CHAPTER 6: PRODUCT

BRANDING

When to adapt a brand

The

demand for the general product class which the

product or service under consideration belongs should
be large.
The demand should be strong enough so that the
market can be high enough to make the effort
profitable
There should be economies of scale.
The product quality should be the best for the price,
and the quality should be easy to maintain.
The brand or trademark should make it easy for the
product to be identified.
Availability of the product is dependable and
widespread.
Favourable shelf location or display in stores must be
available for retailing activities.

Branding Strategies
When

branding products or
services, firms have several
options. These are:
1.Manufacturer branding
2.Reseller branding
3.Mixed branding
4.Generic branding

Manufacturer Branding
Is

a branding strategy in which

the brand name for a product is
designated by the manufacturer.
Two alternative approaches are
available:
1. Multi-product Approach
2. Multi-brand Approach

Reseller Branding
Also

referred to as private
labelling or private branding,
refers to the branding strategy of
a firm which manufactures
products but sell them under the
brand name of a reseller. An
advantage is the shifting of
promotional costs from
manufacturer to reseller.

Mixed Branding
Refers

to the use of the

manufacturer and reseller brands
in a product. It is expected that
market segments attracted to the
manufacturer and to the reseller
will patronize the mixed branded
product.

Generic Branding
Is

a branding strategy which lists

no product name, only a
description of contents. This
approach is applicable to rice,
salt, sugar, and charcoal.

Packaging
Refers

to all activities involved in

designing and producing the
container or wrapper for a product.
The container or wrapper is the
package. The package may include
up to three levels of material briefly
described as follows:
1.Primary Package
2.Secondary Package
3.Shipping Package

Reasons for Packaging

It

provides protection before and

after they are in the possession of
the intended users.
It provides convenience to the user
It provides safety
It provides economy to both the
seller and the user.
It allows sellers to efficiently
promote the product.

What makes a Good

Package
Packages

must be made to assist

in the marketing effort. Defective
packaging may contribute to lost
sales and product damage. Too
much packaging, on the other
hand, may be costly and will eat
up profits.

Labelling
That

part of the product which

provides information about the
product and the manufacturer
called the label. It may be a part
of the package, or a tag attached
to the product.

Types of Labels
The

Brand Label
The Descriptive label
The Grade Label
Then Promotional Label

Product Warranty
One

of the product components that

attract customers to patronize a
product is the warranty, which is a
statement explaining what the
seller promises about the product. It
is actually a manufacturers written
promise as to the extent of the
repair, replacement, or otherwise
compensation for defective goods.

Variations of Warranty
Express

Warranties
A limited coverage warranty
A full warranty
Implied Warranties

Product Life Cycle

Introduction
Growth
Maturity
Decline

Introduction Stage
In

this stage, the product is introduced

to the public. It is generally
characterized by the following:
1.Slow growth of sales
2.Heavy promotional expenditures in
relation to sales
3.Relatively high prices for the products
4.Limited product offerings, like limited
variations in sizes colour and the like

Introduction Stage
The

slow sales growth is

attributed to the following:
Delays in the expansion of
production capacity
Technical product problems that
have to be worked out
Difficulty in gaining wide spread
distributions
Inertia on the part of consumer in
trying the new product.

Introduction Stage
Heavy

promotional expenditures are

attributed to:
1. Heavy sales costs involved in obtaining
distribution
2. The need for heavy advertising to
create consumer awareness and trial.
High prices are caused by:
1. The need to recover investment cost in
plant and equipment
2. Low volume of sales
Limited product offerings are caused by
insufficiency of initial sales volume to
justify variations in the product.

The Growth Stage

The

growth stage in the PLC follows a

successful stage and characterized by
the following:
1.Sales start climbing rapidly as
distribution increases and the
consumers persuaded to try the
product.
2.The ratio of promotional expenditures
to sales decreases. This is due to the
rapid increase in sales but without a
corresponding increase in promotional
expenses.

The Growth Stage

Prices tend to remain high
except when demand
stimulation is required and entry
of competitors is discouraged.
4. New forms of the product
appear, like new colours, new
models and new sizes.
3.

Maturity Stage
When

the growth in Sales slows

down, the maturity stage begins to
take over. This stage is characterized
further by the following:
1.Sales settle down as the product
becomes well-known
2.Price reductions are used as a tool of
competition
3.Competition is intensified
4.The market becomes saturated

The Decline Stage

Begins

with a permanent drop in

sales. Characterized by the
following:
1.A pruning of product models and
variations to eliminate those not
producing profit
2.Promotional expenses are reduced
3.Plans for phasing out the product
is made

Importance of PLC
Provides

a guide in adapting
appropriate marketing strategies
Useful in many aspects of
decision making in marketing
Used extensively to assist the
marketer in achieving his
marketing goals.

Marketing Mix: Price

Price
Is the money, good or service
exchanged for the ownership or
use or a product or service.
e.g.
Tuition Education
Tax
Government Service
Pricing activities involved in the
determination of price.

Pricing Objectives
Profit

Oriented Objectives
Sales Oriented Objectives
Status Quo Objectives

Profit Oriented Objectives

Calls

for profit regeneration. This may

either be:

1. Target

Return Objective - refers to the

pricing objective requiring a certain level of
profit. Most often stated in terms of
percentage of sales or on capital
investment
2. Profit Maximization refers to the pricing
objective of seeking as much profit as
possible. This may be achieved by
increasing the quantity sold or increasing
the profit margin.

Sales Oriented Objective

Refer

to those that will provide higher

sales volume. This may be achieved
through any of the following:
1.Increasing Sales Volume requires an
increase in sales volume for a given
period ( long term profitability is
achieved in the long run)
2.Maintaining or Increasing Market Share
requires maintaining or increasing
the companys market share that helps
companys progress in the long run.

Status Quo Objectives

Requires

maintaining the same

prices for the companys
products. This happens when the
firm is satisfied with its current
market share and profits. May be
due to any of the following:
1.To stabilize prizes
2.To meet competition
3.To avoid competition

The Pricing Procedure

The

determination of the realistic

range of choice
The selection of pricing strategy
The evaluation of economic
feasibility
The setting of the price

Pricing Approaches
Cost

Based Approach
Buyer Based Approach
Competition Based Approach

Cost Based Approach

The

cost based approach in

pricing refers to the setting of
prices on the basis of costs.
Under this approach the total
costs are calculated and a margin
of profit is added. There are two
types of pricing under the cost
based approach. They are the
following

Cost Plus Pricing

This

method calls for adding a

percentage of cost on top of the
total cost. The added percentage
constitutes the profit margin,
while total costs represents the
direct costs and the overhead
costs.
Formula is as follows:

Target Rate of Return

Pricing
To identify what percent is a satisfactory
return
To use the standard return in determining
whether a particular price and marketing
mix combination is feasible.
To determine the selling price using this
method, a standard volume is listed first,
then the per unit variable costs ( labour
and materials) and the per unit fixed cost
are computed. The costs are then added to
the per unit return desired on the capital
employed in producing the product or
service.

Buyer Based Approach