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Chapter 9 Managing the Product

Product Mix (Lines, etc.) Quality Concerns Product Life Cycle Branding Strategies Packaging Careers in Product/Brand Management

9-2

Steps to Manage Products

9-3

Product Planning Developing product line and product mix strategies

Product line: – Firm’s total product offering designed to satisfy a single need or

desire of target customers • P&G’s line of dish detergents: Dawn, Ivory, Joy

Product-Line Strategies– Line extensions

Product mix: – The total set of all products that a firm offers for sale

Product-Mix Strategies– Width of product mix:

• How many different product lines produced by firm

Cannibalization concerns: – Within each line

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Line 1xxxx

Line 2xx

Line 3xxx

x x x

Breadth

Length

Example: P&G offers dish soap, toilet paper, shampoo, window cleaners, and more.

9-5

Quality as a Product Objective

Product quality as an objective: – Product quality is the overall ability of a product to

satisfy customer’s expectations

Total Quality Management (TQM):– Company-wide dedication to the development,

maintenance, and continuous improvement of all aspects of the company’s operations

– Uniform ISO quality standards exist to offer guidance

9-6

ISO Quality Standards

ISO 9000: – Voluntary standards for quality set by International

Organization for Standardization ISO 14000:

– Concentrates on environmental management Six Sigma Methodology:

– Process allowing no more than 3.4 defects per million (getting it right 99.9997% of the time)

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Adding a Dose of Quality to the Marketing Mix

Product: – Improve customer service

Place: – Involve suppliers and customers in improving on-time

delivery Price:

– Lower costs and improve service at same time Promotion:

– Give customers information when they want and need it (not when it’s convenient for the firm)

9-8

Product Quality

9-9

Product Life Cycle

9-10

Marketing Mix Strategies Over the Product Life Cycle

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The Introduction Stage

First stage in the product life cycle– slow growth follows the introduction of a new product

in the marketplace

Goal is to get first-time buyers to try product Firm does not usually make a profit during

this stage

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The Growth Stage

Second stage in the product life cycle– the product is accepted and sales rapidly increase.

Goal is to encourage brand loyalty Firm introduces product variations to attract

market segments and increase market share

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The Maturity Stage Third and longest stage in the product life cycle

– Sales peak and profit margins narrow– Competition grows intense

Marketers need to keep giving consumers new reasons to buy products in the mature stage– Find new uses for an existing product, move into new

markets, or add/change the product’s attributes

Firm resorts to price reductions and reminder advertising.

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The Decline Stage

Final stage in the product life cycle: – Sales decrease as customer needs change.

Market as a whole begins to shrink, profits decline, fewer product variations exist, and suppliers pull out

Firm’s major decision is whether to keep product at all. – Do you have a Cash Cow or a Dog? BCG Matrix

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Creating Product Identity: Branding Decisions

Brand– a name, term, symbol, or any other unique element

that identifies one firm’s product and sets it apart from the competition

Creates a positive connotation Customer perspective:

– An emotional connection that is part of the relationship between product/company and customer

– Brand personality/customer identity

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The Importance of Branding

Brand equity provides competitive advantage– Brands with strong equity capture and hold onto a

larger share of the market – Brands with strong equity sell at prices with higher

profit margins

Brand extensions– New products sold with the same brand name

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Benefits of a Strong Brand Name To company

– *Share of mind ~= market share

– Higher margin – *Advertising efficiencies– Efficiencies in brand

extensions

To consumers* – Decision heuristic

• Simplifies decision making

– “Safe” purchase • “No one ever got fired

for buying IBM”

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Good Brand Names

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

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MERKUR

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Trademarks / Service Marks

Legal terms for a brand name, brand mark, or trade character– Trademark = TM– Service mark = SM

Common-law protection: the firm has used the name and established it over a period of time—within a specific product category

Legally registered trademarks / service markets by a government obtain protection for exclusive use in that country – Symbol in the U.S. ®

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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

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Branding Strategies: Individual Brands vs. Family Brands Individual

– Pros: “Clear” identity– Cons: More expensive to introduce– Example: P&G products are branded individually

(Cheer, Tide, Joy, Crest, Fresh Step, etc.)

Family/umbrella – Pros: Less expensive to introduce– Cons: If new product fails, can “pollute” family name– Example: Arm & Hammer products are all branded with

Arm & Hammer brand (Arm & Hammer cat litter, Arm & Hammer toothpaste, A&H deodarent, etc.)

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Branding Strategies: National and Store Brands

National: – Manufacturer’s (producer’s) brand

Store: – Private-label (retailer’s) brand

• Costco – Kirkland, Safeway – Safeway Select, Walmart – Great Value

–

Questions:

(1) Who makes the retailer’s products?

(2) What is the margin picture for retailers?

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Branding Strategies (cont’d)

Licensing: – one firm sells the right to use a legally

protected brand name for a specific purpose and for a specific period of time

• Disney• UM Grizzlies

Co-branding: – combines two brands– ingredient branding is increasing

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Packaging Functions Contain and/or protect the product Communicate brand personality

– Awareness, trial

Provide specific information – Specific attributes– Sales promotion offers

Make the package more user-friendly – Use and storage

Support retailer needs– Easy to store, compact in sales space

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Designing Effective Packaging

Effective packaging considers: – Can package be used to enhance brand image or

competitive advantage? – Packaging of other brands in same product category– Choice of packaging material and image it projects– Environmental impact of packaging– Shape and color influences on image– Graphic information to be portrayed

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Organizing for Effective Product Management

Management of existing products– A single marketing manager typically handles the

entire marketing function in small firms– Larger firms may have a number of managers who

perform different functions• Brand managers • Product category managers • Market managers

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Organizing for New-Product Development

Venture teams – Specialists in different areas who work together to

focus on new-product development

“Skunk works” – Small and isolated group in remote location that

functions with minimal supervision