Chapter 10
Crafting the Brand
Positioning
10-1
Copyright © 2003 Prentice-Hall, Inc.
Key Points for Chapter 10
1.
2.
3.
4.
5.
6.
Definition of market positioning
Competitive advantage
Product differentiation
Personnel differentiation
Channel differentiation
Image differentiation
10-2
Copyright © 2003 Prentice-Hall, Inc.
Key Points for Chapter 10
7 Product life cycle (PLC)
8 Maturity Stage
 Market Modification
 Product Modification
 Marketing Program Modification
9 Strategies for decline stage of PLC
10 Market evolution
10-3
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Developing and Communicating a
Positioning Strategy
 All marketing strategy is built on
Segmentation, Targeting, and Positioning
10-4
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Developing and Communicating a
Positioning Strategy
 Positioning
 The act of designing the company’s offering and
image to occupy a distinctive place in the mind of
target market.
 The end result of positioning is the successful
creation of a customer-focused value proposition
 Value proposition
 Whole cluster of benefits the company promises to
deliver. Table 10.1
 A cogent reason why the target market should buy
the product
10-5
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Examples of Value Propositions
Demand States and Marketing Tasks
Table 10.1
 See next slide
10-6
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Company
and
Product
Target
Customers
Benefits
Price
Value
Proposition
Perdue
(chicken)
Qualityconscious
consumers of
chicken
Tenderness 10%
premium
More tender
golden chicken
at a moderate
premium price
Volvo
(station
wagon)
Safetyconscious
“upscale”
families
Durability
and safety
20%
premium
The safest, most
durable wagon
in which your
family can ride
Domino’s
(pizza)
Convenienceminded pizza
lovers
Delivery
speed and
good
quality
15%
premium
A good hot
pizza, delivered
to your door
within 30
minutes of
ordering at a
moderate price
10-7
Copyright © 2003 Prentice-Hall, Inc.
Developing and Communicating a
Positioning Strategy
 Each firm needs to develop a distinctive
positioning for its market offering.
 Needs to position the product in the mind of the
target market through differentiation.
 The well-known products generally hold a
distinctive position in consumer’s mind.
 Avis: We are number two. We try harder
 7-Up: The number-one Uncola
10-8
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Differentiation Strategies
 Differentiation
 The process of adding a set of meaningful and
valued differences to distinguish the company’s
offerings from competitors’ offerings
 To differentiate, a company must have competitive
advantage
 Competitive advantage
 A company’s ability to perform in one or more ways
that competitors cannot or will not match
10-9
Copyright © 2003 Prentice-Hall, Inc.
Differentiation Strategies





Product differentiation (Chapter 12)
Service differentiation (Chapter 13)
Personnel differentiation
Channel differentiation
Image differentiation
10-10
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Personnel Differentiation
 Competence
 Employees possess the required skill and knowledge
 Courtesy
 Friendly, respectful, and considerate
 Credibility
 Trustworthy
 Reliability
 Perform services consistently and accurately
 Responsiveness
 Respond quickly to customers’ requests & problems
10-11
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Personnel Differentiation
 Communication
 Understand the customers and communicate clearly
 Appearance
 Clean attire or uniform
 Well trimmed hair
10-12
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Channel Differentiation
 Firms can achieve competitive advantage
through their distribution channel’s
 Coverage
 Expertise
 Performance
 Caterpillar’s success in construction-equipment
industry
 Dell and Avon’s high quality in directmarketing channel
10-13
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Image Differentiation
 Symbols
 Lion of Harris Bank, Apple of Apple Computer,
Doughboy of Pillsbury, Rock of Prudential,
Elizabeth Taylor (Passion perfume)
 Colors
 Blue for IBM, Yellow for Kodak, Red for Campbell,
Brown for UPS
 Slogans
 “The right choice” for AT& T. “Service is our
business” for Shell Oil. “IBM means service” for
IBM. “What can Brown do for you” for UPS
 Special Attributes
 A company’s heritage, the first to enter the field, the
largest or oldest company
10-14
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Image Differentiation
 Physical Space
 Hotels, Banks, Lawyers’ offices
 Invitation to the Sellers’ HQs or Factories
 Ben & Jerry’s, Hershey’s, and Crayola
 Events and Sponsorship
 Creating or sponsoring sports events, or concert, or
donations to hospitals, scholarships, charities such
as MADD
 Limit quantity on purpose for new items
 Swatch produces only 40,000 watches even if it
receives orders of more than 100,000 units. Beanie
Babies toys, Harley-Davidson motorcycle
10-15
Copyright © 2003 Prentice-Hall, Inc.
Product Life-Cycle Marketing
Strategies

To say that a product has a life cycle asserts
four things
1.
2.
3.
4.
Products have 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.
10-16
Copyright © 2003 Prentice-Hall, Inc.
Types of Product Life-Cycle (PLC)




Bell-shaped PLC (S-shaped)
Growth-slump-maturity PLC
Cycle-recycle PLC
Scalloped PLC
10-17
Copyright © 2003 Prentice-Hall, Inc.
Bell-shaped Product Life Cycle
Fig. 10.1
Sales and
Profits ($)
Sales
Profits
Time
Product
Development
Introduction
Growth
Maturity
Decline
Losses/
Investments ($)
Sales and Profits Over the Product’s Life From Inception to
Demise
Copyright © 2003 Prentice-Hall, Inc.
10-18
Bell-shaped PLC
 Introduction
 Slow sales, heavy expenses, negative or no profits
 Growth
 Rapid market acceptance
 Substantial profit improvement
 Maturity
 A slow down in sales growth. Most consumers have
already purchased the product
 Profits stabilize or decline because of increased
competition
 Decline
 Downward sales and eroding profits
10-19
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Other Types of Product Life-Cycle
Figure 10.2: Common Alternate Product Life-Cycle
Patterns
10-20
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Growth-Slump-Maturity PLC
 Grows rapidly and falls to a petrified level
 Small kitchen appliances such as handheld mixers
and bread makers
 Sales grow rapidly when the product is first
introduced
 Then fall to petrified level that is sustained by late
adopters buying the product for the first time and
early adopters replacing the product
10-21
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Cycle-Recycle PLC
 The first cycle by aggressive promotion,
then decline, and the second smaller
cycle by another promotion
 New drugs
10-22
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Scalloped Cycle PLC
 Sales pass through a succession of life
cycles based on the discovery of
 New product characteristics
 New usages
 New users
 Nylon: Parachutes, hosiery, shirts,
carpet, boat sails, auto tires
10-23
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Special Categories of Product LifeCycle
Figure 10.3: Style, Fashion, and Fad Life Cycles
10-24
Copyright © 2003 Prentice-Hall, Inc.
Special Categories of Product
Life-Cycle
 Style PLC
 A basic and distinctive mode of expression in home,
clothing, and art.
 Lasts for generations and goes in and out of vogue
 Fashion PLC
 Currently accepted or popular style in a given field
 Goes through 4 stages: Distinctiveness, Emulation, Mass
fashion, and Decline
 The length of a fashion cycle is hard to predict
 Fad PLC
 A quick fashion. Adopted with great zeal, peaks early and
declines very fast
 Cabbage Patch Dolls, Tattooing, Pet Rocks, Body Piercing
10-25
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Introduction Stage
 Characteristics of Introduction Stage
 Slow sales growth




Delay in the expansion of production capacity
Working out the technical bugs
Delays in obtaining distribution channel
Slow acceptance by customers
 Negative or low profit
 Heavy initial investment
 High distribution expenses
 High promotion expenses
 High prices
 Costs are high
 No or a few competitors
10-26
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Introduction Stage
 Strategies of Introduction Stage
 Focus on the early adopters, who are usually
higher income groups
10-27
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Pioneer Advantage
 The first firm gains the greatest
advantages:
 Substantially higher profit, market share,
and brand preferences than early followers
and late entrants:
 However, the pioneer can be overtaken by
the followers or imitators:
 Bowmar(hand calculators), Apple’s Newton
(personal digital assistance), and Netscape (web
browser), Reynolds (ballpoint pens), Osborne
(portable computers)
10-28
Copyright © 2003 Prentice-Hall, Inc.
Pioneer Disadvantage
 Golder & Tellis raise further doubts about the
pioneer advantage
 A larger number of market pioneers fail
than reported and a larger number of early
market leaders, though not pioneers, succeed
 The late entrants can overcome the pioneer
advantage
 IBM over Sperry in mainframe computers,
Matsushita over Sony in VCRs, Texas
Instruments over Bowmar in hand calculators,
GE over EMI in CAT scan equipment
10-29
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Growth Stage
 Characteristics of Growth Stage
 Marked by a rapid growth in sales
 New competitors enter, attracted by opportunities
 Introduce new product features and expand
distribution.
 Prices remain where they are or fall slightly
 Profits increase as manufacturing costs fall faster
than price declines owing to the producer learning
curve
 Trade-off between high market share and high
current profit
10-30
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Growth Stage
 Strategies of Growth Stage
 Improve product quality and add new product
features and improve styling
 Add new models and flanker products (products of
different sizes, flavors to protect the main product)
 Enter new market segments
 Increase distribution coverage and enter new
distribution channels
 Shift from production awareness advertising to
product-preference advertising
 Lower prices to attract the next layer of pricesensitive buyers
10-31
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Maturity Stage
 Characteristics of Maturity Stage




The rate of sales growth slows down
Sales slowdown creates overcapacity in the industry
Overcapacity leads to intensified competition
A few giant firms-a quality leader, a service leader, and
cost leader- will dominate the industry
 They serve the whole market and make their profits
mainly through high volume and lower costs
 Most products are in the maturity stage
 Most marketing managers cope with the problems of
marketing the mature products
10-32
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Maturity Stage
 Strategies of Maturity Stage
 Market Modification
 Product Modification
 Marketing Program Modification
10-33
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Maturity Stage

Market Modification
Volume=Number of Brand Users x Usage Rate per User

Expand number of brand users by:




Converting nonusers
Entering new market segments
Winning competitors’ customers
Convince current users to increase usage
by:



Using the product on more occasions
Using more of the product on each occasion
Using the product in new ways
10-34
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Maturity Stage
 Product Modification
 Quality improvement
 Increasing product’s durability, reliability, speed, and taste
 Launching a new and improved product
 Feature improvement
 Adding new features that expand the product’s
performance, versatility, safety, or convenience
 Builds company’s image as an innovator
 Easily imitated by the competitors
 Style improvement
 Increasing the product’s aesthetic appeal.
 New car models and new packaging of consumer goods
10-35
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Maturity Stage
 Marketing Program Modification
 Prices
 A price cut? and how? or a price increase?
 Distribution
 More product support and display in existing
outlets?
 More outlets? Or new distribution channel?
 Advertising
 Expenditure increased? Message changed?
Media mix changed?
 Timing, frequency or size of ads changed?
10-36
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Maturity Stage
 Marketing Program Modification
 Sales promotion
 Step up sales promotion?
 Which one of sales promotion tools: Trade-deals,
cents-off coupons, rebates, warranties, gifts and
contest?
 Personal selling
 Number or quality salespeople increased?
 Sales force specialization, territory or incentive
revised?
 Services
 Speed up delivery? Extend more credit? More
technical assistance to customers?
10-37
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Marketing Strategies:
Decline Stage

Reasons for sales decline




Technical advances
Shifts in consumer tastes
Increased domestic and foreign competition
Carrying a weak product is very costly


Weak products consume disproportionate amount of
manager’s time, requires frequent price and inventory
adjustments
The biggest cost might well lie in the future by delaying
the aggressive search for new replacement products
10-38
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Marketing Strategies:
Decline Stage

Characteristics of Decline Stage




Sales decline
Overcapacity
Increased price cutting
Profit erosion
10-39
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Marketing Strategies:
Decline Stage
 Strategies of Decline Stage
 Build Strategy
 Increase firm’s investment to dominate the market
and strengthen its competitive position
 Hold Strategy
 Maintain the firm’s investment level until the
uncertainties about the industry are resolved.
 Decrease Strategy
 Decrease the firm’s investment level selectively by
dropping unprofitable customer groups, while
increasing investment in lucrative niches
10-40
Copyright © 2003 Prentice-Hall, Inc.
Marketing Strategies:
Decline Stage
 Strategies of Decline Stage
 Harvest Strategy
 Harvest (“milk”) the firm’s investment to recover
cash quickly
 Divest Strategy
 Divest the business quickly by disposing of its assets
as advantageously as possible.
10-41
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Evidence on Product Life-Cycle
Concept
 The PLC concept helps marketers
 Interpret product and market dynamics
 Conduct planning and control
 Do forecasting
 Research of 30 product categories
 Shows a distinctive takeoff with 45% sales increase
& a slowdown with 15% sales decline a year
 Growth stage lasts a little over 8 years
 Table 10.5: Summary of Product Life-Cycle
Characteristics, Objectives, and Strategies
10-42
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Critique of Product Life-Cycle
Concept
 Less useful as a forecasting tool, even though it can
be used for planning and controlling
 The PLC patterns are too variable in shape and
duration
 Marketers can seldom tell what stage the product is
in.
 Critics further charge that the PLC pattern is the
result of marketing strategies rather than an
inevitable course that sales must follow
10-43
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Market Evolution
 The PLC focuses on what is happening to a
particular product or brand rather than on
what is happening to the overall market
 Therefore the PLC yields a product-oriented
picture rather than a market-oriented picture.
 Firms need to visualize a market’s evolutionary
path
 The evolutionary path is affected by new needs,
competitors, technology, channels, and other
developments
10-44
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Market Evolution
 Like products, markets evolve through 4
stages




Emergence Stage
Growth Stage
Maturity Stage
Decline Stage
10-45
Copyright © 2003 Prentice-Hall, Inc.
Emergence Stage
 Before a market materializes, it exists as a latent
market.
 A latent market consists of people who share a similar
need or want for something that does not yet exist
 A faster means of calculation: Abacus, slide rules, large adding
machine, small, handheld electronic calculator
 At the emergence stage, buyer preferences usually
scatter evenly-Diffused-preference market
 Firms must design an optimal product for the market
There are three options
 A Single-Niche Strategy
 A Multiple-Niche Strategy
 A Mass-Market Strategy
10-46
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Emergence Stage
 A single-niche strategy
 A new product is designed and launched to meet the
preference of one of the corners of the market
 It makes the most sense for small firms
 A multiple-niche strategy
 Two or more products are designed and
simultaneously launched to capture two or more
parts of the market
 A mass-market strategy
 A new product is designed for the middle of the
market and launched to the whole market
10-47
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Growth Stage
 If the new product sells well, new firms will
enter the market and the market evolves to
Growth Stage
 If the first firm established itself in the center,
the second firm has three options.
 It can position its brand in one of the corners (a
single-niche strategy)
 It can position its brand next to the first competitor
(mass-market strategy)
 It can launch two or more products in different
unoccupied corners (multiple-niche strategy)
10-48
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Maturity Stage
 When the competitors cover and serve all the major
markets, the market enters the maturity stage.
 Firms invade each other’s segments, a reducing
everyone’s profit in the process.
 Heavy competition causes market fragmentation, which
is followed by market consolidation with the emergence
of new attributes
 Market consolidation took place in the toothpaste market
when P& G introduced Crest, which effectively retarded tooth
decay
 Mature markets swing between fragmentation and
consolidation
10-49
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Decline Stage
 Eventually, demand for the present products
will begin to decrease, and market will enter
the decline stage
 Reasons for a market decline
 Society’s total need level declines
 New technology begins to replace the old
 Telex market of Western Union
 A trend toward cremation will affect casket makers and
funeral homes
10-50
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