Gilbert A. Churchill, Jr. J. Paul PeterGilbert A. Churchill, Jr. J. Paul Peter

Chapter 9

Managing Existing Products

Marketing

Types of ProductsTypes of Products

UnsoughtProducts

UnsoughtProducts

SpecialtyProductsSpecialtyProducts

ShoppingProducts

ShoppingProducts

ConvenienceProducts

ConvenienceProducts

ConsumerProducts

ConsumerProducts

BusinessProducts

BusinessProducts

ProductsProducts

A product is a good , service, or idea that offers a wide range of tangible and intangible benefits. It includes both the core, the auxiliary, and anything else that adds value to customers

Slide9-1

Basic Categories of Consumer ProductsBasic Categories of Consumer ProductsSlide9-2

Table9.1

CategoryCategory

Convenience

Type ofType ofPurchasePurchaseDecisionDecision

Shopping

Specialty

Relatively low

PricePrice PromotionPromotionPlacement orPlacement orDistributionDistribution

Moderate

May or may not be expensive

Little information sought

Mass media

Mass media; some personal selling

Widely available

More information sought

Lots of information sought

Mass media; more personal selling

Selectively available

Exclusively available

Unsought Do not seek information and unaware

Relatively expensive

Persuasive advertising; aggressive personal selling

Varies

Goods and ServicesGoods and ServicesSlide9-3

Durable Goods

Non-Durable Goods

Services

Fantastic Sam’s HaircutAirline Taxi Ride

RestaurantMeal

Kleenex TissuesScott Towels

Pair ofGlasses

Sealy MattressMaytag Washer

AutoRepair

• Product Class - a broad group of products that differ somewhat but provide similar benefits.

• household cleaners, beer

• Product Category - subset of a product class containing products of a certain type.

• Household cleaners - liquid, powder, spray, gel

• Beer - light, imported, regular, nonalcoholic

• Product Item - a specific version of a product that can be designated as a distinct offering among an organization’s products.

• Product Line - a group of closely related products offered by the organization.

• P & G - soaps, detergents, toothpaste

• Product Mix - all the product offerings of an organization.• Width of the product mix - number of product lines that an organization offers.

• Gillette - blades and razors, writing instruments, toiletries, lighters

• Depth of a product line - number of product items in a product line.

• Gillette’s blades and razors - mach 3, sensor, track II, atra, etc.

Product TerminologyProduct TerminologySlide9-4

The Product Life Cycle (PLC) The Product Life Cycle (PLC) A graphical description of a product’s historyA graphical description of a product’s history

Time

Do

llars

0

Product Category ProfitsTotal Market Profits

Product Category SalesTotal Market Sales

IntroductoryStage

GrowthStage

MaturityStage

DeclineStage

Slide9-5

INTRODUCTION STAGEINTRODUCTION STAGE

• A full-scale launch of a new product into the marketplace (trying to gain a foothold).

• Typically we have– High failure rates (slow sales initially)– Little to no competition– Frequent product modification– Limited distribution (try to attract intermediaries)– Price is generally high (to recover high marketing &

production costs)– Main customers are Innovators– Negative profits(due to high initial costs)– Durables (one product); non-durables (variety)

• Strategy– Developing product awareness (informing customers

of benefits - lead to trial)– Stimulate primary demand for the product category– Intensive personal selling– Pioneering Advantage - benefit of being the first one in

the market

Slide9-6

GROWTH STAGEGROWTH STAGE

• Begins when the product begins to break even

• Typically we have– sales grow at an accelerated (increasing) rate– Many competitors enter the market– Large companies may acquire small pioneering firms– Profits are healthy (because of demand)– R & D costs have been recovered; sales begin to level

off; sales volume create economies of scale

• Strategy– Promotion stresses brand preference & brand loyalty– Promotion is targeted towards attracting the mass

market– Product quality will be stressed & improved– Wider distribution will be gained and costs will be

lowered

Slide9-7

MATURITY STAGEMATURITY STAGE

• This is where most products spend most amount of time at.

• Typically we have– Sales continue to increase but at a decreasing rate– Marketplace is approaching saturation– Marginal competitors begin dropping out– Both price and profits begin to fall

• Strategy– Heavy promotion is necessary to both dealers and

consumers (by increasing usage)– Product lines are widened; annual models with

emphasis on style rather than function; products require little technological improvements

– Market share can be increased by either taking it away from the competitors or manufacturing private brands for channel members

Slide9-8

DECLINE STAGEDECLINE STAGE

• Signaled by a long-run drop in sales

– Product looses market acceptance

• Change in consumers taste

• Wide availability of substitutable products

• Typically we have

– Few competitors remain

– Decreased profits industry wide

– Price generally stabilizes

• Strategy

– Do very little if any promotion

– Minimize distribution costs

– Drop the product completely

Slide9-9

Adopter CategoriesAdopter CategoriesSlide9-10

Figure9.2

Innovators(2.5%)

EarlyAdopters(13.5%)

EarlyMajority

(34%)

LateMajority

(34%)

Laggards(16%)

Relationship of the Diffusion Process to the PLCRelationship of the Diffusion Process to the PLC

Innovators

Early adopters

Early majority

Late majority

Laggards

Productlife cyclecurve

Diffusioncurve

Cu

mu

lati

ve P

erce

nta

ge

of

Ad

op

tio

n 100

90

80

70

60

50

40

30

20

10

0

Introduction Growth Maturity Decline

Time of Adoption of Innovations

Slide9-11

• Brand - a name, term, design, symbol, or another feature that identifies one seller’s good or service as distinct from other sellers. (e.g. Coca Cola)

• Brand Name - that part of a brand that can be spoken. (e.g. the word Coke)

• Brand Mark - that part of a brand that cannot be spoken. (e.g. the flowing script used to write Coca Cola)

• Trademark - a brand that has legal status by virtue of it’s being registered with the federal government. (e.g. Coca Cola)

• Trade name - the legal name under which a company operates. (e.g. The Coca Cola Company)

• Brand extension - the practice of using an existing brand name for a new product. (e.g. Cherry Coke, Diet Coke, Caffeine Free Coke)

• Service mark - a brand for a service that has legal status by virtue of its being registered with the federal government.

• Family brand - the use of the same brand name for an entire product line.

• Co-Branding - placing two or more brand names on a product (e.g., ConAgra + Kellogg = Healthy Choice)

Branding TerminologyBranding TerminologySlide9-12

BrandBrandStructureStructure

PrivateBrands

GenericBrands

Salsa

Old El PasoSalsa

Types of BrandsTypes of BrandsSlide9-13

Manufacturer’sBrands

A & P MasterchoiceSalsa

Selecting a BrandSelecting a BrandSlide9-14

A good brand name has several characteristics.

1. It should imply product benefits.

2. It should be positive, distinctive, easy to say and easy to remember.

3. It should be consistent with the image of the product and manufacturer.

4. It should be legally protectable and permissible.

5. It should translate well, if the product is to be offered globally.

Elements of Brand EquityElements of Brand EquitySlide9-15

Figure9.5

Provides value to customer by Enhancing Customer’s:

Interpretation/Processing of information

Confidence in the Purchase Decision

Use Satisfaction

Provides value to firm by Enhancing:

Efficiency and effectiveness of Marketing Programs

Brand Loyalty

Prices/Margins

Brand Extensions

Trade Leverage

Competitive Advantage

BrandLoyalty

NameAwareness

PerceivedQuality Brand

AssociationsOther Proprietary Brand Assets

Brand Equity

Name Symbol

Product Mixes and Product LinesProduct Mixes and Product LinesSlide9-16

Figure9.7

Source: Courtesy of P. Gayle Fuguitt, Marketing Research Director, Big “G” Division, General Mills

Ready-to-EatCereals

ConvenienceFoods

Snack Foods BakingProducts

DairyProducts

Total

Wheaties

Lucky Charms

Cinnamon Toast Crunch

Cheerios

Kix

Trix

Hamburger Helper

Suddenly Salad

Betty Crocker Cake Mixes

Creamy Deluxe Frosting

Dessert Mixes

Pop Secret Popcorn

Fruit Rollups

Nature Valley Granola Bars

Bisquick

Gold Medal Flour

Yoplait Yogurt

Colombo Yogurt

Width

DEPTH