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USE PRODUCT TO DECICDE TO ON A PRODUCT STRATEGY
- Firms that plan well succeed; big role in the firm’s tactical marketing plans
- Firms create products that grow, mature and then decline at faster and faster speeds
- To be EFFECTIVE: product-related objectives must be measurable, clear, and unambiguous—and feasible
- Objectives should consider the long-term applications of a product decisions
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OBJECTIVES AND STRATEGIES FOR INDIVIDIDUAL PRODUCTS
- Strategies for individual products (MINI) may be different for new products, for regional, or mature products
- New products: the objectives relate to successful introduction and then when it experiences success in a local or regional market it may decide to introduce it nationally (ex: Coors in Mississippi)
- Mature products: breathing new life into a product while holding on to the traditional brand personality (ex: Goldfish).
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OBJECTIVES AND STRATEGIES FOR MULTIPLE PRODUCTS
- Strategic decisions affect two or more products simultaneously
- Firm must think in terms of its entire portfolio of products
- Product planning-> developing product line and product mix strategies to encompass multiple offering
- Product line: a firm’s total product offering to satisfy a group of target customers
- Full line: A large number of variations that targets many customer segments to boost sales potential
- Limited line strategy: fewer product variations, can improve image, perceive it as a specialist with a clear, specific position in the market
- May decide to extend their product line by adding more brands or models when developing product strategies
- Upward line stretch: adds new items-higher priced and claiming more quality, bells, and whistles
- Downward line stretch: adding items at the lower end (not blur the images of its higher priced, upper end offerings).
- Two-way stretch: adds products at both the upper and lower ends
- Filling-out strategy: adds sizes or styles not previously available in a product category
- Cannibalization: the loss of sales of an existing brand when a new item in a product line or product family is introduced
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Product line
Product line: a firm’s total product offering to satisfy a group of target customers
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Full line
A large number of variations that targets many customer segments to boost sales potential
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Limited line strategy
fewer product variations, can improve image, perceive it as a specialist with a clear, specific position in the market
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Upward line stretch
adds new items-higher priced and claiming more quality, bells, and whistles
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Downward line stretch
adding items at the lower end (not blur the images of its higher priced, upper end offerings).
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Cannibalization
the loss of sales of an existing brand when a new item in a product line or product family is introduced
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Filling Out Strategy
adds sizes or styles not previously available in a product category
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Two-way stretch
adds products at both the upper and lower ends
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Product Mix Strategies
- The total set of all products a firm offers for sale
- Planners usually consider the width of the product mix: the number of different product lines the firm produces
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MARKETINGTHROUGHOUT THE PRODUCT LIFE CYCLE
Useful way to explain how the market’s response to a product and marketing activities change over the life of a product.
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Introduction Stage
- First stage of the product life cycle in which slow growth follows the introduction of a new product in the marketplace
- Get first time buyers to buy the product
- Company usually doesn’t make a profit during this stage, because research and development costs and heavy spending for advertising and promotional efforts cut into revenue.
- Introduction stage last?
- Depends on marketplace acceptance and the producer’s willingness to support its product during start up
- For a new product to succeed consumers must:
- First know it
- Believe that is something they want or need
- Nearly 40% of all new products fail
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Growth Stage
- Sales increase rapidly while profits increase and peak
- Marketing’s goal is to encourage brand loyalty by convincing the market that this brand is superior to others
- Cell phone-> still at its growth stage; relentless innovation as manufacturers continue to build in more and more communication features
- Marketers must advertise heavily and also rely on other forms of promotion
- If it initially set the price high, the firm may now reduce it to meet increasing competition
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Maturity Stage
- The product life cycle is usually the longest
- Sales peak and then begin to level off and even decline while profit margins narrow
- Competition gets intense when remaining competitors begin to fight for what’s left of the market
- Try to sell their product through as many outlets as possible because availability is crucial in a competitive market
- To remain competitive firms may tinker with the marketing mix
- Try to attract new users of the product (market development- introducing an existing product to a market that doesn’t currently use it)
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Decline Stage
- Decrease in product category sales
- Obsolescence forced by new technology
- Single firm may still be profitable, the market as a whole begins to shrink, profits decline, there are fewer variations of the product, and suppliers pull out
- Many competitors but none has a distinct advantage
- Unprofitable product drains resources that it could use to develop newer products
- Firm decides to drop the product, it can eliminate it by:
- 1. Phase it out by cutting production in stages and letting existing stocks run out
- 2. Simply dump the product immediately
- Sell a limited quantity of the product with little or no support from sales, merchandising, advertising, and distribution and just let it “wither on the vine”
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Branding Decisions
- The products identity
- New brands the failure rate is 80%-90%
- An extremely important and expensive element of product strategies
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Brand
- is a name, a term, or a symbol, or any other unique element of a product that identifies one firm’s products and sets it apart from the competition
- Provides the recognition factor products need to succeed in regional, national, and international markets
- Brands must have a positive connotation and be memorable Brand name is probably the most used and most recognized form of branding Use brand names to maintain relationships with consumers
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Prerequisites for Brands
- Four tests:
- 1. Easy to say,
- 2. Easy to spell
- 3. Easy to read
- 4. Easy to remember
- Should “fit” four ways:
- 1. Fit the target market
- 2. Fit the product’s benefits
- 3. Fit the customer’s culture
- 4. Fit legal requirements
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Trademark
- Trademark: legal term for a brand name, brand mark, or trade character “R” or ®; legally registered by a government obtain protection for exclusive use in that country
- Common law protection: exists in the firm has used the name established it over a period of time
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Brand equity
- Brand equity: the value of a brand organization, brand’s value over and above the value of the generic version of the product (loyalty)
- ^ it gives the brand prower to capture and hold on to a larger share of the market and to sell at prices with higher profit margins
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Self concept attachment
product helps establish the user’s identity
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Nostalgic attachment
the product serves as a link with a past self
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Interdependence
product is part of the user’s daily routine
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Love
the product elicits emotional bonds of warmth, passion, or other strong emotion
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Brand extensions
- --Brand extensions: may leverage a brand’s equity, new products it sells with the same brand (create a new brand or modify the existing one)
- --Firm is able to sell its brand extension at a higher price than if it had given it a new brand, and it will attract new customers immediately
- --Sometimes a brand’s meaning simply becomes so stretched with a particular consumer group that it can be tough to find ways to branch
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Individual brand strategy
- Individual brand strategy: Separate, unique brand for each product item
- Communicating clearly and concisely what the customer can expect from the product
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Family Brand
- Family brand (umbrella brand strategy): a brand that a group of individual products or individuals brands share
- Potential dark side to having too many brands-> become undifferentiated in the eyes of the consumer due to poor positioning….brands often compete with one another
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National brands
National or manufacturer brands: brands that the product manufacturer owns (producer’s brands)
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Private Label Brands
- Private label brands: retail store’s or chain’s exclusive trade name
- Store brands are gaining in popularity for many value conscious shoppers
- Competitors that sell only national brands can cut prices on those brands, but that hurts their overall profitability
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Generic Brands
- Generic Branding: a strategy in which products are not branded and are sold at the lowest price possible
- Meet customer’s demand for the lowest prices on standard products
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Licensing
- An agreement in which one firm sells another firm the right to use a brand name for a specific purpose and for a specific period of time
- Can provide instant recognition and consumer interest in a new product, and this strategy can quickly position a product for a certain target market as it trades on the high recognition of the licensed brand among customers in that segment
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Cobranding
- --This branding strategy benefits both partners when combining the two brands provides more recognition power than either enjoys alone
- --Ingredient branding: a form of co-branding that
- uses branded materials as ingredients or component parts in other branded products
- 1. It attracts customers to the host brand because the ingredient brand is familiar and has a strong brand reputation for quality
- 2. The ingredient brand’s firm can sell more of its product and revenues its gets from the licensing agreement
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Packaging Functions
- Package: the covering or container for a product that provides product protection, facilitates product use and storage, and supplies important marketing communication
- Universal Product Code (UPC): the set of black bars or lines printed on the side or bottom of most items sold in grocery stores and other mass merchandising outlets
- UPC bars automatically transmit data to a computer in the cash register so that retailers can easily track sales and control inventory
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Design Effective Packaging
- Must consider the packaging of other brands in the same product category
- The choice of packaging material can make an aesthetic statement
- Firm that wish to act in a socially responsible manner must also consider the environmental impact of packaging
- Green packaging: less harmful to the environment than other materials
- Decisions rest on a marketer’s understanding of consumers, ingenuity, and creative luck
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