Chapter 8: Managing the product

1. Product planning: taking the next

step
Product planning: develop product
objectives (for individual products, for product
ranges and mixes), design product strategies,
and make tactical product decision (product
branding, packaging and labeling design).
- Strategies outlined in the product plan spell
out how the firm expects to develop a product
that will meet marketing objectives.
2. Using product objectives to decide
on a product strategy
Product objectives:
provide focus and direction.
support the broader marketing objectives of the business unit in addition to
being consistent with the firms overall mission.
Need to specify how product decisions will contribute to reaching a desired
market share or level of sales
To be effective, product-related objectives must be SMART: Specific, Measurable,
Achievable, Relevant and Timebound (indicating a specific time frame).
Planners must keep in contact with their customers so that their objectives
accurately respond to customer needs.
should consider the long-term implications of product decisions.
Planners may focus on an individual product or at a group of product offerings as a
whole.
Product Strategies= make decisions about product benefit, features, styling,
branding, labeling and packaging.

2.1 Objectives and strategies for individual products

- For new products, the objectives
relate to successful introduction, such
as retailer acceptance, 70%
awareness of the product etc.
- After firm has experienced success
with a product in a local or regional
market, it may decide to introduce it
nationally: regional products.
- For mature products, objectives
may focus on breathing new life into
a product while holding on to the
traditional brand personality.

2.2 Objectives and strategies for several products

Larger firm often markets a set of related products, decisions therefore affect more
products simultaneously Product planning means developing product range &
product mix strategies.

Product range strategies

Product range = a firms total product offering designed to satisfy a single need or
desire of a group of target customers
Length of the product line = The nb of items within the same category
Full line= A large number of variations in a product range. To boos sales potential.

A limited line strategy = fewer product variations can improve the firms image if
it is perceived as a specialist with a clear, specific position in the market.
Organizations may also decide to extend their product range by adding more
brands or models when they develop product strategies.
Upward line stretch adds higher priced items that claim more quality.
Downward line stretch adds cheaper items. (!) Firm must take care not to
blur the images of the higher-priced items.
Two-way stretch: adds items at the upper & lower ends. When target
market is too small
Filling-out strategy = adding sizes or styles not previously available in a
product category.
Contract product lines, when some items are not profitable.

Cannibalisation = When sales of an existing brand are eaten up by the new item as
the firms current customers switch to the new product. (better than customers
switching to competitors).
whenever a product line or a product family is extended there is a risk for it

Product mix strategies

Product mix = entire range of products.
Width of product mix = nbr of different product lines produced by the firm.
Spreading risks through producing many different lines & normally firms develop a
mix of product lines that have some things in common, e.g. distribution channels or
manufacturing facilities.

2.3 Quality as a product objective

Product objectives often focus on product quality = overall ability of a product to
satisfy customers expectations.
Quality is tied to how customers think a product will perform and not necessarily
to some technical level of perfection, so it can depend on how the company
promotes the product.
Integrating the voice of the consumer into product design = quality means
fanatical attention to detail & also getting extensive input from actual users.
Kansei engineering = philosophy that translates customers feelings into design
elements.

Total Quality Management

TQM = philosophy that calls for company-wide dedication to the development,
maintenance and continuous improvement of all aspects of the companys
operations.
one way that marketing can add value to customers
promote the attitude among employees that everybody working in the company
has customers ( internal customers; other employees with whom they interact)
involve all employees

European Foundation for Quality Management (EFQM) = Organization to

recognize excellence and it awards an EFQM Excellence award.
Around the world, many companies look to the standards of the International
Organization for Standardization (ISO) for quality guidelines:
ISO 9000 = voluntary standards for quality management;
 ISO 14000 = standards which concentrate on environmental management.
Companies must comply with these standards otherwise other companies
will not buy from them.
Six Sigma = six standard deviations from normal distribution curve. Six Sigma
involves DMAIC: define, measure, analyze, improve, control. Employees are trained
and progress towards black belt.
A defect in Six Sigma means failing to meet customers expectations.

Adding a dose of quality to the marketing mix

Price vs. Quality is a major aspect of providing value to consumers.
Marketing has to inform consumers about product quality through its marketing
communications.
How can companies add quality in terms of the marketing mix?
Product: improving customer service support (easier it is the more satisfy they
are)
Place: manufacturing close to customers to improve delivery time improves
quality of service.
Price: lowering costs and improving service to customers at the same time.
Promotion: customers want information when they need it, not when it is
convenient for the marketer.

Dimension of product quality

Durable
Degree
of
Reliable
Pleasur
e Overall
abiity of the
product to
Product
Safety provide the Precise
benefits
customers
want
Ease of Versatil
Use e
Satisfie
s Needs

Marketing planners often focus product objectives on one or both of two key aspects
of quality: level and consistency.
Level of quality is determined through comparison with other brands in the
same product category.
Consistency of quality means that customers experience the same level of
quality in a product time after time, bringing repeat business.
Consistent quality is also one of the major benefits of adopting TQM
Consumers perceptions can change over time when quality is lacking

How e-commerce affects product quality

- People can fast criticize and give feedback.
- Customers can interact directly with other people.

3. Marketing throughout the product life cycle

Product marketing strategies must evolve and change as they continue through the
product life cycle. some brands have short lives

The introduction stage

first chance to purchase the good or service
a single company usually produces the product; if it works competitors follows
 Goal: to get first-time buyers to try the
product.
Steady but slow pace
Does not make profit in this stage,
because of heavy spending for
advertising, promotion and R&D.
Pricing may be high to recover the R&D
costs or low to attract large nbr of
consumers.
The length of the stage is influenced by
the marketplace acceptance and the
producers willingness to support its
product during start-up.
to be successful, the product need to be seen as wanted and needed
Marketing focuses on informing consumers on how to use the product and its
promised benefits.

The growth stage eg. Mobile phone.

Sales increase rapidly while profits increase and peak.
Marketings goal is to encourage brand loyalty (superior to others)
introduction of product variations to attract market segments and increase market
share.
When competition appears, marketers must use heavy advertising and other types
of promotion.
Price competition may develop, driving prices down.
Some firms may seek to capture a particular segment of the market by positioning
their product to appeal a certain group.

The maturity stage

Usually the longest stage. Sales peak and level off & even decline while profit
margins narrow.
Competition grows intense when competitors fight for their share of the shrinking
pie.
Sales are often to replace worn-out items or take advantage of product
improvements.
Firms will try to sell their product through as many outlets as possible because
availability is crucial in a competitive market, as customers will switch to closer
alternatives.
To remain competitive, firms may tinker with the marketing mix. Or through
Market development: introducing the existing product to a market that currently does
not exist.

The decline stage

Decrease in sales, due to obsolescence forced by new technology. Market as a
whole shrinks, profits decline, there are fewer variations of the product and suppliers
pull out.
Many competitors with none having a distinctive advantage.
Major decision in this stage is whether to keep the product at all.
If Keep product decrease advertising and other marketing communication to cut
the cots, reduce the price too
If drop the product phase it out by cutting production in stages and letting
existing stocks run out or simply drop the product immediately.
Some products are not dead thanks to the internet continue to sell online to a
cadre of fans backed by zero marketing support
4. Creating product identity: branding decisions
It is important to give the product an identity Thats where branding comes in.
Branding is an extremely important and expensive element of product strategies.
40% of new products fail but for new brands the failure rate is 80%

4.1 Whats in a name (or a symbol)?

Brand = a name, a term, a symbol or any other unique element of a product that
identifies one firms products and sets it apart from the competition.
recognition factors needed to succeed in national, regional and international
markets.
- Brand must have a positive connotation and be memorable.
- Brand name is probably the most used and most recognized form of branding.
- A good brand name may position a product by conveying a certain image or
personality or by describing how it works.
- There are 4 easy tests for a good brand name: easy to say, easy to spell,
easy to read, easy to remember.
- The name should fit 4 ways: fit the target market, fit the products benefits, fit
the customers culture, fit legal requirements.
- When it comes to graphics, the rule is that it must be recognizable and
memorable. (+ Should have visual impact).

Trademark
= Legal term for a brand name, brand mark or trade character. Marketers register
trademarks to make their use by competitors illegal. The regulation applies only in
the country where it is registered, so it can lead to problems in other countries.

Other protection if no trademark:

Common-law protection = if the firm used the name and established it over a
period of time.
Trademarks might be used for a completely different type of business.
4.2 The importance of branding
The best brand builds an emotional connection with the consumer, it creates an
emotional reaction. If you succeed, the investment creates:
Brand equity = brands value to an organization over and above the value of the
generic version of the product (How much extra customers will pay). Brand perceived
to be superior to competitors.
Different levels of loyalty Brand equity pyramid:

Typesof relationships a person might have with a product:

Self-concept attachment = The product helps establish the users identity.
Nostalgic attachment = The product serves as a link with a past self.
Interdependence = The product is a part of the users daily routine.
Love = The product elicits emotional bonds of warmth, passion or other strong
emotion.
The way to build strong brands is to build strong bonds with customers bonds
based on brand meaning. Strong brand are build on strong meaning Brands die
when their meanings lose value in customers worlds. manage management of
meanings

Brands equity means that a brand enjoys customer loyalty because the customers
are not only aware of it but they also perceive it to be superior to the competition
CA power to capture a larger share of the market + sell at process with higher
profits

What makes a brand successful?

1. The brand excels at delivering the benefits customers truly desire
2. The brand stays relevant
3. The pricing strategy is based on consumers 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 brand equity
8. The brands managers understands 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

Products with strong brand equity provide enticing opportunities:

Brand extensions = new products sold with the same brand (eg. Haagen-Dazs).
Sell products at higher price than otherwise and will attract new customers
immediately.
firms need to live up to the quality or attractiveness of the original brand or the
brand equity will suffer.
4.3 Branding strategies
Individual brands versus family brands
Individual brand strategy = use separate brand for each product. Might be
better to communicate the attributes, values and benefits.
Family brand/Umbrella brand = several items under the same brand name.
The brand equity can rub off (dteindre) on a new brand.
decision depends often on whether company plans to introduce a group of similar
products.

National and own-label brands

National, manufacturer brands = producers brands.
Own-label brands/private-label brands = retail shop or chains exclusive trade
name make more profit on those
Competition that only sells national brands can cut prices on those brands, but
that hurts their overall profitability
But if you have you own-label brand and national brand you can bring prices down
but still make money on your own-label brand
If you stock a unique brand it is much harder for customers to compare it to other
brands.

Generic brands
Generic branding = no branding. Typically, in white with black lettering that name
only the product itself. One strategy to meet demands for lowest price for standard
products account for very little consumer spending.

Licensing
Licensing = one firm sells another firm the right to use a legally protected brand
name for a specific purpose and for a specific period of time. Can quickly position
a product through the recognition of the licensed brand. (ex: Harry Potter t-shirt)

Co-branding
Co-branding = 2 firms offer product together (eg. Ford & Elle magazine Ford
Focus Elle).
benefit both partners when combining the two brands provides more recognition
power than either enjoys alone. Variation:
Ingredient-branding = branded materials become component parts of
other branded products (eg. Celebrations sweets).
Adv.: Attracts customers to the host brand, because the ingredient brand is
familiar and has a strong brand reputation for quality. & The ingredient brands
firm can sell more of its product, not to mention the additional revenues it gets
from the licensing arrangement.
5. Creating product identity: packaging and labeling decisions
5.1 Packaging functions
Package = covering or container for a product, but also a way to create a CA
functional value protect the product + makes it easy to handle and store the
product.
important role in communicating brand personality (colors, words, shapes,
pictures to provide brand and name identification for the products) silent
salesperson scream BUY ME.
provides information about the specific variety, flavour or fragrance, directions for
use, suggestions for other uses, product warnings and product ingredients: info
consumers want & need.

Universal product code (UPC) = set of black bars printed on the side or bottom of
most items, ten-digit number, information about type of item, manufacturer; national
system of product identification. allows the retailer to track sales and control
inventory
communication element

5.2 Designing effective packaging

Planners must consider the packaging of other brands in the same product category.
Choice of packaging can make an aesthetic statement enhance the image (eg.
perfume).
Firms engaging in CSR must also consider choice of material Green packaging that
is less harmful.
+ What shape? + What graphic information? sometimes trace back to irrelevant
personal factors

5.3 Labelling regulations

Trade Description Act (1968)= prevents manufacturers, retailers or service
industry providers in the UK from supplying misleading information to customers
about their products.
Unfair Commercial Practices Directives = gives consumers a high level of
protection and aims to harmonize the fair trading laws of the member states
UK Customer Protection Act (1987) = liabilities a firm has to face if its defective
pharmaceutical products, bio-mechanical devices and general medical equipment
cause an injury.
General Product safety regulation (1994) = amends the Customer Protection
Act and extends it to all suppliers of all consumer goods and requires them to supply
products that are safe in normal or reasonably foreseeable use.
Sale of Goods Act = what your company sells in the UK must fit its description, be
of satisfactory quality and be fit for its purpose.

Food Labelling Regulations (1998 & 1999) = describe requirements that pre-
packed foods sold in the UK needs to contain on the label, the name of the food, date
mark, weight and alcohol strength must be in the same field of vision, the producer
also needs to list the place of origin, storage conditions and instructions for use if it
would be difficult to use the product without it + list of ingredients.

6. Organizing for effective product management

6.1 Management of existing products
Small firms one manager embraces all the functions. In large firms many
managers
Brand managers
Brand manager = responsible for coordinating all marketing activities for a brand:
positioning, identifying target markets, research, distribution, sales promotion,
packaging and evaluating the success of these decisions.
Some firms change the way they allocate responsibilities.
Acting independently and sometimes competitively, brand managers may fight for
increases in short-term sales for their own brand, pushing too hard may hurt long-
term profitability and damage brand equity.

Product category managers

Product-category manager = coordinates the mix of product lines within the more
general product category, such as all products related to telephony solutions and
consider the addition of new product lines based on client needs.

Market managers
Market manager = structure in which different managers focus on specific
customer groups rather than on the products the company makes, can be useful
when the org. makes variety of products that serves needs of wide range of
customers.
Their customers are best served by a differing focus on these very different
markets

6.2 Organising for new product development (NPD)

NPD almost always needs many people: one person may be assigned the role of new
product manager (especially creative with entrepreneurial skills).

Challenge in large companies: to get specialists in different areas together to

work in NPD teams or venture teams. Focus exclusively on the new product
development effort. Sometimes venture team is located away from traditional
company offices, usually in a remote location called skunk works.