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362 Part 4 Product Decisions
CHAPTER 13
DEVELOPING AND MANAGING BRAND AND PRODUCT CATEGORIES
CHAPTER OVERVIEW
Brands play a huge role in our lives. We try certain brands for all kinds of reasons: on recommendations
from friends, because we want to associate ourselves with the images certain brands convey, or because
we remember colorful advertisements. We develop loyalty to certain brands and product lines for varying
reasons as well—quality of a product, price, and habit are a few examples.
This chapter examines the way companies make decisions about developing and managing the products
and product lines they hope will become consumer necessities.
This chapter focuses on two critical elements—product planning and strategy. First, it looks at how firms
build and maintain identity and competitive advantage for their products through the process of branding.
Second, it focuses on new-product planning and development process. Preparation is key in new-product
development.
Changes in the 17th Edition
The chapter has been updated and revised in several ways:
• The Opening Vignette and Evolution of a Brand deal with the story behind Under Armour, a
billion-dollar sports apparel company. Founder Kevin Planck, a former college football player, was
instrumental in the production of its iconic moisture-wicking shirts for sportspeople. Today, the
company also sells other athletic gear. Under Armour sponsors some U.S. Olympic teams and
• Solving an Ethical Controversy features the controversy surrounding a Nutella commercial that
presented the company’s chocolate-hazelnut spread as healthy for children. A class-action suit
against Ferrero USA, Inc., which markets the spread in the United States, was settled in favor of
consumers. The pros and cons of the issue are discussed in “Who is Responsible for the Truth of
Advertising Claims?”
• Career Readiness provides some insights into being a team player. Tips on how to coordinate
with others and to attain success are offered in the feature “How to Be a Team Player.”
Chapter 13 Developing and Managing Brand and Product Categories 363
• Chapter Case 13.1 cites the example of Chobani, a company that manufactures Greek yogurt.
This type of yogurt has more protein and less sugar, making it especially popular with women and
upper-income consumers, and accounts for more than 50 percent of all U.S. yogurt sales. Details
of this company’s success story are presented in “Chobani Greek Yogurt Focuses on Tradition.”
• Video Case 13.2 provides an overview of how Zappos builds brand equity in “At Zappos, Passion
Is Paramount.”
LECTURE OUTLINE
The Opening Vignette and Evolution of a Brand— “Under Armour Brand Soars” presents the
success story of a sports apparel company. What strategies must this American company adopt
to make an impact on the European market? How would Under Armour’s marketing to a youthful
audience will serve the company in the future?
Chapter Objective 1: Determine how to define a brand.
Key Terms: brand, brand recognition, brand preference, brand insistence
PowerPoint Basic: 4-6
PowerPoint Expanded: 4-6
Advertising
Claims?
1. Importance of brands
a. Brands play a huge role in our lives—we try brands when
friends recommend them, when we associate certain
images with them, or because we remember their
advertisements
b. We become loyal to certain brands for many reasons,
including quality, price, and habit
2. Brand loyalty
a. Brands achieve widely varying consumer familiarity and
acceptance, often weighed by the concept of brand loyalty
b. Marketers measure brand loyalty in three stages:
364 Part 4 Product Decisions
Table 13.1
Selected Brands,
Brand Names, and
Brand Marks. Think
of more examples
of products for
recognition, preference, and insistence
c. Brand recognition
i. Brand recognition is a firm’s first objective for newly
introduced products
d. Brand preference
i. Brand preference is the second level of brand loyalty
ii. Buyers rely on previous experiences with the product
when choosing it, if available, over competitors’
products
e. Brand insistence
i. Brand insistence is the ultimate stage in brand
loyalty
Assessment check questions
1.1. What is a brand? A brand is a name, term, sign, symbol, design, or
1.2. Differentiate among brand recognition, brand preference, and brand
insistence. Brand recognition is a company’s first objective for newly
introduced products and aims to make these items familiar to the public.
Brand preference means buyers rely on previous experiences with the
product when choosing it over competitors’ products. Brand insistence
leads consumers to refuse alternatives and to search extensively for the
desired merchandise.
Chapter Objective 2: Identify the five different types of brands.
Key Terms: generic products, manufacturer’s brand or national brand, private brands (labels),
captive brands, family brand, individual brand
Chapter 13 Developing and Managing Brand and Product Categories 365
PowerPoint Basic: 7
PowerPoint Expanded: 7-8
1. Types of brands
a. Brands can be classified in several ways: private,
manufacturer’s or national, family, and individual brands
b. Firms weigh the benefits and disadvantages of each type
2. Manufacturers’ brands versus private brands
a. A manufacturer’s brand, or national brand, refers to a brand
name owned by a manufacturer or other producer
b. Private brands are the brands offered by wholesalers or
retailers
i. Most manufacturers regard the production of private-
label goods as a way to reach additional market
segments
3. Captive brands
a. Captive brands are national products that are sold
4. Family and individual brands
a. Family brands
i. A family brand is a single brand name that identifies
several related products
ii. It may be a full line of food, healthcare, beauty, or
home appliance goods
b. Individual brands
i. An individual brand is a unique identification for the
product itself
366 Part 4 Product Decisions
Assessment check questions
2.1. Identify the five different types of brands. The different types of brands
2.2. How are generic products different from branded products? Generic
products are characterized by plain labels, little or no advertising, and no
brand names.
Chapter Objective 3: Explain the strategic value of brand equity.
Key Terms: brand equity, global brand, differentiation, relevance, esteem, knowledge
PowerPoint Basic: 8
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1. Brand equity
a. A brand can go a long way toward making or breaking a
company’s reputation.
b. A strong brand identity backed by superior quality offers
important strategic advantages for a firm.
c. Brand equity refers to the added value that a certain brand
name gives to a product in the marketplace
i. Brands with high equity often command large market
shares and consumers may pay little attention to
differences in prices
ii. Brand equity contributes to higher profits and stock
returns
iii. Service companies also benefit from brand equity
Chapter 13 Developing and Managing Brand and Product Categories 367
Valuator):
i. Differentiation—a brand’s ability to stand apart from
competitors
Assessment check questions
3.1. What is brand equity? Brand equity refers to the added value a certain
3.2. What are the four dimensions of brand personality? The four
dimensions of brand personality are differentiation, relevance, esteem, and
knowledge.
Chapter Objective 4: Explain the benefits of category and brand management.
Key Terms: brand manager, category management
PowerPoint Basic: 9
PowerPoint Expanded: 10
1. The role of category and brand management
a. Traditionally, companies assign the task of managing a
brand’s marketing strategies to a brand manager
b. Today, because they sell about 80 percent of their products
to national retail chains, many firms have adopted a strategy
called category management, in which the responsibility is
assigned to a category manager.
i. Category managers maximize sales for the retailer
by overseeing the entire product line
ii. They track sales history with data from retailers and
aggregate it with sales data for the entire category
368 Part 4 Product Decisions
market advertising.
c. Some of the steps companies follow in the category
management process include:
i. Defining the category based on target market’s
needs, scoping out a consumer’s decision process
Assessment check questions
4.2. How does category management help retailers? Category
management helps retailers by providing a person—a category manager—
Chapter Objective 5: Discuss how companies develop strong identities for their product or
brand.
Key Terms: brand name, brand mark, trademark, trade dress, label, Universal Product Code
(UPC), brand extension, line extension, brand licensing
PowerPoint Basic: 10-14
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1. Product identification
a. Almost every product that is distinguishable from another
2. Brand names and brand marks
a. A brand name, according to the American Marketing
Association, consists of letters, numbers, or words and
forms a name that identifies and distinguishes the firm’s
offerings from those of its competitors
Chapter 13 Developing and Managing Brand and Product Categories 369
Gives Heinz a
Boost
generic words that describe types or categories
b. When a class of products becomes generally known by the
original brand name of a specific offering, the brand name
may become a descriptive generic name
3. Trademarks
a. The high value of brand equity encourages firms to protect
the resources they invest in their brands
b. A trademark is a brand for which the owner claims exclusive
legal protection
iii. Trademark protection is applied to words or phrases,
abbreviations or nicknames for a product, packaging
elements, or even product features such as shape,
design, or typeface
iv. U.S. law has fortified trademark protection in recent
e. Trade dress
i. Trade dress refers to the visual cues used in
branding to create an overall look
ii. These cues may relate to color, size, package and
label shapes, or a combination of visual cues
370 Part 4 Product Decisions
battles but even the Supreme Court has not arrived
at a consensus on this issue
4. Developing global brand names and trademarks
a. Global firms face unique difficulties in selecting brand
names and trademarks due to cultural and language
5. Packaging
a. A firm’s product strategy must address questions about
packaging
i. A product’s package like its brand name can
powerfully influence a buyers’ purchase decisions
c. Protection against damage, spoilage, and pilferage
i. The original objective of packaging was to offer
physical protection for the merchandise
ii. Packages pass through many stages of handling
iii. Perishable products need protection against spoilage
in transit and during storage
d. Assistance in marketing the product
i. The importance of packaging as a promotional tool
has increased in recent years
ii. This is due in part to the vast array of new products,
changes in consumer lifestyle and buying habits, and
emphasis on targeting smaller segments
iii. Many firms are addressing environmental concerns
by designing packages made of biodegradable and
Chapter 13 Developing and Managing Brand and Product Categories 371
iv. Attractive packaging captures the attention of
buyers
v. They establish a common identity for a group of
items sold under the same brand name
vi. They evoke the product’s image and communicate
its value
vii. They enhance convenience for buyers
viii. They can increase consumer utility for reuse
e. Cost-effective packaging
f. Labeling
i. Labels were once a separate element applied to a
package—today it is an integral part of package
design
ii. A label carries an item’s brand name or symbol,
name and address of the manufacturer or distributor,
information about the product’s size and
composition, and recommended uses
iii. The right label can attract consumer attention and
encourage purchases
iv. Vague or misleading descriptions on labeling led to
the Fair Packaging and Labeling Act (1966)—it
requires that labels give adequate information and
that package designs allow comparisons among
competing products
viii. Labeling regulations vary from country to country
ix. The Universal Product Code (UPC) is a numerical
bar code printed on a package. Used to recognize
items, it has become an effective marketing research
6. Brand extensions
a. Some brands are so popular that marketers decide to use
them on unrelated products in an attempt to gain instant
recognition
7. Brand licensing
a. Brand licensing refers to a growing trend in which firms
authorize other companies to use their brand names
b. It expands a firm’s exposure in the marketplace, much as a
brand extension does
c. The brand’s owner receives an extra source of income in the
form of royalties
d. Limitations of brand licensing
Assessment check questions
5.1. Distinguish between a brand name and a trademark. A brand name is
the part of the brand consisting of letters, numbers, or words that can be
5.2. What are the three purposes of packaging? A package serves three
major objectives: (1) protection against damage, spoilage, and pilferage;
(2) assistance in marketing the product; and (3) cost effectiveness.
5.3. Describe brand extension and brand licensing. Brand extension is the
strategy of attaching a popular brand name to a new product in an
unrelated product category. Brand licensing is the strategy of authorizing
Chapter 13 Developing and Managing Brand and Product Categories 373
other companies to use a brand name.
Chapter Objective 6: Describe the four new-product development strategies.
Key Terms: market penetration strategy, product positioning, market development strategy,
product development strategy, flanker brands, product diversification strategy, cannibalization
PowerPoint Basic: 15
PowerPoint Expanded: 23-25
Strategies. Think of
a category of new
products that would
benefit from each
type of alternative
strategy.
1. New-product planning
a. As its offerings enter maturity and decline stages of the
product lifecycle, a firm must add new items in order to
2. Product development strategies
a. A strategy for launching a new product is based on several
elements:
i. The existing product mix
ii. The match between current offerings and the firm’s
marketing objectives
c. Market penetration strategy—existing products for existing
markets
i. Seeks to increase sales of existing products in
existing markets
ii. Firms may modify products, improve quality, or
promote new uses
d. Market development strategy—new markets for existing
products
i. Concentrates on finding new markets for existing
products
ii. Market segmentation provides useful support for
such an effort
374 Part 4 Product Decisions
f. Product diversification strategy—new products for new
markets
i. Focuses on developing entirely new products for
new markets
ii. Some firms look for new markets that complement
their existing ones, others look in completely new
directions
Assessment check questions
6.1. Distinguish between market penetration and market development
strategies. In a market penetration strategy, a company seeks to increase
6.2. What is product development? Product development refers to the
6.3. What is product diversification? A product diversification strategy
1. The consumer adoption process
a. Refers to the stages consumers go through—from learning
about the new product, to trying it, to deciding whether to
buy it regularly or reject it
b. Stages in the consumer adoption process:
i. Awareness—Individuals first learn about the new
product
Adoption. Which of
the five categories
is the smallest?
Taken together,
which two
represent the
majority of buyers?
Why do you think
this is?
2. Adopter categories
a. Consumer innovators, or first buyers, welcome innovations
and rush to buy new products almost as soon as they hit the
market
3. Identifying early adopters
a. Identifying consumers or organizations that are most likely
to try a new product is vital to a product’s success
b. By reaching them early on, marketers treat these adopters
as part of a test market, allowing them to evaluate the
product and discover suggestions for modifications
c. Early purchasers are often opinion leaders—their attitudes
quickly spread, their feedback helps forecast ultimate
rejection or success
4. Rate of adoption determinants
a. Products move from the introduction stage to market
maturity at different rates
b. Five characteristics of a product innovation that tend to
influence (and increase) its adoption rate:
i. Relative advantage—if it appears far superior to
previous ideas
5. Organizing for new-product development
a. Firms need to be organized in such a way that their
personnel can stimulate and coordinate new-product
development
b. Besides hiring outside contractors, firms organize by
assigning product-innovation functions to new-product
committees, new-product departments, product managers,
or venture teams
c. New-product committees
i. New-product committees are the most common
organizational arrangement
ii. These groups bring together experts from many
areas including marketing, finance, engineering,
d. New-product departments
i. Many firms establish separate, formally organized
new-product departments to generate and refine
new-product ideas
e. Product managers
i. Product managers (another term for brand
managers) support the marketing strategies of an
product manager role in favor of a category
management structure that includes profit and loss
responsibility
f. Venture teams
i. A venture team gathers specialists from different
areas of an organization to develop new products
ii. The team must meet criteria for return on
investment, uniqueness of product, serving a well-
defined need, compatibility of the product with
Assessment check questions
7.1. Who are consumer innovators? Consumer innovators are the first
7.2. What characteristics of a product innovation can influence its adoption
rate? Five characteristics of a product innovation influence its adoption
rate: relative advantage, compatibility, complexity, possibility of trial use,
and observability.
Chapter Objective 8: Explain the six steps in the new-product development process.
Key Terms: concept testing
PowerPoint Basic: 19
PowerPoint Expanded: 37-40
1. The new-product development process
a. When a firm is organized, it can start moving new-product
ideas to the marketplace
b. Developing a new-product can be time-consuming, risky,
and expensive
c. Usually, firms must generate dozens of new-product ideas
to produce even one successful product
d. Firms have to expect some failures—in fact the overall
failure rate for new products is about 80 percent
378 Part 4 Product Decisions
Figure 13.3 Steps
in the New-Product
Development
Process.
Considering the
reasons why
products fail, which
of these six steps
do you think is
often ignored?
Which step might
be more difficult
than it seems? At
which step do you
think many projects
e. Nearly half of total resources devoted to product innovation
result in commercial failures
f. A new product may fail for a number of reasons:
i. Inadequate market assessments
g. Many firms follow a six step development process to ensure
the success of a product : idea generation, screening,
business analysis, development, test marketing, and
commercialization
h. Traditionally, new products go through phased development,
which follows the steps in an orderly sequence
i. Responsibility for each phase passes from product
planners, to designers and engineers, to
manufacturers, and finally to marketers
ii. This may work for firms that dominate mature
markets and can develop variations on existing
products
iii. But rapid changes in technology and markets have
increased pressure to speed up the development
process
i. Accelerated product development programs
i. Feature team members from design, manufacturing,
marketing and sales personnel.
ii. They handle projects from idea generation to
commercialization
2. The six phases of the new product development process:
a. Idea generation
i. Ideas can come from many sources—customers,
sales force, R&D specialists, competitors, suppliers,
