Chapter 11 -
Benefits of packaging and labeling
1. Communication benefits 2. Functional benefits 3. Perceptual Benefits
Product bundling
A common approach to product modification to increase a product's value to consumers by the sale of two or more separate products in one package. For example, Microsoft Office is sold as a bundle of computer software, including Word, Excel, and PowerPoint.
Modifying the market (Market Modification)
A company tries to find new customers, increase a product's use among existing customers, or create new use situations.
Skimming strategy
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 capitalize on the price insensitivity of early buyers.
Cost reduction
About 80 percent of packaging material used in the world consists of paper, plastics, and glass. As the cost of these materials rises, companies are constantly challenged to find innovative ways to cut packaging costs while delivering value to their customers.
Branding
An organization uses a name, phrase, design, symbols, or combination of these to identify its products and distinguish them from those of competitors.
Environmental concerns
Because of widespread global concern about the growth of solid waste and the shortage of viable landfill sites, the amount, composition, and disposal of packaging material continue to receive much attention. For example, PepsiCo, Coca-Cola, and Nestlé have decreased the amount of plastic in their beverage bottles to reduce solid waste. Recycling packaging material is another major thrust.
Advntages of multiproduct branding
Capitalizing again on brand equity, consumers who have a good experience with the product will transfer this favorable attitude to other items in the product class with the same name. Therefore, this brand strategy makes possible product line extensions, the practice of using a current brand name to enter a new market segment in its product class.
Product re positioning
Changes 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.
Catching a rising trend
Changing consumer trends can also lead to product repositioning. Growing consumer interest in foods that offer health and dietary benefits is an example. Many products have been repositioned to capitalize on this trend. Quaker Oats makes the FDA-approved claim that oatmeal, as part of a low-saturated-fat, low-cholesterol diet, may reduce the risk of heart disease. Calcium-enriched products, such as Kraft American cheese and Uncle Ben's Calcium Plus rice, emphasize healthy bone structure for children and adults.
Early Majority
Deliberate; many informal social contacts
Product life cycle
Describes the stages a new product goes through in the market place: introduction, growth, maturity, and decline
Deletion (1st Strategy to deal with declining products)
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. For example, Sanford Corporation continues to sell its Liquid Paper correction fluid for use with typewriters in the era of word-processing equipment.
Laggards
Fear of debt; neighbors and friends and information sources
Create a New Use Situation
Finding new uses for an existing product has been the strategy behind Gillette, the world leader for men's shaving products. The company now markets its Gillette Body line of razors, blades, and shaving gels for "manscaping"—the art of shaving body hair in areas below the neckline—that represents a new use situation.
Advantages of Brand equity
First, brand equity provides a competitive advantage The Sunkist brand implies quality fruit. The Disney name defines children's entertainment. A second advntage us that consumers are often willing to pay a higher price for a product with brand equity. Brand equity, in this instance, is represented by the premium a consumer will pay for one brand over another when the functional benefits provided are identical. Gillette razors and blades, Bose audio systems, Duracell batteries, Cartier jewelry, and Louis Vuitton luggage all enjoy a price premium arising from brand equity.
Trademark
Identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others from using it.
Changing the value offered
In repositioning a product, a company can decide to change the value it offers buyers and trade up or down.
Trade up
Involves adding value to the product (or line) through additional features or higher-quality materials. Michelin, Bridgestone, and Goodyear have done this with a "run-flat" tire that can travel up to 50 miles at 55 miles per hour after suffering total air loss. Dog food manufacturers, such as Ralston Purina, also have traded up by offering super-premium foods based on "life-stage nutrition."
Trade name
Is a commercial, legal name under which a company does business. The Coca-Cola Company is the trade name of that firm.
Packaging
component of a product refers to any container in which it is offered for sale and on which label information is conveyed.
limited-coverage warranty
A limited-coverage warranty specifically states the bounds of coverage and, more important, areas of noncoverage.
Psychological barriers
These are cultural differences or image
Innovators
Venturesome; higher educated; use multiple information sources
Low learning
sales begin immediately because little learning is required by the consumer and the benefits of purchase are readily understood. This product often can be easily imitated by competitors, so the marketing strategy is to broaden distribution quickly. In this way, as competitors rapidly enter, most retail outlets already have the innovator's product. It is also important to have the manufacturing capacity to meet demand. A successful low-learning product is Gillette's Fusion razor. This product achieved $1 billion in worldwide sales in less than three years.
Express Warranty
which are written statements of liabilities. In recent years, the FTC has required greater disclosure on indicate whether the warranty is a limited-coverage or full-coverage alternative. The Magnuson-Moss Warranty/FTC Improvement Act (1975) regulates the content of consumer warranties and so has strengthened consumer rights with regard to warranties.
Challenges for packaging and labeling
1. Continuing need to connect with customers 2. environmental concerns 3. health, safety, and security issues 4. cost reduction
Five categories and profiles of product adopters
1. Innovators 2. Early Adopters 3. Early Majority 4. Late majority 5. Laggards For a product to be successful, it must be purchased by innovators and early adopters
Three Aspects of the Product Life Cycle
1. Length of the Product life Cycle 2. Shape of the Life-Cycle curve 3. The rate at which consumers adopt products
Three ways to manage a product through its life cycle
1. Modifying the product 2. Modifying the market 3. Re-positioning the product
Branding Strategies
1. Multi product branding strategy 2. Multibranding strategy 3. Private branding strategy 4. Mixed branding strategy
Factors that trigger product repositioning
1. Reacting to a Competitor's Position 2. Reaching a new market 3. Catching a rising trend 4. Changing the value offered
Creating Brand equity
1. The first step is to develop positive brand awareness and an association of the brand in consumers' minds with a product class or need to give the brand an identity. Gatorade and Kleenex have achieved this in the sports drink and facial tissue product classes, respectively. 2. Next, a marketer must establish a brand's meaning in the minds of consumers. Meaning arises from what a brand stands for and has two dimensions—a functional, performance-related dimension and an abstract, imagery-related dimension. Nike has done this through continuous product development and improvement and its links to peak athletic performance in its integrated marketing communications program. 3. The third step is to elicit the proper consumer responses to a brand's identity and meaning. Here attention is placed on how consumers think and feel about a brand. Thinking focuses on a brand's perceived quality, credibility, and superiority relative to other brands. Feeling relates to the consumer's emotional reaction to a brand. Michelin elicits both responses for its tires. Not only is Michelin thought of as a credible and superior-quality brand, but consumers also acknowledge a warm and secure feeling of safety, comfort, and self-assurance without worry or concern about the brand. 4. The final, and most difficult, step is to create a consumer-brand connection evident in an intense, active loyalty relationship between consumers and the brand. A deep psychological bond characterizes a consumer-brand connection and the personal identification customers have with the brand. Brands that have achieved this status include Harley-Davidson, Apple, and eBay.
Multi product branding strategy
A company uses one name for all its products in a product class. This approach is sometimes called family branding or corporate branding when the company's trade name is used. For example, Microsoft, General Electric, Samsung, Gerber, and Sony engage in corporate branding—the company's trade name and brand name are identical.
High learning
A high-learning product is one for which significant customer education is required and there is an extended introductory period . It may surprise you, but personal computers had this life-cycle curve. Consumers in the 1980s had to learn the benefits of owning the product or be educated in a new way of performing familiar tasks. Convection ovens for home use required consumers to learn a new way of cooking and alter familiar recipes used with conventional ovens. As a result, these ovens spent years in the introductory period.
Communication benefits
A major benefit of packaging is the label information it conveys to the consumer, such as directions on how, where, and when to use the product and the source and composition of the product, which is needed to satisfy legal requirements of product disclosure. For example, the labeling system for packaged and processed foods in the United States provides a uniform format for nutritional and dietary information. Many packaged foods contain informative recipes to promote usage of the product.
Functional benefits
A major benefit of packaging is the label information it conveys to the consumer, such as directions on how, where, and when to use the product and the source and composition of the product, which is needed to satisfy legal requirements of product disclosure. For example, the labeling system for packaged and processed foods in the United States provides a uniform format for nutritional and dietary information. Many packaged foods contain informative recipes to promote usage of the product.
Brand personality
A set of human characteristics associated with a brand name. Research shows that consumers assign personality traits to products—traditional, romantic, rugged, sophisticated, rebellious—and choose brands that are consistent with their own or desired self-image.
health, safety, and security issues
A third challenge involves the growing health, safety, and security concerns of packaging materials. Today, most consumers believe companies should make sure products and their packages are safe and secure, regardless of the cost, and companies are responding in numerous ways. Most butane lighters sold today, like those made by Scripto, contain a child-resistant safety latch to prevent misuse and accidental fire.
Perceptual Benefits
A third component of packaging and labeling is the perception created in the consumer's mind. Package and label shape, color, and graphics distinguish one brand from another, convey a brand's positioning, and build brand equity. According to the director of marketing for L'eggs hosiery, "Packaging is important to the positioning and equity of the L'eggs brand.
Finding new customer
As part of its market modification strategy, LEGO Group is offering a new line of products to attract consumers outside of its traditional market. Known for its popular line of construction toys for young boys, LEGO Group has introduced a product line for young girls called LEGO Friends. Harley-Davidson has tailored a marketing program to encourage women to take up biking, thus doubling the number of potential customers for its motorcycles.
Valuing brand equity
Brand equity also provides a financial advantage for the brand owner. Successful, established brand names, such as Gillette, Louis Vuitton, Nike, Gatorade, and Apple, have an economic value in the sense that they are intangible assets. The recognition that brands are assets is apparent in the decision to buy and sell brands. For example, Triarc Companies bought the Snapple brand from Quaker Oats for $300 million and sold it three years later to Cadbury Schweppes for $900 million. This example illustrates that brands, unlike physical assets that depreciate with time and use, can appreciate in value when effectively marketed. However, brands can lose value when they are not managed properly.
Modifying the product (Product modification)
Involves altering one or more of a product's characteristics, such as its quality, performance, or appearance, to increase the product's value to customers and increase sales. Wrinkle-free and stain-resistant clothing made possible by nanotechnology revolutionized the men's and women's apparel business and stimulated industry sales of casual pants, shirts, and blouses.
Trade down
Involves reducing a product's number of features, quality, or price. For example, airlines have added more seats, thus reducing legroom, and limited meal service by offering snacks only on most domestic flights. Trading down also exists when companies engage in downsizing—reducing the package content without changing package size and maintaining or increasing the package price.
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. 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.
Brand name
Is any word, device (design, sound, shape, or color), or combination of these used to distinguish a seller's products or services. Some brand names can be spoken, such as a Gatorade. Other brand names cannot be spoken, such as the white apple (the logotype or logo) that Apple puts on its machines and in its ads.
Growth stage
Is characterized 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. Numerous product classes or industries are in the growth stage of the product life cycle today. Examples include smartphones, e-book readers, and other tablet devices such as the iPad.
Brand licensing
It is a contractual agreement whereby one company (licensor) allows its brand name(s) or trademark(s) to be products or services offered by another company (licensee) for a royalty or fee. For example, Playboy earns more than $62 million licensing its name and logo for merchandise.
Early Adopters
Leaders in social setting; slightly above above average education
Fashion Product
Life cycles for these products frequently appear in women's and men's apparel. Fashion products are introduced, decline, and then seem to return. The length of the cycles may be months, years, or decades. Consider women's hosiery. Product sales have been declining for years. Women consider it more fashionable to not wear hosiery—bad news for Hanes brands, the leading marketer of women's sheer hosiery.
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. New Balance, Inc. successfully repositioned its athletic shoes to focus on fit, durability, and comfort rather than competing head-on against Nike and Adidas on fashion and professional sports. The company offers an expansive range of shoes and networks with podiatrists, not sports celebrities.
Continuing need to connect with customers
Packages and labels must be continually updated to connect with customers. The challenge lies in creating aesthetic and functional design features that attract customer attention and deliver customer value in their use. If done right, the rewards can be huge. For example, the marketing team responsible for Kleenex tissues converted its standard rectangular box into an oval shape with colorful seasonal graphics. Sales soared with this aesthetic change in packaging.
Increasing the product use
Promoting more frequent usage has been a strategy of Campbell Soup Company. Because soup consumption rises in the winter and declines during the summer, the company now advertises more heavily in warm months to encourage consumers to think of soup as more than a cold-weather food. Similarly, the Florida Orange Growers Association advocates drinking orange juice throughout the day rather than for breakfast only.
Product class
Refers to the entire product category or industry, such as prerecorded music
Late Majority
Skeptical; below average social status
The rate at which consumers adopt products
Some people are attracted to a product early. Others buy it only after they see their friends or opinion leaders with the item. Figure 11-5</a> shows the consumer population divided into five categories of product adopters based on when they adopt a new product. Brief profiles accompany each category. For any product to be successful, it must be purchased by innovators and early adopters. This is why manufacturers of new pharmaceuticals try to gain adoption by respected hospitals, clinics, and physicians. Once accepted by innovators and early adopters, successful new products move on to the early majority, late majority, and laggard categories.
Role of Product Manager
Sometimes called brand manager. Manages the marketing efforts for a close-knit family of products or brands. All product managers are responsible for managing existing products through the stages of the life cycle. Some are also responsible for developing new products. Product managers' marketing responsibilities include developing and executing a marketing program for the product line described in an annual marketing plan and approving ad copy, media selection, and package design.
Brand equity
The added value a brand name gives to a product beyond the functional benefits provided. This added value has two distinct advantages
Decline Stage
The decline stage occurs when sales drop. Fax machines for business use moved to this stage in early 2005. By then, the average price for a fax machine had sunk below $100. Frequently, a product enters this stage not because of any wrong strategy on the part of companies, but because of environmental changes. For example, digital music pushed compact discs into decline in the recorded music industry. Numerous product classes or industries are in the decline stage of their product life cycle. Two prominent examples include analog TVs and desktop personal computers. Products in the decline stage tend to consume a disproportionate share of management and financial resources relative to their future worth.
The Product Life Cycle and Consumer behavior
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
Maturity Stage
The maturity stage is characterized by a slowing of total industry sales or product class revenue. Also, marginal 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 due to fierce price competition among many sellers, and the cost of gaining new buyers at this stage rises. Marketing attention in the maturity stage is often directed toward holding market share through further product differentiation and finding new buyers and uses. For example, Gillette modified its Fusion shaving system with the addition of ProGlide, a five-blade shaver with an additional blade on the back for trimming. Fax machine manufacturers developed Internet-enabled multifunctional models with new features such as scanning, copying, and color reproduction.
Brand extension
The practice of using a current brand name to enter a different product class. For instance, equity in the Huggies family brand name has allowed Kimberly-Clark to successfully extend its name to a full line of baby and toddler toiletries. This brand extension strategy generates $500 million in annual sales globally for the company.
Product line extension
The practice of using a current brand name to enter a new market segment in its product class
The product level: Class and Form
The product life cycle shown in Figure 11-1is a total industry or generalized product class sales curve. 1. Product class 2. Product form
Shape of the Life-Cycle curve
The product life-cycle sales curve shown in generalized life cycle, but not all products have the same shape to their curve. In fact, there are several life-cycle curves, each type suggesting different marketing strategies. shows the shape of life-cycle sales curves for four different types of products: high-learning, low-learning, fashion, and fad products.
Length of the Product life Cycle
There is no set time that it takes a product to move through its life cycle. As a rule, consumer products have shorter life cycles than business products. For example, many new consumer food products such as Frito-Lay's Baked Lay's potato chips move from the introduction stage to maturity in 18 months. The availability of mass communication vehicles informs consumers quickly and shortens life cycles. Technological change shortens product life cycles as new-product innovation replaces existing products. For instance, smartphones have largely replaced digital cameras in the amateur photography market.
Usage barriers
These are common reasons for resisting product in the introduction stage. In other words, the product is not compatible with existing habits
Value barriers
These are common reasons for resisting product in the introduction stage. The product provides no incentive to change
Risk barriers
These are physical, economic, and social reasons for resisting product in the introduction stage.
Subbranding
This combines a corporate or family brand with a new brand to distinguish a part of its product line from others. Consider American Express. It has applied subbranding with its American Express Green, Gold, Platinum, Optima Blue, and Centurion charge cards, with unique service offerings for each. Similarly, Porsche successfully markets its higher-end Porsche Carrera and its lower-end Porsche Boxster.
Penetrating pricing
To discourage competitive entry, a company can price low. This pricing strategy helps build unit volume, but a company must closely monitor costs.
Disadvantages of brand extensions
Too many uses for one brand name can dilute the meaning of a brand for consumers. Some marketing experts claim this has happened to the Arm & Hammer brand given its use for toothpaste, laundry detergent, gum, cat litter, air freshener, carpet deodorizer, and antiperspirant.
Reaching a new market
When Unilever introduced iced tea in Britain, sales were disappointing. British consumers viewed it as left over hot tea, not suitable for drinking. The company made its tea carbonated and repositioned it as a cold soft drink to compete as a carbonated beverage and sales improved
Harvesting (Second Strategy)
When a company retains the product but reduces marketing costs. The product continues to be offered, but salespeople do not allocate time in selling nor are advertising dollars spent. The purpose of harvesting is to maintain the ability to meet customer requests. Coca-Cola, for instance, still sells Tab, its first diet cola, to a small group of die-hard fans. According to Coke's CEO, "It shows you care. We want to make sure those who want Tab, get Tab
Introduction stage
When a product is 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. The marketing objective for the company at this stage is to create consumer awareness and stimulate trial-the initial purchase of a product by a consumer. Advertising and promotion expenditures in the introduction stage are often made to stimulate primary demand, the desire for the product class rather than for a specific brand, since there are few competitors with the same product. As more competitors launch their own products and the product progresses along its life cycle, company attention is focused on creating selective demand, the preference for a specific brand.
Private branding strategy (private labeling or reseller)
When it manufactures products but sells them under the brand name of a wholesaler or retailer. Rayovac, Paragon Trade Brands, and ConAgra Foods are major suppliers of private-label alkaline batteries, diapers, and grocery products, respectively. Costco, Sears, Walmart, and Kroger are large retailers that have their own brand names.
Mix branding
Where a firm markets products under its own name(s) and that of a reseller because the segment attracted to the reseller is different from its own market. Companies such as Del Monte, Whirlpool, and Dial produce private brands of pet foods, home appliances, and soap, respectively.
Strict liability rulings
Where a manufacturer is liable for any product defect, whether it followed reasonable research standards or not.
Implied warranty
Which assign responsibility for product deficiencies to the manufacturer. Studies show that the type of warranty can affect a consumer's product evaluation. Brands with limited warranties tend to receive less positive evaluations compared with full-warranty items.
Multi-branding strategy
Which involves giving each product a distinct name. Multibranding is a useful strategy when each brand is intended for a different market segment. Procter & Gamble makes Camay soap for those concerned with soft skin and Safeguard for those who want deodorant protection.
Warranty
Which is a statement indicating the liability of the manufacturer for product deficiencies. There are various types of product warranties with different implications for manufacturers and customers.
full warranty
has no limits of noncoverage.
Product form
pertains to variations of a product within the product class. For prerecorded music, product form exists in the technology used to provide the music such as cassette tapes, compact discs, and digital music downloading and streaming. Figure 11-4 shows the life cycles for these three product forms and demonstrates the impact of technological innovation on sales.
