Solomon_ch09_basic

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MARKETING
Real People, Real Choices
Fourth Edition
CHAPTER 9
Managing the Product
Steps in Managing Products
• Develop product objectives
• Design a product strategy
• Make tactical product decisions
• Adidas 1
9-2
Criteria for Effective Objectives
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Measurable
Clear & Unambiguous
Time-framed
Consistent with long-term health of
organization
– E.g. Organization objective: become a
market leader in cars in five years. Product
Objective: Introduce two models every year
over the next five years
9-3
Sample Product Objectives
• In the upcoming fiscal year, modify the
product’s fat content to satisfy
consumers’ health concerns
• Introduce three items to the product line
to take advantage of increased
consumer interest in Mexican foods
• During the coming fiscal year, improve
chicken entrees such that consumers
rate them as better tasting than the
competition
9-4
Product Line Strategies
• A product line is a firm’s total product
offering designed to satisfy a single
need for target customers (e.g., P&G’s
line of dish detergents: Dawn, Ivory,
Joy)
• Length of line vs. width of product mix
9-5
Fabrics & Home Beauty Care
Care (32)
(37)
Health, Baby & Snacks &
Family Care (23) Beverages (6)
Ace
Aussie
Bounty
Folgers
Ariel
Camay
Charmin
Pringles
Bold
Clairol
Crest
Sunny Delight
Bounce
Cover Girl
Fixodent
Torengos
Cascade
Head &
Shoulders
Iams
Cheer
Hugo Boss
Luvs
Downy
Lacoste
Pampers
Dryel
Max Factor
Pepto-Bismol
Febreeze. etc.
Noxzema, etc.
Scope, etc
9-6
Product Lines
• Possible line strategies:
– full line (P&Gs beauty care line) vs. limited
line (Rolls Royce 3 models of cars)
– line stretch: upward (Hyundai’s XG 300),
downward (Rolex?), or two-way (Mariott
Hotels – Fairfield Inns and Courtyard at
lower end and Mariott Marquis & JW
Mariott at upper end)
– filling-out (Nabisco’s bite sized versions of
Oreos) vs. contracting (Heinz and “Bite
me” brand of frozen pizza snacks)
9-7
Product Mix Strategies
• A product mix is a firm’s entire range of
products (e.g., Gillette offers shaving
products, deodorants, writing
instruments, toothbrushes…)
• Strategic mix decisions usually relate to
the width of the product mix - how many
different product lines are produced by
the firm
9-8
Quality as a Product Objective
• Product quality is the overall ability of a
product to satisfy customer expectations
• Dimensions of product quality
– durability
– reliability
– precision
– ease of use
– product safety
– aesthetic pleasure
• Which product’s quality would you judge by
each of these dimensions?
9-9
Quality Standards
• TQM – Malcolm Baldrige Quality Award
• International Organization of Standardization
(Geneva)
– ISO 9000 (standards for quality
management)
– ISO 14000 (standards for environmental
management)
• Six Sigma (no more than 3.4 defects per
million – getting it right 99.9997% of the time)
9-10
Marketing Throughout the PLC
• The Product Life Cycle (PLC) explains
how products progress over their lives
• Marketing strategies must change and
evolve as a product moves through the
PLC
• The PLC relates to a product category
9-11
Introduction – Product Life Cycle
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Full-scale launch of new product into marketplace
Sales are low, high failure rate
Little competition
Frequent product modification
Limited distribution
High marketing and product costs
Promotion focused on product awareness and to
stimulate primary demand
• Intensive personal selling to retailers/wholesalers
• Examples of products? Spicy Beers
9-12
Growth – Product Life Cycle
• Sales grow at an increasing rate
• Many competitors enter market
• Large companies may acquire small
pioneering firms
• Profits are healthy
• Promotion emphasizes brand advertising and
comparative ads
• Wider distribution
• Toward end of growth stage, prices fall
• Sales volume creates economies of scale
• Examples of products: Mp3 players, LCD TVs
9-13
Maturity – Product Life Cycle
• Sales continue to increase but at a
decreasing rate
• Marketplace is approaching saturation
• Typified by annual models of products with an
emphasis on style rather than function
• Product lines are widened or extended
• Marginal competitors drop out
• Heavy promotions - sales promotions
• Prices and profits fall (CD / DVD players)
9-14
Decline – Product Life Cycle
• Signaled by a long-run drop in sales
• Rate of decline is governed by how
rapidly consumer tastes change or how
rapidly substitute products are adopted
• Falling demand forces many out of
market
• Few specialty firms left
• Examples: VCRs
9-15
Branding Decisions
• A brand is a name, term, symbol, or any
other unique element of a product that
identifies one firm’s product(s) and sets
it apart from competition
• Brands should
– be memorable
– have a positive connotation
– convey a certain image
9-16
Good Brand Names
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•
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Easy to say
Easy to spell
Easy to read
Easy to remember
• Fit the target market
• Fit the product’s
benefits
• Fit the customer’s
culture
• Fit legal
requirements
9-17
Trademarks
• Legal term for a brand name, brand mark, or trade
character
• ® is used when registered with the USPTO; ™ is
used when a name or mark has not been legally
registered but the user is claiming ownership
• Trademarks established by the Lanham Act of
1946 and updated by the Trademark Revision Act
of 1989
• Only protects in U.S. - if a firm wants multinational
recognition, it must register in each country
9-18
Brand Equity
• Brand’s value to its organization
• Brand equity provides customer loyalty,
perceived quality, brand name
awareness, competitive advantage
• Brand equity can be used to establish
brand extensions
– Alka Seltzer, Alka Seltzer Morning
Relief
9-19
What Makes a Brand Successful?
• Delivers benefits
customers truly want
• Stays relevant
• Pricing based on
consumer
perceptions of value
• Properly positioned
• Consistent
• Good fit between
brand portfolio and
hierarchy
• Coordinates
marketing activities
to build equity
• Understanding of
what brand means
to consumers
• Brand is given
proper support
• Company monitors
sources of brand
equity
9-20
Branding Strategy
• Leveraging the power of the brand name to
cover the market more effectively
• Why do we do it?
– Phenomenally expensive to create and
promote a new brand name (at least 100 –
150 million dollars)
– Too many brands out there
– Increase productivity of current marketing
programs
9-21
Sub-branding
• Creating new brands which are part of
the parent brand family – expressed as
suffixes of the parent brand.
• e.g Nike Air Jordan is a sub-brand of
Nike which is the parent brand. Air
Trigo, Air Mohawk are sub-brands of
Nike Air.
• Apple I-Pod, I-Pod Mini, I-Pod Shuffle
and now the I-Pod Nano
9-22
Flanker Brand
• Different brand name – same product
line
– Purpose: Pre-empt competition, cover
the market more completely (protect
your flanks)
– Problem: some cannibalization is
expected.
• E.g. Thums Up and Coca Cola in India
• Hallmark and Ambassador cards
9-23
Brand Extension
• Same brand name, new product line e.g.
Reebok shoes and Reebok water. Nike shoes
and Nike casuals. Chevy cars and Chevy
men’s cologne. Hooters restaurants and
Hooters airline
• The concept of congruence determines the
success of a brand extension strategy. E.g.
Johnson’s baby powder and Johnson’s baby
oil – high congruence. But imagine Lysol toilet
bowl cleaner and Lysol toothpaste!!!
9-24
Ingredient Branding
• Branding an ingredient of the main brand,
which is often manufactured by a different
company.
• E.g. Intel Inside is an ingredient brand on
IBM, Dell, Compaq, etc. computers; Breyers
Chocolate Ice Cream with Hershey’s pieces /
M & Ms; Breyers icecream with Splenda
• Can be used to reach out to a different target
audience
9-25
Co-branding
• When two or more mutually reinforcing
brands get together to jointly promote
themselves (one is not an ingredient of
another).
• Also called complementary branding
• E.g. co-branded credit cards like Chase
MasterCard, OR Harley Davidson and Ford
Explorer.
• Used to penetrate the market even better
9-26
Packaging and Labeling Decisions
• Packaging functions
– Protect and preserve the product
– Ease of transportation and handling
– Brand identity
– Advertising
– Legal requirements
– User-friendly
– Instructions for use, UPC, etc.
9-27
Effective packaging
• Effective packaging designs
– Green packaging
• Labeling regulations
– The Federal Fair Packaging and
Labeling Act 1966
– The Nutrition Labeling and Education
Act 1990
• Trans Fats (Jan 1 2006)
9-28
Designing Effective Packaging
• How are competing brands packaged?
• How might the package enhance brand
image?
• What possible environmental impact
might the package have?
• How might package
shape/communicate brand image?
• What graphic information should the
package show?
9-29
Management of Existing Products
• Brand Manager
• Product Category Managers
• Market Managers
9-30
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