What is a product? A product is any offering by a company to a market that serves to satisfy customer needs and wants. It can be an object, service, idea,etc.
New Product Development Most new product development is an improvement on existing products Less than 10% of new products are totally new concepts.
Success rate of new products The success rate of new products is very low – less than 5%. ‘You have to kiss a lot of frogs to find a prince.” Product obsolescence is rapid with improvements in technology Shorter PLCs
Product Development Stages Idea generation Idea screening Concept development and testing Concept testing Conjoint analysis – to find out the best valued attributes by consumers
Business analysis The most customer appealing offer is not always the most profitable to make Estimate on costs, sales volumes,pricing and profit levels are made to find out the optimal price – volume mix. Breakeven and paybacks Discounted cash flow projections
Market testing Test markets Test periods What information to gather? What action to take?
Industrial goods classification Materials and Parts - raw materials - manufactured materials and parts Capital items Supplies and business services
Product Mix The assortment of products that a company offers to a market Width – how many different product lines? Length – the number of items in the product mix Depth – The no. of variants offered in a product line Consistency – how closely the product lines are related in usage
Product Line decisions Product rationalization Market rationalization Product line length too long – when profits increase by dropping a product in the line too short – when profits increase by adding products to the product line Line pruning – capacity restrictions to decide
Brand A name becomes a brand when consumers associate it with a set of tangible and intangible benefits that they obtain from the product or service It is the seller’s promise to deliver the same bundle of benefits/services consistently to buyers
Brand Equity When a commodity becomes a brand, it is said to have equity. The premium a brand can command in the market The difference between the perceived value and the intrinsic value
Levels of meaning Attributes Benefits Values Culture Personality Users
Brand Power Customer will change brands for price reasons Customer is satisfied. No reason to change. Customer is satisfied and would take pains to get the brand Customer values the brand and sees it as a friend Customer is devoted to the brand
Brand Equity – Competitive Advantages Reduced marketing costs Trade leverage Can charge a higher price Can easily launch brand extensions Can take some price competition
Managing Brand Equity Brand Equity needs to be nourished and replenished. We must not flog the brand for equity to be diluted or dissipated Store brands
Advantages of branding Easy for the seller to track down problems and process orders Provide legal protection of unique product features Branding gives an opportunity to attract loyal and profitable set of customers It helps to give a product category at different segments, having separate bundle of benefits It helps build corporate image It minimises harm to company reputation if the brand fails
Brand parity Consumers buy from a set of acceptable/ preferred brands
Umbrella Brand Products from different categories under one brand Dangerous to the brand if the principal brand fails Sometimes the company name is prefixed to the brand. In such cases the company name gives it legitimacy. The product name individualises it.
Naming the Brand Product benefits Product qualities Easy to pronounce Should be distinctive Should not have poor meanings in other languages and countries
Brand strategy Line extension – existing brand name extended to new sizes in the existing product category Brand extension – brand name extended to new product categories Multibrands – new brands in the same product category New brands – new product in a different product category Cobrands –brands bearing two or more well known brand names
Brand Repositioning This may be required after a few years to face new competition and changing customer preferences
Packaging Includes the activities of designing and producing the container for a product Packaging is done at three levels - primary - secondary - shipping
Packaging as a marketing tool Self service Consumer affluence Company and brand image innovation
Definition Product Life Cycle (PLC) deals with the life of a product in the market with respect to business or commercial costs and sales measures
Every Product has a limited life Product sales pass through distinct stages, each posing different challenges, Opportunities, and Problems to the seller Profits rise and fall at different stages of the Product Life Cycle Products require different Marketing, Financial, Manufacturing, Purchasing and Human Resource Strategies in each Life Cycle stage.
Introduction a. Costs are high b. Slow sales volumes to start c. Little or no competition - competitive manufacturers watch for acceptance/segment growth losses d. Demand has to be created e. Customers have to be prompted to try the product f. Makes no money at this stage Conti….
Growth a. Costs reduced due to economies of scale b. Sales volume increases significantly c. Profitability begins to rise d. Public awareness increases e. Competition begins to increase with a few new players in establishing market f. Increased competition leads to price decreases Conti…
Maturity 3. a. Costs are lowered as a result of production volumes increasing and experience curve effects b. Sales volume peaks and market saturation is reached c. Increase in competitors entering the market d. Prices tend to drop due to the proliferation of competing products e. Brand differentiation and feature diversification is emphasized to maintain or increase market share f. Industrial profits go down Conti….
Saturation and Decline a. Costs become counter-optimal b. Sales volume decline or stabilize c. Prices, profitability diminish d. Profit becomes more a challenge of production/distribution efficiency than increased sales
Strategies for the differing stages of the Product Life Cycle. Introduction. The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.
Growth Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise.
Maturity Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.
Decline At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.
Classification of New Products Marketing Innovations: The actual product is not changed and the habits of the consumer also need not to be changed, only a few alternatives are done. Eg. Packaging, branding, easy availability etc. Maggi Juices
Product Improvements when a little improvement is done to the existing product. Like 100 cc scooters, Tubeless tyres, Digi Cams etc. These are normally targeted to a new segment of buyers.
Technological Innovations personal Computers, Photo copiers Here early entrants enjoy the major market leadership.
New Product Development Transfer of Technology Penetration of New Market New Product Lines Product Line Extensions Cost Reduction Repositioning or New Product Launch
Transfer of technology This is more of an adoption of any product. New products are often launched on the basis of new technology. It can be acquired from the parent company or with foreign collaboration. Eg. Personal Computers
Diversification Eg. ITC venturing into Paper Products, FMCG Etc. Bombay Dieing Venturing into Real Estate Business.
Additions to existing product line Eg. Godrej extension from Durable like Refrigerators to Office equipment etc. Videocon entered into washing machine and Music Systems etc.
Improvement in existing product New product which offers superior performance than the existing one and replace it. Eg. Gramophones and record players have been replaced by cassette players and now CD players.
Cost Reduction New product which provides similar performance at lower cost. Classic Eg. Nirma
Product Re-launch Some times old products are re-launched with little improvements. Eg. Tata Tea, Maggie
New Product development process Idea Generation Screening Business Analysis Prototype Development Test Marketing Commercialization
Product, Classification of Products, Product Line and Product Mix
What is a Product? A product is any tangible, intangible offering that might satisfy the needs or aspirations of a consumer. A product has 3 basic levels Core Product: This answers WHY the buyer should have it. It is also called as Generic Requirement.
“ Purchasing agents do not buy drills, they actually buy its ability to make same size holes” Theodre Levit
Core Benefit The generic product concept has two key issues: Its consumers view of what a given product represents. The aspiration of consumer differ from place to place and time to time. Eg. For someone Washing Machine would be: comfort in washing the cloths, some, tough wash, some complete dryer…
Tangible Specifications Tangibility is added to the core product in the form of features, style, color, design, efficiency etc. Eg. The Color of the machine The Electricity consumption Detergent Consumption Capacity Quality ….
Augmented Features This fulfill more of psychological or esteem needs. Eg. Brand Name Services provided Warranty Credit Terms etc….
Classification of Products The classification of the product depends upon the TANGIBILITY and DURABILITY found in an offering. Typical classification of Product: Service Durable Non Durable
Non Durable Products Products that are consumed fast and are purchased on a regular basis. The consumer here spends minimum time and effort in comparing and buying the item. Consumer Products are further classified according to its use: Personal, Family and Household as Convenience, Shopping and Specialty.
FMCG Fast Moving Consumer Goods are the Non Durable Goods. Eg. Sot Drinks, Chips, Ice Creams etc…. The consumer shows minimum effort in buying these articles. FMCG is further sub divided into 3 Classes…
Staples These are goods purchased on a regular basis. Eg. Soap, Pulses, Toothpaste etc… Whenever the stock is about to end the consumer buys these products again.
Impulse Goods These are the goods which are purchased without planning or search… Our external stimuli provokes us to buy these products. Eg. Cold drinks, Chocolates, Chips…. Most of the time the consumers aim is not buying the product solely but when spots them, feels, attracted and ends up in buying them.
Emergency Goods These goods are purchased when the need arises. Eg. Umbrellas in rainy season, Pullovers in winters etc.. The marketers tries for a very good distribution chain, as the sales is not the same throughout and whenever the need arises, the product should be available at maximum places…
Characteristics of FMCG Consumers Point FMCG has a very low shelf life 1. Frequent Purchases : Salt, Rice, Chocolates 2. Low Involvement : The consumer will buy an alternative if the brand ask for is not available…. Exceptions to the rule: Products like Cigarettes, Personal Hygiene Products, Brand Loyalty.
Characteristics of FMCG Marketers Point High Volumes The volume of the product required is very high. Eg. An average family may require 3-4 Soaps a month… Imagine No. of family using it in the whole country??? If the organization cannot ensure high sales volume, they will have difficulties in surviving.
Low Margins As the product is required in high volume, there is an intense competition which makes the marketer sell the product with very less margin. They earn through high volume sales to maximize their turnover. The Key Becomes High Volumes Low Margins.
Extensive Distribution Networks Consumer preference in FMCG products are not that rigid. Recall plays a very important role. Brand Loyalty is not very high. Consumer allows shopkeeper to decide for him. Due to all this it becomes very important for the marketer to make its product available at maximum place possible.
High Stock Turnover It is a characteristic feature of FMCG. It is because these products are bought frequently or on a regular basis. Which in turn allows the marketer to rotate the capital invested.
Product Mix It is the set of product lines and items that a particular company offers to buyers. The Width of product mix refers to how many different product lines a company carries. Product Line: It is a group of products that is closely related because they perform a similar function, targeted at the same customer groups, marketed through same channel.
Eg. Products line of P & G : Detergents Bathing Soaps Shampoos Disposable Diapers etc. If, Pantene comes in 4 variants in 3 different sizes, the depth of the product mix becomes 4 X 3 = 12. This can also be referred as Stock Keeping Units (SKU’s)
Consistency of a product mix refers to how closely related the various product lines are to the end user. The Width, Depth and consistency of product mix enables the company to define the Product Portfolio.
Product Line Line Stretching Downward Stretch : It takes place when the company finds a particular segment (Lower) which is un-attended by the existing product. And introduces a product to cater that lower segment. Upward Stretch : It is when company a company enters Upper market through Line Extension.
Line Filling : A product line can be extended by adding more items to the existing range. Reasons: Reaching for more profits Trying to satisfy dealers who complain about lost sales due to missing items in the line Trying to utilize excess capacity Trying to offer a full line of the production Trying to plug holes in the positioning map.
Line Modernization : Modernization is carried out continuously as competitors are constantly growing and coming out with new products and ideas. In this process an Organization should not be too early, if so, It can harm the existing product or late so that competitors already have a hold in the market.
Line Featuring Its about featuring a particular product of the product line, so as to increase foot falls and then making the consumer exposed to other products too.
Growth Strategies for FMCG Multi-brand Strategy When a company nurtures number of brands in a single category. Strategy: To capture as much market share as possible by trying to cater as much possible segments. Eg. HUL Bathing Soaps: Names?????? P&G Shampoos? Names?????
Product Flanking Basically offering same product in different and price combinations to tap diverse market opportunities.
Brand Extensions This enables the company to enter new product categories more easily. Eg. Lifebuoy: Lifebuoy Plus, Lifebuoy Liquid, Lifebuoy Gold. Eg. Amul: Amul Butter, Amul Ghee, Amul cheese, Amul Milk, Amul Chocolates
Building Product Lines Companies add related new product line to the existing Line. Eg. Britannia: It has all Baked food items which are increasing. Have also added milk products to its kitty.
New Product Development Its due to ever increasing Competition in the market
Innovations in Core Product The life of a FMCG product is short. The marketer continuously tries to introduce new products and a consumer is also open to try new products.
Extending the PLC Expanding Markets by Usage Increase the Number of Customers Encouraging more consumption. Wide distribution Network
Advertising and Media Coverage Sales Promotion Sales Pomotions offer a direct incentive to buy more in the short term.
What is the Territory of the Brand? Six inches wide Grey and wet Mysterious
Contents Presentation Objective Understanding Branding From Products to Brands Brand Attributes Brand Management Brand Architecture Exercise Brand Building Brand Audit Connection Triangle Big Idea Evaluating Advertising
Presentation Objective To understand the facets / issues involved in branding To develop a framework for building a brand
Contents Branding Process Brand Building Understanding Branding
Module 1 Understanding Branding Understanding Branding Brand Building
Module 1 Understanding Branding Exercise Architecture Management Attributes Products to brands Understanding Branding Brand Building
Module I - Understanding Branding Exercise Architecture Management Attributes Products to brands Understanding Branding Brand Building
Module 1 - Stage 1 From Products to Brands Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 1 From Products to Brands A brand is more distinctive than a product It is first of all a name, a means of identification Secondly it s a set of added values offering both functional and psychological benefits Brand v/s. Product Above all ‘ a brand is a promise’ Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 1 From Products to Brands A Brand is a Promise “ … A seller’s promise to deliver consistently a specific set of features, benefits and services to buyers. Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 1 From Products to Brands …… .a short-hand that communicates powerfully & reduces uncertainty
Brand as an Asset “ If Coca Cola lost everything except for ‘the formula’ and its brand name , it could walk into any bank in the world and get $100 billion loan to start from the scratch” Fortune Magazine
Module 1 Understanding Branding Attributes Exercise Architecture Management Attributes Products to brands Understanding Branding Brand Building
Module 1 Understanding Branding Exercise Architecture Management Attributes Products to brands Name Logo Colours Essence Understanding Branding Brand Building
Module 1 - Stage 2 Attributes Immutable Law of Name In the long run the brand is nothing more than a name
Module 1 - Stage 2 Attributes Brand Name Short Kodak, Fuji CNN an AOL Time Warner Company Distinctive Toyota’s Lexus is distinctive.Toyota’s Luxury commonplace Orange was a striking name in a world of tel and coms Not mean anything rude or silly in another language Big Macs( McDonald’s) is a slang for big breasts in Canada Name Logo Colours Essence Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 2 Attributes Brand Name Avoid generic / line extended names Xerox as opposed to Haloids Paper Master Xerox (Copier) is powerful. Xerox Computer is not Changing your name will not overcome a bad strategy “ Monday” (Price Waterhouse Coopers ) Name Logo Colours Essence Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 2 Attributes A brand’s logotype should be designed to fit the eyes. Both eyes Immutable Law of Shape
Module 1 - Stage 2 Attributes Name Logo Colours Essence Brand Logo Simple logo, designed to fit both eyes Mercedes three star Logos with a horizontal bias Logo with a horizontal bias is esp. useful for retail brands Logo font has to be clear and legible A housewife does not buy Ariel because it is written in a specific font Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 2 Attributes A brand should use a colour opposite of its rival Immutable Law of Colour
Module 1 - Stage 2 Attributes The Cola Wars: Energy Vs. Peace
Module 1 - Stage 2 Attributes Brand Colours Colours have meanings Purple means royalty Red is energetic Blue is peaceful Opposite colours can differentiate Coke is red, Pepsi is blue Kodak is yellow, Fuj i is green Name Logo Colours Essence Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 2 Attributes Brand Colours.. Colours can help you stand out FedEx ’s orange and purple packet stands out in corporate blue Logo and colours help, but the power of the brand Essentially in the meaning of the brand name in consumer’s mind, its essence Name Logo Colours Essence Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 2 Attributes Most important thing for a brand is its single mindedness. Immutable Law of Singularity
Module 1 - Stage 2 Attributes Single-mindedness means consistency. Fresh and interesting manifestations of a single idea.
Module 1 - Stage 2 Attributes Brand Essence A brand must “leverage a compelling truth” Linux stands for freedom as opposed to Microsoft’s monopoly A brand should mean a single powerful thing: the essence Essence of Volvo is Safety Essence of Tata is trust Essence of Fevicol is bonding Name Logo Colours Essence Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 2 Attributes Brand Essence A brand should also be clear of what is not its essence In India, STAR NEWS is not a channel of the masses unlike STAR PLUS A brand should drive single mindedly its essence Volvo has been selling safety for 35 years Raymond has been selling the complete man for over 2 decades Essence of Dettol is protection against germs A brand loses its essence if it starts meaning a lot of things What is Miller :A regular,light,draft,cheap, expensive beer Name Logo Colours Essence Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 2 Attributes A brand should try to own a word in consumer’s mind Immutable Law of Word
Module 1 - Stage 3 Management Co-Brand Brands need to address a similar need segment Kellogg's Pop-tarts with Smuckers Jam Brands with complementary strengths: Seen often on the Net NY Times gives Amazon credibility Amazon makes NY Times look modern. Co-Brand Stealth Brand Fighting Brand Multi-Brand Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 3 Management Stealth Brand Brand building that attracts customer attention but not of rivals Home-to-home, word of mouth / PR, internet community building Krispy Kreme relies only on PR Good option when unsure of a new medium/market Little promotion for Maytag website as opposed to a buy.com. Maytag sold 1000s of Neptune washers on web Co-Brand Stealth Brand Fighting Brand Multi-Brand Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 3 Management Fighting Brand Pricing led branding option. Works as a competitive response. Smirnov (Heublein) Case Smirnov attacked by W’schmidt @ $1 less Heublein raised the price of Smirnov Heublein introduced Reiska(fighting brand) at the same price point as W’schmidt Heublein added Popov lower than both Co-Brand Stealth Brand Fighting Brand Multi-Brand Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 3 Management Fighting Brand Built as new, independent brand Prevents dilution of the leading brand HLL introduced Wheel to fight Nirma Co-Brand Stealth Brand Fighting Brand Multi-Brand Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 3 Management There is a time and place to launch a second brand Immutable Law of Siblings
Module 1 - Stage 3 Management Multi Brand Key to a multi-brand approach is to give each sibling a unique identity Time, Fortune,Life, Money, People Tempting to mash the brands and top it with corporate frosting Tata Salt,Tata Tea Second brand risks diluting equity Is Kingfisher Mild drinker more likely to be from Kingfisher or from Fosters? Co-Brand Stealth Brand Fighting Brand Multi-Brand Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage 3 Management Multi Brand.. Common product area focus Shampoos: Clinic Plus, Ayush, Sunsilk Single attribute segmentation Price:Maruti 800, Zen, Esteem Sibling creates a new category Herbal Anti-Dandruff category by Ayush Co-Brand Stealth Brand Fighting Brand Multi-Brand Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 Understanding Branding Attributes Exercise Architecture Management Products to brands Architecture Understanding Branding Brand Building
Module 1 Understanding Branding Attributes Exercise Management Products to brands House of Brands Endorsed Brand Sub Brand Branded House Understanding Branding Brand Building Architecture Architecture
Module 1 - Stage 4 Architecture Immutable Law of Contraction A brand becomes stronger when you narrow its focus
Module 1 - Stage 4 Architecture The Economist is red and daring. Provocative, brutally honest and non-conformist
Module 1 - Stage 4 Architecture House of Brands Often dictated by corporate strategy. Core competence of the firm is marketing / branding P&G is the prime example. Its “big” with the channel Multiple independent brands allows company to fill each niche Helps brand focus Gives an opportunity for the company to focus on each brand and contract its scope. Products to brands House of Brands Endorsed Brand Sub Brand Branded House Understanding Branding Brand Building Exercise Architecture Management Attributes
Module 1 - Stage 4 Architecture Endorsed Brand Endorsement used as a device to transfer brand assets from one brand(corporate) to another Titan from TATA, transferring trust Danger of diluting the equity of endorsing brand Best as a transitional strategy Gain, from makers of Ariel Products to brands House of Brands Endorsed Brand Sub Brand Branded House Understanding Branding Brand Building Exercise Architecture Management Attributes
Module 1 - Stage 4 Architecture Immutable Law of Expansion Brand’s power inversely proportional to scope.
Module 1 - Stage 4 Architecture The Volkswagen bus ad, talked only about ‘plenty of room’
Module 1 - Stage 4 Architecture Sub Brand Inside out branding.Company pushes core brand in different directions Sub-branding can destroy what branding builds Donna Karan menswear, DKNY, DKNY menswear, DKNY kids Products to brands House of Brands Endorsed Brand Sub Brand Branded House Understanding Branding Brand Building Exercise Architecture Management Attributes
Module 1 - Stage 4 Architecture Immutable Law of Company Brands are brands, companies are companies. There is a difference.
Module 1 - Stage 4 Architecture Branded house Consumers buy brands, not companies Danger of branded house, being many things to one group of people Virgin? Does “Virgin trains” work? May motivate trade, so might be useful for PR purposes with trade/other stakeholders P& G way Products to brands House of Brands Endorsed Brand Sub Brand Branded House Understanding Branding Brand Building Exercise Architecture Management Attributes
Module 1 Understanding Branding Attributes Exercise Architecture Management Products to brands Exercise Understanding Branding Brand Building
Module 1 Understanding Branding Two brand positioning within the same brand family?How do we reconcile the two positions? The options available to us Single brand Stand Alone New Brand Transfer of Brand Assets from an existing brand What are the pros and cons of each option ? Exercise
Module 1 Understanding Branding Attributes Architecture Management Products to brands Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Exercise
Module 1 - Stage5 Exercise Single Brand Family ‘ Stand-alone’ New Brand Transfer of Brand Assets ‘x from y’ Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage5 Exercise Option : Single Brand family Constant values / different products Dettol antiseptic / soap / hand wash Crest toothpaste / Mouth wash (But not chewing gum) Differentiate on product usage IBM Value Point - Entry level purchase Gillette Good News Line - Disposables Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage5 Exercise Option : Single Brand family Use as umbrella branding TATA Trust SONY Electronic technology But Taj from TATA for Performance segments Difficult for a single brand to straddle Performance and Price segments Surf entry in popular segment with Surf Easywash. Withdrew after 2 yrs Gap changed Gap Warehouse to Old Navy Clothing due to perceived brand erosion Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage5 Exercise Option : Single Brand family Learnings + Cheaper than creating a new brand - Difficult to stretch brands across Price and Performance - Risk of eroding present position - Lose opportunity of creating a new segment Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage5 Exercise Option : ‘Stand-alone’ New Brand Levers enters popular segment successfully with Wheel as opposed to Surf Easywash Levers use of brand-wise differentiation of brand values and attributes to target consumer segments- Surf / Rin / Wheel / OK detergents Toyota launches Lexus to enter the Premium Auto segment credibly Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage5 Exercise Option : ‘Stand-alone’ New Brand Learnings + Clear brand identity, values and assets + Create new opportunity of a range possibility in Popular segment + Leave present brand secure - Expensive to build brand assets - Difficult to build trial as a stand-alone Brand Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage5 Exercise Option: Transfer of Brand Assets ‘x from y’ Titan (from Tata’s) Worked well for Titan Sonata (from Titan) Eroding equity of Titan Gain (from the makers of Ariel) Apparently a ‘Transitional Strategy’ Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage5 Exercise Option: Transfer of Brand Assets ‘x from y’ Learnings + Cheaper than developing a new brand + Can be used as a ‘Transitional Strategy’ - Still a risk of eroding present image - Possible mix of values and assets Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
Module 1 - Stage5 Exercise Branding Options: Conclusion ‘ Single Brand family possible if: Different products / similar values Differentiate on end use ‘ Stand-alone ‘New Brand’ best option to straddle values - however it is expensive to create a new Brand ‘ Transfer of Brand assets ‘x from y’’ possible, especially as a transitional strategy - still a risk of eroding present values and mixing values and assets Options Single Brand Family Stand Alone Brand Transfer of Brand Assets Understanding Branding Brand Building Exercise Architecture Management Attributes Products to brands
A concept so simple, people have difficulty in understanding how powerful it is!
What is Positioning ? Positioning is owning a piece of consumer’s mind Positioning is not what you do to a product It’s what you do to the mind of the prospect You position the product in the prospect’s mind ‘ It’s incorrect to call it Product Positioning’ – Ries & Trout
Positioning Colgate Is Protection Gillette Is Quality LUX Is Glamour AXE Is Sexual Attraction Pond’s DFT Is Confidence Examples
Brand Identity and Brand Image Brand Positioning
“ To position a product/service in the minds of consumers relative to competitors” Ries and Trout
A ‘reason to be’ “The brand has to be distinctive, relevant and appealing to its target audience”
Positioning Positioning refers to ‘how organizations want their consumers to see their product’ Positioning = Segmentation + Differentiation Slotting your product in the consumer’s mind. Who am I? Why buy me? “ Positioning starts with the product….But Positioning is not what you do to the product. Positioning is what you do to the mind of the prospect” - Ries and Trout
Why is Positioning Required ? The assault on our mind… The media explosion The product explosion The advertising explosion So little message gets through that you ignore the sender and concentrate on the receiver Consumers only accept what is consistent with prior knowledge or experience Very difficult to change the perception once formed
How it is done… The easy way to get into a person’s mind is to be first Xerox , Kodak , Polaroid, Sun TV, The Hindu If you didn’t get into the mind of your prospect first, then you have a positioning problem Better to be first than be best Even if you are not first, be the first to claim a unique position in the mind of the consumer Miller Lite – first lite beer and Beck’s Beer – first beer popular in Germany In the positioning era, you must, however, be first to get into the prospect’s mind
The basic approach is not to create something new or different, but manipulate what’s already in the mind To find a unique position, you must ignore conventional logic Conventional logic says you find concept inside product Not true; look inside prospect’s mind You won’t find an uncola idea inside 7-up; you find it inside cola drinker’s head How it is done…
Brand Positioning : Complan Complan for what? Enriched with 23 vital nutrients in right quantity and proportion essential for healthy growth Complan for whom? A brand for growing children Complan for when? Higher nutrition needs Packaging Complan Boy / Complan Girl
Boost for what? For fitness and health Boost for whom? For the young and the sporty Kapil Dev, Sachin Tendulkar and Virender Sehwag Boost for when? Whenever and wherever energy is needed Packaging Tall cylindrical straight jar that symbolizes athleticism and fitness Brand Positioning : Boost
Brand Positioning : Boost “ Boost is the secret of my energy”
Bournvita for what? For nutrition and health Bournvita for whom? For a growing kid who is healthy, intelligent, energetic and glowing Bournvita for when? Everyday to ensure you are energetic throughout the day Packaging A tall cylindrical straight jar that reflect energy, enthusiasm and vigour Brand Positioning : Bournvita
Positioning of a leader Do not boast of being number 1, implies insecurity about leadership (Coke – “the real thing”) Single Position Strategy – Each brand occupying a single unchanging position in the mind of the customer Cheaper to introduce new brands Introduce new brands instead of changing existing – Safari and Sumo Change is inevitable and leader must be willing to embrace change.
Positioning of a follower It is always better to be first and establish leadership If the product is not first, then it must find an unoccupied position “ Munch ka crunch Mahaan” – Chocolate with a crunch “ Avis is only No. 2 in rent-a-car, so why go with us? We try harder.” A product that seeks to be everything to everyone will end being nothing to everyone
‘ You concentrate on the perceptions of the prospect, not the reality of the product’ - Al Ries & Jack Trout
‘ It’s difficult to change behaviour, but easy to work with it’
Understand the role of words and how they affect people Turtle vs. Lexus Be careful of change Disney Need vision Long term / Not on technology or fad What you need…
Guidelines Start by looking not at the product but at the position in the market that you wish to occupy, in relation to competition Think about how the brand will answer the main consumer questions What will it do for me that others will not? Why should I believe you? Try to keep it short and make every word count and be as specific as possible Vagueness opens the way to confused executions
Guidelines Keep the positioning up-do-date Give as careful consideration to change as you did to the original statement Look for a Key Insight ! An ‘Accepted Consumer Belief ’
What is Key Insight? Key Insight is ‘seeing below the surface’ / ‘seeing inside the consumer’ Insight expresses the totality of all that we know from seeing inside the consumer An insight is a single aspect of this that we use to gain competitive advantage By identifying a specific way… That the brand can either solve a problem or Create an opportunity for the consumer
Key Insight ‘ I wish to get married to a handsome prince’
Key Insight ‘ Fragrance of my current talc does not last long and I miss opportunities to enjoy life’
Key Insight ‘ Soap leaves my skin feeling dry and tight’
More on Key Insight… It will require two separate thoughts to be related to each other in a new and fresh way Insight will generally be enduring Often the process will lead to several insights The one to use is the one that offers to be the source of greatest competitive advantage
More on Key Insight… No need for insight to change if you have identified the higher-order needs of consumers Keep asking ‘why’ to find the real need behind the obvious insight Remember, the insight is always the basis for a brand’s positioning
Proper Positioning Proper positioning Clarifies what the Brand is all about How it is both unique and similar to competitive brands Why customers should purchase and use the Brand
In order to Position a Brand… … you must decide :- Who the Target Consumer is Who your main competitors are How the Brand is similar to your competitors How the Brand is different from your competitors Where do you get this information? Your BRAND INVENTORY!!
Communicate category membership This is the “frame of reference”, where customers can activate what they know about the category and how apply it. How? Communicate category benefits Compare your product to exemplars Rely on product descriptor How do I begin to Position my Brand?
The 3C’s of Positioning Be C rystal clear Be C onsumer-based Be relevant and credible to the consumer Write in consumer language and from consumer’s view point Be C ompetitive Be distinctive Focus on building brand elements into powerful discriminator Be persuasive Be sustainable
And then… The brand name! The name is the first point of contact between the message and the mind ‘ The brand name is a knife that cuts the mind to let the brand message inside’ – Ries & Trout
FOCUS OF POSITIONING Attributes and benefits of the product Competition Product user Product use or application Product class Cultural symbols
Identify Competitors. Determine most important attributes consumers use in choosing a brand. Determine consumers’ perceptions of competitors. Determine perceptions of your brand What is the ideal brand for your market segments? Assess best positioning strategy Track image of brand over time STEPS IN POSITIONING
Brand Positioning Brand Positioning Brand positioning is all about identifying the optimal location in our customers’ minds for our Brand and our competitors. Proper positioning makes it easier to facilitate understanding of our Brand. Taken to its’ logical conclusion, you might think of the Principle as an indicator of a brand’s position.
First Steps…. The first step is to identify and establish Brand positioning and brand values (Keller) Positioning is the foundation for creating and fostering the desired knowledge and perceptions of your customers remember our 3 types of associations in memory? We can really only manage one (positive), can respond to a second (negative), and have no control over the third (idiosyncratic)
Identifying and establishing Brand Positioning The Integrated Brand Model Six elements that define a brand Unified Leverage each other Brand Drivers a function of Organization Drivers These six elements serve as a “roadmap” to our Brand Equity model At every step, we can figure out what to do from our Brand and Organization Drivers
Brand Positioning Guiding Principles…. 1. A brand's positioning should be updated every three to five years, or as often as needed to update the company's overall growth strategy. 2. Positioning should drive all of an organization's brand strategies, as well as revenue and profit streams. 3. Senior management has to lead the charge in implementing a brand's positioning. 4. Employees, not advertising agencies, bring a brand positioning to life. 5. A strong brand positioning is customer driven and fits with customer perceptions of the brand.
Points of Parity? The frame in which we are competing! E.g. Subways Dove Positioning - The Process….
POP and POD Points-of-difference – unique brand values Desirable Deliverable Points-of-parity– shared brand values Necessary Competitive
Nuts and Bolts How do I decide on my PODs and POPs? POPs Analysis of category What attributes do all of my competitors have? I probably need to have those, or my competitors automatically have a POD POPs get you included in category PODs are more difficult Don’t use PODs that are product centric (dominate competition) but customer centric (uniquely address need of customer)
POP and POD POD (Point of Difference) Strong, favorable, unique brand associations May be any kind of attribute or benefit Two types of PODs Attribute Based Functional, performance related differences Image Based Affective, experiential, brand image related differences
POP and POD POP (Point of Parity) Associations that are shared with other brands Two types Category: attributes that are required to include your product as a member of that category Competitive: POP that negate your competitors PODs POPs can be “good enough”, but PODs should be “superior
POP AND POD: BMW over the years 1971 1975 1985 1991 International Desirability Fun to drive Economical Affluence, exclusivity Fun to drive Affluence, exclusivity Fun to drive
Establish POP and POD in marketplace Difficulty: Many attributes that make up POP and PODs are negatively opposed Low price vs. High quality Tastes Great vs. Less filling Separate the attributes Leverage equity in another entity Redefine the relationship
Brand Positioning Statement For women ages 25-55, Loreal Revitalift Anti-wrinkle and firming cream reduces facial wrinkles and firms your skin. NO REASON WHY!
Positioning Strategies Product Attribute or Benefit approach Price-Quality approach User approach Product category approach Competitor approach
Product Attribute or Benefit approach Volvo stands for ‘safety’ BMW for ‘performance’ Mercedes for ‘luxury’ Dermi Cool (prickly heat powder that cools)
Positioning Strategies USER APPROACH Loreal with Aishwarya Rai, Revlon with Cindy Crawford etc. The Marlboro Man, Thums up is also trying to reinforce its ‘for grown ups’ image by using a ‘macho’ celebrity route (Akshay Kumar). PRICE_QUALITY APROACH Baja Auto: “ Value-for-money, for years”. Zenith Computers: “ MNC quality, Indian price.”
Positioning Strategies PRODUCT CATEGORY APPROACH Diet beers (from kingfisher) and ice beers (from United Breweries) as against the regular beer. COMPETITOR APPROACH Captain Cook (free flow vs. Tata Salt) Savlon (does not sting vs. Dettol)
1. The law of Expansion The power of a brand is inversely proportional to its scope Marketers constantly run branding programs in conflict with people’s perception of their brands. Customers want brands that are narrow in scope and are distinguishable by a single word, the shorter the better.&quot;
Chevrolet used to be the largest selling brand in the US with 1,718,839 cars sold in 1986. But trying to be all things to everyone undermined the brand and today Chevy sells less than a million cars and is no longer the market leader.
2. The law of Contraction A brand becomes stronger when you narrow its focus
In a few short years Starbucks has become one of US’s best known and most popular brands. Narrowing one’s focus is not same as carrying a limited line. Starbucks offers thirty different types of coffees.
3. The law of Publicity The birth of a brand is achieved with publicity, not advertising Advertising is best used to maintain a brand, but it is very difficult and expensive to launch a new brand through advertising alone The best way is to be first in a new product or service category, and reap the attendant publicity
Anita Roddick created the concept of Body Shop in 1976 around the concept of natural cosmetics made of pure ingredients, no animal testing and kind to environment and indigenous people. With no advertising but massive amounts of publicity, it is today a powerful global brand.
4. The law of Advertising Once born, a brand needs advertising to stay healthy
A consistent theme of Goodyear advertising over the years has been #1 in tires. So who makes the best tires? It must be Goodyear thinks the customer. It’s the leader.
5. The law of the Word A brand should strive to own a word in the mind of the consumer If you want to build a brand, you must focus your branding efforts on owning a word in the prospect's mind. A word that nobody else owns. Examples: Mercedes = prestige; Volvo = safety; Kleenex = tissue; Xerox = copier; .
Federal Express became successful by becoming the first air cargo carrier to narrow its focus on overnight delivery thereby owning the word overnight in customers minds. FedEx has become synonymous with overnight delivery.
6. The law of Credentials The crucial ingredient in the success of any brand is its claim to authenticity. The best claim is being the leading product or service in your category, because consumers assume that if it is a leading seller, it must be good Never forget leadership. No matter how small the market, don't get duped into simply selling the benefits of the category There are also the long-term benefits of leadership. Once you get on top, its hard to lose your spot.
In 1942, Coca Cola launched an Ad Campaign “ The only things that tastes like Coca Cola is Coca Cola Itself. It’s the real thing.” It has used the real thing slogan over the years to claim its authenticity.
7. The law of Quality Quality is important, but brands are not built by quality alone In fact, most people have no idea as to the &quot;real&quot; quality of a product or service. Is a Rolex really better at keeping time than a Timex? How do you know?
Rolex has become the world’s best known and best selling brand of luxury watches. Does quality have anything to do with its success? Probably not. Does Rolex make high quality watches? Probably. Does it matter? Probably Not.
8. The law of the Category A leading brand should promote the product or service category, not the brand. This may seen counter-intuitive, but the best way for the brand leader to build sales is to promote the category, not their specific brand.
Eatzi’s is the first brand in the new category it calls the meal market. Jointly owned by Brinker international and Phil Romano, Eatzi’s focuses on restaurant quality food primarily for take out consumption.
9. The law of the Name In the long run, a brand is nothing more than a name
One of the world’ most powerful brands, Xerox demonstrates many of the important laws of branding, including being the first in its category with a short unique name , so much to become generic for copying. How ever when it put its name to computers the result was huge losses
10. The law of Extensions The easiest way to destroy a brand is to put its name on everything
With a powerful marketing program, Miller high Life was rapidly gaining on market leader Budweiser. ( It got within 20% of King of Beers) Then it introduced a bevy of line extensions and stopped Miller High Life cold.
11. The law of Fellowship In order to build the category, a brand should welcome other brands
One of the best locations for a number two brand is across the street from the leader. The best place for a Planet Hollywood is right across the street from its biggest competitor, Hard Rock Café. Both brands will benefit.
12. The law of the Generic One of the fastest routes to failure is giving a brand a generic name Generic names (i.e. names describing the product or service category, such as &quot;Wine Coolerz&quot;), do not strongly position the product or service within the category, and are thus liable to confuse potential customers.
Blockbuster Video is a good brand name for a video rental store while General Video Rental is not. Brands should Avoid generic names like the plague. Yet you see a large number of such generic names especially in the retail area.
13. The law of the Company Brands are brands. Companies are companies. There is a difference. Brand names should always take precedence over company names. Consumers buy brands, they don't buy companies. So when a company name is used alone as a brand name like GE, Xerox, Intel customers see these names as brands.
Does Tide need the corporate endorsement of company name Procter & Gamble? Probably Not. Will the endorsement hurt the brand? Probably not. But Corporate endorsements are for the trade , not for customer’s enlightenment.
14. The law of Sub brands What branding builds, sub branding (i.e. brand extensions) can destroy.
Holiday Inn has become a mega brand with the launch of sub brands like Holiday Inn Express, Holiday Inn Select, Holiday Inn Garden Court etc. This sub branding is eroding the power of core brand.
15. The law of Siblings There is a time and a place to launch a second brand. The key to a family approach is to make each sibling a unique individual brand with its own identity. Resist the urge to give the brands a family look or identity. You want to make each brand a different and distinct as possible.
When Honda wanted to introduce an expensive car, it didn’t call the brand Honda Plus or Honda Ultra. It developed a new brand called Acura which became a huge success. As a matter of fact , it became the largest selling imported luxury car in US.
16. The law of Shape A brand's logotype should be designed to fit both the eye. The ideal shape for a logotype or brand symbol is two and a quarter units wide and one unit high.
A customer sees the world through 2 eyes peering out of his head like looking out windshield of an automobile. For Maximum Visual Impact a logotype should be same shape as a windshield. Avis is almost perfect while Arby’s is too vertical.
17. The law of Color A brand should use a color that is the opposite of its major competitor's.
What color is a Tiffany’s box . It’s a distinctive Robin’s egg blue. All tiffany boxes are blue. If Tiffany had used a variety of colors for its boxes ,it would have lost a marvelous opportunity for brand name reinforcement with a distinctive color.
18. The law of Borders There are no barriers to global branding. A brand should know no borders.
Heineken exports it beer to some 170 different countries. In most of these countries, it is the largest selling high priced beer. It locally brews its beer in 50 countries.
19. The law of Consistency A brand is not built overnight. Success is measured in decades, not years
BMW has been ultimate driving machine for 25 years. What's more remarkable is the fact that it retained its strategy even while changing 3 advertising agencies. Change of agencies usually signals end of a brand’s consistency.
20. The law of Change Brands can be changed, but only infrequently and very carefully.
Citibank changed from a corporate bank to a consumer bank with plans of becoming the first global consumer bank. It took a while but was done. But a merger with Travelers Group threatened the entire branding process.
21. The law of Mortality No brand will live forever. Euthanasia is often the best solution.
Film Photography is slowly being replaced by digital photography. But Kodak refuses to face that reality. Instead it is trying to save its brand by using Kodak name on its Digital products.
22. The law of Singularity The most important aspect of a brand is its single-mindedness.
Volvo has been selling safety for over 35 years. In the process it has become the largest selling European luxury car. In the past decade, it has sold 849,348 cars in the US, outselling BMW and Mercedes Benz.
Definitions Measurable financial value that accrues to a product/service from successful programs & activities – Walker & Yankelovich A set of brands assets & liabilities linked to the brand’s name, symbol that add or subtract from the value it provides – David Aaker
Definitions The differential effect of brand knowledge on consumer response to the marketing of the brand
Brand Equity- Advantages Brand equity as a bridge Reflection of the Past Direction for the future Focus and Guidance
Sources of Brand Equity Brand Awareness- recognition & recall Learning advantages Brands become part of the consideration set Affects Choices of consumers
Sources of Brand Equity Brand Image & Association- link strong favorable unique associations to the brand Strength of brand association- attributes (descriptive features of product) & benefits (personal value & meaning attached to product) Favorability – relevant, distinct, belief Uniqueness – points of parity & points of difference
Consumer Based Brand Equity CBBE – differential effect that brand knowledge has on the consumers response to the marketing of that brand. 3 key elements Differential effect Brand knowledge Consumer response to marketing Power of the brand lies in the mind of the consumers.
Sub-dimensions of brand building blocks Salience Resonance Judgments Feelings Performance Imagery Loyalty Attachment Community Engagement Quality Credibility Consideration Superiority Warmth, Fun Excitement, Security, Social Approval, Self-Respect 4 Brand Relationships (WHAT About You AND ME?) 1 Brand Identity (WHO Are You?) 2 Brand Meaning (WHAT Are You?) 3 Brand Response (WHAT About You?) User Profiles Purchase and Usage Situations Personality & Values History, Heritage, & Experiences Brand Characteristics & Secondary Features Product Reliability, Durability & Serviceability Service Effectiveness, Efficiency, & Empathy Style and Design; Price Category Identification Needs Satisfied
4 Steps to Brand building Identify the brand with customers based on need or product class Brand Meaning in the minds of customers by linking tangible &intangible to the brand Response Relationship
Brand Pyramid Identity Salience - Category Identification Need Satisfaction
Brand Pyramid Meaning Performance – Product Reliability, durability, serviceability Service effectiveness, efficiently, empathy Style & design Price
Brand Pyramid Meaning Imagery- User profiles Usage situations Personality & Values History & experiences
Brand Pyramid 3. Response Judgments- Quality Credibility Consideration Superiority Feelings- Warmth Fun Excitement Security Self Respect Social Approval
Building Customer-Based Brand Equity Brand building tools and objectives 2. Consumer knowledge effects 3. Branding Benefits
1. Brand building tools and objectives Choose Brand Elements Brand name Logo Symbol Character Packaging Slogan Memorability Meaningfulness Likability Transferability Adaptability Protectability
Brand building tools and objectives Developing Marketing Programs Product Price Distribution Channels Communications Tangible and intangible benefits Value Perceptions Integrate “Push” & “ Pull” Mix and match options Ref: Strategic Brand Mgmt. – Kevin Kelly
Brand building tools and objectives Leverage on secondary associations Company Country of origin Channels of Dist. Other Brands Endorse or Event Awareness Meaningfulness Transferability
Possible outcomes Greater Loyalty Less vulnerability to competitive marketing actions and crises Larger Margins More elastic response to price decreases More inelastic response to price increases Greater trade cooperation and support Increased marketing communication efficiency and effectiveness Possible Licensing opportunities More favorable brand extension evaluations
Managing Customer Brand Equity Define Brand hierarchy Define Brand- Product mix Enhance Brand Equity over time Establish B.E. over market segments
Managing Customer Brand Equity Define Brand hierarchy Principle of Simplicity Principle of relevance Principle of differentiation Principle of prominence Principle of commonality
Managing Customer Brand Equity Enhance Brand Equity over time Brand Reinforcements Brand revitalization
Managing Customer Brand Equity Establish B.E. over market segments Identify differences in consumer behavior Adjust Branding program
Module V: Pricing Strategies Setting the price, adapting the price, initiating and responding the price changes.
Price The Importance of Price to Marketers Most readily changeable characteristic of a product. Depicts revenues and quantities sold. Firm’s profitability & symbolic value to customers — prestige pricing. Importance due to: 1.) Product differentiation getting blunted 2.) Inter-firm rivalry 3.) Mature products and markets 4.) Customers’ value perception 5.) Inflation in the economy Costs Total - Revenues Total Profit Costs Total - Sold) Quantity x (Price Profits
Price Competition Emphasizing price and matching or beating competitors’ prices An effective strategy in markets with standardized products. Lowest-cost competitor (seller) will be most profitable. Allows marketers to respond quickly to competitors Price wars can weaken competing organizations. Nonprice Competition Distinctive product features: Service, Product quality Promotion, Packaging. When a product or service’s features are difficult to imitate by competitors and customers perceive their value Builds customer loyalty by focusing on non price features.
Buyers may respond to price 1. Value consciousness Concern about price and quality 2. Price consciousness Striving to pay low prices 3. Prestige sensitivity Being drawn to products signify prominence & status
Selection of a Basis for Pricing Dimensions of Pricing Cost , demand , and competition Bases for Pricing Type of product Market structure of the industry Brand ’ s market share relative to competing brands Customer characteristics
Selection of a Basis for Pricing Cost-Based Pricing Adding a rupee amount or percentage to the cost of the product Cost-Plus Pricing : Adding a specified rupee amount or percentage to the seller ’ s cost Markup Pricing: Adding to the cost of the product a predetermined percentage of that cost 2. Demand-Based Pricing Customers pay a higher price when demand for a product is strong and a lower price when demand is weak. 3. Competition-Based Pricing Frequent price adjustments competitors ’ prices
Pricing Strategies 1. Penetration pricing : Where the organization sets a low price to increase sales and market share. Demand is elastic. 2. Skimming pricing : The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. Demand is in elastic . 3. Competition pricing : Setting a price in comparison with competitors. 4. Product Line Pricing: Pricing different products within the same product range at different price points. The greater the features and the benefit obtained the greater the consumer will pay. Maximizes turnover and profits.
5. Bundle Pricing: The organization bundles a group of products at a reduced price. 6. Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. Example : Rs. 199 instead of Rs.200 7. Premium pricing : The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, porsche etc. 8. Optional pricing : The organization sells optional extras along with the product to maximize its turnover. This strategy is used commonly within the car industry.
Pricing Strategy Differential Pricing Charging different prices to different buyers for the same quality and quantity of product
Price Skimming Penetration Pricing 3. Product Line Pricing Establishing and adjusting prices of multiple products within a product line. 2.New Product Pricing
5. Professional Pricing Fees set by people with great skill or experience in a particular field 6. Promotional Pricing : a) Price leaders Products priced below the usual markup, near cost, or below cost b) Special-event pricing Advertised sales or price cutting linked to a holiday, season, or event c) Comparison discounting Setting a price at a specific level and comparing it with a higher price. d) Cash Rebate e) Low- Interest Financing f) Longer Payment terms g) Warranties & service contracts h) Psychological discounting
Pricing Tactics Hi Threat from Competition Lo Lo Hi Opportunity to raise price Maintain competitive level to emerge as brand leader Reduce price to achieve supremacy Opportunity to raise price above competition if market share high Reduce price if market share low / high to get higher penetration Reduce price below competition is market share is low and cost high Maintain Competitive price level if market share high Competitive / higher price if market share and cost high Price higher than competition if market share low and cost high Match competition if cost low, irrespective of market share
Pricing Moves in a Competitive Market Hi Relative Market Share Lo Lo Relative Cost Structure Hi Follow price changes Follow price changes Challenge competition: Lower the price quickly to protect share Follow the competitors Challenge competition by either dropping the price or quickly meet
PRICE WAR Price wars are frequent in industries: A) Intense competitive rivalry . B) Multilateral services of price-reductions. To dominate market through lower costs. Exploring more opportunities. Capital is intensive and products are homogeneous Examples: Airfares, Internet, Petrol, & Loans. To utilize excess plant capacity. Bankruptcy & survey. Response to a competitive attack
CUSTOMER TRAP Low-Quality Fragile-market Shallow-Pocket Trap Trap Trap PRICE INCREASE Over demand Cost Inflation 4 Techniques to increase price: Delayed quotation pricing Escalator clauses Unbundling Reduction of discounts
COMPETITOR’S RESPONSE TO Price Change Maintain price Maintain price & add value Reduce price Increase price & add value Launch a low –price fighter line.
Marketing Mix : 4 P’s Product PRICE Place Promotion Pricing is a very important strategic issue, as it is directly related to product positioning. Pricing affects other marketing mix elements such as product features, Channel decisions and promotion.
Steps to Price a Product (Not always same) Develop Marketing Strategy Market Analysis, Segmentation, Targeting and Positioning Marketing Mix Decision Define the Product, Distribution and Promotional strategies Manage Demand curve Demand Price relation
Cost All fixed and variable cost is calculated Environmental Factors PEST Set Pricing Objective Profit maximization, Revenue maximization, Price stabilization Determination of Price Use one or combination of the above factors and make a pricing structure, give discounts etc.
Pricing Objectives Current Profit Maximization This stresses on Current profits, taking into account revenue and costs Current Revenue Maximization Stresses on increasing the Current revenue, and not profits. The motive is to maximize market share and gain profits in long term.
Maximize Quantity This stresses to maximize the number units sold to decrease long-term costs as the experience curve predicts Maximize Profit Margin Stresses to increase the profit margin per unit, as, number of unit being sold may be low. Quality Leadership Use price to signal high quality, to position the product as quality leaders.
Partial Cost Recovery Organization which has other revenue sources may seek partial cost recovery. Survival Incase of market decline or overcapacity, the emphasis may be on to the survival in the market only and to cover the costs. Status Quo Price Stabilization to avoid price wars and maintain stable level of profits
Skim Pricing Skimming is the strategy used to pursue the objective of Profit Margin Maximization.
Skimming is most Appropriate .. Demand is expected to be relatively inelastic, ie. The customers targeted are not highly price sensitive Large cost savings are not expected at high volumes or it is difficult to predict the cost savings that can be achieved at high volumes The company does not have the resources to finance the last capital expenditure for high volume production with initial low profit margins.
Penetration Pricing, most appropriate … Objective is to maximize the quantity by lowering the prices. Demand highly elastic, ie. Customers are price sensitive, the demand increases as the price decreases. Economies of scale The product should be of mass appeal. Major threat by competition.
Pricing Methods Cost Plus Pricing Set the price at the production cost adding a certain profit margin. Target Return Pricing Set the price to achieve a target return on investment. Value Based Pricing Base the price on the effective value to the customers which is relative to the alternative product. Psychological Pricing Base the price on psychological factors of the consumer.
Price Discounts Quantity Discounts Offer to customers who purchase is large quantities. Cumulative Quantity Discount A discount that increase as the cumulative quantity increases. Seasonal Discount Based on the time when the purchase is made.
Cash Discount Extended to customer who pay there bill before a specified date. Trade Discount A functional discount offered to channel members for performing there roles. Promotional Discount A short term discounted price, offered to stimulate sales.
Leveraging Brand Equity One of the most important changes in the market is the proliferation of extensions.
Managerial Questions When considering entering a new product category, two important questions: 1. Should the firm use a brand extension strategy or a new brand strategy? 2. If the firm chooses to use a brand extension strategy, under what conditions will extensions be successful in capturing sufficient market share?
Why Extensions? Managers use extension strategies under the assumption that brand associations (e.g., quality, reliability, status) and affect (attitudes) will transfer to the extension.
Line Extension Strategy When a brand is used to brand a new product that targets a new market segment within a product category currently served by the parent brand. Examples: Coca-Cola diet Colgate for Kids Watt´s pear juice
Example Bisleri is the pioneering brand in the mineral water category. Originally, Bisleri used to come in a one litre bottle. But recently, Bisleri has exhibited a spate of innovations. The brand launched bottles of different sizes and quantities. The Bisleri portfolio now includes one litre, 1.2 litre, 1.5 litre and 5 litre bottles.
According to Gautam Singhania, Chairman and Managing Director, Raymond India : &quot;Raymond aims to acquire a dominant position in the apparel sector in the country. We believe that venturing into exclusive stores for our apparel brands will make our brands stronger and give the right impetus to our growth plans. We have enhanced our offerings under all our apparel brands to provide a complete wardrobe solution.&quot;
&quot;Men today want different solutions for different occasions - formalwear, relaxed work wear, evening wear, club wear, traditional wear, travel wear as well as sportswear . Our brands Park Avenue, Parx and Manzoni , have different categories to cater to this need. Thus, all our brands offer a solution to changing men's fashion needs at different price points,&quot; says Shreyas Joshi, President, Raymond Apparel .
Why Line Extensions? In most of the product categories including fast moving consumer goods, consumer durables and services, line extension has been the name of the game. It is an expansionist move. The firms seem to seek growth more vigorously.
Nine prominent reasons……… Customer Segmentation Customer need for variety Pricing Breadth Capacity Utilization Quick gains Competitive Reasons Trade Demands Counter Competition Image Benefits
Line Extension Risks There are several dangers associated with line extensions. Line Confusion - Marketers sometimes add products to their line without sound logic and reasoning, without any clear role and goal. This may confuse the customers and the retailers and will affect the brand’s owner company in the long run.
Line Extension Risks… Encourage Variety seeking – Brand loyalty is every marketers dream. By line extension, customers practice and become the habitant of variety seeking. Hence it influence brand switching behaviours. The loyalty is thus weakened.
Line Extension Risks… Success Myopia – An idea may be a grand enough to be converted into a full-fledged independent brand. But the lure of extension seems to be so strong that the ideas are brought into the market as line extensions. This implies loss of a winning asset in the long-term.
Line Extension Risks… Strained relations - When the lines expand, marketers tend to pressurize their trade partners such as wholesalers and retailers to carry the complete line in accordance with their wishes. The pressure appears to be applied more intensely at the retail level. The marketers seek adequate shelf space, promotion and information. But at the retailers end, it brings confusion and chaos. The result is the strained relations between the marketer and the retailer.
Effort to use a successful brand name to introduce a new product into a different product category. Examples: Nike MP4 player Colgate toothbrush Sony digital camera Brand Category Extension Strategy
BRAND EXTENSIONS Using an existing brand name to promote a product in a different category, is Brand Extension. The key difference between line and brand extension is the product category. In line extension the pdt. Category remains constant whereas in brand extensions product category is a variable.
EXAMPLE Ponds - Cold cream, Toilet soap Shampoo, Tooth paste, Moisturising lotion, Talc & Face wash. LG – Television, Refridgerators, Computer monitors, Microwaves, Air Conditioners, Washing Machines & Mobile phones. Park Avenue – Shirts, Shaving cream, Jeans, Belts, Perfumes, Soap & Razar.
Sub-Branding Strategy Using a new brand name in conjunction with a family brand name to introduce new products. Examples: Courtyard by Marriott Technics by Panasonic Levi’s Dockers Milo de Nestle
Co-Branding/Brand Alliance Strategies When two or more brand names are attached to a product. Examples: Compaq - Intel (“Intel inside”) Lan Chile-Mastercard-Banco Stgo
Example of Strategies Parent Brand: Salomon (ski-equipment) Line Extension: New type of skis Brand (Category) Extension: Salomon tennis racquet Sub-Brand: Avenger by Salomon Co-Brand: ingredient brand for grip, frame, or strings (Wilson and Goodyear rubber on soles of ProStaff Classic tennis shoes)
Why Brand Extension? Cost of New launches Promotional Efficiency Consumer Benefits Feedback effects Returns
Types of Extensions Product form extension – A product launched in a different form usually means line extension, but if a different product form constitutes an entirely different product category. Example: Amul milk Amul Condensed milk Real Juices Real Juice Concentrate
Types of Extensions Companion Product – The idea here is to capitalise 0n product complementarity. The consumer may view both the products jointly. Example : Colgate Dental Cream Colgate Tooth Brush Gillette Razors Gillette Shave forms Gillette After Shave
Customer Franchise A marketer may extend a product range in order to meet the needs of a specific customer group. J & J Baby Talc J & J Baby Oil J & J Baby Cream J & J Baby Shampoo J & J Baby Diapers
Company Expertise Brand Extensions often come in the forms of different product category introductions using a common name but emanating from a common expertise pool. This strategy is particularly seen in Japanese companies. Honda Cars Honda Lawn movers Honda scooters
Brand Distinction Many brands achieve distinction in the form of a unique attribute, benefit or feature which gets uniquely associated with the brand. For instance, Parachute may have expertise of ‘coconut nourishment’ in customers’ minds over time. This would give Marico Industries, the brand owner, the opportunity to launch a variety of products exploiting this distinction. Parachute Hair Oil Shampoo Cream Cooking Oil Baby Soap Baby Oil
Brand Image or Prestige A brand extension may involve a foray into unrelated product categories based on a brand’s exclusive image or prestige value. Steel, Automobile, Heavy Vehicles, Watches, S/W devpt. Training etc .,
Distinctive Taste, Ingredient or Component A brand may develop equity based on any and / or combination of taste, ingredient or component. Then the marketers can make entries into unrelated product categories capitalising on these properties. Nescafe Coffee Nescafe Chocolate Nescafe Biscuits Nescafe Milk Supplement Nescafe Cold Coffee
Extensions involve transfer of associations from the parent brand to the extension. The brand extendability depends on its character. The brands can be classified into 5 types through extendability.
Five forms of brands The Product Brand - it is a situation where there is very little difference between the brand and the product. The brand is used as an identity of the product. Example : vicks,
Form 2 – Formula Brand Formula means a set procedure A brand which comes in the formula category simply implies that a standard procedure has been used to make the product. Example : cooking oil, pickles etc.,
Form 3 – Know – how brand Know – how is an expertise that a firm develops in a specialized area of activity. Example : nokia is known for user friendly. Amul has developed its brand as an expertise in milk processing.
Form 4 – Interest brand A brand may be defined by its centre of interest. It may reflect its core spirit. Example – Gillette maintains its focus on men’s grooming in all its brands. Logo is ‘the best a man can get’ which creates the interest among the target audience. Whirlpool – home maker Nike – winning – to be on the cutting edge.
Form 5 - Philosophy The brand at this level acquires more intangible character and orientation. The philosophy transforms its products in a realm altogether different from its physical reality. Example : Parker pen, De beers diamond
Forms of brand extendability Product Brand Pillsburry Atta Formula Brands Mother’s Recipes Pickles lime, mango, mixed Know –how brand Bajaj Irons, Fans, coolers, mixers etc., Interest Brand Disney Toys, Theatre, Theme park, movies, etc Philosophy Brand Cartier Watches, jewellery, Bags, pens
Extensions………………. Extensions are not simple as they appear to a layman. Consumers reject extensions when they do not make sense. Brand extension is not a physical act of merging two products. It is a tough process involving marrying two cognitive or perceptual concepts in order to create a consistent entity. Therefore, it must begin with exploring the brand in a prospect’s mind.
Exploring the brand involves seeking answers to the following questions……. What is a brand’s awareness level? What are its recall and recognition levels? What are different attributes associated with a brand? What benefit associations are connected with a brand? What are a brand’s personality associations? What are the symbols associated with the brand? What are a brand’s user associations? What is the perceived essence of the brand? What is a brand’s philosophy?
Strength of Associations - Ponds PONDS Talc Feminine Floral Body care Cream Body Talc Talc for Special occasions Nail enamels Lip colours etc Room Freshner, soaps, Fragrance, shampoo, etc Body lotion, Body oil, creams Beauty cream, Conditioning cream, cleansing cream, etc
Making an Extension successful Aaker & Keller proposed certain assumptions about consumer behaviour which are fundamentally responsible for the success of a brand extension. The parent brand enjoys positive beliefs and favourable attitude in customers memory. It is these pre-existing beliefs and attitudes which help in the formation of positive beliefs and favourable attitude toward the brand extension. The negative associations are not transferred to the brand extensions, also these are not created by the brand extension.
Possible Extensions for the Lubriderm Brand Nivea Cream BRAND DEFINITIONS RELATED CATEGORIES moisturizer lotion medicinal purity body care pump bottle fragrance Soap - face cream - skin cream sunburn - after-shave - baby antiseptic - first-aid - hemorrhoid cream cotton - gauze - sterile pads emery boards - muscle toner - cotton swabs liquid hair net - mustard - glass cleaner perfume - room deodorizer - deodorant
Category Extension Strategies 1. Introduce the same product in a different form examples: Jello Pudding Pops, Starbucks coffee ice-cream 2. Introduce products containing the brand’s distinctive taste, etc. examples: Haagen-Dazs Cream liqueur, Philadelphia Cream Cheese salad dressing 3. Introduce companion products for the brand examples: Nikon Film, Duracell Durabeam flashlights, Colgate toothbrush 4. Introduce products relevant to customer franchise of the brand examples: Visa Traveler’s Checks, Gerber baby bottles
Category Extension Strategies 5. Introduce products capitalizing on the firm’s perceived expertise examples: Honda motorcycles, Canon photocopy machines, Canon Scanner 6. Introduce products that reflect the brand’s distinctive benefit, attribute or feature owned: examples: Nestle chocolates, Nestle chocolate milk Dove cream, Dove deodorant (Mild and Pure) 7. Introduce products capitalizing on image or prestige of the brand examples: Calvin Klein clothes, Porsche sunglasses
Expanding Brand Meaning Through Extensions Nesquik Flavoring Cereals, yogurt, Fun Food for milk chocolate sauce, for Kids (children) postre de leche. Crayola Crayons Markers, pens Colorful Crafts paints, pencils for Kids clay, etc. Nestlé Condensed Baby food, Nutritious and and powered cereales, choco- High Quality milk lates, ice-cream, etc. Food. Gillette Razor Blades Shaving Set, Personal Care deodorant. For Men and Women Brand Original Product Extension Products New Brand Meaning
Questions for Assignment Highlight atleast five brands of various product category and find out the extension opportunities of those brands. Find out which brand can be extended far from its present product, and which can move just above the extension boundary.