Product & brand strategy

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Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008

Slide 11.1

Lecture 6

Product and Brand Strategy

Chapter 11


Slide 11.2

1. Introduction

2. Product

3. Brands

4. Product differentiation

5. Product platforms

6. Summary and recap

Product strategy

2


Slide 11.3

A product is anything that can be offered to a market

for attention, acquisition, use or consumption that

might satisfy a want or need.

It includes physical objects, services, persons,

places, organisations and ideas.

Kotler (2001)

Definition of product


Slide 11.4

Core

benefit

or service

Installation

After-

sales

service

Delivery

and

credit

Warranty

Features Styling

Brand

name

PackagingQuality

Authors such as Kotler and Levitt have proposed different dimensions

for a product.

Augmented product

Tangible product

Core product

Levels of product

3


Slide 11.5

Twinings 1706 Boeing 1916

Schweppes 1798 Adidas 1920

Levis 1850 Volvo 1926

Agfa 1873 McDonald’s 1937

Coca-Cola 1886 Benetton 1965

Philips 1891 Nike 1972

Pepsi-Cola 1898 Body Shop 1976

Persil 1907 Swatch 1982

Nivea 1911 Eternity 1988

Market introduction of brands


Slide 11.6

• Branding is the process by which firms distinguish

their products from that of their competitors.

E.g. Ford and Mercedes

• This is usually achieved by developing distinctive

names, packaging, design. Often through using

logos and effective advertising.

What is a brand?

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Slide 11.7

• Brands are linked to perceptions

It is well known that in blind product testing, consumers

fail to distinguish between brands in each product

category.

• Different meanings

A brand is a complex symbol that can convey up to

six levels of meaning (Kotler, 2001).

What is a brand? (Continued)


Slide 11.8

• Attributes – good engineering, quality, performance

• Benefits – feeling of safety, savings, etc.

• Values – the producer’s values e.g. prestige

• Culture – the producer’s culture – creativity or efficiency

• Personality – projection of personality

e.g fun or austere

• User – can suggest the type of consumer who buys it

Kotler (2001)

6 levels of meaning

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Slide 11.9

The

brand

Finance

department

Brand

management

External brand flow Internal brand flow

Customer facing

Activities

Complaints procedures

Clubs

After-sales

Repairs

Communications

Activities

Sponsorship

Ads

Direct marketing

Database

promotions

Sales force

Retailers/licensees

Dealers

Point of sale price

Raw materials

Product quality

sourcing

R&D function

NPD

Production process

Warehousing

Distribution & information

Systems

Packaging

Internal and external brand contacts

Source: H. Rubenstein (1996) ‘Brand first management’, Journal of Marketing Management, Vol. 12, 269–80


Slide 11.10

• Purpose to focus and integrate team effort and

permit delegation

• Groups/teams in NPD

• Variety of inputs, including mission, objectives,

platforms, portfolio, differentiation, etc.

What is strategy?

6


Slide 11.11

• Why is differentiation important?

• Differentiation related to competencies of the firm

• Types of differentiation and cost leadership

What is differentiation?


Slide 11.12

• Product uniqueness and novelty

• Technically superior

• Product quality

• Product attractiveness and design

• High performance to cost ratio

Product differentiation

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Slide 11.13

• Form

– size, shape, physical structure

• Features

– supplements basic function

• e.g. car CD player, trim level,

child seats

• Performance quality

– appropriate to target market

and competitor performance

levels

• Conformance quality

– each product identical, meets

the promised specification and

performance

• Durability

– expected operating life

– balanced with technological

obsolescence

• Reliability

– probability of

malfunction/failure

• Repairability

– ease of repair, cost, technical

support

• Style

– aesthetics – look and feel

– distinctive and difficult to copy

Product differentiation (Continued)


Slide 11.14

Five basic strategies:

• Product proliferation (e.g. Sony, Honda)

– Many new products simultaneously or in close succession

– Market response determines support (supporting those products that prove successful)

– Cover all segments and block new entrants (market coverage)

• Value (e.g. Toyota/Lexus)

– New quality/cost trade-off curves

– Continuous improvement/re-engineering (maintain leadership)

• Design (e.g. Braun, Harley-Davidson)

– Aesthetics, touch, ease of use, etc.

– Engineering design + aesthetic design

• Innovation (e.g. Canon, 3M, Merck)

– Technological and marketing innovations

– Either market pioneers or fast-followers

– Utilise both radical and incremental innovation

• Service (e.g. Otis Elevators, SAS)

– Customer relations, physical distribution, after-sales service.

Product-based competition

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Slide 11.15

• Key questions:

– How to deliver distinctive products to market whilst

building on core capabilities and conserving

development, production and marketing resources?

– How to balance the needs of high-volume

manufacturing/service delivery with the needs of

individual customers?

• Product platforms:

– Common platforms for a range of products

– Shared components/parts, production processes,

knowledge, people and relationships

– Improves efficiency.

Differentiation vs standardisation


Slide 11.16

Single platform

Many common partsProduct

price

Low

High

Generic strategy

Overall cost leadership Differentiation

VW Golf

Seat Leon

Skoda Oktavia

Audi A3

Audi TT

Product platforms

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Slide 11.17

Audi

A3

A4

A6

A6

A8

R8

Q7

TT

Bentley

Brooklands

Arnage

Continental

Azure

Volkswagen

Fox

Lupo

Polo

Golf

Passat

Jetta

Beetle

Touran

Phaeton

Touareg

Skoda

Fabia

Octavia

Roomster

Superb

Volkswagen Commercial Vehicles

Caddy

Transporter

Crafter

Carravelle

California

Lamborghini

Murcielago

Gallardo

Seat

Alteo

Alhambra

Toledo

Leon

Ibiza

Bugatti

EB110

Veyron

Volkswagen

Group

Product portfolios (VAG)


Slide 11.18

• The benefits of product platforms include:

– Increased product variety and ability to serve multiple

market segments (mass customisation)

– Greater speed to market

– Improved management of demand and uncertainty

– Accommodating differential technology change

– Reducing production costs

– Supports late-stage differentiation of products

– Reduces service infrastructure requirements

– Greater speed and efficiency in technological learning

and knowledge creation.

Product platforms

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Slide 11.19

A Successful Strategy:

• Helps achieve coordination among

functional areas of the organization.

• Defines how resources are to be

allocated.

• Leads to a superior market position.


Slide 11.20

Elements of a Product Strategy

1. Statement of the objective(s) the product should

attain

2. Selection of strategic alternative(s)

3. Selection of customer targets

4. Choice of competitor targets

5. Statement of the core strategy

6. Description of supporting marketing mix.

7. Description of supporting functional programs

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Slide 11.21

Hierarchy of Objectives

Company Mission/Vision

Corporate objectives

Corporate strategies

Divisional objectives

Divisional strategies

Product/brand objectives

Brand strategies

Program objectives

Tactics

Level I

Level 0

Level III

Level II

Level IV


Slide 11.22

Total Product Concept

Generic

product

Expected

product

Augmented

product

Potential

product

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Slide 11.23

Five Areas for Differentiation

1. Quality

2. Status and Image

3. Branding

4. Convenience and Service

5. Distribution


Slide 11.24

Brand Equity

Reduced marketing

costs

Trade leverage

Attracting new

customers• Create awareness

• Reassurance

Time to respond to

competitive threats

Anchor to which

other associations

can be attached

Familiarity-liking

Signal of substance/

commitment

Brand to be

considered

Provides value to

customer by

enhancing

customer’s:

• Interpretation/

processing of

information

• Confidence in the

purchase decision

• Use satisfaction

Brand

loyalty

Brand

loyalty

Brand

loyalty

Brand

awareness

Brand

loyalty

Brand

equity

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Slide 11.25

Brand Equity cont.

Reason-to-buy

Differentiate/

position

Price

Channel member

interest

Extensions

Help process/

retrieve

information

Reason-to-buy

Create positive

attitude/feelings

Extensions

Provides value to

firm by

enhancing:

• Efficiency and

effectiveness of

marketing programs

• Brand loyalty

• Prices/margins

• Brand extensions

• Trade leverage

• Competitive

advantage

Brand

loyalty

Perceived

quality

Brand

loyalty

Brand

associations

Brand

loyalty

Brand

equity

Competitive

advantageBrand

loyalty

Other

proprietary

brand assets


Slide 11.26

WHAT IS A BRAND?

• Brands include all names, terms, symbols or

designs - all are used to identify and differentiate the

goods of one seller from those of competitors.

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Slide 11.27

Branding

• Brand Extension — launching a new product line in another

product class, making use of the existing brand name, eg.

Cadbury‟s ice cream

• Success is more likely if there is a logical tie between the core

brand and the extension (Cadbury example above). The

extension needs to be carefully evaluated as to any negative

impact on the brand equity of the core brand [eg, if a bank

introduced a defective security service as a brand extension,

this might make people think the bank is not secure and

therefore weaken the core (banking) brand].


Slide 11.28

Brand loyalty

• Brand loyalty reflects both a positive attitude to a

brand and the behavioural repeat purchase probability

of buying the same brand.

• Bednall, Walker and Grant (see pages 163-164 of

text) suggest that most consumers are co-loyal — that

is loyal to a small number of brands that dominate

their evoked set.

• Scan Exhibit 8.4 from the text — contrast the type of

products at the top and bottom.

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Slide 11.29

BENEFITS OF BRANDING

TO BUYER:

• Help buyers identify the product that they like/dislike.

• Identify marketer

• Helps reduce the time needed for purchase.

• Helps buyers evaluate quality of products especially if unable to

• Judge a products characteristics.

• Helps reduce buyers perceived risk of purchase.

• Buyer may derive a psychological reward from owning the brand, ie Rolex or Mercedes.


Slide 11.30 BENEFITS

TO SELLER:

• Differentiate product offering from competitors

• Helps segment market by creating tailored images, ie Contact lenses

• Brand identifies the company‟s products making repeat purchases easier

• Reduce price comparisons

• Brand helps firm introduce a new product that carries the name of one or more of its existing products...half as much as using a new brand,

• lower costs: designs, advertising and promotional costs.

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Slide 11.31

EXAMPLE

• Easier cooperation with intermediaries with well known

brands

• Facilitates promotional efforts.

• Helps foster brand loyalty helping to stabilise market share.

• Firms may be able to charge a premium for the brand.


Slide 11.32

MANUFACTURERS’ BRANDS:

• Initiated by the producer.

• 85% food items, all cars, 75% major appliances, more than

80% patrol

• Requires the producer to be involved in distribution,

promotion, and to some extent, pricing.

• Brand loyalty is encouraged by quality, promotion and

guarantees.

• Producer tries to stimulate demand, encouraging middlemen to

make the product available (PULL)

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Slide 11.33

PRIVATE DISTRIBUTOR BRANDS:• Initiated and owned by the resellers eg Bob Jane T-Mart for

tyres

• Manufacturers not identified in the product.

• Helps retailers develop more efficient promotion, generate

higher margins and increase store image.

• Wholesalers brands-IGA

• Retailers brands K-Mart, Target, Safeway


Slide 11.34

GENERIC BRANDING

„no brand‟ strategy - identifies product by contents

small % of sales

cheaper

promotion and packaging costs lower

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Slide 11.35

FAMILY BRANDING

• single name for all products in the product mix

• reduces cost of introducing new products

makes promotional efforts more efficient


Slide 11.36

TRADE NAME WITH A BRAND NAME

allows all brands to benefit from the company trade

name while maintaining a distinctive and descriptive

label

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Slide 11.37

REASON FOR INCREASE IN PRIVATE

BRANDS:

• Increasing prices of MB in 1990s.

• Increasing Quality of PB

• Increasing Promotion of PB

• PB offer retailers higher margins

• Offer regional products

Manufacturer brands are responding with:

• Reduced price

• Promotions focus on quality and directed at PL

• New product launches, line extensions.

• Focus on core products


Slide 11.38

DESIRABLE QUALITIES FOR A

BRAND NAME

• It should suggest something about the products' benefits and qualities. eg:

Beautyrest, Slumberland, Sunkist, Spic & Span, Pure & Simple.

• Should be easy to pronounce, recognise and remember. eg: Clix, Jatx,

Ritz.

• Should be distinctive. eg: Kodak, Unisys.

• Should translate easily in foreign languages or has no meaning eg Exxon.

• It should be capable of registration and legal protection. Name must be

unique.

• Guard against a brand name becoming a generic term used to refer to

general products category. Generic cannot be protected. eg Aspirin

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Slide 11.39

BRANDS

• Brands allow customer to recognise product.

• Brands encourage the use of preselling and reduce the need for personal contact at the retail level.

• Brands simplify introduction of new products.

• Example of early brands that st ill survive in Australia -Nugget, Vegemite, Vaseline, Velvet Soap.

• Family Brands are groups of products sold under one label by a single f irm. eg: Heinz, Arnotts, GM Holden, Black & Decker (w hich has scrapped the w ell know n GE brand to market under B & D).


Slide 11.40

BRAND MEANINGS

• Attributes. A brand elicits certain product attributes in the

minds of consumers.

• Benefits. The benefits may produce objective need-satisfiers,

such as increased safety, or psychological benefits, such as

enhanced self-esteem.

• Values. The benefits of the brand indicate that these things are

important to the consumer who chooses them.

• Personality. People personify brands and products.

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Slide 11.41

BRAND EQUITY

• Brand Equity Brands are used to:

create awareness,

build preference, and

ultimately, to command loyalty among consumers.

• Companies with strong brands often attempt to build brandportfolios by acquiring brands with strong brand equity fromother companies.

• Brand Name Selection requires careful attention to the needsof the product for success in the competitive marketplace.


Slide 11.42

BRAND STRATEGY

Some Definitions

• Brand Extensions are any effort to use a successful brand name to launchnew or modified products.

• Multibranding offers a way to establish different features and appeal todifferent buying motives.

• New Brands are created with a new brand name enters a new productcategory

• Line Extensions occur when a company introduces additional items in agiven product category.

• Brand repositioning might require changing both a product and its image.

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Slide 11.43

EXAMPLE: Brand Extension

• When Coca-Cola first developed a low-sugar

coke it chose to market it under a new brand

name - TAB.

• When PepsiCo came out with Diet Pepsi it

captured much of the market. Coca-Cola

reacted by introducing Diet Coke

• Brand / Line extension


Slide 11.44

BRAND IMAGE OPTIONS: EXAMPLES

• Multiproduct (Family Brand) - one name for a range of company products

eg Honda: Civic, Accord, Prelude, Legend.

Uncle Tobys, Sharp, Penfolds

• Multibrand - one company with many brands

CUB- Vic Bitter, Melb Bitter, Carlton Cold

• Reseller Brands - David Jones Fashion, Bob Jane brand of tyres

• Mixed (use a variety of strategies) eg Colgate-Palmolive has multibrand

detergents (ColdPower, Fab, Dynamo) and uses multiproduct branding in

toothpaste

• Generic (minimises brand image except for pricing)

eg Farmland, Black & Gold

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Slide 11.45

BENEFITS OF VARIOUS STRATEGIES

• Family Branding

- Single name for all products in the product mix

- Reduces cost of introducing new products (carry-over

effects)

- Makes promotional efforts more efficient

• Generic Branding

- Promotional and packaging costs are lower

- Goods are cheaper


Slide 11.46

BENEFITS SOUGHT FROM BRANDING

• consistency of customer perception

• positive image

• opportunity for leverage

• standardisation of quality

• opportunity for preference generation

• loyal following

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Slide 11.47

BRAND LEVERAGING

Moving a successful name from one product category

into another

Eg Colgate launched the Palmolive brand leveraging it

from its core markets of soap and dishwashing

detergents into hair-care, skin lotion, deodorants and

automatic dishwashing liquids.

Most of these being successful.


Slide 11.48

Why would a company wish to create

Brand Identity?

• To establish an image that differentiates it from competition

• To communicate qualities & attributes

• To facilitate recognition

• To shape customer perception and response to the product

• To establish preference for the brand

• To secure loyal purchase behaviour

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Slide 11.49

BRAND ASSETS: Loyalty

• Contributes to brand value - repeat buying in a market that presents substitutes.

• In extreme form loyalty is an attachment. Insulates brand from competitive pressures

• Helps consumers minimise “buying” effort

• Makes demand for product less price elastic

• Lowers marketing costs

• Results in higher margins and profits

• Gives you time to respond to competitive threats


Slide 11.50

BRAND ASSETS: Awareness

• Familiarity leads to confidence and hence reduces the risk

• assists one thru the buyer decision stages

• consumers tend to prefer brands with which they are familiar

• choice of a known brand provides consumer with justification

for decision

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Slide 11.51

BRAND ASSETS: Perceived Quality

• Inherent in a brand is a view of quality (good or bad)

• There is an association between the name and attributes

eg Gillette makes fine-quality razors

• A brand can become synonymous with a category

eg Xerox, Kleenex

• Brand has strong price associations that influence quality

perceptions eg Kmart is low in price and probably low in

quality

Documents

Product & brand strategy