SEGMENTATION
Segmentation - Dividing a market into smaller groups with distinct needs, characteristics, or
behavior who might require separate products or marketing mixes.
1) Consuming markets
Geographic segmentation calls for dividing the market into different geographical units, such as nations,
regions, states, countries, cities, or even neighborhoods. A company may decide to operate in one or a few
geographical areas or operate in all areas but pay attention to geographical differences in needs and wants.
Example: from Target and Walmart to Kohl’s and Staples—are now opening smaller-format stores designed
to fit the needs of densely packed urban neighborhoods not suited to their typical large suburban
superstores. Target’s CityTarget stores average about half the size of a typical Super Target; its
TargetExpress stores are even smaller at about one-fifth the size of a big-box outlet. These smaller,
conveniently located stores carry a more limited assortment of goods that meet the needs of urban
residents and commuters, such as groceries, home essentials, beauty products, and consumer electronics.
Demographic segmentation divides the market into segments based on variables such as age, life-cycle
stage, gender, income, occupation, education, religion, ethnicity, and generation. Demographic factors are
the most popular bases for segmenting customer groups. One reason is that consumer needs, wants, and
usage rates often vary closely with demographic variables. Another is that demographic variables are easier
to measure than most other types of variables. Age and Life-Cycle Stage. Consumer needs and wants change
with age. Some companies use age and life-cycle segmentation, offering different products or using
different marketing approaches for different age and life-cycle groups.
Example: Kraft’s Oscar Mayer brand markets Lunchables, convenient prepackaged lunches for children. To
extend the substantial success of Lunchables, however, Oscar Mayer later introduced Lunchables Uploaded,
a version designed to meet the tastes and sensibilities of teenagers. Most recently, the brand launched an
adult version, but with the more adult-friendly name P3 (Portable Protein Pack). Now, consumers of all ages
can enjoy one of America’s favorite noontime meals.
Gender segmentation has long been used in marketing clothing, cosmetics, toiletries, toys, and magazines.
For example, P&G was among the first to use gender segmentation with Secret, a deodorant brand specially
formulated for a woman’s chemistry, packaged and advertised to reinforce the female image. More
recently, the men’s personal care industry has exploded, and many cosmetics brands that previously
catered mostly to women—from L’Oréal, Nivea, and Sephora to Unilever’s Dove brand—now successfully
market men’s lines. For example, Dove’s Men+Care line calls itself “The authority on man maintenance.”
The brand provides a full line of body washes (“skin care built in”), body bars (“fight skin dryness”),
antiperspirants (“tough on sweat, not on skin”), face care (“take better care of your face”), and hair
care(“3X stronger hair”)
Income – the marketers of products and services such as automobiles, clothing, cosmetics, financial
services, and travel have long used income segmentation.
Example: the Dollar General, Family Dollar, and Dollar Tree store chains—successfully target low- and
middle-income groups. The core market for such stores is represented by families with incomes under
$30,000. When Family Dollar real estate experts scout locations for new stores, they look for lower-middleclass neighborhoods where people wear less-expensive shoes and drive old cars that drip a lot of oil. With
their low-income strategies, dollar stores are now the fastest-growing retailers in the nation.
Psychographic segmentation divides buyers into different segments based on lifestyle or personality
characteristics.
Example: Royal Dutch Gazelle produces several types of bikes for different kinds of customers. City bikes are
made for short trips to nearby locations, to work, or for a regular shopping trip. Gazelle also produces a
traditional city bike known as the Robust Classic. Trekking bikes are for people who want a sporty and
lightweight bike. These bikes come with high-grade components, a sleekly shaped aluminum frame and
carbon front fork. The light weight makes for easy transport, so you could take with it you on a holiday trip.
Lifestyle bikes, on the other hand, with tough, wide tires and a robust frame, are for the rider to cruise
through the town in style. Gazelle also produces e-bikes for daily use, but the Gazelle Ultimate e-bike
belongs to a top-flight range: made from lightweight high-end carbon or aluminum parts and frames, it is
meant to combine sportiness and speed with great comfort.
Behavioral segmentation divides buyers into segments based on their knowledge, attitudes, uses, or
responses to a product. Many marketers believe that behavior variables are the best starting point for
building market segments.
Occasions. Buyers can be grouped according to occasions when they get the idea to buy, actually make their
purchases, or use the purchased items. Occasion segmentation can help firms build up product usage.
Example: Campbell’s advertises its soups more heavily in the cold winter months. And for more than a
dozen years, Starbucks has welcomed the autumn season with its pumpkin spice latte (PSL). Still other
companies try to boost consumption by promoting usage during nontraditional occasions. For example,
most consumers drink orange juice in the morning, but orange growers have promoted drinking orange
juice as a cool, healthful refresher at other times of the day.
Benefit segmentation requires finding the major benefits people look for in a product class, the kinds of
people who look for each benefit, and the major brands that deliver each benefit.
Example: people who buy wearable health and activity trackers are looking for a variety of benefits,
everything from counting steps taken and calories burned to heart rate monitoring and high-performance
workout tracking and reporting. To meet these varying benefit preferences, Fitbit makes health and fitness
tracking devices aimed at buyers in three major benefit segments: Everyday Fitness, Active Fitness, and
Performance Fitness. Everyday Fitness buyers want only very basic fitness tracking. So Fitbit’s simplest
device, the Fitbit Zip, offers these consumers “A fun, simple way to track your day.” It tracks steps taken,
distance traveled, calories consumed, and active minutes; the Fitbit Charge adds a wristband and watch. At
the other extreme, for the Performance Fitness segment, the high-tech Fitbit Surge helps serious athletes
“Train smarter. Go Farther.” The Surge is “the ultimate fitness super watch,” with GPS tracking, heart rate
monitoring, all-day activity tracking, automatic workout tracking and recording, sleep monitoring, text
notification, music control, and wireless synching to Fitbit’s smartphone and computer app.
User Status. Markets can be segmented into nonusers, ex-users, potential users, first-time users, and
regular users of a product. Marketers want to reinforce and retain regular users, attract targeted nonusers,
and reinvigorate relationships with ex-users. Included in the potential users group are consumers facing lifestage changes—such as new parents and newlyweds—who can be turned into heavy users.
Example: to get new parents off to the right start, P&G makes certain that its Pampers Swaddlers are the
diaper most U.S. hospitals provide for newborns and then promotes them as “the #1 choice of hospitals.”
Usage Rate. Markets can also be segmented into light, medium, and heavy product users. Heavy users are
often a small percentage of the market but account for a high percentage of total consumption.
Example: Carl’s Jr. and Hardee’s restaurants, both owned by parent company CKE Restaurants, focus on a
target of “young, hungry men.” These young male customers, ages 18 to 34, fully embrace the chain’s
positioning. That means they wolf down a lot more Thickburgers and other indulgent items featured on the
chains’ menus. To attract this audience, the company is known for its steamy hot-models-in-bikinis
commercials to heat up the brands’ images.
Loyalty Status. Consumers can be loyal to brands (Tide), stores (Target), and companies ( Apple). Buyers can
be divided into groups according to their degree of loyalty. Some consumers are completely loyal—they buy
one brand all the time and can’t wait to tell others about it.
Example: whether they own a MacBook Pro, an iPhone, or an iPad, Apple devotees are granitelike in their
devotion to the brand. At one end are the quietly satisfied Apple users, folks who own one or several Apple
devices and use them for browsing, texting, email, and social networking. At the other extreme, however,
are the Apple zealots—the so-called MacHeads or Macolytes—who can’t wait to tell anyone within earshot
of their latest Apple gadget.
Other consumers are somewhat loyal—they are loyal to two or three brands of a given product or favor one
brand while sometimes buying others. Still other buyers show no loyalty to any brand—they either want
something different each time they buy, or they buy whatever’s on sale. A company can learn a lot by
analyzing loyalty patterns in its market. It should start by studying its own loyal customers. Highly loyal
customers can be a real asset. They often promote the brand through personal word of mouth and social
media. Instead of just marketing to loyal customers, companies should engage them fully and make them
partners in building the brand and telling the brand story.
Example: Mountain Dew has turned its loyal customers into a “Dew Nation” of passionate superfans who
have made it the nation’s number-three liquid refreshment brand behind only Coca-Cola and Pepsi.
Using Multiple Segmentation Bases – Marketers rarely limit their segmentation analysis to only one or a
few variables. Rather, they often use multiple segmentation bases in an effort to identify smaller, betterdefined target groups.
Example: One of the leading consumer segmentation systems is Experian Marketing Services’ Mosaic USA
system. It classifies U.S. households into one of 71 lifestyle segments and 19 overarching groups based on
income, age, buying habits, household composition, and life events. Mosaic USA segments carry exotic
names such as Birkenstocks and Beemers, Bohemian Groove, Sports Utility Families, Colleges and Cafes,
Heritage Heights, Small Town Shallow Pockets, and True Grit Americans. Such colorful names help bring the
segments to life. For example, the Birkenstocks and Beemers group is located in the Middle-Class Melting
Pot level of affluence and consists of 40- to 65-year-olds who have achieved financial security and left the
urban rat race for rustic and artsy communities located near small cities. They find spirituality more
important than religion. Colleges and Cafes consumers are part of the Singles and Starters affluence level
and are mainly white, under-35 college graduates who are still finding themselves. They are often employed
as support or service staff related to a university. They don’t make much money and tend to not have any
savings. Such rich segmentation provides a powerful tool for marketers of all kinds. It can help companies
identify and better understand key customer segments, reach them more efficiently, and tailor market
offerings and messages to their specific needs.
2) Business Markets
Business buyers can be segmented geographically, demographically (industry, company size), or by benefits
sought, user status, usage rate, and loyalty status. Yet business marketers also use some additional
variables, such as customer operating characteristics, purchasing approaches, situational factors, and
personal characteristics. Almost every company serves at least some business markets. For example,
Starbucks has developed distinct marketing programs for each of its two business segments: the office
coffee segment and the food service segment. In the office coffee and vending segment, Starbucks Office
Coffee Solutions markets a variety of workplace coffee services to businesses of any size, helping them to
make Starbucks coffee and related products available to their employees in their workplaces. Starbucks
helps these business customers design the best office solutions involving its coffees, teas, syrups, and
branded paper products and methods of serving them—portion packs, single cups, or vending. The
Starbucks Foodservice division teams up with businesses and other organizations—ranging from airlines,
restaurants, colleges, and hospitals to baseball stadiums—to help them serve the well-known Starbucks
brand to their own customers. Starbucks provides not only the coffee, tea, and paper products to its food
service partners but also equipment, training, and marketing and merchandising support.
3) International Markets
International firms need to group their world markets into segments with distinct buying needs and
behaviors. They can segment by geographic location, grouping countries by regions such as Western
Europe, the Pacific Rim, South Asia, or Africa. Geographic segmentation assumes that nations close to one
another will have many common traits and behaviors. Although this is sometimes the case, there are many
exceptions. For example, some U.S. marketers lump all Central and South American countries together.
Many Central and South Americans don’t even speak Spanish, including more than 200 million Portuguesespeaking Brazilians and the millions in other countries who speak a variety of Indian dialects.
World markets can also be segmented based on economic factors. Countries might be grouped by
population income levels or by their overall level of economic development. A country’s economic
structure shapes its population’s product and service needs and therefore the marketing opportunities it
offers.
Example: many companies are now targeting the BRIC countries—Brazil, Russia, India, and China—which
are fast-growing developing economies with rapidly increasing buying power.
Countries can also be segmented by political and legal factors such as the type and stability of government,
receptivity to foreign firms, monetary regulations, and amount of bureaucracy. Cultural factors can also be
used, grouping markets according to common languages, religions, values and attitudes, customs, and
behavioral patterns. Segmenting international markets based on geographic, economic, political, cultural,
and other factors presumes that segments should consist of clusters of countries. However, as new
communications technologies, such as satellite TV and online and social media, connect consumers around
the world, marketers can define and reach segments of like-minded consumers no matter where in the
world they are. Using intermarket segmentation(also called cross-market segmentation), they form
segments of consumers who have similar needs and buying behaviors even though they are located in
different countries.
Example: Given its high price, Bentley Motors has focused on economically developed markets such as the
United States and Europe, positioning itself on luxury, prestige, and exclusivity. When sales slumped in
response to the 2008 financial crisis, Bentley began a search for new markets. Using cross-market
segmentation, Bentley shifted its focus from targeting affluent markets to targeting affluent consumers.
This allowed the company to identify and then capitalize on the burgeoning purchasing power in the highincome segments of emerging markets such as Russia and China. Bentley Motors now targets affluent
consumers regardless of the market, who demand and are willing to pay for this product.
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4) Effective segmentation
Measurable. The size, purchasing power, and profiles of the segments can be measured.
Accessible. The market segments can be effectively reached and served.
Substantial. The market segments are large or profitable enough to serve. A segment should be the
largest possible homogeneous group worth pursuing with a tailored marketing program. It would
not pay, for example, for an automobile manufacturer to develop cars especially for people whose
height is greater than seven feet.
Differentiable. The segments are conceptually distinguishable and respond differently to different
marketing mix elements and programs. If men and women respond similarly to marketing efforts
for soft drinks, they do not constitute separate segments.
Actionable. Effective programs can be designed for attracting and serving the segments. For
example, although one small airline identified seven market segments, its staff was too small to
develop separate marketing programs for each segment
TARGETING
The firm now has to evaluate the various segments and decide how many and which segments it can serve
best. We now look at how companies evaluate and select target segments.
1) Evaluating Market Segments
In evaluating different market segments, a firm must look at three factors: segment size and growth,
segment structural attractiveness, and company objectives and resources.
First, a company wants to select segments that have the right size and growth characteristics. But “right size
and growth” is a relative matter. The largest, fastest-growing segments are not always the most attractive
ones for every company. Smaller companies may lack the skills and resources needed to serve larger
segments. Or they may find these segments too competitive. Such companies may target segments that are
smaller and less attractive, in an absolute sense, but that are potentially more profitable for them.
The company also needs to examine major structural factors that affect long-run segment attractiveness.
Example: a segment is less attractive if it already contains many strong and aggressive competitors or if it is
easy for new entrants to come into the segment. The existence of many actual or potential substitute
products may limit prices and the profits that can be earned in a segment. The relative power of buyers also
affects segment attractiveness. Buyers with strong bargaining power relative to sellers will try to force
prices down, demand more services, and set competitors against one another. Finally, a segment may be
less attractive if it contains powerful suppliers that can control prices or reduce the quality or quantity of
ordered goods and services.
Even if a segment has the right size and growth and is structurally attractive, the company must consider its
own objectives and resources. Some attractive segments can be dismissed quickly because they do not
mesh with the company’s long-run objectives. Or the company may lack the skills and resources needed to
succeed in an attractive segment.
Example: the economy segment of the automobile market is large and growing. But given its objectives and
resources, it would make little sense for luxury performance carmaker Mercedes-Benz to enter this
segment. A company should only enter segments in which it can create superior customer value and gain
advantages over its competitors.
2) Selecting target market
A target market consists of a set of buyers who share common needs or characteristics that a company
decides to serve.
a) Undifferentiated Marketing
Using an undifferentiated marketing (or mass marketing) strategy, a firm might decide to ignore market
segment differences and target the whole market with one offer. Such a strategy focuses on what is
common in the needs of consumers rather than on what is different. The company designs a product and a
marketing program that will appeal to the largest number of buyers. Difficulties arise in developing a
product or brand that will satisfy all consumers. Moreover, mass marketers often have trouble competing
with more-focused firms that do a better job of satisfying the needs of specific segments and niches.
b) Differentiated Marketing
Using a differentiated marketing (or segmented marketing) strategy, a firm decides to target several market
segments and designs separate offers for each.
Example: P&G markets at least six different laundry detergent brands in the United States (Tide, Gain,
Cheer, Era, Dreft, and Bold), which compete with each other on supermarket shelves. Then P&G further
segments each detergent brand to serve even narrower niches. For example, you can buy any of dozens of
versions of Tide—from Tide Original, Tide Coldwater, or Tide Pods to Tide Free & Gentle, Tide Vivid White +
Bright, Tide Colorguard etc.
By offering product and marketing variations to segments, companies hope for higher sales and a stronger
position within each market segment. Developing a stronger position within several segments creates more
total sales than undifferentiated marketing across all segments. Thanks to its differentiated approach, P&G
is really cleaning up in the $15 billion U.S. laundry detergent market. Incredibly, by itself, the Tide family of
brands captures a 38 percent share of all North American detergent sales; the Gain brand pulls in another
15 percent. Even more incredible, all P&G detergent brands combined capture a 60 percent U.S. market
share.
But differentiated marketing also increases the costs of doing business. A firm usually finds it more
expensive to develop and produce 10 units of 10 different products than 100 units of a single product.
Developing separate marketing plans for separate segments requires extra marketing research, forecasting,
sales analysis, promotion planning, and channel management. And trying to reach different market
segments with different advertising campaigns increases promotion costs. Thus, the company must weigh
increased sales against increased costs when deciding on a differentiated marketing strategy.
c) Concentrated market
When using a concentrated marketing (or niche marketing) strategy, instead of going after a small share of a
large market, a firm goes after a large share of one or a few smaller segments or niches.
Example: consider nicher Stance Socks.
Through concentrated marketing, the firm achieves a strong market position because of its greater
knowledge of consumer needs in the niches it serves and the special reputation it acquires. It can market
more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined
segments. It can also market more efficiently, targeting its products or services, channels, and
communications programs toward only consumers that it can serve best and most profitably.
Niching lets smaller companies focus their limited resources on serving niches that may be unimportant to
or overlooked by larger competitors. Many companies start as nichers to get a foothold against larger, more
resourceful competitors and then grow into broader competitors. For example, Southwest Airlines began by
serving intrastate, no-frills commuters in Texas but is now one of the nation’s largest airlines
Concentrated marketing can be highly profitable. At the same time, it involves higher-than-normal risks.
Companies that rely on one or a few segments for all business will suffer greatly if the segment turns sour.
Or larger competitors may decide to enter the same segment with greater resources. In fact, many large
companies develop or acquire niche brands of their own. For example, Coca-Cola’s Venturing and Emerging
Brands unit markets a cooler full of niche beverages. Its brands include Honest Tea (the nation’s numberone organic bottled tea brand), NOS (an energy drink popular among auto enthusiasts), FUZE (a fusion of
tea, fruit, and other flavors), Zico (pure premium coconut water). Such brands let Coca-Cola compete
effectively in smaller, specialized markets, and some will grow into future powerhouse brands.
d) Micromarketing
The practice of tailoring products and marketing programs to suit the tastes of specific individuals and local
customer segments. Rather than seeing a customer in every individual, micromarketers see the individual in
every customer. Micromarketing includes local marketing and individual marketing.
Local Marketing. Local marketing involves tailoring brands and promotions to the needs and wants of local
customers. For example, Marriott’s Renaissance Hotels has rolled out its Navigator program, which hyperlocalizes guest experiences at each of its 155 lifestyle hotels around the world.
Thanks to the explosion in smartphones and tablets that integrate geolocation technology, companies can
now track consumers’ whereabouts closely and engage them on the go with localized deals and information
fast, wherever they may be. It’s called SoLoMo (social+local+mobile) marketing.
Example: Shopkick sends special offers and rewards to shoppers simply for checking into client stores such
as Target, Macy’s, Best Buy, Old Navy, or Crate & Barrel and buying brands from Shopkick partners such as
P&G, Unilever, Disney, Kraft, and L’Oréal. When shoppers are near a participating store, the Shopkick app
on their phone picks up a signal from the store and spits out store coupons, deal alerts, and product
information. When Shopkickers walk into their favorite retail stores, the app automatically checks them in
and they rack up rewards points or “kicks.” If they buy something or scan product bar codes, they get even
more kicks. Users can use their kicks for discounted or free merchandise of their own choosing.
Individual Marketing. In the extreme, micromarketing becomes individual marketing— tailoring products
and marketing programs to the needs and preferences of individual customers. Individual marketing has
also been labeled one-to-one marketing, mass customization, and markets-of-one marketing. The
widespread use of mass marketing has obscured the fact that for centuries consumers were served as
individuals: The tailor custom-made a suit, the cobbler designed shoes for an individual, and the
cabinetmaker made furniture to order.
Today, new technologies are permitting many companies to return to customized marketing. Detailed
databases, robotic production and flexible manufacturing, and interactive technologies such as
smartphones and online and social media have combined to foster mass customization.
Mass customization is the process by which firms interact one to one with masses of customers to design
products, services, and marketing programs tailor-made to individual needs. Companies these days are
hyper-customizing everything from food, artwork, earphones, and sneakers to high-end luxury products.
Example: At one end of the spectrum, candy lovers can go to mymms.com and buy M&Ms with personalized
messages or pictures embossed on each little candy. Visit Nike ID or Puma Factory online to design and
order your very own personalized sneakers. JH Audio in Orlando makes customized earphones based on
molds of customers’ ears to provide optimized fit and better and safer sound.
At the other extreme are “bespoke” luxury goods (a fancy word for “custom-made” or “made to order”). For
the right price, well-heeled customers can buy custom-designed goods ranging from bespoke fashions and
accessories by Hermes and Gucci to bespoke cars from Aston Martin or Rolls-Royce.
Example: individual marketing: The Rolls-Royce Bespoke design team works closely with individual
customers to help them create their own unique Rolls-Royces.
Beyond customizing products, marketers also customize their marketing messages to engage customers on
a one-to-one basis.
Example: Nike collected data on its most enthusiastic customers, those who train using FuelBands and apps
such as Nike+ Running. It then used the data to create 100,000 customized animated videos based on each
individual’s actual workout activities. For example, one video might feature an animation of a person in Los
Angeles running past the Hollywood sign; another might show a New Yorker running in the rain along the
East River. Nike then emailed the unique customized videos to each of the 100,000 Nike+ users, challenging
them to achieve new heights in the coming year. The videos not only engaged Nike’s biggest fans, they also
spread to the broader Nike community.
However, target marketing sometimes generates controversy and concern. The biggest issues usually
involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful
products.
Example: fast-food chains have generated controversy over the years by their attempts to target inner-city
minority consumers. They’ve been accused of pitching their high-fat, salt-laden fare to low-income, urban
residents who are much more likely than suburbanites to be heavy consumers. Similarly, big banks and
mortgage lenders have been criticized for targeting consumers in poor urban areas with attractive
adjustable-rate home mortgages that they can’t really afford.
DIFFERENTIATING AND POSITIONING
Differentiation - act of designing a set of meaningful differences to distinguish the company’s offering from
competitors’ offerings.
Differential (competitive) advantage - an attribute of a product or a business that is not currently matched
by rival companies or products and is highly desired by target market’s customers
Positioning - process of creating an image for a product in the minds of target customers relative to
competing products.
A product position is the way a product is defined by consumers on important attributes—the place the
product occupies in consumers’ minds relative to competing products. Products are made in factories, but
brands happen in the minds of consumers.
To simplify the buying process, consumers organize products, services, and companies into categories and
“position” them in their minds. A product’s position is the complex set of perceptions, impressions, and
feelings that consumers have for the product compared with competing products.
Consumers position products with or without the help of marketers. But marketers do not want to leave
their products’ positions to chance. They must plan positions that will give their products the greatest
advantage in selected target markets, and they must design marketing mixes to create these planned
positions.
Positioning begins with actually differentiating the company’s marketing offer so that it will give consumers
more value than competitors offer:
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by offering lower prices than competitors or
by providing more benefits to justify higher prices
Perceptual positioning maps show consumer perceptions of their brands versus those of competing
products on important buying dimensions.
But in many cases, two or more firms will go after the same position. Then each will have to find other ways
to set itself apart.
Above all else, a brand’s positioning must serve the needs and preferences of welldefined target markets.
Example: both Dunkin’ Donuts and Starbucks are coffee and snack shops, they target very different
customers who want very different things from their favorite coffee seller. Starbucks targets more upscale
professionals with more high-brow positioning. In contrast, Dunkin’ Donuts targets the “average Joe” with a
decidedly more low-brow, “everyman” kind of positioning. Yet each brand succeeds because it creates just
the right value proposition for its unique mix of customers.
The differentiation and positioning task consists of three steps: identifying a set of differentiating
competitive advantages on which to build a position, choosing the right competitive advantages, and
selecting an overall positioning strategy. The company must then effectively communicate and deliver the
chosen position to the market.
To the extent that a company can differentiate and position itself as providing superior customer value, it
gains competitive advantage
To find points of differentiation, marketers must think through the customer’s entire experience with the
company’s product or service. An alert company can find ways to differentiate itself at every customer
contact point. It can differentiate along the lines of product, services, channels, people, or image.
Through product differentiation, brands can be differentiated on features, performance, or style and design.
Example: Bose positions its speakers on their striking design and sound characteristics. By gaining the
approval of the American Heart Association as an approach to a healthy lifestyle, Subway differentiates
itself as the healthy fast-food choice.
Some companies gain services differentiation through speedy, convenient, or careful delivery. Example:
Jimmy John’s doesn’t just offer fast food; its gourmet sandwiches are “Freaky Fast.”
Firms that practice channel differentiation gain competitive advantage through the way they design their
channel’s coverage, expertise, and performance. Example: Amazon.com and GEICO set themselves apart
with their smooth-functioning direct channels.
Companies can also gain a strong competitive advantage through people differentiation—hiring and training
better people than their competitors do.
Example: supermarket chain Wegmans has long been recognized as a customer service champ with a cultlike loyalty among its shoppers. The secret to its extraordinary customer service lies in its carefully selected,
superbly trained, happy employees, who personify Wegmans’s commitment to customers: “Everyday You
Get Your Best.” For example, the chain’s cashiers aren’t allowed to interact with customers until they’ve had
at least 40 hours of training. “Our employees are our number one asset,” says the chain’s vice president for
human resources.
Even when competing offers look the same, buyers may perceive a difference based on company or brand
image differentiation. The chosen symbols, characters, and other image elements a brand chooses must be
communicated through advertising that conveys the company’s or brand’s personality.
Which Differences to Promote.
A difference is worth establishing to the extent that it satisfies the following criteria:
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Important. The difference delivers a highly valued benefit to target buyers.
Distinctive. Competitors do not offer the difference, or the company can offer it in a more
distinctive way.
Superior. The difference is superior to other ways that customers might obtain the same
benefit.
Communicable. The difference is communicable and visible to buyers.
Preemptive. Competitors cannot easily copy the difference.
Affordable. Buyers can afford to pay for the difference.
Profitable. The company can introduce the difference profitably
Example: When the Westin Stamford Hotel in Singapore once advertised itself as the world’s tallest hotel, it
was a distinction that was not important to most tourists; in fact, it turned many off. Similarly, Coca-Cola’s
classic product failure—New Coke—failed the superiority and importance tests among core Coca-Cola
drinkers.
SELECTING A POSITION STRATEGY
Value proposition—the full mix of benefits on which a brand is differentiated and positioned.
Positioning – the place the product occupies in consumers’ minds relative to competing products.
POSSIBLE VALUE PROPOSITION MAP
Developing a Positioning Statement
Company and brand positioning should be summed up in a positioning statement. The statement should
follow the form: To (target segment and need) our (brand) is ( concept) that (point of difference).
Example: Evernote: “To busy multitaskers who need help remembering things, Evernote is a digital content
management application that makes it easy to capture and remember moments and ideas from your
everyday life using your computer, phone, tablet, and the web.”
Placing a brand in a specific category suggests similarities that it might share with other products in the
category. But the case for the brand’s superiority is made on its points of difference.
Example: the U.S. Postal Service ships packages just like UPS and FedEx, but it differentiates its Priority Mail
from competitors with convenient, low-price, flat-rate shipping boxes and envelopes.
Communicating and Delivering the Chosen Position
Once it has chosen a position, the company must take strong steps to deliver and communicate the desired
position to its target consumers. All the company’s marketing mix efforts must support the positioning
strategy.
Once a company has built the desired position, it must take care to maintain the position through consistent
performance and communication. It must closely monitor and adapt the position over time to match
changes in consumer needs and competitors’ strategies.
CHAPTER 8
Product – anything that can be offered to a market for attention, acquisition, use, or consumption that
might satisfy a want or need.
Products include more than just tangible objects, such as cars, clothing, or mobile phones.
Broadly defined, products also include services, events, persons, places, organizations, and ideas or a
mixture of these. Thus, an Apple iPhone, a Toyota Camry, and a Caffé Mocha at Starbucks are products. But
so are a trip to Las Vegas, Schwab online investment services, your Instagram account, and advice from your
family doctor.
Services are a form of product that consists of activities, benefits, or satisfactions offered for sale that are
essentially intangible and do not result in the ownership of anything. Examples include banking, hotel,
airline travel, retail, wireless communication, and home-repair services.
Governments offer services through courts, employment services, hospitals, military services, police and
fire departments, the postal service, and schools. Private not-for-profit organizations offer services through
museums, charities, churches, colleges, foundations, and hospitals. A large number of business
organizations offer services—airlines, banks, hotels, insurance companies, consulting firms, medical and
legal practices, entertainment and telecommunications companies, real estate firms, retailers, and others.
4 CHARACTERISTICS OF SERVICE:
1) Example: people undergoing cosmetic surgery cannot see the result before the purchase. Airline
passengers have nothing but a ticket and a promise that they and their luggage will arrive safely at
the intended destination, hopefully at the same time.
2) In contrast, services are first sold and then produced and consumed at the same time. Service
inseparability means that services cannot be separated from their providers, whether the providers
are people or machines. If a service employee provides the service, then the employee becomes a
part of the service. And customers don’t just buy and use a service; they play an active role in its
delivery. Customer coproduction makes provider–customer interaction a special feature of services
marketing. Both the provider and the customer affect the service outcome/
3) Example: Marriott— have reputations for providing better service than others. Still, within a given
Marriott hotel, one registration-counter employee may be cheerful and efficient, whereas another
standing just a few feet away may be grumpy and slow. Even the quality of a single Marriott
employee’s service varies according to his or her energy and frame of mind at the time of each
customer encounter.
4) Example: Some doctors charge patients for missed appointments because the service value existed
only at that point and disappeared when the patient did not show up. The perishability of services is
not a problem when demand is steady. However, when demand fluctuates, service firms often have
difficult problems. For example, because of rush-hour demand, public transportation companies
have to own much more equipment than they would if demand were even throughout the day.
Thus, service firms often design strategies for producing a better match between demand and
supply. Hotels and resorts charge lower prices in the off-season to attract more guests. And
restaurants hire part-time employees to serve during peak periods.
Marketing mix planning begins with building an offering that brings value to target customers. This offering
becomes the basis on which the company builds profitable customer relationships.
A company’s market offering often includes both tangible goods and services. At one extreme, the market
offer may consist of a pure tangible good, such as soap, toothpaste, or salt; no services accompany the
product. At the other extreme are pure services, for which the market offer consists primarily of a service.
Examples include a doctor’s exam and financial services.
To differentiate their offers, beyond simply making products and delivering services, they are creating and
managing customer experiences with their brands or companies.
Example: Disney has long manufactured dreams and memories through its movies and theme parks—it
wants theme park cast members to deliver a thousand “small wows” to every customer. And Nike has long
declared, “It’s not so much the shoes but where they take you.” Today, however, all kinds of firms are
recasting their traditional goods and services to create experiences. Apple’s highly successful retail stores
don’t just sell the company’s products. They create an engaging Apple brand experience. The store design is
clean, simple, and just oozing with style— much like an Apple iPad or a featherweight MacBook Air. The
bustling stores feel more like community centers than retail outlets, with crowds of customers sampling the
goods and buzzing excitedly about all things Apple. The stores encourage a lot of purchasing, to be sure. But
they also encourage lingering, with tables full of fully functioning Macs, iPods, iPads, and iPhones sitting out
for visitors to try and dozens of laid-back Apple employees close at hand to answer questions and cater to
every whim.
LEVELS OF A PRODUCT AND SERVICES
Product planners need to think about products and services on three levels. Each level adds more customer
value. The most basic level is the core customer value, which addresses the question: What is the buyer
really buying? When designing products, marketers must first define the core, problem-solving benefits or
service that people want.
Example: And people who buy an Apple iPad are buying much more than just a tablet computer. They are
buying entertainment, self-expression, productivity, and connectivity with friends and family—a mobile and
personal window to the world.
At the second level, product planners must turn the core benefit into an actual product. They need to
develop product and service features, a design, a quality level, a brand name, and packaging.
Example: the iPad is an actual product. Its name, parts, styling, operating system, features, packaging, and
other attributes have all been carefully combined to deliver the core customer value of staying connected.
Augmented level: offering additional consumer services and benefits.
Example: The iPad is more than just a digital device. It provides consumers with a complete connectivity
solution. Thus, when consumers buy an iPad, Apple and its resellers also might give buyers a warranty on
parts and workmanship, quick repair services when needed, and web and mobile sites to use if they have
problems or questions.
2 types of product: Consumer and Industrial Product
CONSUMER PRODUCT – products and services bought by final consumers for personal consumption.
Marketers usually classify these products and services further based on how consumers go about buying
them. These products differ in the ways consumers buy them and, therefore, in how they are marketed.
1) Convenience products – consumer products and services that customers usually buy frequently,
immediately, and with minimal comparison and buying effort.
Example: include laundry detergent, candy, magazines, and fast food. Convenience products are
usually low priced, and marketers place them in many locations to make them readily available
when customers need or want them.
2) Shopping products – less frequently purchased consumer products and services that customers
compare carefully on suitability, quality, price, and style. When buying shopping products and
services, consumers spend much time and effort in gathering information and making comparisons.
Example: furniture, clothing, major appliances, and hotel services. Shopping product marketers
usually distribute their products through fewer outlets but provide deeper sales support to help
customers in their comparison efforts.
3) Specialty products – consumer products and services with unique characteristics or brand
identifications for which a significant group of buyers is willing to make a special purchase effort.
Example: specific brands of cars, high-priced photography equipment, designer clothes, gourmet
foods, and the services of medical or legal specialists. A Lamborghini automobile is a specialty
product because buyers are usually willing to travel great distances to buy one. Buyers normally do
not compare specialty products. They invest only the time needed to reach dealers carrying the
wanted brands.
4) Unsought products – consumer products that a consumer either does not know about or knows
about but does not normally consider buying. Most major new innovations are unsought until
consumers become aware of them through marketing.
Example: life insurance, preplanned funeral services, and blood donations to the Red Cross. By their
very nature, unsought products require a lot of promoting, personal selling, and other marketing
efforts.
INDUSTRIAL GOOD – items bought by individuals and organizations for use in a company’s operations or to
make other products.
The distinction between a consumer product and an industrial product is based on the purpose for which
the product is purchased.
Example: If a consumer buys a lawn mower for use around home, the lawn mower is a consumer product. If
the same consumer buys the same lawn mower for use in a landscaping business, the lawn mower is an
industrial product.
TYPES OF INDUSTRIAL PRODUCT:
Materials and parts include raw materials as well as manufactured materials and parts.
Raw materials consist of farm products (wheat, cotton, livestock, fruits, vegetables) and natural products
(fish, lumber, crude petroleum, iron ore). Manufactured materials and parts consist of component materials
(iron, yarn, cement, wires) and component parts (small motors, tires, castings). Most manufactured
materials and parts are sold directly to industrial users. Price and service are the major marketing factors;
branding and advertising tend to be less important.
Capital items are industrial products that aid in the buyer’s production or operations, including installations
and accessory equipment. Installations consist of major purchases such as buildings (factories, offices) and
fixed equipment (generators, drill presses, large computer systems, elevators). Accessory equipment
includes portable factory equipment and tools (hand tools, lift trucks) and office equipment (computers, fax
machines, desks).
Supplies and services. Supplies include operating supplies (lubricants, coal, paper, pencils) and repair and
maintenance items (paint, nails, brooms). Supplies are the convenience products of the industrial field
because they are usually purchased with a minimum of effort or comparison. Business services include
maintenance and repair services (window cleaning, computer repair) and business advisory services (legal,
management consulting, advertising). Such services are usually supplied under contract.
Organizations, Persons, Places, and Ideas
Organizations often carry out activities to “sell” the organization itself. Organization marketing consists of
activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward
an organization. Example: Greenpeace – want to change the relation to the environment, attitude of ppl,
change their behavior. Even a company can be a product.
Person marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of
target consumers toward particular people. Example: President Medvedev. People ranging from presidents,
entertainers, and sports figures to professionals such as doctors, lawyers, and architects use person
marketing to build their reputations. And businesses, charities, and other organizations use well-known
personalities to help sell their products. Example: Nike spends almost $1 billion annually on endorsement
deals with a stable of stars spanning almost every conceivable sport worldwide, including headliners such as
tennis greats Maria Sharapova and Rodger Federer, world soccer superstars Cristiano Ronaldo and Neymar,
and current and former NBA all-stars Michael Jordan.
Place marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of
target consumers toward particular places. Example: tourism. Cities, states, regions, and even entire nations
compete to attract tourists, new residents, conventions, and company offices and factories. Example: The
New Orleans city website shouts “Go NOLA” and markets annual events such as Mardi Gras festivities and
the New Orleans Jazz and Heritage Festival. Tourism Australia advertises that “There’s Nothing Like
Australia” and provides a website and smartphone app complete with videos, holiday ideas, destination
information, and about anything else travelers might need to plan an Australian vacation.
Ideas – all marketing is the marketing of an idea, whether it is the general idea of brushing your teeth or the
specific idea that Crest toothpastes create “healthy, beautiful smiles for life.” Here, however, we narrow our
focus to the marketing of social ideas. This area has been called social marketing and consists of using
traditional business marketing concepts and tools to encourage behaviors that will create individual and
societal well-being.
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the use of commercial marketing concepts and tools in programs designed to influence individuals’
behavior to improve their well-being and that of society. Example: Save Driving advertisement.
QUALITY? - value for money – price people are willing to pay.
The company should select its own quality level – the best quality for the company and the quality wanted
by the customers and for which they are willing to pay (that they can afford).
Quality level is the level of quality that supports the product’s positioning.
Product quality is one of the marketer’s major positioning tools. Quality affects product or service
performance; thus, it is closely linked to customer value and satisfaction. In the narrowest sense, quality
can be defined as “no defects.” But most marketers go beyond this narrow definition. Instead, they define
quality in terms of creating customer value and satisfaction. The American Society for Quality defines
quality as the characteristics of a product or service that bear on its ability to satisfy stated or implied
customer needs. Example: Siemens defines quality this way: “Quality is when our customers come back and
our products don’t.
Total quality management (TQM) is an approach in which all of the company’s people are involved in
constantly improving the quality of products, services, and business processes. For most top companies,
customer-driven quality has become a way of doing business.
Product quality has two dimensions: level and consistency.
In developing a product, the marketer must first choose a quality level that will support the product’s
positioning. Product quality means performance quality—the product’s ability to perform its functions.
Example of level of quality: Mercedes has better quality than Daewoo.
Example: a Rolls-Royce provides higher performance quality than a Chevrolet: It has a smoother ride, lasts
longer, and provides more handcraftsmanship, custom design, luxury, and “creature comforts.” Companies
rarely try to offer the highest possible performance quality level; few customers want or can afford the high
levels of quality offered in products such as a Rolls-Royce automobile or a Rolex watch. Instead, companies
choose a quality level that matches target market needs and the quality levels of competing products.
Beyond quality level, high quality also can mean high levels of quality consistency. Here, product quality
means conformance quality—freedom from defects and consistency in delivering a targeted level of
performance.
Example: In this sense, a Chevrolet can have just as much quality as a Rolls-Royce. Although a Chevy doesn’t
perform at the same level as a Rolls-Royce, it can just as consistently deliver the quality that customers pay
for and expect.
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Quality in terms of the product or service is the lack of defects
Quality in terms of the customer is the value and satisfaction provided by the product or service
PRODUCT LINE – for variety seeking customers
Product line is a group of products that are closely related because they function in a similar manner, are
sold to the same customer groups, are marketed through the same types of outlets, or fall within given
price ranges.
Example: Nike produces several lines of athletic shoes and apparel, and Marriott offers several lines of
hotels.
The line is too short if the manager can increase profits by adding items; the line is too long if the manager
can increase profits by dropping items.
Product line length is the number of items in the product line.
2 ways:
1) Line filling occurs when companies add more items within the present price range of the line.
- More profits
- Satisfying dealers
- Excess capacity
- Plugging holes to fend off competitors
- Being the leading full-line company
Line filling is overdone if it results in cannibalization (eating up sales of the company’s own existing
products) and customer confusion. The company should ensure that new items are noticeably different
from existing ones.
Example: Shampoo Head and shoulders with different flavours– variety seeking – catch customers from
other segments.
Nestle chocolate: more than 10 types of chocolate – they usually start w/ 1 product – but customers expect
new products – that’s why you offer variety and fight with competitors.
Advantage: per product, less portion of cost allocation – from financial perspective
2) Product line stretching occurs when a company lengthens its product line beyond its current range.
The company can stretch its line downward, upward, or both ways. Companies located at the
upper end of the market can stretch their lines downward.
Example: Mercedes has stretched downward with the CLA line to draw in younger, first-time buyers. A
company may stretch downward to plug a market hole that otherwise would attract a new competitor
or to respond to a competitor’s attack on the upper end. Or it may add low-end products because it
finds faster growth taking place in the low-end segments.
Example: When Toyota decided to produce lexus – more luxurious, high quality & price.
Example: Mariott – diff types for diff customers – they know how to do this business, but they want to
expand – to increase sales. Hilton? Seems luxurious – middle-priced hotels
Companies can also stretch their product lines upward. Companies stretch upward to add prestige to
their current products or to reap higher margins.
Example: P&G did that with brands such as Cascade dishwashing detergent and Dawn dish soap by
adding “Platinum” versions at higher price points.
Example: Over the years, BMW Group has transformed itself from a single-brand, five-model automaker
into a powerhouse with three brands, 14 “Series,” and dozens of distinct models. The company has
expanded downward with its MINI Cooper line and upward with Rolls-Royce. Its BMW line brims with
models from the low end to the high end to everything in between. The brand’s seven “Series” lines
range from the entry-level 1-Series subcompact to the luxury-compact 3-Series to the midsize 5-Series
sedan to the luxurious full-size 7-Series. In between, BMW has filled the gaps with its X1, X3, X4, X5, and
X6 SUVs; M-Series performance models; the Z4 roadster; and the i3 and i8 hybrids.
PRODUCT LINE DECISIDONS
A product mix consists of all the product lines and items that a particular seller offers for sale.
Example: Colgate-Palmolive is perhaps best known for its toothpaste and other oral care products. But
Colgate is a $17.3 billion consumer products company that makes and markets a full product mix consisting
of dozens of familiar lines and brands. Colgate divides its overall product mix into four major lines: oral care,
personal care, home care, and pet nutrition. Each product line consists of many brands and items.
A company’s product mix has four important dimensions: width, length, depth, and consistency. Product
mix width refers to the number of different product lines the company carries.
Product mix length refers to the total number of items a company carries within its product lines. Colgate
carries several brands within each line.
Example: its personal care line includes Softsoap liquid soaps and body washes, Irish Spring bar soaps,
Speed Stick deodorants, and Skin Bracer, Afta, and Colgate toiletries and shaving products, among others.
The Colgate home care line includes Palmolive and AJAX dishwashing products, Suavitel fabric conditioners,
and AJAX and Murphy Oil Soap cleaners. The pet nutrition line houses the Hills and Science Diet pet food
brands.
Product line depth refers to the number of versions offered of each product in the line.
Example: Colgate toothpastes come in numerous varieties, ranging from Colgate Total, Colgate Optic
White, and Colgate Tartar Protection to Colgate Sensitive, Colgate Enamel Health, Colgate PreviDent, and
Colgate Kids. Then each variety comes in its own special forms and formulations. For example, you can buy
Colgate Total in regular, clean mint, advanced whitening, deep clean etc.
The consistency of the product mix refers to how closely related the various product lines are in end use,
production requirements, distribution channels, or some other way. Colgate’s product lines are consistent
insofar as they are consumer products that go through the same distribution channels. The lines are less
consistent insofar as they perform different functions for buyers.
A company can increase its business in four ways. It can add new product lines, widening its product mix. In
this way, its new lines build on the company’s reputation in its other lines. A company can lengthen its
existing product lines to become a more full-line company. It can add more versions of each product and
thus deepen its product mix. Finally, a company can pursue more product line consistency— or less—
depending on whether it wants to have a strong reputation in a single field or in several fields.
BRAND SPONSORSHIP
A brand is a name, term, sign, symbol, or design or a combination of these that identifies the maker or seller
of a product or service. Branding can add value to a consumer’s purchase. Customers attach meanings to
brands and develop brand relationships. As a result, brands have meaning well beyond a product’s physical
attributes.
Branding has become so strong that today hardly anything goes unbranded. Salt is packaged in branded
containers, common nuts and bolts are packaged with a distributor’s label, and automobile parts—spark
plugs, tires, filters—bear brand names that differ from those of the automakers. Even fruits, vegetables,
dairy products, and poultry are branded—Cuties mandarin oranges, Dole Classic salads, Horizon Organic
milk, Perdue chickens, and Eggland’s Best eggs.
Brand names help consumers identify products that might benefit them. Brands also say something about
product quality and consistency—buyers who always buy the same brand know that they will get the same
features, benefits, and quality each time they buy. Branding also gives the seller several advantages. The
seller’s brand name and trademark provide legal protection for unique product features that otherwise
might be copied by competitors.
Branding helps the seller to segment markets.
Example: rather than offering just one general product to all consumers, Toyota can offer the different
Lexus, Toyota, and Scion brands, each with numerous sub-brands— such as Avalon, Camry, Corolla, Prius,
Yaris, Tundra, and Land Cruiser.
A brand name becomes the basis on which a whole story can be built about a product’s special qualities.
Example: the Cuties brand of pint-sized mandarins sets itself apart from ordinary oranges by promising “Kids
love Cuties because Cuties are made for kids.” They are a healthy snack that’s “perfect for little hands”:
sweet, seedless, kidsized, and easy to peel.
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Brand Name - a part of a brand that can be spoken, including letters, words, and numbers
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Brand Mark - that part of а brand which can be recognized as а symbol, design, or distinctive
coloring or lettering.
Trademark - а brand or part of а brand that is given legal protection — it protects the seller' s
exclusive rights to use the brand name or brand mark.
Brand Recognition - is the extend to which consumers are aware of a brand
A brand is the company’s promise to deliver a specific set of features, benefits, services, and experiences
consistently to buyers. The brand promise must be clear, simple, and honest.
Example: Motel 6 offers clean rooms, low prices, and good service but does not promise expensive
furnishings or large bathrooms. In contrast, the Ritz-Carlton offers luxurious rooms and a truly memorable
experience but does not promise low prices.
A manufacturer has four sponsorship options – who will pay for branding and sponsorship – who will cover
the branding expenses.
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The product may be launched as a national brand (or manufacturer’s brand), as when Samsung and
Kellogg sell their output under their own brand names (the Samsung Galaxy tablet or Kellogg’s
Frosted Flakes) – they make product, produce it, do all advertising, marketing and branding – prices
are higher (NIKE shoes, Dull computers, P&G)
- Or the manufacturer may sell to resellers who give the product a private brand (also called a store
brand). (don’t need to do any branding for Ramstore soap, juice etc – they don’t need to do
packaging, advertising – relatively cheap) – low price is because of lack of advertising, packaging –
price-sensitive consumers. Retail store will max total sales (bc of more choices for consumers).
Producers – they make product (make only production) – give it to retail store and they sell (I don’t
care). Consumers – we have variety – low or high end.
- Although most manufacturers create their own brand names, others market licensed brands.
- Finally, two companies can join forces and co-brand a product.
1. Private brand
Many large retailers skillfully market a deep assortment of store-brand merchandise.
Example: Kroger’s private brands—the Kroger house brand, Private Selection, Heritage Farm, Simple Truth
(natural and organic), Psst and Check This Out (savings), and others—add up to a whopping 25 percent of
the giant grocery retailer’s sales, nearly $25 billion worth annually.
At thrifty grocery chain ALDI, more than 90 percent of sales come from private brands such as Baker’s
Choice, Friendly Farms, Simply Nature, and Mama Cozzi’s Pizza Kitchen.
Online retailer Amazon has developed a stable of private brands, including AmazonBasics (electronics),
Pinzon (kitchen gadgets), Strathwood (outdoor furniture), Pike Street (bath and home products), and Denali
(tools).
Once known as “generic” or “no-name” brands, today’s store brands have shed their image as cheap
knockoffs of national brands. Store brands now offer much greater selection, and they are rapidly achieving
name-brand quality.
Example: retailers such as Target and Trader Joe’s are out-innovating many of their national-brand
competitors. Kroger even offers a Kroger brand guarantee—“Try it, like it, or get the national brand free.”
As a result, consumers are becoming loyal to store brands for reasons besides price. In some cases,
consumers are even willing to pay more for store brands that have been positioned as gourmet or premium
items.
Advantages:
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Product mix control
Slotting fees for manufacturers’ brands
Higher margins
Exclusivity
To compete with store brands, national brands must sharpen their value propositions, especially when
appealing to today’s more frugal consumers. Many national brands are fighting back by rolling out more
discounts and coupons to defend their market share. In the long run, however, leading brand marketers
must compete by investing in new brands, new features, and quality improvements that set them apart.
They must design strong advertising programs to maintain high awareness and preference. And they must
find ways to partner with major distributors to find distribution economies and improve joint performance.
Example: in response to the surge in private-label sales, consumer product giant Procter & Gamble has
redoubled its efforts to develop and promote new and better products, particularly at lower price points.
“We invest $2 billion a year in research and development, $400 million on consumer knowledge, and about
10 percent of sales on advertising,” says P&G’s CEO. “Store brands don’t have that capacity.” As a result,
P&G brands still dominate in their categories. For example, its Tide, Gain, Cheer, and other premium
laundry detergent brands capture a combined 60 percent of the $7 billion U.S. detergent market.
2. Licenzing – use the advantage of some existing characters – additional revenues to allow a
company to use the character. For the company: high sales, when we see the character – we want
to buy it even if we don’t need it.
Some companies license names or symbols previously created by other manufacturers, names of wellknown celebrities, or characters from popular movies and books. For a fee, any of these can provide an
instant and proven brand name.
Example: consider the Kodak brand with its familiar red and yellow colors, which has retained its value even
after the company went bankrupt and discontinued its consumer products. So even though Eastman Kodak
has dropped its consumer lines, we’ll still be seeing a lot of Kodak-branded consumer products made by
other companies under licensing agreements with Eastman Kodak. For example, Sakar International now
makes Kodak cameras and accessories, and the Bullitt Group will soon launch a variety of Kodak electronics,
including an Android smartphone and a tablet computer. Video monitoring company Seedonk makes and
sells a Kodak Baby Monitoring System.
Apparel and accessories sellers pay large royalties to adorn their products with the names or initials of wellknown fashion innovators such as Calvin Klein, Tommy Hilfiger, Gucci, or Armani.
Sellers of children’s products attach an almost endless list of character names to clothing, toys, school
supplies, linens, dolls, lunch boxes, cereals, and other items.
Example: Licensed character names range from classics such as Sesame Street, Disney, Star Wars, Scooby
Doo, Hello Kitty, SpongeBob SquarePants, and Dr. Seuss characters to the more recent Doc McStuffins,
Monster High, Frozen, and Minions. And currently, numerous top-selling retail toys are products based on
television shows and movies.
Example: The Smurfs is a Belgian TV brand about the lives of small, blue creatures that live in mushrooms.
The Smurfs today are a multimillion-dollar licensing company that sells products under the Smurfs brand
name including video games, toys, magazines, and school items. In 2011, a Smurfs-based movie came out,
which gave a boost to the brand’s popularity and the sales of its licensed products.
3. Co-branding – those who love oreo – buy it bc of oreo, alpen gold also benefits.
Occurs when two established brand names of different companies are used on the same product. Cobranding offers many advantages. Because each brand operates in a different category, the combined
brands create broader consumer appeal and greater brand equity.
Example: Benjamin Moore and Pottery Barn joined forces to create a special collection of Benjamin Moore
paint colors designed to perfectly coordinate with Pottery Barn’s unique furnishings and accents. Taco Bell
and Doritos teamed up to create the Doritos Locos Taco. Taco Bell sold more than 100 million of the tacos in
just the first 10 weeks and quickly added Cool Ranch and Fiery versions and has since sold more than a
billion.
It also allows a company to expand its existing brand into a category it might otherwise have difficulty
entering alone.
Example: Nike and Apple co-branded the Nike+iPod Sport Kit, which lets runners link their Nike shoes with
their iPods to track and enhance running performance in real time. The Nike+iPod arrangement gave Apple
a presence in the sports and fitness market. It helps Nike bring new value to its customers.
Disadvantages: Such relationships usually involve complex legal contracts and licenses. Co-branding
partners must carefully coordinate their advertising, sales promotion, and other marketing efforts. Finally,
when co-branding, each partner must trust that the other will take good care of its brand. If something
damages the reputation of one brand, it can tarnish the co-brand as well.