Irwin/McGraw-Hill

1. C H A P T E R T W E L V E MANAGING PRODUCTS AND BRANDS Irwin/McGraw-Hill

2. AFTER READING THIS CHAPTER YOU SHOULDBE 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. (continued)

3. AFTER READING THIS CHAPTER YOU SHOULDBE 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. 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. 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. Stage of the product life cycle Introduction Growth Maturity Decline Total industrysales revenue Sales revenueor profit + 0 – Total industry profit Competition None Growing Many Reduced Promotion Inform, educate Stress competitive differences Reminder oriented Minimal promotion 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 Product One More versions Full product line Best sellers Price Skimming or penetration Gain share, deal Defend share, profit Stay profitable Place(distribution) Limited More outlets Maximum outlets Fewer outlets

7. $7.0 6.0 5.0 4.0 3.0 2.0 1.0 Sales ($billion) 1970 1975 1980 1982 1984 1986 1988 1990 1992 1994 1996 1997 1998 1999 PP12-2 Product Life Cycle for the stand alone FAX machine for business use: 1970-1999

8. 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. 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. PP12-EE Some Dimensions of the PLC--Shape 1. High learning product 2. Low learning product 3. Fashion product 4. Fad product

11. A. High learning product B. Low learning product Sales Sales Time Time C. Fashion product D. Fad product Sales Sales Time Time PP12-3 Alternative Product Life Cycles

12. Millionsof 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. PP12-B Product life cycle for wine coolers

13. 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 PP12-C Recording industry product form life cycles 650 600 550 500 450 400 350 300 250 200 150 100 50 0 Albums Millions of units sold Compactdisks Cassettes Source: Figure drawn from Recording Industry Association of America statistics.

14. 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. A. Video game life cycle by product class and product form (worldwide) 40 30 20 10 0 Product class Total Product form 8-bit machines 16-bit machines 32-/64-bit machines Worldwide sales (millions of units) 1987 1989 1991 1993 1995 1997 1999 (est.) PP12-4a Video game life cycles by product class, product form, and brand

16. B. Advanced video game life cycle by brand (United States) $4 Nintendo Sony Sega 3 U.S. sales, including hardware and software ($ billion) 2 1 0 1994 1995 1996 1997 1998 1999 (est.) PP12-4b Video game life cycles by product class, product form, and brand

17. 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. PP12-5 Five categories and profiles of product adopters Early adopters 13.5% Laggards 16% Innovators 2.5% Early majority 34% Late majority 34% Time • Innovators: • Venturesome, higher educated, use multiple information sources • Early majority: • Deliberate, many informal social contacts • Laggards: • Fear of debt, neighbors and friends are information sources • Early adopters: • Leaders in social setting, slightly above average education • Late majority: • Skeptical, below average social status

19. 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. 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. 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. 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. 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. 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. 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. 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. (continued)

27. 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. 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. PP12-E Definition of Brand Equity Brand Equityis . . . . The added value a given brand provides a product beyond the functional benefits provided.

30. PP12-F Four criteria for picking a good brand name Describe product benefits Be memorable, distinctive, and positive A good brand name should . . . . Fit the company or product image Have no legal restrictions

31. PP12-7 Alternative branding strategies Branding strategy Manufacturer branding strategy • 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 • 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 Generic branding strategy Dog food Peanut butter Green beans Paper towels Aspirin Cola

32. 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. 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. 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. 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. PP12-H Warranty forms Limited-coverage warranty Extent of coverage Full warranty Express warranty Extent of formality Implied warranty

37. 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?