chapter 9 - managing the product

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Chapter 9 Module 1

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Managing the Product

Chapter 9

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Tactical Product Decisions Tactical Product Decisions (the marketing mix)(the marketing mix)

Product StrategiesProduct Strategies

Product & Product Line/Mix Product & Product Line/Mix ObjectivesObjectives

Must be clear, measurable, and within

a distinct time frame (SMART)

Own 15% of the snack-chip market by 20115

Considers life of the product & Rate of

Diffusion.

In two years, create a new package for

Sunchips that is both biodegradable AND

quiet.

Be viewed as the most earth friendly chip

brand

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Main Objectives•Understand the PLC & its

relationship to Diffusion

•Demonstrate how marketers manage a product using the PLC

•Define and understand the role of “branding” as a marketing strategy

•Understand the importance of packaging in the marketing mix

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The Product Life Cycle (PLC)

6The Product Life Cycle (PLC)

Explains how the market’s response to a product and marketing activities change over the entire life of a product.Gives managers insights into how long a new product’s life cycle may be, and can help plan for marketing activities in advance.

Products/brands need to be nurtured and developed with care... The PLC can help.

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Stages in the

PLC relate to a

firm’s

marketing

objectives and

marketing mix

actions.

Why are profits low here?

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Introduction: launch & create desire for a product category, not always specific brands (primary

demand); or create desire for a specific brand or company as competition begins to surface(selective

demand)

Intr

oduct

ion

Intr

oduct

ion

Choose a pricing strategy - Penetration vs. SkimmingMay need to educate target May need to educate target audiencesaudiences

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Growth: rapid sales increases, begin to see repeat purchasers and brand loyalty (advertising should

focus on selective demand), product positioning is more segmented;

product innovation and new features are key!

Gro

wth

Gro

wth

Distribution strategy - broaden the availability, or focus on concentrated/premium distribution and pricing

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Maturity: often the longest stage, rate of sales slowing, prices are decreasing, (relative to inflation)

profits are narrowing, competition is decreasing, firms try to attract new markets---differentiation is

key.

Matu

rity

Matu

rity

Distribution strategy - wide distribution, increase target market awareness

Firms wanting to Firms wanting to compete will revise compete will revise their marketing mixtheir marketing mix

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Decline: rapid decrease in sales, technologies may be obsolete, a product “rebirth” may be needed,

firm dedicates limited resources to marketing; hope competition drops out ?

Decl

ine

Decl

ine

BIG DECISION: Deletion or Harvest?

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On a Sheet of Paper...Place these products on the PLC

curve where you believe they belong today.

VCR

3D-TVDigital photo

Low-carb ice cream USB memory

stick

toothpasteFabric softener

Dryer Bars

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Other

influences on

the PLC and

Diffusion:

• Homophily:  The more similar to each other that members of a culture are, the more likely an innovation is to spread—people are more likely to imitate similar than different models.  The two most rapidly adopting countries in the World are the U.S. and Japan.  While the U.S. interestingly scores very low, Japan scores high.

• Physical distance:  The greater the distance between people, the less likely innovation is to spread. 

• Opinion leadership:  The more opinion leaders are valued and respected, the more likely an innovation is to spread.  The style of opinion leaders moderates this influence, however.  In less innovative countries, opinion leaders tend to be more conservative, i.e., to reflect the local norms of resistance.

• Modernity:  The extent to which the culture is receptive to new things. In some countries, such as Britain and Saudi Arabia, tradition is greatly valued—thus, new products often don’t fare too well.  The United States, in contrast, tends to value progress.

Cultural Influences

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Other

influences on

the PLC and

Diffusion:

• Relative Advantage:  do consumers believe a new product provides superior benefits, or superior value proposition?

• Compatability:  is the product consistent with cultural values, customs, practices? Or is it too radical?

• Complexity:  Can consumers understand how to use the product? • Trialability:  Is the risk low for checking it out? What have we got to

lose? • Observability: Does the product carry social meaning, it is visible and

will it become part of my self-identity?

Product Factors

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Importantly:

PLC’s are not 100% predictable - only estimable based on history

PLC’s are not to be used to forecast sales and production figures

PLC’s can be misleading due to spikes & drops in sales, causing mis-adjustment of marketing mix

elements

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End Module 1

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Chapter 9Module 2

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Bring the product to life:

With brand identityBrand personality and

Brand recognition

“Brand” = symbol, name, unique element that identifies

one product (or firm) from another.

“Brand” = symbol, name, unique element that identifies

one product (or firm) from another.

Brands help firms

create

relationships with

customers

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“Brand” = symbol, name, unique element that identifies one product

(or firm) from another.

“Brand” = symbol, name, unique element that identifies one product

(or firm) from another.

Brand mark: a logo or set of words Trade character: carries human features

Good Brand names are...Easy to say

Convey product benefitsFit customer culture

Are legal

Trademark: the legal term for a brand name, mark, or character.

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Is it memorable??meaningful??

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Dimensions of Brand

MeaningIdentification

Product Attribute Gender

Social classAge

Life stageLifestyle

Traditions/RitualsTrends

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End Module 2

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Chapter 9Module 3

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The Importance of Brands

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Brand Equity

The value over and above the value of the

generic version.

Price premiums are associated with high

brand equity.Consumers can

experience strong attachments to brands

related to....Self-concept * Nostalgia * Interdependence * Love

115 00

39 00

= Comp. Advantage

It’s me. It’s me. Feel good Feel good Can’t do Can’t do without without

Emotional Emotional bonds bonds

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Value: $79b Value: $15b

Pricing Premium: $64b

“Branding accounts for 80% of it’s value.”

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The North Face's logo consists of a slightly skewed quarter-circle with two lines running within it. This image is an interpretation of Half Dome, a massive granitic monolith in Yosemite National Park, viewed from the west, with the sheer north (or northwest) face of Half Dome to the left.

The North Face maintains strong links with the outdoor community through its sponsored athlete program. Athletes such as Lizzy Hawker who recently won the Ultra Trail Tour du Mont Blanc have benefited greatly from the program.

THE NORTH FACE has meaning.

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Leveraging Brand Equity

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The North Face brand was established in 1966 when Douglas Tompkins and Kenneth "Hap" Klopp created an equipment retail store that eventually acquired the name The North Face. This name was chosen because the north face of a mountain in the northern hemisphere is generally the most difficult face to climb.By the 1980s, skiwear was added to the line of products, and eventually camping equipment was added as well. The North Face is now a wholly owned subsidiary of the VF Corporation.

The North Face, Inc. Now specializes in outerwear, fleece, footwear, and equipment such

as backpacks, tents, and sleeping bags.

33Branding strategies

Family Brand Individual Brand

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34Branding strategies

National Brands Private BrandsHigh profit potential

Compete with national brands

Attract price-conscious consumers

Still need some brand awareness and recognition

Owned by retailer or distributor

Carry brand equity

Attract brand loyal customers

Drive store traffic

Owned by manufacturers

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Licensing Brands Co-Branding

More powerful recognition

Can use ingredient branding strategy

Helps create a wider product portfolio

Can offer instant recognition & interest to lesser known

products...

...especially for targeting specific consumer groups

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PackagingAs part of the product identity

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Packages serve several functions:

1. Protect the product 2. Inform the customer3. Brand the product4. Communicate with the customer5. Lets the customer handle the product

Fill the cap for a single serving

Flavor, texture, contents

Brand

Easy to hold

Fits in car cup-holder

Plastic, opaque protects the

contents, maintains freshness.

Must consider: Competitor packaging, retailer specs,

distribution limits, consumer acceptance

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RecapBrand identity influences how

consumers perceive the brand.

Brand equity, as a competitive advantage, is achieved through

branding.

Branding is part of product positioning!

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End Chapter 9