1. Product and Service Strategy and Brand Management
CHAPTER 5

2. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:
Explain the offering concept and offering mix portfolio.
Describe how the marketing manager modifies the offering mix.
Identify and describe the stages in the new-offering development process.
Identify and describe the stages in the product life cycle.

3. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:
Explain the types of positioning strategies.
Define the concepts of brand and brand equity.
Describe how brand equity is created as well as its value to organizations.
Explain the types of branding and brand growth strategies.

4. Modifying the Offering Mix Positioning Offerings
OFFERING STRATEGY DECISIONS
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:
Modifying the Offering Mix
Positioning Offerings
Branding Offerings

5. THE OFFERING PORTFOLIO
CHAPTER 5: PRODUCT AND SERVICE STRATEGY AND BRAND MANAGEMENT
THE OFFERING PORTFOLIO

6. Tangible Product/Service Warranties/ Guarantees
THE OFFERING PORTFOLIO
The Offering Concept
An offering consists of the benefits or satisfaction provided to target markets by an organization
It contains the following elements:
Tangible Product/Service
Related Services
Brand Name(s)
Warranties/ Guarantees
Packaging
Other Features

7. ELEMENTS OF OFFERING

8. THE OFFERING PORTFOLIO
The Offering Concept
Focusing on an offering’s benefits or satisfaction establishes a conceptual framework for marketers
This framework is useful in:
Analyzing competing offerings
Identifying target market unmet needs and wants
Developing new products or services

9. Offering Mix/ Portfolio
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

10. Offering Mix/Portfolio Decisions
THE OFFERING PORTFOLIO
Offering Mix/Portfolio Decisions
Width (Breadth)
The number of offering lines
The number of items in each line
Depth
The extent to which offerings satisfy similar needs, appeal to similar buyer groups, or use similar technologies
Consistency

11. THE OFFERING PORTFOLIO
Offering Mix/Portfolio Decisions Based on:
Organizational Resources
Competitive Situation
Marketing Strategy
One Offering
High-Profit or High-Volume Offerings
Complete Lines

12. MODIFYING THE OFFERING MIX
CHAPTER 5: PRODUCT AND SERVICE STRATEGY AND BRAND MANAGEMENT
MODIFYING THE OFFERING MIX

13. Additions to the Offering Mix
Additions take the form of:
Single Offering
Entire Line
Questions to ask:
How consistent is the new offering with existing offerings?
Consistency
Does the organization have the resources to introduce and sustain the offering?
Resources
Is there a viable market for the offering?
Market

14. 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

15. ADDITIONS TO THE OFFERING MIX
Resources
Consider the firm’s financial strength
Consider the large initial cash outlays for a new offering’s R&D and marketing program
Consider the speed and magnitude of the competitive response
Consider the market growth rate

16. ADDITIONS TO THE OFFERING MIX
Market
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

17. STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS
Idea Generation
Idea Screening
Business Analysis
Market Testing
Commercial-ization

18. STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS
Idea Generation
Sources of new offering ideas include:
Employees
Buyers
Competitors
Suppliers
Ideas are obtained through marketing research (formal) and informal means

19. STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS
Idea Screening
Assess the match between prospective buyers and the proposed offering:
Does it have a relative advantage over existing offerings?
Is it compatible with buyers’ use or consumption?
Is it simple enough for buyers to understand and use?
Can it be tested prior to actual purchase?
Are there immediate benefits from it once consumed?
If “yes” and the offering satisfies a felt need, then go to the business analysis stage

20. STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS
Business Analysis
Assess financial viability based on estimated:
Sales
Costs
Profits
Forecasting sales is difficult for new offerings
Profitability analyses relate to:
Investment
Break-even
Payback Period

21. STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS
Business Analysis
The number of years required for an organization to recapture its initial offering investment =
Payback Period
Total Fixed Costs =
Cash Flows
Payback Period

22. Return on Investment (ROI) Return on Investment (ROI)
STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS
Business Analysis
The ratio of net earnings (return) divided by total investment. =
Return on Investment (ROI)
Net Earnings =
Investment ×
Return on Investment (ROI)

23. STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS
Market Testing
May include product concept or buyer preference tests in a laboratory situation or field test market
A test market is a scaled-down implementation of one or more alternative marketing strategies for a new offering
Ideas that pass through this stage are then commercialized

24. STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS
Commercialization
3,000 raw ideas are needed to produce a single commercially successful new offering
New offering success depends on a fit with:
Market needs
Organizational strengths and resources

25. 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:
Introduction
Growth
Maturity- Saturation
Decline

26. EXHIBIT 5.1: GENERAL FORM OF A PRODUCT LIFE CYCLE
Sales
Growth
Maturity-Saturation
Introduction
Decline
Time

27. LIFE-CYCLE CONCEPT Focus on stimulating trial of the offering by:
Introduction Stage
Focus on stimulating trial of the offering by:
Advertising
Giving out free samples
Obtaining adequate distribution
The vast majority of sales volume is due to trial purchases

28. LIFE-CYCLE CONCEPT
Growth Stage
An increasing share of volume is due to repeat purchases
Marketers focus on retaining existing buyers of the offering through offering:
Modifications
Enhanced brand image
Competitive pricing

29. Maturity-Saturation Stage
LIFE-CYCLE CONCEPT
Maturity-Saturation Stage
There is an increase in the:
Proportion of buyers who are repeat purchasers
Standardization of production operations and product-service offerings
Incidence of aggressive pricing activities by competitors

30. Maturity-Saturation Stage
LIFE-CYCLE CONCEPT
Maturity-Saturation Stage
Marketers:
Find new buyers for the offering
Significantly improve the offering
Increase usage frequency among current buyers
Decline Stage
Marketers decide to harvest or eliminate the offering

31. Modifying the Offering
MODIFYING, HARVESTING, AND ELIMINATING OFFERINGS
Involves adding new features and higher-quality materials or augmenting the offering with attendant services and then raising the price
Trading Up
Modifying the Offering
Is the process of reducing the number of features or quality of an offering and lowering the price
Trading Down

32. Eliminating the Offering
MODIFYING, HARVESTING, AND ELIMINATING OFFERINGS
Eliminating the Offering
An offering may be dropped from the offering mix if the answers to these questions are “very little” or “none.”
What is the offering’s future sales potential?
How much is the offering contributing to offering mix profitability?
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?

33. POSITIONING OFFERINGS
CHAPTER 5: PRODUCT AND SERVICE STRATEGY AND BRAND MANAGEMENT
POSITIONING OFFERINGS

34. 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.

35. Positioning Approaches Product or Service Class
POSITIONING OFFERINGS
Positioning Approaches
Strategies include positioning by:
Attribute or Benefit
Use or Application
Product or Brand User
Product or Service Class
Competitors
Price and Quality
Marketers often combine two or more of these strategies when positioning a product, service, or brand

36. Positioning by Attribute or Benefit
POSITIONING OFFERINGS
Positioning by Attribute or Benefit
Is the strategy most frequently used
Requires determining:
Which attributes are important to target markets
Which attributes competitors emphasize
How the offering can be fitted into this offering-target market environment
Accomplished by designing an offering that contains or stresses the appropriate attributes

37. POSITIONING OFFERINGS
Positioning Matrix
Develop a matrix relating attributes of the offering to market segments (see Exhibit 5.2)
Benefits of the positioning matrix:
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
Can judge the competitive response to a new offering more effectively

38. Toothpaste Attributes
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

39. Positioning Statement
POSITIONING OFFERINGS
Positioning Statement
“For (target market and need), the (product, service, brand name) is a (product/service class or category) that (statement of unique attributes or benefits provided).”
Volvo’s position statement: For upscale American families, Volvo is the family automobile that offers maximum safety

40. Making the Positioning Decision
POSITIONING OFFERINGS
Making the Positioning Decision
The choice of which positioning strategy to use can be made by answering the following:
Who are the likely competitors, what are their marketplace positions, and how strong are they?
What are the preferences of the target consumers and how do they perceive competitors’ offerings?
What position, if any, does the organization already have in the target consumers’ mind?

41. BRAND EQUITY AND BRAND MANAGEMENT
CHAPTER 5: PRODUCT AND SERVICE STRATEGY AND BRAND MANAGEMENT
BRAND EQUITY AND BRAND MANAGEMENT

42. BRAND EQUITY AND BRAND MANAGEMENT
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.

43. BRAND EQUITY AND BRAND MANAGEMENT
Has two marketing advantages:
Provides a competitive advantage, such as signifying quality
Can charge a higher price since consumers are often willing to pay for the brand’s equity premium

44. Multiproduct Branding
BRAND EQUITY AND BRAND MANAGEMENT
Branding Strategy
Multiproduct Branding
A firm uses one name for all its products in a product class
Multibranding
A firm gives each product or product line a distinct name
Private Branding
A firm supplies a reseller with a product bearing a brand name chosen by the reseller

45. Multiproduct Branding
BRAND EQUITY AND BRAND MANAGEMENT
Multiproduct Branding
Also called family branding/corporate branding
Establishes dominance in an offering class
Allows buyers to transfer the good brand equity of one offering to others with the same name
Lowers promotion costs and raises brand awareness since the same name is used

46. Family Branding

47. BRAND EQUITY AND BRAND MANAGEMENT
Multibranding
Is a useful strategy when each brand is intended for a different market segment or uniquely positioned in the marketplace
Often arises from company acquisitions
Increases promotional costs since consumers and distributors must accept each new brand of the firm

48. BRAND EQUITY AND BRAND MANAGEMENT
Multibranding
Reduced risk that one brand’s failure will transfer to the firm itself or to its other brands
Advantage
Disadvantages
The strategy is complex to implement
Promotional costs are higher than with multiproduct branding

49. Multibranding

50. BRAND EQUITY AND BRAND MANAGEMENT
Private Branding
Private branding (or private labeling) involves a manufacturer supplying a reseller (retailer, wholesaler, or distributor) with an offering bearing a brand name chosen by the reseller.

51. BRAND EQUITY AND BRAND MANAGEMENT
Private Branding
If a reseller carries its own private brands:
Avoids price competition with other resellers since they don’t carry an identical brand
Accrues brand goodwill attributed to the offering to the reseller, not the manufacturer
Must locate a willing manufacturer

52. Private Branding

53. Brand Growth Strategies
BRAND EQUITY AND BRAND MANAGEMENT
Brand Growth Strategies
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
Fighting/ Flanker Brand
Creating a new brand to attract specific consumer segments not served by a firm’s existing brands to counteract competitors’ brands

54. EXHIBIT 5.4: BRAND GROWTH STRATEGIES
New Brand Strategy
Line Extension Strategy
Brand Extension Strategy
Fighting/ Flanker Brand Strategy
Existing Product Class
New Product Class
New Brand
Product/Service Class Served by the Organization
Brand Name
Existing Brand

55. Line Extension Strategy
BRAND EQUITY AND BRAND MANAGEMENT
Line Extension Strategy
Consists of new or different flavors, forms, colors, ingredients, features, and package sizes. This strategy:
Responds to customers’ desire for variety
Eliminates gaps in a product line
Lowers advertising and promotion costs
Risks product cannibalism
Can create production and distribution problems
e.g., new bitter chocalate of Nestle, new Magnum ice cream, orange flavoured Absolute

56. Brand Extension Strategy
BRAND EQUITY AND BRAND MANAGEMENT
Brand Extension Strategy
Provides consumers with the familiarity of an established brand when introducing it in a new market
Requires that the perceptual fit and core product benefit of the brand transfers to the new product class
Dilutes the meaning of a brand for buyers if the brand name has too many uses

57. Brand Extension Strategy
BRAND EQUITY AND BRAND MANAGEMENT
Brand Extension Strategy
e.g., Google car, Nestle water, Ferrari perfumes
Renault & Samsung cooperation Samsung branded cars

58. BRAND EQUITY AND BRAND MANAGEMENT
New Brand Strategy
Used when existing brand names are not extendable to a new product class for which it is targeted
May be the most challenging to successfully implement and the most costly: $50 to $100 million for a new brand
This strategy is akin to diversification
e.g., P&G acquired Duracell and Gillette and Unilever acquired Vaseline

59. Flanker/Fighting Brand Strategy
BRAND EQUITY AND BRAND MANAGEMENT
Flanker/Fighting Brand Strategy
Adding new brands on the high or low end of a product line based on a price-quality continuum
Flanker Brand
Adding a new brand whose sole purpose is to confront competitive brands in a product class being served by an organization
Fighting Brand

60. Fighting Brand Strategy
BRAND EQUITY AND BRAND MANAGEMENT
Fighting Brand Strategy
Introduced when:
An organization has a high relative market share of the sales in a product class
Its dominant brand is susceptible to having its high market share reduced by competitors through aggressive pricing or promotion
The organization wishes to preserve its profit margins on its existing brand

61. Flanker/Fighting Brand Strategy
BRAND EQUITY AND BRAND MANAGEMENT
Flanker/Fighting Brand Strategy
Fighting and flanker brand strategies risk cannibalizing other lower-priced brands in a product line
A preemptive cannibalism strategy is the practice of stealing sales from a firm’s existing products or brands to keep buyers from switching to competitors’ offerings so as to not lose sales

62. Fighter & Flanker brands
Fighter brands
- Turkish Airlines-Anadolu Jet
- Renault-Dacia
- Intel: Celeron chip
Flanker brands:
- Hyundai-Genesis
- Toyota-Lexus
Ariel and Alo laundry detergent brands of P&G

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