Product & brand strategy

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Lecture 6

Product and Brand Strategy

Chapter 11

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008

Slide 11.2

Product strategy

1. Introduction
2. Product
3. Brands
4. Product differentiation
5. Product platforms
6. Summary and recap


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Definition of product

A product is anything that can be offered to a market
for attention, acquisition, use or consumption that
might satisfy a want or need.
It includes physical objects, services, persons,
places, organisations and ideas.

Kotler (2001)


Slide 11.4

Levels of product
Augmented product
Core product
Tangible product
Installation

Packaging
Quality
Delivery Core After-
Brand benefit
and sales
name or service
credit service
Features Styling

Warranty

Authors such as Kotler and Levitt have proposed different dimensions
for a product.


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5

Market introduction of brands

Twinings 1706 Boeing 1916
Schweppes 1798 Adidas 1920
Levis 1850 Volvo 1926
Agfa 1873 McDonald’s 1937
Coca-Cola 1886 Benetton 1965
Philips 1891 Nike 1972
Pepsi-Cola 1898 Body Shop 1976
Persil 1907 Swatch 1982
Nivea 1911 Eternity 1988


Slide 11.6

What is a brand?

• Branding is the process by which firms distinguish
their products from that of their competitors.
E.g. Ford and Mercedes

• This is usually achieved by developing distinctive
names, packaging, design. Often through using
logos and effective advertising.


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What is a brand? (Continued)

• Brands are linked to perceptions
It is well known that in blind product testing, consumers
fail to distinguish between brands in each product
category.

• Different meanings
A brand is a complex symbol that can convey up to
six levels of meaning (Kotler, 2001).


Slide 11.8

6 levels of meaning

• Attributes – good engineering, quality, performance
• Benefits – feeling of safety, savings, etc.
• Values – the producer’s values e.g. prestige
• Culture – the producer’s culture – creativity or efficiency
• Personality – projection of personality
e.g fun or austere
• User – can suggest the type of consumer who buys it

Kotler (2001)


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Internal and external brand contacts
External brand flow Internal brand flow

Customer facing
Raw materials
Activities
Product quality
Complaints procedures
sourcing
Clubs
After-sales
Repairs
Finance
department R&D function
Communications NPD
Activities The
Sponsorship brand
Ads
Direct marketing Brand
Database management
Production process
promotions Warehousing
Sales force Distribution & information
Retailers/licensees Systems
Dealers Packaging
Point of sale price
Source: H. Rubenstein (1996) ‘Brand first management’, Journal of Marketing Management, Vol. 12, 269–80


Slide 11.10

What is strategy?

• Purpose to focus and integrate team effort and
permit delegation
• Groups/teams in NPD
• Variety of inputs, including mission, objectives,
platforms, portfolio, differentiation, etc.


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What is differentiation?

• Why is differentiation important?
• Differentiation related to competencies of the firm
• Types of differentiation and cost leadership


Slide 11.12

Product differentiation

• Product uniqueness and novelty
• Technically superior
• Product quality
• Product attractiveness and design
• High performance to cost ratio


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Product differentiation (Continued)

• Form • Durability
– size, shape, physical structure – expected operating life
• Features – balanced with technological
obsolescence
– supplements basic function
• e.g. car CD player, trim level, • Reliability
child seats – probability of
• Performance quality malfunction/failure
– appropriate to target market • Repairability
and competitor performance – ease of repair, cost, technical
levels support
• Conformance quality • Style
– each product identical, meets – aesthetics – look and feel
the promised specification and
– distinctive and difficult to copy
performance


Slide 11.14

Product-based competition

Five basic strategies:
• Product proliferation (e.g. Sony, Honda)
– Many new products simultaneously or in close succession
– Market response determines support (supporting those products that prove successful)
– Cover all segments and block new entrants (market coverage)
• Value (e.g. Toyota/Lexus)
– New quality/cost trade-off curves
– Continuous improvement/re-engineering (maintain leadership)
• Design (e.g. Braun, Harley-Davidson)
– Aesthetics, touch, ease of use, etc.
– Engineering design + aesthetic design
• Innovation (e.g. Canon, 3M, Merck)
– Technological and marketing innovations
– Either market pioneers or fast-followers
– Utilise both radical and incremental innovation
• Service (e.g. Otis Elevators, SAS)
– Customer relations, physical distribution, after-sales service.

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Differentiation vs standardisation

• Key questions:
– How to deliver distinctive products to market whilst
building on core capabilities and conserving
development, production and marketing resources?
– How to balance the needs of high-volume
manufacturing/service delivery with the needs of
individual customers?
• Product platforms:
– Common platforms for a range of products
– Shared components/parts, production processes,
knowledge, people and relationships
– Improves efficiency.

Slide 11.16

Product platforms

High

Audi TT

Audi A3
Single platform
Product
price Many common parts
VW Golf

Seat Leon

Skoda Oktavia
Low

Overall cost leadership Differentiation

Generic strategy


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Product portfolios (VAG)

Volkswagen
Group

Volkswagen Volkswagen Audi Seat Skoda Bentley Lamborghini Bugatti
 Fox
Commercial  A3  Alteo  Fabia
 Brooklands
 Murcielago  EB110

 Lupo
Vehicles  A4  Alhambra  Octavia  Gallardo  Veyron
 Caddy
 Arnage
 Polo  A6  Toledo  Roomster
 Continental
 Transporter
 Golf  A6  Leon  Superb
 Crafter  Azure
 Passat  A8  Ibiza
 Carravelle
 Jetta  R8
 California
 Beetle  Q7

 Touran  TT

 Phaeton

 Touareg


Slide 11.18

Product platforms

• The benefits of product platforms include:
– Increased product variety and ability to serve multiple
market segments (mass customisation)
– Greater speed to market
– Improved management of demand and uncertainty
– Accommodating differential technology change
– Reducing production costs
– Supports late-stage differentiation of products
– Reduces service infrastructure requirements
– Greater speed and efficiency in technological learning
and knowledge creation.


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A Successful Strategy:
• Helps achieve coordination among
functional areas of the organization.
• Defines how resources are to be
allocated.
• Leads to a superior market position.


Slide 11.20

Elements of a Product Strategy

1. Statement of the objective(s) the product should
attain
2. Selection of strategic alternative(s)
3. Selection of customer targets
4. Choice of competitor targets
5. Statement of the core strategy
6. Description of supporting marketing mix.
7. Description of supporting functional programs


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Hierarchy of Objectives
Company Mission/Vision
Level 0
Corporate objectives
Level I
Corporate strategies

Divisional objectives
Level II
Divisional strategies

Product/brand objectives
Level III
Brand strategies

Program objectives
Level IV
Tactics

Slide 11.22

Total Product Concept
Potential Generic
product product

Expected
product

Augmented
product


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Five Areas for Differentiation
1. Quality
2. Status and Image
3. Branding
4. Convenience and Service
5. Distribution


Slide 11.24

Brand Equity
Reduced marketing
costs
Trade leverage

Brand Attracting new
Brand
loyalty customers
loyalty • Create awareness
• Reassurance
Provides value to
customer by
Time to respond to enhancing
competitive threats customer’s:
• Interpretation/
Anchor to which processing of
other associations information
can be attached • Confidence in the
purchase decision
Brand Familiarity-liking
Brand • Use satisfaction
awareness
loyalty Signal of substance/
commitment
Brand to be
considered
Brand
Brand
equity
loyalty


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Brand Equity cont.
Brand Reason-to-buy
Brand
equity
loyalty Differentiate/
position Provides value to
Perceived
Brand
quality Price firm by
loyalty
enhancing:
Channel member
• Efficiency and
interest
effectiveness of
Extensions marketing programs
• Brand loyalty

Help process/ • Prices/margins
retrieve • Brand extensions
information
• Trade leverage
Brand
Brand Reason-to-buy • Competitive
associations
loyalty advantage
Create positive
attitude/feelings
Extensions

Other
Brand
proprietary Competitive
loyalty
brand assets advantage


Slide 11.26

WHAT IS A BRAND?

• Brands include all names, terms, symbols or
designs - all are used to identify and differentiate the
goods of one seller from those of competitors.


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Branding
• Brand Extension — launching a new product line in another
product class, making use of the existing brand name, eg.
Cadbury‟s ice cream
• Success is more likely if there is a logical tie between the core
brand and the extension (Cadbury example above). The
extension needs to be carefully evaluated as to any negative
impact on the brand equity of the core brand [eg, if a bank
introduced a defective security service as a brand extension,
this might make people think the bank is not secure and
therefore weaken the core (banking) brand].


Slide 11.28

Brand loyalty
• Brand loyalty reflects both a positive attitude to a
brand and the behavioural repeat purchase probability
of buying the same brand.
• Bednall, Walker and Grant (see pages 163-164 of
text) suggest that most consumers are co-loyal — that
is loyal to a small number of brands that dominate
their evoked set.
• Scan Exhibit 8.4 from the text — contrast the type of
products at the top and bottom.


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BENEFITS OF BRANDING

TO BUYER:
• Help buyers identify the product that they like/dislike.
• Identify marketer
• Helps reduce the time needed for purchase.
• Helps buyers evaluate quality of products especially if unable
to
• Judge a products characteristics.
• Helps reduce buyers perceived risk of purchase.
• Buyer may derive a psychological reward from owning the
brand, ie Rolex or Mercedes.


Slide 11.30
BENEFITS
TO SELLER:

• Differentiate product offering from competitors
• Helps segment market by creating tailored images, ie Contact
lenses
• Brand identifies the company‟s products making repeat
purchases easier
• Reduce price comparisons
• Brand helps firm introduce a new product that carries the
name of one or more of its existing products...half as much as
using a new brand,
• lower costs: designs, advertising and promotional costs.


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EXAMPLE

• Easier cooperation with intermediaries with well known
brands
• Facilitates promotional efforts.
• Helps foster brand loyalty helping to stabilise market share.
• Firms may be able to charge a premium for the brand.


Slide 11.32

MANUFACTURERS’ BRANDS:

• Initiated by the producer.
• 85% food items, all cars, 75% major appliances, more than
80% patrol
• Requires the producer to be involved in distribution,
promotion, and to some extent, pricing.
• Brand loyalty is encouraged by quality, promotion and
guarantees.
• Producer tries to stimulate demand, encouraging middlemen to
make the product available (PULL)


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PRIVATE DISTRIBUTOR BRANDS:
• Initiated and owned by the resellers eg Bob Jane T-Mart for
tyres
• Manufacturers not identified in the product.
• Helps retailers develop more efficient promotion, generate
higher margins and increase store image.
• Wholesalers brands-IGA
• Retailers brands K-Mart, Target, Safeway


Slide 11.34

GENERIC BRANDING

„no brand‟ strategy - identifies product by contents

small % of sales

cheaper

promotion and packaging costs lower


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FAMILY BRANDING

• single name for all products in the product mix

• reduces cost of introducing new products

makes promotional efforts more efficient


Slide 11.36

TRADE NAME WITH A BRAND NAME

allows all brands to benefit from the company trade
name while maintaining a distinctive and descriptive
label


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REASON FOR INCREASE IN PRIVATE
BRANDS:
• Increasing prices of MB in 1990s.
• Increasing Quality of PB
• Increasing Promotion of PB
• PB offer retailers higher margins
• Offer regional products

Manufacturer brands are responding with:
• Reduced price
• Promotions focus on quality and directed at PL
• New product launches, line extensions.
• Focus on core products


Slide 11.38

DESIRABLE QUALITIES FOR A
BRAND NAME

• It should suggest something about the products' benefits and qualities. eg:
Beautyrest, Slumberland, Sunkist, Spic & Span, Pure & Simple.
• Should be easy to pronounce, recognise and remember. eg: Clix, Jatx,
Ritz.
• Should be distinctive. eg: Kodak, Unisys.
• Should translate easily in foreign languages or has no meaning eg Exxon.
• It should be capable of registration and legal protection. Name must be
unique.
• Guard against a brand name becoming a generic term used to refer to
general products category. Generic cannot be protected. eg Aspirin


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BRANDS

• Brands allow customer to recognise product.
• Brands encourage the use of preselling and reduce the
need for personal contact at the retail level.
• Brands simplify introduction of new products.
• Example of early brands that still survive in Australia -
Nugget, Vegemite, Vaseline, Velvet Soap.
• Family Brands are groups of products sold under one
label by a single firm. eg: Heinz, Arnotts, GM
Holden, Black & Decker (w hich has scrapped the w ell
know n GE brand to market under B & D).


Slide 11.40

BRAND MEANINGS

• Attributes. A brand elicits certain product attributes in the
minds of consumers.

• Benefits. The benefits may produce objective need-satisfiers,
such as increased safety, or psychological benefits, such as
enhanced self-esteem.

• Values. The benefits of the brand indicate that these things are
important to the consumer who chooses them.

• Personality. People personify brands and products.


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BRAND EQUITY

• Brand Equity Brands are used to:
create awareness,
build preference, and
ultimately, to command loyalty among
consumers.
• Companies with strong brands often attempt to build brand
portfolios by acquiring brands with strong brand equity from
other companies.
• Brand Name Selection requires careful attention to the needs
of the product for success in the competitive marketplace.


Slide 11.42

BRAND STRATEGY
Some Definitions
• Brand Extensions are any effort to use a successful brand name to launch
new or modified products.

• Multibranding offers a way to establish different features and appeal to
different buying motives.

• New Brands are created with a new brand name enters a new product
category

• Line Extensions occur when a company introduces additional items in a
given product category.

• Brand repositioning might require changing both a product and its image.


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EXAMPLE: Brand Extension
• When Coca-Cola first developed a low-sugar
coke it chose to market it under a new brand
name - TAB.
• When PepsiCo came out with Diet Pepsi it
captured much of the market. Coca-Cola
reacted by introducing Diet Coke
• Brand / Line extension


Slide 11.44

BRAND IMAGE OPTIONS: EXAMPLES
• Multiproduct (Family Brand) - one name for a range of company products
eg Honda: Civic, Accord, Prelude, Legend.
Uncle Tobys, Sharp, Penfolds
• Multibrand - one company with many brands
CUB- Vic Bitter, Melb Bitter, Carlton Cold
• Reseller Brands - David Jones Fashion, Bob Jane brand of tyres
• Mixed (use a variety of strategies) eg Colgate-Palmolive has multibrand
detergents (ColdPower, Fab, Dynamo) and uses multiproduct branding in
toothpaste
• Generic (minimises brand image except for pricing)
eg Farmland, Black & Gold


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BENEFITS OF VARIOUS STRATEGIES

• Family Branding
- Single name for all products in the product mix
- Reduces cost of introducing new products (carry-over
effects)
- Makes promotional efforts more efficient
• Generic Branding
- Promotional and packaging costs are lower
- Goods are cheaper


Slide 11.46

BENEFITS SOUGHT FROM BRANDING

• consistency of customer perception
• positive image
• opportunity for leverage
• standardisation of quality
• opportunity for preference generation
• loyal following


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BRAND LEVERAGING

Moving a successful name from one product category
into another

Eg Colgate launched the Palmolive brand leveraging it
from its core markets of soap and dishwashing
detergents into hair-care, skin lotion, deodorants and
automatic dishwashing liquids.
Most of these being successful.


Slide 11.48

Why would a company wish to create
Brand Identity?

• To establish an image that differentiates it from competition
• To communicate qualities & attributes
• To facilitate recognition
• To shape customer perception and response to the product
• To establish preference for the brand
• To secure loyal purchase behaviour


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BRAND ASSETS: Loyalty

• Contributes to brand value - repeat buying in a
market that presents substitutes.
• In extreme form loyalty is an attachment. Insulates
brand from competitive pressures
• Helps consumers minimise “buying” effort
• Makes demand for product less price elastic
• Lowers marketing costs
• Results in higher margins and profits
• Gives you time to respond to competitive threats


Slide 11.50

BRAND ASSETS: Awareness

• Familiarity leads to confidence and hence reduces the risk
• assists one thru the buyer decision stages
• consumers tend to prefer brands with which they are familiar
• choice of a known brand provides consumer with justification
for decision


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BRAND ASSETS: Perceived Quality
• Inherent in a brand is a view of quality (good or bad)
• There is an association between the name and attributes
eg Gillette makes fine-quality razors
• A brand can become synonymous with a category
eg Xerox, Kleenex
• Brand has strong price associations that influence quality
perceptions eg Kmart is low in price and probably low in
quality


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