Chapter 9 - product strategy, branding, and product management

brand personality

A distinctive image that captures the character and benefits of a good or service.

objectives and strategies for multiple products

Although a small firm might get away with a focus on one product, larger firms often sell a set of related products. This means that strategic decisions affect two or more products simultaneously. In this situation, the firm must think in terms of its entire portfolio of products. As Figure 9.2 shows, product planning means developing product line and product mix strategies to encompass multiple offerings. A product line is a firm's total product offering to satisfy a group of target customers. For example, as we saw in Chapter 4, Campbell's Soup offers several different brands to satisfy different consumer tastes and needs. One is Campbell's Slow Kettle® soup, which is positioned as a more luxurious experience for more discerning consumers. Slow Kettle® is preservative-free, features creative combinations of ingredients, and employs a slow simmer method of cooking to draw out each soup's unique flavor. On the other hand, Campbell's Soup on the Go is positioned as a quick snack for those with limited time to eat. Soup on the Go features simple soups packaged in a cup that is microwavable for heating, easy to grip with one hand, and consumed by tilting the container in the same way one would do with a can of soda. The product line length is determined by the number of separate items within the same category—in Campbell's case, a total of nine brands each with multiple stock-keeping units (SKUs). An SKU is a unique identifier for each distinct product. Hence, for Campbell's Soup on the Go, each SKU would represent a unique item within the brand, which, in this case, would be each of the different soup recipes sold under that brand.5 In terms of product line strategies, two primary approaches are used. A full-line product strategy targets many customer segments to boost sales potential. In contrast, a limited-line product strategy, with fewer product variations, can improve the firm's image if consumers perceive it as a specialist with a clear, specific position in the market. A great example is Rolls-Royce Motor Cars, which BMW also owns (how about that—from MINI Coopers to Rolls—quite a stable of brands!). Rolls-Royce makes expensive, handcrafted cars built to each customer's exact specifications and for decades maintained a unique position in the automobile industry. Every Rolls Phantom that rolls out the factory door is truly a unique work of art.6 In a product line extension, organizations create a strategy to expand a particular product line by adding more brands or models. In 2018, Procter & Gamble acquired Merck's KGaA consumer health products unit to add vitamin and food supplements to P&G's existing portfolio of over-the-counter pharmacy items and thus take advantage of the growth of nonprescription home remedy sales. The product line extension was touted in the business press as a coup for P&G that gave them control of new brands in a lucrative market.7 When a firm decides to extend its product line, it must decide on the best direction to go—which usually means either stretching the line upward or downward in price. If a firm's current product line includes middle- and lower-end items, an upward product line stretch adds new items—higher-priced entrants that claim better quality or offer more bells and whistles. Over the last decade, Kia has been working to stretch its low-priced product line upward with new brand-building activities and a new luxury car in part because of rival Hyundai's success with its Genesis model. Toward that objective, Kia launched its luxury K900, positioning it between the BMW 5-Series (at about $50,000) and the BMW 7-Series (at about $75,000).8 But it is often challenging for a brand to make the move from offering products in the mid-to-low priced category to offering a high-end product, and the K900 experienced this firsthand in the few years since it was launched. Lower-than-expected sales motivated Kia to cut the manufacturer's suggested retail price (MSRP) of the Premium trim version of the car (one tier below the Luxury trim version initially launched) down to $50,900 by 2018.9 To date, Kia has not experienced anything close to the success at the high end as has Hyundai's Genesis, which is now branded as simply Genesis similarly to the way Toyota brands Lexus separately from Toyota in order to better target luxury car buyers (since the core brands of Hyundai and Toyota are not associated with the luxury market). Conversely, a downward product line stretch augments a line when it adds new items at the lower-priced end. Here, the firm must take care not to blur the images of its higher-priced, upper-end offerings. Rolex, for example, most likely will not want to run the risk of cheapening its image with a new watch line to compete with Timex or Swatch. In some cases, a firm may come to the realization that its current target market is too small. In this case, the product strategy may call for a two-way product line stretch that adds products at both the upper- and lower-priced ends, a potentially very tricky strategy to execute successfully. A filling-out product strategy adds sizes or styles not previously available in a product category. Mars Candy did this when it introduced Reese's Minis as a knockoff of its already crazy-popular full-sized product. In other cases, the best strategy may actually be to reduce the size of a product line, particularly when some of the items are not profitable and the complexity of managing them becomes detrimental to the company. In 2018, Nestle agreed to sell its candy business to Ferrero, maker of Nutella, for $2.8 billion. Included in the deal were chocolate favorites such as Baby Ruth, Butterfinger, and Raisinets. Nestle's goal in divesting its candy business was to reorient the company toward healthier—and more profitable—food options in markets with greater projected growth than candy.10 We've seen that there are many ways a firm can modify its product line to meet the competition or take advantage of new opportunities. To further explore these product strategy decisions, let's stick with the P&G theme and return to the "glamorous" world of dish detergents. By the way, P&G basically invented the product management system that is widely used in firms around the world, so it's certainly fitting to focus on this giant consumer products company. What does P&G do if the objective is to increase market share? One possibility would be to expand its line of liquid dish detergents—as the company did with its move to expand Gain's popularity from laundry soap to dishwashing liquid. If the line extension meets a perceived consumer need the company doesn't currently address, this would be a good strategic objective. Gain brought a bevy of laundry loyalists into its new category in dishes, making for a great base of business on which to build. But whenever a manufacturer extends a product line or a product family, there is risk of cannibalization. This occurs when the new item eats up sales of an existing brand as the firm's current customers simply switch to the new product. That may explain why P&G's Gain dishwashing positioning is all about the unique Gain scent. For Gain Flings (basically the Gain equivalent of Tide Pods), the message to consumers is "get 50 percent more of that original Gain scent you love—it's music to your nose!"

internal customers

Coworkers who interact and harbor the attitude and belief that all activities ultimately impact external customers.

objectives and strategies for individual products

Everybody loves the MINI Cooper (anything small is cute, right?). But it wasn't just luck or happenstance that turned this product into a global sensation. Just how do you launch a new car that's only 151-158 inches long (depending on the model) and makes people laugh when they see it? Its parent company, BMW, succeeded by deliberately but gently poking fun at the MINI Cooper's small size from the beginning of the brand. The original launch of the MINI Cooper included bolting the MINI onto the top of a Ford Excursion with a sign reading, "What are you doing for fun this weekend?" BMW also mocked up full-size MINIs to look like coin-operated kiddie rides you find outside grocery stores with a sign proclaiming, "Rides $16,850. Quarters only." The advertising generated buzz in the 20- to 34-year-old target market, and today the MINI is no joke. As a smaller brand, the MINI never had a huge advertising budget—in fact, it was the first new car in modern times in which the initial launch didn't include TV advertising. Instead, the MINI launched with print, outdoor billboards, and online ads. And of course, it has an active and ongoing social media presence. This is because the objective wasn't a traditional heavy-handed car launch that beats prospects over the head with massive TV ads; rather, BMW envisioned a "discovery process" by which target consumers would find out about the brand on their own and fall in love with it. They used brand storytelling to its fullest potential (watch for a discussion of this concept a little later in this chapter). Ads promoted "motoring" instead of driving, and magazine inserts included MINI-shaped air fresheners and pullout games. Wired magazine even ran a cardboard foldout of the MINI suggesting that readers assemble and drive it around their desks making "putt-putt" noises. Playboy came up with the idea of a six-page MINI "centerfold" complete with the car's vital statistics and hobbies. By the end of its first year on the market, the MINI was rated the second-most memorable new product of the year! As with the MINI, product strategies often focus on a single new product. (As an interesting sidebar, the original MINI was 142 inches long, but enough customers complained about the cramped quarters in the MINI's backseat—it is, after all, a "mini"—that BMW acquiesced and introduced a "larger MINI." Now that's an oxymoron—something like a "jumbo shrimp"!)1 Strategies for individual products may be quite different, depending on the situation: new products, regional products, mature products, or other differences. For new products, not surprisingly, the objectives relate heavily to producing a very successful introduction. After a firm experiences success with a product in a local or regional market, it may decide to introduce it nationally. Chick-fil-A opened its doors in Atlanta in 1967 and slowly became a regional player in the quick-service restaurant industry across the Southeast. Today, the company has over 2,200 restaurants in 47 of the 50 states and Washington, D.C., and is consistently rated at or near the top on customer satisfaction scores in quick service.2 For mature products, like Oreo (dating back to 1912), product objectives may be focused on how to leverage the brand to develop new varieties of the product that appeal to changing consumer tastes. Oreo regularly introduces limited edition flavors, like Brownie Batter and Banana Split Crème.3 Recently, the scrumptious delicacy launched a campaign inviting consumers to dream up their own flavors of Oreo. The #MyOreoCreation Contest asked fans to submit their taste creations via social media for the chance to see their cookie hit shelves nationwide. Three finalists were selected. Each received $25,000 and, of course, the thrill of seeing "their cookie" on store shelves nationwide. The grand prize winner got $50,000 plus a visit inside the Oreo Wonder Vault, "where new Oreo flavors magically appear. The three top new flavors are (drumroll . . . ): Cherry Cola, Kettle Corn, and Piña Colada.4

package and labels: branding's little helper

How do you know if the soda you are drinking is "regular" or "caffeine free"? How do you keep your low-fat grated cheese fresh after you have used some of it? Why do you like that little blue box from Tiffany's so much? The answer to all these questions is effective packaging and labeling. So far, we've talked about how marketers create product identity with branding. In this section, we'll learn that packaging and labeling decisions also help to create product identity. We'll also talk about the strategic functions of packaging and some of the legal issues that relate to package labeling. A package is the covering or container for a product, but it's also a way to create a competitive advantage. The important functional value of a package is that it protects the product. For example, packaging for computers, TV sets, and stereos protects the units from damage during shipping and warehousing. Cereal, potato chips, or packs of grated cheese wouldn't be edible for long if packaging didn't provide protection from moisture, dust, odors, and insects. The multilayered, soft box for the chicken broth you see in Figure 9.7 prevents the ingredients inside from spoiling. In addition to protecting the product, effective packaging makes it easy for consumers to handle and store the product. Review the different elements pointed out in Figure 9.7—collectively, they illustrate how packaging serves a number of different functions. Metrics Moment Recall from our previous discussion that brand equity represents the value of a product with a particular brand name compared to what the value of the product would be without that brand name (think Coca-Cola versus generic supermarket soda). Companies, market research firms, and creative agencies create metrics of brand equity because this is an important way to assess whether a branding strategy has been successful. For example, the Harris Poll EquiTrend® study is conducted on an annual basis to measure the brand equity of more than 3,000 brands in more than 300 categories. A sample of U.S. consumers ages 15 and over are surveyed online.42 You can review the latest results by typing "The Harris Poll Brands of the Year" into any search engine. If consumers have strong, positive feelings about a brand and are willing to pay extra to choose it over others, marketers are on Cloud Nine. Each of the following approaches to measuring brand equity has some good points and some bad points: Customer mindset metrics focus on consumer awareness, attitudes, and loyalty toward a brand. However, these metrics are based on consumer surveys and don't usually provide a single objective measure that a marketer can use to assign a financial value to the brand. Product-market outcome metrics focus on the ability of a brand to charge a higher price than that of an unbranded equivalent. This usually involves asking consumers how much more they would be willing to pay for a certain brand compared with others. These measures often rely on hypothetical judgments and can be complicated to use. Financial market metrics consider the purchase price of a brand if it is sold or acquired. They may also include subjective judgments about the future stock price of the brand. A team of marketing professors proposed a simpler measure that they claim reliably tracks the value of a brand over time. Their revenue premium metric compares the revenue a brand generates with the revenue generated by a similar private-label product (that doesn't have any brand identification). In this case, brand equity is just the difference in revenue (net price times volume) between a branded good and a corresponding private label.43 Apply the Metrics 1. Work with one or more other students to come up with a short list of five to seven of your collective favorite brands. 2. Consider the various aspects of branding you've read about in this chapter. What characteristics of each brand caused you to include it on your short list? Over and above these utilitarian functions, however, a package communicates brand personality. Effective product packaging uses colors, words, shapes, designs, and pictures to provide brand and name identification for the product. In addition, packaging provides product facts, including flavor, fragrance, directions for use, suggestions for alternative uses (e.g., recipes), safety warnings, and ingredients. Packaging may also include warranty information and a toll-free telephone number for customer service. A final communication element is the Universal Product Code (UPC), which is the set of black bars or lines printed on the side or bottom of most items sold in grocery stores and other mass-merchandising outlets. The UPC is a national system of product identification. It assigns each product a unique 10-digit number. These numbers supply specific information about the type of item (grocery item, meat, produce, drugs, or discount coupon), the manufacturer (a five-digit code), and the specific product (another five-digit code). At checkout counters, electronic scanners read the UPC bars and automatically transmit data to a computer in the cash register so that retailers can easily track sales and control inventory. Design Effective Packaging Should the package have a resealable zipper, feature an easy-to-pour spout, be compact for easy storage, be short and fat so it won't fall over, or be tall and skinny so it won't take up much shelf space? Effective package design involves a multitude of decisions. Planners must consider the packaging of other brands in the same product category. For example, when Pringles potato chips were introduced, they were deliberately packaged in a cylindrical can instead of in bags like Lay's and others. This was largely out of necessity because Pringles' manufacturer Kellogg's didn't have all the local trucks to deliver to stores that Frito-Lay did and the cans kept the chips fresher much longer. However, quickly after product introduction, Pringles discovered that not all customers would accept a radical change in packaging and retailers may be reluctant to adjust their shelf space to accommodate such packages. To partly answer the concern, Pringles now comes in a diverse array of products and package types and sizes, including Stix, Snack Stacks, Grab & Go, and, for the healthier eaters, Lightly Salted.44 Packaging can speak to some of the intangible characteristics of a product's brand, such as its personality, heritage, and premium image. Jim Beam underwent a global packaging redesign to reflect a more premium and unified image for the products within its portfolio. Specific changes meant to help unify the products under the brand included the prominent display of the Jim Beam signature "rosette" logo. In addition, to keep the heritage of the brand in the minds of consumers, the portraits on the side of the Jim Beam White bottle, which feature seven generations of Beam family distillers, were refreshed to improve the quality of the images. Specific Jim Beam products also had elements of the bottle updated to further communicate the premium nature of the different product offerings within the brand. This was the first-ever global packaging redesign in the 220-plus-year history of the brand!45 Firms that wish to act in a socially responsible manner must also consider the environmental, social, and economic impact of packaging. For instance, shiny gold or silver packaging transmits an image of quality and opulence, but certain metallic inks are not biodegradable. Some firms are developing innovative sustainable packaging that involves one or more of the following: elements that can be produced from previously used materials, elements that use materials in their development that can be repurposed after use, materials that require fewer resources to cultivate, and materials and processes that are generally less harmful to the environment. Of course, there is no guarantee that consumers will accept such packaging. They didn't take to plastic pouch refills for certain spray bottle products even though the pouches may take up less space in landfills than the bottles do. They didn't like pouring the refill into their old spray bottles. Still, customers have accepted smaller packages of concentrated products, such as laundry detergent, dishwashing liquid, and fabric softener. What about the shape: Square? Round? Triangular? Hourglass? Toiletry manufacturer Mennen once had an aftershave and cologne line called Millionaire that it packaged in a gold pyramid-shaped box. How about an old-fashioned apothecary jar that consumers can reuse as an attractive storage container? What color should it be? White to communicate purity? Yellow because it reminds people of lemon freshness? Brown because the flavor is chocolate? Sometimes, we can trace these decisions back to personal preferences. The familiar Campbell's Soup label—immortalized as art by Andy Warhol—is red and white because a company executive many years ago liked the football uniforms at Cornell University! Finally, there are many specific decisions brand managers must make to ensure that a product's packaging reflects well on its brand and appeals to the intended target market. What graphic information should the package show? Someone once quipped, "Never show the dog eating the dog food." Translation: Should there be a picture of the product on the package? Must green bean cans always show a picture of green beans? Should there be a picture that demonstrates the results of using the product, such as beautiful hair? Should there be a picture of the product in use, perhaps a box of crackers that shows them with delicious-looking toppings arranged on a silver tray? Should there be a recipe or coupon on the back? Of course, all these decisions rely on a marketer's understanding of consumers, ingenuity, and perhaps a little creative luck. Store brands have unique packaging opportunities. Some store brands opt for copycat packaging, mimicking the look of the national branded product they want to knock off. Walgreens is a master of such copycat packaging—look on any shelf in its medicinal categories, and you will see a Walgreens brand proudly merchandised on the shelf (at a very attractive price!) right next to the leading national brand in that category, with the package design and colors so similar that you have to look carefully to discern what you are actually buying.46 Labeling Regulations The Federal Fair Packaging and Labeling Act of 1966 controls package communication and labeling in the U.S. This law aims to make labels more helpful to consumers by providing useful information. More recently, the requirements of the Nutrition Labeling and Education Act of 1990 forced food marketers to make sweeping changes in how they label products. Since August 18, 1994, the U.S. Food and Drug Administration (FDA) requires most foods sold in the U.S. to have labels telling, among other things, how much fat, saturated fat, cholesterol, calories, carbohydrates, protein, and vitamins are in each serving of the product. These regulations force marketers to be more accurate when they describe the contents of their products. Juice makers, for example, must state how much of their product is real juice rather than sugar and water. As of January 1, 2006, the FDA also requires that all food labels list the amount of trans fat in the food directly under the line for saturated fat content. The new labeling reflects scientific evidence showing that consumption of trans fat, saturated fat, and dietary cholesterol raises "bad" cholesterol levels, which increases the risk of coronary heart disease. The new information was the first significant change on the Nutrition Facts panel since it was established.47 Recently, additional changes have been mandated that must be implemented by 2020, including increasing font sizes for calories, number of servings, and serving sizes, and displaying additional details on added sugars and actual amounts of vitamin D, calcium, iron, and potassium.48

quality as a product objective: tqm and beyond

Product objectives often focus on product quality, which is the overall ability of the product to satisfy customer expectations. Quality is tied to how customers think a product will perform, not necessarily to some technological level of perfection. That is, for all intents and purposes, perception is reality. Product quality objectives coincide with marketing objectives for higher sales and market share and to the firm's objectives for increased profits. In 1980, just when the economies of Germany and Japan were finally rebuilt from World War II and were threatening American markets with a flood of new products, an NBC documentary on quality titled If Japan Can Do It, Why Can't We? fired a first salvo to the American public—and to American CEOs—to warn that American product quality was becoming inferior to that of other global players.12 So began the total quality management (TQM) revolution in American industry. You learned in Chapter 1 that TQM is a business philosophy that calls for company-wide dedication to the development, maintenance, and continuous improvement of all aspects of the company's operations. Indeed, some of the world's most admired, successful companies—top-of-industry firms such as Nordstrom, 3M, Boeing, and Coca-Cola, to name a few—endorse a total quality focus. Product quality is one way that marketing adds value to customers. However, TQM as an approach to doing business is far more sophisticated and impactful than simply paying attention to products that roll off the assembly line. TQM firms promote a culture among employees that everybody working there serves its customers—even employees who never interact with people outside the firm. In such cases, coworkers are internal customers—other employees with whom they interact, and these employees harbor an attitude and belief that providing a high quality of service internally will ultimately have an impact on external customers' experiences with the firm and its offerings. This internal customer mindset comprises the following four beliefs: (1) employees who receive my work are my customers, (2) meeting the needs of employees who receive my work is critical to doing a good job, (3) it is important to receive feedback from employees who receive my work, and (4) I focus on the requirements of the person who receives my work. The bottom line is that TQM maximizes external customer satisfaction by involving all employees, regardless of their function, in efforts to continually improve quality. This results in products that perform better and more fully meet customer needs. For example, TQM firms encourage all employees, even the lowest-paid factory workers, to suggest ways to improve products—and then reward them when they come up with good ideas. TQM fired the first shot on product quality, and since then many companies around the world look to the uniform standards of the International Organization for Standardization (ISO) for quality guidelines. This Geneva-based organization developed a set of criteria to improve and standardize product quality in Europe. The ISO 9000 is a broad set of guidelines that establish voluntary standards for quality management. These guidelines ensure that an organization's products conform to the customer's requirements. ISO subsequently has developed a variety of other standards, including ISO 14000, which concentrates on environmental management, and ISO 22000 on food safety management and ISO 27001 on information security. Because members of the European Union and other European countries prefer suppliers with ISO 9000 and ISO 14000 certification, U.S. companies must comply with these standards to be competitive there.13 One way that companies can improve quality is to use the Six Sigma method. The term Six Sigma comes from the statistical term sigma, which is a standard deviation from the mean. Six Sigma refers to six standard deviations from a normal distribution curve. In practical terms, that translates to no more than 3.4 defects per million—getting it right 99.9997 percent of the time. As you can imagine, achieving that level of quality requires a rigorous approach (try it on your term papers—even when you use spell-check!), and that's what Six Sigma offers. The method involves a five-step process called DMAIC (define, measure, analyze, improve, and control). The company trains its employees in the method, and as in karate, they progress toward "black belt" status when they successfully complete all the levels of training. Employees can use Six Sigma processes to remove defects from services, not just products. In these cases, a "defect" means failing to meet customer expectations. For example, hospitals use Six Sigma processes to reduce medical errors, and airlines use the system to improve flight scheduling. It's fine to talk about product quality, but what exactly is it? Figure 9.3 summarizes the many aspects of product quality. In some cases, product quality means durability. For example, athletic shoes shouldn't develop holes after their owner shoots hoops for a few weeks. Reliability also is an important aspect of product quality—customers want to know that a McDonald's hamburger is going to taste the same at any location. For many customers, a product's versatility and its ability to satisfy their needs are central to product quality. For other products, quality means a high degree of precision. For example, purists compare HDTVs in terms of the number of pixels and their refresh rate. Quality, especially in business-to-business (B2B) products, also relates to ease of use, maintenance, and repair. Yet another crucial dimension of quality is product safety. Finally, the quality of products, such as a painting, a movie, or even a wedding gown, relates to the degree of aesthetic pleasure they provide. Of course, evaluations of aesthetic quality differ dramatically among people: To one person, the quality of a mobile device may mean simplicity, ease of use, and a focus on reliability in voice signal, whereas to another, it's the cornucopia of apps and multiple communication modes available on the device.

ingredient branding

a type of branding in which branded materials become "component parts" of other branded products

Stock Keeping Unit (SKU)

a unique identifier for each distinct product

brand manager

an individual who is responsible for developing and implementing the marketing plan for a single brand

brand storytelling

compelling stories told by marketers about brands to engage consumers

sub-branding

creating a secondary brand within a main brand that can help differentiate a product line to a desired target group

iso 9000

criteria developed by the International Organization for Standardization to regulate product quality in Europe

product line length

determined by the number of separate items within the same category

brand anthropomorphism

the assignment of human characteristics and qualities to a brand

trademark

the 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

growth stage

the second stage in the product life cycle, during which consumers accept the product and sales rapidly increase

brand equity

the value of a brand to an organization

brand meeting

the beliefs and associations that a consumer has about the brand

product mix

the total set of all products a firm offers for sale

product quality

the overall ability of the product to satisfy customer expectations

internal customer mindset

an organizational culture in which all organization members treat each other as valued customers

private-label brands

brands that a certain retailer or distributer owns and sells

natural or manufacturer brands

brands that the product manufacturer owns

sustainable packaging

packaging that involves one or more of the following: elements that can be produced from previously used materials, elements that use materials in their development that can be repurposed after use, materials that require fewer resources to cultivate, and materials and processes that are generally less harmful to the environment

package

the covering or container for a product that provides product protection, facilitates product use, and supplies

upward product line stretch

A product line extension strategy that adds new items toward the higher-priced end of the market.

downward product line stretch

A product line extension strategy that adds new items toward the lower-priced end of the market.

9.2 marketing throughout the product life cycle

9.2 Understand how firms manage products throughout the product life cycle. Many products have long lives. Others are "here today, gone tomorrow." The product life cycle (PLC) is a useful way to explain how the market's response to a product and marketing activities change over the life of a product. In Chapter 8, we talked about how marketers introduce new products, but the launch is only the beginning. Product marketing strategies must evolve and change as they continue through the product life cycle. Alas, some brands don't have long to live. Who remembers the Rambler car or Evening in Paris perfume? In contrast, other brands seem almost immortal. For example, Coca-Cola has been the number-one cola brand for more than 120 years, General Electric has been the number-one light bulb brand for over a century, and Kleenex has been the number-one tissue brand for more than 80 years.14 Let's take a look at the stages of the PLC, which are portrayed in Figure 9.4. In addition, Figure 9.5 provides insights on marketing mix strategies throughout each phase of the PLC. Introduction Stage Like people, products are born, they "grow up," and eventually they die. We divide the life of a product into four stages. The first stage we see in Figure 9.4 is the introduction stage. Here, customers get the first chance to purchase the good or service. During this early stage, a single company usually produces the product. If it clicks and is profitable, competitors usually follow with their own versions. During the introduction stage, the goal is to get first-time buyers to try the product. Sales (hopefully) increase at a steady but slow pace. As is also evident in Figure 9.4, the company usually does not make a profit during this stage. Why? Research-and-development (R&D) costs and heavy spending for advertising and promotional efforts cut into revenue. As Figure 9.5 illustrates, during the introduction stage, pricing may be high to recover the R&D costs (demand permitting) or low to attract a large number of consumers. For example, when the popular AncestryDNA direct-to-consumer genealogical test was first launched, the pricing strategy was stable at $99 for several years. Then, as more competitors entered and the newness of the concept began to wear off, occasional promotions brought the price down $10 or so for short periods. By mid-2018, several aggressive and low-price competitors heavily promoted their DNA tests, and AncestryDNA had served more than 10 million people and they were running flash sales for as low as $59.15 How long does the introduction stage last? As we saw in the microwave oven example in Chapter 8, it can be quite long. A number of factors come into play, including marketplace acceptance and the producer's willingness to support its product during start-up. Sales for hybrid cars started out pretty slowly except for the Prius, but now with broader consumer acceptance of the value of hybrid vehicles and greater levels of sales, hybrids can be considered well past the introduction stage. As of mid-2018, Tesla Model 3 usurped everything else at the top of the introduction quadrant.16 However, consumer demand was much higher than Tesla's problem-plagued production process could deliver against, raising the specter of a red-hot product introduction fizzling before achieving a growth stage unless the production issues could be fully and permanently rectified.17 It is important to note that many products never make it past the introduction stage. Infamous examples include New Coke (1985—a product that tasted more like Pepsi), RJ Reynolds Smokeless Cigarettes (1989—introductory marketing investment of $325 million), Coors Rocky Mountain Spring Water (1990—a really bad idea for a product line extension), and Orbitz Soda (1999—the bottles, consistency, and flecks suspended in the liquid looked like a Lava Lamp from the 70s).18 For a new product to succeed, consumers must first know about it. Then, they must believe that it is something they want or need. Marketing during this stage often focuses on informing consumers about the product, how to use it, and its promised benefits. However, this isn't nearly as easy as it sounds: Would you believe that the most recent data indicate that as many as 95 percent of new products introduced each year fail? Shocking as that number is, it's true. Adding to the litany of previously mentioned product flops, have you ever heard of Apple's Newton PDA? How about Colgate Lasagna or Jack Daniels mustard? Probably not! These product blunders—which must have seemed good to some product manager at the time but sound crazy now—certainly didn't last on shelves very long. Ever heard of Google Glass, a headset that you wear like a pair of glasses? They included a small screen tucked into the upper corner of the frame that kept users constantly plugged in to email, calls, and other notifications. The sky-high price, issues around privacy, and cultural backlash helped the product enter and exit the market quickly. It was likely a product a little ahead of its time—so don't count it out as a product relaunch for the future. Firms occasionally relaunch old or former products using principles of segmentation, target marketing, and positioning to reposition an existing product for reintroduction into the product life cycle. The approach typically involves a change to the product itself or to the way it is marketed in order to make it available as a new product to increase sales. It's noteworthy that the product failure example above (as are many) were backed by big companies and attached to already well-known brands. Just think of the product introduction risks for start-ups and unknown brands!19

9.3 branding and packaging: create product identity

9.3 Explain how branding and packaging strategies contribute to product identity. Successful marketers keep close tabs on their products' life cycle status, and they plan accordingly. Equally important, though, is to give that product an identity and a personality. For example, the mere word Disney evokes positive emotions around fun, playfulness, family, and casting day-to-day cares out the window. Folks pay a whole lot of money at Disney's theme parks in Florida and California (as well as in France, China, and Japan) to act on those emotions. Disney achieved its strong identity through decades of great branding. Branding along with packaging are extremely important (and expensive) elements of product strategies. What's in a Name (or a Symbol)? How do you identify your favorite brand? By its name? By the logo (how the name appears)? By the package? By some graphic image or symbol, such as Nike's swoosh? A brand is a name, term, symbol, or any other unique element of a product that identifies one firm's product(s) and sets it apart from the competition. Consumers easily recognize the Coca-Cola logo, the Jolly Green Giant (a trade character), and the triangular red Nabisco logo (a brand mark) in the corner of the box. Branding provides the recognition factor products need to succeed in regional, national, and international markets. A brand name is probably the most used and most recognized form of branding. Smart marketers use brand names to maintain relationships with consumers "from the cradle to the grave." McDonald's would like nothing better than to bring in kids for their Happy Meal and then convert them over time to its more adult Pico Guacamole with Artesian Grilled Chicken (accompanied, they hope, by a Side Salad, Fruit 'N Yogurt Parfait for dessert, and a Turtle Macchiato to drink). A good brand name may position a product because it conveys a certain image (Ford Mustang, which is now more than 50 years old) or describes how it works (Drano). Brand names such as Caress and Shield help position these different brands of bath soap by saying different things about the benefits they promise. Irish Spring soap provides an unerring image of freshness (can't you just smell it now?). Coca-Cola Company's brand Surge is a carbonated beverage meant to give consumers exactly what the brand name suggests through the beverage's caffeine and sugar content. Apple's use of "i-everything" is a brilliant branding strategy because it conveys individuality and personalization—characteristics that millennial buyers prize. How does a firm select a good brand name? Good brand designers say there are four "easy" tests: easy to say, easy to spell, easy to read, and easy to remember—like P&G's Swiffer, Tide, Pampers, Bold, Gain, Downy, Bounty, and Crest (P&G is probably the undisputed branding king of all time). And the name should also pass the "fit test" on four dimensions: Fit the target market Fit the product's benefits Fit the customer's culture Fit legal requirements When it comes to graphics for a brand symbol, name, or logo, the rule is that it must be recognizable and memorable. No matter how small or large, the triangular Nabisco logo in the corner of the box is a familiar sight. And it should have visual impact. That means that from across a store or when you quickly flip the pages in a magazine, the brand will catch your attention. Apple's apple with the one bite missing never fails to attract. A trademark is the legal term for a brand name, brand mark, or trade character. The symbol for legal registration in the U.S. is a capital "R" in a circle: ®. Marketers register trademarks to make their use by competitors illegal. Because trademark protection applies only in individual countries where the owner registers the brand, unauthorized use of marks on counterfeit products is a huge headache for many companies. A firm can claim protection for a brand even if it has not legally registered it. In the U.S., common-law protection exists if the firm has used the name and established it over a period of time (sort of like a common-law marriage). Although a registered trademark prevents others from using it on a similar product, it may not bar its use for a product in a completely different type of business. Consider the range of unrelated "Quaker" brands: Quaker Oats (cereals), Quaker Funds (mutual funds), Quaker State (motor oil), Quaker Bonnet (gift food baskets), and Quaker Safety Products Corporation (firemen's clothing). A court applied this principle when Apple Corp., the Beatles' music company, sued Apple Computers in 2006 over its use of the Apple logo. The plaintiff wanted to win an injunction to prevent Apple Computer from using the Apple logo in connection with its iPod and iTunes products; it argued that the application to music-related products came too close to the Beatles' musical products. The judge didn't agree; he ruled that Apple Computer clearly used the logo to refer to the download service, not to the music itself.22

9.4 organize for effective product management

9.4 Describe how marketers structure organizations for new and existing product management. Of course, firms don't create great products, brands, and packaging—people do. Like all elements of the marketing mix, product strategies are only as effective as their managers make them and carry them out. In this section, we'll talk about how firms organize both to manage existing products and to develop new products. Manage Existing Products In small firms, a single marketing manager usually handles the marketing function. This individual is responsible for new product planning, advertising, working with the company's few sales representatives, marketing research, and just about everything else. But in larger firms, there are a number of managers who are responsible for different brands, product categories, or markets. As illustrated in Figure 9.8, depending on the organization's needs and the market situation, product management may include brand managers, product category managers, and market managers. Let's take a look at how each operates. Brand Managers Sometimes, a firm sells several or even many different brands within a single product category. Take the laundry section in the supermarket, for example. In the detergent category, P&G brands are Bold, Gain, and Tide. In such cases, each brand may have its own brand manager who coordinates all marketing activities for a brand; these duties include positioning, identifying target markets, research, distribution, sales promotion, packaging, and evaluating the success of these decisions. Although this job title and assignment (or something similar) is still common throughout industry, some big firms are changing the way they allocate responsibilities. For example, today P&G's brand managers function more like internal consultants to cross-functional teams located in the field that have responsibility for managing the complete business of key retail clients across all product lines. Brand managers still are responsible for positioning of brands and developing and nurturing brand equity, but they also work heavily with folks from sales, finance, logistics, and others to serve the needs of the major retailers that make up the majority of P&G's business. By its very nature, the brand management system is not without potential problems. If they act independently and sometimes competitively against each other, brand managers may fight for increases in short-term sales for their own brand, potentially to the detriment of the overall product category for the firm. They may push too hard with coupons, cents-off packages, or other price incentives to a point at which customers will refuse to buy the product when it's not "on deal." Such behavior can hurt long-term profitability and damage brand equity. Product Category Managers Some larger firms have such diverse product offerings that they need more extensive coordination. Take IBM, for example. Originally known as a computer manufacturer, IBM now generates much of its revenue from a wide range of consulting and related client services across the spectrum of IT applications (the company hasn't sold personal computers in over a decade, having spun off its ThinkPad business to the Chinese firm Lenovo in 2005). In cases such as IBM, P&G, and similar multi-product line firms, organizing for product management may include a product category manager, who coordinates the mix of product lines within the more general product category and who considers the addition of new product lines based on client needs. Market Managers Some firms have developed a market manager structure in which different people focus on specific customer groups rather than on the products the company makes. This type of organization can be especially useful when firms offer a variety of products that serve the needs of a wide range of customers. For example, GE serves three broad markets: consumers, with products such as microwaves and light bulbs; businesses, with products such as jet engines and imaging equipment for hospitals; and governments, with components used in production of naval vessels and military aircraft. Such firms serve their customers best when they focus separately on each of these very different markets.

maturity stage

The maturity stage of the PLC is usually the longest. Sales peak and then begin to level off and even decline while profit margins narrow. Competition gets intense when remaining competitors fight for their share of a shrinking pie. Firms may resort to price reductions and reminder advertising ("Did you brush your teeth today?") to maintain market share. Because most customers have already accepted the product, they tend to buy to replace a worn-out item or to take advantage of product improvements. For example, almost everyone in the U.S. owns a TV (there are still more homes without indoor toilets than without a TV set), meaning that most people who buy a new set replace an older one—especially when TV stations nationwide stopped using analog signals and began to broadcast exclusively in a digital format. TV manufacturers hope that a lot of the replacements will be sets with the latest-and-greatest new technology—Samsung would love to sell you a smart TV to replace that worn-out basic model. During the maturity stage, firms try to sell their product through as many outlets as possible because availability is crucial in a competitive market. Consumers will not go far to find one particular brand if satisfactory alternatives are close at hand. To remain competitive and maintain market share during the maturity stage, firms may tinker with the marketing mix to extend this profitable phase for their product. Food manufacturers constantly monitor consumer trends, which of late have been heavily skewed toward healthier eating. This has resulted in all sorts of products that trumpet their low-carb, organic, or no-trans-fat credentials.

family brand

a brand that a group of individual products or individual brands share

Product Life Cycle (PLC)

a concept that explains how products go through four distinct stages from birth to death: introduction, growth, maturity, and decline

product line

a firm's total product offering designed to satisfy a single need or desire of target customers

full-line product strategy

a product line strategy that targets many customer segments to boost sales potential

brand dilution

a reduction in the value of a brand typically driven by the introduction of a brand extension that possesses attributes that adversely contrast with the current attributes consumers associate with the brand

Universal prodcut code (UPC)

a set of black bars or lines printed on the side or bottom of most items sold in grocery stores and other mass-merchandising outlets that correspond to a unique 10-digit number

generic branding

a strategy in which products are not branded and are sold at the lowest price possible

product line extension

a strategy to expand an existing product line by adding more brands or models

venture teams

groups of people within an organization who work together to focus exclusively on the development of a new product

two-way product line stretch

A product line extension strategy that simultaneously expands new items both toward the higher and lower ends of the market.

Limited-Line Product Strategy

A product line strategy that has fewer product variations in order to send a signal of exclusivity or specialization to the market.

filling-out product strategy

A strategy to add sizes or styles not previously available in a product category.

9.1 product planning: develop product objectives and product strategy

9.1 Discuss the product objectives and strategies a firm may choose. What makes one product fail and another succeed? It's worth reemphasizing what you learned in Chapter 3: Firms that plan well succeed. Product planning plays a big role in the firm's market planning. And among the famous four Ps of the marketing mix, each P is not created equal—that is, the best pricing, promotion, and physical distribution strategies cannot overcome fundamental problems with the product over the long run! Hence, product planning takes on special significance in marketing. Strategies outlined within the product specify how the firm expects to develop a value proposition that will meet marketing objectives. Product planning is guided by the continual process of product management, which is the systematic and usually team-based approach to coordinating all aspects of a product's strategy development and execution. In some companies, product management is sometimes also called brand management, and the terms refer to essentially the same thing. The organization members that coordinate these processes are called product managers or brand managers. We discuss the role of these individuals in more detail later in the chapter. As more and more competitors enter the global marketplace and as technology moves forward at an ever-increasing pace, firms create products that grow, mature, and then decline at faster and faster speeds. Our discussion in Chapter 3 of agility and agile marketing underscores that smart and agile product management strategies are more critical than ever. Marketers just don't have the luxury of trying one thing, finding out it doesn't work, and then trying the next thing; they have to multitask when it comes to product management, and product managers should be an integral part of the Scrum process you saw in Chapter 3! In Chapter 8, we talked about how marketers think about products—both core and augmented—and about how companies develop and introduce new products. In this chapter, we finish the product part of the story as we see how companies manage products, and then we examine the steps in product planning, shown in Figure 9.1. These steps include developing product objectives and the related strategies required to successfully market products as they evolve from "newbies" to tried-and-true favorites—and in some cases, finding new markets for these favorites. Next, we discuss branding and packaging, two of the more important tactical decisions product planners make. Finally, we examine how firms organize for effective product management. Let's start with an overview of how firms develop product-related objectives. Getting Product Objectives Right When marketers develop product strategies, they make decisions about product benefits, features, styling, branding, labeling, and packaging. But what do they want to accomplish? Clearly stated product objectives provide focus and direction. They should support the broader marketing objectives of the business unit in addition to being consistent with the firm's overall mission. For example, the objectives of the firm may focus on return on investment (ROI). Marketing objectives then may concentrate on building market share or the unit or dollar sales volume necessary to attain that ROI. Product objectives 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 measurable, clear, and unambiguous—and feasible. Also, they must indicate a specific time frame. Consider, for example, how Amy's, a popular organic and health-conscious frozen ethnic entrée manufacturer, might state its product objectives: "In the upcoming fiscal year, reduce the fat and calorie content of our products by 15 percent to satisfy consumers' health concerns." "Introduce three new products this quarter to the product line to take advantage of increased consumer interest in Mexican foods." "During the coming fiscal year, improve the chicken entrées to the extent that consumers will rate them better tasting than the competition." Planners must keep in touch with their customers so that their objectives accurately respond to their needs. In Chapter 2, we introduced you to the idea of competitive intelligence, and an up-to-date knowledge of competitive product innovations is important to develop product objectives. Above all, these objectives should consider the long-term implications of product decisions. Planners who sacrifice the long-term health of the firm to reach short-term sales or financial goals choose a risky course. Product planners may focus on one or more individual products at a time, or they may look at a group of product offerings as a whole. Next, we briefly examine both of these approaches. We also look at one important product objective: product quality.

product category manager

An individual who is responsible for developing and implementing the marketing plan for all the brands and products within a product category.

brand extension

a new product sold with the same brand name as a strong existing brand

brand

a name, term, symbol, design, or any other unique element of a product that identifies one firm's product(s) and sets it apart from the competition

six sigma

a process whereby firms work to limit product defects to 3.4 per million or fewer

growth stage

In the growth stage, sales increase rapidly while profits increase and peak. Marketing's goal here is to encourage brand loyalty by convincing the market that this brand is superior to others. In this stage, marketing strategies may include the introduction of product variations to attract market segments and increase market share. Tablets and smartphones are examples of products that are still in the growth stage, as worldwide sales continue to increase. Continual new product innovations fuel what seems for now to be an endless growth opportunity. The iPhone 8 and iPhone 8 Plus sold over 32 million units in the first two weeks they were on the market. This represented a new sales record for Apple and a sign of the continued growth opportunities within the smartphone market. Of course, the question over the longer term is whether Apple can keep up this momentum given the tough competition from Samsung in the smartphone market.20 When competitors appear on the scene, marketers must heavily rely on advertising and other forms of promotion. Price competition may develop, driving profits down. Some firms may seek to capture a particular segment of the market by positioning their product to appeal to a certain group. And, if it initially set the price high, the firm may now reduce it to meet increasing competition.

decline stage

The decline stage of the PLC is characterized by a decrease in overall product category sales. The reason may be obsolescence forced by new technology—where (other than in a museum) do you see a typewriter today? See many people using flip phones recently? Although a single firm may still be profitable, the market as a whole begins to shrink, profits decline, there are fewer variations of the product, and suppliers pull out. In this stage, there are usually many competitors, but none has a distinct advantage. A firm's major product decision in the decline stage is whether to keep the product at all. An unprofitable product drains resources that the firm could use to develop newer products. If the firm decides to keep the product, it may decrease advertising and other marketing communication to cut costs and reduce prices if the product can still remain profitable. If the firm decides to drop the product, it can eliminate it in two ways: (1) phase it out by cutting production in stages and letting existing stocks run out or (2) simply dump the product immediately. If the established market leader anticipates that there will be some residual demand for the product for a long time, it may make sense to keep the product on the market. The idea is to sell a limited quantity of the product with little or no support from sales, merchandising, advertising, and distribution and just let it "wither on the vine." Here's a question for you: Can a product that has begun the journey downward to decline ever regain momentum and achieve new growth on the PLC? The answer is yes, but it is usually very difficult and requires application of several of the key principles of segmentation, target marketing, and positioning, which you learned about in Chapter 7. There, you read that repositioning is a change in positioning strategy in which a company tries to modify its brand image to keep up with changing times. Venerable Listerine (the #1 selling oral hygiene rinse) has gone through multiple repositioning strategies during its lengthy run as a successful product. Named after Joseph Lister, a pioneer of antiseptic surgery, Listerine was developed in 1879 by Joseph Lawrence, a chemist in St. Louis, Missouri. Over its 140 year history it has been marketed first as primarily an all-purpose antiseptic, then a mouth freshener, and then through extensions of the brand to a variety of new products it has expanded its reach to address indications such as gingivitis, cavities, whitening, and sensitivity. While it may be rare to find products that have had as many successful journeys through the PLC as Listerine, this brand's experiences clearly illustrate that with savvy marketing it's definitely possible to get a "new lease on your product life cycle!"21

product relaunch

Using principles of segmentation, target marketing, and positioning to reposition an existing product for reintroduction into the product life cycle.

cobranding

an agreement between two brands to work together to market a new product

licensing

an agreement in which one firm sells another firm the right to use a brand name for a specific purpose and for a specific period of time

market manager

an individual who is responsible for developing and implementing the marketing plans for products sold to a particular customer group

copycat packaging

packaging designed to mimic the look of a similar or functionally identical national branded product often meant to lead the consumer to perceive the two products as comparable

why brands matter

A brand is a lot more than just the product it represents—the best brands build an emotional connection with their customers. Think about the most popular diapers—they're branded Pampers and Luvs, not some functionally descriptive name like Absorbency Master or Dry Bottom. The point is that Pampers and Luvs evoke the joys of parenting, not the utility of the diaper. Marketers spend huge amounts of money on new product development, advertising, and promotion to develop strong brands. When they succeed, this investment creates brand equity. This term describes a brand's value over and above the value of the generic version of the product. For example, how much extra will you pay for a shirt with the American Eagle Outfitters logo on it than for the same shirt with no logo or, worse, the logo of an "inferior" brand? The difference reflects the eagle's brand equity in your mind. Brand equity means that a brand enjoys customer loyalty because people believe it is superior to the competition. For a firm, brand equity provides a competitive advantage because it gives the brand the power to capture and hold on to a larger share of the market and to sell at prices with higher profit margins. For example, among pianos, the Steinway name has such powerful brand equity that its market share among concert pianists is 95 percent.23 Marketers identify different levels of loyalty (or lack thereof) by observing how customers feel about the product. At the lowest level, customers really have no loyalty to a brand, and they will change brands for any reason—often they will jump ship if they find something else at a lower price. At the other extreme, some brands command fierce devotion, and loyal users will go without rather than buy a competing brand. Escalating levels of attachment to a brand begin when consumers become aware of a brand's existence. Then, they might look at the brand in terms of what it literally does for them or how it performs relative to competitors. Next, they may think more deeply about the product and form beliefs and emotional reactions to it. The truly successful brands, however, are those that truly "bond" with their customers so that people feel they have a real relationship with the product. Here are some of the types of relationships a person might have with a product: Self-concept attachment: The product helps establish the user's identity. (For example, do you feel better in Ralph Lauren or Cherokee clothing, which Target recently dumped but Walmart still sells?) Nostalgic attachment: The product serves as a link to a past self. (Who can't recall the numerous times you enjoyed a Little Debbie Christmas Tree Cake as a kid?)24 Interdependence: The product is a part of the user's daily routine. (Could you get through the day without a Starbucks coffee?) Love: The product elicits emotional bonds of warmth, passion, or other strong emotion. (Hershey's Kiss, anyone?)25 Ultimately, the way to build strong brands is to forge strong bonds with customers—bonds based on brand meaning. This concept encompasses the beliefs and associations that a consumer has about the brand. In many ways, the practice of brand management revolves around the management of meanings. Brand managers, advertising agencies, package designers, name consultants, logo developers, and public relations firms are just some of the collaborators in a global industry devoted to the task of meaning management. Closely related to brand meaning is the idea of brand personality. In a way, brands are like people: We often describe them in terms of personality traits. We may use adjectives such as cheap, elegant, sexy, or cool when we talk about a store, a perfume, or a car. A product positioning strategy often aims to create a brand personality for a good or service—a distinctive image that captures its character and benefits. For example, an advertisement for Elle, an amazingly chic fashion magazine for women, proclaimed, "She is not a reply card. She is not a category. She is not shrink-wrapped. Elle is not a magazine. She is a woman." One of the more effective ways to give a brand a personality in the minds of consumers is to engage in deliberate marketing actions that make the brand seem more human. The phenomenon of attributing to a brand human characteristics is known as brand anthropomorphism, and it can be seen in action when, for instance, a brand's Twitter account makes a quirky comment in reply to someone's tweet (that is, "humanizing the brand through a response") or through the interactions of a brand's mascot in a commercial. Mr. Clean, the impressively bald mascot for P&G's product of the same name, first appeared in 1958. Mr. Clean has taken on a more muscular look as the years have progressed, and he even became somewhat of a sex symbol in 2017 when P&G featured him in a Super Bowl commercial.26 Products as people? It seems funny to say, yet marketing researchers find that most consumers have no trouble describing what a product would be like "if it came to life." People often give clear, detailed descriptions, including what color hair the product would have, the type of house it would live in, and even whether it would be thin, overweight, or somewhere in between.27 If you don't believe us, try doing this yourself. Today, for many consumers brand meaning builds virally as people spread its story online. "Tell to sell," once a mantra of top Madison Avenue ad agencies, has made a comeback as marketers seek to engage consumers with compelling stories rather than peddle products in hit-and-run fashion with interruptive advertising, like 30-second TV commercials—which millennials largely block out anyway. The method of brand storytelling captures the notion that powerful ideas do self-propagate when the audience is connected by digital technology. It conveys the constant reinvention inherent in interactivity in that whether via blogging, content creation through YouTube, or photo sharing on Instagram, there will always be new and evolving perceptions and dialogues about a brand in real time. Airbnb is a great example of a company that has used brand storytelling to connect with consumers and further establish its identity as the premier online marketplace and hospitality service for people to lease or rent short-term lodging. The company underwent a rebranding effort that included the changing of its brand logo to what the company calls the Bélo: the universal symbol of belonging. The symbol looks partially like an upside down heart, partially like an uppercase "A," and it includes an element that resembles the location pin symbol. For Airbnb, the rebrand and accompanying branding campaign provided an opportunity to tell a story that fits with the brand's identity, one that is centered on the experience of being able to feel a sense of belonging wherever a person uses those services provided through Airbnb.28 If we could name the key elements that make a brand successful, what would they be? Here is a list of 10 characteristics of the world's top brands:29 The brand excels at delivering the benefits customers truly desire. The brand stays relevant. The pricing strategy is based on consumers' perceptions of value. The brand is properly positioned. The brand is consistent. The brand portfolio and hierarchy make sense. The brand makes use of and coordinates a full repertoire of marketing activities to build equity. The brand's managers understand what the brand means to consumers. The brand is given proper support, and that support is sustained over the long run. The company monitors sources of brand equity. Products with strong brand equity provide exciting opportunities for marketers. A firm may leverage a brand's equity via brand extensions—new products it sells with the same brand name. Because of the existing brand equity, a firm is able to sell its brand extension at a higher price than if it had given it a new brand, and the brand extension will attract new customers immediately. Of course, if the brand extension does not live up to the quality or attractiveness of its namesake, there is a risk of brand dilution, in which the contrast between the brand extension's less positive characteristics and the more positive characteristics of the brand can lead to a shift in how consumers perceive the brand. Ultimately, this result can impact brand equity as well as brand loyalty and sales. In the pursuit of greater sales and market share, many luxury automakers, such as Audi and BMW, have been using their brand names to sell lower-end models with prices more accessible to a less affluent segment of consumers. Some marketers have voiced concerns over the impact this may have on the value of these brands, which in the past have been heavily associated with luxury and exclusivity.30 One other related approach is sub-branding, or creating a secondary brand within a main brand that can help differentiate a product line to a desired target group. Marriott hotels are a leader in sub-branding, having launched a multitude of sub-brands over the history of the company. From Residence Inn by Marriott to Courtyard by Marriott, Springhill Suites by Marriott, AC Hotels by Marriott, and on and on—the company understands the power of using an established principal brand to launch alternate products. The recent addition of the Starwood stable of sub-brands brings Marriott's total number of sub-brands to well over 20! The question is: with that many sub-brands, can each of them possibly maintain and convey a unique brand meaning and personality?31

product mix strategies

A firm's product mix describes its entire range of products. When they develop a product mix strategy, marketers usually consider the product mix width, which is the number of different product lines the firm produces. If it develops several different product lines, a firm reduces the risk of putting all its eggs in one basket. Normally, firms develop a mix of product lines that have some things in common. Constellation Brands, an international producer and marketer of wine, beer, and spirits, acquired craft beer producer Ballast Point Brewing & Spirits for $1 billion to add a line of craft beers to its current portfolio of beer brands. Constellation was originally more focused on wine and spirits but has been expanding its offering of beers since it acquired permission to market Corona and Modelo beers a few years back. For Constellation, the addition of Ballast Point makes sense as it increases the types of brands and products that it offers to meet the growing consumer demand for craft beers, a market that is expected to continue to grow for the foreseeable future. Some of Ballast Point's products bring with them a loyal following, and Constellation hopes these loyalists will ask local watering holes to sell the product. It stands to reason that Constellation also may be able to increase sales of some of their other beer brands to establishments that currently carry Ballast Point beers through cross-selling opportunities. Strategically, the acquisition of Ballast Points has potential to increase Constellation's product mix width in a way that adds synergies and opportunities for further growth.11

branding strategies

Because brands contribute to a marketing program's success, a major part of product planning is to develop and execute branding strategies. Marketers have to determine which branding strategy approach(es) to use. Figure 9.6 illustrates the options: individual or family brands, national or store brands, generic brands, licensing, and cobranding. This decision is critical, but it is not always an easy or obvious choice. Individual Brands versus Family Brands Part of developing a branding strategy is to decide whether to use a separate, unique brand for each product item—an individual brand strategy—or to market multiple items under the same brand name—a family brand, or umbrella brand, strategy. Individual brands may do a better job of communicating clearly and concisely what the consumer can expect from the product, whereas a well-known company, like Hyatt Hotels, may find that its high brand equity and reputation in one category (e.g., Hyatt Regency and Grand Hyatt at the high end) can sometimes "rub off" on brands in newer, lower-priced categories (e.g., Hyatt Place and Hyatt House). The decision whether to family brand often depends on characteristics of the product and whether the company's overall product strategy calls for introduction of a single, unique product or for the development of a group of similar products. For example, Microsoft serves as a strong umbrella brand for a host of diverse, individually branded products, like Windows 10, Office 2016, Xbox One X, and Bing. In contrast, Unilever and P&G prefer to brand each of their beauty care and household products separately (for most of the products, you'd never know who the manufacturer is unless you look at the small print on the back label). But there's a potential dark side to having too many brands, particularly when they become undifferentiated in the eyes of the consumer as a result of poor positioning or, alternatively, when those brands begin to stray too far from a related parent brand, which results in a loss of synergy. For example, The Coca-Cola Company decided to implement its "One Brand" global strategy to address growing divisions between the various sub-brands that share the Coca-Cola name. Specifically, the strategy seeks to place Coca-Cola, Diet Coke, Coca-Cola Zero, and Coca-Cola Life firmly under the Coca-Cola brand identity with each product's differences framed principally in terms of their product attributes as opposed to differing brand identities. To attempt to shift perceptions in this direction, Coke took a number of actions, including having all of the products share a single tagline ("Taste the Feeling"), developing marketing campaigns that cover all of the different sub-brands, and in some areas, changing the packaging of each product to highlight the differences in the product while at the same time clearly showing that each one is part of the single iconic Coca-Cola brand. The home page exhorts viewers to "Explore them all—taste the feeling." For Coke, this reunification of the different product variants offers an opportunity to help a larger group of consumers to understand that the parent brand is more than just its flagship high-sugar product and that there are different offerings available to Coca-Cola drinkers depending on their specific product preferences and needs. The "One Brand" strategy was initially tested out on a trial basis before the company made the decision to move forward with it on a global basis.32 National and Store Brands Retailers today often are in the driver's seat when it comes to deciding what brands to stock and push. In addition to choosing from producers' brands, called national or manufacturer brands, retailers decide whether to offer their own versions. Private-label brands, also called store brands, are the retail store or chain's exclusive trade name. Target boasts many private labels, including Goodfellow, Market Pantry, Simply Balanced, and Hearth and Hand, covering every category of goods they offer. Their trendy kid's clothing line, Cat & Jack, raked in over $2 billion in its first year!33 During the Great Recession that began in the late 2000s, store brands gained substantially in popularity for many value-conscious shoppers, and many consumers never switched back to the parallel national brands as the economy rebounded because they are satisfied with the quality of the private labels. Interestingly, if a retailer stocks a unique brand that consumers can't find in other stores, it's much harder for shoppers to compare "apples to apples" across stores and simply buy the brand where they find it sold for the lowest price. As such, private labels represent a major roadblock to price transparency online because consumers can't easily use the Internet to compare private label prices to national brand prices before purchase. Grocery giant Aldi markets 90 percent of its products under private label brands. Aldi's product strategy is to introduce new products in line with market trends at high quality but for lower prices than national brand names. And as consumers become more concerned with healthier eating, Aldi has made sure that its private label brands are free of synthetic colors, trans fats, and MSG. Competitors that sell mostly national brands can cut prices on those brands, but that hurts their overall profitability. Aldi can reduce prices on national brands but still make a ton of money on its more profitable private-label products.34 Generic Brands An alternative to either national or store branding is generic branding, which is basically no branding at all. Generic branded products are typically packaged in white with black lettering that names only the product itself (e.g., "Green Beans"). Generic branding is one strategy to meet customers' demand for the lowest prices on standard products, such as dog food or paper towels. Generic brands first became popular during the inflationary period of the 1980s when consumers became especially price conscious. More recently, Walmart has aggressively disrupted the pharmacy business by offering some types of generic prescriptions, such as basic antibiotics. Their website hawks "$4 prescriptions—save big on generic medications," "Walmart customers have saved over $3 billion over the years with our $4 prescriptions," and "You can save too—no insurance needed."35 Licensing Some firms choose to use a licensing strategy to brand their products. This means that one firm sells another firm the right to use a legally protected brand name and other associated elements for a specific purpose and for a specific period of time. Why should an organization sell its name? Licensing can provide instant recognition and consumer interest in a new product, and this strategy can quickly position a product for a certain target market as it trades on the high recognition of the licensed brand among consumers in that segment. For example, the popular toy brand Shopkins recently entered into a licensing agreement with Build-a-Bear so that customers creating their own furry friends at Build-a-Bear stores across the nation can choose to make a Shopkins bear. An exclusive collectible Shopkins figurine is included with every purchase—a must-have for Shopkins fans trying to complete their collection!36 A familiar form of licensing occurs when movie producers license their properties to manufacturers of a seemingly infinite number of products. Remember how each time a blockbuster Harry Potter movie hit the screens, a plethora of Potter products packed the stores? In addition to toys and games, there was Harry Potter candy, clothing, all manner of back-to-school items, home items, and even wands and cauldrons. In 2010, with considerable fanfare, Harry and the gang showed up in the form of a major attraction at Universal Orlando called The Wizarding World of Harry Potter. The next addition, called "Diagon Alley," opened for business in the summer of 2014. Since then, other Wizarding Worlds have opened in Los Angeles and Osaka, Japan.37 Cobranding Frito-Lay sells Tapatío flavored potato chips (with a hint of lime). Taco Bell sells Spicy Chicken Cool Ranch Doritos Locos Tacos, and General Mills sells Reese's Puffs cereal. Strange marriages? Not at all! Actually, these are examples of an innovative strategy called cobranding. Cobranding benefits both partners when combining the two brands provides more recognition power than either enjoys alone. For example, Sony markets its line of digital Cyber-shot cameras that use Zeiss lenses, which are world famous for their sharpness.38 Sony is known for its consumer electronics. Combining the best in traditional camera optics with a household name in consumer electronics helps both brands. A new and fast-growing variation on cobranding is ingredient branding, in which branded materials become "component parts" of other branded products.39 This is the strategy behind brands that are willing to pay more for their raw materials so they can have the tag of a supplier on the product. One great example is Patagonia—they promote the fact that many of their products are lined with Polartec, a special performance lining that keeps its wearer warmer, cooler, or dryer depending on the need. This showcases that even highly regarded and well-known brands like Patagonia understand the benefit of showcasing what's inside the product that makes it special.40 Today, you can buy Breyer's Ice Cream "2 in 1" with chunks of Oreos and Chips Ahoy, Reese's and Reese's Pieces, and Snickers and M&M's—all deliciously decadent combinations! The practice of ingredient branding has two main benefits. First, it attracts customers to the host brand because the ingredient brand is familiar and has a strong brand reputation for quality. Second, the ingredient brand's firm can sell more of its product, not to mention the additional revenues it gets from the licensing arrangement.41

Organize for New Product Development

You read in Chapter 8 about the steps in new product development and learned earlier in this chapter about the importance of the introduction phase of the PLC. Because launching new products is so important, the management of this process is a serious matter. In some instances, one person handles new product development, but within larger organizations, new product development almost always requires many people. Often especially creative people with entrepreneurial skills get this assignment. The challenge in large companies is to enlist specialists in different areas to work together in venture teams, which focus exclusively on the new product development effort. Sometimes the venture team is located away from traditional company offices in a remote location called a "skunk works." This colorful term originated with the Skunk Works, an illicit distillery in the comic strip Li'l Abner. Because illicit distilleries were bootleg operations, typically located in an isolated area with minimal formal oversight, organizations adopted the colorful description "skunk works" to refer to a small and often isolated department or facility that functions with minimal supervision (not because of its odor).49

decline stage

the final stage in the product life cycle, during which sales decrease as customer needs change

introduction stage

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

cannibalization

the loss of sales of an existing brand when a new item in a product line or product family is introduced

product mix width

the number of different product lines the firm produces

product management

the systematic and usually team-based approach to coordinating all aspects of a product's strategy development and execution

maturity stage

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