Transcript MM01 elearning class 2

AIMA-CME
Product concept
Product Life-Cycle Strategies
New-Product Development
Product Concepts
3
Learning Objectives
1. Define the term product.
2. Classify consumer products.
3. Define the terms product item, product line,
and product mix.
4. Describe marketing uses of branding.
Learning Objectives (continued)
5. Describe marketing uses of packaging
and labeling.
6. Discuss global issues in branding
and packaging.
7. Describe how and why product warranties
are important marketing tools.
Product
Everything, both favorable
and unfavorable, that
a person receives
in an exchange.
What is a Product?
Product
is
the “heart” of
Marketing
Mix
Price
Promotion
Place (Distribution)
THE PRODUCT
Products are almost always
combinations of the tangible and
intangible. The entire package is
sometimes referred to as the
augmented product.
The mix of tangibles and intangibles in
the augmented product varies from one
product or service to another.
THE PRODUCT
Product is a key element in the market
offering. Marketing mix planning
begins with formulating an offering to
meet target customers’ needs or wants.
The customer will judge the offering by
three basic elements : product features
and quality, services mix and quality,
and price appropriateness.
COMPONENTS OF THE MARKET
OFFERING
Value based pricing
Attractiveness of the
market offering
Product features
and quality
Services mix and
quality
PRODUCT LEVELS
In planning its market offering, the
marketer needs to think through five
levels of the product.
Each level adds more customer value,
and the five constitute a customer
value hierarchy.
( Contd… )
FIVE LEVELS OF THE PRODUCT
(5) Potential
Product
(1) Core
Product
(2) Basic
Product
(4) Augmented
Product
(3) Expected
Product
FIVE LEVELS OF THE PRODUCT
(1) Core Product / Core Benefit : The
fundamental service or benefit that the
customer is really buying.
(2) Basic Product : At the same level, the
marketer has to turn the core benefit into a
basic product.
(3) Expected Product : A set of attributes
and conditions buyers normally expect
when they purchase this product.
FIVE LEVELS OF THE PRODUCT
(4) Augmented Product : The marketer
prepares an augmented product that
exceeds customer expectations.
Today’s competition essentially takes
place at the product-augmentation
level. ( In less developed countries,
competition takes place mostly at the
expected product level ).
( Contd.….. )
FIVE LEVELS OF THE PRODUCT
( Augmented Product )
According to Levitt : The new competition
is not between what companies produce in
their factories, but between what they add
to their factory output in the form of
packaging, services, advertising, customer
advice, financing, delivery arrangements,
warehousing, and other things that people
value.
FIVE LEVELS OF THE PRODUCT
Some things should be noted about
product-augmentation strategy :
First, each augmentation adds cost. The
marketer has to ask whether customers
will pay enough to cover the extra cost.
Second, augmented benefits soon become
expected benefits. For gaining competitive
advantage one will have to search for still
other features and benefits.
FIVE LEVELS OF THE PRODUCT
( product-augmentation strategy )
Third, as companies raise the price of
their augmented product, some
competitors can offer a “ Strippeddown ” version at a much lower price.
Thus alongside the growth of fine
products we see the emergence of
lower-cost products for the clients
who simply want the basic product.
FIVE LEVELS OF THE PRODUCT
(5) Potential Product : encompasses all
the possible augmentations and
transformations the product might
undergo in the future. Companies search
for new ways to satisfy customers and
distinguish their offer.
( Successful Companies add benefits to
their offering that not only satisfy
customers but also surprise and delight
them. ) “ The best way to hold customers
is to constantly figure out how to give
them more for less. ”
PRODUCT DIFFERENTIATION
The challenge before the product
marketers is to create relevant and
distinctive product differentiation. The
product differentiation may be based
on :
Physical Differences ( eg., features,
performance, conformance, durability,
reliability, design, style, packaging )
Availability Differences ( eg., available
from stores or orderable by phone,
mail, fax, internet )
PRODUCT DIFFERENTIATION
Service Differences ( eg., delivery,
installation, training, consulting,
maintenance, repair )
Price Differences ( eg., very high price,
medium price, low price, very low price )
Image Differences ( eg., symbols,
atmosphere, events, media )
CHALLENGES FOR PRODUCT
INNOVATORS
Any successful differentiation will tend
to draw imitators. The innovator faces
three choices :
Lower the price to protect market share
and accept lower profits.
Maintain the price and lose some
market share and profits.
Find a new basis to differentiate the
product and maintain current price.
PRODUCT CLASSIFICATION
ON THE BASIS OF PRODUCT
CHARACTERISTICS :DURABILITY,
TANGIBILITY AND USE (consumer or
industrial )
(1) NON-DURABLE
(2) DURABLE
(3) SERVICES
( CONTD . )
(1)
NON-DURABLES
These are tangible goods normally
consumed in one or few uses. Because
these goods are consumed quickly and
purchased frequently, the appropriate
strategy is to make them available at
many locations, charge only a small
mark up and advertise heavily to
induce trial and build preference.
(2) DURABLES
These are tangible goods that normally
survive many uses. Normally require
more personal selling and service,
command a higher margin, and require
more seller guarantees.
(3) SERVICES
These are intangible,
inseperable,
variable and
perishable products.
Normally require more quality control,
superior credibility, and adaptability.
PRODUCT CLASSIFICATION
ON THE BASIS OF CUSTOMER
SHOPPING HABITS :
(1) CONVENIENCE GOODS
(2) SHOPPING GOODS
(3) SPECIALITY GOODS
(4) UNSOUGHT GOODS
(1) CONVENIENCE GOODS
are goods that the customer usually
purchases frequently, immediately, and
with a minimum of efforts.
(A) Staples: Consumers purchase on a
regular basis.
(B) Impulse Goods: are purchased without
any planning or search efforts.
(C) Emergency Goods: are purchased
when a need is urgent.
(2) SHOPPING GOODS
are goods that the customer , in the
process of selection and purchase,
characteristically compares on such
basis as suitability, quality, price and
style.
(A) Homogeneous Shopping Goods: are
similar in quality but different enough in
price to justify shopping comparisons.
(B) Heterogeneous Shopping Goods:
differ in product features and services
that may be more important than price.
(3) SPECIALITY GOODS
are goods with unique characteristics
or brand identification for which buyer
is willing to make a special purchasing
effort.
(4) UNSOUGHT GOODS
are goods the consumer does not know
about or does not normally think of
buying. These goods require
advertising and personal selling
support.
PRODUCT STRATEGY
Calls for coordinated decisions on
(1) Product Mix
(2) Product Line
(3) Individual Product
(4) Service Product
PRODUCT MIX
A product mix (also called product
assortment) is the set of all products
and items that a particular seller offers
for sale.
A total group of products that an
organization markets.
A company’s product mix has a certain
width, length, depth and consistency.
DIMENSIONS OF PRODUCT MIX
The width of company’s (say HLL’s)
product mix refers to how many
different product lines the company
carries, such as bathing soap,
detergents, shampoos, toothpaste,
food products.
DIMENSIONS OF PRODUCT MIX
The length of a company’s product mix
refers to the total number of items in its
product mix. Thus in each of the
product line HLL has a number of
product items. Eg., in the product line
of bathing soaps, HLL has several
product items like Lux, Liril, Lifebuoy,
Pears.
DIMENSIONS OF PRODUCT MIX
The depth of a company’s product mix
refers to how many variants are offered
of each product in the line. Thus if
close up toothpaste comes in three
formulations and in three sizes, Close
up has a depth of nine (3x3). The
average depth of HLL product mix can
be calculated by averaging the number
of variants within the brand groups.
DIMENSIONS OF PRODUCT MIX
The Consistency of the product mix
refers to how closely related the
various product lines are in end-use,
production requirements, distribution
channels, or some other way. HLL’s
product lines are consistent insofar as
they are consumer goods that go
through the same distribution
channels.
DIMENSIONS OF PRODUCT MIX
These four dimensions of the
product mix provide the handles for
defining the company’s product
strategy. The company can expand
its business in four ways.
1. The Co. can add new product
lines, thus widening its product mix.
2. The Co. can lengthen each product
line.
3. The Co. can add more product
variants to each product and deepen its
product mix.
4. The Co. can pursue more productline consistency or less, depending
upon whether it wants to acquire a
strong reputation in a single field or
participate in several fields.
PRODUCT LINE
A product line is a group of products
that are closely related, because they
perform a similar function, are sold to
the same customer groups, are
marketed through the same channels
or fall within the given price ranges.
The product mix may be composed of
several product lines.
PRODUCT LINE ANALYSIS
Product line managers need to know
the sales and profits of each item in
their line in order to determine which
items to build, maintain, harvest,, or
divest. They also need to understand
each product’s market profile, i.e. how
their product line is positioned against
competitors’ product lines (The
Product Map).
PRODUCT PORTFOLIO
MANAGEMENT
Product Line Length :
. Downward Line Stretching
. Upward Line Stretching
. Two Way Stretching
High
New
Present
New
Product
Price
Present
New
Product
Low
Low
Present
New
High
Quality
(Downward)
(Upward)
(Two Way)
Portfolio
Analysis
Boston Consulting Group’s
Market Growth- Market Share Matrix
Product-Market
Growth (%)
High
Low
A strategic planning tool
based on the philosophy
that a product’s market
growth rate and market
share are important in
determining marketing
strategy
High
Relative
Market Share
Low
Increase market share, increase economies of scale, increase profits
Market Growth – Market Share Matrix
Product-Market
Growth (%)
High
PROBLEM
CHILD
STARS
Low market share in growth
mkt needs much cash to incr
mkt sh
CASH COWS
DOGS
Low
High
Relative
Market Share
Low
Source: Perspectives. No. 66. “The Product Portfolio.” Reprinted by permission from the Boston Consulting Group, Inc. Boston, MA Copyright  1970.
The BCG Matrix method is the most well-known
portfolio management tool. It is based on product
life cycle theory. It was developed in the early 70s by
the Boston Consulting Group. The BCG Matrix can be
used to determine what priorities should be given in
the product portfolio of a business unit. To ensure
long-term value creation, a company should have a
portfolio of products that contains both high-growth
products in need of cash inputs and low-growth
products that generate a lot of cash. The Boston
Consulting Group Matrix has 2 dimensions: market
share and market growth. The basic idea behind it
is: if a product has a bigger market share, or if the
product's market grows faster, it is better for the
company.
The four segments of the BCG Matrix
Placing products in the BCG matrix provides 4
categories in a portfolio of a company:
Stars (high growth, high market share)
Stars are using large amounts of cash. Stars are
leaders in the business. Therefore they should also
generate large amounts of cash.
Stars are frequently roughly in balance on net cash
flow. However if needed any attempt should be made
to hold your market share in Stars, because the
rewards will be Cash Cows if market share is kept.
Cash Cows (low growth, high market share)
Profits and cash generation should be high.
Because of the low growth, investments which
are needed should be low.
Cash Cows are often the stars of yesterday
and they are the foundation of a company.
Cash Cows (low growth, high market share)
Profits and cash generation should be high.
Because of the low growth, investments which
are needed should be low.
Cash Cows are often the stars of yesterday
and they are the foundation of a company.
Dogs (low growth, low market share)
Dogs (low growth, low market share)
Avoid and minimize the number of Dogs in a
company.
Watch out for expensive ‘rescue plans’.
Dogs must deliver cash, otherwise they must be
liquidated.
Question Marks (high growth, low market share)
Question Marks have the worst cash characteristics of
all, because they have high cash demands and
generate low returns, because of their low market
share.
If the market share remains unchanged, Question
Marks will simply absorb great amounts of cash.
Either invest heavily, or sell off, or invest nothing and
generate any cash that you can. Increase market share
or deliver cash.
The aim of a portfolio analysis is:
1) Analyze its current business portfolio and decide which SBU's
should receive more or less investment, and
2) Develop growth strategies for adding new products and
businesses to the portfolio
3) Decide which businesses or products should no longer be retained.
The BCG Matrix (Boston Consulting Group Matrix) is the best-known
portfolio planning framework. The GE / McKinsey Matrix is a later and
more advanced form of the BCG Matrix.
The McKinsey matrix / General Electric Matrix
The GE / McKinsey Matrix is more sophisticated than the
BCG Matrix in three aspects:
1. Market (Industry) attractiveness replaces market growth
as the dimension of industry attractiveness. Market
Attractiveness includes a broader range of factors other than
just the market growth rate that can determine the
attractiveness of an industry / market.
2. Competitive strength replaces market share as the
dimension by which the competitive position of each SBU is
assessed. Competitive strength likewise includes a broader
range of factors other than just the market share that can
determine the competitive strength of a Strategic Business
Unit.
3. Finally the GE / McKinsey Matrix works with a 3*3 grid,
while the BCG Matrix has only 2*2. This also allows for more
sophistication.
The GE Model
Weak
Medium
Strong
Strong
Medium
Weak
Business Strength
Typical (external) factors that affect Market
Attractiveness:
-
Market size
Market growth rate
Market profitability
Pricing trends
Competitive intensity / rivalry
Overall risk of returns in the industry
Entry barriers
Opportunity to differentiate products and services
Demand variability
Segmentation
Distribution structure
Technology development
Typical (internal) factors that affect Competitive Strength of a
Strategic Business Unit:
Strength of assets and competencies
- Relative brand strength (marketing)
- Market share
- Market share growth
- Customer loyalty
- Relative cost position (cost structure compared with competitors)
- Relative profit margins (compared to competitors)
- Distribution strength and production capacity
- Record of technological or other innovation
- Quality
- Access to financial and other investment resources
- Management strength
six-step approach to implementation of portfolio analysis (using
the GE / McKinsey Matrix) could look like this:
1. Specify drivers of each dimension. The corporation must carefully
determine those factors that are important to its overall strategy
2. Weight drivers. The corporation must assign relative importance
weights to the drivers
3. Score SBU's each driver
4. Multiply weights times scores for each SBU
5. View resulting graph and interpret it
6. Perform a review/sensitivity analysis using adjusted other weights
(there may be no consensus) and scores.
PRODUCT LIFE CYCLE
The Product Life Cycle ( PLC ) is an
important concept in marketing that
provides insights into a product’s
competitive dynamics.
To fully understand the concepts of
PLC , one should first understand its
parent concept, the demand and
technology life cycles.
DEMAND / TECHNOLOGY
LIFE CYCLE
Marketing thinking should not begin with a
product or even a product class, but
rather with a need.
The product exists as one solution among
many to meet a need.
A need is satisfied by some product/
technology.
Each new product/technology normally
satisfies the need in a superior way and it
shows a demand-product life cycle.
The PLC portrays distinct stages in the
sales history of a product.
DEMAND-TECHNOLOGY-PRODUCT LIFE
CYCLES
Sales
Time
STAGES IN THE PRODUCT LIFE CYCLE
Sales
&
Profits
Time
Introduction Growth Maturity Decline
The Product Life Cycle
Market
Introduction
Market
Growth
Market
Maturity
Sales
Decline
Total Industry
Sales
+
Rs
Sales/
Profit
–
Total Industry
Profit
Time
Product Life Cycle
Sales and
Profits ($)
Sales
Profits
Product
Development
Introduction
Growth
Maturity
Time
Decline
Losses/
Investments ($)
Sales and Profits Over the Product’s Lifetime
Stages in the Product Life Cycle
Introduction
Growth
Maturity
Decline
Color
TV
Digital
cameras
Mini-disc
Electric cars
DVD
The time at each stage varies
greatly
Planning for Life Cycle Stages
Introducing New
Products
Focus:
Managing Mature
Products
Focus:
Budget / Rate of Growth
Persuasion / Less Profit
Focus:
Future Adaptation
New Markets
Dying Products
10-3
New or Improve?
Focus:
New Strategies
Focus:
Phase Out
Alternative PLC Shapes
Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Low
Costs
High cost per customer
Profits
Negative
Marketing Objectives
Create product awareness and trial
Product
Offer a basic product
Price
Use cost-plus formula
Distribution
Build selective distribution
Promotion
Heavy to induce product trial
Growth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Rapidly rising
Costs
Average cost per customer
Profits
Rising
Marketing Objectives
Maximize market share
Product
Offer extension, service, warranty
Price
Penetration strategy
Distribution
Build intensive distribution
Promotion
Reduce to take advantage of demand
Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Peak
Costs
Low cost per customer
Profits
High
Marketing Objectives
Maximize profits while defending market share
Product
Diversify brand and models
Price
Match or best competitors
Distribution
Build more intensive distribution
Promotion
Increase to encourage brand switching
Extending the Product Life Cycle
Market
Modification
1. Increase frequency of use
by present customers
2. Add new users
3. Find new uses
Product
Modification
4. Change product quality or
packaging
Purpose: to sell more product and cover original investment
Maturity Stage of the PLC
Modifying the Market: Increase the
consumption of the current product.
How?



Look for new users and market segments
Reposition the brand to appeal to larger or
faster-growing segment
Look for ways to increase usage among
present customers
Maturity Stage of the PLC
Modifying the Product: Changing
characteristics such as quality, features, or
style to attract new users and to inspire
more usage.
How?




Improve durability, reliability, speed, taste
Improve styling and attractiveness
Add new features
Expand usefulness, safety, convenience
Modifying the Product
Crayola has added a steady stream of new colors, forms, and packages
Maturity Stage of the PLC
Modifying the Marketing Mix: Improving
sales by changing one or more marketing
mix elements.
How?




Cut prices
Launch a better ad campaign
Move into larger market channels
Offer new or improved services to buyers
Decline Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Declining
Costs
Low cost per customer
Profits
Declining
Marketing Objectives
Reduce expenditures and milk the brand
Product
Phase out weak items
Price
Cut price
Distribution
Selective: phase out unprofitable outlets
Promotion
Reduce to minimum level
Overlap of Life Cycle for Products A and B
WINDOWS 95
WINDOWS EXP
1995
1997
2004
2005
Practical Problems of PLC
Hard to identify
which stage of the
PLC the product is in
Hard to pinpoint
when the product
moves to next stage
Hard to identify
factors that affect
product’s movement
through stages
Hard to forecast
sales level, length of
each stage, and
shape of PLC
Strategy is both a
cause and result of
the PLC
Product Life Cycle Applications
Product class has the longest life cycle (e.g., gaspowered cars)
Product form tends to have the standard PLC
shape (e.g., dial telephone)
Brand can change quickly because of changing
competitive attacks and responses (e.g., Tide,
Cadbury)
Style is a basic and distinctive mode of expression
(e.g., formal clothing, Danish modern furniture)
Fashion is a popular style in a given field (e.g.,
business casual)
Fad is a fashion that enters quickly, is adopted
quickly, and declines fast (e.g., pet rocks)
STAGES IN THE PRODUCT LIFE
CYCLE
By identifying the stage that a product is in, or
may be headed toward, companies can formulate
better marketing plans.
Products require different marketing, financial,
manufacturing, purchasing and personnel
strategies in each stage of their life cycle.
Marketers must pursue appropriate marketing
strategies in each stage of PLC.
Today, in order to succeed, it is absolutely
essential to constantly improve products to
increase the value offered to customers, ( V =
B/P ).
The success of competitors is based on creating
value for the customer by differentiating their
product,( Competitive Differential ).
EXTENDING THE PRODUCT LIFE CYCLE
Sales
Time
•( When the sales of a product starts declining
marketers may choose suitable strategy for
further growth of product /business/enterprise.)
PRODUCT LIFE CYCLE
Reasons for change in behavior of PLC
:
--Changes in the consumer needs and
preferences
--Advancing Technology
--Competition, Government Policies etc.
--Changes in number of potential buyers
Stages in PLC :
Introduction, Growth, Maturity, And
Decline.
MARKETING STRATEGIES IN THE
INTRODUCTION STAGE
Promotion
High
Price
Low
High
Low
Rapid
Skimming
Strategy
Rapid
Penetration
Strategy
Slow
Skimming
Strategy
Slow
Penetration
Strategy
MARKETING STRATEGIES IN THE
GROWTH STAGE
It improves product quality and adds new
product features and improved styling.
It adds new models and flanker products
(i.e., products of different sizes, flavors,
and so forth that protect the main product )
It enters new market segments.
It increases its distribution coverage and
enters new distribution channels.
It lowers prices to attract the next layer of
price-sensitive buyers.
It shifts from product-awareness
advertising to product-preference
advertising.
MATURITY STAGE
Sales are increasing but at a
decreasing rate.
Profits are beginning to decline.
Price competition increases.
The manufacturer assume a greater
share of the total promotional effort
in the fight to retain dealers and shelf
space in their stores.
MATURITY STAGE
To understand better, we can devide
Maturity Stage into three stages :
Growth Maturity : When the rate of sales growth
starts to decline because of distribution saturation.
Stable Maturity : When the rate of sales growth starts
declining due to market saturation.
Decaying Maturity : The sales level starts to decline
as some of the customers move towards other
competitive and substitute products.
MARKETING STRATEGIES IN THE
MATURITY STAGE
Market Modification
Product Modification
Marketing Mix Modification
MARKETING STRATEGIES IN THE
MATURITY STAGE
Market Modification
Expand number of users :
- Convert non-users
- Enter new market segments
- Win competitors’ customers
Increase annual usage :
- More frequent use
- More usage per occasion
- New and more varied uses
MARKETING STRATEGIES IN THE
MATURITY STAGE
Product Modification
A strategy of quality improvement aims at
increasing the product’s functional
performance - its durability, reliability,
speed, taste.
A strategy of feature improvement aims at
adding new features ( for example - size,
weight, materials, additives, accessories )
that expand the product’s versatility,
safety, or convenience.
MARKETING STRATEGIES IN THE
MATURITY STAGE
Product Modification (contd.)
A strategy of style improvement aims at
increasing the product’s aesthetic
appeal. The periodic introduction of
new car models amounts to style
competition rather than quality or
feature competition.
MARKETING STRATEGIES IN THE
MATURITY STAGE
Marketing Mix Modification
Prices
Distribution
Advertising
Sales Promotion
Personal Selling
Services
MARKETING STRATEGIES IN THE
DECLINE STAGE
Identifying the Weak Products
To do this, many companies appoint a
product-review committee with
representatives from marketing, R&D,
manufacturing and finance. The
product review committee makes a
recommendation for each dubious
product--leave it alone, modify its
marketing strategy, or drop it.
MARKETING STRATEGIES IN THE
DECLINE STAGE (Contd.)
Determining Marketing Strategies :
( Go Strategy )
Continuation Strategy :
-Increasing the firm’s investment ( to
dominate the market or strengthen
the competitive position )
- Maintaining the firm’s investment
level until the uncertainties about the
industry are resolved.
MARKETING STRATEGIES IN THE
DECLINE STAGE (Contd)
Determining Marketing Strategies :
( Go Strategy )
Concentration Strategy :
- Decreasing the firm’s investment level
selectively, by dropping unprofitable
customer groups, while simultaneously
strengthening the firm’s investment in
lucrative niches.
Harvesting Strategy :
- Divesting the business quickly by disposing
of its assets as advantageously as possible.
PRODUCT PORTFOLIO MANAGEMENT
Filling in the Product Line ( adding
more items within the present range of
line )
Product Line Modernization
Product Line Featuring
Product Line Pruning
INDIVIDUAL PRODUCT DECISIONS
Product Attribute Decisions
Brand Decisions
Brand Positioning
Packaging and Labeling
DEFINITION OF BRAND
American Management Association
defines brand as follows :
“ A brand is a name, term, sign,
symbol, or design, or a combination of
them, intended to identify the goods
and services of one seller or group of
sellers and to differentiate them from
those of competitors. ”
THE MEANING OF BRAND
The brand is not a product but it gives
the product meaning and defines its
identity in both time and space.
Brands are a direct consequence of
the strategy of market segmentation
and product differentiation.
Companies want to stamp their mark
on different sectors and set their
imprint on their products.
BUILDING THE BRAND
“The art of marketing is the art of brand
building. When something is not a
brand, it will probably viewed as a
commodity. Then price is what counts.
When price is the only thing that
counts, the only winner is the low-cost
producer.”
.
( Philip Kotler )
BRAND NAME DECISIONS
Individual Names
Blanket Family Names
Separate Family Names for all products
Company Trade name combined with
individual product names.
BRAND NAME
It should suggest something about the
product’s benefits.
It should suggest something about
product qualities.
It should be easy to pronounce,
recognize and remember.
It should be distinctive.
It should not carry poor meanings in
other countries and languages.
BRAND IDENTITY AND ASSOCIATION
A brand identity or association is anything
that is directly or indirectly linked in
memory to a brand. The most common
association is that of product attributes or
customer benefits.
A brand’s associations are assets that can
differentiate, provide reasons to buy, instil
confidence and trust, affect feelings
towards a product and the use experience,
and provide the basis for brand extension.
BENEFITS OF BRAND AWARENESS
First, awareness provides the brand with a
sense of familiarity, and people like the
familiar.
Second, name awareness can be a signal
of presence, commitment, and substance.
The logic is that if a name is recognized,
there must be a reason.
Third, the salience of a brand will
determine if it is recalled at a key time in
the purchasing process.
BRAND LOYALTY
First, brand loyalty reduces the marketing
costs of doing business, since existing
customers are relatively easier to hold.
Second, brand loyalty represents a
substantial barrier to competitors. Excessive
resources are required when entering a
market in which existing customers must be
enticed away from an established brand that
they are loyal to.
Third, Brand loyalty provides trade leverage.
Fourth, a relatively large, satisfied customer
base provides an image of a brand as an
accepted, successful, and enduring product.
Finally, brand loyalty provides the time to
respond to competitive moves.
DEFINITION OF BRAND EQUITY
Brand equity is a set of assets and
liabilities linked to a brand’s name and
symbol that add to or substract from the
value provided by a producer or service to
a firm and / or that firm’s customers.
Brand equity generates value to the
customer that can emerge either as a price
premium or enhanced brand loyalty.
BRAND EQUITY
Brand
Awareness
Brand
Identity
Brand
Equity
Perceived
Quality
Brand
Loyalty
( Powerful brands have high brand
equity, higher brand loyalty.)
TOOLS FOR BUILDING BRAND
Advertising
Sponsorship of games and events
Social Causes
Public Facilities
Founder’s personality
BRAND STRATEGY DECISIONS
Line Extensions
Brand Extensions
Multibrands
New brands
Co-brands
BRAND STRATEGY DECISIONS
Product Category
Existing
Existing
Brand
Name
New
Line
Extension
Multibrands
New
Brand
Extension
New Brand
Names
LINE EXTENSION
Line extension occurs when a company
introduces additional items in the same
product category under the same brand
name, usually with new flavours, forms,
colours, added ingredients, package sizes
and so on.
Line extensions generally have a higher
chance of survival than new products.
On the down side extensions may lead to the
brand name losing its specific meanings;
Ries and Trout call this “ Line Extension Trap
.”
BRAND EXTENSION
Brand Extension occurs when a company
decides to use an existing brand name to
launch a product in the new category.
Brand Extension offers a number of
advantages.
-Instant recognition and earlier acceptance
-Saves considerable advertisement costs
BRAND EXTENSION
Brand Extension also involves risks.
- The new product might disappoint
buyers and damage their respect for
company’s other products.
- The brand name may loose its
special positioning in the consumer’s
mind through over extension - a
phenomenon called “ brand dilution
.”
MULTI BRANDS
A company will often introduce additional
brands in the same product category.
- One of the motives for multibranding is to
establish different features and/or appeal to
different buying motives.
- It also enables the company to lock up
more distributor shelf space and protest its
major brand by setting up flanker brands.
NEW BRANDS
When a company launches products in a new
category, it may find that none of its current
brand names are appropriate.
When the present brand image is not likely to
help the new product, companies are better
off creating new brand names.
CO-BRANDS
Co-branding occurs when two different
companies pair their respective brands in
a collaborative marketing effort.
Each brand sponsor expects that other
brand name will strengthen brand
preference or purchase intention.
MARKETING STRATEGIES IN THE
DECLINE STAGE (Contd)
The Drop Strategy
- When a company decides to drop a
product, it faces further decisions. If the
product has strong distribution and
residual goodwill, the company can
probably sell it to another firm.
- If the company can’t find any buyers, it
must decide whether to liquidate the
brand quickly or slowly. It must also
decide on how much parts inventory and
service to maintain for past customers.
NEW PRODUCT DEVELOPMENT
Explain how companies find and
develop new-product ideas.
List and define the steps in the newproduct development process.
Describe the stages of the product life
cycle.
Describe how marketing strategies
change during the product’s life cycle.
New-Product Development
Strategy
Strategies for Obtaining New-Product Ideas
Acquisition of:
New Products:
Companies
Original Products
Patents
Improvements
Licenses
Modifications
New-Product Failures
Only 10% of new products are still on the
market and profitable after 3 years.
Failure rate for industrial products is as high as
30%.
Why?






Overestimation of market size
Design problems
Incorrectly positioned, priced, or advertised
Pushed despite poor marketing research findings
Development costs
Competition
Major Stages in New-Product
Development
New-Product Development
Process
Idea
Generation
Ideas from:
Customers
and users
Marketing
research
Competitors
Other
markets
Company
people
Intermediaries
Screening
Idea
Evaluation
Strengths
and
weaknesses
Fit with
objectives
Market
trends
Rough ROI
estimate
Concept
testing
Customer
reactions
Rough
estimates
of cost,
sales,
profits
Development
R&D
Develop
model or
service
prototype
Test
marketing
mix
Revise plans
as needed
ROI estimate
Commercial
-ization
Finalize
product and
marketing
plan
Start
production
and
marketing
“Roll out” in
select
markets
Final ROI
estimate
Flow of Ideas and Product
Company Employees
Customers
Competitors
Distributors
Suppliers
Idea Screening
Process to spot good ideas and drop poor
ones.
Develop system to estimate: market size,
product price, development time and
costs, manufacturing costs, and rate of
return.
Evaluate these findings against set of
company criteria for new products.
Concept Development and Testing
Product Idea: idea for a possible product
that the company can see itself offering.
Product Concept: detailed version of the
idea stated in meaningful consumer terms.
Product Image: the way consumers
perceive an actual or potential product.
Marketing Strategy Development
Part One Describes:
The Target Market
Planned Product Positioning
Sales, Market Share, & Profit Goals
Part Two Outlines the First-Year’s:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Run:
Sales & Profit Goals
Marketing Mix Strategy
Business Analysis
Involves a review of
the sales, costs, and
profit projections to
assess fit with
company objectives.
If yes, move to the
product development
phase.
Product Development
Develop concept into
physical product
Calls for large jump in
investment
Prototypes are made
Prototype must have
correct physical
features and convey
psychological
characteristics
Test Marketing
Product and program introduced in more
realistic market setting.
Not needed for all products.
Can be expensive and time consuming,
but better than making major marketing
mistake.
Test Marketing
Nokia test-marketed its new N-Gage cell phone/mobile game player extensively
before introducing it worldwide.
Commercialization
Must decide on timing (i.e., when to
introduce the product).
Must decide on where to introduce the
product (e.g., single location, state, region,
nationally, internationally).
Must develop a market rollout plan.
Organizing New-Product
Development
Sequential Approach: each stage
completed before moving to next phase of
the project.
Simultaneous Approach: Cross-functional
teams work through overlapping steps to
save time and increase effectiveness.
NEW PRODUCT DEVELOPMENT
PROCESS
(1) Idea Generation
(2) Screening
(3) Concept Development and Testing
(4) Marketing Strategy
(5) Business Analysis
(6) Product Development
(7) Market Testing
(8) Commercialization
THEORY OF DIFFUSION OF A NEW PRODUCT
21/2 %
INNOVATORS
131/2%
EARLY
ADOPTERS
34%
EARLY
MAJORITY
34%
LATE
MAJORITY
16%
LAGGARDS
THE CONSUMER ADOPTIONPROCESS
(STAGES IN THE ADOPTION PROCESS )
Awareness : The consumer becomes aware of the
innovation but lacks information about it.
Interest : The consumer is stimulated to seek
information about the innovation.
Evaluation : The consumer considers whether to
try the innovation.
Trial : The consumer tries the innovation to
improve his or her estimate of its value.
Adoption : The consumer decides to make full
and regular use of the innovation.