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BCOR 2400: CHAPTER 11 - MANAGING SUCCESS, PRODUCTS AND BRANDS
Product Life Cycle
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Describes the stages as a new product goes through in the marketplace: 1) introduction, 2) growth, 3) maturity, and 4) decline
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Introduction Stage (Product life cycle)
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Occurs when a product is introduced to its intended target market. Sales grow slowly and profit is minimal.
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Primary demand
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The desire for the product class rather than for a specific brand.
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Selective demand
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The preference for a specific brand.
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Skimming strategy
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A high initial price for a product to help the company recover the costs of development as well as capitalize on the price insensitivity of early buyers.
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Penetration pricing
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A low price for a product used to discourage competitive entry. Helps build unit volume, but a company must closely monitor costs.
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Growth Stage (Product life cycle)
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Characterized by rapid increases in sales. Competitors appear in this stage. The result of more competitors and more aggressive pricing is that profit usually peaks during the growth stage. Product sales in the growth stage grow at an increasing because of new people trying or using the product and a growing proportion of repeat customers. Changes appear in the product in the growth stage.
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Maturity Stage (Product life cycle)
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Characterized by a slowing of total industry sales or product class revenue. Marginal competitors begin to leave the market. Marketing attention in the maturity stage is often directed toward holding market share through further product differentiation and finding new buyers.
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Decline Stage (Product life cycle)
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Occurs when sales drop. Products in this stage tend to consume a disproportionate share of management and financial resources relative to their future worth.
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A company will follow one of two strategies to handle a declining product: Deletion or Harvesting
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Deletion - dropping the product from the company's product line.
Harvesting - when a company retains the product but reduces marketing costs.
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Four aspects of the product life cycle
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1) Length - consumer products have shorter life cycles than business products.
2) Shape - shape of their sales curves
3) The Product Level: Class and Form
4) The Life Cycle and Consumers
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Four types of products showing the shape of life-cycle sales curves (under the second aspect of the product life cycle - Shape)
[excluding the generalized life cycle sales curve]
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High-learning - one for which significant customer education is required and there is an extended introductory period.
Low-learning - sales begin immediately because little learning is required by the consumer, and the benefits of the purchase are readily understood.
Fashion - introduced, decline, and then seem to return.
Fad - experiences rapid sales on introduction and then an equally rapid decline.
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Product Class (under the third aspect of the product life cycle - The Product Level: Class and Form)
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Refers to the entire product category or industry, such as prerecorded music.
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Product Form (under the third aspect of the product life cycle - The Product Level: Class and Form)
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Pertains to variations within the product class. For prerecorded music, product form exists in the technology used to provide the music such as cassette tapes, CDs, and digital music players.
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Diffusion of innovation (under the fourth aspect of the product life cycle - The Life Cycle and Consumers)
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In essence, a product diffuses, or spreads, through the population.
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Common reasons for resisting a product in the introduction stage (under the fourth aspect of the product life cycle - The Life Cycle and Consumers)
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Usage barriers - the product is not compatible with existing habits.
Value barriers - the product provides no incentive to change.
Risk barriers - physical, economic, or social.
Psychological barriers - cultural differences or image.
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Product Manager (sometimes called a brand manager)
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Manages the marketing efforts for a close knit family of products or brands.
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Product Modification
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Involves altering one or more of a product's characteristics, such as its quality, performance, or appearance, to increase the product's value to customers and increase sales.
Product bundling - the sale of two or more separate products in one package.
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Market Modification
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A company tries to find new customers, increase a product's use among existing customers, or create new use situations.
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Four factors that trigger the need for a repositioning action
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1) Reacting to a competitor's position
2) Reaching a new target market
3) Catching a Rising Trend
4) Changing the Value Offered
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Trading Up (Changing the value offered)
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Involves adding value to the product (or line) through additional features or higher-quality materials.
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Trading Down (Changing the value offered)
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Involves reducing the number of features, quality, or price.
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Branding
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A basic decision in marketing products in which an organization uses a name, phrase, design, symbols, or combination of these to identify its products and distinguish them from those of competitors.
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Brand Name
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Any word, device (design, sound, shape, or color), or combination of these used to distinguish a seller's goods or services.
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Trade Name
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A commercial, legal name under which a company does business.
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Trademark
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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.
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Product counterfeiting
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Involves low-cost copies of popular brands not manufactured by the original producer.
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Brand Personality
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A set of human characteristics associated with a brand name. EX: traditional, romantic, rugged, sophisticated, rebellious, etc.
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Brand Equity
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The added value a brand name gives to a product beyond the functional benefits provided. Provides a competitive advantage (Sunkist brand implies quality fruit, Disney name defines children's entertainment, etc) and consumers are often willing to pay a higher price for a product with brand equity (Bose audio systems, Gillette razors, etc).
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Four steps to creating brand equity
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1) Develop positive brand awareness.
2) Establish a brand's meaning in the minds of consumers.
3) Elicit the proper consumer responses to a brand's identity and meaning.
4) Create a consumer-brand connection evident in an intense, active, loyalty relationship between consumers and the brand.
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Brand Licensing
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A contractual agreement whereby one company (licensor) allows its brand name(s) or trademark(s) to be used with products or services offered by another company (licensee) for a royalty or fee. EX: Disney makes billions each year licensing its characters for children's toys, apparel, and games.
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Five criteria mentioned most often when selecting a good brand name
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1) The name should suggest the product benefits.
2) The name should be memorable, distinctive, and positive.
3) The name should fit the company or product image.
4) The name should have no legal or regulatory restrictions.
5) The name should be simple.
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Branding strategies
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Companies can employ several different branding strategies, including multiproduct branding, multibranding, private branding, or mixed branding.
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Multiproduct Branding (sometimes called family branding or corporate branding when the company's trade name is used)
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A company uses one name for all its products in a product class.
Product line extension - the practice of using a current brand name to enter a new market segment in its product class. EX: Campbell's Soup and their many varieties of soup
Subbranding - combines a corporate or family brand with a new brand, to distinguish a part of its product line from others. EX: Gatorade G2
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Multiproduct Branding (cont.)
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Brand extension - practice of using a current brand name to enter a different product class. EX: Honda lawnmowers, snowblowers, marine engines
Co-branding - the pairing of two brand names of two manufacturers on a single product. EX: Hershey + Reeses cereal called Reese's Peanut Butter Puffs
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Multibranding
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Involves giving each product a distinct name. A useful strategy when each brand is intended for a different market segment.
Other multibrand companies introduce new product brands as defensive moves to counteract competition. Called "fighting brands," their chief purpose is to confront competitor brands.
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Private Branding (often called private labeling or reseller branding)
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Used by a company when it manufactures products but sells them under the brand name of a wholesaler or retailer.
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Mixed Branding
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A firm markets products under its own name(s) and that of a reseller because the segment attracted to the reseller is different from its own market.
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Packaging
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The packaging component of a product refers to any container in which it is offered for sale and on which label information is conveyed.
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Label
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An integral part of the package and typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and package contents and ingredients.
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Packaging and labeling benefits
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Communication benefits - directions, legal requirements, etc
Functional benefits - storage, protection, convenience, etc
Perceptual benefits - how the label looks, country of origin, etc
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Packaging and labeling challenges and responses
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1) The continuing need to connect with customers
2) Environmental concerns
3) Health, safety, and security issues
4) Cost reduction
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Warranty
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A statement indicating the liability of the manufacturer for product deficiencies.
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Express warranties
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Written statements of liabilities
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Limited-coverage warranty
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Specifically states the bounds of coverage and, more important, areas of noncoverage.
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Full warranty
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Has no limits of noncoverage.
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Implied warranties
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Assign responsibility for product deficiencies to the manufacturer.
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