CHAPTER 9Managing the Product

M A R K E T I N GReal People, Real Choices

Fourth Edition

9-2

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 product’s 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 firm’s total product offering designed to satisfy a single need for target customers (e.g., P&G’s 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 (P&Gs beauty care line) vs. limited

line (Rolls Royce 3 models of cars)– line stretch: upward (Hyundai’s 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 (Nabisco’s 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 firm’s 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 product’s 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/wholesalers• 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 firm’s 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 product’s

benefits• Fit the customer’s

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

• Brand’s 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 men’s cologne. Hooters restaurants and Hooters airline

• The concept of congruence determines the success of a brand extension strategy. E.g. Johnson’s baby powder and Johnson’s 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 Hershey’s 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