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. Very little innovation motivation for private brands- stores have higher Margins on their private label merchandise, retailers make more on each unit they sell, because they don’t have to buy from manufacturer. Manu produce for private labels, because of contract and it’s an guarantee (duel branding, their own brand and then the private label for stores) Resistance from channel in demand,

LICENSING-special type of branding arrangement where one company gives the rights of it’s name to another company to manu products and sell them under the original companies name (Disney- give the manu rights to produce product and give royalities to Disney) (sports teams) (Gatorade)

BRAND EQUITY: The added value a given brand name provides a product. (generic vs cola the difference in the value to customer)

COMPONENTS OF BRAND EQUITY

• AWARENESS-ready recognition of the brand name (nike)

• ASSOCIATIONS-refers to anything that comes a to mind when the brand name is mentioned, what it means to you (brand image) difference between target and walmart-how we feel about the store and if we would shop there, make it as positive, valence of positive or negative, want to build strong positive associations

• PERCEIVED QUALITY-an association to what it represents-can achieve brand equity only if it has high quality distinction between high quality and perceived quality(corona rated 46th out of 54th best tasting beer)

• LOYALTY-repeated purchase of brand, using over and over has emotional component, and feels very positive about the brand FMRI-allows us to attract electrocal currents in brain-how people respond to brands (coke vs pepsi, pleasure in brain activiated in brain when blindfolded. When identified coke had a higher brain activation in the brain in memory)

MOST VALUABLE BRANDS: 2004

10. Mercedes

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-primary things we do is borrow brand equity from brands we already own

21. LINE EXTENSION-introduce new product in the same basic product category as the parent product (tide : tide atl, tide with downy, Gatorade: gatorade fiece, extermo, frost) line extensions of tide

22. CATEGORY EXTENSION-same brand name but different product category, something that is different from originals brand (Honda: lawnmower, snowblower, generator) how well do these category fit into the orginal categories, their original image (sometimes don’t make sense everlast boxing-made cologne doesn’t work) instant recognition, break down barriers for people willing to try, builds on positive view of brand, negative-can dilute brand image, what does it really stand for? If you launch a new brand with valuable name, and that product fails it can look bad on original name (coca cola –tab)

PACKAGING FUNCTIONS-big part of decision making, can help deliver greater value

23. CONTAIN/PROTECT-to get from factory to reseller in good shape (Tylenol and the cynacide incident) safety seals, (detergent plastic containers protect it from getting wet like carboard would)

24. FACILITATE USE-creating value for customer, (handles on detergent to pour (better than carboard) lid holds exact amount, directions on how to use it, the new coca-cola in fridge stackers

25. COMMUNICATE-use the package itself to consumer, straightforward ”concentrated” , “warnings” safety issues, “stain fighters” also communicate image, can choose wrapping for coca cola (other countries) “youthful”

26. FIT CHANNEL NEEDS-set up package to work well for channels, resellers (panty hose with the egg panty hose to sell in supermarkets)

27. INNOVATION-constantly make up new ideas to sell our products better (self cooling can) Spray on dressing

COORS: A PACKAGING DISASTER-the thumb disaster.

EMERGING ISSUES:

--CONSUMER-BRAND RELATIONSHIPS-we want to try to think the relationshiop between the consumer and the brand as a relationship between people, who are you really. Out of stock, and constantly changing image. Figure out a way to relate more to the consumer

--BRAND COMMUNITIES- an extentision of the relationship issue, orchestrate relationship between consumers, and foster some relationship between consumers, pass along tradition etc. facilitiating interaction around brand., adds more value to brand(harley Davidson)

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download