BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 1
Brand Management and the Firm
BRAND MANAGERS, CHANNEL MANAGERS, PRODUCT MANAGERS,
AND NEW PRODUCT DEVELOPMENT MANAGERS AS CHAMPIONS
ALAN L. WHITEBREAD
HTTP://AWHITEBREAD.BA.TTU.EDU
MARKETING 4356
• Learning and doing in a business environment –
always prepared!
• TESTS 100%
– 6 tests – none are comprehensive
– best 5 test scores determine your grade
• Optional homework and in-class quizzes may
provide bonus test points.
• No make-up tests! No extra credit!
• Chapter 1 Being Known or Being One
of Many
• Chapter 2 To Brand or Not to Brand
– 2.1 B2B # B2C
– 2.2 B2B Brand Relevance
– 2.3 Power of the Business Brand
• Chapter 3 Branding Dimensions
A practitioner approach
– not a textbook!
–
–
–
–
3.1 Brand Distinction
3.2 Brand Communication
3.3 Brand Evaluation
3.4 Brand Specialties
COURSE STRUCTURE
• Business casual environment
• Attendance
• Always prepared – read ahead / read and
reread the text
• Take good class notes on PowerPoints
• Analyze, create, understand, and apply
• Form opinions based on facts
• Understand the theories, concepts,
strategies, issues, and tools of the field
• Participate
– Your comments and questions, in-class activities
SETTING THE STAGE
• Brand management without new product development
[NPD] does not help the firm prosper over the long-term.
•
• Examples
– Highly successful brands [Interbrand reading]
– Kodak [reading]
– Fast growth companies vs. slow growth companies
[Inc. and Fast Company]
ORGANIZATIONAL ROLES
• Process ownership
– NPD; program; …
• Portfolio ownership
– Brand / product family / product line
• Help set the strategic direction
• Resource management
LEADERSHIP
• C-LEVEL & BOARD
VISION
• EXECUTIVE GROUP
STRATEGIES
• MANAGERS
PROGRAMS
TACTICS
IMPLEMENTATION
LEADERSHIP AND TIME HORIZONS
EXECUTIVE
MANAGEMENT
BOARD OF DIRECTORS,
CEO, COO, CMO, GROUP VP, …
1-10 years
EXECUTIVE, &
SENIOR VICE PRESIDENTS
1-5 years
VICE PRESIDENTS
1-3 years
VP MARKETING (& SALES)
MIDDLE
MANAGEMENT
DIRECTORS
DIRECTOR – PRODUCT MANAGEMENT
SENIOR MANAGERS
GROUP PRODUCT MANAGER
MIDDLE MANAGERS
LOWER
MANAGEMENT
SUPERVISION
& WORKFORCE
1 year
1 week-1 year
PRODUCT MANAGER
1 week-few months
JUNIOR MANAGERS
Immediate-30 days
ENTRY-LEVEL MANAGERS
Immediate-30 days
SUPERVISORY PERSONNEL
&
WORK FORCE
Immediate
YOUR CAREER SUCCESS DEPENDS
ON …
•
•
•
•
INDIVIDUAL AND TEAM SUCCESS
ON TIME
UNDER BUDGET
ABOVE PLAN
• EVERY TIME!
• NO EXCUSES!!!
YOUR CAREER SUCCESS ALSO
DEPENDS ON
•
•
becoming very
–
flexible [recognize an item or situation even
if it has a different name],
–
adaptable [take a basic concept, model, or
theory and modify or apply it to a specific
situation] to succeed in the business world,
and
comfortable making decisions based on
incomplete and sometimes uncertain
information!
CHARACTERISTICS OF GOOD
MARKETING MANAGERS
• Excellent managers
– Human resources
– Asset utilization
– Lead and sustain development teams
– Interface well with other functional areas
•
•
LEADING AND SUSTAINING
DEVELOPMENT TEAMS
•
• Everyone does their share in their area of
expertise
• Members are highly motivated
• No shortcuts
• Always lead, and manage when necessary
•
JOB DESCRIPTIONS
Summer 2005 base salary data
•
•
•
•
•
Product Manager [$66-87]
Technical Product Manager [$70-140]
Product Line Manager [$72-115 DFW]
Product Marketing Manger [$68-119 DFW]
Brand Manager [$75-125 DFW]
– This type of position was created by P&G in the 1930’s.
• Channel Manager [$70-120 DFW]
• [New] Product Development Manager [$70-140]
PLUS BONUS!
Often up to 25%.
PRODUCT MANAGER
COMPENSATION
U.S. REGION
SALARY
BONUS
TOTAL
$82,909
$9,088
$91,997
Northeast
95,685
11,439
107,124
Pacific
95,824
11,387
107,211
South
85,175
9,452
94,628
Southwest
90,500
16,667
107,167
West
94,414
12,826
107,240
$90,610
$10,961
$101,572
70.909
8,139
79,048
Midwest
Overall Average
Canada (2)
http://productmarketing.com/productmarketing/survey/2005/index.asp
http://www.pragmaticmarketing.com/productmarketing/magazine/1/2/07sj.asp
PRODUCT MANAGER
CONFECTIONARY INDUSTRY
Design and implement a comprehensive product lifecycle that maximizes market
potential, and includes the product strategy, feature roadmap, pricing and packaging.
Maintain awareness and insight into the competitive environment and best position
products relative to our strategy. Coordinate market introduction and sales support
activities to ensure maximum penetration of the market segment.
P&L responsibility.
Excellent business acumen and problem-solving skills to develop strategic
marketplace positioning. Must be analytical, strategic and possess a well-developed
ability to communicate a tangible vision and product strategy.
Results oriented, great attention to detail, and the ability to meet aggressive
deadlines. Excellent team leadership and project management skills.
Experience managing a product line and related pricing responsibilities, with a track
record of success. Experience in managing market research and competitive
intelligence efforts to drive marketplace positioning and competitive response
initiatives.
5-7+ years of product development experience BS/BA from required; MBA a plus
TECHNICAL PRODUCT MANAGER
SOFTWARE INDUSTRY
Ensure the commercial success of the products assigned to him/her, including
surveys, marketing, design, development, documentation and internal staff training
for existing and new commercial applications.
Coordinate software development.
Evaluate industry needs and provide solutions to those needs, from perception
through to a final, commercially viable product.
Train new contractors on company procedures and software development standards.
Deliver compiling executables from the weekly source code submitted by
contractors.
Test weekly prototype submissions. Write up departures from the software
specification.
Prepare software development projects for final certification.
3+ years product management experience
BA/BS degree required
TECHNICAL PRODUCT MANAGER [TPM]
TPM
PMM
Technology Assessment
44%
20%
Competitive Analysis
75%
79%
Win/Loss Analysis
44%
35%
Innovation
40%
24%
**Market Requirements
91%
68%
**Product Roadmap
85%
53%
User Personas
47%
35%
**Product Contract
38%
16%
**Monitoring release milestones
63%
38%
http://www.pragmaticmarketing.com/productmarketing/topics/03/survey/detailactivities.asp
PRODUCT LINE MANAGER
•Responsible for the development and execution of a marketing plan for a product
line. Maximize revenue and standard gross margin of assigned product line through
the formulation and administration of pricing policies and strategies.
•Recommend short-term and long-term product line strategy and development plans.
Develop marketing input to the strategic business plan and annual operating plan.
•Coordinate market research, product planning, engineering, finance and
manufacturing to develop new product business plans/specifications. Monitor
product developments. Recommend actions with project engineering to maintain
schedules and coordinate new product introduction. monitor/contribute to the
marketing communications plan for assigned product lines. Forecast sales for
product line. Assist in setting factory production schedules - manage lead times and
control inventories.
•Initiate / coordinate value engineering and quality improvement programs to
maintain or improve competitiveness. Analyze competing products and their market
position - develop plans to differentiate product line from competitors while meeting
user needs.
10+ years experience
BS Electrical Engineering
BRAND MANAGER
HEALTHCARE INDUSTRY
Principal duties are to oversee all aspects of global brand business to build brand
equity and deliver short-term and long-term sales volume, market share, and profit
objectives; identify critical, high pay-off global strategies that support the brand
vision; and establish plans and brand priorities based on analyzing market and
competitive information and present future consumer needs.
Manage the marketing of consumer products in international markets. Establish
international sales, profit and consumption objectives based on relevant market and
competitive data. Develop packaging and labeling for international consumer
products.
Direct multi-national cross functional teams in identifying new products or new
markets;
Develop short-term and long-term sales forecasts.
Oversee the launch of new products in international markets.
MBA 5 years experience in the job offered or 5 years experience in the related
occupation, Product Marketing and Management
CHANNEL MANAGER
SOFT DRINK INDUSTRY
· Knowledge of in-store purchasing behavior to develop merchandising programs.
· Ability to convert data / findings into applied, specific information and suggestions.
· Knowledge of and ability to apply brand positioning, brand architecture, SWOT
Analysis, competitive assessment, marketing objectives/strategies, and consumer
segmentation for the development of marketing plans.
· Knowledge of information used to define brand strategic corridors and develop
appropriate business solutions for local market activation.
· Ability to leverage research results into marketing and business building initiatives.
CHANNEL MANAGER
SOFT DRINK INDUSTRY
· Knowledge of basic sales management concepts (e.g., sell-in process, trade
promotion and pricing, category management, feature/benefit selling,
distribution/channels).
· Ability to apply marketing strategies to sales management initiatives.
· Ability to generate new ways of thinking about consumers and our businesses (e.g.,
experiential marketing, intuitive trend forecasting, product innovation).
· Ability to manage projects to ensure successful delivery (on time, within budget,
meeting success criteria) to establish clear goals and accountabilities [e.g. develop
project plans, allocate resources, identify potential issues/risks and develop
contingency plans].
· Trend Analysis: Knowledge of and ability to gather, interpret and apply multiple
consumer/industry insights and trends to develop marketing strategies and
programs.
NEW PRODUCT DEVELOPMENT MANAGER
MEDICAL EQUIPMENT INDUSTRY
•Manage technology development related to device immunity including MRI safe scans,
EMI immunity, and soft error immunity.
•Provide broad leadership across CRM with respect to MRI safety using proprietary
design solutions, and a combination of empirical testing and simulations. Requires
understanding of the MRI environment, the in-vivo lead/device system, and regulatory
requirements. Will work with each new development project to ensure MRI safety is
achieved. This team will also seek to partner with commercial MRI vendors.
•Responsible for providing leadership across CRM with respect to the evaluation of EMI
safety. Employees of this individual will participate in international standards
committees to establish suitable standards, and will partner with each new product
development team to ensure that designs are robust against EMI interference.
•A main focus of the team will be to understand the soft error mechanisms, providing
technology needed to quantify the risks, and to define approaches for mitigating the
errors. Will be responsible for directing the establishment of CRM performance goals,
coordinating with MMC on manufacturing approaches, coordinating required testing,
and providing communication on the test results.
•BA/BS required
CHARACTERISTICS OF GOOD
MARKETING MANAGERS
• Organizational hurdles, politics, and issues
–
• Economics-based viewpoint
• The return on capital used by the SBU for the
product line exceeds the cost of capital.
– Firm objectives are to increase
• Revenue
• Profits
• Competitive strength
C-LEVEL ROLE
• #1
– Improved focus, collaboration, coordination, creativity,
definition [target market segments], implementation,
measurement, process, strategic planning, training
[skills], and understanding [meaningful benefits]
• #2
– Product line extensions
– New markets
– New to the world products [very difficult]
CORPORATE INNOVATION
Corporate venturing
External efforts
F
O
C
U
S
Strategic alliance
SBU business
development
Corporate business
development 1
R&D
Internal ventures
SBU
CORPORATE
PRODUCT DEVELOPMENT –
at every level
Market
Trends
SBU Strategy
Resources /
Project Plan
Comprehensive
Project Plan
Technology
Roadmap
Competitive
Environment
Financial
Returns
Innovation
Strategy
Product
Portfolio
Platform
Strategy
Product
Strategy
INTERFACING WITH OTHER
FUNCTIONAL AREAS
•
• Facilitate cooperation
• Instill motivation
• They are part of the TEAM!
MARKETING MANAGER
CHALLENGES
•
•
•
•
•
•
•
Market research
Sales training
Customer recall
Discontinuing a product
A FEW OF THE CORPORATE
EXAMPLES USED IN THIS CLASS
• Air Products &
Chemicals
• Apple
• Bob Donath & Co.
• Booz Allen Hamilton
• Boston Consulting
Group
• Cadbury Company
• Colgate-Palmolive [
TOTAL]
• Domino’s
• General Electric
•
•
•
•
•
•
•
•
•
•
Hilton
IKEA
Kodak
Marriott
McKinsey & Co.
SONY
Strategos
Taco Bell
Unilever [Vaseline]
and many more
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 2A
Brand Management and the Firm
Corporate Strategy and Customer Orientation:
Understanding Wants, Needs, and the Competitive Environment
ALAN L. WHITEBREAD
INNOVATION
INSIDE-OUT APPROACH
OUTSIDE-IN APPROACH
Product centered
Market and customer centered
Technology provides opportunities
Market knowledge provides
opportunities
Driven by capabilities and
competencies
Driven by fulfilling market needs
Create products the market should
need and desire
Create innovative solutions for market
needs and wants
INNOVATION
INSIDE-OUT APPROACH
OUTSIDE-IN APPROACH
New, more, and superior product
features that outperform the
competition
Meaningful benefits create emotional
ties which increase brand loyalty
Heavy reliance on competitive product
performance
Focus on market attitudes and beliefs
Marketing is to sell what we create
Marketing is to understand the
markets to help us create relevant new
products
?
?
NEW PRODUCT DEVELOPMENT
The Strategy Formation School
• Prescribe how strategies should be
formed.
– Design School
• A process of conception
– Positioning School
• An analytical process
MANAGEMENT TODAY
• Grow the business
– Which businesses?
– Which business models?
• Grow the brands
–
–
–
–
Which brands?
What product families / lines / products?
The hierarchy
How to brands /product families / lines grow change
and/or evolve over time?
– Succeeding with new product development
THE STRATEGIC BUSINESS UNIT [SBU]
• A UNIT OF THE FIRM THAT HAS
DIFFERENT OBJECTIVES AND CAN BE
PLANNED SEPARATELY FROM OTHER
UNITS OF THE FIRM.
• For instance, some of General Electric’s
business units include
– GE Commercial Finance
– GE Consumer Finance
– GE Healthcare
-- GE Industrial
-- GE Infrastructure
-- NBC Universal
THE STRATEGIC BUSINESS UNIT
[SBU]
• SBU ISSUES
– RESOURCE COMPETITION
•
•
•
– FAIR PERFORMANCE MEASURES
• How do you reward very different SBUs?
– WHAT IS THE ACCEPTABLE DEGREE OF
AUTONOMY FOR EVERY SBU?
Trucks
SBU
Cars
Tanks
Delivery
Transportation
War
North America Europe Asia Export
Business Consumer Government
THE CONFIGURATION SCHOOL
AND ORGANIZATIONAL BEHAVIOR
• TYPES OF BUSINESS UNITS [BU or SBU]
–
• Seeks stability; limited product development; narrow market
definitions
– PROSPECTOR [GE EcomaginationSM]
• Seeks innovative new opportunities and ways of responding
to emerging needs
–
• Seeks to minimize risk and maximize the profit opportunity
–
• New products are only developed in response to competitive
developments
STRATEGIC DIRECTION OF THE FIRM
(“THE CORE COMPETENCE OF THE CORPORATION” ARTICLE)
• CORE COMPETENCY*
– The foundations [usually technologies] upon which
you build your business over a very long time.
• CORE COMPETENCY TESTS*
• Sustainable –
And
• Competitive –
And
• Advantage –
KEY SUCCESS FACTORS*
• THE DESIGN SCHOOL OF NPD
• NOT CORE COMPETENCIES
• YOU MUST DO BETTER ALL THE
TIME
• Customer services
• Design
•?
SWOT ANALYSIS*
Your firm and your major competitors
STRENGTHS
Use your
strengths to take
advantage of
opportunities
OPPORTUNITIES
LEVERAGE
CONSTRAINTS
VULNERABILITIES
WEAKNESSES
THREATS
PROBLEMS
Counter threats
SWOT: SITUATIONAL ANALYSIS
• STRENGTHS / WEAKNESSES
– Production costs; marketing acumen; financial
resources; technological requirements;
market perception; …
• OPPORTUNITIES / THREATS
– Economic; competitive; demographic;
technological; legal / political; social; …
BCG AND GE STRATEGIC
PLANNING MODELS
• THE POSITIONING SCHOOL OF NPD
• CONCEPTUALLY SIMILAR MODELS
Market Growth Rate
LOW
HIGH
BOSTON CONSULTING GROUP:
GROWTH – SHARE MATRIX
STARS
QUESTION MARKS /
PROBLEM CHILD
CASH COWS
DOGS
HIGH
LOW
Relative Market Share
GE [McKenzie] STRATEGIC
BUSINESS PLANNING MATRIX
• Market
Attractiveness Index
– Market size, growth
rate, potential
– Competition
– Profitability
– Government regulation
• Business Strength
Index
– Market share
– Customer & market
knowledge
– Cost efficiency
– Technology
GE [McKenzie] STRATEGIC
BUSINESS PLANNING MATRIX
Market share, Customer & market knowledge, Cost efficiency, Technology
Market size, growth rate, potential
Low Medium
High
MARKET ATTRACTIVENESS
BUSINESS STRENGTH
Strong
Medium
Weak
C
B
D
A
Invest & grow
Selective growth
Harvest
GE [McKenzie] STRATEGIC
BUSINESS PLANNING MATRIX
Market share, Customer & market knowledge, Cost efficiency, Technology
Market size, growth rate, potential
Low Medium
High
MARKET ATTRACTIVENESS
BUSINESS STRENGTH
Strong
Medium
Weak
Protect
Invest
Build selectively
Build selectively
Manage for earnings
Limited expansion
or Harvest earnings
Protect earnings
and Refocus
Manage for earnings
Divest or dissolve
Invest & grow
Selective growth
Harvest
OPTIMIZING THE ENTERPRISE
Olefins Wedge Example – Primary Optimization by Monomer
Secondary
Optimization
Sell
Sell
Ethane
Ethylene
Product Line/SBU 1
Market/App 1
Polyethylene
Market/App 2
Market/App 3
Refining
Streams
Propane
Butane
Propylene
Olefins
Plant
Butylene
Product Line/SBU 2 Market/App 1
Polypropylene
Market/App 2
Market/App 3
Naphtha
Butadiene
Gas Oil
Other
Product Line/SBU 3
Market/App 1
EO/EG
Market/App 2
Market/App 3
Buy
Buy
Demand Information
Volumes / Price
http://www.aspentech.com/publication_files/7
The speed of information flow among trading
partners along with the introduction of marketplaces
has changed the nature of planning in the chemicals
industry.
Unstable
• How do you know if your decisions
are optimum for the enterprise not
just individual business units/product
lines?
Planning for the
Unexpected
The
Future
Dynamic
Static
Traditional
Business
Environment
Planning for the
Expected
Stable
http://www.aspentech.com/publication_files/4
• How efficient is the current process
for evaluating the impact of changes
in the business units on the entire
enterprise?
• Are metrics that drive individual
business unit profitability decisions
integrated and coordinated so that
the overall enterprise profitability is
maximized?
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 2B
Brand Management and the Firm
Corporate Strategy and Customer Orientation:
Understanding Wants, Needs, and the Competitive Environment
ALAN L. WHITEBREAD
What is the
threat of
significant new
entrants?
What is the
bargaining power
of your key
suppliers?
What is the
amount of rivalry
among existing
competitors?
What is the
threat of
substitute
products and/or
services?
See Michael E. Porter, Competitive Strategy, New York Free Press, 1980, for
more information.
What is the
bargaining power
of your key
customers?
COMMON FIRM-SPECIFIC
ADVANTAGES
• INTELLECTUAL PROPERTY
•
– Databases, systems, processes, …
•
• CONTROL OF MATERIALS / COMPONENTS
•
• CAPACITY / CAPACITY FLEXIBILITY
•
•
• ?
COMPETITIVE ADVANTAGE OF THE
FIRM [Basic competitive strategy*]
COMPETITIVE ADVANTAGE
Low Cost Position
C
O
M
P
E
T
I
V
E
S
C
O
P
E
INDUSTRY
WIDE
MARKET
SEGMENT
ONLY
OVERALL COST
LEADERSHIP
[Commodities,
Dell]
NICHE
Understanding and focus
LOW COST STRATEGIES MAY BE
ACHIEVED THROUGH
• Location
• Low-cost suppliers
–
•
• Product design
• Scale economies
– Volume; timing; speed
• Supply [value] chain consolidation
• ?
DIFFERENTIATION STRATEGIES
MAY BE ACHIEVED THROUGH
•
•
•
•
•
Improved performance
Mass customization
New functional capabilities
?
LEGAL BOUNDS OF COMPETITION
• Federal protection
– Sherman Act
– Clayton Act
– Robinson-Patman Act
– many more
• Agencies
– FTC
– FDA
– CSPC
ATTACKING COMPETITORS:
GAP ANALYSIS*
CHANNELS OF
DISTRIBUTION
1
3
PRODUCTS
2
2
MARKETS / SEGMENTS
SERVICES
APPLICATIONS
GAPS - INCREASE INDUSTRY
MARKET POTENTIAL
Demographic changes
The baby boom meant more
baby food
An aging population means
more medical services, …
New uses or user segments
Clorox® expands with color
safe bleach, and …
Innovative product
differentiation
Function / price  many levels
of features / benefits for DVD
players
Go see a store selection.
Add new product lines
Crayola® crayons, then bags,
tablets, shirts, …
GAPS – PRODUCT LINE GAP
Fill out existing lines
Automobiles, trucks AND SUV’s
Create new elements /
extend current lines
Miller beer + Miller Lite + Miller Ice
GAPS - DISTRIBUTION
Expand coverage
New product introduction
Begins regional and expands
nationwide
Increase intensity
TOTAL® toothpaste tries to
maximize the number of
toothpaste outlets
Increase exposure
Kellogg’sTM obtains more shelf
space for their cereals
GAPS - USEAGE
Stimulate non-users
Look at the wine industry program.
Increase consumption
by light users
“Did you have your Wheaties® this
morning?”
Increase consumption
per use
2 Alka-Seltzer® per package
GAPS - COMPETITIVE
Penetrate substitute’s
position
Felt tip pen vs. ball point pen
Take share from
competition
Gel pens from …
GAPS – DEFEND THE FIRM’S
POSITION
Increase firm’s sales
New generation of computers
PRODUCT LINE PLANNING
THE APPLICATION OF GAP ANALYSIS
PRODUCT
PLACE
PROMOTION
PRICE
COMPETITION
Features
Expand
channels
Stimulate
light users
How to
compete
Brands
Intensify
coverage
Attract nonusers
Penetrate /
Substitute
Market
segments
Demographic
changes
Use more
each time
Model number
Services
added
A Determinant Gap Map
http://www.northpark.edu/sbnm/documents/BSE3640-McMathWeek8.ppt#282,8,A Determinant Gap Map
THE PRODUCT CONCEPT
Augmented
Product
Installation
Packaging
Brand
Name
Delivery
& Credit
Quality
Level
Core
Product
or
Service
Features
Design
Warranty
Actual / Branded
Product
Core
Product
AfterSale
Service
THE PRODUCT CONCEPT:
APPLIED TO THE AIRLINE INDUSTRY
On-site or very
close hotels
Skycap services
Ample and
easily
available
parking
Baggage Checking
and Handling
Frequent Flyer
Professional
Program
Pilots
CORE
Meals /
Snacks
Airport
security
Movement from
point A to point B
Courteous
Flight
Attendants
ACTUAL / BRANDED
PRODUCT
AUGMENTED
PRODUCT
Mass transit
to / from
airport
Convenient
airport
THE MARKETING MIX - 4 P’s
PRODUCT
PLACE
PROMOTION
PRICE
STRATEGIC GROWTH OPTIONS
•
•
•
•
•
•
•
JV or other types of venturing
Licensing
Franchising
Six Sigma
– Major accounts
• Strategic alliances
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 3
Brand Management and the Firm
Brands and Brand Management: An Introduction
ALAN L. WHITEBREAD
BRAND*
A NAME, TERM, SYMBOL, or ANY OTHER
UNIQUE ELEMENT of a Product that
Identifies One Firms’ Product(s) and
Differentiates Them From the Competition
-American Marketing Association
3
BRAND
•
– The value of your brand[s] to an acquirer
based on what they can do with them over the
first five years of ownership.
– What makes up a brand?
• Name, logo, relationships, ..
• Intangible assets
– Customer lists, positioning, goodwill, …
• Brand loyalty and long-term cash flows
WHAT DOES BRANDING DO?
• Identifies
•
•
• Adds to the value equation
– Real or perceived benefits
– Command a price premium
WHAT DOES BRANDING DO?
•
• Creates preferences and builds brand loyalty [repeat
purchases]
– Brand preference to brand insistence
• Increases sales
•
HOW ARE BRANDS USED?
•
• Create [Google, Yahoo, …]
• Reposition [Cadillac CTS ]
• Rejuvenate [New Coke]
THE BRAND SYSTEM
Brand concept – value proposition
Brand name and brand
marks / symbols
Product / service experience
THE PATH FROM BRAND AWARENESS
TO FINANCIAL VALUE [B2B]
• BRAND ASSETS
–
–
–
–
–
–
–
Awareness
Reputation
Brand personality
Brand values
Brand imagery
Brand preference
IP
• BRAND STRENGTH
–
–
–
–
–
Market share
Market position
Growth rates
Brand loyalty
Value [price premium]
THE PATH FROM BRAND AWARENESS
TO FINANCIAL VALUE
• BRAND ASSETS
– Awareness –
– Reputation – comes from many places
• The firm, perceptions of product performance, innovation,
technological leadership
• Recommendations are informal including social networks, …
– Brand personality – becoming more important
– Brand values –
• Quality – Six Sigma and/or Malcom Baldridge, ISO 9002, and
standards met often have little consumer meaning
• Certifications of origin and quality seals are often promotional
tools
– Brand imagery – a key to consumers relating to the brand
– Brand preference –
– IP
•
THE PATH FROM BRAND AWARENESS
TO FINANCIAL VALUE
• BRAND ASSETS
– Awareness – to even be considered
– Reputation –
• Firm, product performance, innovation, technological
leadership, recommendations
• Endorsements carry weight, …
– Brand personality – rarely used
– Brand values –
•
•
•
•
Quality – Six Sigma and/or Malcom Baldridge
Consistency – ISO 9002
Standards met
…
– Brand imagery – seldom used
– Brand preference –
– IP
• All the standard plus heavy on trade secrets, confidentiality
agreements, joint development, …
THE PATH FROM BRAND AWARENESS
TO FINANCIAL VALUE [B2B]
• BRAND STRENGTH
– Market share –
• Size, number of locations, flexibility in and among the
locations, back-up and contingency planning, …
– Market position – often to be considered
• One of the major competitors, cost or technological
leadership, …
– Growth rates – rarely important
– Brand loyalty –
– Value [price premium] – driven only by long-term
performance excellence
• Team selling, joint teams for cost or product
improvement or new product development,
technological leadership, …
THE EXPANDED PRODUCT CONCEPT*
1-GENERIC [CORE] PRODUCT
Fundamental need or want
2-EXPECTED – Typical basic product
5-POTENTIAL PRODUCT
Future: most advanced product
Warranty
Installation
Packaging
Brand Name
Delivery
& Credit
Quality
Level
Features
Design
3-BRANDED
The variety of the product offering.
4-AUGMENTED PRODUCT
Attributes, benefits, or services
for competitive advantage
AfterSale
Service
GOODS - SERVICES CONTINUUM
QUALITIES
QUALITIES
QUALITIES
Visual, tangible
inspection
Some / all product attributes
can be assessed only through
experience
Product attributes can rarely
be assessed / learned
PURE
GOOD
Groceries
TANGIBLE
Good
w/
Services
Autos
Hybrid
PURE
Service
w/ Goods SERVICE
Restaurants
CHARACTERISTICS
Rental
Movies
Medical
Care
INTANGIBLE
UNDERSTANDING TYPES OF RISK
•
– The product does not perform as expected.
• Manage expectations. Especially services! Utilize safety
factors.
•
– The product can be potentially dangerous to
the consumer.
• B2C: examples?
• B2B: examples?
•
– The product is not worth the price.
• Fix the value equation.
UNDERSTANDING TYPES OF RISK
•
– The product may be embarrassing.
• Let the package to minimize this effect.
– … for Dummies series
•
– The product affects the mental well-being of the
consumer.
• What type of product might this be?
• TIME
– The failure of the product results in an opportunity
cost [expense] of finding another solution.
•
MINIMIZING RISKS*
In-class exercise
RISK
EXAMPLE
OFFSET[S]
FUNCTIONAL
•?
•Set realistic expectations
•Be sure quality level is correct
•Drano®
Threatens well-being
•Proper use instructions
•Warning messages
FINANCIAL
•?
[price and volume
forecast realization]
•Set realistic expectations
•Be sure positioning is correct
•Find the right value equation
Inadequate product
performance
PHYSICAL
Insufficient value
MINIMIZING RISKS*
In-class exercise
RISK
EXAMPLE
OFFSET[S]
SOCIAL
•?
Embarrassing
•Generic peas [white
can with black print]
PSYCHOLOGICAL
•?
•?
•?
•Proper use instructions
•Set realistic expectations
•Be sure quality level is correct
User’s mental well-being
TIME
Opportunity cost to find a
substitute
BRAND EQUITY AND
SHAREHOLDER VALUE
• Brands provide at least three four of value
for shareholders.
1. Equity and market effects of owning the
brand and its long-term performance
expectations.
2. Net present value of the current cash flow
due to the brand.
3. Company book value and hard assets
directly attributable to owning the brand.
BRAND EQUITY AND OFF-BALANCE
SHEET ASSETS
•
•
•
•
•
•
•
Brand name, image, and drawing power
Intellectual property and trade secrets
Market knowledge / Customer relationships
Customer and other mailing lists
Systems, processes, and procedures
Fully depreciated assets
Many, many more
BRAND EQUITY
• Estimating the value of brand equity is
both difficult and quite hypothetical with
the typical marketing models.
–
• How much would it cost to [1] reproduce or [2]
replace the brand?
–
• The incremental cash flows from the sale of the
branded vs. the unbranded product.
–
• The NPV of discounted cash flows from the
branded product.
BRAND EQUITY
M&A Definition
The perceived value of owning the brand
[an off-balance sheet number].
– Balance sheet – approximate current value of tangible assets and
goodwill
– Profit & Loss – measures historical sales and profit levels based on key
business assumptions
– Cash flow – shows how much cash a business can generated [EBITDA]
Altria [PMI] – Kraft Foods
KKR – RJR Nabisco
$13B
$ 5.8B
600% of book
550% of book
BRAND EQUITY
PROJECTION
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
NET SALES
15,225,305
110,654,231
187,149,914
225,687,518
286,405,622
AFTER-TAX INCOME
-4,598,715
20,869,507
36,399,557
44,386,498
61,588,823
PLUS: INTEREST
0
0
0
0
0
PLUS: TAXES
0
4,226,576
13,633,532
16,839,933
24,187,772
-4,598,715
25,096,084
50,033,089
61,226,432
85,776,595
1,647,705
7,065,591
11,003,969
11,273,760
11,593,510
-2,951,010
32,161,675
61,037,058
72,500,192
97,370,105
439,958
487,178
504,918
534,398
563,878
-2,511,052
32,648,853
61,541,976
73,034,590
97,933,983
LESS: CAPITAL EXPENDITURES
-10,844,832
-23,347,138
-11,927,540
-11,939,493
-10,987,290
LESS: INVESMENT IN WORKING
CAPITAL
-962,038
-3,015,648
-3,509,064
-4,231,645
-5,370,110
-14,317,922
6,286,066
46,105,372
56,863,452
81,576,583
EBIT
PLUS: DEPRECIATION
EBITD
PLUS: AMORTIZATION
EBITDA
FREE CASH FLOW
$176,513,551
BRAND EQUITY
OFF-BALANCE SHEET ITEMS [IRS Ruling 59-60]
•
•
•
•
•
•
•
•
•
•
•
Management team
Brand recognition
Earning power of the brands
Leverage of the brands
Intellectual property
Distribution channels
Product offerings
Proprietary designs
Technology
Knowledge of the firm
…
•
•
•
•
•
•
•
Reputation
Processes
Systems
Methods
Manuals
Drawings
Customer / prospect \ /
supplier bases & lists
• Data bases
• Recession-resistant industry
• …
BRAND EQUITY
"The secret to our enduring brand lies in
delivering an experience rather than just a
collection of products and services."
-Harley-Davidson Annual Report, 2003
-See also Foster’s Investors Presentation
http://www.fosters.com.au/investors/docs/merrill_lynch_ny_presentation_september_2004_final.pdf
THE OPPORTUNITY TO BRAND
•
• For easy identification for additional
purchases
• To reduce consumer perceived risk and
cognitive dissonance
• To maximize shareholder value
ENDURING BRAND LEADERSHIP
Tellis and Golder
•
– Pampers® expands usage through product development,
segmentation, and new applications
•
– Breakthrough technology
• FINANCIAL COMMITMENT
– Every major brand does this
•
– INTEL ®, Gillette ®
• ASSET LEVERAGE
– Coca-Cola ® : Tab ® leveraged into Diet Coke ®
BRAND CHALLENGES
In-class exercise
CHALLENGE
SUCCESS REQUIRES
SAVVY CUSTOMERS
• Correct sales organization, sales approach,
and great market / product / technical
knowledge in sales
COMPLEX BRAND FAMILIES
•?
MATURING MARKETS
•?
INCREASING COMPETITION
•?
DECREASING BRAND LOYALTY
•?
GROWTH OF PRIVATE LABELS
•?
INCREASING TRADE POWER
•?
FRAGMENTING MEDIA
•?
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 4A
Brand Management and the Firm
The Strategic Brand Management Process
ALAN L. WHITEBREAD
STRATEGIC BRAND MANAGEMENT
1. Identify and establish brand positioning
and brand values.
2. Plan and implement brand marketing
programs.
3. Measure and interpret brand
performance.
4. Sustain and grow brand equity.
BRAND MANAGEMENT SUCCESS
• Capitalize on a few strategic brands
– Driven by benefits for the consumer
– Put all sub-brands under the primary name
–
• Act as a leader –
• Have a constant flow of innovations
– Strong flow of new product development
–
BRAND MANAGEMENT SUCCESS
• Reward customer repeat purchases to
covert them to active promoters of the
brand.
• Globalize the brand.
–
–
THE STRATEGIC BRAND
MANAGEMENT PROCESS
STEPS
KEY CONCEPTS
Identify and Establish
Brand Positioning and Values
[Mental] Mind maps* [causal models]
Competitive frame of reference
Points-of-parity and points-of-difference
Core brand values*
Brand mantra*
Plan and Implement
Brand Marketing Programs
Mixing and matching of brand elements*
Integrating brand marketing activities
Leveraging of secondary associations
Measure and Interpret
Brand Performance
Grow and Sustain
Brand Equity
Brand Value Chain*
Brand audits
Brand tracking
Brand equity management system
Brand-product matrix*
Brand portfolios and hierarchies*
Brand expansion strategies*
Brand reinforcement and revitalization
THE STRATEGIC BRAND
MANAGEMENT PROCESS
• IDENTIFY AND ESTABLISH BRAND
POSITIONING AND VALUES
– How do consumers perceive brands?
• Involvement
•
• Familiar = trusted
• Brand A > Brand B [B2C]
–
–
•
• Actual benefits / Performance testing [B2B]
• Ego / self-actualization
BRANDS
• Individual consumers [B2C] buy images
associated with the products that tie to
expected benefits and real or perceived
meaningful points of difference.
• Business consumers [B2B] buy the firm
behind the products and the products
because of their performance.
THE STRATEGIC BRAND
MANAGEMENT PROCESS
• FUNCTIONS OF A BRAND
–
• Easily recognized by sight, sound, or other means
– Practical [successful experience]
• Save time with repeat purchases
–
• Consistency of performance or quality
– Optimization for the consumer [experience,
advertising]
• The best solution for their need – minimal cognitive
dissonance
– Continuity
•
– Hedonistic [advertising, image, recognition]
• Ego satisfaction
THE STRATEGIC BRAND MANAGEMENT
PROCESS
BRAND FUNCTION
PRODUCT
POWER
[Strong, Medium, Weak]
Recognition signal
Brand X milk
?
Guarantee [quality]
Bic pens
?
Optimization [best for
need]
Boeing
Caterpillar
Tata
?
Continuity /
Permanence
Old brand = ?
?
Advertising research has shown that brand familiarity and brand uniqueness are
very important to consumers [B2C]. It has also shown some relationship between
brand advertising and sales volume.
THE STRATEGIC BRAND
MANAGEMENT PROCESS
• Brand reputation – what is important?
– Brand advertising
– Brand familiarity
– Brand uniqueness
– Brand sales
– Market share
– Number of competitors
– Relative price
IDENTIFY AND ESTABLISH BRAND
POSITIONING AND VALUES [TOOLS]
• MIND MAP
•
– Items you point out as being the same as your
competitor.
– Sales people use these to offset a claim by a
rival salesperson.
IDENTIFY AND ESTABLISH BRAND
POSITIONING AND VALUES [TOOLS]
•
– The one, two or three key meaningful
differences that would cause the prospect to
buy from yours not from your competitors.
– They have to have all three key
characteristics.
•
– It must be relevant and important.
•
– It must be distinctive – superior is nice.
•
– It must be believable and credible.
STARBUCKS POP AND POD
COMPETITOR
POP
POD
Fast food chains /
convenience stores
Convenience
Value
Quality
Image
Experience
Variety
Supermarket brands for
home
Convenience
Value
Quality
Image
Experience
Variety
Freshness
Local café
Quality
Experience
Price
Community
Convenience
IDENTIFY AND ESTABLISH BRAND
POSITIONING AND VALUES
•
– Are elements where there is
disagreement as to how its
performance or functionality compares
to the next best alternative.
– Seen in comparison or negative
advertising
• Always remember your competitive
positioning and frame of reference.
B2C and B2B POINTS
POINTS OF
B2C
B2B
…Parity
May be used to show
at least equal to …
Virtually meaningless
…Difference
To sell your item
Must be relevant and
distinctive and
believable
Subjective or
emotional are best
Must provide a
specific important
advantage to be of
benefit
…Contention
Consumer may
evaluate [unscientific]
Performance testing
during the supplier
qualification stage will
answer this.
POINTS, NEEDS, AND OFFERINGS
Joel E. Urbany and James H. Davis [Notre Dame], HBR Nov., 2007 pp. 29-30
Customers’ needs
Our
PODs
Unneeded
Growth
Points
of parity
Their
PODs
Unneeded
COCA-COLA COMPETITIVE FRAME
OF REFERENCE
Videos
COMPETITION
•
Beer
Ice cream
only diet colas
Flavored
Colas
Colas
•
Juices
Wines
other soft drinks
Diet
Lemon
Limes
Fast food
Water
Colas
Diet
Coffee, tea
Versions
Dairy
Hobbies
???
•
any other type of beverage
•
any other expenditure
BRAND VISION AND PURPOSE
•
– The heart and soul of the product
•
– How would the market be different if GM did not exist?
• A powerful influence on a market [segment]
–
–
–
–
What does Cadillac mean?
What does Escalade mean?
What does Proctor and Gamble mean?
What does Pampers mean?
PRODUCT-BRAND RELATIONSHIP
• Every brand needs a flagship product
[family, line].
• Expectations must always be exceeded by
–
–
IDENTIFY AND ESTABLISH BRAND
POSITIONING AND VALUES
•
– The 5 to 10 most important attribute and benefit associations that
characterize a brand.
– B2C VIDEO: Lufthansa brand movie
– B2B VIDEO: SYNGENTA
•
– Emotional modifier
• How does the brand deliver benefits?
– Descriptive modifier
• How do you describe the business?
– Brand functions
• How do you describe the product?
CORE BRAND VALUES EXAMPLE
• Texas Tech University Basketball
– Incomparable basketball within a large
geographic area
– Unique environment and experience
– Always competitive
– Fast, controlled, tough mentality
– Unlimited possibilities [championships]
– A vital part of the university, city, and area
BRAND MANTRA EXAMPLE
“A passionate, competitive, west Texas experience.”
Arena external
ease of access
Arena and area
security
Game as a
social function
Arena seat
location
Arena
comfortability
Game
entertainment
Arena parking
options
Game sense of
electricity
Texas Tech
Basketball
Game : Big 12
Conference
Game fills a
passion
Arena internal
ease of access
Team quality
and spirit
Team
competition
Game of high
quality
Meet other TTU
team stars
Team
excitement
Team current
stars
Team coaching
staff
BRAND ELEMENTS
• The IP items that serve to identify and
differentiate the brand from its competitors.
– Name, logo, symbol, characters, colors,
endorsing characteristics, jingles, packaging,
signage, slogans, and URLs.
• Criteria for selecting brand elements include
–
–
–
– Transferable [add to brand equity]
– Adaptable [change over time]
–
PLAN AND IMPLEMENT BRAND
MARKETING PROGRAMS
• MIX AND MATCH BRAND ELEMENTS TO
MAXIMIZE BRAND EQUITY.
– Visual or verbal information that identifies and differentiates a
product [brand name, logo, symbol, character, package, or
slogan, etc.]
• INTEGRATE BRAND MARKETING ACTIVITIES
– 4P’s
• LEVERAGE SECONDARY ASSETS
– Company, geography, channel, ingredients, characters,
spokespeople, events, …
– Maximize synergies
MEASURE AND INTEPRET BRAND
PERFORMANCE
•
BRAND VALUE CHAIN [value creation]
1.
2.
3.
4.
Define brand hierarchy
Define brand-product mix
Enhance brand equity over time
Establish brand equity over multiple market
segments
1. DEFINE BRAND HIERARCHY
• Principle of
– Few brand levels
• Principle of
– Create abstract associations to many products
• Principle of
– Differentiate individual items and brands
• Principle of
– Maximize product distance to competitive products
[perceptual map]
• Principle of Commonality
– Link to other branded products through shared
brand elements
• HP Printer family
2. DEFINE BRAND-PRODUCT
MATRIX
• Brand extensions*
– Establish new equity
– Enhance existing equity
• Brand portfolio*
– Maximize coverage with minimum overlap
3. ENHANCE BRAND EQUITY OVER
TIME
• Brand reinforcement
– Innovate for position
– Relevant imagery
• Brand revitalization
– Do the basics well
– Continually refresh / reinvent the brand
4. ESTABLISH BRAND EQUITY
OVER MARKET SEGMENTS
• Identify differences in behavior
– Identify purchase patterns
– Use patterns
– Knowledge and opinion about different brands
• Adjust branding program
– Choice of brand elements
– Nature of the marketing program
– Leverage associations