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PeterPreface15e_PPT_Ch06.pptxChapter 6
Product and Brand Strategy
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15e
Chapter Outline
Basic issues in product management
Product life cycle
The product audit
Organizing for product management
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Issues in Product Management: Product Definition
Product: Sum of the physical, psychological, and sociological satisfactions the buyer derives from purchase, ownership, and consumption
A product can be viewed in the following ways:
Tangible product: Physical entity or service that is offered to the buyer
Extended product: Tangible product along with whole cluster of services that accompany it
Generic product: The buyer expects to receive essential benefits with the product
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Issues in Product Management: Product Classification, 1
Useful as an analytical device to assist in planning marketing strategy and programs
Criteria for classification
End use or market
Degree of processing or physical transformation
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Issues in Product Management: Product Classification, 2
Agricultural products and raw materials
Organizational goods
Raw materials and semi-finished goods
Major and minor equipment
Parts or components, which become an integral element of a finished good
Supplies that do not become a part of a finished good
Consumer goods
Convenience goods, shopping goods, and specialty goods
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Organizational Goods: Distinguishing Attributes
Market is concentrated geographically
Vertical markets
Products have limited number of buyers
Horizontal markets
Products are purchased by all types of firms in different industries
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Issues in Product Management: Product Quality
Quality: Degree of excellence or superiority that an organization’s product possesses
Can encompass both the tangible and intangible aspects of a firm’s products or services
Many companies have adopted total-quality management and I S O 9000 quality system of standards
Total-quality management or T Q M: Organizational commitment to satisfying customers by improving business processes involved in delivering products or services
I S O 9000: Standardized approach for evaluating a supplier’s quality system
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Issues in Product Management: Product Value
Value: What the customer gets in exchange for what the customer gives
Encompasses quality and price
Customer’s perception of value depends on:
Degree to which the product meets his or her specifications
Price that he or she will have to pay to acquire the product
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Issues in Product Management: Product Mix and Product Line, 1
Full set of products offered for sale by an organization
Consists of several product lines
Product lines: Groups of products that share common characteristics, distribution channels, customers, or uses
Described by its:
Width: Number of product lines offered by the organization
Depth: Average number of products in each product line
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Issues in Product Management: Product Mix and Product Line, 2
Reasons why organizations offer varying products within a product line
Potential customers rarely agree on a single set of specifications regarding their ideal product
Customers prefer variety
Dynamics of competition lead to multiproduct lines
To reach a decision on product line additions, organizations need to evaluate whether:
Total profits will decrease
Quality or value associated with current products will suffer
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Branding, 1
Brand: Name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers
Trademark: Legal term for brand
Branding strategies are used to carry out market and product development strategies
Line extension: Uses a brand name to enter into a new market segment
Brand extension: Uses a current brand name to enter a completely different product class
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Branding, 2
Franchisee extension or family branding: Company attaches the corporate name to a product to either enter a new market segment or a different product class
Dual branding: Two or more branded products are integrated
Also called joint or cobranding
Multibranding: Assigns different brand names to each product
Advantages
Firm can distance products from other offerings it markets
Image of one product is not associated with other products the company markets
Products can be targeted at specific market segments
Should the products fail, the probability of failure impacting on other company products is minimized
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Brand Equity
Set of assets or liabilities linked to the brand that adds or subtracts value
Value of assets depends upon consequences or results of the marketplace’s relationship with a brand
Determined by the consumer and is the result of the consumer’s assessment of the:
Product
Company that manufactures and markets the product
Variables that impact the product between manufacture and consumer consumption
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Figure 6.1: Elements of Brand Equity
Source: Managing Brand Equity: Capitalizing on the Value of a Brand Name by David A. Aaker
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Packaging
Differentiates homogeneous products
Can create new attributes of value in a brand
Can make products urgently salable to a targeted segment
Marketing managers should consider consumers and costs while making packaging decisions
Package must be capable of protecting the product through the channel of distribution to the consumer
Should be convenient in size and be easy to open
Should be attractive, informative, and capable of being used as a competitive weapon to project a product’s image
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Figure 6.2: Product Life Cycle
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Product Life Cycle, 1
Varies according to industry, product, technology, and market
Decisions to be taken when sales decline
Dropping or altering the product
Seeking new uses or new markets for the product
Continuing with more of the same
Forces management to take a long-range view of marketing planning
Limitations
Length of time a product will remain in each stage is unknown
Not all products go through the product life cycle in the same way
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Product Life Cycle, 2
Variations
Fashions: Accepted and popular products that go through a repetitive cycle of popularity, lost popularity, and regained popularity
Fads: Products that experience an intense but often very brief period of popularity
Product adoption and diffusion
Not all customers immediately purchase a product in the introductory stage of the product life cycle
Majority of sales occur after the product has been available for awhile
Diffusion of innovation is the spread of a product through the population
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Adopter Categories
Innovators: Those who are the first to buy a new product
Early adopters: Begin to buy the products if the innovators have a favorable experience
Biggest category of buyers
Early majority: Avoid risks and make purchases carefully
Late majority: Avoid risks and are cautious and skeptical about new ideas
Laggards: Those who buy when the product becomes commonplace
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Product Audit, 1
Marketing management technique whereby the company’s current product offerings are reviewed
Helps ascertain whether each product should be continued as is, improved, modified, or deleted
Deletions
Occur when too many products are fighting for limited shelf space
Factors to be considered during deletion
Sales trends, profit contribution of the product, product life cycle, and customer migration patterns
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Product Audit, 2
Product improvement
Product audit helps ascertain if a product requires altering
Works as a management device for controlling product strategy
Product altering involves changing:
Attributes: Product features, design, and package
Marketing dimensions: Pricing, promotion strategy, and channels of distribution
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Benchmarking
Continuous process of measuring products, services, and practices against those of the toughest competitors or companies renowned as leaders
Assists companies in:
Boosting product quality
Developing more user-friendly products
Improving customer order-processing activities
Shortening delivery lead times
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Organizing for Product Management, 1
Marketing-manager system: One person is responsible for overseeing an entire product line with all of the functional areas of marketing
Popular in organizations with lines of similar products or one dominant line
Brand-manager system: Manager focuses on a single product or a very small group of new and existing products
Criticisms
Brand managers:
Do not have authority commensurate with their responsibilities
Often pay inadequate attention to new products
Are more concerned with their own brand’s profitability than with the profitability of all of the organization’s brands
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Organizing for Product Management, 2
Successful new products require the cooperation of different teams in an organization
Cross-functional teams: Operate independently of the organization’s functional department but include members from each function
Venture teams: Cross-functional teams responsible for all of the tasks involved in the development of a new product
Global virtual team: Cross-functional team that operates across time, geographic distance, organizational boundaries, and cultures, whose members communicate through electronic technology
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Requirements for the Effective Use of Cross-Functional Teams
Commitment of top management and provision of clear goals
Trust among members
Cross-functional cooperation
Time and training
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APPENDICES
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Figure 6.1: Elements of Brand Equity, Appendix
A circle is placed at the center of the figure. The label in the upper portion of the circle reads brand equity, and the label in the lower portion of the circle reads name, symbol. The terms brand loyalty, name awareness, perceived quality, brand associations, and other propriety brand associations are presented above the circle. Arrows originate from each of these terms and point to the circle.
Two arrows originate from the bottom portion of the circle and point to two rectangular boxes. The arrow on the left points to a rectangular box with the content that reads provides value to customer by enhancing customer's interpretation slash processing of information, confidence in the purchase decision, and use satisfaction. The arrow on the right points to a rectangular box with the content that reads provides value to firm by enhancing efficiency and effectiveness of marketing programs, brand loyalty, price slash margins, brand extensions, trade leverage, and competitive advantage.
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Figure 6.2: Product Life Cycle, Appendix
The x-axis of the graph is labeled time, and the y-axis is labeled dollars. The x-axis is divided into sections by vertical dotted lines. Starting from the left, the sections are labeled introduction, growth, maturation, and decline or continued expansion.
Two curves are presented on the graph. The first curve is labeled total market sales. It begins on the base of the x-axis in the section labeled introduction, gradually curves upward in the section labeled growth, and reaches a peak at maturation. It then slopes down as it reaches the section labeled decline or continued expansion. This point has three labels that read new product features, new uses, and new markets. The right end of the curve is labeled status quo. The second curve is labeled total market profit. It starts below the x-axis in the section labeled introduction. It gradually slopes upward in the section labeled growth and reaches its peak in the section labeled maturation. The curve declines as it reaches the section labeled decline or continues expansion. This point has three labels that read new product features, new uses and new markets. The right end of the curve is labeled status quo.
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