Marketing
Chapter 9
Managing
Existing Products
Gilbert A. Churchill, Jr.
J. Paul Peter
Slide
9-1
Types of Products
Products
Consumer
Products
Convenience
Products
Shopping
Products
Business
Products
Specialty
Products
Unsought
Products
A product is a good , service, or idea that offers a wide range of tangible and intangible benefits.
It includes both the core, the auxiliary, and anything else that adds value to customers
Slide
9-2
Table
9.1
Basic Categories of Consumer Products
Category
Type of
Purchase
Decision
Convenience
Little
information
sought
Shopping
More
information
sought
Specialty
Lots of
information
sought
Unsought
Do not seek
information
and
unaware
Placement or
Distribution
Price
Promotion
Relatively
low
Mass media
Widely
available
Mass media;
some
personal
selling
Selectively
available
Mass media;
more
personal
selling
Exclusively
available
Moderate
Relatively
expensive
May or may
not be
expensive
Persuasive
advertising;
aggressive
personal
selling
Varies
Slide
9-3
Goods and Services
Sealy Mattress
Maytag Washer
Kleenex
Tissues
Scott Towels
Pair of
Glasses
Durable
Goods
Non-Durable
Goods
Auto
Repair
Restaurant
Meal
Services
Fantastic Sam’s
Haircut
Airline Taxi Ride
Slide
9-4
•
•
•
•
•
•
•
Product Terminology
Product Class - a broad group of products that differ somewhat but provide similar
benefits.
• household cleaners, beer
Product Category - subset of a product class containing products of a certain type.
• Household cleaners - liquid, powder, spray, gel
• Beer - light, imported, regular, nonalcoholic
Product Item - a specific version of a product that can be designated as a distinct
offering among an organization’s products.
Product Line - a group of closely related products offered by the organization.
• P & G - soaps, detergents, toothpaste
Product Mix - all the product offerings of an organization.
Width of the product mix - number of product lines that an organization offers.
• Gillette - blades and razors, writing instruments, toiletries, lighters
Depth of a product line - number of product items in a product line.
• Gillette’s blades and razors - mach 3, sensor, track II, atra, etc.
Slide
9-5
The Product Life Cycle (PLC)
A graphical description of a product’s history
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline
Stage Product Category Sales
Dollars
Total Market Sales
Product Category Profits
Total Market Profits
0
Time
Slide
9-6
INTRODUCTION STAGE
•
•
•
A full-scale launch of a new product into the marketplace
(trying to gain a foothold).
Typically we have
– High failure rates (slow sales initially)
– Little to no competition
– Frequent product modification
– Limited distribution (try to attract intermediaries)
– Price is generally high (to recover high marketing &
production costs)
– Main customers are Innovators
– Negative profits(due to high initial costs)
– Durables (one product); non-durables (variety)
Strategy
– Developing product awareness (informing customers
of benefits - lead to trial)
– Stimulate primary demand for the product category
– Intensive personal selling
– Pioneering Advantage - benefit of being the first one in
the market
Slide
9-7
GROWTH STAGE
•
•
•
Begins when the product begins to break even
Typically we have
– sales grow at an accelerated (increasing) rate
– Many competitors enter the market
– Large companies may acquire small pioneering firms
– Profits are healthy (because of demand)
– R & D costs have been recovered; sales begin to level
off; sales volume create economies of scale
Strategy
– Promotion stresses brand preference & brand loyalty
– Promotion is targeted towards attracting the mass
market
– Product quality will be stressed & improved
– Wider distribution will be gained and costs will be
lowered
Slide
9-8
MATURITY STAGE
•
•
•
This is where most products spend most amount of time
at.
Typically we have
– Sales continue to increase but at a decreasing rate
– Marketplace is approaching saturation
– Marginal competitors begin dropping out
– Both price and profits begin to fall
Strategy
– Heavy promotion is necessary to both dealers and
consumers (by increasing usage)
– Product lines are widened; annual models with
emphasis on style rather than function; products
require little technological improvements
– Market share can be increased by either taking it
away from the competitors or manufacturing private
brands for channel members
Slide
9-9
DECLINE STAGE
•
•
•
Signaled by a long-run drop in sales
– Product looses market acceptance
• Change in consumers taste
• Wide availability of substitutable products
Typically we have
– Few competitors remain
– Decreased profits industry wide
– Price generally stabilizes
Strategy
– Do very little if any promotion
– Minimize distribution costs
– Drop the product completely
Slide
9-10
Figure
9.2
Adopter Categories
Innovators Early
(2.5%)
Adopters
(13.5%)
Early
Majority
(34%)
Late
Majority
(34%)
Laggards
(16%)
Slide
9-11
Relationship of the Diffusion Process to the PLC
Cumulative Percentage of Adoption
Introduction
Growth
Decline
Maturity
100
Product
life cycle
curve
90
80
70
Early majority
60
Late majority
50
40
30
Early adopters
Innovators
Laggards
20
Diffusion
curve
10
0
Time of Adoption of Innovations
Slide
9-12
•
•
•
•
•
•
•
•
•
Branding Terminology
Brand - a name, term, design, symbol, or another feature that identifies one
seller’s good or service as distinct from other sellers. (e.g. Coca Cola)
Brand Name - that part of a brand that can be spoken. (e.g. the word Coke)
Brand Mark - that part of a brand that cannot be spoken. (e.g. the flowing
script used to write Coca Cola)
Trademark - a brand that has legal status by virtue of it’s being registered
with the federal government. (e.g. Coca Cola)
Trade name - the legal name under which a company operates. (e.g. The Coca
Cola Company)
Brand extension - the practice of using an existing brand name for a new
product. (e.g. Cherry Coke, Diet Coke, Caffeine Free Coke)
Service mark - a brand for a service that has legal status by virtue of its being
registered with the federal government.
Family brand - the use of the same brand name for an entire product line.
Co-Branding - placing two or more brand names on a product (e.g., ConAgra +
Kellogg = Healthy Choice)
Slide
9-13
Types of Brands
Old El Paso
Manufacturer’s
Salsa
Brands
Brand
Structure
Generic
Brands
Salsa
Private
Brands
A&P
Masterchoice
Salsa
Slide
9-14
Selecting a Brand
A good brand name has several characteristics.
1. It should imply product benefits.
2. It should be positive, distinctive, easy to say and
easy to remember.
3. It should be consistent with the image of the
product and manufacturer.
4. It should be legally protectable and permissible.
5. It should translate well, if the product is to be
offered globally.
Slide
9-15
Figure
9.5
Elements of Brand Equity
Name
Awareness
Brand
Loyalty
Brand
Associations
Other
Brand Equity
Proprietary Brand
Assets
Name Symbol
Provides value to customer
by Enhancing Customer’s:
Interpretation/Processing
of information
Confidence in the
Purchase Decision
Use Satisfaction
Perceived
Quality
Provides value to firm by
Enhancing:
Efficiency and
effectiveness of
Marketing Programs
Brand Loyalty
Prices/Margins
Brand Extensions
Trade Leverage
Competitive Advantage
Slide
9-16
Figure
9.7
Product Mixes and Product Lines
Width
D
E
P
T
H
Ready-to-Eat Convenience Snack Foods
Cereals
Foods
Baking
Products
Dairy
Products
Total
Bisquick
Yoplait
Yogurt
Wheaties
Lucky
Charms
Cinnamon
Toast Crunch
Cheerios
Kix
Hamburger
Helper
Pop Secret
Popcorn
Suddenly
Salad
Fruit Rollups
Betty Crocker
Cake Mixes
Nature Valley
Granola Bars
Gold Medal
Flour
Colombo
Yogurt
Creamy Deluxe
Frosting
Dessert Mixes
Trix
Source: Courtesy of P. Gayle Fuguitt, Marketing Research Director, Big “G” Division,
General Mills