Chapter 5 Product and Service Strategy and Brand Management.

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Slide 1 Chapter 5 Product and Service Strategy and Brand Management Slide 2 5-2 In this chapter, you will learn about 1.The Offering Portfolio The Offering Concept The Offering Mix 2.Modifying the Offering Mix Additions to the Offering Mix New-Offering Development Process Life-Cycle Concept Modifying, Harvesting, and Eliminating Offerings Slide 3 5-3 In this chapter, you will learn about 3.Positioning Offerings Positioning Strategies Repositioning Making the Positioning Strategy Decision 4.Brand Equity and Brand Management Creating and Valuing Brand Equity Branding Decisions Brand Growth Strategies Slide 4 5-4 The ultimate profitability of an organization depends on its product or service offering(s) and the strength of its brand(s). Importance of the Offering Slide 5 5-5 Basic Offering-Related Decisions Modifying the Offering Mix Positioning Offerings Branding Offerings Slide 6 5-6 The Offering Concept Tangible product or service Related services (e.g., delivery and setup) Brand name(s) Warranties or guarantees Packaging What is an offering? It consists of: Slide 7 5-7 The Offering Mix (Portfolio) Each line consists of individual offers or items (product line depth) The totality of a companys offerings is known as its product or service offering mix or portfolio Consists of distinct offering lines (product line width) Slide 8 5-8 The Offering Portfolio Bundling enhancing the offering mix by providing two or more product or service items as a package deal McDonalds value meal Travelocitys vacation packages IBM hardware, software, and maintenance contracts Slide 9 5-9 Modifying the Offering Mix Major Decisions Should the offering mix be modified? If yes, what should be added, modified, harvested, or eliminated? Slide 10 5-10 Modifying the Offering Mix Additions to the Offering Mix How consistent is the new offering with existing offerings? Does the organization have the resources to adequately introduce and sustain the offerings? Is there a viable market niche for the offering? Slide 11 5-11 Cannibalization (Kodak cameras) Fit with sales and distribution strategies (Metropolitan Life Insurance) Consistency with target markets How consistent is the new offering with existing offerings? Modifying the Offering Mix Additions to the Offering Mix Slide 12 5-12 Financial strength outlays for research, development, and marketing (Gillette) Market Growth (Miller Lite) Competitive response (RC Cola) Does the organization have the resources to adequately introduce and sustain the offerings? Modifying the Offering Mix Additions to the Offering Mix Slide 13 5-13 Is there a relative advantage over existing competitive offerings? Does a distinct buyer group exist that is not being satisfied with current offerings? Is there a viable market niche for the offering? Modifying the Offering Mix Additions to the Offering Mix Slide 14 5-14 1.Idea generation/idea screening employees, buyers, competitors 2.Business analysis forecasting sales, costs, profitability 3.Market testing laboratory or field market tests 4.Commercialization full-scale introduction of offering to market Modifying the Offering Mix New-Offering Development Process Slide 15 5-15 1.Does the offering have a relative advantage? 4.Can the offering be tested on a limited basis prior to actual purchase? 2.Is the offering compatible with buyers use or consumption behavior? 3.Is the offering simple enough for buyers to understand and use? 5.Are there immediate benefits from the offering, once it is used or consumed? New-Offering Development Process Idea Generation & Screening Slide 16 5-16 Sales Forecasts Profitability Analysis Investment requirements Breakeven analysis Payback period Return on investment (ROI) New-Offering Development Process Business Analysis Slide 17 5-17 Generate benchmark data for assessing sales volume Relative effectiveness of alternative marketing programs can be examined Incidence of offering trial by potential buyers, repeat-purchasing behavior, and quantities purchased Results in a competitive response New-Offering Development Process Test Marketing Slide 18 5-18 There are FOUR main stages: 1.Introduction 2.Growth 3.Maturity (Saturation) 4.Decline Modifying the Offering Mix Life-Cycle Concept A life cycle plots sales of an offering or a product class over a period of time. Slide 19 5-19 Profits Sales IntroductionGrowthMaturityDecline Sales Modifying the Offering Mix Life-Cycle Concept Slide 20 5-20 Sales volume = (number of triers x average purchase amount x price) + (number of repeaters x average purchase amount x price) Modifying the Offering Mix Life-Cycle Concept The sales curve can be viewed as being the result of offering trial and repeat-purchasing behavior. Slide 21 5-21 Modifying the Offering Mix Modification Trading up Improving the product and increasing the price Trading up Improving the product and increasing the price Trading down Reducing the number of features or quality and reducing the price Trading down Reducing the number of features or quality and reducing the price Slide 22 5-22 1.The market for the offering is stable 2.The offering is not producing good profits 3.Market share is becoming difficult to maintain 4.The offering provides other benefits to the organization Modifying the Offering Mix Harvesting Harvesting should be considered when: Slide 23 5-23 1.What is the future sales potential of the offering? 2.How much is the offering contributing to the overall profitability of the offering mix? Modifying the Offering Mix Elimination Elimination is appropriate when the answer to the following questions is very little or none: Slide 24 5-24 3.How much is the offering contributing to the sales of other offerings in the mix? 4.How much could be gained by modifying the offering? 5.What would be the effect on channel members and buyers? Modifying the Offering Mix Elimination Slide 25 5-25 Positioning Offerings The act of designing an organizations offering and image so that it occupies a distinct and valued place in the target customers mind relative to competitive offerings. Slide 26 5-26 Positioning Offerings Positioning Strategies 1.By attribute or benefit 2.By price and quality 3.By use or application 4.By user 5.By product or service class 6.Against competition Slide 27 Example of Positioning by Attributes Toothpaste Attributes Market Segments Children Teens, Young Adults FamilyAdults Flavor Color Whiteness of teeth Fresh breath Decay prevention Price Plaque prevention Stain prevention Principal BrandsAim, Stripe Ultra Brite, McCleans Colgate, Crest Topol, Rembrandt Slide 28 5-28 Positioning Offerings Repositioning Necessary when the initial positioning is no longer competitively sustainable or profitable, or when better positioning opportunities arise Necessary when the initial positioning is no longer competitively sustainable or profitable, or when better positioning opportunities arise St. Josephs aspirin for babies to Low Strength Aspirin for adults Carnival Cruise Lines vacation alternative for older people to a Fun Ship for younger adults and families Slide 29 5-29 Positioning Offerings 1.What position do we want to own? 2.What competitors must be outperformed if we are to establish the position? 3.Do we have the marketing resources to occupy and hold the position? Making the Positioning Strategy Decision Slide 30 5-30 Brand Equity & Brand Management Brand Name Any word, device (design, sound, shape, or color), or combination of these used to identify an offering and set it apart from competing offerings. Brand Name Any word, device (design, sound, shape, or color), or combination of these used to identify an offering and set it apart from competing offerings. Brand Equity The added value a brand name bestows on a product or service beyond the functional benefits provided. Brand Equity The added value a brand name bestows on a product or service beyond the functional benefits provided. Slide 31 Brand Equity & Brand Management Creating and Valuing Brand Equity Develop positive brand awareness and name- product association (Gatorade, Kleenex) Establish a brands meaning in the minds of consumers (Nike) Elicit the proper consumer responses to a brands identity and meaning (Michelin) Create a consumer-brand resonance (Harley- Davidson, Apple, eBay) Slide 32 Customer-Based Brand Equity Pyramid Identity: Who are you? Meaning: What are you? Response: What about you? Relationships: What about you and me? Deep, broad brand awareness Strong, favorable, and unique brand association Positive, accessible reactions Intense, active loyalty Brand Salience Brand Performance Brand Imagery Consumer Judgments Consumer Feelings Consumer Brand Resonance Slide 33 5-33 Assign one brand name all of the organizations offerings (GE, Sony) OR Assign one brand name to each line of offerings (Sears, Craftsman Tools) OR Assign individual names to each offering (P&G, Unilever) Assign one brand name all of the organizations offerings (GE, Sony) OR Assign one brand name to each line of offerings (Sears, Craftsman Tools) OR Assign individual names to each offering (P&G, Unilever) Brand Equity and Brand Management Branding Decisions Slide 34 5-34 Using a single brand name Advantage Easier to introduce new offerings when the brand name is familiar to buyers Disadvantage Can have a negative effect on existing offerings if a new offering fails Sub-branding combining a family brand with a new brand Brand Equity & Brand Management Branding Decisions Slide 35 5-35 Decide whether or not to supply an intermediary with its own brand name. What are the costs/revenues? Is there excess capacity? If we dont manufacture the brand, will a competitor produce it? Brand Equity & Brand Management Branding Decisions Slide 36 5-36 Line Extension Strategy Brand Extension Strategy New Brand Strategy Fighting/Flanker Brand Strategy ExistingproductsNewproducts New Brand Existing Brand Brand Equity & Brand Mgmt Brand Growth Strategies Slide 37 5-37 Adding offerings with the same brand in a product class that an organization currently serves Respond to customers desire for variety Eliminate gaps in the product line Lowers advertising and promotion costs Consider possibilities of product cannibalism and proliferation of offerings (Coke and Vanilla Coke) Adding offerings with the same brand in a product class that an organization currently serves Respond to customers desire for variety Eliminate gaps in the product line Lowers advertising and promotion costs Consider possibilities of product cannibalism and proliferation of offerings (Coke and Vanilla Coke) Brand Equity & Brand Mgmt Line Extension Strategy Slide 38 5-38 The practice of using a current brand name to enter a completely different product class Reduced risk due to brand equity Success depends on perceptual fit with the original product class e.g., Yamaha makes motorcycles, sound equipment, computer peripherals, and musical instruments Brand Equity & Brand Mgmt Brand Extension Strategy Slide 39 5-39 Co-branding Pairing two brand names of two manufacturers on a single product e.g., General Mills and Hershey Foods Reeses Peanut Butter Puffs Co-branding Pairing two brand names of two manufacturers on a single product e.g., General Mills and Hershey Foods Reeses Peanut Butter Puffs Brand Equity & Brand Mgmt Brand Extension Strategy: Co-branding Slide 40 5-40 Most challenging strategy Most costly e.g., Lexus by Toyota Involves the development of a new brand and often a new offering for a product class that has not been previously served by the organization. Brand Equity & Brand Mgmt New Brand Strategy Slide 41 5-41 Flanker Brand Strategy Involves adding a new brand on the high or low end of a product line based on a price- quality continuum (Marriott Hotels). Fighting Brand Strategy Involves adding a new brand whose sole purpose is to confront competitive brands in a product class being served by an organization. (Frito-Lays Santitas used to fight regional tortilla chip brands). Flanker Brand Strategy Involves adding a new brand on the high or low end of a product line based on a price- quality continuum (Marriott Hotels). Fighting Brand Strategy Involves adding a new brand whose sole purpose is to confront competitive brands in a product class being served by an organization. (Frito-Lays Santitas used to fight regional tortilla chip brands). Brand Equity & Brand Mgmt Flanker/Fighting Brand Strategy