that trigger product repositioning Product Repositioning can be triggered by: reacting to a competitor’s position reaching a new market catching a rising trend changing the value offered –trading up –trading down…..can be via downsizing

25. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-NN Concept Check 1.How does a product manager help manage a product’s life cycle? 2.What does “creating new use situations” mean in managing a product’s life cycle? 3.Explain the difference between trading up and trading down in repositioning.

26. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-OOa Branding Branding involves an organization using a name, phrase, design, symbols,or combination of these to identify its products and distinguish them from those of competitors. A brand name is any word, “device” (design, sound, shape, or color), or combination of these used to distinguish a seller’s goods or services.

27. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-OOb Branding - continued A trade name is a commercial, legal name under which a company does business. For example, the Campbell Soup Company is the trade name of that firm. A 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.

28. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-6 Examples of well-known trademarks, brand names, and trade names Brand name that can be spoken Big Mac hamburger Levi’s jeans Teflon plastic Betty Crocker cake mix Macintosh computer Brand name that cannot be spoken Trade name/ legal name/ of organization Campbell Soup Co. Compaq Corp. Ford Motor Co. Kellogg Co. Ralston Purina Co. Trademark, brand name, or trade name registered with the U.S. Patent and Trademark Office

29. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-E Definition of Brand Equity Brand Equity is..... The added value a given brand provides a product beyond the functional benefits provided.

30. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-F Four criteria for picking a good brand name Fit the company or product image A good brand name should.... Describe product benefits Be memorable, distinctive, and positive Have no legal restrictions

31. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-7 Alternative branding strategies Multiproduct branding strategy Sunbeam makes: Sunbeam irons Sunbeam toasters Sunbeam crockware Toro makes: Toro snowblowers Toro lawn mowers Toro garden hoses Multiproduct branding strategy Sunbeam makes: Sunbeam irons Sunbeam toasters Sunbeam crockware Toro makes: Toro snowblowers Toro lawn mowers Toro garden hoses Multibranding strategy Anheuser-Busch makes: Budweiser Busch Michelob Wurtburger Hofbrau Procter & Gamble makes: Tide Cheer Ivory Snow Oxydol Multibranding strategy Anheuser-Busch makes: Budweiser Busch Michelob Wurtburger Hofbrau Procter & Gamble makes: Tide Cheer Ivory Snow Oxydol Private branding strategy A&P has: Ann Page canned goods Ann Parker bakery goods Eight O’Clock coffee Sears has: Kenmore appliances Craftsman tools Private branding strategy A&P has: Ann Page canned goods Ann Parker bakery goods Eight O’Clock coffee Sears has: Kenmore appliances Craftsman tools Mixed branding strategy Michelin makes: Michelin tires Sears tires Epson makes printers as: Epson IBM Mixed branding strategy Michelin makes: Michelin tires Sears tires Epson makes printers as: Epson IBM Generic branding strategy Dog food Peanut butter Green beans Paper towels Aspirin Cola Generic branding strategy Dog food Peanut butter Green beans Paper towels Aspirin Cola Branding strategy Manufacturer branding strategy

32. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-G Line and Brand Extension Line extension.... The use of a current brand to enter a new market segment in its product class Brand extension.... The use of a current brand name to enter a completely different product class

33. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-PP Other Branding Strategies Private Branding is when a manufacturer’s product is sold under the brand name of a wholesaler or retailer. Mixed Branding is a compromise between private and manufacturer branding. It is where a firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different than their own market. Generic Branding is when there is no branding, no identification other than the contents of the product.

34. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-QQ Packaging Packaging is the component of a product that refers to any container in which it is offered for sale and on which information is communicated. To a great extent, the customer’s first exposure to a product is the package. Packaging is expensive and an important part of marketing strategy.

35. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-RR Benefits of Packaging Benefits of Packaging: communication benefits -- the information on the package that is communicated to the consumer, such as directions on how to use, composition of the product, warnings and other information necessary to satisfy legal requirements of product disclosure. functional benefits -- such as convenience, protection, or storage. perceptual benefits -- which can connote status, economy, and/or product quality.

36. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-H Warranty forms Limited-coverage warranty Full warranty Express warranty Implied warranty Extent of coverage Extent of formality

37. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS PP12-SS Concept Check 1.How does a generic brand differ from a private brand? 2.Explain the role of packaging in terms of perception. 3.What is the difference between an expressed and an implied warranty?