Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 12 Developing and Managing Brand and Product Categories

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Objectives 1.Explain the benefits of category and brand management. 2.Identify the different types of brands. 3.Explain the strategic value of brand equity. 4.Discuss how companies develop strong identities for their products and brands. 5.Describe the strategies for new product development. 6.Describe the consumer adoption process. 7.List the stages in the process for developing new products. 8.Discuss the relationship between product safety and product liability.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Creating and Protecting a Strong Identity for Products Branding is the process of creating that identity. Brand is a name, term, sign, symbol, design, or some combination thereof, that identifies the products. Buyers respond to branding by making repeat purchases because they identify the item with the name of its producer.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Building Loyalty How does Avis build customer loyalty? Buy focusing on how customers feel about each step of the car rental process and then applying that knowledge to the day-to-day running of the company. Avis has broken the rental process into more than 100 incremental steps -- making reservations, finding the pickup counter, getting to the car, driving it, returning it, and paying the bill. Source: Business2.0 July 2002 Issue

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Three Stages to Measure Brand 1 of 2 Loyalty Brand recognition Brand preference Brand insistence

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Brand recognition is a company’s first objective for newly introduced products. Marketers begin the promotion of new items by trying to make these items familiar. –Other strategies for creating brand recognition include offering free samples or discount coupons for purchase. Brand preference - buyers rely on previous experiences when choosing that product. Brand insistence, the ultimate stage in brand loyalty, leads consumers to refuse alternatives and to search extensively for the desired merchandise. A product at this stage has achieved a monopoly position. Three Stages to Measure Brand 2 of 2 Loyalty

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Different Types of Brands Generic products - Have plain labels, little or no advertising, and no brand names. Manufacturer’s brand refers to a brand name owned by a manufacturer or other producer Captive brands are national brands that are sold exclusively by a retail chain.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Different Types of Brands Family brand is a single brand name that identifies several related products. Individual brand, uniquely identifies a product itself.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Brand Identity 1.Brand equity refers to the added value that a certain brand name gives to a product in the marketplace. 2.Brand identity backed by superior quality offers important strategic advantages: 1.First, it increases the likelihood that consumers will recognize the firm’s product or product line. 2.Second, a strong brand identity can contribute to buyers’ perceptions of produce quality.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Four Dimensions of Brand Personality Four Dimensions of Brand Quality Knowledge refers to the extent of customers’ awareness of the brand and understanding of what a good or service stands for. Relevance refers to the real and perceived appropriateness of the brand to a big consumer segment. Esteem is a combination of perceived quality and consumer perceptions about the growing or declining popularity of a brand. Differentiation refers to a brand’s ability to stand apart from competitors

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Brand Name 1.Part of the brand consisting of words or letters that form a name that identifies and distinguishes the firm’s offering from those of its competitors. 2.Effective brand names are easy to pronounce, recognize, and remember. 3.Should also give buyers the correct connotation of the product’s image. 4.Must also qualify for legal protection.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Is Bush a Ford and Kerry a BMW? WSJ 8-04 Undecided voters link candidates to the brands below: BUSH KERRY Coffee Dunkin’ Donuts Starbucks Technology IBM Apple Auto Ford BMW Retail Big K Target Fast Food McDonald’s Subway

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Brands Ponder Change Tsunami Research Inc. scratches name & logo featuring a tidal-wave graphic took on a new meaning on Dec. 26, 04 –WSJ 1-05 Ayds Diet chocolates

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Can you image where this product would be today if it had not developed a brand name that is easy to pronounce, recognize, and remember? Finding someone who has never heard of Pepsi could be difficult.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Trademark 1.A brand for which the owner claims exclusive legal protection. 2.Trademark protection confers the exclusive legal right to use a brand name, brand mark, and any slogan or product name abbreviation. 3.Frequently trademark protection is applied to words or phrases. 4.Firms can also receive trademark protection for packaging elements and product features.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Trade Dress Visual cues used in branding create an overall look sometimes referred to as trade dress. Visual components may be related to: –color selections, –sizes, –package and label shapes, –and similar factors.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Packaging A package serves three major objectives:  Protection against damage, spoilage, and pilferage.  Assistance in marketing the product.  Cost effectiveness.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Beer & Wine Packages Iron City Beer in aluminum cans, 9-04 –Easier, safer portability –Allowed at sports & concert venues –Chill faster –Easier to ship –More cost effective to recycle Francis Ford Coppolas’s Winery, 9-04 –Sofia Blanc in pink metallic 4-pack, $20

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Product Development Strategies Market penetration strategy seeks to increase sales of existing products in existing markets. Product positioning refers to consumers’ perceptions of a product’s attributes, uses, quality, advantages and disadvantages. A market development strategy concentrates on finding new markets for existing producers. Product development refers to the introduction of new products into identifiable or established markets.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Stages in the Consumer Adoption Process 1.Awareness - Individuals first learn the new product. 2.Interest - Potential buyers begin to seek information about it. 3.Evaluation - consider the likely benefits of the product. 4.Trial - They make trial purchases to determine its usefulness. 5.Adoption/Rejection - If the trial purchase produces satisfactory results, they decide to use the product regularly.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Rate of Adoption Determinants Relative advantage - An innovation that appears far superior to previous ideas offers a greater relative advantage. Compatibility - An innovation consistent with the values and experiences of potential adopters attracts new buyers at a relatively rapid rate. Complexity - The relative difficulty of understanding the innovation influences the speed of acceptance. Possibility of trial use - An initial free or discounted trial of a good or service. Observability - If potential buyers can observe an innovation’s superiority in a tangible form, the adoption rate increases.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. New Product Innovation Assignments New Product Committees New Product Departments Product Managers Venture Teams

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. New-Product Development Process Idea Generation begins with ideas from any source. Screening Separates ideas with commercial potential from those that cannot meet company objectives. Business Analysis consists of assessing the new product’s potential market, growth rate, and likely competitive strengths. Developme nt The conversion process is the joint responsibility of the firm’s development engineers. Test- Marketing Purpose is to verify that the product will perform well in a real-life business environment. Commercialization--it is ready for full-scale marketing. Can expose the firm to substantial expenses.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Counterfeit War $456b or 7% of global trade Light penalties abroad LVMH or Nike spend $10m/year on enforcement NYC: $25b, NYPD trademark infringement unit created in 1004 RFID tags on tracking imported goods since go through 17 different hands. Only physically inspect 5% of containers entering U.S. ports