Chapter 11 – Managing Successful Products, Services, and Brands
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CHAPTER CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES …………………………………… 11-2
LEARNING OBJECTIVES (LO) ……………………………………………………………………………. 11-3
KEY TERMS ………………………………………………………………………………………………………….. 11-3
LECTURE NOTES
• Chapter Opener: Gatorade: Bringing Science to Sweat for More Than 50 Years ……. 11-4
• Charting the Product Life Cycle (LO 11-1) ………………………………………………………. 11-5
• Managing the Product Life Cycle (LO 11-2) ……………………………………………………. 11-10
• Branding and Brand Management (LO 11-3) …………………………………………………… 11-14
• Packaging and Labeling Products (LO 11-4) ……………………………………………………. 11-20
APPLYING MARKETING KNOWLEDGE …………………………………………………………… 11-25
BUILDING YOUR MARKETING PLAN ………………………………………………………………. 11-27
VIDEO CASE (VC)
• VC 11: P&G’s Secret Deodorant: Finding Inspiration in Perspiration………………….. 11-28
APPENDIX D CASE (D)
• D-11: Pampered Pooches Travel in Style …………………………………………………………. 11-30
IN-CLASS ACTIVITIES (ICA)
• ICA 11-1: Using Brainstorming and N/3 Techniques for Breathe Right®……………11-33
CONNECT APPLICATION EXERCISES ………………………………………………11-39
• Creating Customer Value and Competitive Advantage Click and Drag*
• Relating the Product Life Cycle to Marketing Mix Actions Click and Drag*
• Alternative Branding Strategies for Philip B Case Analysis
• P&G’s Secret Deodorant: Finding Inspiration in Perspiration Video Case
• iSeeit! Video Case: Brand Equity Video Case
• Marketing Analytics: Uncovering Opportunities Analytics Exercise
*Note: An alternate version of each Click and Drag exercise is available in Connect for students with
accessibility needs
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Textbook Figures Slide
Figure 11-1 How stages of the product life cycle relate to a firm’s marketing objectives and
marketing mix actions …………………………………………………………………………………….. 11-4
Figure 11–1A Product life cycle stages and its total industry sales and profit ………………….. …………….11–5
Figure 11–1B How stages of the product life cycle relate to a firm’s marketing objectives and
marketing mix actions ………………………………………………………………………… …………….11-6
Figure 11-2 Stand-alone fax machine product life cycle for business use: 1970-2014…………………. 11-8
Figure 11-3 Alternative product life cycle curves based on product types ………………………………… 11-14
Figure 11-4 Prerecorded music product life cycles by product form ………………………………………… 11-16
Figure 11-5 Five categories and profiles of product adopters (diffusion of innovation) ……………… 11-18
Figure 11-6 The customer-based brand equity pyramid …………………………………………………………. 11-29
Figure 11-7 Alternative branding strategies ………………………………………………………………………….. 11-32
Video Case 11: P&G’s Secret Deodorant: Finding Inspiration from Perspriration …………………….. 11-39
Applying Marketing Metrics
Knowing Your CDI and BDI [See UMD10CDIBDI.xls] ……………………………………………………….. 11-21
Marketing Matters and/or Making Responsible Decisions
Marketing Matters—Customer Value: Will E-Mail Spell Extinction for Fax Machines? ……………. 11-12
Making Responsible Decisions—Consumer Economics of Downsizing—Get Less, Pay More …… 11-24
Marketing Matters—Customer Value: Creating Customer Value Through Packaging—Pez
Heads Dispense More Than Candy …………………………………………………………………………………….. 11-35
Videos
11-1: Gatorade Ad ……………………………………………………………………………………………………………… 11-3
11-2: Gillette Ad ………………………………………………………………………………………………………………. 11-22
11-3: Dr Pepper Ad …………………………………………………………………………………………………………… 11-27
11-4: P&G’s Secret DeodorantVideo Case …………………………………………………………………………… 11-39
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LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO1: Explain the product life-cycle concept.
LO2: Identify ways that marketing executives manage a product’s life cycle.
LO3: Recognize the importance of branding and alternative branding strategies.
LO4: Describe the role of packaging and labeling in the marketing of a product.
KEY TERMS
brand equity
private branding
brand licensing
product class
brand name
product form
brand personality
product life cycle
branding
product modification
label
trade name
market modification
trademark
mixed branding
trading down
multibranding
trading up
multiproduct branding
warranty
packaging
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LECTURE NOTES
GATORADE: BRINGING SCIENCE TO SWEAT FOR MORE THAN 50
YEARS
• Gatorade is synonymous with sports drinks, constant product improvement, and
masterful brand management.
• In 1965, the University of Florida concocted Gatorade to rehydrate its football team.
• The drink was coined “Gatorade” by an opposing coach after his team lost to the
Florida Gators in the Orange Bowl.
• A brief history of the Gatorade brand:
a. Stokely-Van Camp Co.:
• Bought the Gatorade formula in 1967 and commercialized the product.
• The original Gatorade had one flavor—lemon-lime.
b. Quaker Oats:
• Purchased Stokely-Van Camp in 1983 and quickly grew sales.
• Added new flavors, sizes, and distribution venues.
c. PepsiCo purchased Quaker Oats in 2001 and accelerated brand development.
• Today, Gatorade is a global brand and is sold in more than 80 countries.
• Brand development has been a key factor in Gatorade’s success.
• In 2009, Gatorade:
a. Unleashed a bevy of enhanced beverages in bold new packaging.
b. The letter ‘G’ is now displayed alongside its bolt to convey a brand personality.
• In 2010-2011, created the ‘G’ Series to provide “fuel that goes beyond hydration.”
a. Traditional G-Series for athletes
b. G-Series Endurance for extreme sports athletes
c. Gatorade Endurance Carb Energy chews.
• Gatorade remains a vibrant multibillion-dollar brand.
[Video 11-1: Gatorade Ad]
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I. CHARTING THE PRODUCT LIFE CYCLE [LO 11–1]
• [Figure 11-1] The product life cycle describes the stages a new product goes through
in the marketplace: introduction, growth, maturity, and decline.
• The two curves shown in Figure 11-1—total industry sales revenue and total industry
profit—represent the sum of sales revenue and profit of all firms producing the
product.
A. Introduction Stage
• The introduction stage of the product life cycle occurs when a product is first
introduced to its intended target market. During this period:
a. Sales grow slowly.
b. Profit is minimal due to large investment costs in product development.
• The marketing objective is to create consumer awareness and stimulate trial—the
initial purchase of a product by a consumer.
• Companies often spend heavily on advertising and other promotion tools to build
product awareness among consumers.
a. This is done to stimulate primary demand:
• Is the desire for the product class rather than for a specific brand.
• Since there are few competitors.
b. A firm focuses on creating selective demand, the preference for a specific
brand. As:
• More competitors introduce their products.
• The product moves along its life cycle.
• Other marketing mix variables also are important at this stage.
a. Gaining distribution can be a challenge because channel intermediaries may
be hesitant to carry a new product.
b. A company often restricts the number of variations of the product to ensure
control of product quality.
c. During introduction, pricing can be either high or low.
• Skimming strategy.
– Is a high initial price for a product.
– Helps the company recover the costs of development.
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– Capitalizes on the price insensitivity of early buyers.
• Penetration pricing.
– Is a low initial price for a product.
– Discourages competitive entry.
– Builds unit volume, provided costs are monitored.
• [Figure 11-2] Example: This figure charts the stand-alone fax machine product
life cycle for business use in the U.S. from 1970 to 2016.
• Product classes in the introductory stage of the product life cycle: pocket video
cameras and electric-powered automobiles.
B. Growth Stage
• The growth stage of the product life cycle is characterized by:
a. Rapid increases in sales.
b. The appearance of competitors.
• The result of more competitors and more aggressive pricing is that profit usually
peaks during the growth stage.
• Advertising emphasis shifts to stimulating selective demand, in which product
benefits are compared with those of competitors’ offerings to gain market share.
• Product sales grow at an increasing rate because:
a. New people try or use the product.
• Product proliferation occurs.
a. Improved versions or new features are added to the original design.
b. Helps differentiate a company’s brand from its competitors.
• It is important to gain as much distribution for the product as possible.
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C. Maturity Stage
• Total industry or product class sales slow during the maturity stage.
• Weaker competitors begin to leave the market.
• Most consumers either:
a. Are repeat purchasers of the product or…
b. Have tried and abandoned it.
• Sales increase at a decreasing rate as fewer new buyers enter the market.
• Profit declines due to fierce price competition among many sellers.
D. Decline Stage
• The decline stage occurs when sales and profits begin to drop:
a. Due to changes in the marketing environment.
b. Not because of any wrong marketing strategy.
• Product classes in the decline stage of their product life cycle include analog TVs
1. Deletion. Product deletion drops a product from the company’s product line.
a. Is the most drastic strategy.
b. Is not taken lightly since there is a residual core of loyal consumers.
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MARKETING MATTERS
Customer Value: Will E-Mail Spell Extinction for Fax Machines?
Technological substitution often causes the decline stage in the product life cycle.
Will the Internet and e-mail replace fax machines? Not yet—because the two technologies
do not directly compete for the same messaging applications. E-mail is used for text
messages and faxing is predominately used for communicating formatted business
documents. Fax usage is expected to increase through 2018, even though unit sales of fax
machines have declined on a worldwide basis. Internet technology and e-mail may
eventually replace facsimile technology and paper and make fax machines extinct, but not in
the immediate future.
2. Harvesting.
a. Harvesting is when a company continues to offer the product but reduces
marketing costs (salespersons’ selling time and advertising dollars spent).
b. The purpose of harvesting is to maintain the ability to meet customer requests.
E. Three Aspects of the Product Life Cycle
Important aspects of product life cycles are:
1. Length of the Product Life Cycle.
There is no exact time that a product takes to move through its life cycle.
a. Consumer products have shorter life cycles than business products.
2. Shape of the Product Life Cycle.
• The product life cycle sales curve shown in Figure 11-1 is the generalized life
cycle, but not all products have the same shape to their curve.
• [Figure 11-3] There are several distinctive life cycle curves, each type
suggesting different marketing strategies:
a. A high-learning product.
• Requires significant customer education.
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• Has an extended introductory period.
b. A low-learning product.
• Sales begin immediately because:
– The consumer requires little learning.
– The benefits of purchase are readily understood.
• Competitors can easily imitate this product, so the marketing strategy is to
broaden distribution quickly.
• As competitors rapidly enter, most retail outlets already have the
innovator’s product.
• It is important to have the manufacturing capacity to meet demand.
c. A fashion product.
• Is a style of the times, is introduced, declines, and then returns, such as
with clothing styles.
3. The Product Level: Class and Form.
• The product life cycle shown in Figure 11-1 is a total industry or generalized
product class sales curve.
• [Figure 11-4] In managing a product, it is important to distinguish among the
multiple life cycles (class and form) that may exist.
a. Product class. Refers to the entire product category or industry.
b. Product form. Pertains to the variations of a product within the product
class.
4. The Product Life Cycle and Consumer Behavior.
• The product life cycle depends on sales to consumers.
• The shapes of product life cycle curves indicate that most sales occur after the
product has been on the market for some time.
• A product diffuses, or spreads, through the population, a concept called the
diffusion of innovation.
a. Some people are attracted to a product early while others buy it only after
they see their friends or opinion leaders with the item.
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b. [Figure 11-5] The consumer population divided into five categories of
product adopters based on when they choose to buy a new product.
c. Innovators and early adopters must purchase a product for it to be
successful.
d. Once innovators and early adopters accept them, the adoption of new
products moves to the early majority, late majority, and laggard
categories.
• Several barriers affect whether a consumer will resist a new product:
a. Usage barriers. Product is incompatible with existing habits.
• To stimulate initial trial of new products and overcome these barriers, firms
provide warranties, money-back guarantees, usage instructions,
demonstrations, and free samples.
LEARNING REVIEW
11-1. Advertising plays a major role in the __________ stage of the product life cycle, and
__________ plays a major role in maturity.
11-2. How do high-learning and low-learning products differ?
11-3. What are the five categories of product adopters in the diffusion of innovations?
II. MANAGING THE PRODUCT LIFE CYCLE [LO 11–2]
Product managers shepherd a product through successive stages of its life cycle.
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A. Role of a Product Manager
• The product manager, also called a brand manager, manages the marketing
efforts for a close-knit family of products or brands.
a. Consumer goods and industrial firms use the product manager style of
marketing organization.
b. Product managers are responsible for managing new and existing products
through their life cycles.
c. They also develop and execute a marketing program for a product line.
d. Product managers approve ad copy, media selection, and package design.
• Product managers analyze extensive data related to their products and brands.
a. Sales, market share, and profit trends are closely monitored.
b. Managers often supplement these data with two measures:
• A category development index (CDI).
• A brand development index (BDI).
• These indexes:
B. Modifying the Product
• Product modification involves strategies that alter a product’s characteristic, such
as its quality, performance, or appearance, to increase the product’s value to
customers and increase sales.
• Product bundling is the sale of two or more separate products in one package.
• New features, packages, or scents can be used to change a product’s
characteristics and give the sense of a revised product.
C. Modifying the Market
Market modification involves strategies in which a company tries to find new
customers, increase a product’s use among existing customers, or create new use
situations:
1. Finding New Customers. Targeting new market niches.
2. Increasing a Product’s Use. Promoting more frequent usage or consumption.
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[Video 11-2: Gillette Ad]
APPLYING MARKETING METRICS
Knowing Your CDI and BDI
Category Development Index (CDI) and Brand Development Index (BDI)
Product managers often ask, “Where are sales for my product category and brand
strongest and weakest?” Data related to this question are often displayed in a marketing
dashboard using the category development index and brand development index.
Your Challenge.
Hawaiian Punch is the top fruit punch drink sold in the United States. To examine
the performance and identify growth opportunities for Hawaiian Punch (the brand), a
marketing dashboard displays a category development index (CDI) and a brand development
index (BDI). A syndicated marketing research firm provides the data for these indexes. The
CDI and BDI for Hawaiian Punch are calculated as follows:
[See UMD10CDIBDI.xls]
A CDI over 100 indicates above-average product category purchases by a market
segment; a number under 100 indicates below-average purchases. A BDI over 100 indicates
a strong brand position in a segment; a number under 100 indicates a weak one. The
dashboard displays the CDI and BDI for four household segments that consume fruit drinks.
Your Findings.
The BDI and CDI measures show that households with children, and particularly
Your Actions.
An opportunity for Hawaiian Punch exists among households with children 13 to 18
years old—teenagers.
• Reposition Hawaiian Punch for teens.
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3. Creating a New Use Situation. Identifying new uses or applications.
[ICA 11-1: Using Brainstorming and N/3 Techniques
for Breathe Right Nasal Strips]
D. Repositioning the Product
• Product repositioning changes the place an offering occupies in consumers’
minds relative to competitive products to bolster sales. A firm can reposition a
product by changing one or more elements of the marketing mix.
• Four factors that trigger the need for a repositioning action:
1. Reacting to a Competitor’s Position. Repositioning a product because a
competitor’s entrenched position adversely affects its sales and market share.
2. Reaching a New Market. Repositioning a product allows it to reach a new
market not yet tapped.
3. Catching a Rising Trend. Changing consumer trends can also lead to
repositioning a product.
4. Changing the Value Offered. In repositioning a product, a company can decide
to change the value it offers buyers and trade up or down.
a. Trading up involves adding value to the product (or line) through additional
features or higher-quality materials.
b. Trading down involves reducing the number of features, quality, or price.
• Often exists when companies engage in downsizing:
• Firms have been criticized for this practice.
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MAKING RESPONSIBLE DECISIONS
Ethics: Consumer Economics of Downsizing—Get Less, Pay More
Starkist, Frito-Lay, P&G, Haagen-Dazs, Kimberly-Clark, Unliver, Georgia-Pacific,
and many other consumer product marketers have reduced the amount they put in a package
but charge the same price. Or, they reduce the content within a package but maintain the
same package size, dimensions, and prices. The issue raised is whether the practice of
reducing the contents of packages without changing the package size or price is deceptive
and therefore unethical if manufacturers do not inform consumers of the change. Consumer
advocates believe it is; manufacturers do not.
LEARNING REVIEW
11-4. How does a product manager manage a product’s life cycle?
11-5. What does “creating a new use situation” mean in managing a product’s life cycle?
11-6. Explain the difference between trading up and trading down in repositioning.
III. BRANDING AND BRAND MANAGEMENT [LO 11–3]
• Branding is a marketing decision in which an organization:
a. Uses a name, phrase, design, symbols, or combination of these to…
b. Identify its products and distinguish them from those of competitors.
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• A brand name:
a. Is any word, device (design, sound, shape, or color), or combination of these.
b. Is used to distinguish a seller’s goods or services.
c. Some brand names can be spoken (Gatorade).
d. Some brand names cannot be spoken (Apple’s colored logotype or logo).
• Consumers benefit most from branding because they can recognize:
a. Competing products by their distinct brand names and trademarks, which allows
them to be more efficient shoppers.
b. Products with which they are dissatisfied, while becoming loyal to other, more
satisfying brands. This eliminates the need for an external search (see Chapter 5).
• A trade name is a commercial, legal name under which a company does business.
• A trademark:
a. Identifies that a firm has legally registered its brand name or trade name…
b. So the firm has its exclusive use, thereby preventing others from using it.
• Product counterfeiting involves low-cost copies of popular brands not manufactured
by the original producer.
a. Counterfeit products steal sales from or harm the reputation of the manufacturer.
b. U.S. firms lose about $250 billion each year to counterfeit products.
c. The five most counterfeited branded products are, in order:
• Handbags and wallets. • Consumer electronics.
d. The U.S. passed the Stop Counterfeiting in Manufactured Goods Act (2006) to
curb this practice.
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• Consumers benefit most from branding because they can recognize:
a. Competing products by their distinct brand names and trademarks, which allows
them to be more efficient shoppers.
b. Products with which they are dissatisfied, while becoming loyal to other, more
satisfying brands. This eliminates the need for an external search (see Chapter 5).
MARKETING INSIGHTS ABOUT ME
Do You Want to Start a Business Using Your Own Name?
Better Check First!
A. Brand Personality and Brand Equity
• Brands offer both product identification and a means to distinguish their products
from competitors.
• A brand personality is a set of human characteristics associated with a brand
name that successful and established brands take on.
[Video 11-3: Dr Pepper Ad]
• Consumers often:
a. Assign personality traits to products—traditional, romantic, rebellious, etc.
b. Choose brands that are consistent with their own or desired self-image.
• Marketers provide a brand with a personality through advertising that:
• Brand equity is the added value a brand name gives to a product beyond the
functional benefits provided. This value has two distinct advantages:
a. Brand equity provides a competitive advantage.
b. Consumers are often willing to pay a higher price for a product with brand
equity.
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c. This is represented by the premium a consumer will pay for one brand over
another when the functional benefits provided are identical.
1. Creating Brand Equity.
a. Brand equity:
• Is carefully nurtured by marketing programs to…
• Create strong, favorable, and unique consumer associations and
b. [Figure 11-6] Brand equity arises from a sequential four-step building
process:
• Develop positive brand awareness and an association of the brand in
consumers’ minds with a product class or need to give a brand an identity.
• Establish a brand’s meaning in consumers’ minds in terms of:
– A functional, performance-related dimension.
– An abstract, imagery-related dimension.
• Elicit proper consumers’ responses to a brand’s identity and meaning
based on how they think and feel about the brand.
• Create an intense, active loyalty relationship (a deep psychological bond)
between consumers and the brand.
2. Valuing Brand Equity.
a. Brand equity provides a financial advantage for the brand owner.
• Successful, established brands have an economic value in the sense that
they are intangible assets that can be bought or sold.
b. Brand licensing:
• Is a contractual agreement whereby one company (licensor):
– Allows its brand name(s) or trademark(s) to be used with offerings…
– Developed by another company (licensee) for a royalty or fee.
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• Requires careful marketing analysis to assure a proper match between the
licensor’s brand and the licensee’s products.
• Some brand licensing deals have been mistakes, such as Domino’s Pizza
fruit-flavored bubble gum.
B. Picking a Good Brand Name
• Companies spend a lot of money to identify and test a new brand name.
• The criteria for selecting a good brand name are:
a. The name should suggest the product benefits. Example: Easy Off (oven
cleaner).
b. The name should be memorable, distinctive, and positive. Example: Ford
Mustang.
c. The name should fit the company or product image. Example: Duracell.
d. The name should have no:
• Legal restrictions that would produce trademark infringement suits.
e. Brand names need an Internet address, which further complicates name
selection because the domain name may already be registered.
f. The name should be simple. Example: Bic pens.
C. Branding Strategies
[Figure 11-7] Companies have several strategies when branding a product.
1. Multiproduct Branding Strategy.
a. Multiproduct branding:
• Is a branding strategy in which a company uses one name for all its
products in a product class. Example: Samsung phones.
• Is sometimes called family branding, or corporate branding when the
company’s trade name is used. Example: Arm & Hammer.
b. There are several advantages to multiproduct branding. This brand strategy:
Chapter 11 – Managing Successful Products, Services, and Brands
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• Capitalizes on brand equity among consumers…
– Who will transfer a favorable attitude for a product to other items in
the product class with the same name…
– If they have a good experience with the product.
• Makes product line extensions possible:
– Is the practice of using a current brand to enter a new market segment
in its product class.
c. With a product line extension:
• The risk is that sales may come at the expense of other items in the
company’s product line (cannibalism).
• It works best when it provides incremental revenue by taking sales away
from competing brands or attracting new buyers.
d. Some companies employ subbranding, which.
• Combines a corporate or family brand with a new brand to distinguish a
part of its product line from others.
e. A strong brand equity also allows for a brand extension:
• Is the practice of using a current brand name to enter a completely
different product class.
e. Co-branding opportunities are possible from strong brand equity.
• Co-branding is the practice of pairing 2 or more strong brands to
marketing a joint product or service.
• Example: Dell computers with Intel processor.
• The risk is that too many uses for one brand name can dilute the meaning
of a brand for consumers.
• Brand dilution occurs when consumers no longer associate a brand with a
specific product or service.
2. Multibranding Strategy.
a. Multibranding:
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• Is a branding strategy that gives each product a distinct name when…
b. Multibranding is applied in these ways:
• Some companies array their brands on the basis of price-quality segments
(Example: Marriott International, Marriott EDITION, and Vacation
Clubs).
• Other companies introduce fighting brands:
– Are new product brands that are defensive moves to confront and
counteract competitors’ brands.
– Example: Frito-Lay’s Santitas tortilla chips.
c. With multibranding:
• Promotion costs tend to be higher compared to multiproduct branding.
• A firm must generate awareness among consumers and retailers for each
new brand name without the benefit of any previous impressions.
d. The advantages of a multibranding strategy:
e. The disadvantages of a multibranding strategy may outweigh its benefits:
• It is complex.
3. Private Branding Strategy.
a. Private branding:
• Is a branding strategy:
– Used when a company manufactures products but…
– Sells them under the brand name of a wholesaler or retailer.
• Is also called private labeling or reseller branding.
b. Private branding is popular because:
• It typically produces high profits for manufacturers and resellers.