Chapter 13 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. DEVELOPING AND MANAGING BRAND AND PRODUCT CATEGORIES 1

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Objectives 1. Determine how to define a brand. 2. Identify the different types of brands. 3. Explain the strategic value of brand equity. 4. Explain the benefits of category and brand management. 5. Discuss how companies develop a strong identity for their product or brand. 2

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Objectives 6. Identify and briefly describe each of the new-product development strategies. 7. Describe the consumer adoption process. 8. List the stages in the new-product development process. 9. Explain the relationship between product safety and product liability. 3

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Managing Brands for Competitive Advantage ▮ Brands have a powerful influence on consumer behavior ▮ Brand - Name, term, sign, symbol, design, or some combination that identifies the products of one firm while differentiating them from competitors’ offerings 4

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Table 13.1 – Selected Brands, Brand Names, and Brand Marks 5

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Brand Loyalty ▮ Measured in three stages Brand recognition - Consumer awareness and identification of a brand Brand preference - Consumer choice of a product on the basis of a previous experience Brand insistence - Consumer refusal of alternatives and extensive search for desired merchandise 6

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Types of Brands ▮ Generic products - Products characterized by plain labels, no advertising, and the absence of brand names ▮ Manufacturer’s brand - Brand name owned by a manufacturer or other producer ▮ Private brands - Brands offered by wholesalers and retailers 7

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Types of Brands ▮ Captive brands - National brands sold exclusively by a retail chain Example: Target’s sale of products by Michael Gravesproducts by Michael Graves ▮ Family brand - Single brand name that identifies several related products ▮ Individual brand - Single brand that uniquely identifies a product 8

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Brand Equity ▮ Added value that a respected, well-known brand name gives to a product in the marketplace ▮ Built sequentially on four dimensions Differentiation Relevance Esteem Knowledge 9

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories The Role of Category and Brand Management ▮ Brand manager - Marketer responsible for a single brand ▮ Category management - Product management system in which a category manager—with profit and loss responsibility—oversees a product line 10

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Product Identification ▮ Products identified in the marketplace by brand names, symbols, and distinctive packaging ▮ Choosing how to identify a firm’s output represents a major strategic decision for marketers 11

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Brand Names and Brand Marks ▮ Brand name - Part of a brand that can be spoken ▮ Brand mark - Symbol or pictorial design that distinguishes a product ▮ Effective brand names are easy to pronounce, recognize, and remember 12

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Brand Names and Brand Marks ▮ Brand name Should give buyers the correct connotation of the product’s image Must qualify for legal protection ▮ A brand name loses protection when a class of products generally comes to be known by that name 13

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Trademarks ▮ Brand for which the owner claims exclusive legal protection 14

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Protecting Trademarks ▮ Gives firms the exclusive legal right to use a brand name, brand mark, and any slogan or product name abbreviation ▮ Firms can also seek protection for packaging elements and product features 15

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Trade Dress ▮ Visual components that contribute to the overall look of a brand ▮ Visual components may be related to color selections, sizes, package, label shapes, and similar factors 16

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Developing Global Brand Names and Trademarks ▮ An excellent name or symbol in one country may be a poor choice in another ▮ A firm marketing a product in multiple countries has two choices Use a single brand name for universal promotions Tailor names to individual countries 17

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Packaging ▮ Serves three major objectives Protection against damage, spoilage, and pilferage Assistance in marketing the product Cost effectiveness 18

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Labeling ▮ Label - Carries an item’s brand name or symbol, the name and address of the manufacturer or distributor, information about the product’s composition and size, and recommended uses ▮ Universal product code (UPC) - Numerical bar code system used to record product and price information 19

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Labeling ▮ RFID tags may replace some of the functions of UPC codes Reduce labor costs and improve inventory control 20

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Brand Extensions ▮ Attaching a popular brand name to a new product in an unrelated product category ▮ Line extension - Development of individual offerings that appeal to different market segments while remaining closely related to the existing product line 21

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Brand Licensing ▮ Practice that expands a firm’s exposure in the marketplace ▮ Brand name’s owner receives royalties, typically 8 to 12 percent of wholesale revenues ▮ Can hurt a brand if the licensed product is poor quality or ethically incompatible with the brand ▮ Another risk is overextending the brand 22

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Figure 13.1 – Alternative Product Development Strategies 23

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Product Development Strategies ▮ Market penetration - Increase sales of existing products in existing markets ▮ Product positioning - Consumers’ perceptions of a product’s attributes, uses, quality, and advantages and disadvantages relative to competing brands ▮ Market development - Concentrates on finding new markets for existing products 24

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Product Development Strategies ▮ Product development - Introduction of new products into identifiable or established markets ▮ Product diversification - Focuses on developing entirely new products for new markets ▮ Cannibalization - Introducing a new product that adversely affects sales of existing products 25

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Consumer Adoption Process ▮ Adoption process – Stages consumers go through in learning about a new product, trying it, and deciding whether to purchase it again Awareness Interest Evaluation Trial Adoption/rejection 26

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Adopter Categories ▮ Consumer innovators - People who purchase new products almost as soon as the products reach the market ▮ Diffusion process - Process by which new goods or services are accepted in the marketplace 27

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Figure Categories of Adopters Based on Relative Times of Adoption 28

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Identifying Early Adopters ▮ Firms who reach early purchasers can treat them as a test market Evaluating the product and discovering suggestions for modifications ▮ Early purchasers can act as opinion leaders from whom others seek advice Attitudes toward new products quickly spreads to others 29

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Rate of Adoption Determinants ▮ Relative advantage - Innovation that appears far superior to previous ideas ▮ Compatibility - Innovation consistent with the values and experiences of potential adopters ▮ Complexity - Relative difficulty of understanding the innovation influences the speed of acceptance 30

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Rate of Adoption Determinants ▮ Possibility of trial use - Initial free or discounted trial of a good or service reduces adopters financial risk ▮ Observability - Observing an innovation’s superiority increases the adoption rate 31

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Organizing for New Product Development ▮ New-product committees Most common arrangement Brings together functional experts Tends to reach decisions slowly Maintains conservative views Members may compromise so they can return to their regular responsibilities 32

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Organizing for New Product Development ▮ New-product departments Separate and formally organized Aims at generating and refining new product ideas Encourages innovation as a permanent full-time activity Responsible for all phases of a development project within the firm 33

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Product Managers ▮ Another term for a brand manager; supports the marketing strategies of an individual product or product line ▮ Set prices, develop advertising and sales promotion programs, and work with sales representatives in the field 34

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Venture Teams ▮ Specialists from different areas of an organization who work together in developing new products 35

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Venture Teams ▮ The venture team must meet criteria for: Return on investment Uniqueness of product Serving a well-defined need Compatibility of the product with existing technology Strength of patent protection 36

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Figure 13.3 – Steps in the New-Product Development Process 37

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories The New-Product Development Process ▮ Idea generation - New-product development begins with ideas from many sources ▮ Screening - Separates ideas with commercial potential from those that cannot meet company objectives ▮ Business analysis - Assessing the new product’s potential market, growth rate, and likely competitive strengths 38

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories The New-Product Development Process Concept testing - Method for subjecting a product idea to additional study before actual development by involving consumers through focus groups, surveys, in-store polling, and similar strategies Screening and business analysis stages generate important information because they: Define the proposed product’s target market and customers’ needs and wants Determine the product’s financial and technical requirements 39

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories The New-Product Development Process ▮ Development - Financial outlays increase substantially as a firm converts an idea into a visible product ▮ Test marketing - To verify that the product will perform well in a real-life environment ▮ Commercialization - A product is ready for full-scale marketing 40

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Product Safety and Liability ▮ Manufacturers must design their products to protect users from harm ▮ Product liability - Responsibility of manufacturers and marketers for injuries and damages caused by their products 41

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Product Safety and Liability ▮ The Consumer Product Safety Commission has jurisdiction over most consumer product categories ▮ The Food and Drug Administration approves food, medications, and health- related devices ▮ Liability lawsuits are increasing domestically and internationally 42

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Product Safety and Liability ▮ To counter increased litigation and legislation Companies sponsor voluntary improvements in safety standards ▮ Safety planning and testing can be an effective marketing tool 43

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Developing and Managing Brand and Product Categories Zappos Video 44 Scripps Networks Interactive & Food Network Video videos/ch13.html /videos/part4.html