Managing Products Tutorial

Managing ProductsIn the Product Decisions tutorial, we showed that marketers are confronted with many issues when building the product component of their marketing strategy. While product decisions represent just one aspect of marketer’s overall activities, these decisions are often the most important because they lead directly to the reasons (i.e., benefits offered, solutions to problems) for why the customer decides to choose the organization’s goods, services or ideas.

In this part of our Principles of Marketing Tutorials we extend the coverage of product decisions by exploring additional product issues facing the marketer. In particular, we examine four important areas.

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While this tutorial touches on basic concepts and strategies applicable to a large percentage of marketing situations, the reader should understand that no two marketing situations are the same. Yet while some concepts and strategies important to one marketer may not hold the same weight with another, in general, the basic principles of marketing (e.g., satisfying target markets, support decisions using research, etc.) hold no matter the type of industry, type of company or type of product being sold.

What is often different between two marketing situations is the level of complication and challenge that arises as a marketer’s scope of responsibility increases. For our purposes a marketer’s level of responsibility is measured in terms of:

  • the number and variety of tasks that must be performed (i.e., what has to be done)
  • the value these tasks represent to the organization (i.e., how important marketing is perceived within the company)
  • the overall financial stake the marketing position holds (i.e., total sales volume and profit generation).

As responsibilities change so to do the marketer’s tasks. For instance, with regard to product decisions, as a marketer’s responsibilities become greater her or his day-to-day job shifts from being involved in specific product issues (e.g., finding a graphics design company to create a new label) to decisions concerning many products and focusing on setting the future marketing direction of the company (e.g., developing marketing plans for numerous products). We can see this in greater detail by examining the responsibilities associated with four different marketing management levels.

As we discussed in the Product Decisions tutorial, branding is an important decision designed to enhance the identity of the product through the use of unique brand names, symbols and other distinctive measures. With competition growing more intense in almost all industries, establishing a strong brand allows an organization’s products to stand out and avoid potential pitfalls, such as price wars, that have befallen many products. Therefore, a clear understanding of branding strategy is essential in order to build solid products and product lines. In particular, marketers should be aware of various branding approaches that can be pursued.

By branding approach we are referring to different product identification strategies that can be deployed to establish a product within the market. As we will see, the purpose of these approaches is to build a brand that will exist for the long term. Making smart decisions up front is crucial since a company may have to live with the decision for a long time.

Product management can be separated into four different levels with the responsibilities increasing with each level.

Product Item Level

At this level responsibilities are associated with marketing a single product or brand. By “single” we are limiting the marketer’s responsibility to one item. For instance, a startup software development company may initially market just one product. In some organizations the person in charge has the title Product Manager, though in smaller companies this person may simply be the Marketing Manager.

Brand Product Line Level

At this level responsibilities are associated with managing two or more similar product items. By “similar” we are referring to products carrying the same brand name that fit within the same product category and offer similar solutions to customers’ needs. Procter & Gamble, one of the largest consumer products companies in the world, markets Tide laundry detergent in several different packaging sizes (e.g., 50oz., 100oz., 200oz.), in different forms (e.g., powder, liquid) and with different added features (e.g., softener, bleach). Tide’s product line consists of over 100 different versions of the product. Differences in the product offerings indicate these are targeted to different segments within the larger market (e.g., those preferring liquid vs. those preferring powder), however, it may also represent a choice for the same target market who may seek variety. A product line is often measured by its depth, relative to competitors, with deep product lines offering extensive product items. Brand product lines are often managed by a Brand or Product Line Manager.

Category Product Line Level

At this level responsibilities are associated with managing two or more brand product lines within the same product category. In this situation the marketer may manage products that offer similar basic benefits (e.g., clean clothes) but target their offerings to slightly different needs (e.g., product for tough to clean clothing vs. product to clean delicate clothing). Multiple brand product lines allow the marketer to cover the needs of more segments and, consequently, increase their chance to generate sales. Often in larger companies category product lines are the responsibility of the Product Category or Divisional Marketing Manager who may have Brand Product Managers reporting to him/her.

Product Mix Level

At this level responsibilities include two or more category product lines that are directed to different product categories. In some cases the category product lines may yield similar general solutions (e.g., cleaning) but are aimed at entirely different target markets (e.g., cleaning dishes vs. cleaning automobiles). In large companies, the product lines are very diverse and offer different solutions. For example, BIC sells writing instruments, shaving products, and lighters. This diversification strategy cushions against an “all-eggs-in-one-basket” risk that may come if a company directs all resources to one product category. A product mix can be classified based on its width (how many different category product lines) and its depth (how many different brand product lines within a category product line). Generally responsibility for this level belongs to a company’s Vice President for Marketing.

Branding approaches include the following:

  • Individual Product Branding – Under this branding approach new products are assigned new names with no obvious connection to existing brands offered by the company. Under individual product branding the marketing organization must work hard to establish the brand in the market since it cannot ride the coattails of previously introduced brands. The chief advantage of this approach is it allows brands to stand on their own thus lessening threats that may occur to other brands marketed by the company. For instance, if another company brand receives negative publicity this news is less likely to rub off on the company’s other brands that carry their own unique names. Additionally, as mentioned in the Product Decisions tutorial, brands can create financial gains through the concept known as brand equity. Under an individual branding approach, each brand builds its own separate equity which allows the company, if they choose, to sell off individual brands without impacting other brands owned by the company. The most famous marketing organization to follow this strategy is Procter and Gamble, which has historically introduced new brands without any link to other brands or even to the company name.
  • Family Branding – Under this branding approach new products are placed under the umbrella of an existing brand. The principle advantage of this approach is that it enables the organization to rapidly build market awareness and acceptance since the brand is already established and known to the market. But the potential disadvantage is that the market has already established certain perceptions of the brand. For instance, a company that sells low-end, lower priced products may have a brand that is viewed as an economy brand. This brand image may create customer confusion and hinder the company if they attempt to introduce higher-end, higher priced products using the same brand name. Additionally, with family branding any negative publicity that may occur for one product within a brand could spread to all other products that share the same name.
  • Co-Branding – This approach takes the idea of individual and family branding a step further. With co-branding a marketer seeks to partner with another firm, which has an established brand, in hopes synergy of two brands on a product is even more powerful than a single brand. The partnership often has both firms sharing costs but also sharing the gains. For instance, major credit card companies, such as Visa and MasterCard, offer co-branding options to companies and organizations. The cards carry the name of a co-branded organization (e.g., University name) along with the name of the issuing bank (e.g., Citibank) and the name of the credit card company. Besides tapping into awareness for multiple brands, the co-branding strategy is also designed to appeal to a larger target market, especially if each brand, when viewed separately, does not have extensive overlapping target markets with the other brand. Thus, co-branding allows both firms to tap into market segments where they did not previously have a strong position.
  • Private or Store Branding – Some suppliers are in the business of producing products for other companies including placing another company’s brand name on the product. This is most often seen in the retail industry where stores or online sellers contract with suppliers to manufacture the retailer’s own branded products. In some cases the supplier not only produces product for the retailer’s brand but also markets their own brand so that store shelves will contain both brands.
  • No-Name or Generic Branding – Certain suppliers supply products that are intentionally “brandless.” These products are mostly basic commodity-type products that consumer or business customers purchase as low price alternatives to branded products. Basic household products such as paper products, over-the-counter medicines such as ibuprofen, and even dog food are available in a generic form.
  • Brand Licensing – Under brand licensing a contractual arrangement is created in which a company owning a brand name allows others to produce and supply products carrying the brand name. This is often seen when a brand is not directly connected with a product category. For instance, several famous children’s characters, such as Sesame Street’s Elmo, have been licensed to toy and food manufacturers who market products using the branded character’s name and image.