Session 6 & 7 Market Driven Program Development (Part 1) group3

2 Strategic Brand Management

3 STRATEGIC BRAND MANAGEMENT  Challenges in Building Strong Brands  Strategic Brand Analysis  Brand Identity Strategies  Managing Products/Brands  Managing the Brand Portfolio

4 A product is anything that is potentially valued by a target market for the benefits or satisfaction it provides, including objects, services, organizations, places, people, and ideas CHALLENGES IN BUILDING STRONG BRANDS

5 A brand is a name, term, sign, symbol, or design, or combination of them, intended to identify the goods or services of one seller or group of sellers, and to differentiate them from those of competitors. Marketing Association of Pakistan Goods Versus Services

6 Strategic Role of Brands A strategic brand perspective requires managers to be clear about what role brands play for the company in creating customer value and share- holder value. FOR BUYERS, BRANDS CAN: reduce customer search costs by identifying products quickly and accurately, reduce the buyer’s perceived risk by providing an assurance of quality and consistency (which may then be transferred to new products), reduce the social and psychological risks associated with owning and using the “wrong” product by providing psychological rewards for purchasing brands that symbolize status and prestige.

7 FOR SELLERS, BRANDS CAN FACILITATE: repeat purchases that enhance the company’s financial performance because the brand enables the customer to identify and re-identify the product compared to alternatives, the introduction of new products, because the customer is familiar with the brand from previous buying experience, promotional effectiveness by providing a point of focus, premium pricing by creating a basic level of differentiation compared to competitors, market segmentation by communicating a coherent message to the target audience, telling them for whom the brand is intended and for whom it is not, brand loyalty, of particular importance in product categories where loyal buying is an important feature of buying behavior.

8 Brand Management Challenges* Internal and external forces create hurdles for product brand managers in their brand building initiatives: Intense Price and Other Competitive Pressures Fragmentation of Markets and Media Complex Brand Strategies and Relationships Bias Against Innovation Pressure to Invest Elsewhere Short-Term Pressures

9 TM 5-1  Product/Brand Management  Planning, managing, and coordinating the strategy for a specific product or brand  Product Group/Marketing Management  Product director, group manager, or marketing manager  Product Portfolio Management  Chief executive at SBU  Team of top executives Responsibility for Managing Products

10 TM 5-1 Marketing’s Role in Product Strategy 1.Market sensing 2.Identifying the characteristics and performance features of products 3.Guiding target market and program-positioning strategies Strategic brand management decisions are relevant to all businesses, including suppliers, producers, wholesalers, distributors, and retailers.

11 Strategic Brand Management Brand Identity Identity Implementation Brand Strategy Over Time Managing the Brand Portfolio Leveraging the Brand Brand Equity Strategic Brand Analysis

12 Strategic Brand Analysis AnalysesProductProduct Line Portfolio of Product Lines □ Market and Customer □ Competition □ Brand(s)

13 Tracking Product Performance Set Performance Objectives Select Method(s) for Product Evaluation Identify Problem Products Decide How to Eliminate the Problems

14 Analyzing Brand Performance Product life cycle analysis Financial analysis Product grid analysis Research studies Standardized information services Brand Positioning maps

15 Relevant issues in PLC analysis include:  Determining the length and rate of change of the PLC  Identifying the current PLC stage and selecting the product strategy that corresponds to that stage  Anticipating threats and finding opportunities for altering and extending the PLC Product Life Cycle Analysis

16  Product Grid Analysis  Management’s performance criteria  Strengths and weaknesses relative to portfolio  Brand Positioning Analysis  Perceptual maps for brand comparison  Buyer preferences  Other Product Analysis Methods  Information Services  Research studies  Financial analysis

17 Brand Equity Effective strategic brand management requires that we understand brand equity and evaluate its impact when making brand management decisions: “Brand equity is a set of brand assets and liability linked to a brand, its name, and symbol, that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers.* Measuring Brand Equity. Several measures are needed to capture all relevant aspects of brand equity.** loyalty (price premium, satisfaction/loyalty), perceived quality/leadership measures (perceived quality, leadership/popularity), associations/differentiation (perceived value, brand personality, organizational associations), awareness (brand awareness), and market behavior (market share, price and distribution indices). These components provide the basis for developing operational measures of brand equity.

18 BRAND IDENTITY STRATEGIES Brand identity is a unique set of brand associations that the brand strategist aspires to create or maintain. These associations represent what the brand stands for and imply a promise to customers from the organization members.* Four Brand Identity Perspectives Product Organization Person Symbol

19 Specific Product Line of Products Private Branding Company Name Basis of Identification Combination Basis

20 MANAGING PRODUCTS/BRANDS  Building the Product/Brand Over Time  Product Line Strategies  Product/Brand Portfolio Strategies

21 Strategies for Improving Product Performance Product mix strategy Product line Strategy Add new product(s) Cost reduction Product improvement Alter marketing strategy Eliminate specific product(s) Delete product line(s) Change product line priorities Add new product line(s)

22 Strategies for Brand Strength  Brand-Building Strategies –Developing the brand identification strategy –Coordinate identity across the organization  Brand Revitalization –Find new uses for mature brands –Add products related to heritage  Strategic Brand Vulnerabilities –Brand equity can be negative –Retailer private brands compete with manufacturer brands –Major shifts in consumer tastes –Competitive actions –Unexpected events

23 Motivation for changing the product mix:  Increase the growth rate of the business  Offer a more complete range of products to wholesalers and retailers  Gain marketing strength and economies in distribution, advertising, and personal selling  Leverage an existing brand position  Avoid dependence on one product line or category Product Mix Modifications

24 BRAND EXTENSION LINE EXTENSION Extensions of the brand name to other product categories --Similar --Dissimilar Minor variants of a single product are marketed under the same brand name Brand Leveraging Strategy

25 LINE EXTENSIONS BRAND EXTENSIONS Horizontal Extension Vertical Extension Another Product Class Range Brand Co- Branding Up from Core Brand Down from Core Brand Leveraging Alternatives Licensing, Overleveraging

26 BRAND LEVERAGING EVALUATION CRITERIA  Brand Relevance/Differentiation  Capabilities/Perceived Value Match  Market/Segment Opportunity  Cannibalization Risks  Potential for Core Brand Damage  Clarity of Product Offerings  Estimated Financial Performance  Brand Equity Impact

27 SEVEN DEADLY SINS OF BRAND MANAGEMENT*  Failure to fully understand the meaning of the brand.  Failure to live up to the brand promise.  Failure to adequately support the brand.  Failure to be patient with the brand.  Failure to adequately control the brand.  Failure to properly balance consistency and change with the brand.  Failure to understand the complexity of brand equity measurement and management.

28 MANAGING THE BRAND PORTFOLIO  Objectives: – Leverage commonalities to generate synergy – Reduce damage to brand identity – Obtain clarity of product offering – Enable change and adaptation – Guide resource allocations among brands

29 GLOBAL BRANDS INTERNET BRANDS

30 HOW MANY BRANDS? 1. Is it different enough to merit a new name? 2. Will the brand identity add value? 3. Are there risks in using an existing brand name? 4. Is the new brand a viable business venture?

31 Value-Chain Strategy

32 Value Chain Strategy  Strategic role of distribution  Channel of distribution strategy  Managing the channel  International channels  Supply chain management issues

33 Strategic Role of Distribution Distribution functions - buying and selling activities - product assembly - transportation - financing - processing and storage - advertising and sales promotion - pricing - reduction of risk - personal selling - communications - servicing and repairs Channels for Services Direct distribution by manufacturers

34 Illustrative Example: Internet Impact on Distribution The Impact of Technology on Value Chains In India  E-Government  Computer Kiosks  Agricultural e-commerce  Tele-medicine

35 The Marketing System Manufacturers and producers Marketing intermediaries Retailers Agents-brokers Wholesalers-distributors End users Consumer Industrial-institutional Facilitating organizations Financial Transportation Advertising Other Agriculture and raw materials suppliers

36 Marketing Channels Manufacturers/producers Consumers and organizational end users Agents/brokers Wholesalers/ distributors Retailers

37 Illustrative Example: Samsung  Goal of moving from cheap imitative electronics products to a cool brand  Feature-packed products  Products removed from shelves of Wal- Mart and Target and positioned with higher-end chains like Best Buy and Circuit City  Samsung competes through hardware innovation, product customization and speed  Samsung sells only higher-end goods and resists pressures towards marketing low- price products  Strategy is implemented in part through supply chain and distribution choices

38 Distribution by Manufacturers  Manufacturers have three distribution alternatives: –Direct distribution is necessary –Use of intermediaries is necessary –Both direct and intermediary contact are feasible

39 Distribution by the manufacturer Opportunity for competitive advantage Supporting services are required Rapidly changing market environment Extensive purchasing process Early stages of product life cycle Complex product application Profit margins adequate to support distribution organization Complete line of products Purchases are large and infrequent Small number of geographically concentrated buyers Factors Favoring Distribution by Manufacturer

40 Illustrative Example: Retail Initiatives by Manufacturers  Apple Computer –To educate consumers about computers and music players  Sony Electronics, palmOne –Reinforce brands with affluent consumers and better understand market trends  Driving forces are market access and market learning

41 Channel of Distribution Strategy Types of distribution channel Distribution intensity Selecting the channel strategy Strategies at different channel levels

42 Steps in Channel Strategy Selection (1) Type of channel arrangement (3) Selection of a channel configuration Administ ered IntensiveExclusiv e Selective (2) Desired intensity of distribution Contractual Ownership ConventionalVertically coordinated

43 Distribution Intensity Illustrations Trading Area A B C Exclusive distribution Selective distribution Intensive distribution Illustrations Cadillac automobiles Ethan Allen furniture Revlon cosmetics Caterpillar equipment Estée Lauder cosmetics Timex watches

44 Design stages Decision criteria Intensity of distribution Access to end users Prevailing distribution practices Necessary activities and functions Revenue-cost analysis Time horizon for development Control considerations Legal constraints Channel availability Select the channel Market coverage Capabilities Intermediary’s needs Functions provided Availability Identification of channel alternatives Evaluation and selection of channel(s) to be used Selection of channel participants Selecting the Channel Strategy

45 Illustrative Channel Strategy Evaluation Evaluation Manufacturer’s Company Criteria Representatives Salesforce Market access Rapid 1 to 3 year development Sales forecast (2 years) $10 million $20 million Forecast accuracy High Medium to low Estimated costs $1 million* $2.4 million** Selling Expense (cost/sales) 10% 12% Flexibility Good Fair Control Limited Good * Includes 8% commission plus management time for recruiting and training representatives. ** Includes $100,000 for 10 salespeople, plus management time.

46 Managing the Channel Channel leadership Management structure and systems Physical distribution management Channel relationships Conflict resolution Channel performance Legal and ethical considerations

47 International Channel of Distribution Alternatives Home countryForeign country The foreign marketer or producer sells to or through Domestic producer or marketer sells to or through Open distribution via domestic wholesale middlemen Exporter Foreign agent or merchant wholesalers Foreign retailer ImporterForeign consumer Export management company or company sales force Source: Philip R. Cateora, International Marketing, 7th ed., Homewood, Ill.: Richard D. Irwin, Inc., 1990, 572.

48 Strategic Value Chain Management  Supply chain management –Efficient Consumer Response program –Lean supply chains –Agile supply chains  Impact of supply chain strategy on marketing  E-business models  Retailer and distributor power  Strategic flexibility and change

49 Efficient Consumer Response  Traditional channel problems –Forward buying and diverting –Excessive inventories –Damages and unsaleable goods –Complex deals and deductions –Too many promotions and coupons –Too many new products  Efficient Consumer Response –Category management –“Value” pricing replaces promotions –Continuous replenishment and cross- docking –Electronic data interchange –New performance measures –New organizational processes and structures –Internet-based network for supplier- buyer trading

50 Lean Supply Chain Elements 1. Definition of Value 2. Identification of Value Streams and Removal of Muda (Waste) 3. Organizing Around Flow, Instead of “Batch and Queue” 4. Responding to Pull Through the Supply Chain 5. The Pursuit of Perfection