978-0077861063 Chapter 6 Lecture Note 2

Type

Quiz

Book Title

A Preface to Marketing Management 14th Edition

ISBN 13

978-0077861063

April 8, 2019

Chapter 06 - Product and Brand Strategy

II. Product Life Cycle



A firm’s product strategy must take into account the fact that products have a life cycle.

Products are introduced; they grow, mature, and decline. Figure 6.2 illustrates this

life-cycle concept.

During the introduction phase of the cycle, there are usually high production and marketing

costs, and since sales are only beginning to materialize, profits are low or nonexistent.

Profits increase and are positively correlated with sales during the growth stage as the

market begins trying and adopting the product.

As the product matures, profits for the initiating firm do not keep pace with sales because

of competition.



At some point sales decline, and the seller must decide whether to:

oDrop the product

oAlter the product

oSeek new uses for the product

oSeek new markets

oContinue with more of the same

In doing so, it should become clear that shifts in phases of the life cycle correspond to

changes in the market situation, competition, and demand.

When applied with sound judgment, the life-cycle concept can aid in forecasting, pricing,

advertising, product planning, and other aspects of marketing management.

As useful as the product life cycle can be to managers, it does have limitations that require

it to be used cautiously in developing a strategy.

Fashions are accepted and popular product styles. Their life cycle involves a

distinctiveness stage in which trendsetters adopt the style, followed by an emulation stage

in which more customers purchase the style to be the trendsetters.

Fads are products that experience an intense but brief period of popularity.

Some fads may repeat their popularity after long lapses.

Refer Marketing Insight 6-7 for marketing strategy implications of the product life cycle.

A. Product Adoption and Diffusion

The shape of the life-cycle curve indicates that most sales occur after the product has

been available for awhile.

The spread of a product through the population is known as the diffusion of

innovation, as illustrated in Figure 6.3, which presents five adopter categories.

oThe first category is the innovators, those who are the first to buy a new product.

oIf the experience of the innovators is favorable, early adopters begin to buy.

oMembers of the early majority tend to avoid risk and to make purchases

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Chapter 06 - Product and Brand Strategy

carefully.

oMembers of the late majority not only avoid risks but are cautious and skeptical

about new ideas.

oLaggards are reluctant to make changes and are comfortable with traditional

products.

III. The Product Audit



The product audit is a marketing management technique whereby the company’s current

product offerings are reviewed to ascertain whether each product should be continued as is,

improved, modified, or deleted.

The audit is a task that should be carried out at regular intervals as a matter of policy.

Product audits are the responsibility of the product manager unless specifically delegated

to someone else.

A. Deletions

In today’s environment, there are growing numbers of products being introduced, that

are competing for limited shelf space.

This growth is primarily due to:

oNew knowledge being applied faster

oThe decrease in time between product introductions (by a given organization)

One of the main purposes of the product audit is to detect sick products and then bury

them.

Rather than let the retailer or distributor decide which products should remain,

organizations themselves should take the lead in developing criteria for deciding

which products should stay and which should be deleted.

Some of more obvious factors to be considered are listed below:

oSales trends

oProfit contribution

oProduct life cycle

oCustomer migration patterns

B. Product Improvement



An important objective of the audit is to ascertain whether to alter the product in some

way or to leave things as they are.

Attributes refer mainly to product features, design, package, and so forth.

Marketing dimensions refer to things as price, promotion strategy, and channels of

distribution.

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Chapter 06 - Product and Brand Strategy

Product improvement is a top-level management decision, but the information needed

to make the improvement decision may come from the consumer or the middlemen.

A discussion of product improvement would not be complete without taking into

account the benefits associated with benchmarking, especially as they relate to the

notion of the extended product, the tangible product along with the whole cluster of

services that accompany it.

The formal definition of benchmarking is the continuous process of measuring

products, services, and practices against those of the toughest competitors or

companies renowned as leaders.

It is an effective tool organizations use to improve on existing products, activities,

functions, or processes.

Benchmarking can assist companies in many product improvement efforts, including:

oBoosting product quality

oDeveloping more user-friendly products

oImproving customer order-processing activities

oShortening delivery lead times

IV. Organizing for Product Management

Whether managing existing products or developing new products, organizations that are

successful have one factor in common—they actively manage both types.

Under a marketing-manager system, one person is responsible for overseeing an entire

product line with all of the functional areas of marketing such as research, advertising,

sales promotion, sales, and product planning.

This type of system is popular in organizations with a line or lines of similar products or

one dominant product line.

Sometimes referred to as category management, the marketing manager system is seen as

being superior to a brand manager system because one manager oversees all brands within

a particular line, thus avoiding brand competition.

Under a brand-manager system, a manager focuses on a single product or a very small

group of new and existing products.

Successful new products often come from organizations that try to bring all the capabilities

of the organization to bear on the problems of customers.

This requires the cooperation of all the various functional departments in the organization.

Thus, the use of cross-functional teams has become an important way to manage the

development of new products.

A venture team is a popular method used in such organizations as Xerox, Polaroid, Exxon,

IBM, Monsanto, and Motorola.

A venture team is a cross-functional team responsible for all the tasks involved in the

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Chapter 06 - Product and Brand Strategy

development of a new product.

The use of cross-functional teams in product management and new product development is

increasing for a very simple reason—organizations need the contributions of all functions

and therefore require their cooperation.

Cross-functional teams operate independently of the organization’s functional departments

but include members from each function.

Figure 6.4 presents some prerequisites for the use of cross-functional teams in managing

existing products and developing new products.

KEY TERMS

Brand: 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.

Brand equity: The set of assets (or liabilities) linked to the brand that add (or subtract) value.

The value of these assets is dependent upon the consequences or results of the market place’s

relationship with the brand.

Brand extension: A strategy that uses a current brand name to enter a completely different

product class.

Brand-manager system: Type of product management system in which a manager focuses on a

single product or a very small group of new and existing products. The brand manager is

responsible for everything from marketing research and package design to advertising.

Cross-functional teams: Teams requiring the membership and cooperation of all the various

functional departments in the organization to create successful new products.

Dual branding: A strategy in which two or more branded products are integrated. This strategy

is sometimes called joint or cobranding.

Extended product: The tangible product along with the whole cluster of services that

accompany it; one of the three ways a product can be viewed.

Fads: Products that experience an intense but often very brief period of popularity. The faster

they become popular, the faster they will become unpopular. A few fads may repeat their

popularity after long absences.

Family branding: Sometimes called franchise extension; an organization’s attachment of the

corporate name to a product to enter either a new market segment or a different product class.

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Chapter 06 - Product and Brand Strategy

Fashions: Accepted and popular products that go through a repetitive cycle of popularity, lost

popularity, and regained popularity, repeating the cycle again.

Generic product: Product that includes the essential benefits the buyer expects to receive; one

of the three ways a product can be viewed.

Global virtual team: A cross-functional team that operates across time, geographic distance,

organizational boundaries, and cultures, whose members communicate mainly through electronic

technology. (e.g., smartphone, laptop, texting, e-mail, video conferencing, etc.)

Horizontal marketing: Market that exists for an organizational product when it is purchased by

all types of firms in many different industries.

Marketing-manager system: Type of product management system popular in organizations

with a line or lines of similar products or one dominant line. One person is responsible for

overseeing an entire product line with all of the functional areas of marketing such as research,

advertising, sales promotion, sales, and product planning.

Multibranding: A strategy that assigns different brand names to each product. The organization

makes a conscious decision to allow the products to succeed or fail on their own merits.

Product: The sum of the physical, psychological, and sociological satisfactions the buyer

derives from purchase, ownership, and consumption. This definition is consistent with the

marketing concept.

Product adoption and diffusion: The spread of a product through the population; encompasses

five stages of adopters: innovators, early adopters, early majority, late majority, and laggards.

Product life cycle: The concept that many products go through a cycle; that is, they are

introduced, grow, mature, and decline. While the cycle varies according to industry, product,

technology and market, it is a valuable aid in developing product and marketing strategies.

Product line: A group of products that share common characteristics, distribution channels,

customers, or uses.

Product line extension: A strategy of line extension that uses a well-known brand name to enter

into a new market segment.

Product mix: The full set of products offered for sale by an organization; described by its width

and depth.

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Chapter 06 - Product and Brand Strategy

Product mix depth: The average number of products in each product line.

Product mix width: The number of individual product lines offered by the organization.

Quality: The degree of excellence or superiority that an organization’s product or service

possesses. It can encompass both the tangible and intangible aspects of a product or service.

Although quality can be evaluated from many perspectives, the customer’s perception of quality

is crucial.

Tangible product: The physical entity or service that is offered to the buyer; one of the three

ways a product can be viewed.

Value: Encompasses not only quality but also price. Value is what the customer gets for what the

customer gives.

Venture team: A cross-functional team responsible for all of the tasks involved in the

development of a new product. When the new product is launched, the team usually turns over

responsibility for managing the product to a brand manager or product manager or it may

manage the new product as a separate business.

Vertical market: Market for organizational products that have a limited number of buyers. A

vertical market is narrow because customers are restricted to a few industries and is deep in that

a large percentage of the producers in the market use the product.

ADDITIONAL RESOURCES

Calkins, Tim. Defending Your Brand. New York: Palgrave Macmillan, 2012.

Gladwell, Malcolm. The Tipping Point. NY: Book Bag Books, 2006.

Keough, Donald R. The Ten Commandments of Business Failure. NY: Portfolio Books, 2008.

Knapp, Duane. The Brand Promise. NY: McGraw-Hill, 2008.

Pullig, Chris, Carolyn J. Simmons, and Richard G. Netemeyer. “Brand Dilution: When Do New

Brands Hurt Existing Brands?" Journal of Marketing, April 2006, pp. 52-64.

Rust, Roland, Debra Viana Thompson, and Rebecca Thompson. “Defeating Feature Fatigue.”

Harvard Business Review, February 2006, pp. 98-109.

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Chapter 06 - Product and Brand Strategy

Van Praet, Douglas. Unconscious Branding. New York: Palgrave Macmillan, 2012.

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