1. CHAPTER 5 Product and Service Strategy and Brand Management

2. Slide 1-2© 2013 Pearson Education, Inc. publishing as Prentice Hall OFFERING STRATEGY DECISIONS Modifying the Offering Mix Positioning Offerings Branding Offerings  An organization’s profitability depends on its product or service offering(s) and the strength of its brand(s)  Marketers face three offering- related strategy decisions:

3. Slide 1-3© 2013 Pearson Education, Inc. publishing as Prentice Hall THE OFFERING PORTFOLIO CHAPTER 5: PRODUCT AND SERVICE STRATEGY AND BRAND MANAGEMENT

4. Slide 1-4© 2013 Pearson Education, Inc. publishing as Prentice Hall  An offering consists of the benefits or satisfaction provided to target markets by an organization  It contains the following elements: Warranties/ Guarantees Packaging Related Services Brand Name(s) Tangible Product/Service Other Features THE OFFERING PORTFOLIO The Offering Concept

5. Slide 1-5© 2013 Pearson Education, Inc. publishing as Prentice Hall THE OFFERING PORTFOLIO Offering Mix/ Portfolio The totality of an organization’s offerings Offering Lines Groups of offerings similar in terms of usage, buyers marketed to, or technical characteristics Offering Items A specific product or service noted by a brand, size, or price

6. Slide 1-6© 2013 Pearson Education, Inc. publishing as Prentice Hall THE OFFERING PORTFOLIO Width (Breadth) The number of offering lines The extent to which offerings satisfy similar needs, appeal to similar buyer groups, or use similar technologies Consistency Offering Mix/Portfolio Decisions The number of items in each line Depth

7. Slide 1-7© 2013 Pearson Education, Inc. publishing as Prentice Hall THE OFFERING PORTFOLIO Competitive Situation Organizational Resources Offering Mix/Portfolio Decisions Based on: Marketing Strategy One Offering High-Profit or High-Volume Offerings Complete Lines

8. Slide 1-8© 2013 Pearson Education, Inc. publishing as Prentice Hall  Is valued by consumers more than the individual items sold separately  Provides a lower total cost to buyers and lower marketing costs to sellers THE OFFERING PORTFOLIO  Has the following benefits: Bundling Don’t have to make separate purchases Satisfaction from one item given the presence of another Is the marketing of two or more items in a single “package” that creates a new offering

9. Slide 1-9© 2013 Pearson Education, Inc. publishing as Prentice Hall MODIFYING THE OFFERING MIX CHAPTER 5: PRODUCT AND SERVICE STRATEGY AND BRAND MANAGEMENT

10. Slide 1-10© 2013 Pearson Education, Inc. publishing as Prentice Hall MODIFYING THE OFFERING MIX Eliminating the Offering Harvesting the Offering Modifying the Offering Trading Up Trading Down Adding to the Offering Mix New Offering Development Single Offering Entire Line Offering Mix Decisions

11. Slide 1-11© 2013 Pearson Education, Inc. publishing as Prentice Hall ADDITIONS TO THE OFFERING MIX  Questions to ask:  Additions take the form of: Single Offering Entire Line Does the organization have the resources to introduce and sustain the offering? Resources How consistent is the new offering with existing offerings? Consistency Is there a viable market for the offering? Market Additions to the Offering Mix

12. Slide 1-12© 2013 Pearson Education, Inc. publishing as Prentice Hall ADDITIONS TO THE OFFERING MIX Consistency  Consider demand interrelationships (offering substitutes or complements) —the cannibalization effect  Consider the degree to which the new offering fits the organization’s existing selling and distribution strategies

13. Slide 1-13© 2013 Pearson Education, Inc. publishing as Prentice Hall ADDITIONS TO THE OFFERING MIX Resources  Consider the firm’s financial strength  Consider the speed and magnitude of the competitive response  Consider the market growth rate  Consider the large initial cash outlays for a new offering’s R&D and marketing program

14. Slide 1-14© 2013 Pearson Education, Inc. publishing as Prentice Hall ADDITIONS TO THE OFFERING MIX  Consider whether a market exists (consumer willingness and ability to buy)  Consider whether the new offering has a competitive advantage  Consider if there is a distinct market segment for which no present offering is satisfactory Market

15. Slide 1-15© 2013 Pearson Education, Inc. publishing as Prentice Hall STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS Idea Generation Idea Screening Business Analysis Market Testing Commercial- ization

16. Slide 1-16© 2013 Pearson Education, Inc. publishing as Prentice Hall LIFE-CYCLE CONCEPT  A life cycle plots the sales curve of an offering or a product class over a period of time  Life cycles are divided into 4 stages: Growth Maturity- Saturation Introduction Decline

17. Slide 1-17© 2013 Pearson Education, Inc. publishing as Prentice Hall EXHIBIT 5.1: GENERAL FORM OF A PRODUCT LIFE CYCLE Sales Time GrowthMaturity-SaturationIntroductionDecline

18. Slide 1-18© 2013 Pearson Education, Inc. publishing as Prentice Hall MODIFYING, HARVESTING, AND ELIMINATING OFFERINGS Modifying the Offering Trading Up Trading Down Involves adding new features and higher- quality materials or augmenting the offering with attendant services and then raising the price Is the process of reducing the number of features or quality of an offering and lowering the price

19. Slide 1-19© 2013 Pearson Education, Inc. publishing as Prentice Hall MODIFYING, HARVESTING, AND ELIMINATING OFFERINGS  Harvesting is the strategic decision to reduce the investment in a business entity in the hope of cutting costs and/or improving cash flow  The decision is not to abandon the offering outright but to minimize the human and financial resources allocated to it Harvesting the Offering

20. Slide 1-20© 2013 Pearson Education, Inc. publishing as Prentice Hall MODIFYING, HARVESTING, AND ELIMINATING OFFERINGS Should be considered when:  The market for the offering is stable  The offering is not producing good profits  Market share becomes increasingly costly to defend from competitors  The offering enhances the firm’s image  The offering provides a full product line despite a poor future Harvesting the Offering

21. Slide 1-21© 2013 Pearson Education, Inc. publishing as Prentice Hall MODIFYING, HARVESTING, AND ELIMINATING OFFERINGS  What is the offering’s future sales potential?  How much is the offering contributing to offering mix profitability? An offering may be dropped from the offering mix if the answers to these questions are “very little” or “none.”  How much is the offering contributing to the sale of other offerings in the mix?  How much could be gained by modifying the offering?  What would be the effect on channel members and buyers? Eliminating the Offering

22. Slide 1-22© 2013 Pearson Education, Inc. publishing as Prentice Hall POSITIONING OFFERINGS CHAPTER 5: PRODUCT AND SERVICE STRATEGY AND BRAND MANAGEMENT

23. Slide 1-23© 2013 Pearson Education, Inc. publishing as Prentice Hall POSITIONING OFFERINGS Positioning is the act of designing an organization’s offering and image so that it occupies a distinct and valued place in the target customer’s mind relative to competitive offerings.

24. Slide 1-24© 2013 Pearson Education, Inc. publishing as Prentice Hall POSITIONING OFFERINGS  Strategies include positioning by: Use or Application Product or Brand User Attribute or Benefit Price and Quality Competitors Product or Service Class  Marketers often combine two or more of these strategies when positioning a product, service, or brand Positioning Approaches

25. Slide 1-25© 2013 Pearson Education, Inc. publishing as Prentice Hall POSITIONING OFFERINGS  Requires determining: Which attributes are important to target markets Which attributes competitors emphasize  Is the strategy most frequently used  Accomplished by designing an offering that contains or stresses the appropriate attributes Positioning by Attribute or Benefit

26. Slide 1-26© 2013 Pearson Education, Inc. publishing as Prentice Hall POSITIONING OFFERINGS  Benefits of the positioning matrix: Can judge the competitive response to a new offering more effectively Can spot potential opportunities for new offerings and determine if a market niche exists Can estimate the extent to which a new offering might cannibalize existing offerings  Develop a matrix relating attributes of the offering to market segments (see Exhibit 5.2) Positioning Matrix

27. Slide 1-27© 2013 Pearson Education, Inc. publishing as Prentice Hall EXHIBIT 5.2: ATTRIBUTES AND MARKETING SEGMENT POSITIONING Adults Toothpaste Attributes Children Teens; Young Adults Family Market Segments Principal Brands for Each Segment Topol; Rembrandt Aim; Stripe Ultra Brite; McCleans Colgate; Crest         NOTE: A check (  ) indicates principal benefits sought by each market segment. Flavor Color Whiteness of Teeth Decay Prevention Fresh Breath Price Plaque Prevention Stain Prevention

28. Slide 1-28© 2013 Pearson Education, Inc. publishing as Prentice Hall BRAND EQUITY AND BRAND MANAGEMENT CHAPTER 5: PRODUCT AND SERVICE STRATEGY AND BRAND MANAGEMENT

29. Slide 1-29© 2013 Pearson Education, Inc. publishing as Prentice Hall BRAND EQUITY AND BRAND MANAGEMENT Brand A brand name is any word, “device” (design, sound, shape, or color), or combination of these that are used to identify an offering and set it apart from competing offerings. Brand equity is the added value a brand name bestows on a product or service beyond the functional benefits provided. Brand Equity

30. Slide 1-30© 2013 Pearson Education, Inc. publishing as Prentice Hall BRAND EQUITY AND BRAND MANAGEMENT  Provides a competitive advantage, such as signifying quality Has two marketing advantages:  Can charge a higher price since consumers are often willing to pay for the brand’s equity premium Brand Equity

31. Slide 1-31© 2013 Pearson Education, Inc. publishing as Prentice Hall BRAND EQUITY AND BRAND MANAGEMENT  Can be bought and sold, generating earnings  Can appreciate in value, not depreciate as tangible assets do with time and use  Achieve a high rate of return relative to competitors Successful brand names provide organizations with financial benefits because they: Brand Equity

32. Slide 1-32© 2013 Pearson Education, Inc. publishing as Prentice Hall BRAND EQUITY AND BRAND MANAGEMENT Multiproduct Branding Private Branding Multibranding A firm uses one name for all its products in a product class A firm gives each product or product line a distinct name A firm supplies a reseller with a product bearing a brand name chosen by the reseller Branding Strategy

33. Slide 1-33© 2013 Pearson Education, Inc. publishing as Prentice Hall BRAND EQUITY AND BRAND MANAGEMENT Line Extension Introducing additional offerings with the same brand in a product class that it currently serves Brand Extension Using a current brand name to enter a completely different product class New Brand Developing of a new brand and often a new offering for a product class not yet served by the firm Brand Growth Strategies