1. Chapter 9 Manage the Product

2. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-2 Chapter Objectives  Explain the different product objectives and strategies a firm may choose  Explain how firms manage products throughout the product life cycle  Discuss how branding strategies create product identity  Explain how packaging and labeling contribute to product identity  Describe how marketers structure firms for new and existing product management

3. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-3 Real People, Real Choices: Decision Time at Petters Group Worldwide  What should the Petters Group do about Polaroid? –Option 1: Offer Polaroid a larger percentage of the firm’s revenues and continue as a licensee –Option 2: Acquire a new brand to replace Polaroid in the consumer electronics line –Option 3: Buy the Polaroid Corporation

4. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-4 Product Planning: Using Objectives to Decide Strategy  Firms that plan well succeed –Product planning is part of the firm’s tactical marketing plan and involve decisions about benefits, features, styling, branding, labeling, and packaging  Today, successful product management is more important than ever –Products are created, grow, reach maturity, and decline at faster and faster rates of speed  Effective product-related objectives must be measurable, clear, unambiguous and feasible

5. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-5 Using Product Objectives to Decide on a Product Strategy  Objectives and strategies for individual products: –Successful introduction of new products –Breathing new life into mature products while maintaining brand personality

6. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-6 Objectives and Strategies for Multiple Products  Product planning means developing product line and product mix strategies –Product line: Firm’s total product offering designed to satisfy a single need or desire of target customers –Product mix: The total set of all products that a firm offers for sale

7. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-7 Objectives and Strategies for Multiple Products  Product-Line Strategies –Full-line vs. limited-line strategies –Upward, downward, or two-way line stretch –Filling out or contracting a product line  Product-Mix Strategies –Width of product mix: The number of different product lines produced by firm

8. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-8 Quality as a Product Objective  Product quality as an objective: –Product quality is the overall ability of a product to satisfy customer’s expectations  Total Quality Management (TQM): –Company-wide dedication to the development, maintenance, and continuous improvement of all aspects of the company’s operations –Uniform ISO quality standards exist to offer guidance

9. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-9 ISO Quality Standards  ISO 9000: –Voluntary standards for quality set by International Organization for Standardization  ISO 14000: –Concentrates on environmental management  Six Sigma methodology: –Process allowing no more than 3.4 defects per million (getting it right 99.9997% of the time)

10. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-10 Adding a Dose of Quality to the Marketing Mix  Product: improve customer service  Place: involve suppliers and customers in improving on-time delivery  Price: lower costs and improve service at same time  Promotion: give customers information when they want and need it (not when it’s convenient for firm)

11. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-11 Dimensions of Product Quality  Degree of pleasure  Product safety  Ease of use  Satisfies needs  Durable  Reliable  Precision  Versatile These factors contribute to the level and consistency of product quality

12. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-12 Marketing Throughout the Product Life Cycle  Product life cycle: The way products go through four distinct stages from birth to death— introduction, growth, maturity, and decline

13. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-13 The Introduction Stage  First stage in the product life cycle, in which slow growth follows the introduction of a new product in the marketplace –The goal during introduction is to get first- time buyers to try product –The firm does not usually make a profit during this stage

14. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-14 The Growth Stage  Second stage in the product life cycle, during which the product is accepted and sales rapidly increase –The goal is to encourage brand loyalty –Firms introduce product variations to attract market segments and increase market share –Advertising is heavy to counter new competition

15. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-15 The Maturity Stage  Third and longest stage in the product life cycle, during which sales peak and profit margins narrow –Competition grows intense –New features are added to the product –The firm resorts to price reductions and reminder advertising

16. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-16 The Decline Stage  Final stage in the product life cycle, during which sales decrease as customer needs change –Market as a whole begins to shrink, profits decline, fewer product variations exist, and manufacturers begin to pull out entirely –Firm’s major decision is whether or not to keep the product

17. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-17 Creating Product Identity: Branding Decisions  Brand: A name, term, symbol, or any other unique element that identifies one firm’s product and sets it apart from the competition –Brand marks (Nike Swoosh) and trade characters (Keebler Elves) are part of the branding process

18. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-18 Brand Names  A “good” brand name: –Creates a positive, memorable connotation –Positions a product by conveying an image or personality (Ford Mustang) or by describing how it works (Weedeater) –Is easy to say, spell, read, and remember –Fits the target market, product benefits, customer’s culture, and legal requirements

19. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-19 Trademarks  Trademark is 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 –® is the trademark symbol used in the U.S. –Common-law protection occurs when the firm has used the name and established it over a period of time

20. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-20 The Importance of Branding  Brand equity: –A brand’s value to its organization over and above the value of the generic version of the product  Brand meaning: –The beliefs and associations a consumer has about the brand

21. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-21 The Importance of Branding  Brand equity provides competitive advantage –Brands with strong equity capture can hold onto a larger share of the market –Brands with strong equity sell at prices with higher profit margins  Brand extensions: –New products sold with the same brand name

22. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-22 Branding Strategies  Individual brands vs. family brands –Family brands provide an umbrella under which multiple products can be marketed (Example: Sunbeam)  National vs. store brands –Store brands (private label brands) are exclusive to a given retailer  Generic branding

23. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-23 Branding Strategies  Licensing: –One firm sells the right to another to use a legally protected brand name for a specific purpose and for a specific period of time  Co-branding: –Two brands combine to create a new product, providing greater recognition or other strengths than either could achieve alone –Ingredient branding is increasing

24. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-24 Creating Product Identity: The Package and Label  Package: –The covering or container for a product that provides product protection, facilitates product use and storage, and supplies important marketing communication  Universal Product Code (UPC): –Set of black bars or lines printed on the side/bottom of most items sold in stores; creates a national system of product identification

25. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-25 Designing Effective Packaging  Effective packaging considers: –Packaging of other brands in same product category –Choice of packaging material and image it projects –Environmental impact of packaging –Shape and color influences on image –Graphic information to be portrayed

26. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-26 Labeling Regulations  Federal Fair Packaging and Labeling Act of 1966: –Aims at making labels more helpful to consumers by providing useful information  Food and Drug Administration: –Requires food labels to tell how much fat, trans fat, saturated fat, cholesterol, calories, carbohydrates, protein, and vitamins are in each product serving

27. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-27 Organizing for Effective Product Management  Management of existing products –A single marketing manager typically handles the entire marketing function in small firms –Larger firms may have a number of managers who perform different functions Brand managers Product category managers Market managers

28. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-28 Organizing for New-Product Development  Venture teams: –Specialists in different areas who work together to focus on new-product development  “Skunk works”: –Small and isolated group in remote location that functions with minimal supervision

29. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-29 Real People, Real Choices: Decision Made at Petters Group Worldwide  Tom chose option 3 –Implementation: The Petters Group bought Polaroid for $ 426 million. Production of instant film ceased in 2008. Digital cameras and digital picture frames were added to Polaroid’s existing line of DVD and LCD TVs –Measuring success: Lower inventory costs and increased production efficiencies were realized

30. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-30 Keeping It Real: Fast-Forward to Next Class Decision Time at the 76ers  Meet Lara Price, Sr. VP of Business Operations for the Philadelphia 76ers  The 76ers are a professional basketball team within the NBA  The decision to be made: What method should be used to compile more detailed information about the customer base?

31. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall9-31 Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.