PRODUCT STRATEGY AND BRANDING Professor Chip Besio Cox School of Business Southern Methodist University WHAT ARE PRODUCTS AND SERVICES? GOODS, SERVICES, AND IDEAS Product Good • Nondurable Goods • Durable Goods Services Ideas WHAT ARE PRODUCTS AND SERVICES? PRODUCT ITEMS, LINES, AND MIXES Product Item • Stock Keeping Unit (SKU) Product Line Product Mix 10-3 WHAT IS A PRODUCT? Augmented Product Installation Packaging Brand Name Delivery & Credit Quality Level Core Features Benefit or Design Service AfterSale Service Actual Product Warranty Source: Prentice Hall Core Product How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions Stages of the product life cycle and its total industry sales and total industry profit How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions CHARTING THE PRODUCT LIFE CYCLE INTRODUCTION STAGE Primary Demand Selective Demand Skimming Strategy Penetration Pricing Product life cycle for the stand-alone fax machine for business use: 1970-2012 CHARTING THE PRODUCT LIFE CYCLE GROWTH STAGE Rapid Sales Growth More Competitors Repeat Purchasers New Features Broad Distribution CHARTING THE PRODUCT LIFE CYCLE MATURITY STAGE Industry/Product Sales Slow Profit Declines Product Differentiation Fewer Competitors CHARTING THE PRODUCT LIFE CYCLE DECLINE STAGE Industry/Product Sales Drop Environmental Changes Deletion Harvesting CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS Length of the Product Life Cycle Shape of the Product Life Cycle • Generalized Life Cycle • High-Learning Product • Fashion Product • Low-Learning product • Fad Product Alternative product life cycle curves based on product types CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS The Product Level: Class and Form • Product Class • Product Form Prerecorded music product life cycles by product form CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS The Life Cycle and Consumers • Diffusion of Innovation Innovators Late Majority Early Adopters Laggards Early Majority Five categories and profiles of product adopters (diffusion of innovation) CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS The Life Cycle and Consumers • Barriers to Adoption Usage Value Risk Psychological 11-19 MANAGING THE PRODUCT LIFE CYCLE ROLE OF A PRODUCT MANAGER Product/Brand Manager Responsibilities • Product Life Cycle • New Product Development • Marketing Program Implementation • Data Analysis CDI BDI 11-20 MANAGING THE PRODUCT LIFE CYCLE MODIFYING THE PRODUCT OR MARKET Product Modification • Product Bundling • New Characteristics Market Modification • Finding New Customers • Increasing a Product’s Use • Creating a New Use Situation 11-21 MANAGING THE PRODUCT LIFE CYCLE REPOSITIONING THE PRODUCT Product Repositioning Reacting to a Competitor’s Position Reaching a New Market Catching a Rising Trend 11-22 The Milk Processor Education Program What factor triggered its repositioning? 11-23 MANAGING THE PRODUCT LIFE CYCLE REPOSITIONING THE PRODUCT Changing the Value Offered • Trading Up • Trading Down • Downsizing 11-24 BRANDING AND BRAND MANAGEMENT Branding Brand Name • Logotype (Logo) Trade Name Trademark ® ™ • Product Counterfeiting 11-25 BRANDING AND BRAND MANAGEMENT BRAND PERSONALITY AND BRAND EQUITY Brand Personality Brand Equity • Provides a Competitive Advantage • Consumers Willing to Pay a Premium 11-26 GATORADE: QUENCHING THE ACTIVE THIRST WITHIN YOU Göt2b Hair Products and Degree Deodorant What are their brand personalities? The customer-based brand equity pyramid BRANDING AND BRAND MANAGEMENT BRAND PERSONALITY AND BRAND EQUITY Creating Brand Equity • Develop Positive Brand Awareness • Establish a Brand’s Meaning • Elicit the Proper Response • Create Intense Brand Loyalty BRAND EQUITY The value your customers perceive to be uniquely associated with your brand = Awareness + Associations Awareness – Recall – Recognition Associations – Perceived Quality – Image BRAND AWARENESS RECOGNITION BRAND AWARENESS RECOGNITION Free publicity in the Wall Street Journal BRAND AWARENESS RECALL Essential for memory-based choice and customer-initiated contact 35% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 30% 25% 20% 15% 10% 5% 0% Recalled Recalled Recalled Recalled Recalled 1st (top 2nd or 4th or 6th or 8th or of mind) 3rd 5th 7th 9th Seen before recall Seen after recall Percent seeing film after Percent seeing film before Order of Recall (movie data) Source: Wes Hutchinson BRAND ASSOCIATIONS PERCEIVED QUALITY Profitability (ROI): PERCEIVED RELATIVE QUALITY RELATIVE MARKET SHARE high medium low inferior 21% 14% 7% moderate 27% 20% 13% superior 38% 29% 20% SOURCE: PIMS (Profit Impact of Market Strategies; based on 2,200 business units) Future Profitability (Stock Price): Stock Price = f(ROI, perceived quality) * ROI and perceived quality exert approximately equal effects * SOURCE: Aaker, D. A. and R. Jacobson (1994; based on daily measures of NYSE, AMEX, and NASDAQ). BRAND ASSOCIATIONS IMAGE Brand image is the integration of all experiences with and information about a brand as perceived and remembered by customers The whole is more than the sum of its parts Brand image is relative easy to create, but almost impossible to change! BRAND EQUITY BRAND LOYALTY Brand loyalty - the probability of choosing a brand given that you are a user of that brand - can result from: Inertia: the general tendency to repeat previous purchases due to high switching costs, convenience, or habit Preference: an enduring preference for a brand over and above what would be expected based on the benefits derived from the product or from a long-term relationship with the brand BRAND LOYALTY AN EXAMPLE In 1983, six people in Chicago died of cyanide poisoning from tampered TYLENOL capsules. J&J reacted quickly and appropriately withdrawing all capsules from the market. Tylenol shared dropped only from 37% to 35% and eventually recovered completely. BRAND EQUITY BETTER BUSINESS RESULTS Brands Price Price Premium Market Share Share Premium Crest $2.19 $ .44 27.2% 17.3% Colgate $2.19 $ .37 21.8% 12.2% Aqua-fresh $2.19 $ .24 15.1% 6.6% Close-Up $2.14 $ .27 16.5% 8.0% Toothpastes (6 oz.) SOURCE: Park, C. S. and V. Srinivasan (1994; based on survey results) BRAND EQUITY BETTER BUSINESS RESULTS Brands Mouthwashes (24 oz.) Price Scope $3.83 Price Premium $ .47 Market Share 31.2% Share Premium 13.7% Listerine $3.79 $ .42 26.8% 11.1% Close-Up $5.02 $ .23 2.3% .8% Plax $4.29 $ .26 10.3% 3.4% Colgate $5.22 $ .10 1.4% .2% SOURCE: Park, C. S. and V. Srinivasan (1994; based on survey results) BRANDING AND BRAND MANAGEMENT BRAND PERSONALITY AND BRAND EQUITY Valuing Brand Equity • Provides a Financial Advantage • Brand Licensing BRANDING AND BRAND MANAGEMENT PICKING A GOOD BRAND NAME Should Suggest Product Benefits Should Be Memorable and Positive Should Fit the Company or Product Image Should Have No Legal or Regulatory Restrictions Should Be Simple and Emotional ALTERNATIVE BRANDING STRATEGIES BRANDING AND BRAND MANAGEMENT BRANDING STRATEGIES Multiproduct Branding (Family or Corporate Branding) • Product Line Extensions • Subbranding • Brand Extension • Co-Branding BRANDING AND BRAND MANAGEMENT BRANDING STRATEGIES Multibranding • Fighting Brands Private Branding (Private Labeling or Reseller Branding) Mixed Branding BRANDING STRATEGY Brand Name Product Category Currently Served New Existing Line Extension Brand Extension New Multi-brand New Brand Source: Prentice Hall BRANDING STRATEGY Line Extension – Existing brand names extended to new forms, sizes, and flavors of an existing product category Brand Extension – Existing brand names extended to new product categories Multi-brands – New brand names introduced in the same product category New Brands – New brand names in new product categories Source: Prentice Hall Kimberly-Clark’s Huggies What branding strategy is used? Black & Decker and DeWalt Tools What branding strategy does each use? INDIVIDUAL PRODUCT STRATEGY DECISIONS Attributes Packaging Labeling Product Support PRODUCT ATTRIBUTES WHERE DO THEY COME FROM? Quality Design Source: Prentice Hall Features PACKAGING AND LABELING PRODUCTS CREATING CUSTOMER VALUE AND COMPETITIVE ADVANTAGE Packaging Label Communication Benefits Functional Benefits Perceptual Benefits PACKAGING Competitive Advantages Sales Tasks Packaging Product Safety Identifies Labeling Promotes Describes Source: Prentice Hall “?” and Heinz Ketchup What are the packaging benefits for each? Lay’s STAX, Pringles and Celestial Seasonings What are the packaging benefits for each? PACKAGING AND LABELING PRODUCTS PACKAGING AND LABELING CHALLENGES AND RESPONSES Connecting with Customers Environmental Concerns Health, Safety, and Security Issues • Shelf Life Cost Reduction BRANDING AND BRAND MANAGEMENT Warranty • Express Warranties • Limited Coverage Warranties • Full Warranties • Implied Warranties PRODUCT MIX Variety - number of different product lines Product Mix all the product lines offered Assortment number of items within product lines