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First job out of school I worked full time during my school

years so when I graduated I was a

Customer Service Manager.

Career high To help Grendene grow from selling

137,000 pairs of shoes in the United

States to 8 million pairs.

270

What I do when I’m not working Enjoy my family and play tennis

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Grendha is the American subsidiary of the Grendene Corporation, a major Brazilian shoe manufacturer. As Vice President of Grendha Shoes Corporation, Angelo Daros is responsible for all of the Brazilian company’s business in the United States. This includes the com- pany’s operations, all of its brands—Rider, Melissa, and Grendha—and direct sales. He reports directly to the President of Grendene in Brazil. Angelo has been with Grendene for 16 years. He opened the American sub- sidiary in 1994. He earned a Bachelor’s Degree in busi- ness administration and a Master’s Degree in marketing from Fundacao Getulio Vargas in São Paulo, Brazil.

My management style Get together, discuss, get opinions,

and then make decisions.

Business book I’m reading now Focus: The Future of Your Company

Depends on It by Al Ries.

My pet peeve Lying

9 Managing the Product

271

Meet Angelo Daros, a Decision Maker at Grendha Shoes Corporation

real people, real choices

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272 PART THREE CREATING THE VALUE PROPOSITION

Decision Time at Grendha Rider is one of many different shoes brands that Grendene S.A. makes and sells. The company first introduced the Rider brand as a line of sandals,

mainly slides. Grendene promoted the shoes pri- marily in terms of their comfort: “a vacation for your

feet.” This positioning allowed Rider to become a very suc- cessful sandal brand in the Brazilian market. Rider’s popular- ity in Brazil mushroomed to the point that the company was selling millions of pairs every month—it was safe to say that just about every person in Brazil owned at least one pair of Riders. And Riders is a very “democratic” brand that appealed to consumers at many income levels. In Brazil, the climate and culture create an environment where it is accept- able to wear sandals, particularly slides, anytime and any- where. Riders became entrenched as a part of Brazilian life.

In an effort to grow sales, Grendene opened a sub- sidiary in the United States in 1994 called Grendha Shoes Corporation. As part of this expansion, Grendha decided to launch the Rider brand in the American market. But slides are not as widely accepted by American consumers in all social situations, so Angelo needed a plan to position the Rider brand for the U.S. market. Angelo considered his options:

Option 1 Position the American Rider in the same way as the Brazilian version.

Angelo could position the line as a medium-priced line of sandals ($10 to $20), superior in quality to the unbranded products volume discounters sold. This would provide Grendha with only low to medium margins but a larger sales volume. There is no one major brand dominating this space. Competitors would be beach and surf brands like OP, Side Out, Speedo, and Body Glove that don’t have footwear as

When you finish reading this chapter, you will be able to:

Explain the different product objectives and strategies a firm may choose.

Explain how firms manage products throughout the product life cycle.

Discuss how branding creates product identity, and describe different types of branding strategies.

3 2 1

O B J E C T I V E S

Explain the roles packaging and labeling play in developing effective product strategies.

Describe how organizations are structured for new and existing product management.

5 4

their main focus. This plan would connect the shoes to the mystique of the Brazilian lifestyle—sunny and colorful. But this option assumed that Americans wanted an extremely casual shoe that wasn’t necessarily very fashionable: a “vacation for your feet” to be worn in many situations.

Option 2 Position Rider as an “after sport footwear” brand.

The sandals would sell for more ($20 to $30), ideally at major sporting good retailers such as Foot Locker, Athletes Foot, The Sports Authority, Finish Line, and Champs. Selling at a higher price point would give Grendha bigger margins, which would allow the company to spend more to advertise and promote the brand. But Grendha would have to compete against the “big guys” in the sports arena such as Nike, Adidas, and Reebok.

Option 3 Position Rider more specifically as an “after soccer” brand.

The shoes would sell for $20 to $30 to provide funds to promote them in the United States. This strategy would allow Grendha to focus its efforts on one sports segment. In addition, the company could take advantage of Brazil’s rep- utation as a soccer power. Grendha might be able to sign famous Brazilian players to endorse the shoe, which would give Riders instant credibility among soccer enthusiasts. But Grendha would still encounter stiff competition from established soccer brands such as Umbro, Puma, and Adidas that were already well entrenched among American soccer players. In addition, this niche marketing strategy might limit the size of the potential market.

Now, put yourself in Angelo’s Riders: Which option would you choose, and why?

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Product Planning: Taking the Next Step In 2006, Lexus introduced the GS450h—that’s “h” as in hybrid. It’s the first hybrid ever brought to market on a rear-wheel drive car, with an acceleration claim of 0 to 60 mph in 5 1/2 seconds. The GS450h is also the first “luxury hybrid;” it’s out to prove that the phrase isn’t an oxymoron. With an initial base price of $54,900, Lexus is banking on reeducating high-end car buyers that they can have their cake and eat it too with fuel economy, comfort, and performance.1

At the lower end of the emerging hybrid market Toyota’s Prius has been a sales phenom- enon—although several other Prius rivals have posted more disappointing sales. Will the Lexus offering succeed? A lot depends on how the automaker markets and manages this innovative product. What makes one product fail and another succeed? It’s worth repeating what we said in Chapter 2: Firms that plan well succeed. Product planning plays a big role in the firm’s tactical marketing plans. Strategies the product plan outlines spell out how the firm expects to develop a value proposition that will meet marketing objectives.

Today, successful product management is more important than ever. As more and more competitors enter the global marketplace and as technology moves forward at an ever- increasing pace, products are created, grow, reach maturity, and decline at faster and faster speeds. This means that good product decisions are more critical than ever. Marketers just don’t have the luxury of trying one thing, finding out it doesn’t work, and then trying something else.

In Chapter 8, we talked about what a product really is and about how companies develop and introduce new products. In this chapter, we’ll finish the product part of the story by seeing how companies manage products and examine the steps in product plan- ning, as Figure 9.1 outlines. These steps include developing product objectives and the strategies required to successfully market products as they evolve from “new kids on the block” to tried-and-true favorites—and in some cases finding new markets for these favorites, as Grendha Shoes is trying to do. Next, we’ll discuss branding and packaging, two of the more important tactical decisions product planners make. Finally, we’ll exam- ine how firms organize for effective product management. Let’s start by seeing how firms develop product-related objectives.

Using Product Objectives to Decide on a Product Strategy When marketers develop product strategies, they make decisions about product benefits, features, styling, branding, labeling, and packaging. But what do they want to accom- plish? Clearly stated product objectives provide focus and direction. They should support the broader marketing objectives of the business unit in addition to being consistent with

Develop Product Objectives

• For individual products • For product lines and mixes

Design Product Strategies

Make Tactical Product Decisions

• Product branding • Packaging and labeling design

Figure 9.1

Steps in Managing Products

Effective product strategies come from a series of orderly steps.

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274 PART THREE CREATING THE VALUE PROPOSITION

the firm’s overall mission. For example, the objectives of the firm may focus on return on investment. Marketing objectives then may concentrate on building market share and/or the unit or dollar sales volume necessary to attain that return on investment. Product objectives need to specify how product decisions will contribute to reaching a desired market share or level of sales.

To be effective, product-related objectives must be measurable, clear, and unambigu- ous—and feasible. Also, they must indicate a specific time frame. Consider, for example, how a frozen entrée manufacturer might state its product objectives:

• “In the upcoming fiscal year, eliminate the product’s trans fat content to satisfy con- sumers’ health concerns.”

• “Introduce three new items this quarter to the product line to take advantage of increased consumer interest in Mexican foods.”

• “During the coming fiscal year, improve the chicken entrées to the extent that con- sumers will rate them better tasting than the competition.”

Planners must keep in touch with their customers so that their objectives accurately respond to customer needs. An up-to-date knowledge of competitive product innovations also is important to develop product objectives. Above all, these objectives should consider the long-term implications of product decisions. Planners who sacrifice the long-term health of the firm to reach short-term sales or financial goals may be on a risky course. Product planners may focus on one or more individual products at a time, or they may look at a group of product offerings as a whole. In this section, we’ll briefly examine both these approaches. We’ll also look at one important product objective: product quality.

Objectives and Strategies for Individual Products Back to our love affair with cars. How do you launch a new car that’s only 142 inches long and makes people laugh when they see it? BMW did it by calling attention to the small size and poking fun at the car itself. The original launch of the MINI Cooper a few years back included bolting the MINI onto the top of a Ford Excursion with a sign “What are you doing for fun this weekend?” BMW also mocked up full-size MINIs to look like coin-oper- ated kiddie rides you find outside grocery stores with a sign proclaiming: “Rides $16,850. Quarters only.” The advertising generated buzz in the 20- to 34-year-old target market.

With a relatively tiny advertising budget for a new car model, the marketers of the MINI Cooper had to be very creative.

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As a smaller brand, the MINI didn’t have an adver- tising budget for TV commercials—in fact, it was the first launch of a new car in modern times without TV advertising. Instead, the MINI launched with print, outdoor billboards, and Web ads. The aim wasn’t a heavy car launch but more of a “discovery process.” Ads promoted “motoring” instead of driving, and magazine inserts included MINI-shaped air freshen- ers and pullout games. Wired magazine ran a card- board foldout of the MINI suggesting readers assem- ble and drive it around their desks making “putt-putt” noises. Playboy came up with the idea of a six-page MINI “centerfold” complete with the car’s vital statistics and hobbies. By the end of its first year on the market, the MINI was the second most memo- rable new product of the year, following the heavily advertised Vanilla Coke.2

Some product strategies, for example, the new hybrid Lexus GS450h or the MINI Cooper, focus on a single new product. Strategies for individual products may be quite different for new products, for regional products, and for mature products. For new products, not surpris- ingly, the objectives relate to successful introduction. After a firm experiences success with a product in a local or regional market, it may decide to introduce it nationally. Coors, for example, started out in 1873 as a regional beer sold only in Colorado. It didn’t move east of the Mississippi until 1981 and took another decade to move into all 50 states.

For mature products like tasty, cheddar Goldfish snack crackers that Campbell’s Soup Company manufactures under its Pepperidge Farm label, product objectives may focus on breathing new life into a product while holding on to the traditional brand personality. For Goldfish, “The snack that smiles back,” this means introducing a host of spin-offs—peanut butter flavored, giant-sized, multi-colored, and color-changing to name a few. Goldfish has been around since 1962 but continue to try to stay fresh with 25 varieties sold in more than 40 countries. In fact, over 75 billion Goldfish are consumed per year—if strung together, enough to wrap around the earth 30 times!3

Objectives and Strategies for Multiple Products Although a small firm might make a go of focusing on one product, a larger firm often markets a set of related products. This means that strategic decisions affect two or more products simultaneously. The firm must think in terms of its entire portfolio of products. As Figure 9.2 shows, product planning means developing product line and product mix strategies encompassing multiple offerings. Figure 9.3 illustrates how this works for a selection of Procter & Gamble’s products.

PRODUCT LINE STRATEGIES A product line is a firm’s total product offering designed to satisfy a single need or desire of a group of target customers. For example, Procter & Gamble’s line of cleaning products includes three different liquid dish detergent brands: Dawn stresses grease-cutting power, Ivory emphasizes mildness, and Joy is for people who want shiny dishes. To do an even better job of meeting varying consumer needs, each of the three brands comes in more than one formulation. In addition to regu- lar Dawn, (now called Ultra Dawn) you can also buy Dawn with Bleach Alternative, Dawn Botanicals, Dawn Power Dissolver, Dawn Power Dish Brush, Dawn Direct Foam, and Dawn with Odor Erasor. The number of separate items within the same category determines the length of the product line.

product line A firm’s total product offering designed to satisfy a single need or desire of target customers.

NyQuil's value proposition includes the promise of a good night's sleep even if you have a nasty cold.

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276 PART THREE CREATING THE VALUE PROPOSITION

Mature product: Increase consumer enthusiasm for the product

Regional product: Introduce nationally

Introduce new products

Individual Products

Downward

Upward

Two-way

Stretching Adding new items to line

Filling Adding sizes

or styles

Contracting a product line

Dropping items

Product Line Extensions

Multiple Products

Increase width of product mix

Product Mix

Figure 9.2 Objectives for Single and Multiple Products

Product objectives provide focus and direction for product strategies. Objectives can focus on a single product or a group of products.

We describe a large number of variations in a product line as a full line that targets many customer segments to boost sales potential. A limited-line strategy, with fewer prod- uct variations, can improve the firm’s image if consumers perceive it as a specialist with a clear, specific position in the market. A great example is Rolls-Royce Motor Cars, which BMW now owns. Rolls-Royce makes expensive, handcrafted cars built to each customer’s exact specifications and for decades has maintained a unique position in the automobile industry. Every Rolls Phantom and 101EX that rolls out the factory door is truly a unique work of art.4

Organizations may decide to extend their product line by adding more brands or mod- els when they develop product strategies. For example, Patagonia, Gap, and Lands’ End extended their reach by adding children’s clothing. When a firm stretches its product line, it must decide on the best direction to go. If a firm’s current product line includes middle and lower-end items, an upward line stretch adds new items—higher priced and claiming more quality, bells and whistles, and so on. Hyundai decided it could tap the market for bigger, more luxurious cars and SUVs, and stretched its line upward in the form of mod- els such as the Azera sedan, Tucson and Santa Fe SUVs, and Entourage mini-van. It posi- tions each of these against top-end products by Toyota and Honda but prices its cars thousands of dollars less.5

Conversely, a downward line stretch augments a line by adding items at the lower end. Here the firm must take care not to blur the images of its higher-priced, upper-end offer- ings. Rolex, for example, may not want to run the risk of cheapening its image with a new watch line to compete with lower-priced watches.

In some cases, a firm may decide that it is targeting too small a market. In this case, the product strategy may call for a two-way stretch that adds products at both the upper and lower ends. Marriott Hotels, for example, added Fairfield Inns and Courtyard at the lower end and J.W. Marriott and Ritz Carlton at the upper end to round out its product line.

A filling-out strategy may mean adding sizes or styles not previously available in a product category. Nabisco did this by introducing “bite-size” versions of its popular Oreo

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Beauty Care

Width of Product Mix

Fabric and Home Care Health Care/Baby and Family Care

Ace Laundry and Bleach

Alomatik

Ariel

Bold

Bonux

Bounce

Cascade

Cheer

Dash

Dawn

Daz

Downy

Dryel

Era

Fairy

Febreze

Flash

Gain

Hi Wash

Ivory Dish

Joy

Lang

Lenor

Maestro Limpio

Mr. Clean/Proper

Myth

Rindex

Salvo

Swiffer

Tide

Viakal

Vizir

Ausonia

Aussie

Camay

Clairol’s Herbal Essences

Cover Girl

Evax

Giorgio

Head & Shoulders

Hugo Boss

Infasil

Infusion 23

Ivory Personal Care

Lacoste

Laura Biagiotti

Lines Feminine Care

Max Factor

Mum Always Whisper

Muse

Natural Instincts and Hydrience

Naturella

Nice ’n Easy

Noxzema

Olay

Old Spice

Orkid

Pantene

Pert

Physique

Rejoice

Safeguard

Secret

SK-II

Sure

Tampax

Vidal Sassoon

Wash&Go

Zest

Actonel

Asacol

Bounty

Charmin

Codi

Crest

Didronel

Dodot

Eukanuba

Fixodent

Iams

Kandoo

Luvs

Macrobid

Metamucil

Pampers

Pepto-Bismol

Puffs

PUR

Scope

Tempo

ThermaCare

Vicks

Snacks and Beverages

Folgers

Millstone

Pringles

Punica

Sunny Delight

Torengos

Le n

g th

o f

Pr o

d u

ct L

in e

Figure 9.3 Product Line Length and Product Mix Width A product line is a firm’s total offerings that satisfy one need, whereas the product mix includes all the products that a firm offers. Here we see an example of both for a selection of Procter & Gamble’s extensive family of products. The figure illustrates the length of Procter & Gamble’s product line as well as the width of its product mix.

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278 PART THREE CREATING THE VALUE PROPOSITION

Kansei engineering A Japanese philosophy that translates customers’ feelings into design elements.

and Nutter Butter cookies. In other cases, the best strategy may be to contract a product line, particularly when some of the items are not profitable. For example, Heinz scrapped its “Bite Me” brand of frozen pizza snacks because of poor sales. The product, targeted to teens, failed to meet company expectations.6

We’ve seen that there are many ways a firm can modify its product line to meet the competition or take advantage of new opportunities. To further explore these strategic decisions, let’s return to the “glamorous” world of dish detergents. What does Procter & Gamble do if the objective is to increase market share? One possibility would be to expand its line of liquid dish detergents. If the line extension meets a perceived consumer need the company is not currently addressing, this would be a good strategic objective.

But whenever a manufacturer extends a product line or a product family, there is risk of cannibalization, which occurs when the new item eats up sales of an existing brand as the firm’s current customers switch to the new product. That may explain why Procter & Gamble met consumer demands for an antibacterial dish liquid by creating new versions of the existing brands Joy and Dawn.

PRODUCT MIX STRATEGIES Product planning can go beyond a single product item or a product line to entire groups of products. A firm’s product mix is its entire range of products. For example, in addition to a deep line of shaving products, Procter & Gamble’s 2005 acquisition of Gillette gave P&G new toiletries Oral B toothbrushes, Braun oral care products, and Duracell batteries.

In developing a product mix strategy, planners usually consider the width of the prod- uct mix, that is, the number of different product lines the firm produces. By developing several different product lines, firms can reduce the risk associated with putting all their eggs in one or too few baskets. Normally, firms develop a mix of product lines that have some things in common, be it distribution channels or manufacturing facilities.

Wine and spirits distributor Constellation Brands’ entry into the mainstream super- market wine space through its acquisition of Robert Mondavi is an example of a success- ful product mix expansion strategy. Americans are drinking more wine (and hard liquor) of late, and the Mondavi brand gives Constellation the crown jewel in the $3.6 billion supermarket wine channel.7

Quality as a Product Objective Product objectives often focus on product quality: the overall ability of the product to sat- isfy customers’ expectations. Quality is tied to how customers think a product will per- form and not necessarily to some technological level of perfection. Product quality objec- tives coincide with marketing objectives for higher sales and market share and to the firm’s objectives for increased profits.

In some cases, quality means fanatical attention to detail and also getting extensive input from actual users of a product as it’s being developed or refined—marketers refer to this as integrating the voice of the consumer into product design. The Japanese take this idea a step further with a practice they call Kansei engineering, a philosophy that trans- lates customers’ feelings into design elements. In one application of this practice, the designers of the Mazda Miata focused on young drivers who saw the car as an extension of their body, a sensation they call “horse and rider as one.” After extensive research, they discovered that making the stick shift exactly 9.5 centimeters long conveys the optimal feeling of sportiness and control.8

TOTAL QUALITY MANAGEMENT (TQM) In 1980, just when the economies of Germany and Japan were finally rebuilt from World War II and were threatening American markets, an NBC documentary on quality titled, “If Japan Can Do It, Why Can’t We?” demonstrated to the American public—and to American CEOs—the poor quality of American products.9 So began the TQM revolution in American industry.

As we noted in Chapter 1, many firms with a quality focus have adopted the principles and practices of total quality management (TQM), a philosophy that calls for company- wide dedication to the development, maintenance, and continuous improvement of all aspects of the company’s operations. Indeed, many of the world’s most admired, success-

total quality management (TQM) A management philosophy that focuses on satisfying customers through empowering employees to be an active part of continuous quality improvement.

cannibalization The loss of sales of an existing brand when a new item in a product line or product family is introduced.

product mix The total set of all products a firm offers for sale.

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ISO 9000 Criteria developed by the International Organization for Standardization to regulate product quality in Europe.

ISO 14000 Standards of the International Organization for Standardization concerned with “environmental management” aimed at minimizing harmful effects on the environment.

ful companies—top-of-industry firms such as Nordstrom, 3M, Boeing, and Coca-Cola— endorse a total quality focus.

Product quality is one way that marketing can add value to customers. However, TQM as an approach to doing business is far more sophisticated and effective than simply paying attention to product quality. TQM firms promote the attitude among employees that everybody working there has customers—even employees who never interact with people outside the firm. In such cases, employees’ customers are internal customers—other employ- ees with whom they interact. In this way, TQM seeks to ensure customer satisfaction by involving all employees, regardless of their function, in efforts to continually improve quality. For example, TQM firms encourage employees, even the lowest-paid factory workers, to suggest ways to improve products—and then reward employees for good ideas.

But how do you know when you’ve attained your goal of quality? Other than increased sales and profits, a few key award programs recognize firms that are doing the job well. For example, in 1987, the U.S. Congress established the Malcolm Baldrige National Quality Award to recognize excellence in U.S. firms. Major goals for the award are “help- ing to stimulate American companies to improve quality and productivity for the pride of recognition while obtaining a competitive edge through increased profits” and “recogniz- ing the achievements of those companies that improve the quality of their goods and ser- vices.”10 Table 9.1 shows recent winners of the Baldrige Award.

Of course, recognition of the benefits of TQM programs is not limited to the United States. Around the world, many companies look to the uniform standards of the International Organization for Standardization (ISO) for quality guidelines. This Geneva- based organization developed a set of criteria in 1987 to improve and standardize product quality in Europe. The broad set of guidelines, known as ISO 9000, establishes voluntary standards for quality management. Quality management ensures that an organization’s products conform to the customer’s requirements. In 1996, the ISO developed ISO 14000 standards, which concentrate on “environmental management.” This means the organi- zation works to minimize any harmful effects it may have on the environment. Because members of the European Union and other European countries prefer suppliers with ISO 9000 and ISO 14000 certification, U.S. companies must comply with these standards to be competitive there.11

One way that companies can improve quality is by using the Six Sigma method. The term Six Sigma comes from the statistical term sigma, which is a standard deviation from the mean. Six Sigma, therefore, refers to six standard deviations from a normal distribu- tion curve. In practical terms, that translates to no more than 3.4 defects per million—get- ting it right 99.9997 percent of the time. As you can imagine, achieving that level of qual- ity requires a very rigorous approach (try it on your term papers—even when you use spell-check!), and that’s what Six Sigma offers. The method involves a five-step process called “DMAIC” (define, measure, analyze, improve, and control). Employees are trained in the method, and, as in karate, they progress toward “black belt” status by successfully

Six Sigma A process whereby firms work to limit product defects to 3.4 per million or fewer.

Table 9.1 2005 Malcolm Baldrige Award Winners

To receive the prestigious Malcolm Baldrige National Quality Award, companies must demonstrate excellence in seven areas: strategic planning, leadership, information and analysis, customer and market focus, human resources focus, process management, and business results. Winners come from five general categories: service, manufacturing, education, health care, and small business. To read why these companies won, visit the National Institute of Standards and Technology’s Web site at www.nist.gov/public_affairs/releases/2005baldrigewinners.htm.

Award Category Company

Manufacturing Sunny Fresh Foods, Monticello, MN

Service DynMcDermott Petroleum Operations, New Orleans, LA

Small business Park Place Lexus, Plano, TX

Education Richland College, Dallas, TX, and Jenks Public Schools, Jenks, OK

Health care Bronson Methodist Hospital, Kalamazoo, MI

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completing all the levels of training. Employees can use Six Sigma processes to remove defects from services, not just products. A “defect” means failing to meet customer expec- tations. For example, hospitals can use Six Sigma processes to reduce medical errors, and airlines can use Six Sigma to improve flight scheduling.

ADDING A DOSE OF QUALITY TO THE MARKETING MIX Marketing people research the level of quality consumers want and need in their products and what price they are willing to pay for them. The price-versus-quality decision is a major aspect of providing value to consumers. Marketing also has to inform consumers about product quality through its marketing communications.

But keeping on top of what customers want is just the beginning. Firms also have to deliver a product consumers perceive to be of high quality at the right place and at the right price. Instead of being satisfied with doing things the same way year after year, mar- keters must continually seek ways to improve product, place, price, and promotion. Let’s see how quality concerns affect the marketing mix:

• Product: One way firms can offer quality for their customers is by improving their customer service support. For example, Whirlpool has been steadily improving the repair services it offers on its appliances. In the past, if your washing machine broke down, you’d call Whirlpool, they’d refer you to a service center, and you’d call the service center and try to schedule a repair time. Today, technology lets Whirlpool’s customer service reps view the schedules of all its repair technicians in your area and then schedule a repair time that suits your schedule—all during the first phone call. Whirlpool also offers an online service that lets customers schedule service them- selves, without even talking with a rep. The easier it is for customers to interact with the company and get results, the more satisfied they will be. And Whirlpool’s acqui- sition of Maytag in 2006 gives the company the opportunity to expand this quality emphasis to include customers of the already quality-focused Maytag product line.12

• Place: TorPharm, the largest generic pharmaceutical manufacturer in Canada, involved its suppliers in its efforts to improve on-time delivery to customers. First, TorPharm developed purchasing and delivery strategies to ensure that more than 99 percent of the time the right quantities of raw materials arrived from suppliers when expected. Then TorPharm worked with its customers, namely U.S. pharma- cies, to improve its on-time delivery rate of products from as low as 60 to 95 per- cent or better.13

• Price: Hewlett-Packard (HP) is lowering costs and improving service to customers at the same time. HP developed a “sure supply” technology that is embedded into its printer cartridges. The technology has a sensor that detects when the ink supply is low, and the networked printer automatically orders a new cartridge. By building an automated cartridges-supply service into the printer, HP also reduces its own costs related to processing a customer’s phone order.14

• Promotion: Today’s marketing firms realize that customers want information when they need it, not when it’s convenient for the marketer. Gap exemplifies this philoso- phy. At Gap’s Old Navy stores, salespeople wear headsets so they can quickly get information to answer customers’ questions.

DIMENSIONS OF PRODUCT QUALITY But what exactly is quality? Figure 9.4 summarizes the many meanings of quality. In some cases, product quality means dura- bility. For example, athletic shoes shouldn’t develop holes after their owner shoots hoops for a few weeks. Reliability also is an important aspect of product quality—just ask Maytag and the “lonely repairman” it featured in its commercials for years. For many customers, a product’s versatility and its ability to satisfy their needs are central to product quality.

For other products, quality means a high degree of precision. For example, high-tech audio equipment promises clearer music reproduction with less distortion. Quality, espe- cially in business-to-business products, is also related to ease of use, maintenance, and repair. Yet another crucial dimension of quality is product safety. Finally, the quality of products such as a painting, a movie, or even a wedding gown relates to the degree of aes-

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Degree of Pleasure

Product Safety

Ease of Use

Reliable

Precision

Satisfies Needs

Durable

Versatile

Overall ability of the product to provide

the benefits customers want

• Level of quality • Consistency of quality

Figure 9.4 Product Quality

Some product objectives focus on quality or the ability of a product to satisfy customer expectations—no matter what those expectations are.

product life cycle A concept that explains how products go through four distinct stages from birth to death: introduction, growth, maturity, and decline.

thetic pleasure they provide. Of course, evaluations of aesthetic quality differ dramatically among people: To one person, quality TV may mean PBS’s Masterpiece Theater, while to another it’s Adult Swim’s Aqua Teen Hunger Force.

Marketing planners often focus product objectives on one or both of two key aspects of quality: level and consistency. Customers often determine the level of quality of a prod- uct by comparison with other brands in the same product category. A handcrafted Rolls- Royce boasts higher quality than an assembly-line Ford Mustang, but this may be irrele- vant to a Mustang buyer inclined to compare his sports car to a MINI Cooper and not to an elite luxury car.

Consistency of quality means that customers experience the same level of quality in a product time after time, bringing repeat business and free word-of-mouth advertising, or buzz. Consistent quality is also one of the major benefits of adopting TQM practices. Consumer perceptions can change overnight when quality is lacking. Ask anybody who’s ever bought a new car that turned out to be a lemon.

HOW E-COMMERCE AFFECTS PRODUCT QUALITY The Internet has made product quality even more important in product strategies. One of the most exciting aspects of the digital world is that consumers can interact directly with other peo- ple—around the block or around the world. But this form of communication cuts both ways since it lets people praise what they like and slam what they don’t to an audience of thousands. Numerous Web sites like Planet Feedback (www.planetfeedback.com) let consumers “vent” about bad experiences they have had with products.

Marketing Throughout the Product Life Cycle Many products have very long lives, while others are “here today, gone tomorrow.” The product life cycle is a useful way to explain how the market’s response to a product and marketing activities change over the life of a product. In Chapter 8, we talked about how marketers go about introducing new products, but the launch is only the beginning. Product marketing strategies must evolve and change as they continue through the prod- uct life cycle.

Alas, some brands don’t have long to live. Who can remember the Nash car or Evening in Paris perfume? In contrast, other brands seem almost immortal. For example, Coca- Cola has been the number one cola brand for 120 years, General Electric has been the number one lightbulb brand for 104 years, and Kleenex has been the number one tissue brand for 82 years.15

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Introduction Stage

No profits because the company is recovering R&D costs

$ Sales

and Profits

Growth Stage

Profits increase and peak

Maturity Stage

Sales peak

Decline Stage

Market shrinks: Sales fall

Profit margins narrow

Profits fall

Sales

Time

Profits

Figure 9.5 The Product Life Cycle

The product life cycle helps marketers understand how a product changes over its lifetime and suggests how marketing strategies should be modified accordingly.

The Introduction Stage Like people, products are born, they “grow up” (well, most people grow up anyway), and eventually they die. We can divide the life of a product into four separate stages. The first stage shown in Figure 9.5 is the introduction stage. Here customers get the first chance to purchase the good or service. During this early stage, a single company usually produces the product. If it clicks and is profitable, competitors will follow with their own versions.

During the introduction stage, the goal is to get first-time buyers to try the product. Sales (hopefully) increase at a steady but slow pace. As is also evident in Figure 9.5, the company usually does not make a profit during this stage. Why? Research-and-development (R&D) costs and heavy spending for advertising and promotional efforts cut into revenue.

During the introduction stage, pricing may be high to recover the R&D costs (demand permitting) or low to attract a large numbers of consumers (see Figure 9.6). For example, the introductory base price of the Lexus GS450h we described at the beginning of this chapter was $54,900, nearly the same as the BMW 550i’s base price of $57,400. The price is designed to appeal to consumers who are willing to pay for the GS450h’s unique combination of comfort, great gas mileage, and superb performance. The high cost helps Lexus recover its R&D costs for this revolutionary new engineering design.

How long does the introduction stage last? As we saw in Chapter 8’s Wi-Fi example, it can be quite long. A number of factors come into play, including marketplace acceptance and the producer’s willingness to support its product during start-up.

Many products never make it past the introduction stage. For a new product to be suc- cessful, consumers must first know about it. Then they must believe that it is something they want or need. Marketing during this stage often focuses on informing consumers about the product, how to use it, and its promised benefits. However, this isn’t nearly as easy as it sounds: Nearly 40 percent of all new products fail.16

The Growth Stage In the growth stage, sales increase rapidly while profits increase and peak. Marketing’s goal here is to encourage brand loyalty by convincing the market that this brand is supe- rior to others. In this stage, marketing strategies may include the introduction of product variations to attract market segments and increase market share. The cell-phone is an example of a product that is still in its growth stage, as worldwide sales continue to increase. A big part of its continued growth is due to relentless product innovation and the building in of converging communication features. As we saw in Chapter 2, Qode is betting its future on the continued growth of the cell-phone industry.

growth stage The second stage in the product life cycle, during which the product is accepted and sales rapidly increase.

introduction stage The first stage of the product life cycle in which slow growth follows the introduction of a new product in the marketplace.

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Characteristic Introduction Growth Maturity Decline

Product

Single company produces single product

New competitors enter the market creating new variations of the product

New features added; sales are mostly replacement products

Number of variations reduced

Goals

Get first-time buyers to try the new product

Encourage brand loyalty

Attract new users Remain profitable; decide whether to keep or phase out product

Sales Increase at a steady but slow pace

Rapid increase Peak, then level off, often decline

Continue to decline

Profits Negative Increase and peak Profit margins

narrow Declining

Pricing High: recover R&D costs Low: attract large numbers of customers

May need to reduce because of increased competition

Price to maintain market share

May reduce if product can remain profitable

Marketing Communications

Informing customers

Heavy advertising to counter new competition

Reminder advertising

Decreased to maintain profitability

Figure 9.6 Marketing Mix Strategies Through the Product Life Cycle Marketing mix strategies—the Four Ps—change as a product moves through the life cycle.

When competitors appear, marketers must use heavy advertising and other types of promotion. Price competition may develop, driving profits down. Some firms may seek to capture a particular segment of the market by positioning their product to appeal to a cer- tain group. And, if pricing has initially been set high, it may be reduced to meet the increasing competition.

The Maturity Stage The maturity stage of the product life cycle is usually the longest. Sales peak and then begin to level off and even decline while profit margins narrow. Competition grows intense when remaining competitors fight for their share of a shrinking pie. Firms may resort to price reductions and reminder advertising (“did you brush your teeth today?”) to maintain market share. Because most customers have already accepted the product, sales are often to replace a “worn-out” item or to take advantage of product improve- ments. For example, almost everyone owns a TV, which means most people who buy a new set are replacing an older one. During the maturity stage, firms will try to sell their product through as many outlets as possible because availability is crucial in a compet- itive market. Consumers will not go far to find one particular brand if satisfactory alter- natives are close at hand.

To remain competitive and maintain market share during the maturity stage, firms may tinker with the marketing mix. Competitors may add new “bells and whistles,” as when producers of potato chips and other snack foods modify their products. When consumers became concerned about carbohydrates and turned to diets such as Atkins and South Beach, Frito-Lay introduced new lines of low-carb chips like the Tostitos Edge low-carb tortilla chips. Unilever likewise rolled out 18 new low-carb products, rejuvenating venerable brands like Ragu spaghetti sauce and Wishbone salad dressing.17

maturity stage The third and longest stage in the product life cycle, during which sales peak and profit margins narrow.

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Attracting new users of the product can be another strategy that marketers use in the maturity stage. Market development means introducing an existing product to a market that doesn’t currently use it. Many U.S. firms are finding new markets in develop- ing countries such as China for products whose domestic sales are stagnant. For example, Emerson Electric, a venerable brand in the United States for over 125 years, is offsetting stagnated domestic sales with aggressive investment in growth in China—over 25 percent per year, with sales of over $1 billion there.18

The Decline Stage We characterize the decline stage of the product life cycle by a decrease in product category sales. The rea- son may be obsolescence forced by new technology— where do you see a new typewriter in this computer age? Although a single firm may still be profitable, the market as a whole begins to shrink, profits decline, there are fewer variations of the product, and suppliers pull out. In this stage, there are usually many competitors, with none having a distinct advan- tage.

A firm’s major product decision in the decline stage is whether to keep the product at all. An unprofitable product drains resources that it could use to develop newer products. If the firm decides to keep the product, it may decrease advertising and other marketing communications to cut costs, and reduce prices if the product can still remain profitable. If the firm decides to drop the product, it can eliminate it in two ways: phase it out by cut- ting production in stages and letting existing stocks run out, or simply dump the product immediately. If the established market leader anticipates that there will be some residual demand for the product for a long time, it may make sense to keep the

product on the market. The idea is to sell a limited quantity of the product with little or no support from sales, merchandising, advertising, and distribution and just let it “wither on the vine.”

In the Internet era, some products that otherwise would have died a natural death in stores continue to sell online to a cadre of fans, backed by zero marketing support. Online purveyors such as oldtimecandy.com, hometownfavorites.com, and candydirect.com sell Beeman’s, Black Jack, and Clove gum direct to consumers. In the “old days” (that is, before the Internet), those gum brands would have been doomed by aggressive marketing budgets for all the crazy new product introductions in the category by behemoth gum competitors Wrigley and American Chicle.

At the start of the chapter, you met Angelo Daros of Grendha Shoes. He needs to figure out the best way to introduce Rider sandals to the American shoe market. Read “Real People, Other Voices” to learn how others advise Angelo.

Oil of Olay has been a great example of a product that, like a cat, has had multiple lives through the product life cycle. The pink moisturizer was first developed during World War II for Britain’s Royal Air Force as a lotion to treat burns. In 1962, another company bought it and started to market it as a “beauty fluid.” Procter & Gamble acquired that company in 1985 and reinvigorated it by pumping in a lot of advertising dollars. In the early 1990s, P&G started to launch line extensions built around the Oil of Olay name.

decline stage The final stage in the product life cycle, during which sales decrease as customer needs change.

Pentax continues to modify its product offerings to stay competitive.

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Advice for Grendha Shoes

real people, other voices

Professor Gurram Gopal Elmhurst College I would choose Option 3 because we are unknown in the U.S. market and we need a fo-

cused entry strategy that leverages our success on our home turf. Positioning our Rider as an “After Soccer” brand will allow us to capitalize on the growing popularity of soccer in the United States. This strategy will let us focus our marketing resources on penetrating the niche “After Soccer” market by riding the popularity of Brazilian soccer and promoting our slides through soccer-related events, sponsorships, and media advertising. This positioning also supports our value proposition as a comfortable yet stylish, exotic but affordable after sport shoe. The west and east coasts set the fashion trends in the United States, and as soc- cer is popular on both coasts, Option 3 enables us to introduce our products on both coasts and ride a potential fashion trend. Further, we can anticipate that if Rider proves popular in this market, our customers are going to be leading us to Option 2. Rider users would be spending their “after soccer” time with their family, friends, and other athletes, thus giving our slides valuable publicity and could position us to become the footwear of choice after any sport, not just soccer. Given the plethora of low-priced and often low-quality shoes that are available at retailers like Payless shoes, we would have to spend a significant amount of resources just to get our share of “noise” and, thus, Option 1 would not be an attractive en- try strategy.

Professor Kathleen A. Krentler San Diego State University

There seem to be underlying assumptions that go along with each of the three options that may be viewed as risky. In the case of Option 1, positioning the sandals similar to the

way they are marketed in Brazil—to a mass market, there is an assumption that the American market will possess the same wants as the Brazilian market and will respond to similar marketing efforts. This is an assumption that is not based on research and hence risky. Option 2 assumes Grendha’s ability to compete effectively with large firms that have strong brand equity in the “af- ter sport” market. Since this has apparently not been tested, again a risky assumption seems to be in place. With Option 3, Grendha assumes that the market being considered is large enough to allow it to achieve its sales and profit objectives. Since the market is acknowledged as a niche, this may be a risky assumption. Weighing the risks associated with each of the alterna- tives, I would recommend that Grendha choose Option 2. This option allows the firm to target a specific segment but one that is fairly large. It avoids the risk of zeroing in on a small niche seg- ment but still provides the firm with the advantages of segmentation. In order to compete with established brands Grendha might consider pricing its product slightly below the major com- petitors. If the sandals sell successfully the firm can consider extending its efforts to reach a larger mass market in the future.

Professor V.H. Manek Kirpalani Bloomsburg University This case presents an interesting dilemma. How should Angelo Daros position Rider san-

dals, mainly slides, in the United States? To answer this successfully, one must first remind oneself that a product has three dimensions: core benefits; the more complete product that de- livers benefits such as quality, features, design, brand name and package; and the augmented product that consists of extra items such as after sale service, delivery and credit, installation and warranty. The Rider slide has the core benefit of giving comfort, “a vacation for sore feet.” It also

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has some quality, a design, and brand name but does not have or need augmented product fea- tures. Secondly, at the sandal/slide price $10-$20 it is basically a convenience product. Thirdly, slides are not as widely accepted by American consumers in all social situations as they are in Brazil, with the latter’s climate and laid-back culture. Given the above, trying to market Rider as a higher price shopping good and as an “after sport footwear” brand in competition with well es- tablished big guys in the sport arena such as Nike, Adidas, and Reebok will be a high risk strategy and expensive to engage in. Marketing and advertising expenditures will be high. The third op- tion of going for a niche strategy and pricing Rider up as an “after soccer” product will meet strong competition from Umbro, Puma, and Adidas. Its only advantage would be lowering risk of failure, by using Brazil’s reputation as a soccer power and the image of Brazilian players to en- dorse the product. Yet it will possibly narrow the market to soccer enthusiasts, and so result in limited sales. Thus the first option of positioning Rider as a medium-priced line of sandals/slides, superior in quality to the unbranded competition, is the strategy most likely to succeed. Later Daros could consider moving a new superior Rider product into the “after soccer” niche.

The company also began revamping the product’s image to make it more appealing to women. P&G figured out that they are grossed-out by the word “oil” because they equate it with greasy. Now the $500 million line of skin-care products and cosmetics is known simply as Olay, targeted to women who want to “love the skin you’re in.” The Olay line includes over a dozen brand extensions such as Total Effects (to diminish Baby Boomers’ fine lines and wrinkles), Complete (an all-day moisturizer with UV protection), and Ribbons body wash (with your choice of aloe extract, almond oil, or jojoba butter). Olay’s an example of a product with life cycle staying power!

Creating Product Identity: Branding Decisions Successful marketers keep close tabs on their products’ life cycle status, and they plan accordingly. Equally important, though, is giving that product an identity like Skippy Peanut Butter did with its Skippy Snack Bars. These scrumptious delights are made of lay- ers of peanut butter and granola combined with kid-pleasing ingredients such as marsh- mallows and fudge. That’s where branding comes in. Here, the brand personality con- notes pure, unadulterated fun, and the launch of the new snack bars featured TV commercials with the animated Nutshells, a band of musical elephants.19 How important is branding? Well, of the more than 17,000 new products or line extensions companies introduce each year, 25 percent are new brands. Marketers spend about $127.5 billion per year to introduce these new brands—that’s $7.5 million per brand, on average.

We said earlier that nearly 40 percent of all new products fail, but for new brands the failure rate is even higher—up to 80 to 90 percent.20 Branding is an extremely important (and expensive) element of product strategies. In this section, we’ll examine what a brand is and how certain laws protect brands. Then we’ll discuss the importance of branding and how firms make branding decisions.

What’s in a Name (or a Symbol)? How do you identify your favorite brand? By its name? By the logo (how the name appears)? By the packaging? By some graphic image or symbol, such as Nike’s swoosh? A brand is a name, a term, a symbol, or any other unique element of a product that identi- fies one firm’s product(s) and sets it apart from the competition. Consumers easily recog- nize the Coca-Cola logo, the Jolly Green Giant (a trade character), and the triangular red Nabisco logo (a brand mark) in the corner of the box. Branding provides the recognition factor products need to succeed in regional, national, and international markets.

brand A name, a term, a symbol, or any other unique element of a product that identifies one firm’s product(s) and sets it apart from the competition.

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There are several important considerations in selecting a brand name, brand mark, or trade character. First, it must have a positive connotation and be memorable. Consider Toro’s experience when it introduced a lightweight snow thrower called the “Snow Pup.” Sales were disappointing because “pup” conveyed a small, cuddly animal—not a desir- able image for a snow thrower. Renamed the “Snow Master” and later the “Snow Commander,” its sales went up markedly under the more rugged names.21

A brand name is probably the most used and most recognized form of branding. Kool- Aid and Jell-O are two of the first words kids learn. Smart marketers use brand names to maintain relationships with consumers “from the cradle to the grave.” For example, Jell-O now markets low-carb versions of its gelatin dessert to appeal to carb-counting adults.22

A good brand name may position a product by conveying a certain image or personal- ity (Ford Mustang) or by describing how it works (Drano). Brand names such as Caress and Shield help position these different brands of bath soap by saying different things about the benefits they promise. Irish Spring soap provides an unerring image of freshness (can’t you just smell it now?). The Nissan Xterra combines the word terrain with the let- ter X, which many young people associate with extreme sports, to give the brand name a cutting-edge, off-road feel.

How does a firm select a good brand name? Good brand designers say there are four “easy” tests: easy to say, easy to spell, easy to read, and easy to remember—like P&G’s Tide, Cheer, Dash, Bold, Gain, Downy, and Ivory Snow. And the name should also “fit” four ways: fit the target market, fit the product’s benefits, fit the customer’s culture, and fit legal requirements.

When it comes to graphics for a brand symbol, name, or logo, the rule is that it must be recognizable and memorable. No matter how small or how large, the triangular Nabisco logo in the corner of the box is a familiar sight. And it should have visual impact. That means that from across a store or when you are quickly flipping the pages in a magazine, the brand will catch your attention. Some successful marketers enhance brand recognition by creating a trade character such as the Pillsbury Dough Boy or the Playboy Bunny.

TRADEMARKS A trademark is the legal term for a brand name, brand mark, or trade character. The symbol for legal registration in the United States is a capital “R” in a circle like this: ®. Marketers register trademarks to make their use by competitors illegal. Because trademark protection applies only in individual countries where the owner regis- ters the brand, unauthorized use of marks on counterfeit products is a huge headache for many companies.

A firm can claim protection for a brand even if it has not legally registered it. In the United States, common-law protection exists if the firm has used the name and estab- lished it over a period of time (sort of like a common-law marriage). Although a regis- tered trademark prevents others from using it on a similar product, it may not bar its use for a product in a completely different type of business. Consider the range of “Quaker” brands: Quaker Oats (cereals), Quaker Funds (mutual funds), Quaker State (motor oil), Quaker Bonnet (gift food baskets), and Quaker Safety Products Corporation (firemen’s clothing). A court recently applied this principle when Apple Corp., the Beatles’ music company, sued Apple Computers in 2006 over its use of the Apple logo. The plaintiff wanted to win an injunction to prevent Apple Computer from using the Apple logo in connection with its iPod and iTunes products; it argued that the application to music- related products came too close to the Beatles’ musical products. The judge didn’t agree; he ruled that Apple Computer clearly used the logo to refer to the download service, not to the music itself.23

The Importance of Branding A brand is a lot more than just the product it represents—the best brands build an emo- tional connection with the consumer. Strong brands don’t just meet rational needs, they create an emotional reaction. Think about the most popular diaper brands—they’re named Pampers and Luvs, not some functionally descriptive name like AbsorbancyMaster. The point is that Pampers and Luvs evoke the joys of parenting, not the utility of the diaper.

trademark The legal term for a brand name, brand mark, or trade character; trademarks legally registered by a government obtain protection for exclusive use in that country.

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Marketers spend huge amounts of money on new-product development, advertising, and promotion to develop strong brands. When they succeed, this investment creates brand equity, which is a brand’s value to its organization over and above the value of the generic version of the product (that is, how much extra will you pay for a golf shirt with a Ralph Lauren logo on it than for the same shirt with no logo?). We can identify differ- ent levels of loyalty or lack thereof by observing how customers feel about the product. At the lowest level, customers really have no loyalty to a brand and will change brands for any reason, often jumping ship if they find something else at a lower price. At the other extreme, some brands command fierce devotion, and loyal users will go without rather than buy a competing brand.

Figure 9.7 shows one way to think about these escalating levels of attachment to a brand. At the lowest level of the “brand equity pyramid,” consumers are aware of a brand’s existence. Moving up the pyramid, they might look at the brand in terms of what it literally does for them or how it performs relative to competitors. Going up still farther, they may think more deeply about the product and form beliefs and emotional reactions to it. The truly successful brands, however, are those that make the long climb to the top of the pyramid—they “bond” with their customers so that people feel they have a real relationship with the product. Here are some of the types of relationships a person might have with a product:

• Self-concept attachment: The product helps establish the user’s identity. (For exam- ple, do you feel more like yourself in Ralph Lauren or Sean John clothing?)

• Nostalgic attachment: The product serves as a link with a past self. (Does eating the inside of an Oreo cookie remind you of childhood?)

• Interdependence: The product is a part of the user’s daily routine. (Could you get through the day without a Starbucks coffee?)

• Love: The product elicits emotional bonds of warmth, passion, or other strong emo- tion. (Hershey’s Kiss, anyone?)24

As the pyramid in Figure 9.7 shows us, the way to build strong brands is to build strong bonds with customers—bonds based on brand meaning. This concept encompasses the beliefs and associations that a consumer has about the brand. In many ways, the prac-

brand equity The value of a brand to an organization.

4. Relationships: What about you and me?

3. Responses: What about you?

2. Meaning: What are you?

1. Identity: Who are you?

Brand Imagery

Consumer Feelings

Brand Salience

Brand Performance

Consumer Judgments

Consumer Brand

Resonance

Intense, active relationships

Positive, accessible responses

Strong, favorable, and unique brand associations

Deep, broad brand awareness

Figure 9.7 The Brand Equity Pyramid The brand equity pyramid shows one way to think about escalating levels of attachment to a brand.

Source: Kevin Lane Keller, Building Customer-Based Brand Equity: A Blueprint for Creating Strong Brands, Working Paper Series, Report 01-107 (Cambridge, MA: Marketing Science Institute, 2001), 7.

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tice of brand management revolves around the management of meanings. Brand man- agers, advertising agencies, package designers, name consultants, logo developers, and public relations firms are just some of the collaborators in a global industry devoted to the task of meaning management. This complex and synergistic system is based on one simple but critical truth: strong brands are built on strong meanings. The corollary: brands die when their meanings lose value in consumers’ worlds. Table 9.2 shows some of the dimen- sions of brand meaning.

Brand equity means that a brand enjoys customer loyalty because they are not only aware of it but they also perceive it to be superior to the competition. For a firm, brand equity provides a competitive advantage because it gives the brand the power to capture and hold on to a larger share of the market and to sell at prices with higher profit mar- gins. For example, among pianos, the Steinway name has such powerful brand equity that its market share among concert pianists is 95 percent.25

What makes a brand successful? Here is a list of 10 characteristics of the world’s top brands:26

1. The brand excels at delivering the benefits customers truly desire. 2. The brand stays relevant. 3. The pricing strategy is based on consumers’ perceptions of value. 4. The brand is properly positioned. 5. The brand is consistent. 6. The brand portfolio and hierarchy make sense. 7. The brand makes use of and coordinates a full repertoire of marketing activities to

build equity.

8. The brand’s managers understand what the brand means to consumers. 9. The brand is given proper support, and that support is sustained over the long run.

10. The company monitors sources of brand equity.

Table 9.2 Dimensions of Brand Meaning

Dimension Example

Brand identification markers Coca-Cola’s red and white colors, the Nike swoosh logo, Harley-Davidson’s characteristic sound

Product attribute and benefit Starbucks as good coffee; BMW as the ultimate driving associations machine

Gender WWF, Harley-Davidson, Marlboro and masculinity; Laura Ashley and femininity

Social class Mercedes and the old-guard elite; Jell-O and the lower- middle class

Age Skechers, Nokia, and teen America

Reference group Dockers and the casual workforce; Williams-Sonoma and the serious cook

Life stage Dewar’s and the coming of age; Parent’s Soup and new mothers

Lifestyles and taste subcultures BMW and the yuppie; Red Bull and the club culture

Place Coke and America; Ben & Jerry’s and rural Vermont

Time and decade Betty Crocker and the 1950s; VW and the 1960s countercultural revolution

Trends Pottery Barn and cocooning; Starbucks and small indulgences

Traditions and rituals Häagen-Dazs ice cream and the pampering of self

Source: Adapted from Susan Fournier, Michael R. Solomon, Basil G. Englis, and Jeff Green, “How Brands Mean: Resonance as a Mediator of the Brand Meaning–Brand Strength Connection,” unpublished manuscript, March 2004.

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Products with strong brand equity provide enticing opportunities. A firm may leverage a brand’s equity with brand extensions—new products sold with the same brand name. For example, in 2004 premium ice cream maker Häagen-Dazs decided to get into the growing low-fat ice cream market (keep in mind, in this context “low” fat is a relative concept). Its choices were to create a new brand or modify the existing one. It chose to introduce the line as Häagen-Dazs Light, which it proclaimed to have “all the taste and texture of original Häagen-Dazs with only half the fat.” The brand extension was an immediate success, and the company now offers 14 flavors under the Light banner, many of which are available only in a Light version. More generally, this success highlights the potential value of a strong brand name: Although many people assume that the European-sounding name ensures high quality, in reality the name is made up. Häagen-Dazs started in the Bronx, New York, and today Pillsbury owns it!27

The makers of those irresistable marshmallow Peeps have expanded the brand to increase recognition and jump-start candy sales, which had been growing steadily but slowly. The first official “Peeps merchandise” including socks, jewelry, and loungewear, appeared in thousands of Target, JCPenney, Wal-Mart, and Nordstrom stores in Spring 2004 and the following spring the company rolled out a more ambitious line that includes everything from cosmetics to egg-dyeing kits to Peeps screensavers. Anybody ever catch a glimpse of the giant yellow Peeps balloon floating down Broadway in the Macy’s Thanksgiving Day Parade? That’s one big yellow chick!28

Because of the existing brand equity, a firm is able to sell its brand extension at a higher price than if it had given it a new brand, and the brand extension will attract new customers immediately. Of course, if the brand extension does not live up to the quality or attractiveness of the original brand, brand equity will suffer, as will brand loyalty and sales.

Branding Strategies Because brands are important to a marketing program’s success, developing and execut- ing branding strategies is a major part of product decision making. Marketers have to determine whether to create individual or family brands, national or store brands, or co- brands—not always easy or obvious decisions.

INDIVIDUAL BRANDS VERSUS FAMILY BRANDS Part of developing a brand- ing strategy is deciding whether to use a separate, unique brand for each product item—an individual brand strategy—or market multiple items under the same brand name—a family brand or umbrella brand strategy. Individual brands may do a better job of communicating clearly and concisely what the consumer can expect from the product, while a well-known company like Apple may find that its high brand equity in other categories (like computers) can sometimes “rub off” on a new brand (like the iPod). The decision of whether to use an individual or family branding strategy often depends on characteristics of the product and whether the company’s overall product strategy calls for introduction of a single, unique product or for the development of a group of similar products. For example, Microsoft serves as a strong umbrella brand for a host of diverse individually branded products like Office, Internet Explorer, Xbox, and MSN Web Search, while Procter & Gamble prefers to brand each of its household products separately.

NATIONAL AND STORE BRANDS Retailers today often are in the driver’s seat when it comes to deciding what brands to stock and push. In addition to choosing from producers’ brands, called national or manufacturer brands, retailers decide whether to offer their own versions. Private-label brands, also called store brands, are the retail store’s or chain’s exclusive trade name. Wal-Mart, for example, sells store brand Sam’s Cola and Sam’s cookies along with national brands such as Coke and Oreos. Store brands are gaining in popularity for many value-conscious shoppers. Retailers continue to develop new ones, and some are adding services to the mix: Target and others now

brand extensions A new product sold with the same brand name as a strong existing brand.

family brand A brand that a group of individual products or individual brands share.

national or manufacturer brands Brands that are owned by the manufacturer of the product.

private-label brands Brands that are owned and sold by a certain retailer or distributor.

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offer walk-in medical care in select locations, staffed by a nurse practitioner or physician’s assistant.32

Retailers choose a private-label branding strategy because they generally make more profit on these than on national brands. Even midrange retailers such as JCPenney now offer private-label clothing to lure millions of customers away from more upscale department stores as well as lower-end discounters. Penney’s Stafford and St. John’s Bay brands for men have become a significant competitive force against national brands like Dockers, Haggar, and Levi’s.

In addition, if you stock a unique brand that consumers can’t find in other stores it makes it much harder for shoppers to compare “apples to apples” across stores and simply buy the brand where they find it sold for the low- est price. Loblaws, Canada’s largest supermarket chain, sells over 4,000 food items under the “premium quality” President’s Choice label, from cookies to beef, olive oil, curtains, and kitchen utensils. Sales of President Choice items run from 30 to 40 percent of total store volumes. Under the private label, Loblaws can introduce new prod- ucts at high quality but lower prices than brand names. It can also keep entire categories profitable by its mix of pricing options. Competitors that sell only national brands can cut prices on those brands, but that hurts their overall profitability. Loblaws can bring prices down on national brands but still make money on its private-label products.33

GENERIC BRANDS An alternative to either national or store branding is generic branding, which is basically no branding at all. Generic branded products are typically packaged in white with black lettering that names only the product itself (for example, “Green Beans”). Generic brand- ing is one strategy to meet customers’ demand for the lowest prices on standard products such as dog food or paper tow- els. Generic brands first became popular during the infla- tionary period of the 1980s, when consumers became espe- cially price conscious because of rising prices. However, today generic brands account for very little of consumer spending.

LICENSING Some firms choose to use a licensing strat- egy to brand their products. This means that one firm sells another firm the right to use a legally protected brand name for a specific purpose and for a specific period of time. Firms do this for a variety of reasons. Licensing can provide instant recognition and consumer interest in a new product, and this strategy can quickly position a product for a certain target mar- ket by trading on the high recognition of the licensed brand among consumers in that segment. For example, distiller Brown-Forman licensed its famous Jack Daniels bour- bon name to T.G.I. Friday’s for use on all sorts of menu items from shrimp to steak to chicken. The menu partnership—called the Jack Daniels Grill—has been highly suc- cessful, contributing to a turnaround in sales at Friday’s in the highly competitive midrange family restaurant space.34

Much better known, however, is the licensing of entertainment names, such as when movie producers license their properties to manufacturers of a seemingly infinite number

measuring valuemeasuring value Marketing Metrics

Brand equity is the comparative value of a product with a particular brand name compared to the value of a product without the brand name. Many corporations, marketing research firms, and ad agencies have devised various measures of brand equity because this is an important way to assess whether a branding strategy has been successful. For example, Harris Interactive conducts its EquiTrend® study twice a year to measure the brand equity of over 1,000 brands. The company interviews over 25,000 consumers to determine how they feel about competing brands.29 In a recent survey, the following were the most highly rated brands across all categories: (1) Smithsonian Institution, (2) Craftsman Tools, (3) Crayola Crayons and Markers, (4) Bose, and (5) Hershey’s Kisses.30

If consumers have strong, positive feelings about a brand and are willing to pay extra to choose it over others, you are in marketing heaven. Each of the following approaches to measuring brand equity has some good points and some bad points:

1. Customer mind-set metrics focus on consumer awareness, attitudes, and loyalty toward a brand. However, these metrics are based on consumer surveys and don’t usually provide a single objective measure that can be used to assign a financial value to the brand.

2. Product-market outcomes metrics focus on the ability of a brand to charge a higher price than the one charged by an unbranded equivalent. This usually involves asking consumers how much more they would be willing to pay for a certain brand compared to others. These measures often rely on hypothetical judgments and can be complicated to use.

3. Financial market metrics consider the purchase price of a brand if it is sold or acquired. They may also include subjec- tive judgments about the future stock price of the brand.

4. A team of marketing professors has proposed a simpler mea- sure that they claim reliably tracks the value of a brand over time. Their revenue premium metric compares the revenue a brand generates with the revenue generated by a similar pri- vate-label product (that doesn’t have any brand identifica- tion). In this case, brand equity is just the difference in rev- enue (net price times volume) between a branded good and a corresponding private label.31

generic branding A strategy in which products are not branded and are sold at the lowest price possible.

licensing An agreement in which one firm sells another firm the right to use a brand name for a specific purpose and for a specific period of time.

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of products. Each time a blockbuster Harry Potter movie hits the screens, a plethora of Potter products packs the stores. In addition to toys and games, you can buy Harry Potter candy, clothing, all manner of back-to-school items, home items, and even wands and cauldrons.

COBRANDING Frito-Lay sells K.C. Masterpiece–flavored potato chips, and Post sells Oreo O’s cereal. Strange marriages? No, these are examples of cobranding, as is the Jack Daniels/T.G.I. Friday’s combination we already mentioned. This branding strategy bene- fits both partners when combining the two brands provides more recognition power than either enjoys alone. For example, Panasonic markets a line of digital cameras that use Leica lenses. Leica lenses are legendary for their superb image quality. Panasonic is known for its consumer electronics. Combining the best in traditional camera optics with a household name in consumer electronics helps both brands.

A new and fast-growing variation on cobranding is ingredient branding, in which branded materials become “component parts” of other branded products.35 This was the strategy behind the classic “Intel inside” campaign that convinced millions of con- sumers to ask by name for a highly technical computer part (a processor) that they wouldn’t otherwise recognize if they fell over it.36 Today, consumers can buy Breyer’s Ice Cream with Reese’s Peanut Butter Cups or M&M’s candies, Twix cookies or Snickers bars. Van De Camp’s Fish & Dips come with Heinz ketchup dipping cups. The ultimate cobranding deal may be an Oscar Meyer Lunchables Mega Pack, which includes up to five brands in a single package. Its Pizza Stix pack, for example, comes with Tombstone pizza sauce, Kraft cheese, a Capri Sun Splash Cooler, and a 3 Musketeers bar. Brand heaven!

The practice of ingredient branding has two main benefits. First, it attracts customers to the host brand because the ingredient brand is familiar and has a strong brand repu- tation for quality. Second, the ingredient brand’s firm can sell more of its product, not to mention the additional revenues it gets from the licensing arrangement.37

cobranding An agreement between two brands to work together in marketing a new product.

ingredient branding A form of cobranding in which branded materials are used as ingredients or component parts of other branded products.

The phenomenal success of the Harry Potter books and movies have made it a hot property. Characters popped up all over in numerous licensed products.

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Creating Product Identity: Packaging and Labeling Decisions How do you know if the soda you are drinking is “regular” or “caffeine-free?” How do you keep your low-fat grated cheese fresh after you have used some of it? Why do you always leave your bottle of Glow perfume out on your dresser so everyone can see it? The answer to all these questions is effective packaging and labeling. So far, we’ve talked about how marketers create product identity with branding. In this section, we’ll learn that packaging and labeling decisions also are important in creating product identity. We’ll also talk about the strategic functions of packaging and some of the legal issues related to package labeling.

Packaging Functions A package is the covering or container for a product, but it’s also a way to create a com- petitive advantage. So, the important functional value of a package is that it protects the product. For example, packaging for computers, TV sets, and stereos protects the units from damage during shipping, and warehousing. Cereal, potato chips, or packs of grated cheese wouldn’t be edible for long if packaging didn’t provide protection from moisture, dust, odors, and insects. A multilayered, soft box protects the chicken broth shown in Figure 9.8 from spoilage. In addition to protecting the product, effective packaging makes it easy for consumers to handle and store the product. Figure 9.8 shows how packaging serves a number of different functions.

Over and above these utilitarian functions, however, the package plays an important role in communicating brand personality. Effective product packaging uses colors, words, shapes,

package The covering or container for a product that provides product protection, facilitates product use and storage, and supplies important marketing communication.

Pour spout: easy to use Recognizable brand name and logo

Recipes for alternative uses

Package material protects product from spoilage and is environmentally friendly

Photo of actual product Photo of

product in use

Package shape easy to store in cabinet and refrigerator

Directions for use

Warnings

Product benefits

Nutritional information

Ingredients

Toll-free number

UPC code

Figure 9.8 Functions of Packaging Great packaging provides a covering for a product, and it also creates a competitive advantage for the brand.

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designs, and pictures to provide brand and name identification for the product. In addition, packaging provides specific information consumers want and need, such as information about the specific variety, flavor or fragrance, directions for use, suggestions for alternative uses (for example, recipes), product warnings, and product ingredients. Packaging may also include warranty information and a toll-free telephone number for customer service.

We’ve already talked about Häagen-Dazs; now let’s see how rival Ben & Jerry’s Ice Cream redesigned its package in the late 1990s to make its products more user-friendly.38

Because the top of the carton is the first thing customers see in a coffin-type freezer, the company replaced the photo of Ben and Jerry that used to appear on the top lid with text identifying the flavor. Other changes included a more upscale look of a black-on-gold color scheme and enticing realistic watercolors of the product’s ingredients. These made it easier for consumers to find the flavors they wanted.

A final communication element is the Universal Product Code (UPC), which is the set of black bars or lines printed on the side or bottom of most items sold in grocery stores and other mass-merchandising outlets (we saw in Chapter 2 how Qode is using the three- dimensional version of this code to launch a new business). The UPC is a national system of product identification. Each product has a unique 10-digit number assigned to it. These numbers supply specific information about the type of item (grocery item, meat, produce, drugs, or a discount coupon), the manufacturer (a five-digit code), and the specific prod- uct (another five-digit code). At checkout counters, electronic scanners read the UPC bars and automatically transmit data to a computer controlling the cash register, allowing retailers to track sales and control inventory.

Designing Effective Packaging Should the package have a zip-lock closing, feature an easy-to-pour spout, be compact for easy storage, be short and fat so it won’t fall over, or be tall and skinny so it won’t take up much shelf space? Designing effective packaging involves a multitude of decisions.

Planners must consider the packaging of other brands in the same product category. For example, dry cereal usually comes in tall rectangular boxes. Quaker, however, offers a line of “Quaker Bagged Cereals” packaged in reclosable plastic bags and priced in stores at 25 to 35 percent less than well-known brands packaged in fancy boxes. Not all cus- tomers are willing to accept a radical change in packaging, and retailers may be reluctant to adjust their shelf space to accommodate such packages. In addition to functional bene- fits, the choice of packaging material can make an aesthetic statement. Enclosing a fine liqueur in a velvet or silk bag may enhance its image. A fine perfume packaged in a beau- tifully designed glass bottle means consumers are buying not only the fragrance but an attractive dressing table accessory as well. Who says people don’t judge a book by its cover?

Firms seeking to act in a socially responsible manner must also consider the environ- mental impact of packaging. Shiny gold or silver packaging transmits an image of quality and opulence, but certain metallic inks are not biodegradable and are harmful to the envi- ronment. Some firms are developing innovative green packaging that is less harmful to the environment than other materials. Of course, there is no guarantee that consumers will accept such packaging. They didn’t take to plastic pouch refills for certain spray bottle products even though the pouches may take up less space in landfills than the bottles do. They didn’t like pouring the refill into their old spray bottles. Still, customers have accepted smaller packages of concentrated products such as laundry detergent, dishwash- ing liquid, and fabric softener.

What about the shape: Square? Round? Triangular? Hourglass? How about an old-fash- ioned apothecary jar that consumers can reuse as an attractive storage container? What color should it be? White to communicate purity? Yellow because it reminds people of lemon freshness? Brown because the flavor is chocolate? Sometimes we can trace these deci- sions back to personal preferences. The familiar Campbell’s Soup label is red and white because a company executive many years ago liked the football uniforms at Cornell University!

Finally, what graphic information should the package show? Should there be a picture of the product on the package? Should cans of green beans always show a picture of green

Universal Product Code (UPC) The set of black bars or lines printed on the side or bottom of most items sold in grocery stores and other mass- merchandising outlets. The UPC, readable by scanners, creates a national system of product identification.

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beans? Should there be a picture of the results of using the product, such as beautiful hair? Should there be a picture of the product in use, perhaps a box of crackers showing them with delicious- looking toppings arranged on a silver tray? Should there be a recipe or coupon on the back? Of course, all these decisions rest on a marketer’s understanding of consumers, ingenuity, and per- haps a little creative luck.

Labeling Regulations The Federal Fair Packaging and Labeling Act of 1966 controls package communications and labeling in the United States. This law aims at making labels more helpful to consumers by pro- viding useful information. More recently, the requirements of the Nutrition Labeling and Education Act of 1990 have forced food mar- keters to make sweeping changes in how they label products. Since August 18, 1994, the U.S. Food and Drug Administration (FDA) requires most foods sold in the United States to have labels telling, among other things, how much fat, saturated fat, cholesterol, calories, carbohy- drates, protein, and vitamins are in each serving of the product. These regulations are forcing mar- keters to be more accurate than before in describ- ing their products. Juice makers, for example, must state how much of their product is real juice rather than sugar and water.

As of January 1, 2006, the FDA also requires that all food labels list the amount of trans fats in the food, directly under the line for saturated fat content. The new labeling reflects scientific evidence showing that consumption of trans fat, saturated fat, and dietary cholesterol raises “bad” cholesterol levels, which increase the risk of coronary heart disease. The new infor- mation is the first significant change on the Nutrition Facts panel since it was established.39

Organizing for Effective Product Management Of course, firms don’t create great packaging, brands, or products—people do. Like all elements of the marketing mix, product strategies are only as effective as their managers make them and carry them out. In this section, we’ll talk about how firms organize for the management of existing products and for the development of new products.

Management of Existing Products In small firms, a single marketing manager usually handles the marketing function; he or she is responsible for new-product planning, advertising, working with the company’s few sales representatives, marketing research, and just about everything else. But in larger firms, there are a number of managers like Angelo Daros of Grendha responsible for dif- ferent brands, product categories, or markets. Depending on the organization, product management may include brand managers, product category managers, and market man- agers. Let’s take a look at how each operates.

Cheers! There’s big news for big and little sippers.

Great new designs. Great new colors. They’re the new Playtex® Sipster™Cups. Available in your choice of spouts – one designed for littler sippers. One for bigger ones. And each our break-proof, spill-proof best. Now that’s something to cheer about.

FIRST SIPSTER•SIPSTER•SPARKLIN’SIPSTER•INSULATOR•BIG SIPSTER

In many cases, the package is part of the product’s story.

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BRAND MANAGERS Sometimes, a firm sells several or even many different brands within a single product category. Take the laundry soap aisle in the supermarket for example. Would you have ever guessed that all these brands are manufactured and marketed by Procter & Gamble: Bounce, Cheer, Downy, Dreft, Era, Febreze, Gain, Ivory, and Tide? In such cases, each brand may have its own brand manager who coordinates all marketing activities for a brand: positioning, identifying target markets, research, distribution, sales promotion, packaging, and evaluating the success of these decisions.

While this assignment is still common, some big firms are changing the way they allo- cate responsibilities. For example, today P&G’s brand managers function more like inter- nal consultants to cross-functional teams located in the field that have responsibility for managing the complete business of key retail clients across all product lines. Brand man- agers still are responsible for positioning of brands and developing brand equity, but they also work heavily with folks from sales, finance, logistics and others to serve the needs of the major retailers that comprise the majority of P&G’s business.

By its very nature, the brand management system is not without potential problems. Acting independently and sometimes competitively against each other, brand managers may fight for increases in short-term sales for their own brand. They may push too hard with coupons, cents-off packages, or other price incentives to a point at which customers will refuse to buy the product when it’s not “on deal.” Such behavior can hurt long-term profitability and damage brand equity.

PRODUCT CATEGORY MANAGERS Some larger firms have such diverse product offerings that they need more extensive coordination. Take IBM, for example. Originally known as a computer manufacturer, IBM now generates much of its revenue from a wide range of consulting and related client services across the spectrum of IT applications (and the company doesn’t even sell personal computers anymore!). In cases such as IBM, orga- nizing for product management may include product category managers, who coordinate the mix of product lines within the more general product category and who consider the addition of new-product lines based on client needs.

MARKET MANAGERS Some firms have developed a market manager structure in which different managers focus on specific customer groups rather than on the products the company makes. This type of organization can be useful when firms offer a variety of products that serve the needs of a wide range of customers. For example, Raytheon, a company that specializes in consumer electronics products, special-mission aircraft, and business aviation, sells some products directly to consumer markets, others to manufac- turers, and still others to the government. Its customers are best served by a differing focus on these very different markets.

Organizing for New-Product Development Because launching new products is so important, the man- agement of this process is a serious matter. In some instances, one person handles new-product development, but within larger organizations new-product development almost always requires many people. Often individuals who get this assignment are especially creative people with entre- preneurial skills.

The challenge in large companies is to get specialists in different areas to work together in venture teams. These teams focus exclusively on the new-product development effort. Sometimes the venture team is located away from tra- ditional company offices, usually in a remote location called a “skunk works.” This colorful term originated with the Skonk Works, an illicit distillery in the comic strip “Li’l Abner.” Because illicit distilleries were bootleg operations,

brand manager An individual who is responsible for developing and implementing the marketing plan for a single brand.

product category managers Individuals who are responsible for developing and implementing the marketing plan for all the brands and products within a product category.

market manager An individual who is responsible for developing and implementing the marketing plans for products sold to a particular customer group.

venture teams Groups of people within an organization who work together focusing exclusively on the development of a new product.

measuring valuemeasuring value How Grendha Measures Success

Grendha uses a variety of metrics to track its performance. These include:

• Weekly sales reports from retailers • Industry Sales Tracking Reports that provide data on a daily

basis about sales of Riders and of its competitors • Tracking of online sales on the company Web site • Reorders from clients during the season

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typically located in an isolated area with minimal formal oversight, organizations have adopted the colorful description “skunk works” to refer to a usually small and often iso- lated department or facility that functions with minimal supervision (not because of its odor).40

Now that you’ve learned about product management and branding, read “Real People, Real Choices: How It Worked Out” to see which strategy Angelo selected to market Grendha’s Rider shoes.

How It Worked Out at Grendha Shoes

Angelo chose Option 2, and Grendha positioned Rider as an “after sport footwear” brand. Grendha even used this focus in its logo by renaming the shoe Rider After Sport Footwear. The “after sport” market was starting to become established as a sep- arate segment of the footwear industry, and Angelo wanted Rider to be a player in that market.

Grendha approached Foot Locker, one of the largest athletic shoe chains, with a plan to test the Rider brand in its stores. The test started in 50 Foot Locker stores, and the promising results led Foot Locker to expand it to 150 stores, then 500 stores, and finally the chain started to sell Riders in all of its stores nationwide. Rider became identified as a unique slide that excelled in comfort, design, and technology. As a result Rider sold 80,000 pairs in its first year. Sales continued to climb until Grendha was selling about 1 million pairs a year to American consumers. These results were very important not only for the American operation, but it also helped to introduce and rein- force the Rider brand around the world. Grendha went on to adapt the same strategy in over 85 coun- tries around the world and now sells millions of pairs globally.

An ad for the U.S. campaign for Rider.

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Now that you have finished reading this chapter, you should be able to:

1. Explain the different product objectives and strategies a firm may choose. Objectives for individual products may be related to introducing a new product, expanding the market of a regional product, or rejuvenating a mature product. For multiple products, firms may decide on a full- or a limited-line strategy. Often companies decide to extend their product line with an upward, downward, or two-way stretch or with a filling-out strategy, or they may decide to contract a product line. Firms that have multiple product lines may choose a wide product mix with many different lines or a narrow one with few. Product quality objectives refer to the durability, reliability, degree of precision, ease of use and repair, or degree of aesthetic pleasure.

2. Explain how firms manage products throughout the product life cycle. The product life cycle explains how products go through four stages from birth to death. During the introduction stage, marketers seek to get buyers to try the product and may use high prices to recover research and development costs. During the growth stage, characterized by rapidly increasing sales, marketers may introduce new-product variations. In the maturity stage, sales peak and level off. Marketers respond by adding desirable new-product features or with market-development strategies. During the decline stage, firms must decide whether to phase a product out slowly, to drop it immediately, or, if there is residual demand, to keep the product.

3. Discuss how branding creates product identity, and describe different types of branding strategies. A brand is a name, term, symbol, or other unique element of a prod- uct used to identify a firm’s product. A brand should be selected that has a positive connotation and is recogniz-

able and memorable. Brand names need to be easy to say, spell, read, and remember and should fit the target mar- ket, the product’s benefits, the customer’s culture, and legal requirements. To protect a brand legally, marketers obtain trademark protection. Brands are important because they help maintain customer loyalty and because brand equity or value means a firm is able to attract new customers. Firms may develop individual brand strategies or market multiple items with a family or umbrella brand strategy. National or manufacturer brands are owned and sold by producers, whereas private-label or store brands carry the retail or chain store’s trade name. Licensing means a firm sells another firm the right to use its brand name. In cobranding strategies, two brands form a partnership in marketing a new product.

4. Explain the roles packaging and labeling play in develop- ing effective product strategies. Packaging is the covering or container for a product and serves to protect a product and to allow for easy use and storage of the product. The colors, words, shapes, designs, pictures, and materials used in package design communicate a product’s identity, benefits, and other important product information. Package designers must consider cost, product protec- tion, and communication in creating a package that is functional, aesthetically pleasing, and not harmful to the environment. Product labeling in the United States is con- trolled by a number of federal laws aimed at making package labels more helpful to consumers.

5. Describe how organizations are structured for new and existing product management. To successfully manage existing products, the marketing organization may include brand managers, product category managers, and market managers. Large firms, however, often give new-product responsibilities to new-product managers or to venture teams, groups of specialists from different areas who work together for a single new product.

Can You Leverage Your Brand Power To Create A Competitive Advantage?

Let’s face it, you’re unique and your brand should be too. What’s your brand strategy? Are you a self-starter? The leader? Have a magic ingredient (skills)? Take steps now to be the preferred brand, the one employers choose, now and throughout your career. To learn more, go to Chapter 9 in the Brand You supplement.

Chapter Summary

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Chapter Review Marketing Concepts: Testing Your Knowledge

1. What are some reasons a firm might determine it should expand a product line? What are some reasons for contracting a product line? Why do many firms have a product mix strategy?

2. Why is quality such an important product strategy objective? What are the dimensions of product quality? How has e-commerce affected the need for quality product objectives?

3. Explain the product life cycle concept. What are the stages of the product life cycle?

4. How are products managed during the different stages of the product life cycle?

5. What is a brand? What are the characteristics of a good brand name? How do firms protect their brands?

6. What is a national brand? A store brand? Individual and family brands?

7. What does it mean to license a brand? What is cobranding?

8. What are the functions of packaging? What are some important elements of effective package design?

9. What should marketers know about package labeling?

10. Describe some of the ways firms organize the marketing function to manage existing products. What are the ways firms organize for the development of new products?

Marketing Concepts: Discussing Choices and Ethical Issues

1. Brand equity means that a brand enjoys customer loy- alty, perceived quality, and brand name awareness. To what brands are you personally loyal? What is it about the product that creates brand loyalty and, thus, brand equity?

2. Quality is an important product objective, but quality can mean different things for different products, such as durability, precision, aesthetic appeal, and so on. What does quality mean for the following products?

a. Automobile b. Pizza c. Running shoes d. Hair dryer e Deodorant f. College education

3. Many times firms take advantage of their popular, well-known brands by developing brand extensions because they know that the brand equity of the original or parent brand will be transferred to the new product. If a new product is of poor quality, it can damage the reputation of the parent brand, while a new product that is of superior quality can enhance the parent brand’s reputation. What are some examples of brand extensions that have damaged and that have enhanced the parent brand equity?

4. Sometimes marketers seem to stick with the same pack- aging ideas year after year regardless of whether they are the best possible design. Following is a list of products. For each one, discuss what, if any, problems you have with the package of the brand you use. Then think of ways the package could be improved. Why do you think marketers don’t change the old packaging? What would be the results if they adopted your package ideas?

a. Dry cereal b. Laundry detergent c. Frozen orange juice d. Gallon of milk e. Potato chips f. Loaf of bread

Key Terms brand, 286

brand equity, 288

brand extensions, 290

brand manager, 296

cannibalization, 278

cobranding, 292

decline stage, 284

family brand, 290

generic branding, 291

growth stage, 282

ingredient branding, 292

introduction stage, 282

ISO 9000, 279

ISO 14000, 279

Kansei engineering, 278

licensing, 291

market manager, 296

maturity stage, 283

national or manufacturer

brands, 290

package, 293

private-label brands, 290

product category managers, 296

product life cycle, 281

product line, 275

product mix, 278

Six Sigma, 279

total quality management

(TQM), 278

trademark, 287

Universal Product Code

(UPC), 294

venture teams, 296

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5. You learned in this chapter that it’s hard to legally protect brand names across product categories— Quaker and Apple, for example, and also Delta— which is an airline and a faucet. But what about the ethics of borrowing a name and applying it to some unrelated products? Think of some new business you might like to start up. Now consider some possible names for the business that are already in use as brands in other unrelated categories. Do you think it would be ethical to borrow one of those names? Why or why not?

Marketing Practice: Applying What You’ve Learned

1. The Internet allows consumers to interact directly through blogs and other means with other people so they can praise products they like and slam those they don’t. With several of your classmates, conduct a brief survey of students and of older consumers. Find out if consumers complain to each other about poor product quality. Have they ever used a Web site to express their displeasure over product quality? Make a report to your class.

2. You may think of your college or university as an orga- nization that offers a line of different educational prod- ucts. Assume that you have been hired as a marketing consultant by your university to examine and make recommendations for extending its product line. Develop alternatives that the university might consider:

a. Upward line stretch b. Downward line stretch c. Two-way stretch d. Filling-out strategy Describe how each might be accomplished. Evaluate each alternative.

3. Assume that you are the vice president of marketing for a firm that markets a large number of specialty food items (gourmet sauces, marinades, relishes, and so on). Your firm is interested in improving its marketing man- agement structure. You are considering several alterna- tives: using a brand manager structure, having product category managers, or focusing on market managers. Outline the advantages and disadvantages of each type of organization. What is your recommendation?

4. Assume that you are working in the marketing depart- ment of a major manufacturer of athletic shoes. Your firm is introducing a new product, a line of disposable

sports clothing. That’s right—wear it once and toss it! You wonder if it would be better to market the line of clothing with a new brand name or use the family brand name that has already gained popularity with your existing products. Make a list of the advantages and disadvantages of each strategy. Develop your rec- ommendation.

5. Assume that you have been recently hired by Kellogg, the cereal manufacturer. You have been asked to work on a plan for redesigning the packaging for Kellogg’s cereals. In a role-playing situation, present the follow- ing report to your marketing superior: a. Discussion of the problems or complaints customers

have with current packaging b. Several different package alternatives c. Your recommendations for changing packaging or

for keeping the packaging the same

Marketing Miniproject: Learning by Doing

In any supermarket in any town, you will surely find exam- ples of all the different types of brands discussed in this chapter: individual brands, family brands, national brands, store brands, and cobranded and licensed products. This miniproject is designed to give you a better understanding of branding as it exists in the marketplace.

1. Go to a typical supermarket in your community.

2. Select two product categories of interest to you: ice cream, cereal, laundry detergent, soup, paper products, and so on.

3. Make a list of the brands available in each product cat- egory. Identify what type of brand each is. Count the number of shelf facings (the number of product items at the front of each shelf) for each brand.

4. Arrange to talk with the store manager at a time that is convenient with him or her. Ask the manager to discuss the following:

a. How the store decides which brands to carry b. Whether the store is more likely to carry a new

brand that is an individual brand versus a family brand

c. What causes a store to drop a brand d. The profitability of store brands versus national

brands e. Other aspects of branding that the store manager

sees as important from a retail perspective

5. Present a report to your class on what you learned about the brands in your two product categories.

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real people, real surfers: exploring the web As we discussed in this chapter and in Chapter 8, compa- nies protect their products by obtaining patents and legal protection for their brands with trademarks. The U.S. Patent and Trademark Office issues both of these forms of protection. Visit the Patent Office Web site at www.uspto.gov. Use the Internet site to answer the follow- ing questions.

1. What is a patent? What can be patented? 2. Who may apply for a patent? Can foreign individuals

or companies obtain a U.S. patent? Explain.

3. What happens if someone infringes on a patent? 4. What does the term patent pending mean? 5. What is a trademark? What is a service mark?

6. Who may file a trademark application? Do firms have to register a trademark? Explain.

7. What do the symbols TM, SM, and ® mean? 8. What are the benefits of federal trademark registra-

tion?

9. What are common-law rights regarding trademarks? 10. How long does a trademark registration last? How

long does a patent last?

11. How would you evaluate the Patent and Trademark Office Web site? Was it easy to navigate? Was it useful? What recommendations do you have for improving the Web site?

Marketing Plan Exercise Dr. Pepper is an interesting brand with a long history (the his- tory is worth reading—go to www.drpepper.com, then click on “About Us” and then “Our Story”). Suffice it to say, it is the oldest soft-drink brand in the United States. Assume for a moment that Cadbury Schweppes, the London-based firm that owns Dr. Pepper, is doing some marketing planning involving this brand.

1. What are some product line strategies you might sug- gest that Dr. Pepper consider?

2. How important is TQM and product quality in general to a brand like Dr. Pepper? How do these issues play into its marketing plan?

3. Take a look at the different Dr. Pepper products por- trayed on its Web site. Where does each fall on the product life cycle? What leads you to conclude this?

4. What realistic opportunities do you believe exist for brand extensions for Dr. Pepper? Explain how the com- pany might go about introducing each to the market.

5. Does Dr. Pepper have high brand equity? What evi- dence do you have for your answer? What can Dr. Pepper do to enhance its brand equity, given the 800- pound gorillas it competes against (Coke and Pepsi)?

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302 PART THREE CREATING THE VALUE PROPOSITION

M A R K E T I N G I N A C T I O N C A S E

Real Choices at Sony

Sony has created many popular brands, including Walkman, Trinitron television, and PlayStation. Sony enjoys a reputation for some of the best consumer electronics products on the market, and its brand equity is the result of the quality, trust, and reliability its brands communicate to customers. For example, when the company introduced its Bravia line of liquid-crystal-display TV sets in 2005, it quickly became the market leader.

Yet, all is not well in Sony-land. The vast array of products the company manufactures— digital cameras, computers, TVs, and baby monitors—is very difficult to manage. Sony President Dr. Ryoji Chubachi summarizes their challenge when he says, “we have this corps of talented engineers but there are times when they lose sight of our customers.” Concern that its brand may be overextended caused Sony to divest its chain of over 1,200 cosmetic salons across Japan and several outlets of its restaurant chain, as well as discontinue producing robotic pets and high-end ($4,000+) digital cameras and $13,000+ 70-inch televisions. Streamlining the Sony product line has not yet produced the kind of positive results the company hoped to achieve. As a result, Sony is pinning its hopes for the future on the PlayStation 3 video game console.

The PlayStation 3 (PS3) is Sony’s latest upgrade to this highly successful product. PlayStation competes in a $26.6-billion-a-year video-gaming industry in which Sony already owns a dominant share of the business. Sony’s objectives for the PS3 are bigger than simply extending its leadership position in video gaming. Sony plans to use the new product to help establish global industry standards for high-definition video projection and consumer data storage needs. In addition, Sony wants to use the PS3 as a platform for Sony products to seamlessly share music, video, and data. Lofty goals for just one product to achieve, right? Ken Kutaragi, the head of Sony’s games business, articulates the company’s vision for the product when he says that the PS3 is “not a game machine” but rather it is a “machine with supercomputer calculation capabilities for home entertainment.”

Putting so much emphasis on this one product may be setting Sony up for failure. Due to quality control issues, the product launch of the PS3 was delayed nearly a year from its originally announced launch date, which gave archrival Microsoft’s Xbox 360 additional exclusive time as the most advanced game system on the market. Microsoft sold nearly 10 million Xbox 360s by the time the PS3 hit store shelves. Sony also needs to worry about the price of the new product. Sony priced the basic version of the PS3 at $499 and an enhanced version at $599. These prices are $200 more than comparable Xbox products. Are consumers really willing to pay $500 or $600 for a game system? This high price is why Sony has a steep hill to climb to convince everyone that this product is more than just a game system.

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Clearly, the path to success for the new PS3 is loaded with obstacles. Introduction of PS3 at such a high price, especially if Sony has not completely eliminated the quality problems that caused the delay, could spell disaster for the brand. As a result, Sony has to decide several questions: How can it ensure the successful introduction of this product? How can it leverage the product’s “supercomputer calculation capabilities for home entertainment” to expand market share? And finally, what should the company do if the PS3’s introduction is not as successful as originally planned?

You Make the Call

1. What is the decision facing Sony?

2. What factors are important in understanding this decision situation?

3. What are the alternatives?

4. What decision(s) do you recommend?

5. What are some ways to implement your recommendation?

Source: Marc Gunther, “The Welshman, the Walkman, and the Salarymen,” Fortune, June 12, 2006, 70–83.

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