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MANAGING PRODUCTS, SERVICES,
AND BRANDS
CHAPTER CONTENTS
PAGE
MATERIALS AVAILABLE FOR LECTURE AND DISCUSSION ................................. 11-2
STUDENT LEARNING OBJECTIVES ............................................................................... 11-3
KEY TERMS AND CONCEPTS .......................................................................................... 11-3
LECTURE NOTES

Gatorade: A Thirst for Competition.............................................................................. 11-4

The Product Life Cycle ................................................................................................. 11-4

Managing the Product Life Cycle ................................................................................. 11-8

Branding and Brand Management ............................................................................... 11-10

Creating Customer Value Through Packaging and Labeling ...................................... 11-13

Managing the Marketing of Services ........................................................................... 11-14
ANSWERS TO “APPLYING MARKETING CONCEPTS AND PERSPECTIVES” ... 11-17
ANSWERS TO “INTERNET EXERCISE”........................................................................ 11-19
SUPPLEMENTAL LECTURE NOTE (SLN)

SLN 11-1: Frosted Cheerios: Launching a Line Extension ......................................... 11-20
IN-CLASS ACTIVITY (ICA)

ICA 11-1: Using Brainstorming and N/3 Techniques for
Breathe Right® Nasal Strips ........................................................................................ 11-22
VIDEO CASE 11 TEACHING NOTE (TN)

BMW: “Newness” and the Product Life Cycle ........................................................... 11-28
POWERPOINT THUMBNAILS ......................................................................................... 11-30
11-1
Chapter 11
MATERIALS AVAILABLE FOR LECTURE AND DISCUSSION
PowerPoint
Slides1
Transparencies2
Handouts3
Textbook Figures
Figure 11-1
How stages of the product life cycle relate to
a firm’s marketing objectives and
marketing mix actions ............................................. 

Figure 11-2
Product life cycle for the stand-alone fax machine
for business use: 1970-2002.................................... 
Figure 11-3
Alternative product life cycles ................................. 
Figure 11-4
Five categories and profiles of product adopters ..... 

Figure 11-5
Customer-based brand equity pyramid .................... 

Figure 11-6
Alternative branding strategies ................................ 
Supplemental Figures and Advertisements
Figure 11-A
DVD player product life cycle ................................. 

Figure 11-B
Recording industry product form life cycles ........... 

Figure 11-C
Quaker Oats oatmeal advertisement ........................ 

Figure 11-D
Four criteria for picking a good brand name ........... 

Figure 11-E
Line and brand extension ......................................... 

Figure 11-F
Frosted Cheerios: From idea to grocery shelf
in six months ........................................................... 
Figure 11-G
The cross-functional team’s thinking behind the
new Frosted Cheerios package................................ 
In-Class Activity (ICA) Figures
ICA 11-1, Figure 1
Brainstorming Ground Rules ....................... 

ICA 11-1, Figure 2
N/3 Ground Rules ........................................ 

1
2
3
“PowerPoint Slides” are available on a CD-ROM and appear as “PowerPoint Thumbnails” within this chapter
of the Instructor’s Manual.
100 “Transparencies” are available to textbook adopters by request of their local McGraw-Hill/Irwin sales
representative.
Instructors may choose to reproduce some figures and hand them out to each student in the class to enhance
discussion. These “Handouts” are shown with a check in the right column.
Chapter 11
11-2
STUDENT LEARNING OBJECTIVES
After reading this chapter students should be able to:

Explain the product life-cycle concept and relate a marketing strategy to each stage.

Recognize the differences in product life cycles for various products and their
implications for marketing decisions.

Understand alternative approaches to managing a product’s life cycle.

Describe elements of brand personality and brand equity and the criteria for the good
brand name.

Explain the reason for different branding strategies employed by companies.

Understand the role of packaging and labeling in the marketing of a product.
KEY TERMS AND CONCEPTS
brand equity
multibranding
brand name
multiproduct branding
brand personality
off-peak pricing
branding
packaging
capacity management
product life cycle
11-3
Chapter 11
LECTURE NOTES
Chapter Opening
Photo
CHAPTER OPENING EXAMPLE
Gatorade: A Thirst for Competition
Slide 11-8
Gatorade’s sales
Effective brand
management?
Slide 11-9
Gatorade’s
product line
Effective brand
management?
Slide 11-10
Gatorade has become synonymous with sports beverages. Concocted in
1965 at the University of Florida to rehydrate the football team, the drink was
coined “Gatorade” by an opposing coach after watching his team lose to the
Florida Gators in the Orange Bowl. Stokely-Van Camp Co. bought the
Gatorade formula in 1967 and commercialized the product. Quaker Oats
purchased Stokely-Van Camp in 1983, growing sales steadily to over $2 billion
in 2001, when PepsiCo, Inc. acquired Quaker Oats.
Brand development has been a key factor in Gatorade’s success as
marketers grew sales through a variety of means. More flavors were added, and
multiple package sizes were offered in different containers. Distribution
expanded to include convenience stores and supermarkets followed by vending
machines and fountain service. Consistent advertising and promotion
effectively conveyed the product’s unique benefits and links to athletic
competition. International opportunities were vigorously pursued. Gatorade
has recently entered the bottled water category–a new market in which to grow
the brand.
The marketing of Gatorade illustrates effective product and brand
management in a dynamic market place. The actions taken by Gatorade
executives are typical of those made by successful marketers.
I. THE PRODUCT LIFE CYCLE
The product life cycle describes the stages a new product goes through
in the marketplace: introduction, growth, maturity, and decline.
Figure 11-1
Figure 11-2
Figure 11-A
Stages of the PLC
PLC of the fax
PLC for DVDs
Slide 11-12, T
Slide 11-13
Slide 11-14, T
A. Introduction Stage
Honda Insight
What stage
of the PLC?

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 marketing objective is to create consumer awareness and
stimulate trial—that first purchase of a product by a consumer.
Slide 11-15
Chapter 11
11-4
Toshiba DVD ad
What stage
of the PLC?

Companies often spend heavily on advertising and other
promotion tools to build awareness. 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, companies focus on
creating selective demand, or demand for a specific brand.

Other marketing mix variables are also important at this stage.
Gaining distribution can be a challenge because channel
intermediaries may hesitate to carry a new product. A company
often restricts the number of variations in the product to ensure
control of product quality.

During introduction, pricing can be either high or low.
–
A high initial price, or skimming strategy, may be used to
help the company recover the costs of development as well
as capitalize on the price insensitivity of early buyers.
However, high prices tend to attract competitors.
–
To discourage competitive entry, a company can price low,
referred to as penetration pricing. This strategy helps build
unit volume, but a company must closely monitor costs.
B. Growth Stage

The second stage of the product life cycle, growth, is
characterized by rapid increases in sales and competitors appear.

Profit usually peaks during the growth stage as the result of more
competitors and more aggressive pricing. At this point the
emphasis of advertising shifts to stimulating selective demand,
in which product benefits are compared with those of
competitors’ offerings.

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. Failure to obtain repeat
purchasers usually means an early death for a product.

Changes start to appear in the product during this stage.
To help differentiate a company’s brand from its competitors,
an improved version or new features are added.

It is important to gain as much distribution as possible.
Slide 11-17
11-5
Chapter 11
C. Maturity Stage

The third stage, maturity, is characterized by a slowing of total
industry sales or product class revenue. 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.

Marketing attention is directed toward holding market share
through further product differentiation and finding new buyers.
D. Decline Stage

The decline stage occurs when sales begin to drop. A product
may enter this stage because of environmental changes, such as
technological innovation. A company will follow one of two
strategies to handle a declining product:
1. Deletion. Product deletion, or dropping a product from the
company’s product line, is the most drastic strategy and is not
taken lightly since there is a residual core of loyal consumers.
2. Harvesting. Harvesting, is when a company keeps the product
but reduces marketing costs, such as sales and advertising.
MNN
MARKETING NEWSNET
Electronic
Mailboxes
Will E-Mail Spell Doom for the Familiar Fax?
Slide 11-18
Technological substitution often causes the decline stage in the product
life cycle. Will the Internet and e-mail replace fax machines? Not yet—
because the two technologies do not directly compete for the same messaging
applications. E-mail is used for text messages and faxing is predominately used
for communicating formatted business documents.
E. Some Dimensions of the Product Life Cycle
There are two important aspects of the product life cycle:
1. Length of the Product Life Cycle. There is no exact time that
a product takes to move through its life cycle.



Chapter 11
As a rule, consumer products have shorter life cycles than
business products.
Mass communication informs consumers faster and shortens
life cycles.
Also, technological change tends to shorten product life
cycles as new product innovation replaces existing products.
11-6
Figure 11-B
Music industry
product form LC

In the recording industry, record albums were replaced by
cassette audio tapes, that have largely now been replaced by
compact disks (CDS), which in turn may be replaced by
digital music files (mp3 and other new innovations).
Slide 11-20, T
Figure 11-3
Alternative PLCs
2. Shape of the Product Life Cycle. The product life cycle shown
in Figure 11-1 is the generalized life cycle. However,
Figure 11-3 shows that there are several distinctive life cycle
curves, each type suggesting different marketing strategies.

A high-learning product is one for which significant
education of the customer is required and there is an
extended introductory period.

Sales for a low-learning product begin immediately because
little learning is required by the consumer and the benefits of
purchase are readily understood.
Slide 11-21
Mach3 razors
Stage & shape of
its PLC
–
–
Slide 11-22
Since this product is often easily imitated by competitors,
the marketing strategy is to broaden distribution.
Also, manufacturing capacity meet the demand.
Venus razors
Stage & shape of
its PLC

A fashion product is introduced, declines, and then seems to
return. The length of the cycles may be years or decades.

A fad experiences rapid sales on introduction and then an
equally rapid decline. These products are novelties and have
a short life cycle.
Slide 11-23
Figure 11-4
Diffusion of
innovation
3. The Life Cycle and Consumers. A product diffuses, or
spreads, through the population, a concept called the diffusion of
innovation.

Some people are attracted to a product early, but others buy
it only after they see friends with the item. Once accepted by
innovators and early adopters, the adoption of new products
moves on to the early majority, late majority, and laggard
categories.

The marketing manager must develop a plan to overcome
barriers for resisting a product in the introduction stage:
Slide 11-25, T
–
–
Usage. Product is incompatible with existing habits.
Value. Product provides no incentive to change.
–
–
Risk. Physical, economic, or social.
Psychological. Cultural differences or image.
11-7
Chapter 11
CONCEPT CHECK
1. Advertising plays a major role in the ___________ stage of the
product life cycle, and ___________ plays a major role in maturity.
Answer: introductory, sales promotion.
2. How do high-learning and low-learning products differ?
Answer: 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.
II. MANAGING THE PRODUCT LIFE CYCLE
Marketers rely on three ways to manage a product through successive
stages of its life cycle.
ICA 11-1
Using Brainstorming and
N/3
Techniques
for Breathe
Right® Strips
A. 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 or packages can be used to change a product’s
characteristics and give a sense of a revised product.
B. Modifying the Market
Milk Education
What market
modification?
With market modification strategies, a company tries:
1. Finding New Users. Targeting new market niches.
2. Increasing Use. Promoting more frequent usage or
consumption.
Slide 11-29
3. Creating New Use Situations. Identifying new applications.
C. Repositioning the Product
To increase sales, a company may engage in product repositioning,
which 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:
Chapter 11
11-8
1. Reacting to a Competitor’s Position. One reason to reposition
a product is because a competitor’s entrenched position is
adversely affecting sales and market share.
2. Reaching a New Market. Repositioning a product allows it to
reach a new market. For example, the older consumer’s heavier
weight was a cause of New Balance repositioning its athletic
shoes to appeal to aging baby boomers.
Figure 11-C
Quaker Oats ad
Slide 11-31, T
ESRA
Downsizing
3. Catching a Rising Trend. Changing consumer trends can also
lead to repositioning a product. For example, consumer interest
in “functional foods” that offer health and dietary benefits
beyond nutrition inspired repositioning of oatmeal.
4. Changing the Value Offered. In repositioning a product, a
company can decide to change the value it offers buyers and
trade up or down.

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, or price.

Trading down often exists when companies engage in
downsizing—reducing the content of packages without
changing package size and maintaining or increasing the
package price.
ETHICS AND SOCIAL RESPONSIBILITY ALERT
Consumer Economics of Downsizing: Get Less, Pay More
Slide 11-32
Many consumer product marketers have reduced the amount they put in
a package but charge the same price. Or, they reduce the content within a
package but maintain the same package size, dimensions, and prices. The issue
raised is whether the practice of reducing the contents of packages without
changing the package size or price is deceptive and therefore unethical if
manufacturers do not inform consumers of the change. Consumer advocates
believe it is; manufacturers do not.
“Downsizing” is not necessarily unethical or illegal. However, some
manufacturers do not inform consumers of this practice. Chapter 4 outlined the
ethics of exchange, including the “right to be informed.” This means that
marketers have an ethical obligation to give consumers complete and accurate
information about products and services, including content changes. In this
context, “downsizing” without informing consumers might be viewed as an
unethical practice. Manufacturers may argue that this practice is a way of
keeping prices from rising beyond psychological barriers for their products.
11-9
Chapter 11
CONCEPT CHECK
1. What does “creating new use situations” mean in managing a
product’s life cycle?
Answer: Finding new uses for an existing product.
2. Explain the difference between trading up and trading down in
repositioning.
Answer: 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, or price, or downsizing—
reducing the content of packages without changing package size and
maintaining or increasing the package price.
III. BRANDING AND BRAND MANAGEMENT

A basic decision in marketing products is branding, in which an
organization 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
color), or combination of these used to distinguish a seller’s goods
or services. Some brand names can b spoken while others cannot,
such as a logotype or logo.
Consumers benefit most from branding becuae they can recognize
coimpeting products by their brand names, allowing them to be more
efficient and brand loyal shoppers.
got2b ad
What is its brand
personality?
Slide 11-36
A. Brand Personality and Brand Equity

Successful and established brands take on a brand personality,
a set of human characteristics associated with a brand name.

Research shows that consumers often assign personality traits to
products and choose brands that are consistent with their own or
desired self-image.

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:
Mambo ad
What is its brand
personality?
Slide 11-37
Chapter 11
11-10
a. Brand equity provides a competitive advantage.
b. Consumers are often willing to pay a higher price for a
product with brand equity, which is represented by the
premium a consumer will pay for one brand over another
when the functional benefits provided are identical.
Figure 11-5
1. Creating Brand Equity.
Brand equity
pyramid

Brand equity is carefully nurtured by marketing programs to
create strong, favorable, and unique consumer associations
and experiences with a brand.
Slide 11-38, T

Brand equity arises from a sequential building process
consisting of four steps:
a. Develop positive brand awareness and an association of
the brand in consumer’s minds with a product class or
need to give a brand an identity.
b. Establish a brand’s meaning in the minds of consumers,
in terms of a functional, performance-related dimension
and an abstract, imagery-related dimension.
c. Get consumers to develop proper responses to a brand’s
identity and meaning. Here attention is placed on how
consumers think (quality, credibility, and superiority)
and feel (warm, safe, and assured) about the brand.
d. Create an intense, active loyalty relationship between
consumers and the brand.
2. Valuing Brand Equity. Brand equity also provides a financial
advantage for the brand owner. Successful, established brands
have an economic value in the sense that they are intangible
assets. They can appreciate in value when effectively
managed—and can lose value when not managed properly.
B. Picking a Good Brand Name
There are five criteria for selecting a good brand name:
Figure 11-D
Picking a good
brand name
Slide 11-40, T





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.
The name should be simple and emotional. For international
use, brand names must be carefully checked for prior
impressions or undesirable images in different languages and
cultures.
11-11
Chapter 11
Figure 11-6
Alternative
branding strategies
C. Branding Strategies
Companies have several strategies when branding a product:
1. Manufacturer Branding.
Slide 11-41
SLN 11-1
Launching
the Frosted
Cheerios Line
Extension

With manufacturer branding, the producer determines the
brand name using either a multiproduct or multibranding
approach.

Multiproduct branding is when a company uses one name
for all its products. This is often referred to as a blanket or
family branding strategy. It has several advantages:
a. This brand strategy makes possible line extensions, the
practice of using a current brand to enter a new market
segment in its product class.
b. Some companies employ subbranding, which combines a
family brand with a new brand.
c. A strong brand equity also allows for brand extension,
the practice of using a current brand name to enter a
completely different product class. However, too many
uses for one brand name can dilute the meaning of a
brand for consumers.
Figure 11-E
Line and band
extension
Slide 11-42, T
Black & Decker ad

What is the
branding strategy?
An alternative manufacturer’s branding strategy,
multibranding, involves giving each product a distinct
name.
a. Multibranding is a useful strategy when each brand is
intended for a different market segment.
b. Compared with the multiproduct approach, promotional
costs tend to be higher with multibranding. The
company must generate awareness among consumers and
retailers for each new brand name without the benefit of
any previous impressions.
c. The advantages of multibranding are that each brand is
unique to each market segment and there is no risk that a
product failure will affect other products in the line.
d. The disadvantages are that the complexity and expense
of implementation can outweigh the benefits.
Slide 11-43
DeWalt ad
What is the
branding strategy?
Slide 11-44
2. Private Branding.

Chapter 11
A firm uses private branding, often called private labeling or
reseller branding, when it manufactures products but sells
them under the brand name of a wholesaler or retailer.
11-12

Private branding is popular because it typically produces
high profits for manufacturers and resellers.
3. Mixed Branding. 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 the firm’s.
IV. CREATING CUSTOMER VALUE THROUGH PACKAGING
AND LABELING

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 package contents and ingredients.
The customer’s first exposure to a product is the package and label.
While both are expensive, they are important strategy because they
provide benefits for the manufacturer, retailer, and ultimate customer.
MNN
MARKETING NEWSNET
Customer Value
thru Packaging
Creating Customer Value through Packaging:
Pez Heads Dispense More Than Candy
Slide 11-47
L’eggs ad
What package
benefits?
Pez Candy, Inc. recognizes the importance of creative packaging as a
source of customer value. Pez sells more than 3 billion Pez candies annually,
with each tablet dispensed from a Pez character’s head. The unique Pez
package dispenses a “use experience” for customers beyond the candy: fun.
A. Communication Benefits

A major benefit of packaging is the label information on it
conveyed to the consumer, such as directions on how to use the
product and what the product is made of, which is needed to
satisfy legal requirements of product disclosure.

Packaging can have brand equity benefits because it enhances
brand recognition and facilitates the formation of strong,
favorable, and unique brand associations.
Slide 11-48
B. Functional Benefits
Packages play an important functional role, such as convenience,
protection, or storage.
11-13
Chapter 11

The convenience dimension of packaging is becoming
increasingly important.

Consumer protection has become an important function of
packaging, including the development of tamper-resistant
containers.

Labeling also protects consumers through “open dating,” which
states the expected shelf life of the product.
C. Perceptual Benefits
Packaging and labeling also create perception in the consumer’s
mind. A package can connote status, economy, and product quality.

A package can connote status, economy, and product quality.

The color of packages can affect consumers’ perceptions.
V. MANAGING THE MARKETING OF SERVICES
A. Product (Service)
There are three unique aspects of the product/service element of the
marketing mix for services:
1. Exclusivity.

Unlike products, services cannot be patented.

Many businesses try to distinguish their core product with
new or supplementary services through outsourcing.
2. Branding. Because services are intangible and, therefore, more
difficult to describe, the brand name or logo of the service
organization is particularly important in consumer decisions.
3. Capacity Management.
Chapter 11

Most services have a limited capacity due to the
inseparability of the service from the service provider and
the perishable nature of the service.

Thus, the service component of the mix must be integrated
with efforts to influence consumer demand. This is termed
capacity management.
11-14
B. Pricing
In the service industries, price is referred to in various ways by
different services—hospitals (charges), lawyers (fees), airlines
(fares), and hotels (rates).

In the service industries, price is referred to in various ways by
different services—hospitals (charges), lawyers (fees), airlines
(fares), and hotels (rates).

Pricing plays two essential roles in services: (1) to affect
consumer perceptions and (2) to be used in capacity
management.

Many service businesses use off-peak pricing, which consists of
charging different prices during different times of the day or
days of the week to reflect variations in demand for the service.
C. Place (Distribution)
Place or distribution is a major factor in developing a service
marketing strategy because of the inseparability of services from the
producer. As competition grows, the value of convenient
distribution is being recognized.
D. 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 the past, advertising has been viewed negatively by many
nonprofit and professional service organizations.

Another form of promotion, publicity, has played a major role in
the promotion of nonprofit services and some professional
organizations. In using publicity, services rely on public service
announcements (PSAs) to disseminate their message. PSAs are
free space or time allocated by media to nonprofit organizations.
However, the timing and location of a PSA are under the control
of the medium, not the organization.
11-15
Chapter 11
CONCEPT CHECK
1. What is the difference between a line extension and a brand
extension?
Answer: A line extension is the practice of using a current brand 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.
2. Explain the role of packaging in terms of perception.
Answer: A package can communicate status, economy, and/or product
quality to prospective buyers.
3. How do service businesses use off-peak pricing?
Answer: Service businesses use off peak pricing, which consists of
charging different prices during different times of the day or days of the
week, to reflect variations in demand for the service during.
Chapter 11
11-16
ANSWERS TO “APPLYING MARKETING CONCEPTS
AND PERSPECTIVES”
1.
Listed here are three different products in various stages of the product life cycle.
What marketing strategies would you suggest to these companies? (a) GTE cellular
telephone company—growth stage, (b) Mountain Stream tap-water purifying
systems—introductory stage, and (c) handheld manual can openers—decline stage?
Answers:
2.
a.
GTE cellular telephone company. Must try to generate selective demand in the
face of increasing competition. The company may offer new services such as call
waiting or call forwarding.
b.
Mountain Stream tap-water purifying systems. Must generate awareness
by running ads, getting publicity on the value and health of bottled water.
The company must stimulate primary demand.
c.
Handheld manual can openers. May choose to market their can openers in third
world countries where electricity is not widely available in households.
It has often been suggested that products are intentionally made to break down or
wear out. Is this strategy a planned product modification approach?
Answer: Sellers rarely make products deliberately intended to break down or wear out
but they often reduce the product life and quality to lower the price and make it more
affordable to consumers. These consumers may then replace the worn out product with a
newer, upgraded one—in this sense a “planned product modification approach.”
3.
The product manager of GE is reviewing the penetration of trash compactors in
American homes. After more than two decades in existence, this product is in
relatively few homes. What problems can account for this poor acceptance?
What is the shape of the trash compactor life cycle?
Answers:
The trash compactor is a high learning product. The problems include convincing
consumers there is a benefit to compacting trash. There is also a fear among consumers
about having a household appliance that has such force. Since safety is a persistent
worry, the shape of the life cycle would seem to have a very long introduction period.
11-17
Chapter 11
4.
For several years, Ferrari has been known as the manufacturer of expensive luxury
automobiles. The company plans to attract the major segment of the car-buying
market who purchases medium-priced automobiles. As Ferrari considers this
trading-down strategy, what branding strategy would you recommend? What are
the trade-offs to consider with your strategy?
Answers:
Trading down for Ferrari is very risky. The company may lose the profitable,
upper market that has purchased its expensive cars. Ferrari might develop a new car and
choose a different Italian-sounding brand name. The company might promote its heritage
as “designed by the makers of Ferrari.” This different name might minimize the impact
on their loyal buyers. Obviously, this approach means the company must spend more
money promoting the name of this new car.
Chapter 11
11-18
ANSWERS TO “INTERNET EXERCISE”
New Product News provides a central Internet location on the latest new products.
It provides a forum for companies to present their most recent new products. New Product
News is updated daily with company press releases from the entire world. Some 30 product
categories with one or more new products are typically listed by New Product News each
day. A unique feature of New Product News is that a company website address that can be
accessed immediately follows each new product description.
Visit the New Product News website at www.newproductnews.com and go to “New
items this week.” Your assignment is outlined below:
1. Identify and describe how a new product listed promotes more frequent usage,
creates a new use situation, reaches a new market or new users, or changes the
value offered to consumers.
2. Identify and describe a new product that is branded using a family branding
strategy, a subbranding strategy, or a brand extension strategy.
Answers:
1. Instructors may decide to limit the assignment to one of the topics or to choose the
product. On June 18, 2003, Handspring introduced the Treo 600, a smartphone that
combines a fully integrated QWERTY keyboard with a smaller, more phone-like
form factor. Additional features include a new version of the Handspring Blazer web
browser to enable full web browsing, an expansion slot for third-party secure digital
and MMC solutions such as MP3 and wireless networking solutions, a built-in VGA
camera for taking and sending pictures and setting up picture caller ID, and dual
speaker architecture for high-quality phone and system audio. This is an example of
a product that changes the value offered to consumers.
2. Instructors should visit the website to familiarize themselves with the products
currently listed. The following are examples from mid 2003. February 28, 2003
Animal Planet PET product line released using a brand extension strategy.

On June 10, 2003, Nature Valley introduced the Apple Crisp Crunchy Granola bar
using a family branding strategy.

On June 25, 2003, GE introduced the GE Profile Spacemaker® microwave oven, a
subbranding strategy (GE = family brand; Profile Spacemaker = sub brand).

On June 18, 2003, BMW and MINI jointly announced their own versions of a
Memory Watch that features an integrated USB port and holds up to 128
megabytes (MB) of data via an internal memory card. By directly connecting to
any computer, business presentations, photos, music, passwords and more can be
stored on both the BMW Memory Watch ($128) and the MINI Memory Watch
($128). Of course, they also tell time.
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Chapter 11
SLN 11-1: SUPPLEMENTAL LECTURE NOTE
Frosted Cheerios: Launching a Line Extension
Figure 11-F
Frosted Cheerios:
6 mo. time to mkt.
Slide 11-58
Planning and implementing the introduction of Frosted Cheerios by a
General Mills team shows the interactions of marketing strategy and tactics
with the information, actions, and people needed for success. Central to all of
this activity is a new-product marketing plan. Figure 11-F shows a time line of
actions in the marketing plan that led to the shipment of Frosted Cheerios to
stores in September 1995. The time from the new-product idea in March 1995
to first shipment in September was six months—half the normal launch time for
a new cereal product at General Mills.
Figure 11-F illustrates many key marketing concepts developed throughout the
textbook:
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Chapter 11
Cross-functional teams. The first thing the product manager did
was recruit a team with a representative from every pertinent
department: marketing, sales, research and development (R&D),
marketing research, product development, and manufacturing.
Corporate goals. Frosted Cheerios must contribute to General
Mills’ corporate targets of increasing earnings per share 12 percent
annually and growth of unit volume 5 percent annually.
Marketing goals. The new product must not cannibalize sales of
existing brands of Cheerios or hurt their images. Also, 0.5 percent
market share is considered a success.
Marketing budget. Top management allocated $40 million for the
launch, the most for any product in company history.
Target market. The target market is kids (60 percent) and babyboomer adults (40 percent) who do not have the sugared cereals
hang-up that their parents do.
Benchmarking. The team studied successful product launches of
all kinds, including Disney movies and Nickelodeon TV programs,
to learn lessons for its cereal launch.
Marketing research on consumers. In April (see Figure 11-E)
consumers were asked about the Frosted Cheerios concept; 88
percent of the kids said they would eat them. In-home taste tests in
May bore this out and identified the best from among three
formulations.
Competitive advantages/points of difference. A big concern was
copycat imitations. So the product team targeted these unique
elements: complex enough to avoid copying, sweet enough to appeal
to the target market, and grainy enough to maintain the Cheerios
taste and image.
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Figure 11-G

Frosted Cheerios
cross-functional
team
Slide 11-59

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Product strategy. Manufacturing Frosted Cheerios was a lot more
complex than dipping regular Cheerios in sugar. R&D scientists
found they had to blend corn flour with the regular oat flour to give
their new product the proper Cheerios “Crunch.” The final package,
shown in Figure 11-G, was selected from seven competing designs.
The figure shows the detailed planning needed to position the
product.
Pricing strategy. The team set a price consistent with other
Cheerios brands and competitive with other sugared cereals, such as
Kellogg’s Frosted Flakes.
Promotion strategy. Working with the team, its advertising agency
shot the TV commercials in September (Figure 11-G), using
contemporary and campy characters such as Underdog, rap artist
Queen Latifah, and loud-mouth comedian Gilbert Gottfried.
Place strategy. As shown in Figure 11-G, General Mills started
shipping to stores in September and had 90 percent distribution the
next month.
In terms of implementation, Frosted Cheerios was on retailer shelves when the TV ad
campaigns started, always a huge concern with new grocery product introductions. Industry
analysts have called it the most successful product launch of a ready-to-eat cereal in history.
Clearly, Frosted Cheerios is a huge success by any standard–a success attributable to a cohesive
cross-functional team’s attention to detail and deadlines in its new-product marketing plan.
The 2001 acquisition of Pillsbury by General Mills provides new opportunities to extend
the use of cross-functional teams to bring new products, often involving new technologies, to
market quickly. General Mills believes that after adding Pillsbury’s products and technologies to
its own portfolio, nearly 80 percent of retail sales will come from products ready to eat in
15 minutes or less.
Sources: Terry Fledler, “Soul of a New Cheerios,” Star Tribune (January 28, 1996), pp. D1, D4; Tony Kennedy,
“New Cheerios about to Sweeten Cereal Market,” Star Tribune (July 25, 1995), pp. 1D, /2/D; Ann Merrill,
“Working Out Merger Kinks,” Star Tribune (February 18, 2002), pp. D1, D4; The New General Mills: Midyear
Report 2002 (Minneapolis, MN: General Mills, Midyear 2002).
11-21
Chapter 11
ICA 11-1: IN-CLASS ACTIVITY
Using Brainstorming and N/3 Techniques for Breathe Right® Nasal Strips
Learning Objectives. To have students: (1) experience an actual brainstorming session
with a fun and rather outrageous product; and (2) evaluate the emerging ideas using an N/3
(“N over 3”) rating process to assess some of the strengths and weaknesses of both techniques.
Definition. The following marketing term is referred to in this in-class activity (ICA):

Brainstorming: To generate ideas about products, services, processes, or ideas.
Nature of the Activity. To have students engage in brainstorming and N/3 activities
based on specific guidelines to generate advertising featuring the Breathe Right nasal strip.
Estimated Class Time. 20 minutes.
Materials Needed.

The Core11.ppt file from the Core PowerPoint CD in the Core Instructor’s Box.

Purchase a package(s) of tan and/or clear adult (small/medium) Breathe Right nasal
strips from the grocery or drug store, which are found in the cough/colds section.
Retail price: $4.99 per box of 12 strips.

Transparencies of:
a. ICA 11-1, Figure 1 (or use Slide 11-62): Brainstorming Ground Rules.
b. ICA 11-1, Figure 2 (or use Slide 11-63): N/3 Ground Rules.
Preparation Before Class. Follow the steps below:
1. Read the material below to be able to give background mini-lecture on Breathe Right.
2. Go to the Breathe Right nasal strip website at www.breatheright.com to learn more
about the product and its uses.
3. Go to the store and purchase a package of Breathe Right nasal strips.
4. Make transparencies of ICA 11-1, Figure 1 (or use Slide 11-62): Brainstorming
Ground Rules and ICA 11-1, Figure 2 (or use Slide 11-63): N/3 Ground Rules.
5. Practice placing a Breathe Right nasal strip on your nose to be able to demonstrate the
procedure to students in class.
6. Review the PowerPoint slides.
Chapter 11
11-22
Instructions. Follow the steps below to conduct this ICA:
Breathe Right
product line
Slide 11-61
1. Show Slide 11-61. Give the following background mini-lecture:
“Breathe Right nasal strips, made by CNS, Inc., became popular
among both professional athletes and consumers to open their nasal
passages and improve their breathing when San Francisco 49ers’
Jerry Rice used one during an outstanding Super Bowl performance.
In 1995, the U.S. Food and Drug Administration allowed CNS to
claim that use of its Breathe Right nasal strips reduced nighttime
snoring. Your goal is to brainstorm and give ideas of characters or
situations for use in advertisements for a Breathe Right nasal strip
could be highlighted to target the “snorers” market segment.”
(Write the underlined goal on the board).
2. Have 2 to 3 student volunteers try on the Breathe Right nasal strip
from those purchased from the store.
ICA 11-1, Figure 1
Brainstorming
Ground Rules
3. Show Slide 11-62 or the transparency made from ICA 11-1,
Figure 1: Brainstorming Ground Rules. Explain that brainstorming
is often used to come up with new product ideas as well as
advertising ideas. Answer any questions students have concerning
this technique before proceeding with this part of the ICA.
Slide 11-62
4. Ask students to take 5 minutes to generate as many advertising ideas
(characters or use situations) as possible during the time allotted.
Ideas will be evaluated later, so encourage students to be as creative
as they want and strive for at least 15 or 20 ideas.
5. List the advertising ideas on either the board or transparency made
from ICA 11-1, Figure 1.
ICA 11-1, Figure 2
N/3 Ground Rules
Slide 11-63
6. After the 5 minutes, stop the brainstorming session and show Slide
11-63 or the transparency made from ICA 11-1, Figure 2: N/3
Ground Rules. Answer any questions students have concerning the
ground rules before proceeding.
7. Ask students to take 5 minutes to evaluate which are the better
advertising ideas. Have them identify the top ten advertising
characters and use situations.
8. Show Slide 11-64 to Slide 11-69, which are examples of CNS’
advertising characters and use situations. Do any match the
characters or use situations the students came up with? Have
students comment on the effectiveness of both the print and TV ads
in communicating the benefits of a Breathe Right nasal strip.
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Chapter 11

Slide 11-64: Brand personality print ads.

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Slide 11-65: NYC marathon specialty strip and print ad.

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Slide 11-66: Vicks for colds print ad.
Breathe Right strips
Breathe Right strips
Breathe Right strips
Brand personality
print ads
NYC marathon
strip & print ad
Vicks for colds ad
Slide 11-64
Slide 11-65
Slide 11-66
Slide 11-67: Improves breathing TV ad (TRT 0:30).
Slide 11-68: Reduces snoring TV ad (TRT: 1:00).
Slide 11-69: Vicks w/ strip TV ad (TRT: 0:30).
Breathe Right strips
Breathe Right strips
Breathe Right strips
Breathing TV ad
Snoring TV ad
Vicks TV ad
Slide 11-67
Slide 11-68
Slide 11-69
9. Summarize the advantages and disadvantages of the brainstorming technique:

Advantages:
a. Helps focus a group of people on generating a list of alternative solutions to a
defined problem.
b. Enables “piggybacking,” which often leads to more creative solutions among
the group.
c. Gives a time deadline to generate the creative solutions rather than it out over
a longer period.

Disadvantages:
a. Limits the list of candidate solutions to those given by a specific group of
people at one specific time.
b. Possibly generates many trivial, impractical candidates.
c. Does not provide for systematic screening of the generated ideas (which is one
of the benefits of the N/3 technique).
Chapter 11
11-24
10. Summarize the advantages and disadvantages of the N/3 technique:

Advantages:
a. Provides a ranking that utilizes judgments from a knowledgeable cross-section
of people.
b. Allows, through the 3, 2, 1, 0 point system, peoples’ judgments to be weighted
to reflect their personal priorities.

Disadvantages:
a. May be biased by an individual’s voting for his/her ideas submitted in the
brainstorming session.
b. Omits inclusion of other ideas not coming from the brainstorming session.
c. Utilizes initial impressions for the evaluation judgments rather than greater indepth business analysis.
Marketing Lessons. Marketers use brainstorming and N/3 techniques to develop and
evaluate new or refine existing products and services in terms of their features, as well as price,
promotion (advertising), and distribution strategies and tactics.
Websites. Connect to either the CNS website, marketers of Breathe Right nasal strips
(www.cns.com) or the Breathe Right website (www.breatheright.com) for more information
about: (1) the target markets for Breathe Right nasal strips (i.e. congestion, allergies, athletic and
exercise performance enhancement, etc.; (2) a demo of what they are and how they work; and
(3) a detailed discussion of the causes of snoring.
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Chapter 11
ICA 11-1, FIGURE 1
BRAINSTORMING GROUND RULES
1. Strive for quantity of ideas, without special
concern about quality.
2. “Piggybacking” on another person’s ideas
is OK, and is even encouraged.
3. Stress creativity by looking at a problem
from another point of view in order to
develop new ideas.
4. No evaluation or criticism allowed in the
brainstorming session.
© McGraw-Hill Companies, Inc. 2003
Chapter 11
11-26
ICA 11-1, FIGURE 2
N/3 GROUND RULES
1. Divide the total number of ideas
generated (N) by 3 to get the “points” each
student can allocate.
Example:
If 30 ideas are generated, then N/3 = 30/3 = 10 points.
2. Have each student allocate her/his
10 points to the 30 items, with 3, 2, 1, or 0
points to each item—the maximum being
3 points for a given item.
3. Read down the list and have students hold
up 1, 2, or 3 fingers for each item.
© McGraw-Hill Companies, Inc. 2003
11-27
Chapter 11
TN VIDEO CASE 11
BMW: “Newness” and the Product Life Cycle
BMW
Newness & the
PLC
Slide 11-71
Synopsis:
BMW engages in a unique product management strategy that keeps its
products in the introduction and growth stages of the product life cycle rather
than developing into the maturity and decline stages. BMW cars typically have
a product life cycle of 7 years, and BMW introduces a new model in each of its
lines almost every year to keep the whole line “new” throughout the 7-year
cycle. BMW also uses a simple branding system that can easily be understood
throughout the world—a 328 is a car from the 3 series with a 2.8 liter engine.
Finally, BMW is enhancing its product offerings through its award winning
web site. Customers can configure their own car at the web site, then send that
information along to their local dealer for further information or to order it.
Teaching Suggestions:
Start the class out by asking who has seen the Bond movie with the BMW Z3 featured in
it (GoldenEye). Many of them are likely to have seen the film and remember the accompanying
BMW promotional blitz. How do they think about BMW products after seeing the Z3 in this
movie? Students are likely to say they perceive BMW as being more flashy, exciting, sexy and
dynamic than they previously did. Creating excitement through this type of promotion is an
example of how BMW keeps its products (in this case, cars in the Z line) perpetually in the
introduction and growth stages of the product life cycle.
Answers to Case Questions:
1. Compare the product life cycle described by BMW for its cars to the product life
cycle shown in Figure 11-1. How are they (a) similar and (b) dissimilar?
Answers:
a. Similar. In Figure 11-1, products are shown going through the introduction, growth,
maturity and then decline stages, with total sales revenue peaking in the maturity
stage. BMW’s strategy is somewhat similar to Figure 11-1 in that it strives to keep its
products in the first two stages, and never have them enter the last two stages at all
before they are taken off the market.
b. Dissimilar. However, BMW actually sells the most cars in their sixth and seventh
years on the market, when they would normally be in the decline stage, but due to
BMW’s innovative marketing strategies, are actually still in the growth stage. So the
revenues actually peak in the growth stage, clearly dissimilar from Figure 11-1.
Chapter 11
11-28
2. Based on BMW’s typical product life cycle, what marketing strategies are
appropriate for the 3 series? The X5?
Answers:
a. 3 Series. The 3 series is in the growth stage, and the customers are most likely repeat
purchasers. BMW takes advantage of this by offering attractive trade-in packages—
current BMW 3 series owners can trade in their car for a new model and get an
especially good deal from the manufacturer. New features are also constantly being
added to the 3 series to keep up its healthy growth. Finally, using the Internet to
enhance distribution, as described in the case, is a good strategy for managing the
growth stage.
b. X5. The X5 is in the introduction stage, and hence BMW needs to create awareness
of the product. Engaging in creative, high profile product placement like the James
Bond campaign for the Z3 would be a good strategy for the X5. A skimming strategy
would work best for the X5—a high price helps to keep up the high quality image of
all the BMW products. The BMW web site can also be used to increase awareness of
this new product as well as to facilitate distribution through BMW’s established
dealership network.
3. Which of the three ways to manage the product life cycle does BMW utilize with its
products—modifying the product, modifying the market, or repositioning the
product?
Answer: BMW primarily uses a modifying-the-product strategy to manage its product
life cycle. BMW introduces new models in each of its lines quite frequently to keep the
lines in the growth stages, and also gives each of its cars the latest technology as soon as
it becomes available (i.e., top of the line braking systems, side impact barriers, etc.).
4. How would you describe BMW’s branding strategy (manufacturer branding,
private branding, or mixed branding)? Why?
Answer: BMW engages in manufacturer branding—every car that BMW manufactures
has the BMW name on it along with the individual car brand (i.e., the 328). This is a
classic example of the multibranding strategy. However, BMW also sells Rover brand
cars and will begin selling Rolls Royce brand cars soon, and the BMW name will not be
on these products.
5. Go to the BMW website (www.bmwusa.com) and design a car to your own
specifications. How does this enable you as a customer to evaluate the product
differently than would be otherwise possible?
Answer: Students will answer with such features as it allows the customer to evaluate the
product features at his/her convenience, 24 hours a day, or the customer can see what all
the possible different combinations of features would look like, all of which are usually
not available at the dealership. Also, customers can get price information on individual
features without haggling with a salesperson on the lot.
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