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Offering (Product & Service) Strategy and Brand Management Defining & Segmenting the Product-market Product Life Cycle and Product & Brand Strategies Modifying.

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Presentation on theme: "Offering (Product & Service) Strategy and Brand Management Defining & Segmenting the Product-market Product Life Cycle and Product & Brand Strategies Modifying."— Presentation transcript:

1 Offering (Product & Service) Strategy and Brand Management Defining & Segmenting the Product-market Product Life Cycle and Product & Brand Strategies Modifying The Offering Concept & Positioning Strategies Forecasting New Product Sales Key Learning Points 1

2 Marketing Process C ompany C ustomers C ompetitors C ollaborators C ontext SWOT Analysis P roduct/Service Offering P romotion/ Communication P ricing P lace/ Channel Market Segmentation Selection & Targeting Product/Service Offering Positioning Customer Acquisition Customer Retention/Expansion Revenue & Profits Create Value Communicate & Capture Value Sustain Value Customer Relationship Management 2

3 Segmentation, Targeting, Positioning Segmentation Selection Targeting Acquisition vs. Retention & Expansion Positioning Break market into segments that respond differently to elements of the marketing mix. Identify segment(s) that will respond most positively (i.e., profitably) to firm’s offerings. Concentrated vs. Differentiated targeting. Determine how to best acquire, retain & expand purchases by the most profitable segments. Design, price, place, & promote offering so it occupies a distinct & valued place in target customer’s mind relative to competitive offerings. 3

4 Defining & Segmenting the Product Market Define & segment the Product Market by:Product Market – type of customers served (who), – particular needs of those customers (what), – the means or technology used to satisfy those customer needs (how), & – geography of the market served (where). 4 Customers Products/Technology Channels/ Geographies Current New

5 All food & beverage Cakes & Pastries Breads & Scones Gum Candy Candied Nuts Dark Chocolate Product Market Competition: Packaged Confection Product Class 5

6 Four Levels of Product Market Definition Implies Different Tasks for each Level: – Product form competition: focus marketing activities on immediate customers & competitors; e.g., Montreaux’s dark chocolates w/fruit are the best. – Product category competition: convince customers that your product form/offering is best in the category; e.g., dark chocolate is much healthier than sugary candies. – Generic competition: convince customers of the superiority of your product (category) offering’s ability to satisfy needs over other (category) offerings; e.g. packaged candies are the most convenient snack on the run. – Budget competition: convince customers of the superiority of your company’s portfolio of products; e.g.,Apollo’s line of snacks & confections are the highest quality. Be sure to identify the most relevant level of competition in each case. Where Should the Focus Be? 6

7 Product Market Competition: Higher Education All self improvement Law courses Engineering courses Marketing courses Entrepreneurship courses Finance courses Core Biz Classes 7

8 For Cox MBA students, MKTG 6201 is a core class that, unlike other foundational classes (e.g., Accounting, Economics, OB, Finance), emphasizes the company’s boundary-spanning activities that focus on customers, downstream collaborators, and competitors. Product form competition: focus positioning & marketing activities on immediate customers & competitors. For Cox MBA students, Marketing is a concentration that, unlike Finance, Management, or Strategy, prepares you for a successful career in Brand Management, Marketing Consulting, and Marketing Analytics. Product Market Definition & Positioning 8 Good positioning statements focus on: one or two benefits that resonate with the target market. companies create and capture value from customers and downstream collaborators. will help you understand how and Marketing

9 For working professionals in North Texas seeking career advancement, the Cox PMBA is a part-time MBA program that, unlike other programs in the area, offers a small, private-school environment and a strong, professional network. For ambitious people seeking continuing/higher education, SMU is a private university that, unlike other universities, will shape you into a world changer. 9 Product category competition: convince customers that your product form/offering is best in the category. Generic competition: convince customers of the superiority of your product (category) offering’s ability to satisfy needs over other (category) offerings.

10 Positioning K&P Formulating positioning strategy requires knowing: – The importance of each value dimension to customers – How the brand & the competition compare on each dimension 10 Exhibit 4 - Attribute Ratings for the 5 oz. Stand-up Pouch with Healthy Messaging Concept How much would you agree with the statements made about this product? Product Attribute (% Agree or Strongly Agree) Would be better for me than other chocolates87 Would be high quality85 Would taste great84 Would come in varieties I like78 Would be a good way in indulge myself74 Would be good for any time of the day61 Would taste better than other dark chocolates54 Would be good for everyday use42 Would be an all-natural snack option38 Would be a good value33

11 Partial Marketing-Mix Comparison Personal Computers Dell was positioned as a product leader with the best perceived technology. IBM was positioned as a brand-centric differentiator with no objective or perceived advantage. PCs  Lenovo; IBM  customer-centric. Gateway’s positioning: customer intimacy emphasizing customization (i.e., user compatibility & configurability). 11

12 Positioning Formulating positioning strategy requires knowing: – The importance of each value dimension to customers – How the brand & the competition compare on each dimension Implementing the positioning strategy requires programs that communicate a brand’s differential advantage on: – Attribute/benefit, price/quality – User or Use/Application – Product class or competitors 12

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14 Positioning Formulating positioning strategy requires knowing: – The importance of each value dimension to customers – How the brand & the competition compare on each dimension Implementing the positioning strategy requires programs that communicate a brand’s differential advantage on: – Attribute/benefit, price/quality – User or Use/Application – Product class or competitors To determine a Product’s Position: – Ask customers to rate a firm’s brand, the competitor’s brands, and the “ideal” brand on a number of dimensions. – Plot ratings in 2 dimensions to represent the competitive “space” - typically called a perceptual map. 14

15 Hybrid Car Perceptual Map 15

16 Product & Brand Decisions  Many Product & Brand Decisions are Related to the Product Life Cycle (PLC), Technology Diffusion, & Long- Term Expectations for Product Category Evolution  The PLC sketches the sales history of a product category – or perhaps a product form – over time.  Strategy and segmentation options and the importance of marketing mix variables vary across each stage of the PLC.  Not all product categories follow the standard PLC curve across time in a linear manner. 16

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18 Cumulative Five-Year Purchase Volume for Various Mobile Technologies 18 Source: Morgan Stanley %s represent five-year predicted penetration rate for tablets & 2011 penetration rates for other technologies

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21 The Product (Category) Life Cycle -- Context Two Critical Inflection Points Key SegmentEarly Market First-time Purchase Early Majority/ Pragmatists Mainstream Repurchase Greatest Competitor Complexity Greatest Customer Complexity Strategic EmphasisProduct Differentiation Customer Acquisition Brand Differentiation/Customer Intimacy  Cost Customer Retention & ExpansionLeadership 21

22 Marketing Strategies Over the Product Life Cycle  Introduction  Growth  Maturity  Decline  Market size small and growth rate is increasing.  Product: disruptive technology that creates new product category.  Pricing: skimming targets innovators/visionaries & LT Product (quality-based) differentiation  Advertising: product category advantages.  Distribution & Selling : PUSH PLC Stages 22

23 Marketing Strategies Over the Product Life Cycle  Introduction  Growth  Maturity  Decline  Moving Mainstream – Increasing competition – Market segmentation  Positioning for LT advantage − Continue to emphasize Product differentiation (innovation & quality) & market growth or niche of maturing market − Begin shift to brand differentiation/ customer intimacy with incremental product improvements, proliferation as market matures (i.e., late growth) PLC Stages 23

24 Product & Brand Strategies… In the Growth Stage or in Hi-Tec, Turbulent Categories with Rapid Cycles & Permanent Growth: – Product Line Strategies focus on Product Innovation that replaces (i.e., cannibalizes) current offerings – Branding strategies deemphasize specific products/features and focus on organizational competencies & differentiation (i.e., multiproduct or corporate branding) Consistent with Innovation or Product Differentiation 24

25 Intel ’ s Co-branding Efforts After the “Intel Inside” branding campaign began 1991, the company received over $3 billion worth of advertising exposure showing the Intel Inside logo. The logo appears in POP displays too. 25

26 Marketing Strategies Over the Product Life Cycle  Introduction  Growth  Maturity  Decline PLC Stages  Fully Mainstream – Oligopoly market structure – Well-defined segments with sophisticated consumers  Positioning for advantage − Emphasize brand differentiation/ customer intimacy, incremental product improvements, proliferation, intangibles (e.g., branding, service, advertising) or − Emphasize operational efficiencies to establish Cost Leadership advantage in fully mature market. − Innovator attempts to jumpstart new cycle of Growth (Apple). 26

27 Product & Brand Decisions… In the Maturity/Decline Stage: – Product Line Strategies focus on Product Proliferation that extends current offerings to: Eliminate competitors &/or erect entry barriers Provide one-stop shop for downstream collaborators Satisfy increasingly segmented customer base – Branding strategies emphasize distinct product brands and features (i.e., multibranding), sometimes applied to entire lines. Consistent with Brand-centric differentiation or Customer Intimacy 27

28 P&G’s Product Proliferation & Multibranding Strategy P&G Controls Over 60% Market Share in the Laundry Care Category Key Management Challenge: How to organize, manage & market all the brands? 28

29 P&G’s Product Proliferation Multibranding Strategy 29

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31 Marketing Strategies Over the Product Life Cycle  Introduction  Growth  Maturity  Decline  Many strategies for reviving mature product categories can be applied to those in decline; for example, product enhancements and line extensions for segments still buying category.  Sometimes product categories revive due to serendipity.  Being the “last iceman” in a truly dying market can be profitable… to a point. PLC Stages 31

32 Modifying the Offering Mix How consistent is the new offering with existing offerings – Complementarities versus cannibalization Does the organization have the resources & capabilities to introduce & sustain the offering? Is there a viable market for the offering? What share is required? What position do we currently own and do we want to own? What type of branding strategy do we implement? – Multiproduct (family) or multibranding (individual) 32

33 Montreaux Chocolate USA This case addresses a global CPG company’s attempt to develop optimal positioning for a new dark chocolate offering. Be sure to use the Montreaux spreadsheet to calculate trial rates, market share, and project contribution; review the Sales Projections assignment if you’re not sure how to conduct the analyses. And use the Montreaux Exhibits to identify Apollo’s (potential) competitive advantage and a positioning statement for Montreaux chocolates.Montreaux spreadsheetSales Projections Montreaux Exhibits 33

34 34 TopicPoorFairGoodExcellent Launch Strategy Brand Name & Branding Strategy (see K&P pp ) & First-year Brand Objective(s) Product-Market Strategy (see K&P Ex. 1.2) & Targeting & Positioning Statement Implementation and Fit Recommended A&P budget and Quality Level to achieve intermediate objectives (Awareness, Distribution, Repeat) Likelihood of achieving intermediate objectives given Company’s Resources & CapabilitiesResources & Capabilities Likelihood of achieving intermediate objectives given external Opportunities & Threats (Customers, Competition, Collaborators, PLC) Financial Evaluation Year-1 Financial Analysis (key assumptions required to meet objective) Financial Assessment of the Likelihood of meeting Year-2-3 objectives Value-Adding Exhibits (e.g., SWOT, Comparative Analysis, Positioning Map) Overall Presentation & Organization Paragraph #1 Paragraph #2 Paragraph #3

35 Customer-Based Brand Equity Model Consumer- Brand Resonance Brand Salience Consumer Judgments Value, relevance, differentiation Consumer Feelings Excitement, security, fun Brand Performance Characteristics, design, price Brand Imagery Who uses, when, personality DEEP RELEVANCE INTENSE, ACTIVE LOYALTY DEEP RELEVANCE INTENSE, ACTIVE LOYALTY RATIONAL & EMOTIONAL REACTIONS POINTS-OF-PARITY & POINTS-OF- DIFFERENCE DEEP, BROAD BRAND AWARENESS 4. RELATIONSHIPS = What about you & me? 4. RELATIONSHIPS = What about you & me? 3. RESPONSE = What about you? 3. RESPONSE = What about you? 2. MEANING = What are you? 2. MEANING = What are you? 1. IDENTITY = Who are you? 1. IDENTITY = Who are you? Recognition & Recall Purchase/Consumption Consideration Behavior/Affective Commitment 35

36 Marketing Pro Formas Breakeven Analysis Customer Lifetime Value (CLV) Sales Forecasts Economic Value Analysis Channel Margin Calculus Demand Elasticity Financial Analysis in Marketing K&P Chapter 2 36

37 Market Potential, Sales Potential, Sales Forecast Estimating Market Potential: – Determine the potential buyers /users of the products. – Determine # of customers in each group of buyers. – Estimate the potential purchasing/usage rate. Estimating Company Sales Potential – Multiply market potential by desired or “best” possible market share. Sales Forecast: Estimate from Sales Potential… 37 −Use purchase intention surveys/qualitative methods. Forecasts for frequently-purchased items combine test market or early sales data with brand awareness, trial, repeat purchase, or usage rate data ( See Sales Forecast Final Exam Question)Sales Forecast Final Exam Question

38 Estimating Year-1 Sales Volume Using a Chain Ratio Model Focus Group % Adjusted for Bias Awareness % Distribution % Penetration % Trial Rate % Definitely %80%Depends on Probably %30%ConsumerTrade CRM/ Trial HouseholdsRepeat Rate %Repeat Households Excellent product (~38%) From AboveAverage product (~33%)Trial Households Mediocre product (~28%)x Repeat Rate 38 ××× × = = × % Trial Rate# HouseholdsTrial Households Repeat Households Repeat Purchase Rate Total Units Sold × = × = +

39 Review Questions What are 4 levels of product market definition? What are the key customer segments, growth strategies, and strategic emphases for each stage of the product life cycle? What are the key questions to ask when making offering modification decisions? What is the difference between market potential, sales potential, & sales forecast? 39 Next Week Montreaux Chocolates


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