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long - ch 8

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Department
Marketing
Course
MKTG 2030
Professor
Ben Kelly
Semester
Winter

Description
Chapter 8: Manage the Product 8.1 Product Planning: Use Product Objectives to Decide on a Product Strategy Product Management (or Brand Management) is the systematic and usually team-based approach to coordinating all aspects of a product’s marketing initiative including all elements of the marketing mix - Coordinated by product or brand managers - Smart product management strategies are more critical than ever - Objectives provide focus and direction- they should support the broad marketing objectives of the business unit in addition to be consistent with the firm’s overall mission - Measurable, clear, unambiguous and feasible – should also indicate a specific time frame - Planners should keep in touch with customers so that their objectives accurately respond to their needs - Should consider long-term implications of product decisions Objectives and Strategies for Individual Products - After a firm experiences success with a product in a local or regional market, it may decide to introduce it nationally Steps to Manage Products 1. Develop Product Objectives (for individual products, for product lines and mixes) 2. Design Product Strategies 3. Make Tactical Product Decisions (Product Branding, packaging and labeling design) Objectives and Strategies for Multiple Products Product Line or product family is a firm’s total product offering designed to satisfy a single need or desire of target customers - To do an even better job of meeting varying consumer needs, each of the three brands comes in more than one formulation Product line length is determined by the number of separate items within the same category - Limited-line strategy has fewer product variations, can improve the firm’s image if firm’s perceive it as a specialist with a clear, specific position in the market - Organizations may decide to extend their product line by adding more brands or models when develop product strategies - If a firm’s current product line includes middle and lower end items, an upward line stretch adds new items- higher priced entrants that claim better quality or offer more bells and whistles - Downward line stretches augment a line when they add items at the lower end- here, a firm must take care not to blur the images of its higher-priced, upper-end offerings - A two-war stretch adds products at both the upper and lower ends - A filling out strategy adds sizes or styles not previously available in a product category - A contracting strategy dropping some of the less profitable items - A firm can modify its product line to meet the competition or take advantage of new opportunities - Whenever a manufacturer extends a product line or a product family, there’s a risk of cannibalization which is when the new items eat some sales of an existing brand as the firm’s current customers simply switch to the new brand FIGURE 8.2 Product Mix Strategies Product Mix is the total set of all products a firm offers for sale Product Mix Width the number of different product lines the firm produces; considered when developing a product mix strategy; if the firm has lots of different product lines, it reduces its risk; firms usually develop a mix of product lines that have something in common Supermarket wine channel is the mass market wines that people buy in large volume where they shop for groceries rather than at specialty wine shops Quality as a Product Objective: The Science of TQM Product Quality is the overall ability of the product to satisfy customers’ expectations - Quality is tied to how customers think a product will perform, not necessarily to some technological level of perfection - Product quality objectives coincide with marketing objectives for higher sales and market share and the firm’s objective for increased profits Total Quality Management (TQM) is a mgmt. philosophy that focuses on satisfying customers through empowering employees to be an active part of continuous quality improvement; calls for company-wide dedication to the development, maintenance, and continuous improvement of all aspects of the company’s ops - Product quality is one way that marketing adds value to customers - TQM isn’t just paying attention to product quality- it’s entails that firms promote the attitude among employees that everybody serves the customers; maximizes customer satisfaction by involving all employees, regardless of their function, in efforts to continually improve quality - TQM firms encourage all employees to suggest ways to improve the products- then rewards their good ideas Quality Guidelines ISO 9000 is criteria developed by the International Org for Standardization to regulate product quality in Europe ISO 14000 standards of the International Org for Standardization concerned with ‘environmental management’ aimed at minimizing harmful effects on the environment Six Sigma is a process whereby firms limit production defects to 3.4 per million or fewer; it’s a rigorous approach; five-step process called ‘DMAIC’ (define, measure, analyze, improve, and control); a company would train its employees in in the method; this process removes defects from services, not just products; in these cases ‘defects; mean failing to meet customer expectations; Product Quality Some product objectives focus on quality, which is the ability of a product to satisfy customer expectations- no matter what those expectations are - Overall ability of the product to provide the benefits customers want (level of quality, consistency of quality) - What can quality mean? Durable, reliable, precise, versatile, degree of pleasure/aesthetic pleasure, product safety, ease of use, satisfies needs Marketing Throughout the Product Life Cycle Product Life Cycle (PLC) is a concept that explains how products go through four distinct stages from birth to death: introduction, growth, maturity, and decline The Introduction Stage Introduction Stage: is the first stage of the product life cycle in which slow growth follows the introduction of a new product in the marketplace - Customers get the first change to purchase the g/s - A single company usually produces the product - Goal is to get first-time buyers to try the product - Sales (hopefully) increase at a steady but slow pace - Company usually doesn’t make a profit b/c of heavy R&D costs, heavy spending on advertising and promotion, higher distribution costs due to the lower quantities initially being shopped - This stage can be quite long - Marketplace acceptance and the producer’s willingness to support its product - Many products never make it past this stage (even when backed by big companies) - For a product to succeed, consumers must first know about it and then they must believe that it’s something they want/need - Marketing should focus on informing consumers about the product, how to use it and its promised benefits - 95% of new products introduced each year fail The Growth Stage Growth Stage is the second stage of the product life cycle, during which consumers accept the product and sales increase rapidly - Sales increase rapidly, profits increase and peak - Marketing strategies could include the introduction of product variations to attract market segments and increase market share - I.e. smartphones- continual new product introductions, product innovation, developers/manufacturers continue to build in more aps and communication features The Maturity Stage Maturity Stage is the third and longest stage in the product life cycle, during which sales peak and profit margins narrow - Competition gets intense, remaining competitors fight for market share - Price reductions and reminder advertising - Customers tend to buy to replace ‘worn out’ items or to take advantage of product improvements - To remain competitive, and maintain market share during the maturity stage, firms may tinker with the marketing mix in order to extend this profitable phase for their product The Decline Stage Decline stage is where sales decrease as customers need change; reason could be obsolescence forced by new technology (i.e. type writer); although ha single firm might be profitable, the market as a whole begins to shrink, profits decline, fewer variations of the product, suppliers pull out - In this stage there are usually many competitors but none has a distinct advantage - Firm’s major decision is whether to keep the product at all - An unprofitable product drains resources that could be used to develop newer products - 2 ways to eliminate: (1) phase it out by cutting production in stages and letting existing stocks run out (2) simply dumping the product immediately - Choose #1 if believe that there will be some residual demand - Idea is to sell a limited quantity w/ little or no support from sales, merchandising, advertising and distribution and just let it ‘wither on the vine’ Characteristic Introduction Growth Maturity Decline Product Single company New competitors New features Number of produces single enter the market added; sales are variations product creating new mostly reduced variations of the replacement product products Goals Get first-time Encourage brand Attract new users Remain buyer to try the loyalty profitable; decide new product whether to keep or phase out product Sales Increase at a Rapid increase Peak, then level Continue to steady but slow off, often decline decline pace Profits Negative Increase and Profit margins Declining peak narrow Pricing High: recover May need to Price to maintain May reduce if R&D costs reduce b/c of market share product can Low: attract large increased remain profitable numbers of competition customers Marketing Informing Heavy Reminder Decreased to Communications customers advertising to advertising maintain counter new profitability competition 8.3 Create Product Identity: Branding Decisions - Important to give the product an identity and a personality - Think, Disney which has achieved its strong identity through decades of branding - Branding is an important (and expensive) element of product strategies What’s in a Name (or a Symbol)? Brand is a name, term, symbol (or graphic image), or any other unique element of a product that identifies one firm’ s product(s) and sets it apart from the competition - Jolly Green Giant is a trade character - Nabisco logo is a brand mark - Branding provides the recognition factor products need to succeed in regional, national and international markets - Brand name is probably the most used and recognized form of branding Brand name is the name that uniquely identifies the brand owner as the source of the g/s - If it’s good it’ll position a product b/c it conveys a certain image or personality or describes how it works - Apple’s “i-everything” is brilliant b/c it conveys individuality and personalization which are characteristics that Gen Y buyers prize - Good brand designers say that there are 4 ‘easy’ tests: easy to say, spell, read and remember - 4 ways the brand name should ‘fit’: fit the target market, the product’s benefits, the customer’s culture and legal requirements - Common law protection exists in Canada- if the firm has used the name and established it over a period of time - A registered trademark prevents others from using it on a similar product, it may not bar its use for a product in a completely different type of business Why Brands Matter - A brand is a lot more than just the product it represents- the best brands build an emotional connection with their customers Brand Equity describes the brand’s value over and above the value of the generic version of the product; the value of a brand to an org - Brand equity means that a brand enjoys customer loyalty b/c people believe it’s superior to the competition - It provides a competitive advantage b/c it gives the brand the power to capture and hold on to a larger share of the market and to sell at prices with higher profit margins - Marketers
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