12420211MGT 209 Marketing ManagementSession 4

1/24/2021
1
MGT 209: Marketing Management
Session 4:
Product and Positioning Strategies
MGT 209: Marketing Management
Professor Ashish Sood
Agenda
• Recap Session 3
• Segmentation and Targeting
• Product
• New Product Adoption – product vs. customer characteristics
• Market Pioneering
• Positioning
• Value Proposition
• Segment storyboards – creating a powerful Positioning
Statement
• Specific examples of Positioning Strategies from the industry

• Using Perceptual Maps for marketing strategy
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Customer Company Competitor Collaborators Context
Today’s Focus
Market
Segmentation
Target Market
Selection
Product and
Service Positioning
Product &
Service
Place
Channels
Promotion Pricing
Customer Acquisition
Customer Retention

Profits
What is a new product anyways?
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What is a Product?
A product is anything that can be offered to a market to satisfy
a want or need,
including physical goods, services, experiences, events,
persons, places,
properties, organizations, information, and ideas.
What would be these levels for a car?
Innovation and Value
WHY DO
FIRMS
CREATE NEW
PRODUCTS?
Changing
Customer

Needs
Market
Saturation
Managing
Risk
through
Diversity
Fashion
Cycles
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file://agsmad.ucr.edu/DFS/homes/asood/My Documents/My
Videos/Positioning Hyundai Elentra Autostart.mp4
Videos/Positioning Hyundai Elantra Autobrake.mp4
https://www.youtube.com/watch?v=wapLaF5jmr U
1/24/2021
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How do consumers make decisions about buying
a new product
Think about your decision to select UCR for your MBA.
Describe the process of making the decision including
your thoughts, actions, and emotions.

Include the time since you began the decision process
till the end of orientation.
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The Consumer Decision Process
• Does everyone go though the same process?
• Every time?
• What is the difference?
• Across consumers?
• Across purchase occasions?
• Over time?
2º 3º 4º 5º
RANKING MUNDIAL DE USUÁRIOS DE INTERNET
1º 6º
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Diffusion of Innovations
• Innovators
• Venturesome, ‘techies’, multiple info
sources, willing to pay premium
despite product/service deficiencies
• Early adopters
• Social leaders, popular, educated,
high WTP
• Early majority
• Quality conscious, many informal
social contacts, somewhat price
sensitive
• Late majority
• Skeptical, traditional, often lower
socio-economic status, need lower
price, higher availability and high
advertising
• Laggards
• Neighbors and friends are main info

sources, fear of debt, often price
constrained
Consumer decision funnel:
Successive Sets in Decision Making
• Importance of creating awareness and
influencing preference throughout the
consumer decision making process
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Factors Influencing the Consumer Decision Process
What makes a new product
appealing to customers?
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Characteristics of Innovation

Roger’s Diffusion of Innovations Model
• Relative Advantage – over existing technologies - can be
perceived, may be measured
in economic terms, social prestige, convenience and
satisfaction.
• Compatibility – with existing values, past experiences, needs
of potential adopters
(and their social system)
• Complexity - degree to which an innovation is perceived as
difficult to understand
and use.
• Trialability – degree to which an innovation may be
experimented with on a limited
basis. A trialable innovation represented less uncertainty to a
potential adopter.
• Observability – degree to which the results of an innovation
are visible to others.
Adoption of New Products
• Relative Advantage
• Compatibility
• Complexity
• Trialability
• Observability

e-book vs. i-pod
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http://www.google.com/glass/start/how-it-feels/
http://www.youtube.com/watch?v=8aghzpO_UZE
https://www.youtube.com/watch?v=ArlavrOFpkI
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Developing and delivering a complete solution requires more
than improving the
product and making it affordable to the mainstream market.
Forces that Shape Market Growth
Forces that Shape Market Growth
❑ Products or services with weak overall
scores for both customer forces and
product forces experience very slow
market growth.
❑ The best results naturally occur when
both the customer forces and the
product forces are strong overall.
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Which company pioneered photocopying
machines?
How many firms were already in the market when Xerox
(Haloid) introduced its first photcopying machine?
Why is it important to be the First?
• Consumer advantages
• Brand loyalty
• Pioneers shape consumers’ tastes, leading to
enduring preferences
• What should a Cola taste like?
• Inertia
• Due to switching costs, consumers prefer to
stay with a pioneering brand
• Learning time, habit formation, low
involvement products…
• Learning theory
• Consumers develop standards based on
pioneer product and evaluate later products
with that as reference e.g. What should an

mp3 player look like?
• Positioning
• Pioneers have opportunity to position in the
middle and then branch out
• Targeting the mass market instead of niches
• Manufacturer advantages
• Economies of scale
• Pioneers enjoy bigger overall markets e.g.
Intel vs. AMD
• Experience curves
• Higher cost and learning curves benefits
spread over a longer time
• Patents
• Pioneers protect their technological lead
• Technological leadership
• Enables firm to have consistently better
products than competitors
• Resource mobilization
• Pioneers mobilize the best suppliers, supplies,
distributors and preempt scarce assets e.g.
Debeers, Nintendo
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Dangers of Pioneering
• Free rider effects
• Late entrant acquires same technology at lower cost
• Shifts in technology
• Late entrant benefits from technology improvements e.g. Sony
vs. Ampex
• Shift in consumer trends (esp. for new-to-the-world products)
• Change in preferred flavor from lemon to ginger ale to cola
since 1850s
• Improper positioning
• Shifting targets e.g. if ideal point becomes evident only after
product is widely available e.g. netbooks,
e-books
• Overestimation of market size
• Pushed despite poor marketing research findings
• Insufficient investments
• Small firms, firms lacking vision
Potential for first mover advantages

• Calm waters
• Very likely (moving first almost always pays off)
• Brand awareness helpful but resources less critical
• The Market Leads
• Likely (address all segments as they emerge)
• Large scale marketing, distribution and production capacities
essential
• The Technology Leads
• Unlikely (fast change creates opportunities for entrants)
• Strong R&D and NPD; deep pockets
• Rough Waters
• Very unlikely (worst conditions)
• Large scale marketing, distribution and production capacities
and strong R&D (all at once)
Ref: Suarez and Lanzolla 2005
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Takeaways

• New product success in markets depends on
• Consumer characteristics
• Product characteristics
• Understanding the forces that shape market growth helps to
predict
market acceptance of nwe products
• Pros and cons of entering market first/ early
Product Positioning
Influencing what consumers think
about a product
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The STP Process
S
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TA
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P
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To achieve above-average profits, a business has to develop
some source of competitive
advantage that provides target customers with positive customer
value.

Superior customer value results in superior profits
Competitive Advantage, Customer Value, & Profitability
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Sources of Advantage & Performance
A competitive advantage results in some level of superior
customer value based on a customer’s
preference for performance benefits, the cost of the purchase,
and the ease of the purchase.
Competitive Advantage, Customer Value, & Profitability
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Compare and contrast the three companies above in terms of
their sources of

competitive advantage and the relative impact on their financial
performance
Sources of Advantage & Performance
Each type of cost
advantage can be
achieved in several ways.
A cost advantage relative
to competition
contributes to higher
levels of profitability.
Cost Advantage and Profitability
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As volume increases, the cost per unit
generally decreases.

❑ Scale Effect: larger unit volume allows for
production and purchasing economies that lower
the per-unit manufacturing cost of a product.
❑ Scope Effect: a business can lower the average
unit cost of all products by adding products that
have similar manufacturing processes and that are
made of the same materials as its other products.
❑ Learning Effects: each unit produced provides
additional learning and the opportunity to build the
next unit more efficiently.
Unit Cost & Experience Curve
For Honda, the cost of ignition switches is lower than for some
other manufacturers because
the same ignition switch components are used in cars,
motorcycles, lawn mowers, all-terrain
vehicles, snow blowers, snowmobiles, jet skis, and generators.
Scale and Scope Cost Advantages
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Procter & Gamble’s sales force
expense per pound of detergent
sold should decrease as it adds
more brands of detergent to its
product line.
Each time a soup is advertised,
the ad reinforces top-of-the-mind
awareness of Campbell’s Soup
brand and other soups in the
product line.
Product Scope and Marketing Cost Advantage
The more dominant the share leader is with regard to market
share compared with its top three
competitors, the greater are the share leader’s profits.
Market Share Advantage & Profits
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A product’s durability, reliability, performance, features,
appearance, and conformance to a
specific application each have potential to be a differentiation
advantage.
Product Differentiation Advantage
By tracking its service performance each day, FedEx is able to
create greater overall customer
satisfaction with fewer errors, lower costs, and greater profits
for shareholders.
Service Differentiation Advantage
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https://www.youtube.com/watch?v=TLqni9Qe4NU
https://www.youtube.com/watch?v=M7FIvfx5J10
https://www.youtube.com/watch?v=fGaVFRzTTP4
https://www.youtube.com/watch?v=NcoDV0dhWPA

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The stature of brand names adds a dimension of appeal that is
an important customer benefit for
many less price-sensitive, more image-conscious consumers.
Brand Advantage & Profitability
A broad product line gives a business more prospective
customers and the
potential to sell more to each customer—translating into more
sales and higher
levels of profitability.
Microbrew Segment
Import Position
Low-Cal, Low-Carb
Product Line Advantage
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https://www.youtube.com/watch?v=W16qzZ7J5YQ
https://www.youtube.com/watch?v=P3jJGDCczL4
1/24/2021
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A business that has exclusive access to
distributors can control channels in a given
market and, to some degree, can control
market access.
Channel Advantage
• __________ (product/brand) is __________ (unique and most
important
claim) among all __________ (competitive frame) for
__________
(target segment) because __________ (support / evidence).
Step 6. Create ‘segment storyboards’
Positioning Statement
• Land Rover Discovery is the most versatile and flexible
among all SUVs for the family because
of its off-road durability and luxury seating.
• Apple offers the best personal computing experience to
students, educators, creative
professionals and consumers around the world through its

innovative hardware, software
and Internet offerings.
• For businesses who need computers, IBM is the company you
can trust for all your needs.
• Chrysler PT Cruiser is an inexpensive, small car, that is
versatile, fun to drive, and will appeal
to active singles and young couples with children who otherwise
would have bought an SUV
or a minivan.
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Some More Successful Positioning Themes
Apple iPod
BMW
Burger King
Charmin Tissue

Coke
Chevy Trucks
Colgate Total Toothpaste
Disney
GE
Mobil Service Stations
Universal’s Orlando
Visa
Volvo
Viagra
Lipitor
1000 songs
Exceptional performance
Have it your way
Softness
Authentic, real, original
Tough, strong, durable
Total dental protection

Wholesome family entertainment
Quality of life
Fast, friendly service
Thrills, excitement, escape
Accepted everywhere
Safety
Quality of life
More potent at lower price
Positioning Yourself!
“What people say about you when you
have left the room.”
Jeff Bezos, founder and CEO of Amazon
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Step 7 – Marketing Mix Strategy

• Product Positioning:
• Finding the proper location in mind of
consumers or market segment, so that
they think about a product or service in
the desired way to maximize benefit for
firm
• Use all aspects of marketing mix –
product, place, price, promotion – to
create desired positioning
Positioning Strategies
• Important to identify differences across segments and market
to them differently
• Helpful to ask why:
• Why would someone want this product?
• Are these reasons the same for everyone?
• Often companies offer multiple products that appeal to
different market
segments and let customers self-select.
• That is, the firm does not identify customers in various market
segments;
• Instead, the customers reveal their market segment identity by
choosing different products.
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What is the logic behind the Intel’s Product Positioning?
Early 1990’s
Late 1990’s
1990
Mid 2000’s
Year Introduced
Intel Product Positioning Strategy
Black & Decker (B&D) owns DeWalt.
Why don’t they use B&D with the DeWalt brand name?
Black & Decker Positioning Strategy
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Samsung – Repositioning Strategy

Which product features drive
interest in this Nike shoe?
Nike Shoe Positioning
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https://www.youtube.com/watch?v=ajD2WZioOOc
https://www.youtube.com/watch?v=whpJ19RJ4JY
1/24/2021
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What is the logic behind GE’s
Product Line Strategy?
GE Appliance Product Line Positioning Strategy
Every register at Nordstrom stores has pen and paper for
customers to share their stories.
Every morning before each store opens, Nordstrom employees
gather in the main lobby for
the store manager to share some of the best stories from the
previous day and reward the
employees in those stories.

Customer
service has
become
synonymous
with
Nordstrom
Nordstrom Service Quality
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https://www.youtube.com/watch?v=0mybsSaZkg8
https://www.youtube.com/watch?v=uq7iRC02slc
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Product Positioning
Perceptual Maps
Understanding what consumers think
about a product
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Perceptual Maps
Perceptual Maps
• Perceptual maps represent how your
target segment currently thinks/ feels
about these brands;
• may be inaccurate and
• can be influenced (corrected) by
advertising and consumer education
• Used frequently to formulate strategy
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Takeaways
• Successful Product Positioning depends on creating and
communicating customer value
• Competitive advantage from customer value takes many forms:
• Cost advantage
• Differentiation advantage

• Marketing advantage
• Positioning statement help to consolidate the customer value
succinctly
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Case Study to understand Product Positioning
Using the Perceptual Mapping Technique
Eastman Kodak
Eastman Kodak – some background
•
Since inception in 1888, Kodak a market leader in the photograp
hy business.
•
As late as 1976, Kodak commanded 90% of film sales and 85%
of camera sales in the U.S.
•
Japanese competitor Fujifilm entered U.S. market with lower‐ p
riced film
•
Kodak did not believe that American consumers would ever des
ert its brand.
• Kodak began to struggle financially in the late 1990s ‐
decline in sales of photographic film
and its slowness in transitioning to digital photography, despite

developing the first self‐
contained digital camera.
•
By 1993, its share had declined to 70% from 76% in only 5 year
s
• Kodak’s research:
•
50% of buyers “Kodak‐ loyal”; 40% ‘Samplers’; 10% shopped o
n price.
•
Importance of Brand name in decision making to buy film was s
till strong.
• But number of price sensitive consumers was increasing.
Eastman Kodak – proposed solution
•
To stop eroding share position and compete with less expensive
rivals, Kodak
management preparing to launch a new brand called Funtime.
• Kodak’s existing product line :
• Ektar ‐ professional brand at $4.27/roll
• Royal Gold – household brand at $3.49/roll
•
Kodak’s new product line strategy replaces the existing brands
with:
• Royal Gold ‐
for “very special” occasions, especially to make an enlargement
(to replace Ektar).
• Gold Plus ‐

for “everyday” use (to replace Royal Gold as mainstay brand).
• Funtime ‐ for “casual picture taking”
• Funtime would have the following characteristics:
• Only available during off‐ peak times
• Value‐ size package of 4 rolls
• Limited quantities; no advertising
Eastman Kodak contd…
Brand Price Overall Quality Score
Superpremium Brands
Fujicolor Reala $4.69 90
Kodak Ektar $4.27 92
Premium Brands
Kodak Gold Plus $3.49 93
Agfacolor XRG $3.49 88
Economy Brands
Fujicolor Super G $2.91 94
Konica Super SR $2.91 93
ScotchColor $2.69 92
Price Brands
a
(S) Polaroid High Definition $2.49 95
(S) Kroeger $2.49 91
(A) Walgreen's $2.49 91
(S) York $2.40 90
(A) Clark Color $2.35 90
(S) Kmart Focal $2.29 89
(S) Target $2.19 92

Notes:
• ScotchColor was also sold as private label
from Kmart, Kroeger , Walgreen’s, Target and
York, among others as shown in the table.
• Consumer Reports regarded score
differences of less than 5 points as ‘not
significant’.
• Let us review the market situation and the
proposed Funtime strategy to see if it might
resolve Kodak’s problems.
(S) Designates the film was procured from 3M and was equivale
nt to ScotchColor
(A) Designates the film was procured from Bayer’s Agfa and wa
s equivalent to AgfaColor XRG
Eastman Kodak contd…
Price
Quality
$1 $2 $3 $4
$5 $6
95
94
93

92
91
90
89
88
(S) Designates the film was procured from 3M and
was equivalent to ScotchColor
(A) Designates the film was procured from Bayer’s
Agfa and was equivalent to AgfaColor XRG
Kodak plans to replace Ektar with Royal Gold and
introduce Funtime @ ± 20% price difference
Position all these
brands on the map:
Brand Price Overall Quality Score
Superpremium Brands
Fujicolor Reala $4.69 90
Kodak Ektar $4.27 92
Premium Brands
Kodak Gold Plus $3.49 93
Agfacolor XRG $3.49 88
Economy Brands
Fujicolor Super G $2.91 94
Konica Super SR $2.91 93

ScotchColor $2.69 92
Price Brands
a
(S) Polaroid High Definition $2.49 95
(S) Kroeger $2.49 91
(A) Walgreen's $2.49 91
(S) York $2.40 90
(A) Clark Color $2.35 90
(S) Kmart Focal $2.29 89
(S) Target $2.19 92

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