CHAPTER TWELVE MANAGING PRODUCTS AND BRANDS IrwinMc GrawHill

CHAPTER TWELVE MANAGING PRODUCTS AND BRANDS Irwin/Mc. Graw-Hill MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

AFTER READING THIS CHAPTER YOU SHOULD BE 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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

AFTER READING THIS CHAPTER YOU SHOULD BE 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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -1 How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions Sales revenue or profit Stage of the product life cycle Introduction Growth Maturity Decline Total industry sales revenue + 0 – Total industry profit Marketing objective Gain Awareness Stress differentiation Maintain brand loyalty Harvesting, deletion Competition None Growing Many Reduced Product One More versions Best sellers Price Skimming or penetration Gain share, deal Full product line Defend share, profit Promotion Inform, educate Stress competitive differences Reminder oriented Minimal promotion Place (distribution) Limited More outlets Maximum outlets Fewer outlets MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Stay profitable Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -2 Product Life Cycle for the stand alone FAX machine for business use: 1970 -1999 $7. 0 Sales ($billion) 6. 0 5. 0 4. 0 3. 0 2. 0 1970 1975 1980 1982 1984 1986 1988 1990 1992 1994 1996 1997 1998 1999 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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? MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -EE Some Dimensions of the PLC--Shape 1. High learning product 2. Low learning product 3. Fashion product 4. Fad product MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -3 Alternative Product Life Cycles B. Low learning product Sales A. High learning product Time C. Fashion product D. Fad product Sales Time MARKETING, 6/e BERKOWITZ Time KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -B Product life cycle for wine coolers Millions of 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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

Albums Compact disks 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 Cassettes 1975 650 600 550 500 450 400 350 300 250 200 150 100 50 0 1973 Millions of units sold PP 12 -C Recording industry product form life cycles Source: Figure drawn from Recording Industry Association of America statistics. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -4 a Video game life cycles by product class, product form, and brand Worldwide sales (millions of units) 40 A. Video game life cycle by product class and product form (worldwide) Product class Total 30 Product form 8 -bit machines 16 -bit machines 32 -/64 -bit machines 20 10 0 1987 MARKETING, 6/e 1989 BERKOWITZ 1991 KERIN 1993 HARTLEY 1995 RUDELIUS 1997 1999 (est. ) Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -4 b Video game life cycles by product class, product form, and brand U. S. sales, including hardware and software ($ billion) $4 3 B. Advanced video game life cycle by brand (United States) Nintendo Sony Sega 2 1 0 1994 MARKETING, 6/e 1995 BERKOWITZ KERIN 1996 HARTLEY 1997 RUDELIUS 1998 1999 (est. ) Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -5 Five categories and profiles of product adopters Early adopters 13. 5% Innovators 2. 5% Laggards 16% Early majority Late majority 34% Time Innovators: Venturesome, higher educated, use multiple information sources Fear of debt, neighbors and friends are information sources Deliberate, many informal social contacts Early adopters: Leaders in social setting, slightly above average education MARKETING, 6/e Laggards: Early majority: BERKOWITZ KERIN HARTLEY Late majority: Skeptical, below average social status RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -HH Concept Check 1. 2. 3. Advertising plays a major role in the _____ stage of the PLC, and _____ plays a major role in maturity. How do high learning and low learning products differ? What does the life cycle for a fashion product look like? MARKETING, 6/e ? BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -KK 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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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). MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -E Definition of Brand Equity is. . The added value a given brand provides a product beyond the functional benefits provided. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -7 Alternative branding strategies Branding strategy Manufacturer branding strategy Multiproduct branding strategy Multibranding Private strategy branding strategy Mixed branding strategy Generic branding strategy Sunbeam makes: Sunbeam irons Sunbeam toasters Sunbeam crockware Anheuser-Busch makes: Budweiser Busch Michelob Wurtburger Hofbrau Michelin makes: Michelin tires Sears tires Dog food Peanut butter Green beans Paper towels Aspirin Cola Toro makes: Toro snowblowers Toro lawn mowers Toro garden hoses A&P has: Ann Page canned goods Ann Parker bakery goods Eight O’Clock coffee Procter & Gamble makes: Tide Cheer Ivory Snow Oxydol Sears has: Kenmore appliances Craftsman tools MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Epson makes printers as: Epson IBM Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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 MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -RR 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. MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -H Warranty forms Limited-coverage warranty Extent of coverage Full warranty Express warranty Extent of formality MARKETING, 6/e BERKOWITZ Implied warranty KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000

PP 12 -SS Concept Check 1. 2. 3. How does a generic brand differ from a private brand? Explain the role of packaging in terms of perception. What is the difference between an expressed an implied warranty? MARKETING, 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 2000