CHAPTER 10 Managing Products, Services and Brands

CHAPTER 10 Managing Products, Services and Brands
Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10 - 1

After reading this chapter you should be able to:
Explain the product life-cycle concept and relate a marketing strategy to each stage. Recognise the difference in product life cycles for various products and their implications for marketing decisions. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10 - 2

Understand different approaches to managing a product’s life cycle. Describe elements of brand personality and brand equity and the criteria for the good brand name. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10 - 3

Explain the reason for different branding strategies employed by companies. Understand the role of packaging and labeling in the marketing of a product. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10 - 4

Managing Products, Services and Brands
Managing products, services and brands is becoming increasingly important not just from a marketing perspective. Many companies wealth is now based in the value of their brands. If a brand is not carefully managed then the entire future of the company may be placed at risk. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10 - 5

The Product Life Cycle Products, like people, have been viewed as having a life cycle. The concept of the product life cycle describes the stages a new product goes through in the marketplace: introduction, growth, maturity and decline There are two curves shown in this figure, total industry sales dollars (revenue) and total industry profit. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10 - 6

Product Life Cycle Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10 - 7

How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10 - 8

Introduction Stage The introduction stage of the product life cycle occurs when a product is first introduced to its intended target market. During this period, sales grow slowly, and profit is minimal. The lack of profit is often the result of large investment costs in product development, such as the US$1 billion spent by Gillette to develop and launch the Fusion razor shaving system. The marketing objective for the company at this stage is to create consumer awareness and stimulate trial—that first purchase of a product by a consumer. Companies often spend heavily on advertising and other promotion tools to build awareness among consumers in the introduction stage. These expenditures are often made to stimulate primary demand, or desire for the product class rather than for a specific brand since there are few competitors with the same product. As more competitors introduce their own products and the product progresses along its life cycle, company attention is focused on creating selective demand, or demand for a specific brand. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10 - 9

Introduction Stage Other marketing mix variables also are important at this stage. Gaining distribution can be a challenge because channel members may be hesitant to carry a new product. Moreover, in this stage a company often restricts the number of variations of the product to ensure control of product quality. During introduction, pricing can be either high or low. A high initial price may be used as part of a skimming strategy to help the company recover the costs of development as well as take advantage of the price insensitivity of early buyers. High prices tend to attract competitors eager to enter the market because they see the opportunity for profit. To discourage competitive entry, a company can price low, referred to as penetration pricing. This pricing strategy helps build unit volume, but a company must closely monitor costs. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Toshiba DVD Ad What stage of the product life cycle?
Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Growth Stage The second stage of the product life cycle, growth, is characterised by rapid increases in sales. It is in this stage that competitors appear. The result of more competitors and more aggressive pricing is that profit usually peaks during the growth stage. Product sales in the growth stage grow at an increasing rate because of new people trying or using the product and a growing proportion of repeat purchasers—people who tried the product, were satisfied and bought again. Changes start to appear in the product during the growth stage. To help differentiate a company’s brand from its competitors, an improved version or new features are added to the original design, and product proliferation occurs. Distribution is critical at this stage. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Maturity Stage The third stage, maturity, is characterised by a slowing of total industry sales for the product class. Also, weaker competitors begin to leave the market. Most consumers who would buy the product are either repeat purchasers of the item or have tried and abandoned it. Sales increase at a decreasing rate in the maturity stage as fewer new buyers enter the market. Profit declines because there is fierce price competition among many sellers. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Maturity Stage Marketing attention in the maturity stage is often directed towards holding market share through further product differentiation and finding new buyers. Gillette, for example, differentiated its MACH 3 razor through new product features specifically designed for women and then launched the Gillette Venus Razor for Women just as the MACH 3 razor entered its maturity stage. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Decline Stage The decline stage occurs when sales begin to drop.
Frequently, a product enters this stage not because of any wrong strategy on the part of the company but because of environmental changes. Technological innovation often comes before the decline stage as newer technologies replace older ones. A company will follow one of three strategies to handle a declining product: deletion harvesting or finding a new market. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Decline Stage Deletion Harvesting Finding a new market.
Product deletion, or dropping the product from the company’s product line, is the most drastic strategy. Because a residual core of consumers still consume or use a product even in the decline stage, product elimination decisions are not taken lightly. Harvesting A second strategy, harvesting, is when a company keeps the product but reduces marketing costs. Finding a new market. finding a new market, is when a company seeks a market where the product may not be in the same stage of the life cycle. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Gillette Mach3 Men’s Razors What stage and shape in the (PLC)?
Mach3 Turbo (2001) Mach3 Turbo GForce (2003) Mach3 (1998) Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Some Dimensions of the Product Life Cycle
Two important aspects of product life cycles are (1) their length and (2) the shape of their curves. Length of the Product Life Cycle: There is no exact time that a product takes to move through its life cycle. As a rule, consumer products have shorter life cycles than business products. Shape of the Product Life Cycle: The product life-cycle curve shown in Figure 9–1 is the generalised life cycle, but not all products have the same shape to their curve. There are several different life-cycle curves, each type suggesting different marketing strategies, such as: High learning product - low learning product Fashion product - fad product. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Alternative product life cycles

The Life Cycle and Consumers
The life cycle of a product depends on sales to consumers. Not all consumers rush to buy a product in the introductory stage, and the shapes of the life-cycle curves indicate that most sales occur after the product has been on the market for some time. In essence, a product diffuses, or spreads, through the population, a concept called the diffusion of innovation. Several factors affect whether a consumer will adopt a new product or not. Common reasons for resisting a product in the introduction stage are usage barriers (the product is not compatible with existing habits), barriers (the product provides no incentive to change), risk barriers (physical, economic or social) and psychological barriers (cultural differences or image) Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Five categories and profiles of product adopters

Concept Check Advertising plays a major role in the _____________ stage of the product life cycle, and ____________ plays a major role in maturity. How do high-learning and low-learning products differ? 1. introductory, sales promotion 2. A high-learning product requires significant customer education and there is an extended introductory period. A low-learning product requires little customer education because the benefits of purchase are readily understood, resulting in immediate sales. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Managing The Product Life Cycle
An important task for a firm is to manage its products through the successive stages of their life cycles. Marketers rely on three ways to manage a product through its life cycle: modifying the product. modifying the market. repositioning the product. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Modifying the Product Product modification involves altering a product’s characteristic, such as its quality, performance or appearance, to try to increase and extend the product’s sales. New features, packages or scents can be used to change a product’s characteristics and give the sense of a revised product. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Modifying the Market With market modification strategies, a company tries to find new customers, increase a product’s use among existing customers, or create new use situations. The Australian Egg Board’s advertising encourages the consumers to find new uses for its product. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Repositioning the Product
Often a company decides to reposition its product or product line in an attempt to increase sales. Product repositioning is changing the place a product occupies in a consumer’s mind relative to competitive products. A firm can reposition a product by changing one or more of the four marketing mix elements. Four factors that trigger a repositioning action are: Reacting to a Competitor’s Position Reaching a New Market Catching a Rising Trend Changing the Value Offered Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Concept Check What does ‘creating new use situations’ mean in managing a product’s life cycle? Explain the difference between trading up and trading down in repositioning. 1. Finding new uses for an existing product. 2. Trading up involves adding value to the product (or line) through additional features or higher-quality materials. Trading down involves reducing the number of features, quality, and price, or downsizing—reducing the content of packages without changing package size and maintaining or increasing the package price. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Branding And Brand Management
A basic decision in marketing products is branding, in which an organisation uses a name, phrase, design, symbol or combination of these to identify its products and distinguish them from those of competitors. A brand name is any word, ‘device’ (design, sound, shape or colour) or combination of these used to distinguish a seller’s goods or services. Consumers may benefit most from branding. Recognising competing products by brand names allows them to be more efficient shoppers. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Brand Personality and Brand Equity
Product managers recognise that brands offer more than product identification and a means to distinguish their products from competitors’. Successful and established brands take on a brand personality, a set of human characteristics associated with a brand name. Brand name importance to a company has led to a concept called brand equity, the added value a given brand name gives to a product beyond the functional benefits provided. This value has two distinct advantages. First, brand equity provides a competitive advantage and second consumers are often willing to pay a higher price for a product with brand equity. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Creating Brand Equity Brand equity doesn’t just happen.
It is carefully crafted and nurtured by marketing programs that create strong, favourable and unique consumer associations and experiences with a brand. Brand equity resides in the minds of consumers and results from what they have learned, felt, seen and heard about a brand over time. Marketers recognise that brand equity is not easily or quickly achieved. It arises from a sequential building process consisting of four steps. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Customer-based brand equity pyramid

Valuing Brand Equity Brand equity also provides a financial advantage for the brand owner. Successful, established brand names, such as Gillette, Nike, Nescafé and Nokia, have an economic value. They are intangible assets. For example, Telstra, the most valuable in Australasia, has been valued at A$9.3 billion; the success of Billabong has put its brand value at A$1.1 billion. Financially lucrative brand licensing opportunities arise from brand equity. Brand licensing is a contractual agreement whereby one company (licensor) allows its brand name(s) or trademark(s) to be used for products or services offered by another company (licensee) for a royalty or a fee. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Picking a Good Brand Name
There are some very simple rules for picking a good brand name. These are: The name should suggest the product benefits. The name should be memorable, distinctive and positive. The name should fit the company or product image. The name should have no legal or regulatory restrictions. Finally, the name should be simple. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Branding Strategies In deciding to brand a product, companies have several possible strategies, including: manufacturer branding reseller branding or mixed branding approaches Let’s examine these in more detail. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Black & Decker Ad What is Black & Decker’s branding strategy?
Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 10- 35 l

Manufacturer Branding
With manufacturer branding, the producer determines the brand name using either a multiproduct or a multi brand approach. Multiproduct branding is when a company uses one name for all its products. This approach is often referred to as a blanket or family branding strategy. There are several advantages to multiproduct branding, such as: line extensions - multi branding sub branding - brand extension Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Alternative branding strategies

Reseller Branding A company uses private branding, often called private labelling or reseller branding, when it manufactures products but sells them under the brand name of a wholesaler or retailer. Dick Smith Electronics, Aldi, Kmart and Coles are large retailers that have their own brand names. Private branding is popular because it typically produces high profits for manufacturers and resellers. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Mixed Branding Approaches
A compromise between manufacturer and private branding is mixed branding, where a firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different from their own market. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Customer Value and Pez Pez dispensers offer consumers value in two ways. One the core and actual product that the consumer is buying. Secondly, the augmented product of the collectable dispensers themselves. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Creating Customer Value Through Packaging And Labelling
The packaging component of a product refers to any container in which it is offered for sale and on which label information is conveyed. A label is an integral part of the package and typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and product contents and ingredients. To a great extent, the customer’s first exposure to a product is the package and label and both are an expensive and important part of marketing strategy. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Creating Customer Value Through Packaging And Labelling
Despite the cost, packaging and labelling are essential because both provide important benefits for the manufacturer, retailer and ultimate consumer. Some of the key benefits are: Communication benefits, Functional benefits, Perceptual benefits. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Managing the Marketing of Services
The Four Ps framework is the most appropriate method for discussing the marketing mix for services. Remember the four P’s are: Product Place Price Promotion Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Managing the Marketing of Services - Product
To a large extent, the concepts of the product component of the marketing mix apply equally well to Cheezels (a good) and to Mastercard (a service). Yet there are three aspects of the product/service element of the mix that warrant special attention when dealing with services: exclusivity, brand name, capacity management. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Managing the Marketing of Services - Pricing
In the service industries, price is referred to in various ways. Property management firms refer to rents; consultants, lawyers and accountants to fees; airlines to fares; telecommunication companies to charges; and hotels to rates. Regardless of the term used, price plays two essential roles: to affect consumer perceptions and to be used in capacity management. Because of the intangible nature of services, price can indicate the quality of the service. Off peak pricing is another concept that applies here. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Managing the Marketing of Services - Place
Place or distribution is a major factor in developing a service marketing strategy because of the inseparability of services from the producer. Historically in services marketing, little attention has been paid to distribution. As competition grows, the value of convenient distribution is being recognised, especially in areas such as franchising of services. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Managing the Marketing of Services - Promotion
The value of promotion, specifically advertising, for many services is to show the benefits of purchasing the service. It is valuable to stress availability, location, consistent quality and efficient, courteous service. In addition, services must be concerned with their image. Promotional efforts, such as Singapore Airline’s use of the Singapore Girl in their ads, contribute to image and positioning strategies. In most cases promotional concerns of services are similar to those of products. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Promotion of Services The promotion of services is growing.
Traditional advertising methods, such as humour, are successfully applied by companies like CommInsure. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Concept Check 1. What is the difference between a line extension and a brand extension? 1. A line extension is the practice of using a current brand name to enter a new market segment in its product class, whereas a brand extension is the practice of using a current brand name to enter a completely different product class. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Concept Check 2. Explain the role of packaging in terms of perception.
2. A package can communicate status, economy, and product quality to prospective buyers. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Concept Check 3. How do service businesses use off-peak pricing?
3. Service businesses use off-peak pricing, which consists of charging different prices during different times during the day or days of the week, to reflect variations in demand for the service. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

Finish Questions? Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University

CHAPTER 10 Managing Products, Services and Brands

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