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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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prior written consent of McGraw-Hill Education.
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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prior written consent of McGraw-Hill Education.
Chapter 06 - Product and Brand Strategy
Van Praet, Douglas. Unconscious Branding. New York: Palgrave Macmillan, 2012.
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