chapter 5 product and service strategy and brand management
TRANSCRIPT
ChapterChapter 55
Product and Service Strategy Product and Service Strategy
and Brand Managementand Brand Management
5-2
In this chapter, you will In this chapter, you will learn about…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
5-3
In this chapter, you will In this chapter, you will learn about…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
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 OfferingImportance of the Offering
5-5
Basic Offering-Related Basic Offering-Related DecisionsDecisions
Modifying the Offering Mix
Positioning Offerings
Branding Offerings
5-6
The Offering ConceptThe 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:
5-7
The Offering Mix The Offering Mix (Portfolio)(Portfolio)
Each line consists of individual offers or items (product line depth)
The totality of a company’s offerings is known as its product or service offering mix or portfolio
Consists of distinct offering lines (product line width)
5-8
The Offering PortfolioThe Offering Portfolio
Bundling – enhancing the offering mix by providing two or more product or service items as a “package deal”
McDonald’s “value meal”
Travelocity’s vacation packages
IBM hardware, software, and
maintenance contracts
5-9
Modifying the Offering MixModifying the Offering MixMajor DecisionsMajor Decisions
Should the offering mix be modified?
If yes, what should be added, modified, harvested,
or eliminated?
5-10
Modifying the Offering MixModifying the Offering MixAdditions to the Offering MixAdditions 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?
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 MixModifying the Offering MixAdditions to the Offering MixAdditions to the Offering Mix
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 MixModifying the Offering MixAdditions to the Offering MixAdditions to the Offering Mix
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 MixModifying the Offering MixAdditions to the Offering MixAdditions to the Offering Mix
5-14
1. Idea generation/idea screeningemployees, buyers, competitors
2. Business analysisforecasting sales, costs,
profitability
3. Market testinglaboratory or field market tests
4. Commercializationfull-scale introduction of offering
to market
Modifying the Offering MixModifying the Offering MixNew-Offering Development ProcessNew-Offering Development Process
5-15
1. Does the offering have a relativeadvantage?
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 New-Offering Development ProcessProcess
Idea Generation & ScreeningIdea Generation & Screening
5-16
Sales Forecasts
Profitability Analysis– Investment requirements– Breakeven analysis– Payback period– Return on investment (ROI)
New-Offering Development New-Offering Development ProcessProcess
Business AnalysisBusiness Analysis
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 New-Offering Development ProcessProcess
Test MarketingTest Marketing
5-18
There are FOUR main stages:
1. Introduction
2. Growth
3. Maturity (Saturation)
4. Decline
Modifying the Offering MixModifying the Offering MixLife-Cycle ConceptLife-Cycle Concept
A life cycle plots sales of an offering or a product class over a period of time.
5-19
Profits
Sales
Introduction Growth Maturity Decline
Sales
Modifying the Offering MixModifying the Offering MixLife-Cycle ConceptLife-Cycle Concept
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 MixModifying the Offering MixLife-Cycle ConceptLife-Cycle Concept
The sales curve can be viewed as being the result of offering trial and repeat-purchasing behavior.
5-21
Modifying the Offering MixModifying the Offering MixModificationModification
Trading upTrading up
Improving the product and increasing the price
Trading upTrading up
Improving the product and increasing the price
Trading downTrading down
Reducing the number of features or quality
and reducing the price
Trading downTrading down
Reducing the number of features or quality
and reducing the price
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 MixModifying the Offering MixHarvestingHarvesting
Harvesting should be considered when:
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 MixModifying the Offering MixEliminationElimination
Elimination is appropriate when the answer to
the following questions is “very little” or “none”:
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 MixModifying the Offering MixEliminationElimination
5-25
Positioning OfferingsPositioning Offerings
The act of designing an organization’s
offering and image so that it occupies a
distinct and valued place in the target
customer’s mind relative to competitive
offerings.
The act of designing an organization’s
offering and image so that it occupies a
distinct and valued place in the target
customer’s mind relative to competitive
offerings.
5-26
Positioning OfferingsPositioning OfferingsPositioning StrategiesPositioning 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
Example of Positioning by Example of Positioning by AttributesAttributes
Toothpaste Attributes
Market Segments
ChildrenTeens, Young
AdultsFamily Adults
Flavor
Color
Whiteness of teeth
Fresh breath
Decay prevention
Price
Plaque prevention
Stain prevention
Principal Brands Aim, StripeUltra Brite, McCleans
Colgate, Crest
Topol, Rembrandt
5-28
Positioning OfferingsPositioning OfferingsRepositioningRepositioning
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. Joseph’s 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
5-29
Positioning OfferingsPositioning 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
5-30
Brand Equity & Brand Equity & Brand ManagementBrand 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.
Brand Equity & Brand ManagementBrand Equity & Brand ManagementCreating and Valuing Brand EquityCreating and Valuing Brand Equity
Develop positive brand awareness and name-product association (Gatorade, Kleenex)
Establish a brand’s meaning in the minds of consumers (Nike)
Elicit the proper consumer responses to a brand’s identity and meaning (Michelin)
Create a consumer-brand resonance (Harley-Davidson, Apple, eBay)
Customer-Based Brand Equity Customer-Based Brand Equity PyramidPyramid
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
5-33
Assign one brand name all of the organization’s 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 organization’s 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 Equity and Brand ManagementBrand Management
Branding DecisionsBranding Decisions
5-34
Using a single brand name…
AdvantageEasier to introduce new offerings when the brand name is familiar to buyers
DisadvantageCan 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 Equity & Brand ManagementBrand Management
Branding DecisionsBranding Decisions
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 don’t manufacture the brand, will a competitor produce it?
Brand Equity & Brand Equity & Brand ManagementBrand Management
Branding DecisionsBranding Decisions
5-36
Line Extension Strategy
Line Extension Strategy
Brand Extension Strategy
Brand Extension Strategy
New Brand Strategy
New Brand Strategy
Fighting/Flanker Brand Strategy
Fighting/Flanker Brand Strategy
ExistingExistingproductsproducts
NewNewproductsproducts
New New BrandBrand
Existing Existing BrandBrand
Brand Equity & Brand Brand Equity & Brand MgmtMgmt
Brand Growth StrategiesBrand Growth Strategies
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 Brand Equity & Brand MgmtMgmt
Line Extension StrategyLine Extension Strategy
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 Brand Equity & Brand MgmtMgmt
Brand Extension StrategyBrand Extension Strategy
5-39
Co-branding
Pairing two brand names of two
manufacturers on a single product
e.g., General Mills and Hershey Foods’
Reese’s Peanut Butter Puffs
Co-branding
Pairing two brand names of two
manufacturers on a single product
e.g., General Mills and Hershey Foods’
Reese’s Peanut Butter Puffs
Brand Equity & Brand Brand Equity & Brand
MgmtMgmtBrand Extension Strategy: Co-brandingBrand Extension Strategy: Co-branding
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 Brand Equity & Brand MgmtMgmt
New Brand StrategyNew Brand Strategy
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-Lay’s 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-Lay’s Santitas used to fight regional
tortilla chip brands).
Brand Equity & Brand Brand Equity & Brand MgmtMgmt
Flanker/Fighting Brand StrategyFlanker/Fighting Brand Strategy