chapter 11 Flashcards
Product Life Cycle
Describes stages a new product goes through: introduction, growth, maturity, & decline
Introduction Stage
When a product is introduced to its target market; slow sales & minimal profit
-GAIN AWARENESS
-Telling the market what the product is about
-Marketing obj for the comp is to create consumer awareness & stimulate trial
- Comps spend heavily on advertising & other promotional tools to build awareness/stimulate product trial
Ex:Gillette budgeted $200 million in advertising to introduce the Fusion shaving system male shavers & over 60% of male shavers became aware within 6 months
Ex: Smart TVs & electric cars are in introduction stage
Trial
Initial purchase of a product by a consumer
Primary Demand
the desire for the product class rather than for a specific brand, since there are few competitors with the same product
Selective Demand
the preference for a specific brand
- Pricing can be either high or low
Skimming Strategy
uses a high initial price to help the comp recover the costs of development as well as capitalize on the price insensitivity of early buyers
Penetration Pricing
Uses low prices to build unit volume; › but a company must closely monitor costs (discourages competitive entry)
Growth Stage
Rapid sales increase, profit peaks, competitors appear
-STRESSES DIFFERENTIATION
-People are interested in the product. Demand, sales, competition grows
Ex: E-book readers & 3-D printers are in growth stage
Repeat Purchasers
people who tried the product, were satisfied, and bought again
Maturity Stage
Slowing sales, profit decline, focus on differentiation & new uses
-MAINTAIN LOYALTY
› Marketing attention is directed toward holding market share through further product differentiation & finding new buyers/uses
› Comps strategy is to control overall marketing costs by improving promotional & distribution efficiency
Decline Stage
Sales drop due to environmental changes
-Something replaced the product & customers are not interested anymore
Ex: Digital music pushed compact discs into decline in the recorded music industry
Two Strategies to Handle a Declining Product:
- deletion
- harvesting
Deletion
dropping the product from the company’s product line (most drastic strategy)
Ex: CD/DVD players
Harvesting
when a company retains the product but reduces marketing costs. The product continues to be offered, but salespeople do not allocate time in selling & limited, if any, advertising dollars are spent to support it
Three Aspects of the Product Life Cycle
- their length
- the shape of their sales curves
- The Difference b/w Product Classes & Forms
- Length of the Product Life Cycle
there is no set time that it takes a product to move through its life cycle
› Consumer products have shorter life cycles than business products
- Shape of the Life Cycle Curve
not all products have the same shape to their curve
Four Different Types of Products
- High-Learning Product
- Low-Learning Product
- Fashion Product
- Fad Product
High-Learning Product
significant customer education is required & there’s an extended introductory period
-Takes ppl longer to figure out/doing new things
Ex: Personal computers & convection ovens
Low-Learning Product
sales begin immediately, little learning is required by the consumer & the benefits of purchase are readily understood
-Basically the same as before
- The product can be easily imitated by competitors, so the marketing strategy is to broaden distribution quickly
Ex: New flavor of chips
Fashion Product
style of the times; are introduced, decline, & then return
-Trends die & then come back
Ex: Crocs/Bell Bottoms
Fad Product
experiences rapid sales on introduction & then equally rapid decline
-Takes off super quick & everyone wants one
Ex: Fidget spinners, Beanie Babies, Stanleys
- The Difference b/w Product Classes & Forms
Product Class vs Product Form
Product Class
refers to the entire product category/industry
Ex: Prerecorded music
Ex: Cars
Product Form
pertains to variations of a product within the product class
Ex: Cassette tapes, CDs, digital music downloading/streaming
Ex: Electric car, conventional car
Diffusion of Innovation
a product diffuses, or spreads through the population
- Some people are attracted to a product early. Others buy it only after they see their friends/opinion leaders w/ the item
5 Types of Product Adopters:
- Innovators
- Early Adopters
- Early Majority
- Late Majority
- Laggards
Innovators 2.5% (Introduction Stage)
those buyers who want to be the first to have the new product or service
-Venturesome; higher educated, use multiple information sources
Early Adopters 13.5% (Growth Stage)
generally don’t like to take as much risk as innovators but instead wait and purchase the product after careful review
-Little pickier, it’s new in something that interests them/has value. It’s not just about newness, but more about word of mouth/reviews
- Leaders in social setting; slightly above-average education
Early Majority 34% (Maturity Stage)
Wait until bugs are worked out.
Few new products can be profitable until this large group buys them.
-Wait till enough ppl have tried it
-Deliberate; many informal social contacts
Late Majority 34% (Maturity Stage)
Last group to enter a new product market
The product has achieved its full market potential
-Skeptical; below average social status
Laggards 16%
avoid change and rely on traditional products
-Fear of debt; neighbors/friends are info sources
Common Reasons for Resisting a Product in the Introduction Stage:
› Usage Barriers: the product is not compatible w/ existing habits
› Value Barriers: the product provides no incentive to change
› Risk Barriers: physical, economic, or social
› Psychological Barriers: cultural differences or image
Product Manager
Manages marketing efforts for a close-knit family of products/brands
- Ways Product Managers Manage a Product Through Its Life Cycle:
- Modifying the Product
- Market penetration
- Market development
- Repositioning the Product
Product Modification
altering one or more of a product’s characteristics, such as its quality, performance, or appearance, to increase the product’s value to customers & increase sales
Ex: Oreo introduces a new flavor
Ex: Wrinkle-free & stain-resistant clothing
Ex: Pantene shampoo/conditioner’s new vitamin formula & relaunched brand w/ multimillion-dollar advertising & promotion campaign
Product Bundling
the sale of two or more separate products in one package
- Common approach to product modification to increase a product’s value
Ex: Microsoft Office is sold as a bundle of computer software including Word, Excel, & PowerPoint
Market Modification
strategies, a company tries to find new customers, increase a product’s use among existing customers, or create new use situations
Ex: Oreos targeting Asia
Ways They Can Modify the Market
- Finding New Customers
- Increasing a Product’s Use
- Creating a New Use Situation
- Finding New Customers
Ex: LEGO offers a new line of products to attract consumers outside of its traditional market. LEGO has introduced a product line for young girls called LEGO Friends
Ex: Harley-Davidson has tailored a marketing program to encourage women to take up biking, thus doubling the number of potential customers for its motorcycles
- Increasing a Product’s Use
Ex: Campbell Soup Comp advertises more heavily in warm months to encourage consumers to think of soup as more than a cold-weather food
Ex: Florida Orange Growers Association advocates drinking orange juice throughout the day rather than for breakfast only
- Creating a New Use Situation
Ex: Gillette Body line of razors, blades, & shaving gels for “manscaping”-the art of shaving body hair in areas below the neckline- (a new use situation)
Product Repositioning
changes the place a product occupies in a consumer’s mind relative to competitive products
-Changing the way consumers think about it
› A firm can reposition a product by changing one or more of the four marketing mix elements
Ex: Al known for steak sauce changed to Al Original (changed the label, have new packaging, but still the same sauce)
Four Factors That Trigger The Need for a Repositioning Action:
- Changing the Value Offered
- Reacting to a Competitor’s Position
- Reaching a New Market
- Catching a Rising Trend
Changing the Value Offered
Trading Up, Trading Down, Downsizing
Trading Up
adding value to the product (or line) through additional features or higher-quality materials
Ex: Target/Walmart, can trade up by adding a designer clothes section to their product assortment
Trading Down
reducing a product’s number of features, quality, or price
Ex: Airlines have added more seats, thus reducing legroom, & limited meal service by offering only snacks on most domestic flights
- Trading down exists when companies engage in shrinkflation
Shrinkflation/Downsizing
Reducing package content without changing package size & maintaining/increasing the package price
Reacting to a Competitor’s Position
because a competitor’s entrenched position is adversely affecting sales & market share
Ex: New Balance successfully repositioned its athletic shoes to focus on fit, durability, & comfort rather than competing head-on against Nike on performance & Adidas on fashion
Reaching a New Market
reach new customers
Ex: Unilever introduced iced tea but sales were disappointing. They repositioned it as a cold soft drink to compete as a carbonated beverage & sales improved
Catching a Rising Trend
taking advantage of changing consumer trends
Ex: Growing consumer interest in foods that offer health & dietary benefits
Ex: Calcium-enriched products, such as Kraft American cheese & Ben’s Original Calcium Plus rice, emphasized healthy bone structure for children & adults
Branding
an organization uses a name, phrase, design, symbols, or combination of these to identify its products & distinguish them from those of competitors
Brand Name
any word, device (design, sound, shape, or color), or combination of these used to distinguish a seller’s products/servs
- Verbal label that’s attached to certain products
Ex: Coca Cola, Pepsi, Apple, Nike
Brand Mark
nonverbal representation of the brand
Ex: Nike Swoosh
Trade Character
personification of the brand
Ex: Ronald McDonald, Chick Fil A Cow, Mickey Mouse, Pillsbury Dough Boy
Logo
a word, name, symbol, or trademark designed for easy recognition
-Combination of things that make you think of that brand
Ex: Nike Swoosh & name together
Trademark
identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others from using it
- Trademarks are registered w/ the U.S. Patent & Trademark Office & protected under the Lanham Act
Ex: Coca-Cola/P&G have trademarked hashtags (#) that make reference to their brands
Brand Personality
a set of human characteristics associated with a brand name
Ex: Personality traits linked w/ Coca-Cola are all-American & real
Pepsi: young & exciting
Harley-Davidson: masculinity, defiance, & rugged individualism
Brand Equity
the added value a brand name gives to a product beyond the functional benefits provided
Ex: Nutella vs unknown brand w/ same product. You are going to pick Nutella.
2 Advantages of Brand Equity
- Brand equity provides a competitive advantage
- Consumers are often willing to pay a higher price for a product w/ brand equity
Components of Brand Equity
- brand awareness
- brand associations
- perceived value
- brand loyalty
Awareness
ppl need to be aware of your brand, creating awareness from your targeted segment
Associations
associating your brand w/ the thing you want customers to think about when thinking about your brand
Ex: Target >special/luxury
Ex: Apple>high tech//easy to use
Perceived Quality
Brands want to make sure consumers have quality on their mind when they think of them
Ex: Walmart=low prices
Loyalty
growth expands on your brand, customers will keep buying form you
Ex: Apple comes out w/ new phone every year & customers keep buying it
Brand Purpose
the reason why a brand exists, the place it has in consumers’ lives, the solution it provides to consumers, & the brand’s role in making society better off
› Focuses on a brand’s underlying values & beliefs & its identity and meaning
Ex: Nike’s purpose is to bring inspiration & innovation to every athlete in the world
Brand Licensing
a contractual agreement whereby one company (licensor) allows its brand name(s) or trademark(s) to be used with products/servs offered by another company(licensee) for a royalty/fee
Ex: UF licensing deal w/ Gatorade
Ex: NFL & NBA license team names & logos for merchandise
Six Criteria When Selecting a Good Brand Name
- suggest the product benefits
- memorable, distinctive, & positive
- fit the company or product image
- no legal or regulatory restrictions
- simple & emotional
- favorable phonetic & semantic associations in other languages
Four Branding Strategies
- Multiproduct branding strategy
- Multibranding strategy
- Private branding strategy
- Mixed branding strategy
Multiproduct Branding
Using one name for all products in a product class
-Family Branding
-About the brand
Ex: Apple: Apple iPhone, Apple iPad, Apple Watch, etc
Product Line Extensions
the practice of using a current brand name to enter a new market segment in its product class
Ex: Starbucks selling packs of coffee beans
Subbranding
combines a corporate or family brand with a new brand, to distinguish a part of its product line from others
Ex: American Express applied subbranding w/ its American Express Green, Gold, Platinum, Blue, & Centurion black charge cards, w/ unique serv offerings for each
Brand Extension
using a current brand name to enter a different product class
Ex: Honda’s established name for motor vehicles has extended easily to snowblowers, lawn mowers, snowmobiles, & business jets
Co-branding
pairing two or more strong brands to facilitate the marketing of a joint product/serv for their mutual benefit
-Two comps come together & bring the best out of each other
Ex: Doritos & Taco Bell (Doritos Locos Tacos)
Ex: sponsorships
Brand Dilution
when consumers no longer associate a brand w/ a specific product/serv or start thinking less favorably about the brand
Multibranding
Giving each product a distinct name for different segments
› Adv: Each brand is unique to each market segment & there’s no risk that a product failure will affect other products in the line
› Advertising & promotion costs tend to be higher w/ multibranding
-About the product itself
Ex: P&G makes Camay Soap for those concerned w/ soft skin & Safeguard for those who want deodorant protection
Fighting Brands
when other multibrand companies introduce new product brands as defensive moves to counteract competition. Their chief purpose is to confront competitor brands
Ex: Frito-Lay introduced Santitas brand tortilla chips to go head-to-head against Doritos & Tostitos
Private Branding
manufactures products but sells them under the brand name of a wholesaler or retailer
Ex: Kirkland (only at Costco)
Mixed Branding
a firm markets products under its own name(s) & that of a reseller bc the segment attracted to the reseller is different from its own market
Ex: P&G sells its products but Target/Walmart also sells them
Packaging
any container in which it is offered for sale & on which label information is conveyed
Label
an integral part of the package & typically identifies the product/brand, who made it, where & when it was made, how it is to be used, & package contents/ingredients
Packaging & Labeling Benefits:
- Communication benefits
- Functional benefits
- Perceptual benefits
Communication Benefits
label info it conveys to the consumer, such as directions on how, where, & when to use the product, the source/composition of the product, which is needed to satisfy legal requirements of product disclosure
Ex: The labeling system for packaged/processed foods in the U.S. provides a uniform format for nutritional & dietary information
Functional Benefits
provides storage, convenience, or protection/ensuring product quality
Ex: Stackable food containers
Ex: Pringles’ cylindrical packaging
Perceptual Benefits
perception created in the consumer’s mind. Package & label shape, color, graphics distinguish one brand from another, convey a brand’s positioning, & build brand equity
Ex: Pepsi has used packaging changes to uphold its image among teens & young adults, introducing new package graphics that change every few weeks to reflect diff themes
Packaging Functions
- contain/protect facilitate use communicate
- fit channel needs innovation
Four Packaging & Labeling Challenges
- Connecting w/ Customers
- Environmental Concerns
- Healthy Safety, & Security Issues
- Cost Reduction:
Three Levels of Product
Core
Expected
Augmented
Core
why am I buying this & what absolutely needs to be in the product to be considered that product
Ex: Car needs to drive and take me from point A to B
Expected
expecting new improvements since times have changed
Ex: No longer manually roll down a window & expect a button to do that for us
Augmented
features that you don’t expect to be in your product
Ex: Airplay in cars, we didn’t expect that because it’s not normally in cars
