Chapter Objectives

1. Developing and Managing Brand and Product Categories CHAPTER12 Chapter Objectives Explain the benefits of category and brand management. Identify the different types of brands. Explain the strategic value of brand equity. Discuss how companies develop strong identities for their products and brands. Identify and briefly describe each of the new-product development strategies. Describe the consumer adoption process. List the stages in the new-product development process. Explain the relationship between product safety and product liability. 4 1 7 2 8 5 3 6

2. MANAGING BRANDS FORCOMPETITIVE ADVANTAGE • Brand Name, term, sign, symbol, design, or some combination that identifies the products of one firm while differentiating them from the competition’s. BRAND LOYALTY • Brand recognition Consumer awareness and identification of a brand. • Brand preference Consumer reliance on previous experiences with a product to choose that product again. • Brand insistence Consumer refusal of alternatives and extensive search for desired merchandise.

3. TYPES OF BRANDS • Generic products Products characterized by plain labels, no advertising, and the absence of brand names. • Manufacturer’s brand Brand name owned by a manufacturer or other producer. • Private brands—brands offered by wholesalers and retailers. • Captive brands—national brands sold exclusively by a retail chain. • Family brand Single brand name that identifies several related products. • Individual brand—uniquely identifies the item itself.

4. BRAND EQUITY • Brand equity Added value that a respected, well-known brand name gives to a product in the marketplace. • Strong brand equity increases recognition, contributes to quality perceptions, reinforces loyalty, and facilitates expansion into foreign markets. THE ROLE OF CATEGORY AND BRAND MANAGEMENT • Category management Product management system in which a category manager—with profit and loss responsibility—oversees a product line. • Helps category buyer identify opportunities for growth, set performance targets, and create marketing strategy.

5. PRODUCT IDENTIFICATION BRAND NAMES AND BRAND MARKS • Brand name Part of a brand consisting of words or letters that form a name that identifies and distinguishes a firm’s offerings from those of its competitors. • Brand mark—symbol or pictorial design that distinguishes a product. TRADEMARKS • Trademark Brand for which the owner claims exclusive legal protection. • Gives firm exclusive legal right to use brand name, brand mark, and any slogan name or product name appreciation. • Trade dress—visual cues in branding that create an overall look.

6. DEVELOPING GLOBAL BRAND NAMES AND TRADEMARKS • An excellent name or symbol in one country may be a poor choice in another. • Some sounds are common to most languages, such as o, k, and short a, so names such as Coca-Cola and Texaco tend to work well worldwide. PACKAGING • Can powerfully influence buyers’ decisions. • Protects against damage, spoilage, and pilferage. • Assists in marketing the product. • Must be cost-effective. • Includes labeling that carries an item’s brand name or symbol and other marketing and legally required information.

7. BRAND EXTENSIONS • Brand extension Strategy of attaching a popular brand name to a new product in an unrelated product category. BRAND LICENSING • Authorizing other companies to use a firm’s brand name. • Brand’s owner receives royalties, typically four to eight percent of wholesale revenues. • Can hurt a brand if the licensed product is poor quality or ethically incompatible with the brand. • Another risk is overextending the brand.

8. NEW-PRODUCT PLANNING • Firms must add new products in order to continuing prospering as other items reach the later stages of the product life cycle. PRODUCT DEVELOPMENT STRATEGIES Market Penetration Product Development Market Development Product Diversification

9. • Product positioning—refers to consumers’ perceptions of a product’s attributes, uses, quality, and advantages and disadvantages relative to competing brands. • Market development—concentrates on finding new markets for existing products. • Product development—introduction of new products into identifiable or established markets. • Product diversification—focuses on developing entirely new products for new markets. • Firms must avoid cannibalization—introducing a new product that adversely affects sales of existing products.

10. CONSUMER ADOPTION PROCESS • Adoption process Stages that consumers go through in learning about a new product, trying it, and deciding whether to purchase it again. • Consumers go through five stages: • Awareness—individuals first learn of the new product, but they lack full information about it. • Interest—potential buyers begin to seek information about it • Evaluation—they consider the likely benefits of the product. • Trial—they make trial purchases to determine its usefulness. • Adoption/rejection—decide whether to use the product regularly.

11. ADOPTER CATEGORIES • Consumer innovators People who purchase new products almost as soon as the products reach the market. • Diffusion process Process by which new goods or services are accepted in the marketplace.

12. IDENTIFYING EARLY ADOPTERS • Firms who reach early buyers can treat them as a test market. • Tend to be younger, have higher social status, are better educated, and enjoy higher incomes than other consumers. Rate of Adoption Determinants • Relative advantage—increases the product’s adoption rate. • Compatibility—innovation consistent with the values and experiences of potential adopters. • Complexity—difficulty understanding the innovation can slow the speed of acceptance. • Possibility of trial use—can accelerate the rate of adoption. • Observability—observing an innovation’s superiority increase the adoption rate.

13. ORGANIZING FOR NEW PRODUCT DEVELOPMENT • Firms must be organized so personnel can stimulate and coordinate new-product development. • New-product committees primarily review and evaluate others’ new product plans rather than develop their own. • Tend to move slowly and conservatively in large companies. • New-product departments encourage innovation as a full-time activity. • Product managers support the marketing strategies of an individual product or product line. • Venture teams—a group of specialists gathered from different areas of an organization to work together in developing new products.

14. THE NEW-PRODUCT DEVELOPMENT PROCESS • Firms must usually generate dozens of ideas to produce one successful product. Idea Generation Screening Business Analysis Development Test Marketing Commercialization

15. PRODUCT SAFETY AND LIABILITY • Manufacturers must design their products to protect users from harm. • Product liability—responsibility of manufacturers and marketers for injuries and damages caused by their products. • Consumer Product Safety Commission has jurisdiction over most consumer product categories. • Food and Drug Administration approves food, medications, and health-related devices. • Liability lawsuits are increasing domestically and internationally. • To counter increased litigation and legislation, some companies sponsor voluntary improvements in safety standards. • Safety planning and testing can be an effective marketing tool.