CHAPTER 9 Managing the Product

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CHAPTER 9Managing the Product
M A R K E T I N G
Real People, Real Choices Fourth Edition
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Steps in Managing Products

• Develop product objectives
• Design a product strategy
• Make tactical product decisions
• Adidas 1

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Criteria for Effective Objectives

• 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

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Sample Product Objectives

• In the upcoming fiscal year, modify the products
  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

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Product Line Strategies

• A product line is a firms total product offering
  designed to satisfy a single need for target
  customers (e.g., PGs line of dish detergents
  Dawn, Ivory, Joy)
• Length of line vs. width of product mix

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Fabrics Home Care (32) Beauty Care (37) Health, Baby Family Care (23) Snacks 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
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Product Lines

• Possible line strategies
• full line (PGs beauty care line) vs. limited
  line (Rolls Royce 3 models of cars)
• line stretch upward (Hyundais 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 (Nabiscos bite sized versions of
  Oreos) vs. contracting (Heinz and Bite me brand
  of frozen pizza snacks)

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Product Mix Strategies

• A product mix is a firms 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

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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 products quality would you judge by each
  of these dimensions?

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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)

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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

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Introduction Product Life Cycle

• 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/wholesaler
  s
• Examples of products? Spicy Beers

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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

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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)

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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

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Branding Decisions

• A brand is a name, term, symbol, or any other
  unique element of a product that identifies one
  firms product(s) and sets it apart from
  competition
• Brands should
• be memorable
• have a positive connotation
• convey a certain image

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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 products benefits
• Fit the customers culture
• Fit legal requirements

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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

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Brand Equity

• Brands 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

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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 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

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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

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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

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Brand Extension

• Same brand name, new product line e.g. Reebok
  shoes and Reebok water. Nike shoes and Nike
  casuals. Chevy cars and Chevy mens cologne.
  Hooters restaurants and Hooters airline
• The concept of congruence determines the success
  of a brand extension strategy. E.g. Johnsons
  baby powder and Johnsons baby oil high
  congruence. But imagine Lysol toilet bowl cleaner
  and Lysol toothpaste!!!

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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 Hersheys pieces / M Ms Breyers
  icecream with Splenda
• Can be used to reach out to a different target
  audience

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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

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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.

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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)

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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?

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Management of Existing Products

• Brand Manager
• Product Category Managers
• Market Managers