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Part 3: Create the Value Proposition
Chapter 9
Manage the Product
I. CHAPTER OVERVIEW
Today successful product management is more important than ever. As more and more
competitors enter the global marketplace and as technology moves forward at an ever-increasing
pace, products are created, grow, reach maturity, and decline at faster and faster speeds.
In this chapter, students learn about the life of the product. They learn that a product includes
benefits, features, styling, branding, labeling, and packaging. Strategic decisions must be made
about each of these elements. These decisions must complement each other creating an overall
product strategy.
II. CHAPTER OBJECTIVES
1.
2.
3.
4.
5.
Explain the different product objectives and strategies a firm may choose.
Understand 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 organizations for new and existing product
management.
III. CHAPTER OUTLINE
►MARKETING MOMENT INTRODUCTION
Play “Name that Trademark.” Have students draw trademarks on the board and see if their peers
can recognize them. Note that how even with poor artistic ability, everyone recognizes the “golden
arches.”
p. 245
1.
REAL PEOPLE, REAL CHOICES—HERE’S MY
PROBLEM AT GENERAL MILLS
Due to the boom in consumer interest in fiber, Fiber One was
positioned for growth from increased marketing investment that
would build awareness about the brand. General Mills launched
new brand extensions including Fiber One Honey Clusters Cereal
and Fiber One Oats and Chocolate Snacks Bars. The brand took
on a fresh, more contemporary look with a packaging redesign
The big question is how the core Fiber One brand should be
positioned and grow as it matures through its life cycle. David
considered his options:
1. Own the position of “Fiber Superiority.”
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Chapter 9: Manage the Product
2. Own the position of “Great Tasting High Fiber.”
3. Own the position of “Digestive Health.”
The vignette ends by asking the student which option he/she
would choose.
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REAL PEOPLE, REAL CHOICES – David chose option #2.
Figure 9.1
2.
PRODUCT PLANNING: USE PRODUCT
Steps to
OBJECTIVES TO DECIDE ON A PRODUCT STRATEGY
Strategies the product plan outlines spell out how the firm expects Manage Products
to develop a value proposition that will meet marketing
objectives. The continual process of product management
guides product planning , which is the systematic and usually
team-based approach to coordinating all aspects of a product’s
marketing initiative including all elements of the marketing mix.
In some companies, product management is sometimes also called
brand management, and the terms refer to essentially the same
thing. The organization members that coordinate these processes
are called product managers or brand managers.
Clearly stated product objectives provide focus and direction.
They should support the broader marketing objectives of the
business unit in addition to being consistent with the firm’s
overall mission. To be effective, product-related objectives must
be measurable, clear and unambiguous—and feasible. In addition,
they must indicate a specific period. Above all, these objectives
should consider the long-term implications of product decisions.
Planners who sacrifice the long-term health of the firm to reach
short-term sales or financial goals choose a risky course. Product
planners may focus on one or more individual products at a time,
or they may look at a group of product offerings as a whole.
2.1
Objectives and Strategies for Individual Products
Some product strategies focus on a single new product. Strategies
for individual products may be quite different for new products,
for regional products, and for mature products. For new products,
the objectives relate to successful introduction. For mature
products, product objectives may focus on breathing new life into
a product while holding on to the traditional brand personality.
For products that have achieved success at the local or regional
market, it may be decided to introduce them nationally.
2.2
Objectives and Strategies for Multiple Products
A larger firm often sells a set of related products. This means that
strategic decisions affect two or more products simultaneously.
The firm must think in terms of its entire portfolio of products.
Product planning means developing product line and product mix
strategies encompassing multiple offerings.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Figure 9.2
Objectives for
Single and
Multiple Products
Part 3: Create the Value Proposition
A product line is a firm’s total product offering to satisfy a group
of target customers. The number of separate items within the
same category determines the product line length. We describe a
large number of variations in a product line as a full line that
targets many customer segments to boost sales potential. A
limited-line strategy, with fewer product variations, can improve
the firm’s image if consumers perceive it as a specialist with a
clear, specific position in the market. Organizations may decide to
extend their product line by adding more brands or models when
they develop product strategies.
When a firm stretches its product line, it must decide on the best
direction to go. If a firm’s current product line includes middle
and lower-end items, an upward line stretch adds new items—
higher priced entrants that claim better quality or that offer more
bells and whistles. Conversely, a downward line stretch augments
a line when it adds items at the lower end. Here the firm must take
care not to blur the images of its higher-priced, upper-end
offerings. In some cases, a firm may decide that its target is too
small a market. In this case, the product strategy may call for a
two-way stretch that adds products at both the upper and lower
ends. A filling-out strategy adds sizes or styles not previously
available in a product category. In other cases, the best strategy
may be to contract a product line, particularly when some of the
items are not profitable.
Whenever a manufacturer extends a product line or a product
family, there is risk of cannibalization. This occurs when the
new item eats up sales of an existing brand as the firm’s current
customers simply switch to the new product.
Use Website Here: http://www.pg.com/en_US/brands/all_brands.shtml
P&G example of long and wide product lines
Use Website Here: http://marriott.com/hotel-search.mi. Click on different brands and note the
different target market and positioning of the product lines.
p. 249
2.3
Product Mix Strategies
A firm’s product mix describes its entire range of products.
When they develop a product mix strategy, planners usually
consider the product mix width: the number of different product
lines the firm produces. If it develops several different product
lines, a firm reduces the risk of putting all its eggs in one basket.
Normally, firms develop a mix of product lines that have some
things in common.
p. 250
Timberland ad
2.4
Quality as a Product Objective: The Science of TQM
Product objectives often focus on product quality: the overall
ability of the product to satisfy customers’ expectations. Quality
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Chapter 9: Manage the Product
is tied to how customers think a product will perform, and not
necessarily to some technological level of perfection. Product
quality objectives coincide with marketing objectives for higher
sales and market share and to the firm’s objectives for increased
profits.
The total quality management (TQM) revolution in American
industry is a business philosophy that calls for company-wide
dedication to the development, maintenance, and continuous
improvement of all aspects of the company’s operations.
p. 250
TQM firms promote the attitude among employees that everybody
working there serves its customers—even employees who never
interact with people outside the firm. In such cases, employees’
customers are internal customers—other employees with whom
they interact. In this way, TQM maximizes customer satisfaction
by involving all employees, regardless of their function, in efforts
to continually improve quality.
2.5
Quality Guidelines
Around the world, many companies look to the uniform standards
of the International Organization for Standardization (ISO) for
quality guidelines. The ISO 9000 is a broad set of guidelines that
establishes voluntary standards for quality management. These
guidelines insure that an organization’s products conform to the
customer’s requirements. In 1996, the ISO developed ISO 14000
standards, which concentrate on “environmental management.”
This means the organization works to minimize any harmful
effects it may have on the environment.
One way that companies can improve quality is to use the Six
Sigma method. The term Six Sigma comes from the statistical
term sigma, which is a standard deviation from the mean. Six
Sigma refers to six standard deviations from a normal distribution
curve. In practical terms, that translates to no more than 3.4
defects per million—getting it right 99.9997 percent of the time.
As you can imagine, achieving that level of quality requires a
very rigorous approach (try it on your term papers—even when
you use spell-check!), and that is what Six Sigma offers. The
method involves a five-step process called “DMAIC” (define,
measure, analyze, improve, and control).
In some cases, product quality means durability. Reliability also is
an important aspect of product quality. For many customers, a
product’s versatility and its ability to satisfy their needs are
central to product quality. For other products, quality means a
high degree of precision. Quality, especially in business-to-
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Figure 9.3
Product Quality
Snuggie blanket ad
Part 3: Create the Value Proposition
p. 252
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business products, also relates to ease of use, maintenance, and
repair. Yet, another crucial dimension of quality is product safety.
Finally, the quality of products such as a painting, a movie, or
even a wedding gown relates to the degree of aesthetic pleasure
they provide. Of course, evaluations of aesthetic quality differ
dramatically among people: To one person, quality a mobile
device may mean simplicity, ease of use, and a focus on reliability
in voice signal (think a basic Samsung or LG flip phone), while to
another it’s the cornucopia of applications and multiple
communication modes available (think Apple iPhone).
3.
MARKETING THROUGHOUT THE PRODUCT
LIFE CYCLE
The product life cycle (PLC) is a useful way to explain how the
market’s response to a product and marketing activities change
over the life of a product. Product marketing strategies must
evolve and change as they continue through the product life cycle.
3.1
The Introduction Stage
In the introduction stage, customers get the first chance to
purchase the good or service. During this early stage, a single
company usually produces the product.
During the introduction stage, the goal is to get first-time buyers
to try the product. Sales (hopefully) increase at a steady but slow
pace. The company usually does not make a profit during this
stage. Research-and-development (R&D) costs and heavy
spending for advertising and promotional efforts cut into revenue.
During the introduction stage, pricing may be high to recover the
R&D costs or low to attract large numbers of consumers. An
introduction stage can be quite long. Many products never make it
past the introduction stage.
p. 254
Marketing during this stage often focuses on informing
consumers about the product, how to use it, and its promised
benefits. However, it is not as easy as it sounds: Would you
believe that the most recent data indicate that as many as 95
percent of new products introduced each year fail?
3.2
The Growth Stage
In the growth stage, sales increase rapidly while profits increase
and peak. Marketing’s goal is to encourage brand loyalty by
convincing the market that this brand is superior to others. In this
stage, marketing strategies may include the introduction of
product variations to attract market segments and increase market
share.
When competitors appear, marketers must use heavy advertising
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Amy Winehouse
ad
Figure 9.4
The Product Life
Cycle
Figure 9.4
Marketing Mix
Strategies through
the Product Life
Cycle
3 Musketeers
Candy Bar ad
Chapter 9: Manage the Product
p. 254
and other types of promotion. Price competition may develop,
driving profits down. If pricing was set high initially, it may be
reduced to meet the increasing competition.
3.3
The Maturity Stage
The maturity stage of the product life cycle is usually the
longest. Sales peak and then begin to level off and even decline
while profit margins narrow. Competition grows intense when
remaining competitors fight for their share of a shrinking pie.
Price reductions and reminder advertising may be used to
maintain market share. Sales are often to replace a “worn-out”
item or to take advantage of product improvements. During the
maturity stage, firms will try to sell their product through as many
outlets as possible because availability is crucial in a competitive
market.
To remain competitive and maintain market share during the
maturity stage, firms may tinker with the marketing mix in order
to extend this profitable phase for their product.
►Marketing Moment In-Class Activity
Pick a variety of products in the mature stage (ketchup, salad dressing, laundry detergent, etc) and
have students brainstorm product “improvements” to maintain consumer interest in the product
(such as colored Ketchup, scented laundry detergent, etc.)
p. 254
Gillette Fusion ad
3.4
The Decline Stage
The decline stage of the product life cycle is characterized by a
decrease in product category sales. Although a single firm may
still be profitable, the market as a whole begins to shrink, profits
decline, there are fewer variations of the product, and suppliers
pull out. In this stage, there are usually many competitors, with
none having a distinct advantage.
A firm’s major product decision in the decline stage is whether to
keep the product. If the firm decides to keep the product,
advertising and other marketing communications may be
decreased to cut costs, and prices may be reduced if the product
can remain profitable.
If the firm decides to drop the product, it can eliminate it in two
ways: 1) phase it out by cutting production in stages and letting
existing stocks run out, or 2) simply dump the product
immediately.
E-commerce is now a significant factor for marketing. Some
products that would have died a natural death in brick-and-mortar
stores continue to sell on-line to a cadre of fans, backed by zero
marketing support (translation: high profits for the manufacturer).
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Part 3: Create the Value Proposition
p. 255
4.
CREATE PRODUCT IDENTITY: BRANDING
DECISIONS
Successful marketers keep close tabs on their products’ life cycle
status, and they plan accordingly. Equally important, though, is to
give that product an identity and a personality.
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4.1
What’s in a Name (or a Symbol)?
A brand is a name, a term, a symbol, or any other unique element
of a product that identifies one firm’s product (s) and sets it apart
from the competition.
The Cutting Edge:
iPad’s Branding
Strategy Had
Some “Bugs”
How does a firm select a good brand name? Good brand designers
say there are four “easy” tests: easy to say, easy to spell, easy to
read, and easy to remember. The name should also “fit” four
ways: Fit the target market, Fit the product’s benefits, Fit the
customer’s culture, and Fit legal requirements.
When it comes to graphics for a brand symbol, name, or logo, the
rule is that it must be recognizable and memorable. In addition, it
should have visual impact.
Discussion: Identify five of your favorite brand names. List reasons for selecting these brand
names.
A trademark is the legal term for a brand name, brand mark, or
trade character. The symbol for legal registration in the United
States is a capital “R” in a circle: ®. Marketers register trademarks
to make their use by competitors illegal.
A firm can claim protection for a brand even if it has not legally
registered it. In the United States, common-law protection exists if
the firm has used the name and established it over a period of
time.
p. 257
Use the following website for examples of well known
trademarks:
http://www.frompatenttoprofit.com/trademarkexamples.htm
4.2
Why Brands Matter
A brand is a lot more than just the product it represents—the best
brands build an emotional connection with their customers.
Marketers spend huge amounts of money on new-product
development, advertising, and promotion to develop strong
brands. When they succeed, this investment creates brand equity.
This term describes a brand’s value over and above the value of
the generic version of the product.
Marketers identify different levels of loyalty, or lack thereof, by
observing how customers feel about the product. At the lowest
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Chapter 9: Manage the Product
level, customers really have no loyalty to a brand and they will
change brands for any reason—often they will jump ship if they
find something else at a lower price. At the other extreme, some
brands command fierce devotion, and loyal users will go without
rather than buy a competing brand.
The truly successful brands, however, are those that truly “bond”
with their customers so that people feel they have a real
relationship with the product. Here are some of the types of
relationships a person might have with a product:
 Self-concept attachment
 Nostalgic attachment
 Interdependence
 Love
Ultimately, the way to build strong brands is to forge strong bonds
with customers—bonds based on brand meaning. This concept
encompasses the beliefs and associations that a consumer has
about the brand. In many ways, the practice of brand management
revolves around the management of meanings. Brand managers,
advertising agencies, package designers, name consultants, logo
developers, and public relations firms are just some of the
collaborators in a global industry devoted to the task of meaning
management.
Brand equity means that a brand enjoys customer loyalty because
people believe it is superior to the competition. For a firm, brand
equity provides a competitive advantage because it gives the
brand the power to capture and hold on to a larger share of the
market and to sell at prices with higher profit margins.
Nowadays, for many consumers brand meaning builds virally as
people spread its story online. The method of brand storytelling
captures the notion that powerful ideas do self-propagate when the
audience is connected by digital technology. It conveys “the
constant reinvention inherent in interactivity in that whether it’s
blogging, content creation through YouTube or other means, or
social media, there will always be new and evolving perceptions
and dialogues about a brand real-time.
The following is a list of ten characteristics of the world’s top
brands:
1. The brand excels at delivering the benefits
customers truly desire.
2. The brand stays relevant.
3. The pricing strategy is based on consumers’
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Table 9.1
Dimensions of
Brand Meaning
Part 3: Create the Value Proposition
perceptions of value.
4. The brand is properly positioned.
5. The brand is consistent.
6. The brand portfolio and hierarchy make sense.
7. The brand makes use of and coordinates a full
repertoire of marketing activities to build equity.
8. The brand’s managers understand what the brand
means to consumers.
9. The brand is given proper support, and that support
is sustained over the long run.
10. The company monitors sources of brand equity.
Because of the existing brand equity, a firm is able to sell its brand
extension at a higher price than if it had given it a new brand, and
the brand extension will attract new customers immediately. Of
course, if the brand extension does not live up to the quality or
attractiveness of its namesake brand equity will suffer, as will
brand loyalty and sales. One other related approach is subbranding, or creating a secondary brand within a main brand that
can help differentiate a product line to a desired target group.
Sometimes a brand’s meaning simply becomes so entrenched with
a particular consumer group that it can be tough to find ways to
branch out and achieve new users through extensions.
Activity:
Ask students to develop a list of possible new brand extensions for the following products:
 Pepsi
 Band-Aid
 Kool-Aid
►Marketing Moment In-Class Activity
Ask students to identify the top brands in their mind (it may be Abercrombie, Guess, or a B2B like
FedEx or UPS). How does the brand illustrate these top 10 characteristics? For example, FedEx is
expensive but worthwhile (value) for fast, reliable delivery; FedEx is consistent (same colors),
FedEx is positioned properly (upscale, expensive delivery service), etc.
p. 259
Figure 9.6
4.3
Branding Strategies
Because brands contribute to a marketing program’s success, a
Branding
major part of product planning is to develop and execute branding
Strategies
strategies. Marketers have to determine which branding strategy
approach(es) to use. Figure 9.6 illustrates the options: individual or Campbell’s
family brands, national or store brands, generic brands, licensing,
Chunk Soup ad
and co-branding.
p. 260
4.4
Individual Brands Versus Family Brands
Part of developing a branding strategy is to decide whether to use a
separate, unique brand for each product item—an individual brand
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Chapter 9: Manage the Product
p. 260
p. 261
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strategy—or to market multiple items under the same brand
name—a family brand or umbrella brand strategy. Individual
brands may do a better job of communicating clearly and concisely
what the consumer can expect from the product, while a wellknown company like Apple may find that its high brand equity in
other categories (like computers) can sometimes “rub off” on a
new brand (like the iPod and iPhone). The decision often depends
on characteristics of the product and whether the company’s
overall product strategy calls for introduction of a single, unique
product or for the development of a group of similar products.
4.5
National and Store Brands
Retailers today often are in the driver’s seat when it comes to
deciding what brands to stock and push. In addition to choosing
from producers’ brands, called national or manufacturer brands,
retailers decide whether to offer their own versions. Private-label
brands, also called store brands, are the retail store’s or chain’s
exclusive trade name. Wal-Mart, for example, sells store brand
Sam’s Cola and Sam’s cookies along with national brands such as
Coke and Oreos. During the recent recession store brands gained
substantially in popularity for many value-conscious shoppers, and
the projection is that many consumers will not switch back to the
parallel national brands as the economy rebounds because they are
satisfied with the private labels.
4.6
Generic Brands
An alternative to either national or store branding is generic
branding, which is no branding at all. Generic branded products
are typically packaged in white with black lettering that names
only the product itself (for example, “Green Beans”). Generic
branding is one strategy to meet customers’ demand for the lowest
prices on standard products such as dog food or paper towels.
Generic brands first became popular during the inflationary period
of the 1980s when consumers became especially price conscious
because of rising prices. Lately, they have experienced resurgence
with the soft economy.
4.7
Licensing
Some firms choose to use a licensing strategy to brand their
products. This means that one firm sells another firm the right to
use a legally protected brand name for a specific purpose and for a
specific period. Why should an organization sell its name?
Licensing can provide instant recognition and consumer interest in
a new product, and this strategy can quickly position a product for
a certain target market as it trades on the high recognition of the
licensed brand among consumers in that segment. A familiar form
of licensing occurs when movie producers license their properties
to manufacturers of a seemingly infinite number of products.
4.8
Co-branding
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Jelly Belly ad
Part 3: Create the Value Proposition
p. 262
Co-branding benefits both partners when combining the two brands
provides more recognition power than either enjoys alone. A new
and fast-growing variation on co-branding is ingredient branding
in which branded materials become “component parts” of other
branded products.
4.9 Brand Metrics
Companies, marketing research firms, and creative agencies create
metrics of brand equity because this is an important way to assess
whether a branding strategy has been successful.
Each of the following approaches to measuring brand equity has
some good points and some bad points:
1. Customer mind-set metrics focus on consumer awareness,
attitudes, and loyalty toward a brand.
2. Product-market outcome metrics focus on the ability of a
brand to charge a higher price than the one unbranded
equivalent charges.
3. Financial market metrics consider the purchase price of a
brand if it is sold or acquired.
4. A team of marketing professors proposed a simpler
measure that they claim reliably tracks the value of a brand
over time. Their revenue premium metric compares the
revenue a brand generates with the revenue generated by a
similar private-label product (that doesn’t have any brand
identification). In this case, brand equity is just the
difference in revenue (net price times volume) between a
branded good and a corresponding private label.
Use Website Here: http://www.happymeal.com Example of co-branding with McDonald’s.
p. 262
Figure 9.7
5. CREATE PRODUCT IDENTITY: THE PACKAGE AND
Functions of
LABEL
Packaging
p. 263
5.1
What Packages Do
A package is the covering or container for a product, but it is also Edy’s Ice Cream
a way to create a competitive advantage. Therefore, the important ad
functional value of a package is that it protects the product. In
addition to protecting the product, effective packaging makes it
easy for consumers to handle and store the product.
Over and above these utilitarian functions, however, the package
communicates brand personality. Effective product packaging
uses colors, words, shapes, designs, and pictures to provide brand
and name identification for the product. In addition, packaging
provides product facts including flavor, fragrance, directions for
use, suggestions for alternative uses (for example, recipes), safety
warnings, and ingredients. Packaging may also include warranty
information and a toll-free telephone number for customer
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Chapter 9: Manage the Product
service.
p. 264
A final communication element is the Universal Product Code
(UPC), which is the set of black bars or lines printed on the side
or bottom of most items sold in grocery stores and other massmerchandising outlets. The UPC is a national system of product
identification. It assigns each product a unique 10-digit number.
5.2
Design Effective Packaging
Effective package design involves a multitude of decisions.
Planners must consider the packaging of other brands in the same
product category.
Fuji Waterproof
Camera ad
Sephora Aztec
Code photo
Firms that wish to act in a socially responsible manner must also
consider the environmental impact of packaging. Some firms are
developing innovative green packaging that is less harmful to the
environment than other materials.
p. 265
Finally, there are many specific decisions brand managers must
make to ensure a product’s packaging reflects well on its brand
and appeals to the intended target market.
5.3
Labeling Regulations
The Federal Fair Packaging and Labeling Act of 1966 controls
package communications and labeling in the United States. This
law aims to make labels more helpful to consumers by providing
useful information. More recently, the requirements of the
Nutrition Labeling and Education Act of 1990 forced food
marketers to make sweeping changes in how they label products.
Since August 18, 1994, the U.S. Food and Drug Administration
(FDA) requires most foods sold in the United States to have labels
telling, among other things, how much fat, saturated fat,
cholesterol, calories, carbohydrates, protein, and vitamins are in
each serving of the product.
Ripped From the
Headlines: Ethical/
Sustainable
Decisions in the
Real World
Pain Reliever PM
photo
As of January 1, 2006, the FDA also requires that all food labels
list the amount of trans fats in the food, directly under the line for
saturated fat content.
p. 266
6.
ORGANIZE FOR EFFECTIVE PRODUCT
MANAGEMENT
Like all elements of the marketing mix, product strategies are
only as effective as their managers make them and carry them out.
p. 266
6.1
Manage Existing Products
In small firms, a single marketing manager usually handles the
marketing function. She is responsible for new-product planning,
advertising, working with the company’s few sales
representatives, marketing research, and just about everything
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Figure 9.8
Types of Product
Management
Part 3: Create the Value Proposition
else. However, in larger firms, there are a number of managers
who are responsible for different brands, product categories, or
markets.
p. 266
6.2
Brand Managers
Each brand may have its own brand manager who coordinates
all marketing activities for a brand; these duties include
positioning, identifying target markets, research, distribution,
sales promotion, packaging, and evaluating the success of these
decisions.
p. 266
6.3
Product Category Managers
Some larger firms have such diverse product offerings that they
need coordination that is more extensive. Organizing for product
management may include product category managers, who
coordinate the mix of product lines within the more general
product category and who consider the addition of new-product
lines based on client needs.
p. 267
p. 267
6.4
Market Managers
Some firms have developed a market manager structure in
which different people focus on specific customer groups rather
than on the products the company makes. This type of
organization can be useful when firms offer a variety of products
that serve the needs of a wide range of customers.
6.5
Organize for New-Product Development
Because launching new products is so important, the management
of this process is a serious matter. In some instances, one person
handles new-product development, but within larger
organizations, new-product development usually requires many
people. Often especially creative people with entrepreneurial
skills get this assignment.
The challenge in large companies is to enlist specialists in
different areas to work together in venture teams. These teams
focus exclusively on the new-product development effort.
p. 267
REAL PEOPLE, REACH CHOICES: HERE’S MY CHOICE
AT GENERAL MILLS
David chose option #2.
Brand You: What makes you special? What makes your
brand unique? For example, do you describe yourself as
“good with people” or do you make the description into a
compelling advantage by saying you are a “collaborative
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Chapter 9: Manage the Product
problem solver?” Turn your features into benefits that a
company wants by creating your personal brand value
proposition. Chapter 9 in the Brand You supplement takes
you through this important process, which creates the
framework for your resume.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Part 3: Create the Value Proposition
IV. END-OF-CHAPTER ANSWER GUIDE
Chapter Questions and Activities
 CONCEPTS: TEST YOUR KNOWLEDGE
1. What are some reasons a firm might determine it should expand a product line? What are
some reasons for contracting a product line? Why do many firms have a product mix
strategy?
When a firm has a large number of product variations in its product line, it is said to carry a
full line. A company that adopts a limited line strategy markets a smaller number of product
variations. In developing product strategies, organizations may decide to extend their product
line—that is, add more items to an existing product line. Alternatively, if the company does
decide to stretch its product line, it must decide on the best direction to extend it. It can go
upward to top–of-the-line items, downward to items on the lower end, do both by
implementing a two-way stretch, or follow a filling-out strategy where only certain items are
added to fill holes in the line. Contraction of the product line normally occurs when the
company wants to remove unprofitable items from the line. A product mix is the total set of
all products offered for sale by a firm, including all product lines sold to all customer groups.
A product mix strategy is necessary because of all the possible products that can be carried in
a company’s product line. Coordination of marketing efforts becomes essential.
2. Why is quality such an important product strategy objective? What are the dimensions of
product quality? How has e-commerce affected the need for quality product objectives?
Product objectives often address product quality or the product’s ability to satisfy customers.
Product quality is tied to customer expectations of product performance. It can mean
durability, reliability, degree of precision, ease of use and repair, safety, or degree of
aesthetic pleasure. Product quality objectives are likely to focus on the level and the
consistency of product quality. E-commerce has allowed consumers and companies to
exchange information in ways never before possible in the past. There are chat rooms,
product-rating sites, shopping bots, and almost instant contact possibilities with companies. If
a customer is unhappy with quality, he or she can tell many people about concerns via e-mail
or even a website. Sharing negative experiences is a big problem for some companies. See
Figure 9.4 for more information.
3. Explain the product life cycle concept. What are the stages of the product life cycle?
The four-stage product life cycle (PLC) concept helps to explain the diffusion of an
innovation. The first or introduction stage is characterized by slow growth. The growth stage
is characterized by increased sales, decreasing prices, high profits, and product
improvements. The maturity stage shows indications that the products’ sales are leveling off,
new competitors are not entering the market, and the leading firms improve product quality
while decreasing price. During the decline stage, sales continue to decrease and many firms
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Chapter 9: Manage the Product
abandon the product. See Figure 9.5 and 9.6 for a more detailed description of the product
life cycle concept and its phases or stages.
4. How are products managed during the different stages of the product life cycle?
Phases:




Introduction—the goal in this stage is to get first-time buyers to try the product. Prices
are often high in this stage and profits are nonexistent.
Growth—in this phase marketing strategies may include the introduction of product
variation to attract market segments and grow market share. Heavy advertising is also
necessary as competition increases.
Maturity—sales have peaked, profit margins begin to narrow, and competition is intense
and shrinking. To remain competitive and maintain market share, firms may tinker with
the marketing mix, especially the product. Attracting new users is also crucial in this
phase.
Decline—the major decision is whether or not to keep the product. Decisions regarding
how to phase out the product must be made.
5. What is a brand? What are the characteristics of a good brand name? How do firms protect
their brands?
A brand is a name, a term, a symbol, or any other unique element of a product that identifies
one firm’s product(s) and sets it apart from the competition. Brands are important because
they help to develop and maintain customer loyalty and create value or brand equity. A brand
should be selected that has a positive connotation, is memorable, reproducible, and
recognizable, and can be legally protected. In addition, the brand name should be easy to say,
easy to spell, easy to read, and easy to remember. Lastly, the brand should fit the target
market, fit the product’s benefits, fit the consumer’s culture, and fit legal requirements. To
protect a product legally, the brand name or symbol or other distinctive aspects can receive
legal trademark protection.
6. What is a national brand? A store brand? Individual and family brands?
The types of brands are:




National or manufacturer brand—brand name owned by the manufacturer.
Private distributor or store brand—brand name used for products sold by a certain
retailer.
Family brand—a brand used with a number of different product lines.
Individual brand—a brand used for one product only.
7. What does it mean to license a brand? What is co-branding?
Some firms choose to use licensing to brand their products. Typically, a licensing agreement
means that one firm sells another firm the right to use a legally protected brand name for a
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Part 3: Create the Value Proposition
specific purpose and for a specific period. Firms choose a licensing strategy because it can
provide instant recognition and consumer interest and it can be important in positioning a
product to a particular market segment. Co branding benefits partners when combining two
brands provides more recognition power than either one enjoys alone.
8. What are the functions of packaging? What are some important elements of effective
package design?
A package is the covering or container for a product and serves to protect a product and
allow for easy use and storage. In addition, the colors, words, shapes, designs, pictures, and
materials used in the package design communicate a product’s identity, benefits, and other
important product information. Package designers must consider cost, product protection,
and communication in creating a package that is functional, aesthetically pleasing, and not
harmful to the environment. See Figure 9.8 for additional details.
9. What should marketers know about package labeling?
Labels should:



Help consumers by providing useful information.
Be legally responsible in their description of their product.
Be accurate.
10. Describe some of the different ways firms organize the marketing function to manage
existing products. What are the ways firms organize for the development of new products?
One way that firms manage existing products is with individual brand managers who
supervise all the marketing activities for a single brand. Other firms may include product
category managers to coordinate the activities of individual brands. Sometimes firms feel that
it is best to focus on specific customer groups and structure product management with a
number of market managers. In large firms, new product managers can develop marketing
for the many different new products the firm develops New products can also be managed by
venture teams, groups of specialists from different areas who work together for a single new
product. Finally, new product development may be the result of partnering, in which two (or
more) different companies form an alliance and work together to create a new product.
ACTIVITIES: APPLY WHAT YOU’VE LEARNED
1. The Internet allows consumers to interact directly through blogs and other means with other
people so they can praise products they like and slam those they do not. With several of your
classmates, conduct a brief survey of students and of older consumers. Find out if consumers
complain to each other about poor product quality. Have they ever used a website to express
their displeasure over product quality? Make a report to your class.
This application should be of interest to students. Who among them has not experienced
frustration or even anger toward products with low quality? The Internet (as shown in the
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Chapter 9: Manage the Product
chapter) is a great way to vent such frustration or anger. Blogs are another avenue that
individuals now have to share feelings on any topic. The survey should not be difficult to
conduct (be sure to follow the guidelines of human subjects testing as prescribed by your
university or college). However, before conducting such a survey, be sure to carefully think
through the questions that are to be asked so common comparisons will make sense. Once the
survey is completed, discussion in the classroom can begin. If there is time, go to any one of
a number of “slam” sites to see what people are saying about products (try
www.homedepotsucks.com—an interesting site from one irate consumer).
2. You may think of your college or university as an organization that offers a line of different
educational products. Assume that you have been hired as a marketing consultant by your
university to examine and make recommendations for extending its product line. Develop
alternatives that the university might consider:
a. Upward line stretch
b. Downward line stretch
c. Two-way stretch
d. Filling-out strategy
Describe how each might be accomplished. Evaluate each alternative.
Make it clear what your expectations are with this question. Do you want students to consider
educational products such as degree programs/courses or do you want physical products that
can be licensed. Most will choose educational products. For the upward stretch, consider
adding graduate programs of some type (these are generally more expensive with respect to
tuition and more prestigious). The downward stretch could be technical training, work skills,
or a two-year program. The two-way stretch could be both or extension campuses could be
added. The filling-out strategy could be adding courses or majors that do not now exist.
Evaluations of each alternative should follow.
3. Assume that you are the vice president of marketing for a firm that markets a large number of
specialty food items (gourmet sauces, marinades, relishes, and so on). Your firm is interested
in improving its marketing management structure. You are considering several alternatives: a
brand manager structure, having product category managers, or focusing on market
managers. Outline the advantages and disadvantages of each type of organization. What is
your recommendation?
A good place for students to begin to collect data to answer the above is to reference the text.
Marketing management structures are reviewed in the latter portion of the chapter. This
question would be a good group activity because of the number of decisions that must be
reached and the number of alternatives that must be evaluated. Some instructors prefer to use
role-play for this question. In any event, the students will be able to see that product
management is an interesting and crucial field in overall marketing management.
4. Assume that you are working in the marketing department of a major manufacturer of
athletic shoes. Your firm is introducing a new product, a line of disposable sports clothing.
That’s right – wear it once and toss it! You wonder if it would be better to market the line of
clothing with a new brand name or use the family brand name that has already gained
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Part 3: Create the Value Proposition
popularity with your existing products. Make a list of the advantages and disadvantages of
each strategy. Develop your recommendation.
This exercise somewhat follows the rationale developed in the chapter with respect to
product line extension and quality issues. As product lines are extended, a brand grows.
There are benefits from extensions (as the students will list); however, watering-down a
brand name is also a hazard. This is especially true if the new line extension is perceived as
radically different or inferior to the core line. Switching to an alternative brand name, while
losing certain extension advantages, does have merit. Students should be able to effectively
argue these points.
5. Assume Kellogg, the cereal manufacturer, has recently hired you. You have been asked to
work on a plan for redesigning the packaging for Kellogg’s cereals. In a role-playing
situation, present the following report to your marketing superior:
a. Discussion of the problems or complaints customers have with current packaging
b. Several different package alternatives
c. Your recommendations for changing packaging or for keeping the packaging the
same
Before beginning this exercise, it is suggested that students visit a grocery store to familiarize
themselves with packaging of Kellogg’s and other cereal brands. The students will notice
color, jazzy names, contests, and other gimmicks that normally are associated with cereal
merchandising. However, ask students to also look for alternative packaging such as foil
pouches, plastic tubes, or even plastic or glass jars of cereal. This may spur their creativeness
when it comes to offering packaging alternatives. Lastly, if students will go to the websites of
the various national cereal manufacturers (such as Kellogg’s, C.W. Post, Nabisco, or Quaker
Oats), the students will often find a historical display of name brands and packaging over the
years. Some cereal brands are fifty to seventy-five years old and have gone through many
changes.
MARKETING
METRICS EXERCISE
The chapter introduces you to the concept of brand equity, an important measurement of the
value vested in a product’s brand in-and-of-itself. Different formulas for calculating brand equity
exist. One well-publicized approach is that of Interbrand, which annually publishes its Best 100
Global Brands list. Go to the location on the Interbrand website where they provide these
rankings for the present and past years (http://www.interbrand.com/best_global_brands.aspx).
Peruse the list of brands and select any five for which you have interest. For each, observe
whether brand equity has been trending up or down over the past few years. How does
Interbrand explain the changes (or stability) in each? Do you agree with Interbrand’s assessment
or do you have another opinion why your brand’s equity is what it is?
This will prove to be a very interesting activity for most students—many brands on this list
inspire strong emotional response from many students. An interesting additional assignment
would be to develop a paper in which students expand on their prediction of future trending for
specific brands.
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Chapter 9: Manage the Product
 CHOICES: WHAT DO YOU THINK?
1. Brand equity means that a brand enjoys customer loyalty, perceived quality, and brand name
awareness. To what brands are you personally loyal? What is it about the product that creates
brand loyalty, and thus, brand equity?
Brand equity is a brand’s value to the organization. For Coca-Cola, IBM, Intel, McDonald’s,
Pepsi Cola, or Taco Bell, brand equity is one of the most important assets that the company
owns. Have students make a list of brands they are loyal to, automobiles or trucks,
computers, small electronic appliances, personal care products, large electronic appliances
(like a television), music equipment (like a CD player), clothing, fragrances, or restaurants.
Once the lists have been constructed, have students describe what it is about the product or
service that creates brand loyalty. What could a marketer learn from the lists if he or she
wanted to create brand loyalty for a new product?
2. Quality is an important product objective, but quality can mean different things for different
products, such as durability, precision, aesthetic appeal, and so on. What does quality mean
for the following products?
a. Automobile
b. Pizza
c. Running shoes
d. Hair dryer
e. Deodorant
f. College education
Each student will have different impressions of what quality means for these products. What
would be the value of these impressions? The impressions point out to the marketer a variety
of issues that must be addressed in promotion and segmentation if the consumer is truly to be
reached. If competitors reach the consumer with better quality statements and messages, then
the competitors will probably get the consumer’s business. Observe how many students put
down more than one characteristic for each of the above items.
3. Many times firms take advantage of their popular, well-known brands by developing brand
extensions because they know that the brand equity of the original or parent brand will be
transferred to the new product. If a new product is of poor quality, it can damage the
reputation of the parent brand while a new product that is of superior quality can enhance the
parent brand’s reputation. What are some examples of brand extensions that have damaged
and that have enhanced the parent brand equity?
Some examples to get the discussion started are:

Positive examples—Reese’s, the maker of Reese’s Peanut Butter Cups candy, is now
marketing a line of peanut butter; Grey Poupon, a product of the Nabisco Foods
Group, has added salad dressings to its traditional mustard offerings; Bull’s Eye Steak
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Part 3: Create the Value Proposition
Sauce is an extension of the Bull’s Eye Bar-B-Que sauce; Harley-Davidson has a line
of male fragrances.

Negative examples—New Coke’s addition to the established Coca-Cola line as a
potential replacement for what is now called Coca-Cola Classic; in the 1980s Cadillac
produced a “mini-Cadillac” to offset declining sales to imports and the Cadillac buyer
saw it as an inferior and cheap version of the American classic luxury car.
4. Sometimes marketers seem to stick with the same packaging ideas year after year, regardless
of whether they are the best possible design. Following is a list of products. For each one,
discuss what, if any, problems you have with the package of the brand you use. Then think of
ways the package could be improved. Why do you think marketers do not change the old
packaging? What would be the results if they adopted your package ideas?
a. Dry cereal
b. Laundry detergent
c. Frozen orange juice
d. Gallon of milk
e. Potato chips
f. A loaf of bread
To do this project it would probably be better to place the students in small groups and let
them exchange their ideas and present the results to the class. Common problems that the
students will have experienced with packages are that the packages are often difficult to get
into, they tear too easily, they won’t reseal, they leak, they cause spilling or dripping, and
they don’t fit the place where they will be stored. Remind the students the function of
packages and the costs associated with producing and then changing a package. From a
reseller perspective, packages must also fit into shelves in stores and must be stackable (in
most instances). Ask the students if they can name some of the communication advantages
and disadvantages to changing a package design. Can they remember a package change
recently for one of their favorite products? What did they like or not like about the change in
packaging?
5. You learned in this chapter that it is hard to legally protect brand names across product
categories—Quaker and Apple, for example, and Delta—which is an airline and a faucet.
However, what about the ethics of borrowing a name and applying it to some unrelated
products? Think of some new business you might like to start up. Now consider some
possible names for the business that are in use as brands in other unrelated categories. Do
you think it would be ethical to borrow one of those names? Why or why not?
Students may have strong opinions on this question, resulting in some heated discussion. You
might ask students to visit the web to determine if the examples of dual brand names existing
in the marketplace were accidental or purposeful. This might also be a good time to discuss
how firms seek to prevent their brand name from becoming a generic name for a product
category. How many of them go to the store to buy Kleenex even if not that brand of tissues?
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Chapter 9: Manage the Product
MINI-PROJECT: LEARN BY DOING
In any supermarket in any town, you will surely find examples of all the different types of brands
discussed in this chapter: individual brands, family brands, national brands, store brands, and cobranded and licensed products. This mini-project is designed to give you a better understanding
of branding as it exists in the marketplace.
1. Go to a typical supermarket in your community.
2. Select two product categories of interest to you: ice cream, cereal, laundry detergent, soup,
paper products, and so on.
3. Make a list of the brands available in each product category. Identify what type of brand each
is. Count the number of shelf facings (the number of product items at the front of each shelf)
for each brand.
4. Arrange to talk with the store manager at a time that is convenient with him or her. Ask the
manager to discuss the following:
a. How the store decides which brands to carry
b. Whether the store is more likely to carry a new brand that is an individual brand
versus a family brand
c. What causes a store to drop a brand
d. The profitability of store brands versus national brands
e. Other aspects of branding that the store manager sees as important from a retail
perspective
5. Present a summary to your class on what you learned about the brands in your two product
categories.
The purpose of the mini-project listed in the chapter is to develop an understanding of
branding as it exists in the marketplace.
Through five specific questions (or exercises), individuals (or teams) are asked to review the
marketing practices of national manufacturers of grocery products (selected items are given
to the students) by visiting a local grocery store. During the visit, students are asked to make
lists of brands in chosen product categories and count shelf facings. Next, students should
interview a store manager about brand selection, positioning, new brands and products,
dropping brands or products, profitability issues for store brands versus national brands, and
general feelings about brand strategy. Students should conclude their project by writing a
descriptive report of their findings and experiences.
Instructors may wish to extend the deadline for this assignment so students have many
opportunities to visit, write their report, and report their findings.
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Part 3: Create the Value Proposition
V. MARKETING IN ACTION CASE: REAL CHOICES AT
STARBUCKS
Summary of Case
The Starbucks product selection includes drip brewed coffee, espresso-based hot drinks, other
hot and cold drinks, coffee beans, salads, hot and cold sandwiches and paninis, pastry, snacks,
and items such as mugs and tumblers. One of Starbuck's prominent brands that suffered in the
recession at the beginning of the 21st century is the Frappuccino. Dunkin' Donuts, McDonald's,
along with many other smoothie chains are readied for the challenge of the competitive retail
market. Due to the importance of the frappuccinos brand to Starbucks financial success, and the
resources of its closest competitors, any challenges to the brand are considered significant. In
response to the marketplace dynamics and the desire to grow, Starbucks is set to implement new
changes to the Frappuccino brand. The plans include customized Frappuccinos, Frappuccino ice
cream, new bottled versions, new "wacky" ingredients, and other products for the brand. When
Starbucks introduce the "however-you-want-it-Frappuccino" customization program, it offered at
a premium over the current choices. Starbucks also attempts to grow the brand through product
extensions (frappuccino-flavored ice creams, a bottled beverage, and new blends in China and
other Asian markets). Annie Young-Scrivner, global chief marketing officer for Starbucks,
maintains that one of the target markets for the Frappuccino is an 18 to 24 years old woman. The
customization option allows for calorie counting customers to create a non-fat milk, light syrup
and no whipped cream version with only 160 calories. The Frappuccino has an involved
preparation process and takes longer to produce than other Starbucks beverages. This may
present a problem if the new program is successful. The preparation may lead to long lines,
customer irritation, and slower-than-expected sales growth. Starbucks has questions to answer
concerning amongst other things, pricing, training, and competition.
Suggestions for Presentation
This case could be assigned for various out-of-class or in-class discussion activities.
Out of class
Compare and contrast the similarities and differences between Starbucks’ Frappuccino and other
similar competitors’ products from a marketing standpoint. Which would you buy?
Evaluate the strengths and weaknesses of Starbucks’ Frappuccino and other similar competitors’
products. Do you feel one is superior to the others?
In class
Discuss how the coffee industry is affected and influenced by the product life cycle.
As a class project, conduct a SWOT analysis focused on the marketing aspects for Starbucks.
Suggested Answers for Discussion Questions
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Chapter 9: Manage the Product
1. What is the decision facing Starbucks?

As the case mentions, Starbucks has questions to answer concerning pricing, training, and
competition in response to potential problems with its new "however-you-want-itFrappuccino" customization program--this may lead to long lines, customer irritation, and
slower-than-expected sales growth.
2. What factors are important in understanding this decision situation?
The following factors are important in understand this decision situation:







Dunkin' Donuts, McDonald's, along with many other smoothie chains are readied for the
challenge of the competitive retail market.
Like the terms “Kleenex” and “Band-Aid,” the word “Frappuccino” has become almost
generic and many customers think the product is readily transferable at different coffee
purveyors.
The Frappuccino brand is over 15 years old
Annie Young-Scrivner, global chief marketing officer for Starbucks, maintains that one
of the target markets for the Frappuccino is an 18 to 24 years old woman.
The customization option allows for calorie counting customers to create a non-fat milk,
light syrup and no whipped cream version with only 160 calories.
According to Young-Scrivner, this market is ideal for the custom-made frappuccino. She
told the Wall Street Journal "Millennials (otherwise known as Gen Y) are the iPod age
group… accustomed to selecting exactly what they want. Now, they can choose an extra
shot of espresso, no whipped cream, or a dab more caramel, for instance."
The Frappuccino has an involved preparation process and takes longer to produce than
other Starbucks beverages.
3. What are the alternatives?
Students might recommend a variety of different alternatives. Some possibilities are:



Abandon the new customized offering and revert to its original successful form of
delivery.
Expend a significant effort and allocate a large budget to a marketing campaign for this
new customized offering.
Conduct extensive marketing research to monitor customer attitudes about this new
customized offering in order to adjust its marketing strategy.
4. What decision(s) do you recommend?
Students may actually need to recommend more than one alternative in order to meet the
decision requirements. They should, however be encouraged to discuss which alternative actions
are more critical and the possible positive and negative outcomes of each alternative.
5. What are some ways to implement your recommendations?
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Part 3: Create the Value Proposition
Students may make a variety of suggestions for implementation depending on their
recommendations. These may include specific promotion activities, specific pricing, research
activities and many others.
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Chapter 9: Manage the Product
WEB RESOURCES
Prentice Hall support link: http://247.prenhall.com
Black and Decker product lines: http://www.blackanddecker.com
The ISO 14000 family addresses various aspects of environmental management:
http://www.iso.org/iso/iso_14000_essentials
DuPont helps package many of the world's top-selling products:
http://www2.dupont.com/Packaging/en_US//
History of Kool-Aid: http://www.hastingsmuseum.org/koolaid/kahistory.htm
Patent Office website: http://www.uspto.gov/
Pepsi products: http://www.pepsi.com/
Coke products: http://www.thecoca-colacompany.com/presscenter/newproducts.html
Examples of well-known trademarks:
http://www.frompatenttoprofit.com/trademarkexamples.htm
Marriott Hotels home page listing all hotel brands: http://www.marriott.com/hotel-search.mi
P&G example of long and wide product lines:
http://www.pg.com/en_US/brands/all_brands.shtml
Six Sigma information: http://www.isixsigma.com/sixsigma/six_sigma.asp
Universal Product Codes (UPC):
http://www.upccode.net/?engine=adwords!111&match=broad&keyword=upc+code&gclid=CP3
Planet feedback website: http://www.planetfeedback.com/
Example of co marketing with McDonald’s Happy Meals: http://www.happymeal.com
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