chapter 5 product and service strategy and brand management

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?


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?


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?


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)


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


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


5-20

Sales volume = (number of triers x average

purchase amount x price) + (number of

repeaters x average purchase amount x price)


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



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?



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)


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 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.


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).


Flanker/Fighting Brand StrategyFlanker/Fighting Brand Strategy

chapter 5 product and service strategy and brand management

Documents

offering slide

offering mix slide

offering mix additions

new offering

offering mix new

offering mix portfolio

offering mix major decisions

offering portfolio bundling