Offering (Product & Service) Strategy and
Brand Management
Key Learning Points
• Defining & Segmenting the Product-market
• Product Life Cycle and Product & Brand
Strategies
• Modifying The Offering Concept &
Positioning Strategies
• Forecasting New Product Sales
1
Marketing Process
SWOT Analysis
Company Customers Competitors Collaborators Context
Market
Segmentation
Create
Value
Selection &
Targeting
Product/Service
Offering
Promotion/
Communicate & Communication
Capture Value
Customer
Acquisition
Product/Service
Offering Positioning
Place/
Channel
Pricing
Customer
Retention/Expansion
Revenue & Profits
Customer
Relationship
Management
Sustain
Value
2
Segmentation, Targeting, Positioning
Segmentation Break market into segments that respond
differently to elements of the marketing mix.
Selection
Identify segment(s) that will respond most
positively (i.e., profitably) to firm’s offerings.
Concentrated vs. Differentiated targeting.
Targeting
Determine how to best acquire, retain &
Acquisition vs. expand purchases by the most profitable
Retention &
segments.
Expansion
Positioning
Design, price, place, & promote offering so it
occupies a distinct & valued place in target
customer’s mind relative to competitive
3
offerings.
Defining & Segmenting the Product Market
• Define & segment the Product Market by:
– type of customers served (who),
– particular needs of those customers (what),
– the means or technology used to satisfy those customer
needs (how), &
– geography of the market served (where).
New
New
Channels/
Geographies
Customers
Current
New
Products/Technology
4
Product Market Competition:
Packaged Confection Product Class
Cakes & Pastries
Gum
Candy
Dark
Chocolate
Candied
Nuts
Breads & Scones
All food &
beverage
5
Four Levels of Product Market Definition
Implies Different Tasks for each Level:
– Product form competition: focus marketing activities
on immediate customers & competitors;
e.g., Montreaux’s dark chocolates w/fruit are the best.
– Product category competition: convince customers
that your product form/offering is best in the category;
Where
Should e.g., dark chocolate is much healthier than sugary candies.
the – Generic competition: convince customers of the
Focus
superiority of your product (category) offering’s ability
Be?
to satisfy needs over other (category) offerings;
e.g. packaged candies are the most convenient snack on the run.
– Budget competition: convince customers of the
superiority of your company’s portfolio of products;
e.g.,Apollo’s line of snacks & confections are the highest quality.
Be sure to identify the most relevant level of competition in each case.
6
Product Market Competition:
Higher Education
Law courses
Marketing
courses
Finance
courses
Core
Biz
Classes
Entrepreneurship
courses
Engineering courses
All self
improvement
7
Product Market Definition & Positioning
Product form competition: focus positioning & marketing
activities on immediate customers & competitors.
For Cox MBA students, MKTG 6201 is a core class that,
unlike other foundational classes (e.g., Accounting,
Economics, OB, Finance), will
emphasizes
company’s
help youthe
understand
how
boundary-spanning
activities
focus
oncustomers
customers,
companies
create and
capturethat
value
from
and
collaborators, and competitors.
downstream collaborators.
For Cox MBA students, Marketing is a concentration that,
unlike Finance, Management, or Strategy, prepares you for a
Marketing
successful career in Brand Management, and
Marketing
Consulting, and Marketing Analytics.
Good positioning statements focus on:
one or two benefits that resonate with the target market.
8
Product category competition: convince customers that
your product form/offering is best in the category.
For working professionals in North Texas seeking career
advancement, the Cox PMBA is a part-time MBA program
that, unlike other programs in the area, offers a small,
private-school environment and a strong, professional
network.
Generic competition: convince customers of the
superiority of your product (category) offering’s ability to
satisfy needs over other (category) offerings.
For ambitious people seeking continuing/higher education,
SMU is a private university that, unlike other universities, will
shape you into a world changer.
9
Positioning
K&P 146-47
• Formulating positioning strategy requires knowing:
– The importance of each value dimension to customers
– How the brand & the competition compare on each dimension
Exhibit 4 - Attribute Ratings for the 5 oz. Stand-up Pouch with Healthy Messaging Concept
How much would you agree with the
statements made about this product?
Product Attribute
(% Agree or Strongly Agree)
Would be better for me than other chocolates
87
Would be high quality
85
Would taste great
84
Would come in varieties I like
78
Would be a good way in indulge myself
74
Would be good for any time of the day
61
Would taste better than other dark chocolates
54
Would be good for everyday use
42
Would be an all-natural snack option
38
Would be a good value
33
10
Partial Marketing-Mix Comparison
Personal Computers
Dell was positioned as a product leader with the best perceived technology.
IBM was positioned as a brand-centric differentiator with no objective
or perceived advantage. PCs  Lenovo; IBM  customer-centric.
Gateway’s positioning: customer intimacy emphasizing customization
(i.e., user compatibility & configurability).
11
Positioning
• Formulating positioning strategy requires knowing:
– The importance of each value dimension to customers
– How the brand & the competition compare on each dimension
• Implementing the positioning strategy requires programs
that communicate a brand’s differential advantage on:
– Attribute/benefit, price/quality
– User or Use/Application
– Product class or competitors
12
13
Positioning
• Formulating positioning strategy requires knowing:
– The importance of each value dimension to customers
– How the brand & the competition compare on each dimension
• Implementing the positioning strategy requires programs
that communicate a brand’s differential advantage on:
– Attribute/benefit, price/quality
– User or Use/Application
– Product class or competitors
• To determine a Product’s Position:
– Ask customers to rate a firm’s brand, the competitor’s brands, and
the “ideal” brand on a number of dimensions.
– Plot ratings in 2 dimensions to represent the competitive “space” typically called a perceptual map.
14
Hybrid Car Perceptual Map
15
Product & Brand Decisions
 Many Product & Brand Decisions are Related to the
Product Life Cycle (PLC), Technology Diffusion, & LongTerm Expectations for Product Category Evolution
 The PLC sketches the sales history of a product category
– or perhaps a product form – over time.
 Strategy and segmentation options and the importance of
marketing mix variables vary across each stage of the PLC.
 Not all product categories follow the standard PLC curve
across time in a linear manner.
16
17
Cumulative Five-Year Purchase Volume for
Various Mobile Technologies
Source: Morgan Stanley
%s represent five-year predicted penetration rate for tablets & 2011 penetration rates for other technologies
18
19
20
The Product (Category) Life Cycle -- Context
Two Critical Inflection Points
Greatest
Competitor
Complexity
Key Segment
Strategic Emphasis
Greatest
Customer
Complexity
Early Market
Early Majority/
Mainstream
First-time Purchase
Pragmatists
Repurchase
Product Differentiation
Brand Differentiation/Customer Intimacy  Cost
Customer Acquisition
Customer Retention & Expansion
Leadership
21
Marketing Strategies Over the Product Life Cycle
PLC Stages




Introduction
Growth
Maturity
Decline
 Market size small and growth rate is
increasing.
 Product: disruptive technology that
creates new product category.
 Pricing: skimming targets
innovators/visionaries & LT Product
(quality-based) differentiation
 Advertising: product category
advantages.
 Distribution & Selling : PUSH
22
Marketing Strategies Over the Product Life Cycle
PLC Stages




Introduction
Growth
Maturity
Decline
 Moving Mainstream
– Increasing competition
– Market segmentation
 Positioning for LT advantage
− Continue to emphasize Product
differentiation (innovation & quality) &
market growth or niche of maturing
market
− Begin shift to brand differentiation/
customer intimacy with incremental
product improvements, proliferation as
market matures (i.e., late growth)
23
Product & Brand Strategies…
• In the Growth Stage or in Hi-Tec, Turbulent
Categories with Rapid Cycles & Permanent
Growth:
– Product Line Strategies focus on Product Innovation
that replaces (i.e., cannibalizes) current offerings
– Branding strategies deemphasize specific
products/features and focus on organizational
competencies & differentiation (i.e., multiproduct or
corporate branding)
Consistent with Innovation or Product Differentiation
24
Intel’s Co-branding Efforts
After the “Intel Inside”
branding campaign
began 1991, the
company received over
$3 billion worth of
advertising exposure
showing the Intel Inside
logo. The logo appears
in POP displays too.
25
Marketing Strategies Over the Product Life Cycle
PLC Stages




Introduction
Growth
Maturity
Decline
 Fully Mainstream
– Oligopoly market structure
– Well-defined segments with
sophisticated consumers
 Positioning for advantage
− Emphasize brand differentiation/
customer intimacy, incremental
product improvements, proliferation,
intangibles (e.g., branding, service,
advertising) or
− Emphasize operational efficiencies to
establish Cost Leadership
advantage in fully mature market.
− Innovator attempts to jumpstart new
cycle of Growth (Apple).
26
Product & Brand Decisions…
• In the Maturity/Decline Stage:
– Product Line Strategies focus on Product Proliferation
that extends current offerings to:
• Eliminate competitors &/or erect entry barriers
• Provide one-stop shop for downstream collaborators
• Satisfy increasingly segmented customer base
– Branding strategies emphasize distinct product brands
and features (i.e., multibranding), sometimes applied
to entire lines.
Consistent with Brand-centric differentiation or Customer
Intimacy
27
P&G’s Product Proliferation &
Multibranding Strategy
P&G Controls
Over 60%
Market Share
in the
Laundry Care
Category
Key Management Challenge: How to organize, manage & market all the brands?
28
P&G’s Product Proliferation
Multibranding Strategy
29
30
Marketing Strategies Over the Product Life Cycle
PLC Stages




Introduction
Growth
Maturity
Decline
 Many strategies for reviving
mature product categories can
be applied to those in decline;
for example, product
enhancements and line
extensions for segments still
buying category.
 Sometimes product categories
revive due to serendipity.
 Being the “last iceman” in a
truly dying market can be
profitable… to a point.
31
Modifying the Offering Mix
• How consistent is the new offering with existing
offerings
– Complementarities versus cannibalization
• Does the organization have the resources &
capabilities to introduce & sustain the offering?
• Is there a viable market for the offering? What
share is required?
• What position do we currently own and do we
want to own?
• What type of branding strategy do we implement?
– Multiproduct (family) or multibranding (individual)
32
Montreaux Chocolate USA
• This case addresses a global CPG company’s attempt to
develop optimal positioning for a new dark chocolate
offering. Be sure to use the Montreaux spreadsheet to
calculate trial rates, market share, and project
contribution; review the Sales Projections assignment if
you’re not sure how to conduct the analyses. And use the
Montreaux Exhibits to identify Apollo’s (potential)
competitive advantage and a positioning statement for
Montreaux chocolates.
33
Topic
Launch Strategy
Good
Excellent
.25
.5
.75
1
.25
.25
.5
.5
.75
.75
1
1
.25
.5
.75
1
.25
.5
.75
1
.25
.5
.75
1
.25
.5
.75
1
.25
.5
.75
1
.25
.5
.75
1
.25
.5
.75
1
Paragraph #2
Recommended A&P budget and Quality Level to achieve
intermediate objectives (Awareness, Distribution, Repeat)
Likelihood of achieving intermediate objectives given
Company’s Resources & Capabilities
Likelihood of achieving intermediate objectives given
external Opportunities & Threats (Customers, Competition,
Collaborators, PLC)
Financial Evaluation
Fair
Paragraph #1
Brand Name & Branding Strategy (see K&P pp. 143-44) &
First-year Brand Objective(s)
Product-Market Strategy (see K&P Ex. 1.2) &
Targeting & Positioning Statement
Implementation and Fit
Poor
Paragraph #3
Year-1 Financial Analysis (key assumptions required to meet
objective)
Financial Assessment of the Likelihood of meeting Year-2-3
objectives
Value-Adding Exhibits (e.g., SWOT, Comparative Analysis,
Positioning Map)
Overall Presentation & Organization
34
Financial Analysis in Marketing
K&P Chapter 2
•
•
•
•
•
•
•
Marketing Pro Formas
Breakeven Analysis
Customer Lifetime Value (CLV)
Sales Forecasts
Economic Value Analysis
Channel Margin Calculus
Demand Elasticity
36
Market Potential, Sales Potential, Sales Forecast
• Estimating Market Potential:
– Determine the potential buyers /users of the products.
– Determine # of customers in each group of buyers.
– Estimate the potential purchasing/usage rate.
• Estimating Company Sales Potential
– Multiply market potential by desired or “best” possible
market share.
• Sales Forecast: Estimate from Sales Potential…
− Use purchase intention surveys/qualitative methods.
Forecasts for frequently-purchased items combine test market or
early sales data with brand awareness, trial, repeat purchase, or
usage rate data
(See Sales Forecast Final Exam Question)
37
Estimating Year-1 Sales Volume
Using a Chain Ratio Model
Focus Group
Adjusted
%
× for Bias
×
Awareness
%
×
Distribution
%
Definitely %
80%
Depends on
Depends on
Probably %
30%
Consumer
Trade CRM/
Penetration Trial Rate
= %
× %
% Trial Rate
×
# Households
=
Trial Households
Trial Households
×
Repeat Rate %
=
Repeat Households
Excellent product (~38%)
From Above
Trial Households
+
Average product (~33%)
Trial Households
Mediocre product (~28%)
x Repeat Rate
Repeat
Households
×
Repeat Purchase
= Total Units Sold
Rate
38
Review Questions
• What are 4 levels of product market definition?
• What are the key customer segments, growth
strategies, and strategic emphases for each stage
of the product life cycle?
• What are the key questions to ask when making
offering modification decisions?
• What is the difference between market potential,
sales potential, & sales forecast?
Next Week Montreaux Chocolates
39