Part 4: Product Decisions Product and Service Strategies Category and Brand Management, Product Identification, and New-Product Development

Product and Service Strategies

Category and Brand Management, Product Identification, and New-Product Development

Chapter 12 Category and Brand Management, Product Identification, and New-Product Development

Chapter Objectives Explain the benefits of category and brand management. Identify the different types of brands. Explain the strategic value of brand equity. Discuss how companies develop strong identities for their products and brands. Identify and briefly describe each of the four strategies for new-product development. Describe the consumer adoption process. List the stages in the process for developing new products. Explain the relationship between product safety and product liability.

Explain the benefits of category and brand management.

Identify the different types of brands.

Explain the strategic value of brand equity.

Discuss how companies develop strong identities for their products and brands.

Identify and briefly describe each of the four strategies for new-product development.

Describe the consumer adoption process.

List the stages in the process for developing new products.

Explain the relationship between product safety and product liability.

Managing Brands for Competitive Advantage Branding is the process of creating that identity. Buyers respond to branding by making repeat purchases because they identify the item with the name of its producer. Brand: name, term, sign, symbol, design, or some combination that identifies the products of a firm while differentiating them from the competition’s

Branding is the process of creating that identity.

Buyers respond to branding by making repeat purchases because they identify the item with the name of its producer.

Brand: name, term, sign, symbol, design, or some combination that identifies the products of a firm while differentiating them from the competition’s

Brand Loyalty Brand recognition : Consumer awareness and identification of a brand. Brand preference : Consumer reliance on previous experiences with a product to choose that product again. Brand insistence : Consumer refusals of alternatives and extensive search for desired merchandise.

Brand Loyalty

Brand recognition : Consumer awareness and identification of a brand.

Brand preference : Consumer reliance on previous experiences with a product to choose that product again.

Brand insistence : Consumer refusals of alternatives and extensive search for desired merchandise.

Types of Brands Generic product : item characterized by plain label, with no advertising and no brand name Manufacturers’ brand or National Brand : brand name owned by a manufacturer or other producer Private brands : brand name placed on products marketed by wholesalers and retailers

Generic product : item characterized by plain label, with no advertising and no brand name

Manufacturers’ brand or National Brand : brand name owned by a manufacturer or other producer

Private brands : brand name placed on products marketed by wholesalers and retailers

Captive brands : national brands that are sold exclusively by a retail chain Family brand : brand name that identifies several related products Individual brand : unique brand name that identifies a specific offering within a firm’s product line and that is not grouped under a family brand

Captive brands : national brands that are sold exclusively by a retail chain

Family brand : brand name that identifies several related products

Individual brand : unique brand name that identifies a specific offering within a firm’s product line and that is not grouped under a family brand

Brand equity : added value that a respected, well-known brand name gives to a product in the marketplace. Brand equity increases the likelihood that consumers will recognize the firm’s product when they make purchase decisions A strong brand equity can contribute to buyers’ perceptions of product quality Branding can also reinforce customer loyalty and repeat purchases

Brand equity : added value that a respected, well-known brand name gives to a product in the marketplace.

Brand equity increases the likelihood that consumers will recognize the firm’s product when they make purchase decisions

A strong brand equity can contribute to buyers’ perceptions of product quality

Branding can also reinforce customer loyalty and repeat purchases

Brand Equity The Young & Rubicam Model: Brand Asset Valuator

Brand Equity

The Young & Rubicam Model:

Brand Asset Valuator

The Role of Category and Brand Managers Brand manager : Marketing professional charged with planning and implementing marketing strategies and tactics for a brand Category management : Product management system in which a category manager—with profit and loss responsibility—oversees a product line.

The Role of Category and Brand Managers

Brand manager : Marketing professional charged with planning and implementing marketing strategies and tactics for a brand

Category management : Product management system in which a category manager—with profit and loss responsibility—oversees a product line.

Product Identification Brand name : part of a brand consisting of words or letters that form a name that identifies and distinguishes a firm’s offering from those of its competitors Brand mark : symbol or pictorial design that identifies a product Generic name : branded name that has become a generically descriptive term for a class of products (e.g., nylon, aspirin, kerosene, and zipper)

Brand name : part of a brand consisting of words or letters that form a name that identifies and distinguishes a firm’s offering from those of its competitors

Brand mark : symbol or pictorial design that identifies a product

Generic name : branded name that has become a generically descriptive term for a class of products (e.g., nylon, aspirin, kerosene, and zipper)

Trademark : legal protection which confers the exclusive right to user brand name, trade mark, and any slogan or product name abbreviation Trade Dress : visual cues used in branding to create an overall look The distinctive shape of Philips light bulbs and the McDonald’s arches provide an example of trade dress

Trademark : legal protection which confers the exclusive right to user brand name, trade mark, and any slogan or product name abbreviation

Trade Dress : visual cues used in branding to create an overall look

The distinctive shape of Philips light bulbs and the McDonald’s arches provide an example of trade dress

Developing Global Brand Names and Trademarks Potentially an acute problem for international marketers An excellent brand name or symbol in one country may prove disastrous in another Trademarks that are effective in their home countries may fare less well in other cultures

Developing Global Brand Names and Trademarks

Potentially an acute problem for international marketers

An excellent brand name or symbol in one country may prove disastrous in another

Trademarks that are effective in their home countries may fare less well in other cultures

Packaging A package serves three major objectives: Protection against damage, spoilage, and pilferage Assistance in marketing the product Cost effectiveness Labeling Label Universal Product Code (UPC)

A package serves three major objectives:

Protection against damage, spoilage, and pilferage

Assistance in marketing the product

Cost effectiveness

Labeling

Label

Universal Product Code (UPC)

Brand extension : application of a popular brand name to a new product in an unrelated product category Line extensions refers to new sizes, styles, or related products Brand licensing : practice allowing other companies to use a brand name in exchange for a payment

Brand extension : application of a popular brand name to a new product in an unrelated product category

Line extensions refers to new sizes, styles, or related products

Brand licensing : practice allowing other companies to use a brand name in exchange for a payment

New Product Planning As a firm’s offerings enter the maturity and decline stages of the product life cycle, it must add new items to continue to prosper Alternative Product Development Strategies

As a firm’s offerings enter the maturity and decline stages of the product life cycle, it must add new items to continue to prosper

Alternative Product Development Strategies

Product Development Strategies Product positioning : consumers’ perceptions of a product’s attributes, uses, quality, and advantages and disadvantages in relation to those of competing brands Cannibalization : a loss of sales of the current product due to competition from a new product in the same line

Product Development Strategies

Product positioning : consumers’ perceptions of a product’s attributes, uses, quality, and advantages and disadvantages in relation to those of competing brands

Cannibalization : a loss of sales of the current product due to competition from a new product in the same line

The Consumer Adoption Process Adoption process : Stages that consumers go through in learning about a new product, trying it, and deciding whether to purchase it again. Awareness Interest Evaluation Trial Adoption or rejection

Adoption process : Stages that consumers go through in learning about a new product, trying it, and deciding whether to purchase it again.

Awareness

Interest

Evaluation

Trial

Adoption or rejection

Consumer innovator : People who purchase new products almost as soon as the products reach the market Diffusion process : Process by which new goods or services are accepted in the marketplace

Consumer innovator : People who purchase new products almost as soon as the products reach the market

Diffusion process : Process by which new goods or services are accepted in the marketplace

Figure 12.8 Categories of Adopters Based on Relative Times of Adoption

Figure 12.8

Categories of Adopters Based on Relative Times of Adoption

Identifying Early Adopters Substantial benefits may be obtained by locating the likely first buyers of new products (innovators and early adopters) Suggestions for modifying the product may be obtained from these individuals Acceptance or rejection of the innovation by innovators and early adopters can help forecast sales

Identifying Early Adopters

Substantial benefits may be obtained by locating the likely first buyers of new products (innovators and early adopters)

Suggestions for modifying the product may be obtained from these individuals

Acceptance or rejection of the innovation by innovators and early adopters can help forecast sales

Rate of Adoption Determinants Characteristics of a product innovation that influence its adoption rate include: Relative advantage Compatibility Complexity Possibility of trial use Observability

Rate of Adoption Determinants

Characteristics of a product innovation that influence its adoption rate include:

Relative advantage

Compatibility

Complexity

Possibility of trial use

Observability

Organizing for New Product Development New-Product Committees New-Product Departments Product Managers Venture Teams Task forces

Organizing for New Product Development

New-Product Committees

New-Product Departments

Product Managers

Venture Teams

Task forces

New Product Development Process New product development process: six stages through which new product ideas progress before being introduced to the overall market

New product development process: six stages through which new product ideas progress before being introduced to the overall market

Idea Generation New product ideas come from many sources including: Sales force, Customers, Employees, R&D specialists, The competition, Suppliers, Retailers, Independent inventors Screening Screening separates ideas with commercial potential from those that cannot meet company objectives Checklists of development standards can be helpful at this stage

Idea Generation New product ideas come from many sources including:

Sales force, Customers, Employees, R&D specialists, The competition, Suppliers, Retailers, Independent inventors

Screening Screening separates ideas with commercial potential from those that cannot meet company objectives

Checklists of development standards can be helpful at this stage

Business Analysis The business analysis consists of assessing the new product’s market potential, growth rate, likely competitive strengths, and compatibility of the proposed product with organizational resources Concept testing Development Converting an idea into a physical product Requires interaction among many of the firm’s departments Prototypes may go through many changes

Business Analysis The business analysis consists of assessing the new product’s market potential, growth rate, likely competitive strengths, and compatibility of the proposed product with organizational resources

Concept testing

Development Converting an idea into a physical product

Requires interaction among many of the firm’s departments

Prototypes may go through many changes

Test Marketing Test marketing: Introduction of a trial version of a new product supported by a complete marketing campaign to a selected city of television coverage area Some firms skip this stage, moving directly to full-scale commercialization Commercialization In this stage, the firm establishes marketing strategies, and funds outlays for production and marketing The sales force, marketing intermediaries and potential customers are acquainted with the new product

Test Marketing Test marketing: Introduction of a trial version of a new product supported by a complete marketing campaign to a selected city of television coverage area

Some firms skip this stage, moving directly to full-scale commercialization

Commercialization In this stage, the firm establishes marketing strategies, and funds outlays for production and marketing

The sales force, marketing intermediaries and potential customers are acquainted with the new product

Product Safety and Liability Product Liability : responsibility of manufacturers and marketers for injuries and damages caused by their products

Product Liability : responsibility of manufacturers and marketers for injuries and damages caused by their products