Types of products Durable goods Nondurables Services
PRODUCT LIFE CYCLE (PLC) Theory applies to products, not brands. 4 Stages: Introduction, growth, maturity, & decline Introduction: e.g., Caller ID service - slow sales growth - near zero profits - heavy expenses in educating the customer Price High: If volumes are small, production costs high, R&D costs high, high tech. Price Low: Low tech product, no patent protection, high volumes.
Growth: e.g., mobile phones - Rapid growth in acceptance New product features - expand market - Increase in sales and profits Increase distribution Improve quality
Maturity: - Sales growth slows down Differentiate your product - Increase in competition/decrease in profits Modify market, product, mix - Exit of weak companies Decline: e.g., oatmeal, video arcade games - Sales falling off quickly and profits decline Sell off business - Exit from market Reduce product line. Drop markets, segments, channels. Reposition. Some studies show PLC applies to brands, fashions, and fads. Similar to BCG analysis in some aspects.
PRODUCT QUALITY What is quality? - Consists of attributes and superiority on these attributes. AND - Also the ability to perform as specified (i.e., it depends on perception of the customer).
How to communicate quality: - signs and product cues (fine coats - lining) - price - packaging, distribution, advertising, promotion. - association with manufacturer (IBM), with countries (Japanese automobiles, Italian clothing). Does higher quality lead to higher profitability? Strategic Planning Institute found a significant positive relationship.
Product features: Can be standard or “extras” Cars Cameras What features to add? Balance customer value to cost.
Product Design: Much neglected. Differentiate using design (e.g., Olivetti). Style: Appearance of product Design: Functionality, aesthetics, human factors, ease of service, costs.
Product line length, width, and depth WIDTH Detergent Toothpaste Soaps Diapers L Bold Gleem Ivory Pampers E Cheer Crest Zest Luvs N Tide Coast G Oxydol Camay T H
Branding: Know what is meant by: brand brand name brand mark trademark copyright
To brand or not? Generics: 30-50% cheaper - threat to established brands - sell better where perceived quality difference is less. How did companies react? - increase quality, segment markets (e.g., Ralston Purina) - introduce cheaper line (e.g., P&G “Banner” line of paper products) - cut prices - open special shops (Ralph Lauren, Benneton) - demonstrate superiority (Kraft taste tests)
Advantages of branding: - Easy to process orders and track problems - Legal protection - Attract loyal and profitable set of cusotmers - Helps in segmentation - Distribution leverage - Signal of quality - Leads to innovation through generating competition - Premium price
Types of brands: Manufacturer’s brands: –Campbell, Heinz, Kellogg, Goodyear Private brands: –Sears, J.C. Penney Licensed Brands: –Christian Dior, Pierre Cardin, Coca Cola clothing Battle of the Brands: between manufacturer and middleman
Categories of branding: Individual brand names (e.g., Tide, Cheer, Camay, Folgers ) Adv: Does not tie company’s reputation to one brand. Disadv: Dilute your company’s resources such as advertising. No brand may be dominate. Blanket family name: (e.g., Heinz, Campbell ) Adv: Costs less to introduce new products, no “name” research required. Separate family brand names for each product. e.g., Diehard, Craftsman, Kenmore Combination of 1 and 2. e.g., Kelloggs Raisin Bran
Brand Strategy decisions Line extensions Brand extensions Multibrands New brands Co-brands
Desirable qualities for brand name: - could convey product benefits: Coldspot, Coppertone, Craftsman - could convey product qualities such as action or color Sunkist, Firebird - easy to pronounce, recognize and remember 7-Up, Puffs - distinctive Kodak, Exxon - translate easily Enco - Standard Oil - pronunciation problems - EZ
Tests done before deciding on a name Association tests: what images come to mind? Learning tests: how easily is the name pronounced? Memory tests: how well remembered? Preference tests: which one preferred?
Name lab and interbrand: top consulting firms (Acura, Compaq) Good brand becomes associated with the product category eg: Problem: can be made common names eg:
BRAND EQUITY: It is the “added value” that a brand endows a product (“that something extra”). How do you measure that “value”? It depends upon which perspective one is considering. 1.Firm perspective - Brand equity is the incremental cash flow from the association of the brand with the product. Sources: Increased market share Premium pricing Reduced promotional expenses
*Brand equity also imparts a differential advantage over competitors from a loyal customer base. Sources: Platform for new products and extensions Momentum to carry through difficult periods Resistance from competitive attack 2. Trade perspective - *Brand equity gives brand leverage over other products in a category. Sources: Easier acceptance and wider distribution Ability to negotiate better terms Protection against private labels
3.Customer perspective - *Brand equity is the increase in attitude strength a customer has for a product using the brand. How do you get brand equity? Build: begin with a quality product develop accessible attitudes maintain a consistent image Borrow: line extensions (different favor, form, application) category extension (same core benefit, usage situation, customer base)
Brand Extensions: Adv: Instant recognition Low ad costs e.g., Honda lawn mower Disadv: can fail and hurt original name e.g., BiC pantyhose, Life Savers gum may be inappropriate and may dilute image Buy: License Acquire
BRAND LOYALTY: Attitude + repeat purchase Three levels of loyalty: - Brand recognition - Brand preference - Brand insistence Why multibrand: - Combined sales higher - Get greater shelf space - Helps brand switchers - Motivates organization - Can target different segments Problems: small shares for each, none may be profitable
Packaging: –primary –secondary Earlier function- to contain and protect product. Other functions - - as a sales tool (attract, inform, persuade) - instant recognition - convenience
Labelling: Functions - identify, grade, describe, promote Fair Packaging and Labeling Act 1966 Unit pricing Open dating Nutrition labeling Other social issues: Excessive cost Scarce resources Pollution