1. PRODUCT STRATEGY AND BRANDING Professor Chip Besio Cox School of Business Southern Methodist University

2. What Is the Product? Brand Name Quality Level Packaging Design Features Delivery& Credit Installation Warranty After- Sale Service Core Benefit or Service Core Benefit or Service Actual Product Core Product Augmented Product Source: Prentice Hall

3. Types of Products  Consumer  Industrial  Other Entities –Organizations –Persons –Places –Ideas

4. Types of Products CONSUMER PRODUCTS Shopping Products >Buy less frequently >Gather product information >Fewer purchase locations >Compare for: Suitability & Quality Price & Style Convenience Products >Buy frequently & immediately >Low priced >Many purchase locations >Includes: Staple goods Impulse goods Emergency goods Specialty Products >Special purchase efforts >Unique characteristics >Brand identification >Few purchase locations Unsought Products >New innovations >Products consumers don’t want to think about >Require much advertising & personal selling Source: Prentice Hall

5. Types of Products INDUSTRIAL PRODUCTS Supplies and Services Supplies and Services Materials and Parts Materials and Parts Capital Items Capital Items Source: Prentice Hall

6. Characteristics of Services Intangibility Inseparability Variability Perishability Source: Prentice Hall Can’t be seen, tasted, felt, heard, or smelled before purchase Can’t be separated from service providers Quality depends on who provides them and when, where and how Can’t be stored for later sale or use

7. Individual Product Strategy Decisions  Attributes  Packaging  Labeling  Product Support

8. Product Attributes - Where Do They Come From? FeaturesFeatures DesignDesign Source: Prentice Hall QualityQuality

9. Packaging PromotesIdentifies Competitive Advantages Describes Sales Tasks Product Safety Packaging Labeling Packaging Labeling Source: Prentice Hall

10. Multi-Product Strategy Decisions  Branding  Product Lines  Product Mix –Variety –Assortment

11. What Do Brands Mean to Customers? Brand Personality Attributes Value Quality Benefits Culture Company Values User Characteristics

12. Brand Equity  The value your customers perceive to be uniquely associated with your brand AwarenessAssociations = Awareness + Associations  Awareness –Recall –Recognition  Associations –Perceived Quality –Image

13. Brand Awareness RECOGNITION

15. Brand Awareness RECALL  Essential for memory-based choice and customer-initiated contact Order of Recall (movie data) 0% 5% 10% 15% 20% 25% 30% 35% Recalled 1st (top of mind) Recalled 2nd or 3rd Recalled 4th or 5th Recalled 6th or 7th Recalled 8th or 9th Percent seeing film before 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Percent seeing film after Seen before recallSeen after recall Source: Wes Hutchinson

16. Brand Associations PERCEIVED QUALITY Profitability (ROI): PERCEIVED RELATIVE QUALITY inferiormoderatesuperior RELATIVEhigh21%27%38% MARKETmedium14%20%29% SHARE low7%13%20% SOURCE: PIMS (Profit Impact of Market Strategies; based on 2,200 business units) Future Profitability (Stock Price): Stock Price = f(ROI, perceived quality) * ROI and perceived quality exert approximately equal effects * SOURCE: Aaker, D. A. and R. Jacobson (1994; based on daily measures of NYSE, AMEX, and NASDAQ).

17. Brand Associations IMAGE  Brand image is the integration of all experiences with and information about a brand as perceived and remembered by customers The whole is more than the sum of its parts easy to create impossible to change  Brand image is relative easy to create, but almost impossible to change!  Example 1: K-Mart and the “Blue Light Special”  Example 2: Hyundai and product quality

18. Brand Equity  BRAND LOYALTY Brand loyalty - the probability of choosing a brand given that you are a user of that brand - can result from:  Inertia  Inertia: the general tendency to repeat previous purchases due to high switching costs, convenience, or habit  Preference  Preference: an enduring preference for a brand over and above what would be expected based on the benefits derived from the product or from a long-term relationship with the brand

19. Example BRAND LOYALTY  In 1983, six people in Chicago died of cyanide poisoning from tampered TYLENOL capsules. J&J reacted quickly and appropriately withdrawing all capsules from the market. Tylenol shared dropped only from 37% to 35% and eventually recovered completely.

20. Brand Equity  BETTER BUSINESS RESULTS Brands PriceMarket Share Toothpastes (6 oz.) Price PremiumShare Premium Crest$2.19$.4427.2%17.3% Colgate$2.19$.3721.8%12.2% Aqua-fresh$2.19$.2415.1%6.6% Close-Up$2.14$.2716.5%8.0% SOURCE: Park, C. S. and V. Srinivasan (1994; based on survey results)

21. Brand Equity  BETTER BUSINESS RESULTS Brands PriceMarketShare Mouthwashes (24 oz.)Price Premium Share Premium Scope$3.83$.4731.2%13.7% Listerine$3.79$.4226.8%11.1% Close-Up$5.02$.232.3%.8% Plax$4.29$.2610.3%3.4% Colgate$5.22$.101.4%.2% SOURCE: Park, C. S. and V. Srinivasan (1994; based on survey results)

22. Major Brand Decisions Brand Strategy Line Extensions***Brand ExtensionsMulti-brands***New Brands Line Extensions***Brand ExtensionsMulti-brands***New Brands Brand Sponsor Manufacturer’s Brand**Co-brandingPrivate Brand**Licensed Brand Manufacturer’s Brand**Co-brandingPrivate Brand**Licensed Brand Brand Name Selection Protection Selection Protection Source: Prentice Hall

23. Brand Strategy Line Extension Multi-brand Brand Extension New Brand Brand Name Currently ServedNew Product Category Existing New Source: Prentice Hall

24. Brand Strategy  Line Extension –Existing brand names extended to new forms, sizes, and flavors of an existing product category  Brand Extension –Existing brand names extended to new product categories  Multi-brands –New brand names introduced in the same product category  New Brands –New brand names in new product categories Source: Prentice Hall

25. Brand Strategy BRAND EXTENSION  Brand associations determine which brand extensions will be successful Source: Wes Hutchinson

26. Product Mix Product Mix - all the product lines offered Product Mix - all the product lines offered Variety Variety - number of different product lines Assortment Assortment - number of items within product lines Assortment Assortment - number of items within product lines