CHAPTER TWELVE
MANAGING PRODUCTS
AND BRANDS
Irwin/McGraw-Hill
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-1 How stages of the product life cycle relate to a firm’s
marketing objectives and marketing mix actions
Sales revenue
or profit
Stage of the product life cycle
Introduction
Growth
Maturity
Decline
Total industry
sales revenue
+
0
–
Total industry profit
Marketing
Marketing
objective
objective
Gain
Gain
Awareness
Awareness
Stress
Maintain
Stress
Maintain
differentiation
brand
differentiation brandloyalty
loyalty
Harvesting,
Harvesting,
deletion
deletion
Competition
Competition
None
None
Growing
Growing
Reduced
Reduced
Product
Product
More
Moreversions
versions
Price
Price
One
One
Skimming
Skimmingor
or
penetration
penetration
Promotion
Promotion
Inform,
Inform,educate
educate
Place
Place
(distribution)
(distribution)
Limited
Limited
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
Many
Many
Full
Full
product
productline
line
Defend
Defendshare,
share,
Gain
Gainshare,
share,deal
deal profit
profit
Stress
Stress
Reminder
Reminder
competitive
competitive
oriented
oriented
differences
differences
Maximum
Maximum
More
outlets
More outlets
outlets
outlets
KERIN
HARTLEY
RUDELIUS
Best
Bestsellers
sellers
Stay
Stayprofitable
profitable
Minimal
Minimal
promotion
promotion
Fewer
Feweroutlets
outlets
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-2 Product Life Cycle for the stand alone FAX machine for
business use: 1970-1999
$7.0
Sales ($billion)
6.0
5.0
4.0
3.0
2.0
1.0
1970 1975 1980 1982 1984 1986 1988 1990 1992 1994 1996 1997 1998 1999
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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?
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-EE Some Dimensions of the PLC--Shape
1.
High learning product
2.
Low learning product
3.
Fashion product
4.
Fad product
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-3 Alternative Product Life Cycles
B. Low learning product
Sae
ls
Sae
ls
A. High learning product
C. Fashion product
D. Fad product
Sae
ls
Time
Sae
ls
Time
Time
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
Time
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-B Product life cycle for wine coolers
Millions
of Dollars
$1500
$1000
$500
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Source: Figure drawn from Wine and Liqour Handbook statistics.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Albums
Compact
disks
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
Cassettes
1975
650
600
550
500
450
400
350
300
250
200
150
100
50
0
1973
Millions of units sold
PP12-C Recording industry product form life cycles
Source: Figure drawn from Recording Industry Association of America statistics.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-FF Some Dimensions of the PLC--Product Level
1.
Product brand -- the specific version of a
product offered by a particular company
2.
Product class -- refers to the entire product
category or industry such as video games
3.
Product form -- pertains to variations
within the product class
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-4a Video game life cycles by product class, product form,
and brand
Worldwide sales (millions of units)
40
A. Video game life cycle by product class and product form (worldwide)
Product class
Total
30
Product form
8-bit machines
16-bit machines
32-/64-bit machines
20
10
0
1987
MARKETING,
MARKETING, 6/e
6/e
1989
BERKOWITZ
1991
KERIN
1993
HARTLEY
1995
RUDELIUS
1997
1999 (est.)
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-4b Video game life cycles by product class, product form,
and brand
B. Advanced video game life cycle by brand (United States)
U.S. sales, including hardware and
software ($ billion)
$4
3
Nintendo
Sony
Sega
2
1
0
1994
MARKETING,
MARKETING, 6/e
6/e
1995
BERKOWITZ
KERIN
1996
HARTLEY
1997
RUDELIUS
1998
1999 (est.)
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-5 Five categories and profiles of product adopters
Early adopters
13.5%
Innovators
2.5%
Laggards
16%
Early majority
34%
Late majority
34%
Time
Innovators:
Innovators:
Venturesome,
Venturesome,higher
higher
educated,
use
multiple
educated, use multiple
information
informationsources
sources
Fear
Fearofofdebt,
debt,neighbors
neighbors
and
friends
are
and friends are
information
informationsources
sources
Deliberate,
Deliberate,many
many
informal
social
informal socialcontacts
contacts
Early
Earlyadopters:
adopters:
Leaders
Leadersininsocial
socialsetting,
setting,
slightly
above
average
slightly above average
education
education
MARKETING,
MARKETING, 6/e
6/e
Laggards:
Laggards:
Early
Earlymajority:
majority:
BERKOWITZ
KERIN
HARTLEY
Late
Latemajority:
majority:
Skeptical,
Skeptical,below
belowaverage
average
social
status
social status
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-HH Concept Check
1.
2.
3.
Advertising plays a major role in the _____
stage of the PLC, and _____ plays a major
role in maturity.
How do high learning and low learning
products differ?
What does the life cycle for a fashion
product look like?
?
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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).
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-E Definition of Brand Equity
Brand
Brand Equity
Equity is
is .. .. .. ..
The added value a given brand
provides a product beyond the
functional benefits provided.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-F Four criteria for picking a good brand name
Describe
Describeproduct
productbenefits
benefits
Be
Bememorable,
memorable,distinctive,
distinctive,and
and
positive
positive
AAgood
good
brand
brandname
name
should
should........
Fit
Fitthe
thecompany
companyor
orproduct
productimage
image
Have
Haveno
nolegal
legalrestrictions
restrictions
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-7 Alternative branding strategies
Branding
Brandingstrategy
strategy
Manufacturer
Manufacturerbranding
brandingstrategy
strategy
Multiproduct
Multiproduct
branding
branding
strategy
strategy
Multibranding
Multibranding
strategy
strategy
Sunbeam
Sunbeammakes:
makes:
Sunbeam
Sunbeamirons
irons
Sunbeam
Sunbeam
toasters
toasters
Sunbeam
Sunbeam
crockware
crockware
Anheuser-Busch
Michelin
Anheuser-Busch A&P
A&Phas:
has:
Michelin
makes:
Ann
Page
makes:
makes:
Ann Page
makes:
Budweiser
canned
goods
Michelin
Budweiser
canned goods
Michelin
Busch
Ann
Parker
tires
Busch
Ann Parker
tires
Michelob
bakery
goods
Sears
Michelob
bakery goods
Searstires
tires
Wurtburger
Eight
O’Clock
Wurtburger
Eight O’Clock
Hofbrau
coffee
Epson
Hofbrau
coffee
Epsonmakes
makes
printers
printersas:
as:
Procter
&
Sears
has:
Epson
Procter &
Sears has:
Epson
Gamble
makes:
Kenmore
IBM
Gamble makes:
Kenmore
IBM
Tide
appliances
Tide
appliances
Cheer
Craftsman
Cheer
Craftsman
Ivory
Snow
tools
Ivory Snow
tools
Oxydol
Oxydol
Toro
Toromakes:
makes:
Toro
Toro
snowblowers
snowblowers
Toro
Torolawn
lawn
mowers
mowers
Toro
Torogarden
garden
hoses
hoses
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
Private
Private
branding
branding
strategy
strategy
HARTLEY
RUDELIUS
Mixed
Mixed
branding
branding
strategy
strategy
Generic
Generic
branding
branding
strategy
strategy
Dog
Dogfood
food
Peanut
Peanutbutter
butter
Green
beans
Green beans
Paper
Papertowels
towels
Aspirin
Aspirin
Cola
Cola
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-G Line and Brand Extension
Line
Line extension
extension .. .. .. ..
The
The use
use of
of aa current
current brand
brand to
to enter
enter aa new
new
market
market segment
segment in
in its
its product
product class
class
Brand
Brand extension
extension .. .. .. ..
The
The use
use of
of aa current
current brand
brand name
name to
to enter
enter aa
completely
completely different
different product
product class
class
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
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.
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-H Warranty forms
Limited-coverage
Limited-coveragewarranty
warranty
Extent
Extentof
of
coverage
coverage
Full
Fullwarranty
warranty
Express
Expresswarranty
warranty
Extent
Extentof
of
formality
formality
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
Implied
Impliedwarranty
warranty
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
PP12-SS Concept Check
1.
2.
3.
How does a generic brand differ from a
private brand?
Explain the role of packaging in terms of
perception.
What is the difference between
an expressed and an implied
warranty?
MARKETING,
MARKETING, 6/e
6/e
BERKOWITZ
KERIN
HARTLEY
RUDELIUS
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000