Download Chapter 10

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
After reading this chapter you should
be able to:
• 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
After reading this chapter you should
be able to:
• 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.
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PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
10 - 6
Product Life Cycle
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PPTs t/a Marketing: The Core by Kerin et al
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10 - 7
How stages of the product life cycle relate to a firm’s
marketing objectives and marketing mix actions
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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
10 - 10
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
10 - 11
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
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10 - 12
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
10 - 13
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
10 - 14
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
10 - 15
Decline Stage
Deletion
– 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
10 - 16
Gillette Mach3 Men’s Razors
What stage and shape in the (PLC)?
Mach3 (1998)
Mach3
Turbo (2001)
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PPTs t/a Marketing: The Core by Kerin et al
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Mach3 Turbo
GForce (2003)
10 - 17
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
– Fashion product
- low learning 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
10 - 18
Alternative product life cycles
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10 - 19
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
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10 - 20
Five categories and profiles of product
adopters
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10 - 21
Concept Check
1. Advertising plays a major role in the _____________ stage
of the product life cycle, and ____________ plays a major
role in maturity.
2. 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
10 - 22
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
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10 - 23
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
10 - 24
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
10 - 25
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
10 - 26
Concept Check
1. What does ‘creating new use situations’ mean in managing
a product’s life cycle?
2. 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
10 - 27
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
10 - 28
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
10 - 29
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
10 - 30
Customer-based brand equity pyramid
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10 - 31
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
10 - 32
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
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10 - 33
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.
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10 - 34
Black &
Decker Ad
What is Black
& Decker’s
branding
strategy?
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l
10- 35
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
– sub branding
- multi branding
- brand extension
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10 - 36
Alternative branding strategies
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10 - 37
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
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10 - 38
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.
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10 - 39
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.
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10 - 40
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.
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10 - 41
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.
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10 - 42
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
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10 - 43
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.
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10 - 44
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:
1. to affect consumer perceptions and
2. 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
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10 - 45
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.
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10 - 46
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.
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10 - 47
Promotion of Services
• The promotion of services is
growing.
• Traditional advertising
methods, such as humour,
are successfully applied by
companies like CommInsure.
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10 - 48
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.
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10 - 49
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.
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10 - 50
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.
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10 - 51
Finish
• Questions?
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10 - 52