managing the product. 2 chapter objectives explain the different product objectives and strategies a...

Managing the Product

2

Chapter Objectives

• Explain the different product objectives and strategies a firm may choose

• Explain how firms manage products throughout the product life cycle

• Discuss how branding creates product identity and describe different types of branding strategies

• Explain the roles packaging and labeling play in developing effective product strategies

• Describe how organizations are structured for new and existing product management

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Real People, Real Choices

• Grendha Shoes Corp. (Angelo Daros)• Launching the Rider brand in the United

States, Angelo needed a plan to position the brand. Option 1: position U.S. Rider the same way as the

Brazilian versionOption 2: position Rider as an “after sport footwear”

brandOption 3: position Rider more specifically as an “after

soccer” brand

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Product Planning:Taking the Next Step

• Today, successful product management is more important than ever.

• Products are created, grow, reach maturity, and decline at faster and faster speeds.

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Using Product Objectives toDecide on a Product Strategy

• Objectives must be measurable, clear, unambiguous, and feasible and must indicate a specific time frame.

• Objectives and strategies for individual products: --Successful introduction of new products --Breathing new life into mature products

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Objectives and Strategies forMultiple Products

• Product line: Firm’s total product offering designed to satisfy a single need or desire of target customers

• Product mix: The total set of all products a firm offers for sale

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Objectives and Strategies forMultiple Products

• Product-Line StrategiesFull-line versus limited-line strategiesUpward, downward, or two-way line stretch Filling out or contracting a product line

• Product-Mix StrategiesWidth of product mix: the number of different product

lines produced by firm

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Quality as a Product Objective

• Product quality: overall ability of product to satisfy customer’s expectations

• Total Quality Management (TQM): company-wide dedication to the development, maintenance, and continuous improvement of all aspects of the company’s operations

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ISO Quality Standards

• ISO 9000: voluntary standards for quality management set by International Organization for Standardization (ISO)

• ISO 14000: concentrate on environmental management

• Six Sigma methodology: no more than 3.4 defects per million (getting it right 99.9997% of the time)

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Adding Quality to the Marketing Mix

• Product: improve customer service

• Place: involve suppliers and customers in improving on-time delivery

• Price: lower costs and improve service at same time

• Promotion: give customers information when they want and need it (not when it’s convenient for firm)

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Dimensions of Product Quality

• Degree of pleasure

• Product safety

• Ease of use

• Satisfies needs

• Durable

• Reliable

• Precision

• Versatile

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Marketing Throughoutthe Product Life Cycle

• Product life cycle: the way products go through four distinct stages from birth to death -- introduction, growth, maturity, and decline.

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The Introduction Stage

• First stage in the product life cycle, in which slow growth follows the introduction of a new product in the marketplace.

• --Goal is to get first-time buyers to try product.

• --Firm does not usually make a profit during this stage.

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The Growth Stage

• Second stage in the product life cycle, during which the product is accepted and sales rapidly increase.

• --Goal is to encourage brand loyalty.

• --Firm introduces product variations to attract market segments and increase market share.

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The Maturity Stage

• Third and longest stage in the product life cycle, during which sales peak and profit margins narrow.

• --Competition grows intense.

• --Firm resorts to price reductions and reminder advertising.

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The Decline Stage

• Final stage in the product life cycle, during which sales decrease as customer needs change.

• --Market as a whole begins to shrink, profits decline, fewer product variations exist, and suppliers pull out.

• --Firm’s major decision is whether to keep product at all.

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Creating Product Identity:Branding Decisions

• Brand: a name, term, symbol, or any other unique element that identifies one firm’s product and sets it apart from the competition.

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A Good Brand Name:

• Creates a positive connotation.

• Is memorable.

• Positions a product by conveying image or personality (Ford Mustang) or describing how it works (Drano).

• Is easy to say, spell, read, and remember.

• Fits the target market, product benefits, customer’s culture, and legal requirements.

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Trademarks

• Legal term for a brand name, brand mark, or trade character

• --Trademarks legally registered by a government obtain protection for exclusive use in that country.

• --Symbol in the U.S.: ®• --Common-law protection: the firm has used the

name and established it over a period of time.

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The Importance of Branding

• Brand equity: a brand’s value to its organization over and above the value of the generic version of the product

• Brand meaning: the beliefs and associations a consumer has about the brand

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The Importance of Branding (cont’d)

• Brand equity provides competitive advantage: the power to capture and hold onto a larger share of the market and to sell at prices with higher profit margins

• Brand extensions: new products sold with the same brand name

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Branding Strategies

• Individual brands vs. family brands

• National and store brands

• Generic brands: no branding

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Branding Strategies (cont’d)

• Licensing: one firm sells the right to use a legally protected brand name for a specific purpose and for a specific period of time

• Co-branding: combines two brands

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Creating Product Identity:Packaging and Labeling Decisions

• Package: the covering or container for a product that provides product protection, facilitates product use and storage, and supplies important marketing communication

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Packaging and Labeling Decisions (cont’d)

• Universal Product Code (UPC): set of black bars or lines printed on the side/bottom of most items sold in stores; creates a national system of product identification

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Designing Effective Packaging

• Effective packaging considers:

• Packaging of other brands in same product category

• Choice of packaging material

• Environmental impact

• Shape and color

• Graphic information

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Labeling Regulations

• Federal Fair Packaging and Labeling Act of 1966 aims at making labels more helpful to consumers by providing useful information.

• Food and Drug Administration requires food labels to tell how much fat, saturated fat, cholesterol, calories, carbohydrates, protein, trans fats, and vitamins are in each product serving.

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Organizing for Effective Product Management

• Management of Existing ProductsBrand managers Product category managers Market managers

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Organizing for New-Product Development

• Venture teams: specialists in different areas who work together to focus on new-product development

• “Skunk works”: small and isolated group in remote location that functions with minimal supervision

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Real People, Real Choices

• Grendha Shoes Corporation (Angelo Daros)

• Angelo chose option 2: position Rider as an “after sport footwear” brandGrendha adapted the same strategy in over 85

countries around the world and now sells millions of pairs globally.

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Marketing in Action Case:You Make the Call

• What is the decision facing Sony?

• What factors are important in understanding this decision situation?

• What are the alternatives?

• What decision(s) do you recommend?

• What are some ways to implement your recommendation?

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Keeping It Real: Fast Forward to Next Class Decision Time at Universal Studios

• Meet Robyn Eichenholz, senior brand manager at Universal Orlando.

• Upcoming Donna Summer concert would attract many customers

• The decision: How to plan for the Donna Summer concert