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Chapter 13


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Chapter 13

  1. 1. Product and branding strategy Chapter 13
  2. 2. Introduction <ul><li>To marketers, products are bundles of benefits delivered to the customer. </li></ul><ul><li>The form in which these benefits are delivered can be both tangible and intangible. </li></ul><ul><ul><li>At the intangible end of the product spectrum are services. </li></ul></ul><ul><li>Product strategy is derived from the company's marketing objectives </li></ul><ul><ul><li>influenced by how products are organised by line and range, and also by the product life cycle. </li></ul></ul>
  3. 3. Levels of a product Figure 13.1  Three levels of product
  4. 4. Levels of a product <ul><li>Core product </li></ul><ul><ul><li>problem solving service or core benefits that consumers are really buying when they obtain a product. </li></ul></ul><ul><li>Actual product </li></ul><ul><ul><li>incorporates the quality, features and design, brand name, packaging and other attributes that combine to deliver core product benefits. </li></ul></ul><ul><li>Augmented product </li></ul><ul><ul><li>incorporates the consumer services and benefits built around the core and actual products. </li></ul></ul>-
  5. 5. Product classifications <ul><li>Products can be classified according to their durability and tangibility. </li></ul><ul><ul><li>Non-durable products are goods consumed quickly and used on one or a few occasions, e.g. beer, soap. </li></ul></ul><ul><ul><li>Durable products are used over an extended time and may last for years, e.g. fridge. </li></ul></ul><ul><li>Marketers also divide products and services into two other classifications: consumer and industrial products . </li></ul>
  6. 6. Consumer products <ul><li>Bought to satisfy personal and family needs. </li></ul><ul><ul><li>Classified according to consumer shopping habits : </li></ul></ul><ul><li>Convenience products </li></ul><ul><ul><li>Purchased frequently, minimum comparison and buying effort. </li></ul></ul><ul><li>Shopping products </li></ul><ul><ul><li>Process of selection, compared on bases of quality, suitability, price and style. </li></ul></ul><ul><li>Unsought products </li></ul><ul><ul><li>Consumer does not know about the product or perceives no need for it. </li></ul></ul>
  7. 7. Table 13.1  Marketing considerations for consumer products
  8. 8. Industrial products <ul><li>Products bought for further processing or the purposes of resale. </li></ul><ul><ul><li>Distinction based upon the purpose for which the product is purchased. </li></ul></ul><ul><li>Materials and parts </li></ul><ul><ul><li>Raw materials. </li></ul></ul><ul><ul><li>Manufactured materials and parts. </li></ul></ul><ul><li>Capital items </li></ul><ul><ul><li>Installations. </li></ul></ul><ul><ul><li>Accessory equipment. </li></ul></ul><ul><li>Supplies and services </li></ul><ul><ul><li>Electricity to power the machines making shirts. </li></ul></ul>
  9. 9. Organisations, persons, places and ideas <ul><li>Marketers have broadened the concept of product to include other marketable entities such as organisations, persons, places and ideas. </li></ul>
  10. 10. Product decisions <ul><li>Marketers make product decisions at three levels: </li></ul><ul><ul><li>individual product decisions </li></ul></ul><ul><ul><li>product line decisions </li></ul></ul><ul><ul><li>product mix decisions </li></ul></ul>
  11. 11. Individual product decisions <ul><li>Product decisions are focused around the development and marketing of </li></ul><ul><ul><li>Product attributes </li></ul></ul><ul><ul><li>Branding </li></ul></ul><ul><ul><li>Packaging </li></ul></ul><ul><ul><li>Labelling </li></ul></ul><ul><ul><li>Product support services. </li></ul></ul>
  12. 12. Product attributes <ul><li>Define the benefits offered to the customer </li></ul><ul><ul><ul><li>Product quality </li></ul></ul></ul><ul><ul><ul><ul><li>Conformance and Customer driven quality </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Durability, reliability, precision, ease of operation and other valued attributes. </li></ul></ul></ul></ul><ul><ul><ul><li>Product features </li></ul></ul></ul><ul><ul><ul><ul><li>Features are competitive tools in differentiating the products from the competitors’. Assessed upon the basis of its customer value versus company cost. </li></ul></ul></ul></ul><ul><ul><ul><li>Product style and design </li></ul></ul></ul>
  13. 13. Branding <ul><li>A name, term, sign, symbol or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate them from the competitors. </li></ul>
  14. 14. Branding: benefits for consumers <ul><ul><ul><li>Brand names tell the buyer about the quality of the product. </li></ul></ul></ul><ul><ul><ul><li>Brand names increase shopper efficiency. </li></ul></ul></ul><ul><ul><ul><li>Brand names alert consumers to products that might benefit them. </li></ul></ul></ul>
  15. 15. Branding: supplier advantage <ul><ul><ul><li>Brand name makes it easier for the supplier to process orders and track down problems. </li></ul></ul></ul><ul><ul><ul><li>The supplier’s brand name and trademark provide legal protection for unique production features that might otherwise be copied by the opposition. </li></ul></ul></ul><ul><ul><ul><li>Branding enables the supplier to attract a loyal and profitable set of customers. </li></ul></ul></ul><ul><ul><ul><li>Branding helps suppliers segment markets. </li></ul></ul></ul>
  16. 16. Branding: powerful marketing mechanism <ul><ul><ul><li>Leads to higher and more consistent product quality. </li></ul></ul></ul><ul><ul><ul><li>Increases innovation by giving producers an incentive to look for more new features that can be safeguarded by the patent. </li></ul></ul></ul><ul><ul><ul><li>Branding results in more product variety and choice for consumers. </li></ul></ul></ul><ul><ul><ul><li>Branding provides consumer information about products and where to find them. </li></ul></ul></ul>
  17. 17. Packaging <ul><ul><li>Innovative and attractive packaging to gain the attention of the consumer. </li></ul></ul><ul><ul><li>Packaging is central to the marketing considerations and the packaging concept should illustrate what the package should be or do for the product. </li></ul></ul><ul><ul><ul><li>Protection of contents </li></ul></ul></ul><ul><ul><ul><li>Design and presentation </li></ul></ul></ul><ul><ul><ul><li>Colour, trade marks etc. </li></ul></ul></ul><ul><ul><ul><li>Tamper - proof packaging </li></ul></ul></ul>
  18. 18. Labelling <ul><ul><li>Identifies the product </li></ul></ul><ul><ul><li>Conforms to legal requirements as in the case of medical products </li></ul></ul><ul><ul><li>Describes the key features of the product </li></ul></ul><ul><ul><li>Promotes the product through attractiveness </li></ul></ul><ul><ul><li>Grades the quality of the product </li></ul></ul><ul><ul><li>Unit pricing </li></ul></ul><ul><ul><li>Open dating </li></ul></ul><ul><ul><li>Nutritional labelling </li></ul></ul>
  19. 19. Product support services <ul><ul><li>Customer service is an essential element of the product strategy, and can play a major or minor part in the product offering. </li></ul></ul><ul><ul><li>Product support services augment the actual products. </li></ul></ul>
  20. 20. Product line considerations <ul><ul><ul><li>The product line is comprised of a group of products that are closely related because: </li></ul></ul></ul><ul><ul><ul><ul><ul><li>they function in a similar manner </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>are sold to the same groups </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>are marketed through the same types of outlet </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>fall within given price ranges </li></ul></ul></ul></ul></ul>
  21. 21. Product line length decisions <ul><li>The product line length involves the number of items in the product line. </li></ul><ul><li>Greatly influenced by the company objectives and the resources. </li></ul><ul><li>Product line growth needs to be planned carefully and is extended in two ways: ‘ stretching ’ and ‘ filling ’. </li></ul>
  22. 22. Product line stretching <ul><ul><li>Downward stretch </li></ul></ul><ul><ul><ul><li>Company initially located at the top end of the market and then ‘stretches’ downwards to pre-empt a competitor or respond to an attack. Launch of C-Class by Mercedes-Benz. </li></ul></ul></ul><ul><ul><li>Upward stretch </li></ul></ul><ul><ul><ul><li>Companies stretching upwards to add prestige to their existing range of products. Toyota with the Lexus. </li></ul></ul></ul><ul><ul><ul><li>Can be risky due to customer perception and inability of sales people to trade up and negotiate to the new level. </li></ul></ul></ul><ul><ul><li>Two-way stretch </li></ul></ul><ul><ul><ul><li>Extending product lines upwards and downwards to address different segments of the market. </li></ul></ul></ul>
  23. 23. Figure 13.3  Product-line stretching decisions
  24. 24. Product line filling <ul><ul><li>Increasing the product line by adding more items within the present range of the line. </li></ul></ul><ul><ul><li>Reasons for product filling: </li></ul></ul><ul><ul><ul><li>Extra profits </li></ul></ul></ul><ul><ul><ul><li>Satisfying dealers </li></ul></ul></ul><ul><ul><ul><li>Using excess capacity </li></ul></ul></ul><ul><ul><ul><li>Being the leading full - line company </li></ul></ul></ul><ul><ul><ul><li>Plugging holes to keep out the opposition </li></ul></ul></ul><ul><ul><li>Care needs to be taken that the line filling does not lead to cannibalisation and customer confusion. </li></ul></ul>
  25. 25. Product mix decisions <ul><li>Product mix or product assortment consists of all the product lines and items that a particular seller offers for sale to buyers. </li></ul>
  26. 26. 4 Dimensions of the product mix <ul><li>Breadth or width </li></ul><ul><ul><li>Wide product mix containing many different product lines. </li></ul></ul><ul><ul><ul><li>Unilever producing cooking oil, toilet soap, cosmetics etc. </li></ul></ul></ul><ul><li>Length </li></ul><ul><ul><li>Total number of products in the product lines </li></ul></ul><ul><li>Depth </li></ul><ul><ul><li>Different versions, such as size of packaging and different formulations. </li></ul></ul><ul><li>Consistency </li></ul><ul><ul><li>How closely related the various product lines are in end use, production requirements, distribution channels etc. </li></ul></ul>
  27. 27. Product mix strategies <ul><li>Company can add new product lines, thus widening the product mix. </li></ul><ul><li>Company can lengthen the existing product lines to become a more full line company. </li></ul><ul><li>It can add more product versions of each product and deepen its product mix. </li></ul><ul><li>The company can pursue more product line consistency, or less, depending upon whether it wants to have a strong reputation in a single field or in several fields. </li></ul>
  28. 28. Branding strategy <ul><li>Branding viewed as the major enduring asset of a company, outlasting products. </li></ul><ul><li>Powerful assets that must be developed and managed. </li></ul><ul><li>Branding is an important element of the tangible product </li></ul><ul><ul><ul><li>particularly in consumer markets as a means of linking items within a product line or emphasising the individuality of product items. </li></ul></ul></ul>
  29. 29. Brand equity <ul><li>Brands represent the consumers’ perceptions and feelings about products and their performance. </li></ul><ul><li>The real value of branding is the ability to capture consumer preference and loyalty. </li></ul><ul><li>Brands vary in power and value and have varying degrees of brand awareness , brand preference and brand loyalty . </li></ul>
  30. 30. Brand equity <ul><li>Brand equity is defined as the value of the brand, based on the extent to which it has high brand loyalty, name awareness, perceived quality, strong brand associations and other assets such as patents, trademarks and channel relationships. </li></ul>
  31. 31. Brand valuation <ul><li>Placing values on brands is difficult. </li></ul><ul><li>Not always incorporated into the balance sheet asset valuations. </li></ul><ul><li>Interbrand , the branding consultancy utilise the estimated economic earnings; which is equal to the brand’s future operating profits minus a capital and tax charge, as the valuation method for brands. </li></ul><ul><ul><li>However, this does not measure future growth and thus the following marketing insight illustrates other methods: </li></ul></ul>
  32. 32. Figure 13.4  Major brand strategy decisions
  33. 33. Aspects of brand positioning <ul><li>Attributes </li></ul><ul><ul><li>Provides a basic position for the brand based upon its features. </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Customers buy benefits not features. These features must be translated into functional and emotional benefits. </li></ul></ul><ul><li>Values </li></ul><ul><ul><li>The brand reflects the values of the buyer. </li></ul></ul><ul><li>Culture </li></ul><ul><ul><li>The brand represents the culture of the organisation and product. </li></ul></ul><ul><li>Personality </li></ul><ul><ul><li>Each brand has a personality and the brand will attract people whose actual or desired self-images match the brand’s image. </li></ul></ul>
  34. 34. Brand name selection <ul><li>A good name contributes significantly to the success of a brand. </li></ul><ul><li>Given the global market, great care needs to be taken regarding the translation of the brand name as illustrated: </li></ul>
  35. 35. Desirable qualities for a brand name <ul><li>Should suggest something about the product’s features and benefits. </li></ul><ul><li>Easy to pronounce, recognise and remember. </li></ul><ul><li>Brand name must be distinctive. </li></ul><ul><li>Must translate easily and accurately into other major languages. </li></ul><ul><li>Must be capable of registration and legal protection. </li></ul><ul><ul><li>Once selected, the brand name needs to be legally protected and registered with the appropriate Trade Marks Register. </li></ul></ul>
  36. 36. Brand sponsorship <ul><li>Manufacturer’s brand (national brand) </li></ul><ul><ul><li>Brand created and owned by the producer of the product or service. </li></ul></ul><ul><li>Private brand (middleman, distributor or store brand) </li></ul><ul><ul><li>A brand created and owned by a reseller of a product or service. </li></ul></ul><ul><li>Licensed brand </li></ul><ul><ul><li>A product or service using a brand name offered by the brand owner to the licensee for an agreed fee or royalty. </li></ul></ul><ul><li>Co-brand </li></ul><ul><ul><li>The practice of using the established brand names of two different companies on the same product. </li></ul></ul>
  37. 37. Manufacturers’ brand versus private brand <ul><li>The brand battles rage between manufacturers’ brands and private brands. Winners of the battle focus on one simple rule: achieve success through delivering superior value to target customers. </li></ul>
  38. 38. Manufacturers’ brand versus private brand <ul><li>Retailers have many advantages: </li></ul><ul><ul><li>They control the stock on the shelf </li></ul></ul><ul><ul><li>Which products to feature in promotions </li></ul></ul><ul><ul><li>They price store brands lower than the manufacturers’ brands </li></ul></ul><ul><ul><li>Appeal to budget conscious consumers </li></ul></ul><ul><ul><li>Higher profit margins generated </li></ul></ul>
  39. 39. Brand licensing <ul><li>Branding is costly and time consuming and in an effort to short circuit the process, some organisations seek licensing agreements for big brands especially in emergent markets. </li></ul><ul><li>The fastest growing licensing category is corporate brand licensing , a form of licensing whereby a firm rents a corporate trademark or logo made famous in one product or service category, and uses it in a related category. </li></ul>
  40. 40. Co-branding <ul><li>Co-branding occurs when two established brand names of different companies are used on the same product or service. </li></ul><ul><li>It offers many advantages: </li></ul><ul><ul><li>creates broader consumer appeal. </li></ul></ul><ul><ul><li>greater brand equity. </li></ul></ul><ul><ul><li>allows companies to enter new markets with minimal risk or investment. </li></ul></ul><ul><li>It also has limitations: </li></ul><ul><ul><li>partnerships should be carefully evaluated and often involve complex legal contracts. </li></ul></ul><ul><ul><li>a great deal of trust is necessary for success. </li></ul></ul>
  41. 41. Figure 13.5  Brand development strategies
  42. 42. Brand development <ul><li>Line extensions </li></ul><ul><ul><li>Using a successful brand name to introduce additional items in a given product category under the same brand name, such as new flavours, forms, colours, added ingredients or package size. </li></ul></ul><ul><ul><li>Danger of overextending the brand and losing meaning. </li></ul></ul><ul><ul><li>Danger of cannibalisation of own products. </li></ul></ul>
  43. 43. Brand development <ul><li>Brand extensions </li></ul><ul><ul><li>Using a successful brand name to launch a new or modified product in a new category. </li></ul></ul><ul><ul><li>Gives new product greater recognition and faster acceptance. </li></ul></ul><ul><ul><li>Save high advertising costs due to familiar brand name. </li></ul></ul><ul><ul><li>Must ensure the appropriateness of the new product to the brand and market to customers that value the brand. </li></ul></ul><ul><ul><li>Guard against confusing the consumer . </li></ul></ul>
  44. 44. Brand development <ul><li>Multi-brands </li></ul><ul><ul><li>Firm develops two or more brands in the same product category. </li></ul></ul><ul><ul><li>Establishes different features and appeals to different market segments and buying motives. </li></ul></ul><ul><ul><li>Some companies develop multiple brands for different families of products. This is called range branding and is illustrated by the Matsushita Group with its ranges of Technics™, National™, Panasonic™ and Quasar™. </li></ul></ul><ul><ul><li>In corporate branding the firm makes its company name the dominant brand identity across all products, e.g. Johnson & Johnson ™ . </li></ul></ul><ul><ul><li>Other companies use the company and individual branding approach, e.g. Nestl é KitKat™. </li></ul></ul>
  45. 45. Brand development <ul><li>New brands </li></ul><ul><ul><li>Some companies create a new brand for a new product if their existing brands do not fit or seem appropriate. </li></ul></ul>