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Chapter 6
Product and Brand Strategy
High-Level Chapter Outline
I. Basic Issues in Product Management
A. Product Definition
B. Product Classification
C. Product Quality and Value
D. Product Mix and Product Line
E. Branding and Brand Equity
F. Packaging
II. Product Life Cycle
A. Product Adoption and Diffusion
III. The Product Audit
A. Deletions
B. Product Improvement
IV. Organizing for Product Management
Detailed Chapter Outline
I. Basic Issues in Product management
Successful marketing depends on understanding the nature of products and basic decision
areas in product management.
A. Product Definition
The way in which the product variable is defined can have important implications for
the survival, profitability, and long-run growth of the firm.
The same product can be viewed in at least three different ways:
oIn terms of the tangible product
oIn terms of the extended product
oIn terms of the generic product
From the standpoint of the marketing manager, to define the product solely in terms of
the tangible product is to fall into the error of “marketing myopia.”
Executives who are guilty of committing this error define their company's product too
narrowly, since they overemphasize the physical object itself.
The classic example of this mistake can be found in railroad passenger service.
Although no amount of product improvement could have staved off its decline, if the
industry had defined itself as being in the transportation business, rather than the
railroad business, it might still be profitable today.
In line with the marketing concept philosophy, a product can be defined as the sum of
the physical, psychological, and sociological satisfactions the buyer derives from
purchase, ownership, and consumption.
From this standpoint, products are customer-satisfying objects that include such things
as accessories, packaging, and service.
B. Product Classification
A product classification scheme can be useful to the marketing manager as an
analytical device to assist in planning marketing strategy and programs.
In general, products are classified according to two basic criteria:
oEnd use or market
oDegree of processing or physical transformation
Agricultural products and raw materials
oThese are goods grown or extracted from the land or sea, such as iron ore, wheat,
and sand.
oIn general, these products are fairly homogeneous, sold in large volume, and
have low value per unit or in bulk weight.
Organizational Goods
oSuch products are purchased by business firms for the purpose of producing
other goods or for running the business.
oThis category includes the following:
Raw materials and semifinished goods
Major and minor equipment, such as basic machinery, tools, and other
processing facilities
Parts or components, which become an integral element of some other
finished good
Supplies or items used to operate the business that do not become part of
the final product
Consumer Goods
oConsumer goods can be divided into three classes:
Convenience goods, such as food, which are purchased frequently with
minimum effort. Impulse goods would also fall into this category.
Shopping goods, such as appliances, which are purchased after some time
and energy, are spent comparing the various offerings.
Specialty goods, which are unique in some way so the consumer will make
a special purchase effort to obtain them.
In general the buying motive, buying habits, and character of the market are different
for organizational goods vis-à-vis consumer goods.
Organizational goods are usually purchased as means to an end and not as an end in
themselves. This is another way of saying that the demand for organizational goods is
a derived demand.
Many organizational goods are subject to multiple influence, and a long period of
negotiation is often required.
Certain products have a limited number of buyers; this is known as a vertical market,
which means that:
oIt is narrow, because customers are restricted to a few industries
oIt is deep, in that a large percentage of the producers in the market use the
product
Some products have a horizontal market, which means that the goods are purchased by
all types of firms in many different industries.
From the standpoint of the marketing manager, product classification is useful to the
extent that it assists in providing guidelines for developing an appropriate marketing
mix.
C. Product Quality and Value
Quality can be defined as the degree of excellence or superiority that an organization’s
product possesses.
Quality can encompass both the tangible and intangible aspects of a firm’s products or
services.
Although quality can be evaluated from many perspectives, the customer is the key
perceiver of quality because his or her purchase decision determines the success of the
organization’s product or service and often the fate of the organization itself.
Many organizations have formalized their interest in providing quality products by
undertaking total-quality management (TQM) programs.
TQM is an organizationwide commitment to satisfy customers by continuously
improving every business process involved in delivering products or services.
Organizations that practice TQM train and commit employees to continually look for
ways to do things better so defects and problems don’t arise in the first place.
The result of this process is the higher-quality products being produced at a lower cost.
The term quality is often confused with the concept of value.
Value encompasses not only quality but also price.
Value can be defined as what the customer gets in exchange for what the customer
gives.
Some organizations are beginning to shift their primary focus from one that solely
emphasizes quality to one that also equally encompasses the customer’s viewpoint of
the price/quality trade-off.
Organizations that are successful at this process derive their competitive advantage
from the provision of customer value.
D. Product Mix and Product Line
A firm’s product mix is the full set of products offered for sale by the organization.
A product mix may consist of several product lines, or groups of products that share
common characteristics, distribution channels, customers, or uses.
A firm’s product mix is described by its width and depth. Width refers to the number of
product lines handled by the organization. Depth refers to the average number of
products in each line.
An integral component of product line planning revolves around the question of how
many product variants should be included in the line.
Organizations offer varying products within a given product line for three reasons:
Potential customers rarely agree on a single set of specifications regarding their “ideal
product.”
oCustomers prefer variety.
oThe dynamics of competition lead to multiproduct lines.
All too often, organizations purchase product line additions with little regard for
consequences.
However, in reaching a decision on product line additions, organizations need to
evaluate whether:
oTotal profits will decrease
oThe quality/value associated with current products will suffer
E. Branding and Brand Equity
A critical focus in marketing strategy is on building the company’s brand and brand
equity.
Marketing Insight 6–3 presents some of the most valuable worldwide brands that are
most likely to be familiar because of some or all of the following reasons:
oWhatever they do, they do it very well
oThey tell their story often and very welll
oCustomers see the brand wherever they shop
oThe brand has a distinct personality, in other words, they stand for something
The brand name is perhaps the single most important element on the package, serving
as a unique identifier.
A brand is a name, term, design, symbol, or any other feature that identifies one
seller’s good or service as distinct from those of other sellers.
The legal term for brand is trademark.
A good brand name can evoke feelings of trust, confidence, security, and strength.
Many companies make use of manufacturer branding strategies in carrying out market
and product development strategies.
oThe line extension approach uses a brand name to facilitate entry into a new
market segment.
oIn brand extension, a current brand name is used to enter a completely different
product class.
oIn franchise extension or family branding, a company attaches the corporate
name to a product to enter either a new market segment or a different product
class.
oA final kind of branding strategy that is becoming more and more common is
dual branding in which two or more branded products are integrated.
Companies may also choose to assign different brand names to each product. This is
known as multibranding strategy.
Major advantages of using multiple brand names are that:
oThe firm can distance products from other offerings it markets
oThe image of one product is not associated with other products the company
markets
oThe products can be targeted at a specific market segment
oShould the product(s) fail, the probability of failure impacting on other company
products is minimized
The major disadvantage of this strategy is that because new names are assigned, there
is no consumer brand awareness and significant amounts of money must be spent
familiarizing customers with new brands.
Increasingly, companies are finding that brand names are one of the most valuable
assets they possess.
Brand equity can be viewed as the set of assets (or liabilities) linked to the brand that
add (or subtract) value.
Brand equity is determined by the consumer and is the culmination of the consumer’s
assessment of the product, the company that manufactures and markets the product,
and all other variables that impact on the product between manufacture and consumer
consumption.
Figure 6.1 lists the elements of brand equity.
As with consumer products, organizational products also can possess brand equity.
However, several dierences do exist between the two sectors.
oOrganizational products are usually branded with rm names
and as a result, loyalty (or disloyalty) to the brand tends to be of
a more global nature, extending across all the rm’s product
lines.
oBecause rm versus brand loyalty exists, attempts to position
new products in a manner differing from existing products may
prove to be di"cult, if not impossible.
oLoyalty to organizational products encompasses not only the
rm and its products but also the distribution channel members
employed to distribute the product.
As a related branding strategy, many retail firms produce or market their products
under a so-called private label.
Private label products differ markedly from so-called generic products that sport labels
such as “beer”, “cigarettes”, and “potato chips.”
Private label brands are being marketed as value brands, products that are equivalent
to national brands but are priced much lower.
Private brands are rapidly growing in popularity.
Consolidation within the supermarket industry, growth of super stores, and heightened
product marketing are poised to strengthen private brands even further.
F. Packaging
Distinctive or unique packaging is one method of differentiating a relatively
homogenous product.
In other cases, packaging changes have succeeded in creating new attributes of value
in a brand.
Finally, packaging changes can make products urgently salable to a targeted segment.
On one hand, the package must be capable of protecting the product through the
channel of distribution to the consumer.
In addition, it is desirable for packages to have a convenient size and be easy to open
for the consumer.
The marketing manager must determine the optimal protection, convenience,
positioning, and promotional strengths of packages, subject to cost constraints.
