Dhruv Grewal Michael Levy Marketing Chapter 10 Product, Branding, and Packaging Decisions Dhruv Grewal Michael Levy

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Diesel Jeans Italian based with over 50 company owned stores in 80 countries Unique relationship between customers and the brand Irreverent, creative advertising, promotion and retail experience Ask students: How many own Diesel jeans? How many have heard of them? Why would you buy $200 jeans when you can get domestic brands like Levi’s for a fraction of the price? The answer is in the mystique of the brand. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Product Assortment and Product Line Decisions This chapter uses ConAgra brands as examples. Many students may be unfamiliar with the name ConAgra, but they likely know its brands, such a Chef Boyardee. The first slide lists ConAgra consumer brands, though it also has other divisions that focus on ingredients for food service. ConAgra resulted from a series of mergers and acquisitions over time. The company provides an excellent example of managing a brand portfolio to meet strategic objectives. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Product Assortment and Product Line Decisions Product Category 1 Product Category 2 SKUs SKUs

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Category Depth In the canned pasta category, ConAgra offers a wide range of products under its Chef Boyardee brand. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Product Lines Product line breadth Product line depth One of ConAgra’s best known and most successful brands is Healthy Choice. With its distinctive green packaging, Healthy Choice products appear throughout supermarkets. Group activity: List as many Healthy Choice products as you can think of. How many product lines do they represent? Healthy choices (http://www.healthychoice.com/products/news.jsp) has four types of meals, soups (bowls and cans), frozen novelties, bread and pasta sauces, Thus, they have five product lines © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Test Your Knowledge The number of product lines offered by a firm is known as its _______________. A) product breadth B) product assortment C) product depth D) product mix Answer: A

Colgate-Palmolive Product Assortment Just as ConAgra manages its brand portfolio to meet the needs of current customers, Palmolive similarly adds and sheds brands to create better value. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Change Product Mix Breadth Increase Breadth ConAgra through the 1980’s and 1990’s added extensively to its product mix Decrease Breadth ConAgra has also taken products out of its product mix in response to changing market conditions and strategy Ask students: Why would a company want to increase its product mix breadth? Why would it want to decrease it? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Adopting Product Breadth to Meet Changing Consumer Demand How do firms decide which products to add or subtract from their product mix? In fast changing competitive markets, firms must constantly evaluate their products/services to ensure they meet customer needs and changing preferences

Case in Point: Goodbye Vanilla Coke To keep up with customer demands in a rapidly changing beverage landscape. Challenge Answer Results Explore new flavors that appeal more to customers than current flavors. Vanilla Coke and Diet Vanilla Coke, though selling well over 250 million cases, were removed from stores in the U.S. (2005) and the UK (2006). Consumers are now demanding Cherry flavored drinks so Black Cherry Vanilla Coke and Black Cherry Vanilla Diet Coke are now on the market. Consumers’ tastes and preferences change quickly, and keeping up is difficult. Even Coca-Cola must constantly evaluate its product offerings.

Change Product Mix Depth ConAgra expanded its presence in popcorn by including three popular brands. To meet the needs of different market segments for the same product category, firms often offer competing brands. ConAgra offers three of the most popular popcorn brands, each of which is positioned slightly differently in the marketplace and carries its own unique marketing mix. Ask students: What are the pros and cons of offering competing products in the same category? The primary advantage is to increase overall sales and profits. But at the same time, adding competing products can cannibalize sales of current brands. Firms must determine the net effect on sales and the overall impact on competitive products. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Change Number of SKUs Addition or deletion of SKU’s in existing categories Designed to stimulate sales or react to consumer demand Many stores add SKUs to provide a deeper assortment. They might add, for instance, more colors or sizes in a category. Ask students: What effect does this have on consumer behavior? On financial performance? What is the effect of reducing the number of SKUs? By providing consumers with a deeper assortment, it is more likely that the store will satisfy their demand, which should result in increased sales. But adding SKUs is expensive. The effect of reducing SKUs is just the opposite © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Product Line Decisions for Services The same types of decisions can be used for services Group activity: Have students choose a service. Have them describe how they would change the breadth, depth, and # of services (SKUs) of the assortment. A bank could extend the breadth of its product line to include financial services, insurance, online banking, credit cards, and so forth. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Branding Product assortment Product line Single item The Chevrolet provides a good example of multilevel branding. Group activity: Compare the positioning of two Chevrolet brands (e.g., Corvette, Aveo, Impala, and Malibu). Why does Chevrolet have so many competing brands in the same category? Each brand is aimed at a different target market. Aveo starts around $10,000 while a Corvette coup starts at $45,000.

Branding A brand can use: Name, logo symbols, characters, slogans, jingles and even distinctive packages. Brand identification takes many forms. Ask students: How many of you can sing the Oscar Meyer jingle?

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Makes a Brand? URLs Brand name Branding Logos and symbols Group activity: Identify a brand that you recognize primarily by each of these elements. Brand Name: Most brands. Jingles: Be all you can be – Army. URLs: www.eBay.com Logos & Symbols: Nike Swoosh. Slogans Nike- Just Do It.: Characters: Quaker, KFC, McDonalds. Jingles Characters Slogans © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Value of Branding for the Customer and the Marketer Group activity: Have students pick a well-established brand. Have them provide examples of how the brand provides value. For example, consider eBay. The brand facilitates instant recognition, consumers are avidly loyal, which reduces competition from other online auctions and reduces expensive marketing ads. The brand is a valuable asset that they protect through copyrights, and directly affects their profits. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Test Your Knowledge The purpose of branding is to _______________. A) allow advertising firms to establish a name for themselves B) make customers aware of a product’s features C) ensure legal rights for a product D) help consumers distinguish one company’s products from another Answer: D

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Brand Equity Brand equity cuts both ways; customers dislike some brands because of the firm’s actions or their negative perceptions. Nike has been the target of many labor activists, which causes some consumers to refuse to purchase or wear Nike products. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Brand Equity: Awareness Remind students what they have learned about consumer behavior. When consumers recognize a need, they begin with an internal search, during which they consider any brand they already know. If consumers are not aware of the brand, they simply will not purchase it. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Brand Equity: Perceived Value Discussion question How do organic brands create value for customers? Consumers report looking for and purchasing more organic products for a variety of reasons, such as concerns about health, the environment, and safety. Organic products often cost more but are perceived as more valuable by some because they mitigate these concerns. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Brand Equity: Brand Associations Brand personality Consumers develop links between brands and their own identity. Some brands are just “not for them.” Ask students: How many of you proudly wear Abercrombie & Fitch clothing? How many choose never to wear this brand? How do you perceive this brand’s message? Kristen Davis, Charlotte from “Sex in the City”, offers her classical good looks to reflect the brand personality of Weatherproof outerwear © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Test Your Knowledge Consumers tending to associate higher prices with higher quality is known as _______________. A) brand association B) quality perception C) perceived value D) brand awareness Answer: B

Brand Equity: Brand Loyalty Consumers are often less sensitive to price Marketing costs are much lower Firm insulated from the competition Brand loyalty provides the firm with high value. State Farm has built their brand equity by having loyal customers. Ask students: Once you have chosen an insurance company or a bank, how likely is it that you will switch? How likely is it that you will switch due to an increase in price? Is it important for the firm to spend a lot of money marketing to you, a loyal customer? Do you pay much attention to ads or direct mail pieces from competition? To further illustrate brand loyalty, ask students: would you leave a store if your particular brand were not in stock? When you order a Sprite in a restaurant and the server asks, “Is 7-Up okay?” do you say no? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Adding Value 10.1: Building a Brand from Scratch in the U.S. Location, location, location Product line Branding Theme © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Branding Strategies © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Brand Ownership Manufacturer brands or national brands Private-label brands or store brands Generic Unlike Europe, where store brands such as Tesco (U.K. grocery chain) were extremely popular, in the United States, few store brands had achieved such status and were often considered inferior to manufacturer or national brands. Today, many store brands are well established, such as Kenmore, Charter Club, and Presidents’ Choice.

Naming Brands and Product Lines Branding exists on multiple levels, and firms choose strategically how to brand their products. The names they assign their products reflect this strategic choice. Marriott gives its individual brands unique names, all tied together by the phrase “by Marriott,” like Fairfield Inns by Marriott. Ask students: What is the benefit of this type of naming strategy? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Naming Strategies Corporate or family brand GE The Gap Corporate and product line brands Kellogg’s Corn Flakes (Kellogg’s) Pop-Tarts Individual lines Mr. Clean (Proctor & Gamble) Swiffer (Proctor & Gamble) Ask students: Name a firm that uses a corporate or family brand? A corporate and product line brand? Individual lines? Family brands include Heinz and Del Monte. Detergents are good examples of firms using individual brands: Tide, Bold, Gain and Surf. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Test Your Knowledge Brands that are owned and managed by retailers are called _______________ brands. A) public-label B) generic C) private-label D) corporate Answer: C

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Brand Extension Group activity: Think further about the Healthy Choice brand. How has ConAgra been able to extend this brand? What other extensions might it consider? Some possibilities for ConAgra’s healthy Choice to expand could include ice-creams and fruit juices. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Brand Extension It’s All About the Choices We Make © ConAgra Foods, Inc. All Rights Reserved. The term “category” used within refers to a portion of the overall Prepared Foods Category. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Brand Dilution Evaluate the fit between the product class of the core brand and the extension. Evaluate consumer perceptions of the attributes of the core brand and seek out extensions with similar attributes. Refrain from extending the brand name to too many products. Is the brand extension distanced enough from the core brand? A brand is only as good as its last extension. Many firms try to take their brands just one more step, only to find the extension hurts rather than helps the parent brand. For example, McDonald’s agreed to license a McKids line of clothing, but the line was not as successful as it had hoped it would be. Ask students: In terms of this slide, what do you think McDonald’s did wrong? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Cobranding Cobranding benefits the participating brands by attracting the consumers of one brand to the others. Remind students of the FedEx/Kinko’s example. The synergy between these two brands helped ensure a successful cobranding effort. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Brand Licensing Lacoste Founded in 1933 by David Lacoste Still sold in stores today Harley Davidson ConAgra recently introduced Harley Davidson Beef Jerky into the $2.7 billion per year beef snack category The product will be sold in convenience stores and in Harley Davidson dealerships Think about the products that feature the Lacoste alligator or the Harley-Davidson logo. Ask students: Why can these brands be extended in so many directions? Answer: These brands have a strong mystique and a loyal following, and are therefore likely to buy their brand extensions. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

How do firms effectively use brand licensing to reach new markets? Using Brand Licensing How do firms effectively use brand licensing to reach new markets?

Case in Point: Slave Labor Graphics and Disney Challenge Answer Results Disney Publishing Worldwide, the largest children’s publisher in the world, sought to attract an older market to its products. Disney licensed Slave Labor Graphics to create older series based on “Tron”, “Haunted Mansion”, “Gargoyles,” and “Wonderland” (based on Alice in Wonderland). Their names suggest an unlikely match, yet Disney turned to Slave Labor Graphics to help it repackage an existing product for a new audience The new series are being launched throughout 2005 and 2006.

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Brand Repositioning Whirlpool: New design Surf detergent: New message Elizabeth Arden: New faces YM: New audience Gallo: New image Aqua Velva: New packaging Arm & Hammer: New uses Firms reposition their brand in the marketplace in various ways, but the overriding purpose is to convey that the brand meets consumers’ changing needs. Ask students to identify a brand that might need repositioning, e.g., 7Up, or Ginger Ale. How would they reposition the brand? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Test Your Knowledge What is the purpose of brand repositioning? A) To allow another firm to use a brand name for a negotiated fee. B) To target new markets or realign the brand’s core emphasis with changing market preferences. C) To market two or more brands together. D) To extend the brand name to additional products. Answer: B

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Packaging Although often overlooked as a marketing tool, packaging helps determine the success of a product. In some instances, such as Coca-Cola or Aunt Jemima Maple Syrup, the package has become synonymous with the brand. Ask students: What packages are so distinct that it helps make the brand successful? Possible answers are: some bottled waters such as Perrier, Altoids, and Tiffany’s turquoise box Primary package Secondary package © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Using Packaging to Create Value How can firms use packaging to create value for customers and the firm? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Case in Point: Quaker Coffee Challenge Answer Results To find a way to establish the brand image and convey the product description. Coffee labels that communicate roast qualities, bakery labels that say baked fresh, and the cups attract customers. Even small firms benefit from good packaging and labeling. Quaker Coffee’s packaging conveys its value proposition to the marketplace. Sales increased 400 percent.

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Product Labeling Label information is determined by regulations, and labeling rules vary from country to country. Certain terms convey specific meanings, such as “natural,” “organic,” “made in the USA,” and products must meet specific tests before placing such terms on their label. Group activity: Look at the label of a snack or drink you may have brought to class. What information does it provide? How does it support the marketing of this item? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Chapter 10 Glossary Brand association: The mental links that consumers make between a brand and its key product attributes; can involve a logo, slogan, or famous personality. Brand personality: Refers to a set of human characteristics associated with a brand, which has symbolic or self-expressive meanings for consumers. Perceived value: The relationship between a product or service’s benefits and its cost. Primary package: The packaging the consumer uses, such as the toothpaste tube, from which he or she typically seeks convenience in terms of storage, use, and consumption. Product line breadth: Represents the number of product lines offered by the firm. Product line depth: The number of categories within a product line. Secondary package: The wrapper or exterior carton that contains the primary package and provides the UPC label used by retail scanners. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin