SEGMENT 8: PRODUCT STRATEGY
SEGMENT 8: PRODUCT STRATEGY
(Related chapter in text: 11)
LEARNING OBJECTIVES:
1. Define what is meant by a “product” and describe its three key levels - core, expected, and augmented
2. Distinguish product item, line and mix; distinguish the width, breadth, and consistency of the product mix
3. Define the product life cycle (PLC) and describe its role and importance in setting product strategy
4. Distinguish the brand, product form, and product class PLCs
5. Understand how to compute and use the Brand Development Index (BDI) and Category Development Index (CDI)
6. Understand the factors involved in family vs. multiple branding and national brands vs. private label brands
7. Define and distinguish brand equity, category extension, and line extension
PRODUCT STRATEGY
WHAT IS A PRODUCT?-people don’t buy quarter inch drills, they buy quarter inch holes (what is the product with a drill) they afterism by ted levits at Harvard, “ people don’t buy physical product, they buy what they think that product will do for them”they want the benefit
NOT JUST A PHYSICAL ENTITY...
THREE LEVELS OF PRODUCT- (faster, cleaner people will switch to i) think of levels of product, center aspect, the core-the benefits delivered by product, why they buy it(need a hole, buy a drill) many products and brands that deliver that hole, next level is expected product, number of expectations they wil have on the product, brand image, price, (black and decker, deluxe, warranty, variable speed) all the brands that remain in market will meet customer needs (on the core and expected) competive wars are won by augemented, where we delight customer, go beyond expectations (taking the drill back to black and decker, after 25 yrs and get a new one for free because of warranty-competitive wars)
People get hung up on technology rather than what it does customers, or how it affects the customers and benefits received
AUGMENTEd
EXPECTED
CORE
A CRUCIAL DISTINCTION: FEATURES Vs Benefit –build features into product also have to think terms of what those features deliver as in benefit to customer . focus on benefits
Feature-flat screen
Benefit-clearer screen
DEFINITION:
A PRODUCT IS A GOOD, SERVICE, OR IDEA CONSISTING OF A BUNDLE OF TANGIBLE AND INTANGIBLE BENEFITS. Benefits expected to receive, how good do I feel using a black and decker vs kraftmans
KEY TERMS
PRODUCT ITEM: A SPECIFIC PRODUCT, IDENTIFIED BY ITS ORDERING CODE, THE STOCK KEEPING UNIT (SKU)
PRODUCT LINE: A GROUP OF CLOSELY RELATED PRODUCTS- within a particular company (Campbell chunky soup (chicken noodle, broccoli and cheese, tomato)
PRODUCT MIX: THE SET OF PRODUCT LINES SOLD BY A COMPANY Campbells (pace, Pepperidge farm, v8, condensed soup)
SOME PROCTER & GAMBLE BRANDS
0. IVORY 127- number of years product has been in business
1. TIDE 58
2. CREST 49
3. PAMPERS 39
SOME OTHER BRANDS
4. HARLEYS 102
5. WIFFLE BALL 53
6. BARBIE 47
7. BIG MAC 38
8. NERF BALL 38
9. KOOSH BALL 21
THE PRODUCT LIFE CYCLE (PLC): The life of a product over four stages: introduction-slow growth,
Growth-competitors come into market,fast, competitive shake out-betweeen growth and maturity so when market begins to slow, they competitors leave market, becomes more stable
, maturity-how do we extenc this, grows negatively, only phase we can prolong
,- and decline.
Fad-rapid growth, rapid decline
A STYLIZED PLC
SALES
TIME
THE PLC AS AN AID TO MARKETING PLANNING
TYPICAL MARKETING MIX VARIES OVER STAGES OF THE PLC
DIFFERENT PLC LEVELS
10. PRODUCT CLASS-the overall product category (automobile tires)
11. PRODUCT FORM (standard tire, steel belted tire,) specific type of product offered by different types of companies (Goodyear aqua tread) the action in a product category driven by product form lifecycle) (condensed soup declining because ready at hand soups increasing) oftenly driven by technology,
12. BRAND
BRAND PLC MAY BE UNDER MARKETING CONTROL...
BUT PRODUCT FORM PLC IS OFTEN
DRIVEN BY CHANGING TECHNOLOGY OR
CONSUMER TASTES.-so you have to change with market trend with product form level
EXAMPLE: RETURN TO PRE-RECORDED MUSIC FORMS
CASSETTES
UNITS
LPs ONLINE
CDs
1980 1985 1990 1995 2000 2005
EXTENDING PLCS
13. MARKET PENETRATION-selling more of our product to the same basic group of customers, so penetrate more potential cust to actual cust
14. MARKET DEVELOPMENT-trying to sell to new groups of people, same product but sell to slightly different group of people (exporting) Different users, red bull for golf in early morning, attrack new customers
15. PRODUCT MODIFICATION-refreshing and renewing itself (different car models for mustangs over the years)
16. PRODUCT REPOSITIONING- spice up the image in the eyes of consumer, (new tag lines) giving it an different position in the eye of consumers
BRAND DEVELOPMENT INDEX (BDI) Market Penetration
BSPCT/BSPCN
BDIj = $ BRAND SALES PER CAPITA IN TERRITORY J-how much do we sell per person in that territory
$ BRAND SALES PER CAPITA NATIONALLY x100
How many we sell national
CATEGORY DEVELOPMENT INDEX (CDI)
CDIj = $ CATEGORY SALES PER CAPITA IN TERRITORY J (all competitors)
$ CATEGORY SALES PER CAPITA NATIONALLY x100
EXAMPLE
100 MILLION CONSUMERS IN TARGET MARKET-selling to just men or women (product)
NATIONAL CATEGORY SALES OF $350 MILLION- all brands combined
NATIONAL BRAND SALES OF $60 MILLION (single brand)
TERR. CATEGORY ( CONS. CDI BRAND BDI
SALES SALES
N.Y. $27M 10M 77 $8M 133
CAL. $39M 10M 111 $3M 50
FLA. $30M 8M 107 $5M 104
ILL. $10M 5M 57 $2M 67
COL. $10M 2M 143 $2M 167
Cdi for fla—30 mil/ 8 mil = 3.75 selling per capita in fla then 350 mil/ 100 mil = 3.50 per capita then 3.75/3.50= 1.07 then multiply by 100= 107 so slightly above national average
BDI for fla - 5 mil/ 8 mil.= .625 per capita. then divide by national sales 60mil/100 mil consumers nationally =.60 per capita so then .625/.60=1.042 then times 100= 104
CDI
|BDI |< 100 |> 100 |
|< 100 |Not attractive market, |Competitors are doing well, |
| | |but our brand is low, have |
| | |potential to move upward, |
| | |good candidate to beef up |
|> 100 |Doing well, competitors | |
| |aren’t doing well, want to do|High potential market, |
| |well, but don’t want to over |competitors are active in , |
| |invest |cost a lot promotionally |
More salesforce, more advertising in those advertsising where there is potential to penetrate market
BASIC BRANDING TERMINOLOGY
17. BRAND NAME-a verbal label that we attach to a product (foldgers)
18. BRAND MARK- non verbal (mcdonald arches)
19. TRADE CHARACTER-personified (Mr. Peanut for planters, Pillsbury doughboy)
20. TRADEMARK (17 yrs) -any of the above that are legally protected
FAMILY BRANDING VS. MULTIPLE BRANDING
Family- (nike) When were going to put the same brand name on everything they produce (use to share equity and image of brand across brands Nike Golf)
Mutiple- (proctor and gamble) different name for every product, different brands when we want to differentiate across different brands, don’t want them to be seen as similar (proctor and gamble have eight different detergents and wants each brand to have a different meaning to each customer tide different from cheers) (general mills has natural cereal named under cascading farms to no give the cereal the idea of general mills, different products for different segments with different meaning
NATIONAL BRANDS VS. PRIVATE LABEL BRANDS
National-well known brands, advertised heavily, market leader, higher prices, perceived as higher quality, innovations (r&D) goal is to build brand loyalty
Private-brands that are sold and owned by retailers (sam’s choice sold only by walmart, old roy only sold by walmart) to build store loyalty, not nearly as much advertising, can make better margins.
LICENSING
BRAND EQUITY: The added value a given brand name provides a product.
COMPONENTS OF BRAND EQUITY
• AWARENESS
• ASSOCIATIONS
• PERCEIVED QUALITY
• LOYALTY
MOST VALUABLE BRANDS: 2004
10. Marlboro
9. Toyota
8. Nokia
7. McDonald’s
6. Disney
5. Intel
4. General Electric
3. IBM
2. Microsoft
1. Coca-Cola
EXTENSION OF BRAND EQUITY
21. LINE EXTENSION
22. CATEGORY EXTENSION
PACKAGING FUNCTIONS
23. CONTAIN/PROTECT
24. FACILITATE USE
25. COMMUNICATE
26. FIT CHANNEL NEEDS
27. INNOVATION
COORS: A PACKAGING DISASTER
EMERGING ISSUES:
--CONSUMER-BRAND RELATIONSHIPS
--BRAND COMMUNITIES
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