Product and Brand Management Notes

Product/Service

  • Product: Combination of physical item/service and symbolic attributes satisfying customer needs/wants.
  • Product/Service: Term used interchangeably (difference exists but is not emphasized in this principles class).
  • Extended Product: The core physical item plus additional factors justifying a higher price point.
    • Examples: warranty length/conditions, company reputation, brand positioning, service quality, financing options, exceeding quality expectations.
  • American companies justify higher prices through the extended product concept due to high costs of labor, manufacturing, and components.
  • Many products are homogeneous, meaning they can be provided by multiple companies.
  • IBM's success is attributed to superior customer service and support, justifying higher prices, as their technology is readily available elsewhere for less.

Consumer Product Definitions

Understanding these definitions is crucial as they influence distribution channels and pricing strategies.

Convenience Goods

  • Definition: Products bought frequently, by impulse or habit, with little consideration.
  • Examples: Soda, everyday food items, school supplies.
  • Characteristics:
    • Low risk: Purchase doesn't significantly impact budget.
    • Low price: Must be inexpensive to eliminate risk.
    • Wide distribution: Available everywhere for immediate purchase.
    • Example: A new Hershey's candy bar might be a convenient food.
  • Distribution: Intensive, meaning available everywhere (gas stations, convenience stores, supermarkets, vending machines).

Shopping Goods

  • Definition: Products requiring more consideration; consumers shop around and compare.
  • Examples: Home entertainment systems, bedroom sets (costing $5,000).
  • Characteristics:
    • Higher risk: More expensive, cannot be easily discarded if disliked.
    • Higher price: Justifies careful evaluation.
    • Selective distribution: Not available everywhere; consumers are willing to travel.

Specialty Goods

  • Definition: Unique products in high demand with limited supply, easy to market.
  • Examples: Rare artwork, castles in Scotland.
  • Characteristics:
    • Unique: Possesses distinct qualities.
    • High Demand: Customers desire the product.
    • High price: Customers are willing to pay a premium.
    • Exclusive distribution: Limited availability, customers will travel to acquire.

Unsought Goods

  • Definition: Products consumers need but don't want to think about or purchase.
  • Examples: Cemetery plots, cremation urns, long-term nursing care insurance.
  • Characteristics:
    • Negative association: Reminds people of mortality or vulnerability.
    • Difficult to market: Consumers avoid thinking about them.
    • Variable distribution: Depends on the specific product.

Consumer vs. Company Positioning

  • The consumer determines the product category (convenience, shopping, specialty).
  • Mismatched positioning (e.g., positioning a convenience good as a shopping good) leads to pricing and distribution problems.

Industrial Products

Distribution can parallel consumer products but may involve more intermediaries like agents and brokers.

Installation or Capital Goods

  • Definition: Expensive, big-ticket items used for company operations, prorated over their lifespan (10-15 years).
  • Examples: Ovens for a bakery, trucks for a landscaping company.

Accessories or Office Supplies

*Definition: Items used daily to run a business.
*Examples: Stationary, laptops, desks, chairs, pens.

Component Parts

  • Definition: Manufactured products incorporated into the final product.
  • Example: General Motors buys tires, steel, windshields, brake pads, etc., from suppliers.

Raw Materials

  • Definition: Unmanufactured, natural resources used in production.
  • Examples: Enterman's bakery buys sugar, wheat, flour, raisins, and cocoa.
    *Example: Landscaping companies buy dirt, gravel, fertilizer, seeds and plants.

Products for Resale

  • Definition: Products bought to be resold through distribution channels.
  • Example: Procter & Gamble sells Tide detergent to wholesalers, who sell to retailers, who sell to customers.
  • Example: PC Richard & Son buys GE washing machines for resale.

Business Services/Professional Services

  • Definition: Expert assistance in running a business.
  • Examples: CPAs, marketing consultants, quality control specialists, production personnel.

Quality

  • Quality is generally defined by the customer.
  • Two main schools of thought:
    • Western (US): Total Quality Management (TQM)
    • Eastern (Japan): Kaizen

Total Quality Management (TQM)

  • Principles:
    • Do it right the first time: Avoid mistakes that need correction later.
    • Continuous Improvement: Seek input from everyone involved to make constant improvements.
    • Focus: Aims at large-scale improvements.

Kaizen

*Definition: Continuous incremental improvement.
*Focus: Small, short-term improvements.
*Goal: Incremental progress (e.g., reducing product introduction time by one day).

Industrial Customers and Quality

*Industrial customer priorities:
1.Quality
2.Customer service and support
3.Price

Product Definitions

Product Element/Item

  • Definition: A unique, standalone product.
    *Example: A purple checked shirt in size large.
    *Variations: Style, color and size.
    *Importance: Used for tracking and inventory control.

Product Line

  • Definition: All related product elements.
    *Example: All shirt styles, colors and sizes make up a product line.
  • Television product line: all kinds of televisions at PC Richards.

Product Line Depth

  • Deep: Many related elements; typical of specialty stores (e.g., a women's shoe store).
  • Shallow: Few related elements; typical of discount stores (e.g., Target, Walmart shoes).

Product Line Consistency

*Definition: Offering multiple product lines that support additional customer spending.

  • Example: A shoe store selling shoes, handbags, wallets, and scarves that complement each other.
    *Inconsistency: Selling unrelated products (e.g., pasta in a shoe store).

Product Mix

*Definition: The totality of product lines and elements offered.
*Wide: Many different product lines (e.g., Target, Walmart).
*Narrow: Few product lines (e.g., a specialty shoe store).

Product Audit

  • Definition: An evaluation of the product mix to determine if it makes sense.
  • Determine if products should be added, removed or if variations are needed.
  • Product Clutter: A situation where the product mix does not make sense and needs to be cleaned up.

Exit Strategy

*Definition: A plan for discontinuing a product or product line.
*Considerations: Avoid leaving customers stranded, especially with capital goods.
*Example: IBM discontinued a PC line but provided certified technicians and replacement parts for five years.

Product Lifecycle

*Definition: The stages a product goes through after its introduction to the market.
*Stages:
1. Introduction: Expensive stage with education and promotion costs.
2. Growth: Revenue increases; competition emerges.
3. Maturity: Revenue peaks but growth slows.
4. Decline: Revenue decreases; potential for product death or reintroduction.
*Example: Captain Crunch cereal was reintroduced with a healthier formula after declining sales.

Pricing Strategies

*Introduction stage: Early adopters willing to pay a premium (price skimming strategy).
*Growth stage: Prices may be lowered due to competitive pricing.
*Decline stage: Prices lowered to clear inventory for replacement products.

Advertising Strategies

*Introduction stage: Focus on education and product awareness.
*Growth stage: Competitive advertising to differentiate from competitors.
*Decline stage: Advertising reduced to minimize costs.

Product Lifecycle and Revenue

The need to introduce new products to replace declining revenue from older products.

Revenue Management during the Lifecycle

  • Revenue is tracked to maximize it as the product declines.
  • New product is introduced as the pervious one declines.
  • Management wants to see constant growth.

Timing New Product Introductions

  • If a new product is introduced too late you lose revenues.
  • If product introduced too early, it sacrifices growth revenue.

Brand Management

  • Brand: Name, Logo, Design that identifies a product/service or company.
  • Goal is to differentiate from competition.
  • Some companies have brand names and logos the same (e.g., IBM).

Types of Brands

  • Generic/No Name Brands: No recognizable name, plain packaging, very low prices (common in low-income areas).
  • Manufacturer/National/International Brands: Widely recognized, advertised brands (e.g., General Electric, Sony).
  • Private/Store Brands: Owned by distribution channels (e.g., Kenmore at Sears, Kirkland at Costco).
  • Co-Brands: Products with multiple brand names (e.g., Chase Bank Visa card with United Airlines).

Brand Equity

*Definition: The value of a brand name.
*Brands provide:
*Security
*Product protection.
*Brand Equity Example: Apple, Microsoft is so strong that they can handle price competition from any number of competitors.

Characteristics of Brand Names

  • Pronounceable: Easy to say and remember.
  • Reflect Product: Suggest something about the product (e.g., DieHard car battery).
  • Distinct and Unique: Legally protectable through registration or trademark.

Stages of Brand Positioning

  1. Unfamiliar: Nobody has heard of the brand.
  2. Brand Recognition: Awareness of the brand name.
  3. Brand Preference: Desire to buy the brand, but willing to substitute if unavailable.
  4. Brand Insistence: Loyalty to the brand; unwilling to accept substitutes.

Protecting the Brand

  • Protect it is written 4 times in the notes.
    *Legally fighting to prevent other people from using it.
    *Legal Expression example: It's my water.
    *When the legal term says the product has gone generic that means the brand as lost its protection. This can happen when they don't fight to keep the brand safe.

Brand Dilution Concerns

  • Companies like Xerox and Google must ensure their brand names are not used as verbs (e.g., "Xerox 20 copies," "Google it"), which can lead to the brand name becoming generic.

Packaging Characteristics

  1. Protect the Product
  2. Promote the Product and its Family Brand
  3. Be Cost-Effective

New Product Development/Product Realization Objectives

  1. Do More of It: Introduce more new products to stimulate spending.
  2. Do It Faster: Reduce the average introduction time for technology products.
  3. Do It Within Budget: Control costs associated with improving and changing products.