BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 16 The Launch Alan L. Whitebread

BEST CONSUMER TEST MARKETS ALBANY-SCHENECTADY-TROY, NY 2. ROCHESTER, NY 3. GREENSBORO--WINSTON-SALEM--HIGH POINT, NC 4. BIRMINGHAM, AL 5. SYRACUSE, NY 6. CHARLOTTE-GASTONIA-ROCK HILL, NC-SC 7. NASHVILLE, TN 8. EUGENE-SPRINGFIELD, OR 9. WICHITA, KS 10. RICHMOND-PETERSBURG, VA

WORST CONSUMER TEST MARKETS EL PASO, TX 142. COLUMBIA, MO 143. TALLAHASSEE, FL 144. BROWNSVILLE-HARLINGEN-SAN BENITO, TX 145. PROVO-OREM, UT 146. OCALA, FL 147. McALLEN - EDINBURG-MISSION, TX 148. HONOLULU, HI 149. SAN FRANCISCO, CA 150. NEW YORK, NY

TEST MARKET LAUNCH Test all aspects of the product –Functionality – –Clarity of instructions –… Discover problems / improvements – Test acceptance rate and forecast assumptions

TEST MARKET LAUNCH Coca-Cola Offers Money-Back Guarantee on New Product Launch Sep 15, :04 AM PROMO Xtra Coca-Cola is offering the ultimate marketing tool to launch its new sports drink: the money-back guarantee. Coca-Cola offers guarantee on POWERade POWERade OPTIONPOWERade OPTION, a low-calorie, low-carbohydrate sports drink is now on store shelves nationwide featuring a "Great Taste" money-back guarantee that gives consumers who don't like the taste a full refund. The company decided to make the offer based on overwhelming positive feedback on the produce and strong sales, said Mary Herrera, director of marketing for sports & energy drinks, Coca-Cola North America, in a statement.Coca-Cola North America "Combine this initial feedback with the results from the taste test against Propel, and it was an easy decision to initiate the 'Great Taste' money-back guarantee," she said. Propel is made by The Gatorade Co., a division of PepsiCo.Propel Sampling is getting underway at special events in key markets across the country. POWERade OPTION comes in strawberry, black cherry and lemon flavors and is sold in 32-ounce bottles, 20-ounce single bottles and six-packs. Print ads, in-store merchandising and promotions as well as public relations and online sponsorship programs support.

THE LAUNCH The largest expenditure of management time, money, and corporate resources used at any time in the NPD process.

THE LAUNCH: GOALS Seamless to the customer –Timing, coordination Integration of –Operations ramp –Sales training –Customer service[s] –Maximizing IMC Impact The communication plan –TOTAL toothpaste example » » »

THE LAUNCH: ROLL-OUT STRATEGY –Multiple simultaneous markets or segments –A series of launches across markets or segments [or countries if international]

THE LAUNCH: BACKGROUND High risk compared to a product [line] extension or improvement Many potential pitfalls –What can go wrong? Very high expenditures

THE LAUNCH: POTENTIAL PITFALLS The forecast Supply chain issues – –Logistical coordination –Out-of-stocks –Manufacturing / vendor flexibility –IMC:

LEAN LAUNCH METHOD Flexible supply chain –Quickly respond to demand –Reduce lead times to improve response –Postponement Time: Forward inventory placements Form: assembly, packaging, labeling-especially for multiple products –Computers [WIP] –Neutral base for house paints –International [labels and languages]

IMC AND THE LAUNCH Consumer promotion Direct marketing Internet activities Print advertising Public relations Radio advertising Reseller education Reseller support materials [collateral, POS, …] Sales force promotion Sales force training Trade promotion Trade shows TV advertising …

MONITORING THE LAUNCH POS sales information EDI or its equivalent Regional roll-outs

UNDERSTANDING SUCCESS AND FAILURE A General Electric study found the three largest new product failure factors are 1.market changes that could not be predicted 2.substitute new products by the competition; and, 3.poor timing caused by excessive time in the commercialization process.

NEW PRODUCT STRATEGIES TIME DeclineMaturityIntroductionGrowth SALES PRODUCT CATEGORY CYCLE Increasing competition

INNOVATIVE NEW PRODUCT STRATEGY Technology-driven Completely new products Probably a new brand Broad initial product assortment is desired May have new channel members or a new channel Skimming price strategy Capitalize on first-mover advantage

INNOVATIVE NEW PRODUCT STRATEGY Continually reinforce that yours is the original. –Coke “the real thing” –Kentucky Fried Chicken …

OFFENSIVE ADDITION STRATEGY Innovative, improved products Create barriers for competitors Expand product assortment

DEFENSIVE ADDITION STRATEGY: You are not the market leader Less innovative, market-driven product line additions Late growth and early maturity stages of the PLC Maximize presence in existing market [segments] Possible brand extensions Market penetration strategies Heavy sales promotion at all levels

WHY DO NEW PRODUCTS SUCCEED? Defined NPD process Written documentation Excellent research and development Outstanding implementation Well defined product concept prior to development Technological/marketing fit Unique, superior product Feedback loops for rapid response to varying conditions

WHY DO NEW PRODUCTS FAIL? Overestimation of market size No major points of difference Insufficient quality Insufficient access to market segment[s] / poor fit with the firm Poor execution of product mix Insufficient funding or ROI Competitive actions / reactions

REAL LAUNCHES: SONY March 24, 2005 SONY Portable Playstation –1,000,000 PSP Value Pack units in retail stores across the country for today’s launch

SONY PSP Value Pack -- PSP(TM) (PlayStation(R) Portable) -- AC Adaptor -- Battery Pack -- Memory Stick Duo(TM) (32 MB) -- Headphone with remote control -- Soft Case -- Wrist Strap -- Cleaning Cloth -- UMD in-pack game/movie/music sampler -- Spider-Man(TM) 2 from Sony Pictures Home Entertainment (for the first 1 Million PSP Value Packs shipped)

CHRISTMAS 2006: SONY PLAYSTATION 3 –Initially targeted Spring, 2006 [confirmed 2/20/06] Shortage of blue laser diodes U.S. production to start May, Terre Haute, IN 750,000 per month building to 5,000,000 per month in October, 2006 –400,000 in U.S. on delayed Nov. 17 launch date –2 models: $499 & $599 [Europe €499 & €599] –600,000 more by year-end –6,000,000 in the first five months –Ships are usually full from July through November foot containers or 60 Boeing ’s or Volga Dnepr fleet of Anatov 124’s

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 17 Building Successful Brands: The Marketing Plan II Alan L. Whitebread

NEW PRODUCT GROUP INTRODUCTION STAGE OF THE PLC Sales Low but accelerating; growth based on market acceptance rates Costs High initial marginal cost per unit then declining Profits A function of the cost system; could be negative to low Marketing objectives Create awareness and stimulate initial purchases Product A basic product set-possibly different sizes, colors, flavors, … Price Usually skimming; do not use cost-plus Distribution High cost; especially if you are adding new members or a new channel IMC Strong across all channel members to build awareness and stimulate initial purchases

GROWTH STAGE OF THE PLC Sales Increase at an increasing rate then at a decreasing rate Costs Costs continue to fall; begin to approach a minimum cost of production per unit Profits Marginal and total profits are increasing Marketing objectives Build and solidify market share; strengthen the position in the marketplace Product Rapidly expand product offering to include sizes, styles, accessories, warranty, … Price Likely switch to very competitive based on the desired position Distribution Increase the number of outlets, shelf space, etc. without corrupting the channel[s] IMC Continue to increase awareness, build interest, and repeat purchase / use

MATURITY STAGE CHALLENGES EXPAND THE MARKET SEGMENT[S] –Increase consumption frequency and amount MODIFY THE PRODUCT –Expand variety especially quality, features, styles, colors, …Continually improve the product to push it back toward the growth stage

MATURITY STAGE CHALLENGES MODIFY THE MARKETING MIX –Continually change the marketing mix to maximize sales –Find additional applications

MATURITY STAGE CHALLENGES FIND ADDITIONAL APPLICATIONS –Promote new uses for the product WD-40 –Cleans through grease and duct tape –Keeps glass and mirrors fog and spot-free –Lubricates and stops squeaks; loosens stubborn zippers –Prevents rust on saws, saw blades, and other tools –Protects silver from tarnishing; untangles jewelry chains –Protects the Statute of Liberty from the elements –Removes lipstick stains and tomato stains from clothing –Removes crayon from walls and stains from stainless steel sinks –Restores and cleans chalkboards, leather dashboards, vinyl bumpers, and roof racks

MATURITY STAGE OF THE PLC Sales Reach a maximum Costs Lowest marginal cost of production Profits Good but declining marginal profitability; excellent cash cow Marketing objectives Defend/increase market share while seeking to maintain profitability Product Some additional product line expansion possible – especially early in the maturity stage Price Maximum competition and very competitive pricing; AUP is likely to decrease over time Distribution Expand distribution as much as possible without corrupting channels IMC Stress differentiation and value; possible heavy promotion

DECLINE STAGE OF THE PLC Sales Declining then declining at an increasing rate Costs Low, but can start increasing either in production or inventory storage Profits Declining Marketing objectives Minimize expenditures; seek to improve position Product Pare product line; eventually divest or discontinue and redeploy assets to a better opportunity Price Falling Distribution Shrinking; eliminate poor performing entities IMC Minimize to retain only loyal customers

NEW PRODUCTS AND BRANDS Three choices for a new product 1.Create an entirely new brand name 2.Somehow place it with an existing brand name [brand extension] 3.Combine an existing brand with a new name [brand extension or sub-brand] –Parent brand is the existing one in 2 and 3 above. –If the parent brand has multiple extensions it is a family brand.

MASTER BRANDS Sub-branding –Adds a new element below the brand hierarchy Super-branding –Adds a new element above the brand hierarchy Brand building –Also called cross branding or brand bundling Citibank AAdvantage Visa Card Brand bridging –Use a master brand to introduce a new brand Neutrogena … T-Gel therapeutic shampoo

4.Product diversification 3. Market development New markets 1. Market penetration / saturation Existing markets Existing products 2. Product development New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID

New markets 1. Market penetration / saturation Existing markets Existing products New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID MAXIMIZE

New markets Existing markets Existing products 2. Product development New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID EXPAND market share

3. Market development New markets Existing markets Existing products New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID DEVELOP line extension[s]

4.Product diversification New markets Existing markets Existing products New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID VERY HIGH RISK category extension

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES 1.Same product, change of form Jell-O Pudding Pops 2.Contain brand’s distinctive taste, ingredient, or component Haagen-Dazs cream liqueur 3.Companion products Coleman camping equipment Duracell Durabeam flashlights 4.Products relevant to the franchise of the brand

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES 5.Capitalize on firm’s expertise Canon cameras lead to –Photocopiers –and ???

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES 6. Reflect the brand’s distinctive benefit, attribute, or feature 7. Capitalize on the image or prestige of the brand Calvin Klein clothes / accessories Porsche sunglasses

ADVANTAGES OF BRAND EXTENSIONS Improve and expand the brand image Channels are more willing to accept brand extensions Lower product introduction costs

DISADVANTAGES OF BRAND EXTENSIONS Extension success comes with too much cannibalization of the parent brand May shift perception away from other family members

PRODUCT LINE CHALLENGES

THE PRODUCT LIFE CYCLE OVERVIEW [Countries or products in boxes] TIME Decline MaturityIntroduction Growth SALES AIBCDEEGHJK Delete products

ITEMS TO EVALUATE Category extensions –Colgate toothbrushes –Mars ice cream bars Related categories for Vaseline Intensive Care –Clorox laundry detergent –LifeSavers Chewing Gum

GUIDELINES FOR LINE EXTENSIONS Outstanding market segmentation and sub-segments Thoroughly understand consumer needs and desires Line extensions provide price breadth and channel flexibility

GUIDELINES FOR LINE EXTENSIONS Build trade [reseller] pressure through the breadth of the offering “one-stop shop” concept

4.Product diversification 3. Market development New markets 1. Market penetration / saturation Existing markets Existing products 2. Product development New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID

New markets 1. Market penetration / saturation Existing markets Existing products New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID MAXIMIZE market share variety innovation

New markets Existing markets Existing products 2. Product development New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID EXPAND category extension or new market share applications & products

3. Market development New markets Existing markets Existing products New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID DEVELOP line extension[s] new varieties new applications

4.Product diversification New markets Existing markets Existing products New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID VERY HIGH RISK category extension prefer acquisition of an existing brand

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES 1.Same product, change of form Jell-O Pudding Pops 2.Contain brand’s distinctive taste, ingredient, or component Haagen-Dazs cream liqueur 3.Companion products Coleman camping equipment Duracell Durabeam flashlights 4.Products relevant to the franchise of the brand Visa traveler’s checks

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES 5.Capitalize on firm’s expertise Canon core competencies Precision mechanics Fine optics Microelectronics Canon cameras lead to –Photocopiers –and ???

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES 6. Reflect the brand’s distinctive benefit, attribute, or feature Lysol deodorizers 7. Capitalize on the image or prestige of the brand Calvin Klein clothes / accessories Porsche sunglasses

ADVANTAGES OF BRAND EXTENSIONS Improve and expand the brand image Consumer perceives less risk to purchasing the new item Channels are more willing to accept brand extensions Increase IMC efficiency Lower product introduction costs

DISADVANTAGES OF BRAND EXTENSIONS May confuse consumers if there are too many of them or not logical Extension success may come with too much cannibalization of the parent brand May shift perception away from other family members May dilute brand meaning

THE PRODUCT LIFE CYCLE OVERVIEW [Countries or products in boxes] TIME Decline MaturityIntroduction Growth SALES AIBCDEEGHJK Delete products

ITEMS TO EVALUATE Category extensions –Colgate toothbrushes –Mars ice cream bars Related categories for Vaseline Intensive Care –Clorox laundry detergent [disinfecting] –LifeSavers Chewing Gum [protection]

GUIDELINES FOR LINE EXTENSIONS Requires outstanding market segmentation and sub-segments Thoroughly understand consumer needs and desires Line extensions provide price breadth and channel flexibility Can absorb excess capacity Rewards with minimal risk

GUIDELINES FOR LINE EXTENSIONS Improve competitive position and intensity Build trade [reseller] pressure through the breadth of the offering “one-stop shop” concept

4.Product diversification 3. Market development New markets 1. Market penetration / saturation Existing markets Existing products 2. Product development New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID

New markets 1. Market penetration / saturation Existing markets Existing products New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID MAXIMIZE

New markets Existing markets Existing products 2. Product development New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID EXPAND market share

3. Market development New markets Existing markets Existing products New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID DEVELOP line extension[s]

4.Product diversification New markets Existing markets Existing products New products ANSOFF’S PRODUCT / MARKET EXPANSION GRID VERY HIGH RISK category extension

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES 1.Same product, change of form Jell-O Pudding Pops 2.Contain brand’s distinctive taste, ingredient, or component Haagen-Dazs cream liqueur 3.Companion products Coleman camping equipment Duracell Durabeam flashlights 4.Products relevant to the franchise of the brand

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES 5.Capitalize on firm’s expertise Canon cameras lead to –Photocopiers –and ???

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES 6. Reflect the brand’s distinctive benefit, attribute, or feature 7. Capitalize on the image or prestige of the brand Calvin Klein clothes / accessories Porsche sunglasses

ADVANTAGES OF BRAND EXTENSIONS Improve and expand the brand image Channels are more willing to accept brand extensions Lower product introduction costs

DISADVANTAGES OF BRAND EXTENSIONS Extension success comes with too much cannibalization of the parent brand May shift perception away from other family members

PRODUCT LINE CHALLENGES

THE PRODUCT LIFE CYCLE OVERVIEW [Countries or products in boxes] TIME Decline MaturityIntroduction Growth SALES AIBCDEEGHJK Delete products

ITEMS TO EVALUATE Category extensions –Colgate toothbrushes –Mars ice cream bars Related categories for Vaseline Intensive Care –Clorox laundry detergent –LifeSavers Chewing Gum

GUIDELINES FOR LINE EXTENSIONS Outstanding market segmentation and sub-segments Thoroughly understand consumer needs and desires Line extensions provide price breadth and channel flexibility

GUIDELINES FOR LINE EXTENSIONS Build trade [reseller] pressure through the breadth of the offering “one-stop shop” concept

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 18 Building Successful Brands: Years 2 and beyond Alan L. Whitebread

PORTFOLIO PLANNING & MANAGEMENT Strategic Planning Portfolio Planning Portfolio Assessment -Capability development -Resource management -Portfolio review Technology Scanning Opportunity Scanning

PORTFOLIO PLANNING & MANAGEMENT Strategic Planning Core competencies SWOT analysis Planning models Organizational structure Key success factors Competitive analysis & competitive advantage Gap analysis

PORTFOLIO PLANNING & MANAGEMENT Technology Scanning Technology advancement New technologies Use a Technology Roadmap to increase capabilities -Develop internally -Acquire -Both

TECHNOLOGY ROADMAP Technology area Last year This year +1 year +2 years Vision Weight/size 16-bit chipMicro controller Integrated unit Single chipSoft radio Ease of use 4 line screen 10 line screen VGATouch screen Voice interface Longevity Audio quality Video quality

PORTFOLIO PLANNING & MANAGEMENT Opportunity Scanning Market research Competitive research Close to the market Close to the customer -General needs -Joint development

PORTFOLIO PLANNING & MANAGEMENT Portfolio Planning Portfolio planning and analysis Product Generation Map

PRODUCT GENERATION MAP: HP DeskJet DeskJet Plus DeskJet 500C DeskJet 550C DeskJet 300 DeskJet 560C 1. Cost reduction 2. Quality improvement Swap color and black cartridges One color and one black cartridge Portable with small footprint Cost reduction TIME

PORTFOLIO PLANNING & MANAGEMENT Portfolio Assessment -Capability development & NPD -Resource management -Portfolio review Gap analysis Life-cycle analysis Brand / line extensions Metrics

MARKET METRICS Its all about measurement –Continuous customer feedback –Many topics Current products Emerging needs Future products Trends –In-class exercise: What trends do you expect in the communications field in the next 10 years?

THE PRODUCT LIFE CYCLE OVERVIEW [Countries or products in boxes] TIME Decline MaturityIntroduction Growth SALES A-IBCDEEGH-J-K Most developed nations – stream of new product introductions

BANDAID TIMELINE March 9, 2007

DISNEY PRODUCT FAMILIES

ADVANCED BRAND MANAGEMENT TOPICS Measuring brand equity Building a strong brand and increasing brand equity – –Full range of brand elements –Strong and consistent IMC program –Continual innovation and NPD Pharmaceutical example [Merck 12/2005]

ADVANCED BRAND MANAGEMENT TOPICS Challenging larger brands / fighting a challenge Scale generally slows development and/or implementation – –Focus efforts and concentrate resources –

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 19A B2B Brands and Issues Alan L. Whitebread

CHARACTERISTICS OF BUSINESS MARKETS BUSINESS MARKETSCONSUMER MARKETS Market Structure Geographically concentrated Many types of markets [segments] Fewer very-high volume buyers Fluctuating, derived demand Geographically dispersed Mass markets Small volumes Primary demand Products Standard / complex / custom Service etc. are critical Business applications Engineering / Quality / Testing involvement Standard Service etc. of some note Personal use No formal evaluation Buyer Behavior Professionally trained Multiple levels involved Performance hurdles Individuals purchasing Some family influence Social / psychological drives Buyer-Seller Relationships Technical expertise Close interpersonal relationships Long-term focus May be very dependent on each other Amateur Impersonal Immediate / Short-term

CHARACTERISTICS OF BUSINESS MARKETS BUSINESS MARKETSCONSUMER MARKETS Supply Chains / Channels of distribution Predominant Often shorter [more direct] Not seen by consumer Usually indirect Promotion Often technical Personal selling Often involves resellers Simple Advertising Price Professional negotiating / purchasing Volume sensitive Complex formalized process Competitive bid / Many strategies Individuals limited purchasing skill Little, if any, leverage Simple process N/A Demand Derived Inelastic in the short-run Volatile and discontinuous Direct Elastic Limited volatility

B2B COMPETITION: Sources of Information Industry reports Government reports Industry consultants/experts Brokerage reports / various filings –SEC, UCC, state and local, … Data bases Supplier/customer network

B2B COMPETITION: Analytical Techniques Benchmarking 5 forces [Porter] Patent analysis Trend analysis Cost analysis Risk analysis Regression analysis Scenario building

B2B COMPETITION: Review uncertainties/risks Analyze threats Anticipate competitive moves Understand strategic/tactical alternatives Scenario implementation

B2B SEGMENTATION BASES: Buying organization characteristics –Size, location, usage rate, … Product/Service/Application set –NAICS [or old SIC] category, end market served, value of use [compared to competitors or substitutes] Purchasing Characteristics –Type of buying, stage of the purchase decision

B2B SEGMENTATION BASES: Key buying criteria –Total system cost, compatible systems, flexibility, supplier capabilities, … Importance of purchase –Strategic, high to low, … Customer Organization Characteristics –Innovator or follower –Technology level –Sophistication

B2B SEGMENTATION BASES Product line Geographic region Customer industry Customer size [company, purchases] Customer buying behavior Customer technology Process and supply chain requirements

B2B SEGMENTATION CRITERIA 1.Measurable –The degree to which you can measure buyer characteristics 2.Accessible –The ability to focus on target market segments 3.Substantial –The degree to which target market segments are large enough and potentially profitable enough to pursue

B2B SEGMENTATION 4. -The extent to which marketing and business strengths compare to current and expected competitive and technology states 5. -The extent to which target market segments respond to elements of the marketing mix

B2B SEGMENTATION: Implementing your segmentation Sales force [organization, training, …] Requirements [technical, customer service, …] If services are needed, how will assistance options be provided on a real- time continuous basis? If it will be international, is the flexibility built into the design to allow adaptations to be made easily?

B2B SEGMENTATION: Understanding product market dimensions Customer function –[meaningful functions [most value], …] Technology –[alternative ways to provide the customer function, …] Customer segment –Groups served [sales reps, customer service reps, product managers, … Value-added system –Related products and services [potential alliances and/or threats]

B2B SEGMENTATION Sources of Competition Direct competition Substitute products/services/materials Severed relationships [alliances, joint ventures, etc. that dissolved]

B2B SEGMENTATION Attractiveness of segments Size, growth rate, potential market share Ability to reach effectively –distribution & communication channels Competitive intensity Value Strengths match market needs Differentiability and positioning Strategic fit with the organization

B2B MAKE OR BUY DECISIONS If any of the following are answered yes, make the product. Is it part of a core competence? Does it involve a core technology? Must or do we want to protect it? If any of the above were answered no, then consider making or buying the product. Is it sufficiently important for us to make it? Are the any unacceptable risks to buying the product?

B2B DISRUPTIVE TECHNOLOGIES Creating New Businesses DIMENSIONSSUSTAINING INNOVATIONS LOW-END DISRUPTIONS HIGH-END DISRUPTIONS Targeted performance [product and/or service] Most meaningful and valued by the target market segment Good enoughImproved performance in new attributes Customer or market application The most profitable customers or target market Observed customers / market Target non- consumers Business modelImproves or maintains margins with existing processes and cost structure Uses a new operating and/or financial approach Must pass corporate hurdle rates

IMC: Collateral Copies of ads Sales literature Catalogs Product brochures Data sheets Capabilities brochures Technical bulletins/specifications Application sheets

IMC—THE PROMOTIONAL MIX AND THE PRODUCT LIFE CYCLE: Purina Dog Chow Example LO

B2B IMC Advertising evaluation Target market coverage Key buying motives Effectiveness of messages Media effectiveness Overall results

THE ROLE OF DIRECT MARKETING OTHER ACCOUNTS RESELLER ACCOUNTS NATIONAL ACCOUNT, OEM, DIRECT & FIELD SALES FORCES MARKETS OR INDUSTRIES LARGER ACCOUNTS SMALLER ACCOUNTS HOW DO WE COST-EFFECTIVELY REACH TARGET MARKETS OF SMALL ACCOUNTS?

B2B SALES MANAGEMENT Traditional Accounts vs. Key Accounts TRADITIONAL SELLINGKEY ACCOUNT SELLING Small to mediumLarge, frequently across multiple SBUs Regular products and services [core]Core plus customized products, applications, and services Product/service salesNot just products and services but the long-term strategic fit and associated benefits to both organizations Sales person is the key link to the Buyer Multiple relationships across many levels managed by the Key Account Manager Sales person with limited skill setExperienced pro that is as comfortable on the factory floor as they are in the boardroom. Highly skilled.

B2B SALES MANAGEMENT Role of a B2B Sales Professional Build the relationship and trust throughout the Buyer’s organization. Lead the communications process between Buyer and Seller. Manage the exchange of information. Provide problem-solving solutions. Effectively negotiate. Manage the relationship.

B2B SALES MANAGEMENT Key Account Customer Analysis Technologies and processes Businesses and product lines Markets and customer types Their competitors Channels of distribution Channels of communication Preferred relationships Culture

B2B SALES MANAGEMENT Potential – Forecast - Actual Potential –The total potential sales to the market [segment] Forecast –Sales estimate of sales to each market [segment] by customer, product, and territory Actual –Net sales and net units

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 19B B2B Brands and Issues: OEM / Private Label Strategies and the Importance of Services Alan L. Whitebread

THE B2B MARKETPLACE Business marketers often have large customers wielding tremendous Customers want solutions and long-term relationships, not just features. Share common goals, objectives, and team solutions. Competitive advantage requires a firm to offer the customer a solution set –

THE B2B MARKETPLACE The internet has driven the cost of acquiring supplier and product specification information to almost zero. Buyers must evaluate the value of services before they are provided. The service provider’s track record, reputation, image, and other inferences are used to make the buying decision.

THE B2B MARKETPLACE A service enhancement in an offering keeps on providing value. Its contribution to a long-term relationship and customer lifetime value should exceed the out-of-pocket expense of providing it. Procurement needs partners who can ensure reliable supply, high efficiency, and

BUSINESS SERVICES Source: Christian Homburg and Bernd Garbe, “Towards an Improved Understanding of Industrial Services: Quality Dimensions and Their Impact on Buyer-Seller Relationships” (ISBM Report , Working Paper of the Institute for the Study of Business Markets, Smeal College of Business, Pennsylvania State University; 1999).

EVALUATING BUSINESS SERVICES The technical competence The competence The quality of the service delivery [friendliness, thoroughness, response time, time to completion, …] Successful outcome

ADDING VALUE TO P/L AND OEM CUSTOMER RELATIONSHIPS SHORT-TERM VALUELONG-TERM VALUE Current product cost reduction Improved business systems interfaces Business systems services

UNDERSTANDING BRANDS Your main brand Other brands –OEM –Private Label

BRAND TERMINOLOGY

WHY HAVE A PRIVATE LABEL? Provide consumers a cost-effective alternative to the big name brand Adds to owner brand power – A strong alternative to weak brands –take their shelf space –reason to discontinue slow movers

WHY HAVE A PRIVATE LABEL? Minimal conflicts with manufacturer’s brand since it is often made by the big brand company Provide access to product markets Improve market segmentation to include more of the less brand conscious buyers

PRIVATE LABELELLERS ISSUES Private label strategy –Creativity [product line extensions] –Breadth and depth

COMPETING AGAINST PRIVATE LABEL BRANDS? No imitations allowed –IP Fakes Close imitations –Packaging Vigorously defend your positioning Reinforce creativity, innovation, originality Use promotions Stress investment in R&D, NPD

SHOULD WE MAKE BRANDS FOR OTHER FIRMS/ Additional volume spreads fixed costs Benefit from economies of scale –Purchasing power –Especially if only the package is different Profitable –Little sales or IMC expense [%] Your competitors will likely provide the products if you do not act.

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 20 A Detailed Comparison of Brand Management Approaches Alan L. Whitebread

BRAND MANAGEMENT 4 MAJOR APPROACHES Economic approach Identity approach Consumer-based approach Personality approach Others approaches exist

4 MAJOR APPROACHES: Assumptions Economic approachBrand is managed and controlled by the firm. Identity approachBrand should have identity with visual and behavioral aspects that fit with the strategy. Consumer-based approach The brand is a cognitive construct in the mind of the consumer but the marketer is able to control brand value creation. Personality approachAssumes personality traits are important drivers of emotional bonding between consumers and brands.

4 MAJOR APPROACHES: Theoretical basis Economic approach1-The economic man [classical economics] 2-Transaction cost theory [stresses optimization of the firm; there are barriers to consumer utility optimization] Identity approachBrand identity themes [1-corporate identity, 2- behavioral identity, 3-image, 4-reputation] Consumer-based approach Cognitive consumer perspective [memory, language, problem-solving, imagery, deduction, and induction] Personality approach3 Themes - personality, consumer self, and brand-self congruence A strong emotional bond should form between the consumer and the brand.

4 MAJOR APPROACHES: Methodologies employed Economic approachMathematical models of empirical data Investigate causal effects [regression analysis and other methods] Identity approachAlign the three strategic stars [strategic vision, organization culture, stakeholders images] Lives in the hearts and minds of the organization Consumer-based approach Brand knowledge is composed of brand awareness [recognition and recall] and brand image [associations linked to the brand] Employs association maps to understand the relationships Personality approachUses qualitative [free association] and quantitative methods [scaling] to discover brand personality.

4 MAJOR APPROACHES: Managerial implications Economic approachUse the marketing mix to implement the brand strategy Product is always in stock where the consumer wants to purchase it. Identity approachMarketing mix is the main instrument for the creation and management of brand equity The firm and its employees are at the center of brand equity creation and enlargement. Consumer-based approach Marketer should stress brand congruency and consistency Brand equity begins with brand awareness Personality approachCreate and manage brand personality through direct and indirect methods. Brand management must understand consumer identity construction and translate that into a brand personality that is relevant and valuable to the consumer.

4 MAJOR APPROACHES: Behavior of the firm Economic approachThe firm focuses on price, demand, and supply Identity approachFocuses on a single brand identity that is the essence of the organization [Who we are.] and distinctive [Who are the stakeholders?]. The brand is for all stakeholders. It must be created by the firm and its stakeholders Consumer-based approach Brand equity should be a strategic priority so one must take a long-term view of marketing decisions Focus on implementation excellence. Personality approachThe company develops a brand personality with a core theme and supports that with the product related attributes. Characteristics attributed to the brand must be strong, consistent, and resilient.

4 MAJOR APPROACHES: Brand communication Economic approachBroadcast mode [PUSH] to the entire market and the consumer will respond Focus is on brand attributes and benefits Identity approachFocus on sending messages Consumer-based approach Brand value creation occurs by molding the consumer's brand associations. Brand strength comes from strong, unique, and positive associations. Personality approachIntegrates brand-self congruence, personality, and the consumer self Uses a central theme [sincerity, excitement, competence, sophistication, ruggedness]

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT SECTION 21 International Brands and Issues Alan L. Whitebread

International Brands and Programs Global programs and market flexibility Differences in –wants, –needs, –desires, –uses, and –cultural issues

INTERNATIONAL BRAND SENSITIVITY Cultural environment – –Relationships –Language

INTERNATIONAL EXPANSION STRATEGIES NARROW FOCUS –concentrated markets / countries COUNTRY FOCUS –country-by-country COUNTRY DIVERSIFICATION – GLOBAL DIVERSIFICATION –

POTENTIAL BARRIERS TO MARKET ENTRY Insufficient scale Cost disadvantages unrelated to scale Capital requirements Government policies and procedures

FOREIGN MARKET ENTRY ALTERNATIVES DIRECT EXPORTING FRANCHISING INDIRECT EXPORTING DIRECT INVESTMENT CONTRACTUAL LICENSING COPYRIGHT A. WHITEBREAD,

ENTERING FOREIGN MARKETS Manufacturer Agents / Distributors [Not in destination country - Usually in home country] COPYRIGHT A. WHITEBREAD, INDIRECT EXPORTING RISKS –LIABILITY, CONTROL –VERY ERRATIC DEMAND –FIT WITH OPERATIONS REWARDS –VERY LITTLE SALES EFFORT –INCREMENTAL VOLUME AND PROFIT

ENTERING FOREIGN MARKETS COPYRIGHT A. WHITEBREAD, DIRECT EXPORTING RISK –CONTROL OF INDEPENDENT RESELLERS REWARD DIRECT CONTACT WITH LOCAL MARKET Manufacturer Sales Subsidiary Resellers [Usually not in home country] Individual Accounts OEM’s

ENTERING FOREIGN MARKETS LICENSING & FRANCHISING RISK –CONTROL OF RESELLERS REWARDS –MINIMIZE ENTRY RISK –PROFIT STREAM Manufacturer Licensees or Franchisees Resellers Individual Accounts COPYRIGHT A. WHITEBREAD,

ENTERING FOREIGN MARKETS DIRECT INVESTMENT [ACQUISITION, GREENFIELD, BROWNFIELD] RISKS –START-UP OPPORTUNITY COST; INVESTMENT; WC –COUNTRY STABILITY; CURRENCY EXCHANGE REWARDS –DIRECT MARKET CONTACT –PROFIT STREAM COPYRIGHT A. WHITEBREAD, Manufacturer Subsidiary (Manufacturing) Resellers Individual Accounts OEMs

ENTERING FOREIGN MARKETS CONTRACTUAL [JOINT VENTURE, STRATEGIC ALLIANCE, CONTRACT MANUFACTURING] RISKS –AUDIT & CONTROL –START-UP INVESTMENT; WC REWARDS –MINIMIZE ENTRY RISK –PROFIT STREAM Manufacturer Contract Manufacturing Resellers Individual Accounts COPYRIGHT A. WHITEBREAD,

LIKELY ENTRY ALTERNATIVES SITUATIONOPTION[S] A small firm wants to export only.Indirect or direct exporting A specialized machinery manufacturer wants to increase their presence in key country markets. A firm is having difficulty supplying enough goods to a regional market. A firm wants to aggressively increase its sales in a region

ENTITY OPTIONS Sole Proprietorship Corporation –C or S in the U.S. Partnership –General –Limited Liability Partnership [LLP] Limited Liability Company [LLC]

TYPES OF VERTICAL MARKETING SYSTEMS [VMS] Greater Lesser Degree of Direct Control Degree of Direct Control CORPORATE Common Ownership at Different Channel Levels CONTRACTURAL Contractual Agreements Among Channel Members ADMINISTERED Leadership is Assumed by One or a Few Dominant Members; Contracts are not common

TYPES OF CHANNELS Corporate Subsidiary or JV Corporate Subsidiary or JV Contractual Resellers Licensees [ Franchisees ] Contractual Resellers Licensees [ Franchisees ] Administered No agreement Administered No agreement International Vertical Marketing Systems [VMS] International channels of distribution may use any possible combination of the above systems. There is frequently significant region-to-region variation and sometimes major country-to-country differences. Each business must build the best combination for their needs.

DISTRIBUTION STRATEGY: INTENSITY INTENSIVE EXCLUSIVE SELECTIVE

CONSUMER CHANNEL MAP [Simple distribution] Manufacturer’s Internet Site Wholesaler Manufacturer CONSUMERS Mass Merchandiser’s Internet Site Retail Store Indirect distributionDirect distribution

STRUCTURING CHANNELS WITH TERMS & CONDITIONS OF SALE ACCOUNT TYPEPAYMENT TERMSDELIVERY TERMSSPECIAL TERMSPROMOTION AND INCENTIVES Regional Distributor Choose from: Net _ days Prompt pay discount … Choose from: FOB [Ex works] Time Special charges Shipping fees Drop ship … Choose from: Inventory adjustment Minimum order size … Choose from: Co-op advertising Sales promotions … Distributor Dealer B2B Consumer

MEXICO BEARING INDUSTRY $1.00 $1.25 $1.56 $1.95

International Brands and Programs Differences in –Product development –Competitive environment –Legal environment –Government regulations

International Brands and Programs International Product Standards How should we enter a foreign market?

International Brands and Programs Global programs and market flexibility Differences in wants, needs, desires, uses, and cultural issues Sometimes limited marketing tools

CONSUMER PROMOTIONS GermanyItaly Multi-purchase offers MY Extra product MY Free product YY Mail-in offers NY Purchase-with-purchase NY Contests MY Sweepstakes NM Money-off coupons NM Next-purchase coupons NM Cash rebates MN In-store demos YY Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

THE INTERNATIONAL PRODUCT LIFE CYCLE: AN OVERVIEW TIME Decline MaturityIntroduction Growth SALES A-IBCDEEGH-J-K Most developed nations – stream of new product introductions Medium developed nations – trailing introduction Least developed nations – simple product version

IMPLEMENTING THE MARKETING MIX Country #1 Marketing Mix Country #2 Country #3 Country #4 Country #5 Every country will likely have a unique marketing mix. Sometimes a regional marketing approach will work. There may still be some changes in the marketing mix – especially with the IMC.

TYPES OF SALES FORCES FIELD DIRECT SALES NATIONAL ACCOUNTS OEM GOVERNMENT HOUSE DIRECT MARKETING TELESALES DIRECT MAIL CATALOG INTERNET SUBSIDIARIES MANUF. REP’S FRANCHISES LICENSEES JOINT VENTURES AFFILIATES Copyright A. Whitebread,