ch 11 mrkt notes

7/31/2019 Ch 11 Mrkt Notes

1/6

Marketing 3104: Exam 1 Material

Chapter 11: Managing Successful Products and Brands (PowerPoint called: Product Strategy)

L1: Charting the Product Life Cycle

1. Product Life Cycle: describes the stages a new product goes through in the marketplace;introduction, growth, maturity, and decline stages.

a. Introduction Stage: occurs when a product is introduced to intended target market,sales grow slowly, and profit is minimal. The marketing objective for the company at this

stage is to create consumer awareness and stimulate trial

i. Trial: the initial purchase of a product by a consumer. Companies spend a lot ofmoney in this stage trying to stimulate trial.

ii. Primary Demand: is the desire for the product class rather than for a specificbrand, since its a new product. Advertising and promotion expenditures in this

stage are made to stimulate primary demand at first

iii. Selective Demand: the preference for a specific brand. Company attention isfocused on this as more competitors launch their own products.

iv. In this stage, pricing can be high or low1. Skimming Strategy: is a high initial price might be used to help the

company recover costs developments

2. Penetration Pricing: a company can price low and it will discouragecompetitive entry

v. Examples are pocket video cameras and electric powered carsb. Growth Stage: this stage is characterized by rapid increases in sales, in this stage

competitors appear. With more competitors and more aggressive pricing is that profit

usually peaks in this stage. Emphasis is on stimulating selective demand; product

benefits are compared with those of competitors offerings for the purpose of gaining

market share.

i. Repeat Purchasers: people who tried the product were satisfied and boughtagain. There is a growing proportion of these in this stage

ii. Changes appear in the product now; to help differentiate a companys brandfrom competitors and improved version or new features are added

iii. Examples are smart phones and digital camerasc.

Maturity Stage: here there is a slowing of total industry sales or product class revenue,competitors are leaving the market, consumers are abandoning product, sales increase

at a decreasing rate.

i. Marketing attention now is directed toward holding market share throughfurther product differentiation and finding new buyers

ii. Examples of this are soft drinks and DVD playersd. Decline Stage: occurs when sales drop. A product enters this stage not because of any

wrong strategy but because of environmental changes, like technology. A company will

use one of these 2 strategies to handle a declining product

i. Deletion: product deletion is dropping the product from the companys productline; its the most drastic strategy.

ii. Harvesting: when a company retains the product but reduces marketing costs.The product continues to be offered, but they dont spend time or money

advertising

2. Four Aspects of the Product Life Cycle:a. Length of product life cycle: consumer products have shorter life cycles than business

products. Mass communication and technology tends to shorten life cycles.

b. Shape of the product life cycle: the sales curve of products dont always follow thegeneralized life cycle, different products have different sales curves

i. High Learning Product: one that requires customer education so there is anextended introductory period. Ex. Computers in the 1980s, people had to learn

how to use them. (curve has long time in intro then normal after)


2/6

ii. Low Learning Product: little learning is required, product can be easily imitatedby competitors so the marketers try to broaden distribution quickly ex. Gillettes

fushion razor (curve grows fast, and looks the most even across graph)

iii. Fashion Product: a style of the times, these life cycles appear in clothes, they areintroduced, they decline, and then they seem to return. Ex. Hosiery (curve goes

up and down up and down like a rollercoaster)

iv. Fad Product: experience raid sales on introduction then and equally rapiddecline, they have the shortest life cycles (line is so short, and is really up highly

steep in the introductory period)

c. The Product Level: Class and Form. Some product life cycles show a total industry orproduct class sales curve, but you should distinguish them;

i. Product Class: refers to the entire product category or industry, such asprerecorded music

ii. Product Form: pertains to variations within the product class, like going furtherinto prerecorded music and saying cassette types, compact discs, etc.

d. The Life Cycle and Consumers: not all consumers rush to buy a product in theintroductory stage, and the shapes of the life cycle curves show most sales occur after

the product has been on the market for some time. Diffusion of Innovation: So a

product Diffuses, or spreads, through the population. But some like a product early.

i. The following are 5 different types of consumers called Product Adopters;1. Innovators: buys them first, they make up 2.5% of consumers. They are

venturesome, higher educated and use multiple information sources.2. Early Adopters: are next, they are leaders in social settings, slightly

above average education, make up 13.5% of consumers.

3. Early Majority: they are deliberate, many informal social contacts, theymake up 34%.

4. Late Majority: they are skeptical, below average social status, 34% ofconsumers

5. Laggards: they are last to buy, they have fear of debt, and they useneighbours and friends as information sources

For any product to be a success, it must be purchased by innovators andearly adopters so it can catch on to the rest.

ii. Several factors affect whether a consumer will adopt a new product or not1. Usage Barriers: the product is not compatible with existing habits2. Value Barriers: the product provides no incentive to change3. Risk Barriers: physical, economic, or social4. Psychological Barriers: cultural differences or image Companies try to get over these barriers with things like warranties,

money back guarantees, extensive usage instructions, demonstrations,

and free samples to stimulate trial.

o 71% of consumers consider a sample to be the best way toevaluate a new product

L2: Managing the Product Life Cycle

This section describes the role of the product manager who is usually responsible for managing itsproducts through the stages of their life cycles, and the 3 ways the product manager does that.

1. Role of a Product Manager: the product manager, also called a brand manager, manages themarketing efforts for a close knit family of products or brands. They are responsible for

managing existing products through the stages of the life cycle, some also have to develop new

products, and approve ads or package designs for product marketing etc.

a. They also engage in extensive data analysis about their products/brands. They take thesales, market share, and profit trends data and do 2 measures;

i. Category Development Index (CDI)ii. Brand Development Index (BDI) These indexes help identify strong and weak market segments so they can

provide direction for marketing efforts


3/6

Now here are the three ways a product manager manages a product through its life cycle1. Modifying the Product: a way to manage a product through its life cycle

a. Product Modification: involves altering a products characteristic, such as its quality,performance, or appearance, to increase the products value to customers and increase

sales. Its to give a sense of a revised product.

i. Product Bundling: the sale of two or more separate products in one package. Ex.Nokia has a mobile that plays music, takes pictures, surfs the Internet, has a big

screen for watching TV and playing video games

2. Modifying the Market: a way to manage a product through its life cyclea. Market Modification: this strategy is when a company tries to find new customers,

increase a products use among existing customers, or create new use situations

i. Finding New Customers: ex. Harley Davidson has tailored a marketingprogramme to encourage women to take up biking

ii. Increasing a Products Use: promoting more frequent usage. Ex. Florida OrangeCompany advocates/advertises drinking orange juice throughout the day not

only for breakfast.

iii. Creating a New Use Situation: finding new uses for an existing product. Ex.Dockers pants (jcp) originally intended as a single pant for every situation, but

now they promote different looks for different usage situations; work, weekend,

golf, dress etc.

3. Repositioning the Product: way to manage a product through its life cycle, a company decides touse this strategy bolster sales

a. Product Repositioning: changes the place a product occupies in a consumers mindrelative to competitive products. A firm can reposition a product by changing one or

more of the marketing mix elements.

b. Here are 4 factors that trigger the need for a repositioning action;i. Reacting to a Competitors Position: maybe a competitors well-established

position is negatively affecting sales and market share, you might want to

reposition

ii. Reaching a New Market: ex. Unilever introduced iced tea in Britain to bad sales,they viewed it as leftover hot tea that cooled. So Unilever repositioned it as a

cold soft drink and made the tea carbonated and sales improved.

iii. Catching a Rising Trend: consumer trends are always changing so you shouldreposition your product. Ex. People are more health conscious now so mostfood/drink companies offer low calorie versions of their product

iv. Changing the Value Offered: when repositioning, a company can decide tochange the value it offers buyers and trade up or down

1. Trading Up: involves adding value to the product through additionalfeatures or higher quality materials ex. Stores can add designer sections

2. Trading Down: involves reducing the number of features, quality, orprice. Firms do this when they are downsizing (which they are criticized

for)

a. Downsizing: reducing the package content without changingpackage size/price

b. Ex of trading down; airlines have added more seats whichreduces legroom, and limited snack service

L3: Branding and Brand Management

1. Branding: when an organization uses a name, phrase, design, symbols, or combination of theseto identify its products and distinguish them from those of competitors. Its a basic decision in

marketing products.

2. Brand Name: is any word, device (design, sound, shape, or colour), or combination of these usedto distinguish a sellers goods or services

a. Can be spoken: like Gatoradeb. Can be unspoken, with a Logo: like the bitten apple on Apple products


4/6

3. Trade Name: a commercial, legal name under which a company does business. Ex. The Coca-Cola Company

4. Trademark: identifies that a firm has legally registered its brand name or trade name so the firmhas its exclusive use, thereby preventing others from using it

a. Done through the US Patent and Trademark Office and protected under the Lanham Actb. A well known trademark can help a company develop brand loyalty and help sellc. Product Counterfeiting: low cost copies of popular brands. This is a serious problem

because they steal sales of around $200 billion annually

i. Stop Counterfeiting in Manufactured Goods Act of 2006: US passed it tocounteract the counterfeiting, and it makes counterfeiters subject to 20-year

prison sentences and $15 million in fines.

5. Brand Personality and Brand Equity:a. Brand Personality: a set of human characteristics associated with a brand name.

Successful brands have this. Ex. Harley Davidson traits linked to masculinity and defiance

b. Brand Equity: the added value a brand name gives to a product beyond the functionalbenefits provided. It has two main advantages below;

i. It provides a competitive advantageii. Consumers are often willing to pay a higher price for a product with brand

equity

6. Creating Brand Equity: marketers know that brand equity is not easily or quickly achieved.Rather, it arises from a sequential building process consisting of four steps

a. Step 1: develop positive Brand Awareness and an association of the brand in consumersminds with a product class

b. Step 2: marketer establish a brands meaning in the minds of customers. Meaning arisesfrom what a brand stands for and has two dimensions

i. Brand Performance: a functional, performance related dimensionii. Brand Imagery: an abstract, imagery related dimension

c. Step 3: elicit the proper consumer responses to a brands identity and meaningi. Consumer Judgments: thinking focuses on a brands perceived quality credibility

and superiority relative to other brands

ii. Consumer Feelings: relates to the consumers emotional reaction to a brandd. Step 4: create a Consumer-Brand Connection evident in an intense, active loyalty

relationship7. Valuing Brand Equity: brands are assets (like just the name of the company itself). Successfulbrand names have an economic value I the sense that they are intangible assets. Brands can

appreciate in value when effectively marketed, or they can lose value when gone wrong.

Companies buy and sell brands.

a. Brand Licensing: is a contractual agreement whereby one company (licensor) allows itsbrand name or trademark to be used with products or services offered by another

company (licensee) for a royalty or fee. Ex. Disney licenses its characters for toys,

apparel, and games.

b. Picking a good brand name is important and companies will spend a lot of money toidentity and test a new brand name. There are 5 main criteria for choosing a name;

i. The name should suggest the product benefits; ex. Easy Off (an oven cleaner)ii. The name should be memorable, distinctive, and positiveiii. The name should fit the company or product image; ex. Sharp (a name that can

apply to audio and video equipment)

iv. The name should have no legal or regulatory restrictionsv. The name should be simple and should be emotional

8. Branding Strategies. Companies can have several different branding strategies, here are 4;a. Multiproduct Branding Strategy: a company uses one name for all its products in a

product class.

i. Corporate branding: Ex. Microsoft, Sony, Samsung have the same trade nameand brand name

ii. Family branding: ex. Church&Dwight uses the Arm&Hammer family brand namefor all its products featuring baking soda as the primary ingredient


5/6

iii. An advantage is that consumers who have a good experience with the productwill think favorable to other items in the product class with the same name

1. Product Line Extensions: the practice of using a current brand name toenter a new market segment in its product class. Ex. Campbell Soup

does soup line extensions with many different types of soup.

a. Good: They have lower ad costs because the same name is usedon all products which raises the level of brand awareness.

b. Bad: sales of an extension may come at the expense of otheritems in the companys product line

iv. Subbranding: some multiproduct branding companies do this which combines acorporate or family brand with a new brand, to distinguish a part of its product

line from others. Ex. Gatorade G2, Porsche Carrera

v. Brand Extension: the practice of using a current brand name to enter a differentproduct class, strong brand equity allows for this.

1. Ex. Hondas good name for cars has extended easily to snow blowers,lawn mowers, etc.

2. However, to many uses for one brand name can dilute the meaning of abrand for consumers

vi. Co-Branding: the pairing of two brand names of two manufactures on a singleproduct ex. Pillsbury cookies using Hersheys morsels

b. Multibranding Strategy: This involves giving each product a distinct name. This is usefulwhen each brand is intended for a different market segment.

i. Ex. Disney uses the Miramax and Touchstone Pictures names for films directedat adults and its Disney name for childrens films

ii. Some companies array their brands on the basis of price quality segmentsiii. Others introduce new product brands as defensive moves to counteract

completion

1. Fighting Brands: their chief purpose is to confront competitor brands.Ex. Ford launched its Fusion brand to halt the defection of Ford owners

who were buying competitors midsize cars

iv. Advertising and promotion costs tend to be higher with multibranding, becausethe company must generate awareness among consumers and retailers for each

new brand namev. Advantages to this strategy are that each brand is unique to each marketsegment and there is no risk that a product failure will affect other products in

the line

c. Private Branding Strategy: (sometimes called Private Labeling or Reseller Branding), itswhen a company manufactures products but sells them under the brandname of a

wholesaler or retailer. Ex. Is like the Great Value @Wal-Mart, or Kroger brands

i. Its popular because it produces high profits for manufacturers and resellersii. Consumers buy them; 1 out 5 items purchased at supermarkets, drugstores, and

mass merchandisers have a private brand

d. Mixed Branding Strategy: where a firm markets products under its own name and thatof a reseller because the segment attracted to the reseller is different from its own

market

i. Ex. Elizabeth Arden is sold through department stores and a line of skin careproducts at Wal-Mart with the skinsimple brand name.

Multiproduct Branding:

Toro makes;

Toro snow blowers

Toro lawn mowers

Toro garden hoses

Toro sprinkler systems

Multibranding:

Procter & Gamble makes;

Tide

Cheer

Ivory Snow

Bold

Private Branding:

Sears has its own;

Kenmore appliances

Craftsman tools

DieHard batteries

Mixed Branding:

Michelin makes;

Michelin & Sears tires

Epson makes; Epson

& IBM Printers

Branding Strategy


6/6

L4: Packaging and Labeling Products

Packaging: refers to the component of a product that any container in which it is offered for saleand on which label information is conveyed

Label: is an integral part of the package and typically identifies the product or brand, who madeit, where and when it was made, how it is to be used, and package contents and ingredients

Packaging & labeling are expensive and a very important part of the marketing strategy becauseits the customers first exposure to the product

1. Creating Customer Value and Competitive Advantage through Packaging and Labeling:a.

Communication Benefits: a major benefit of packaging is the label information on itconveyed to the consumer. Ex. The nutritional/dietary information on food packages

b. Functional Benefits: packaging often plays a functional role, such as storage,convenience, protection, or product quality

i. The convenience dimension of packaging is increasingly important. Ex. They aremaking squeeze bottles for salad dressing

ii. Consumer protection is important, including the development of tamperresistant containers ex. Today companies use safety seals or pop tops

c. Perceptual Benefits: a third component of packaging and labeling is the perceptioncreated in the consumers mind. Package and label shape, color, and graphics distinguish

one brand from another, covey a brands positioning, and build brand equity.

2. Packaging and Labeling Challenges and Responses: package and label designers face 4challenges;

a. The Continuing Need to Connect with Customers: packages and labels must becontinually updated to connect with customers, so the challenge lies in creating

aesthetic and functional design features that attract/connect with customers

b. Environmental Concerns: because of widespread worldwide concern about the growthof solid waste and the shortage of viable landfill sites, the amount, composition, and

disposal of packaging material continues to receive much attention

c. Health, Safety, and Security Issues: there are growing concerns about these in relationto package materials.

i. Ex. Child proof caps on pharmaceutical products are now commonii. Shelf Life: the time a product can be stored, is extended by new packaging

technology and materials that prevent spoilaged. Cost Reduction: cost of packaging material (like paper, plastics, and glass) is rising so

companies are constantly challenged to find innovative ways to cut packaging costs

3. Product Warranty: a final component for product consideration is the warrantya. Warranty: a statement indicating the liability of the manufacturer for product

deficiencies

i. Express Warranties: written statements of liabilitiesii. Limited Coverage Warranty: specifically states the bounds of coverage and,

more important, areas of noncoverage

iii. Full Warranty: has no limits of noncoverageiv. Implied Warranties: which assign responsibility for product deficiencies t the

manufacturer

ch 11 mrkt notes

Documents