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Product and Service Strategy and Brand Management

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Title: Product and Service Strategy and Brand Management


1
Chapter 5
  • Product and Service Strategy and Brand Management

2
In this chapter, you will learn about
  • The Offering Portfolio
  • The Offering Concept
  • The Offering Mix
  • Modifying the Offering Mix
  • Additions to the Offering Mix
  • New-Offering Development Process
  • Life-Cycle Concept
  • Modifying, Harvesting, and Eliminating Offerings

3
In this chapter, you will learn about
  • Positioning Offerings
  • Positioning Strategies
  • Repositioning
  • Making the Positioning Strategy Decision
  • Brand Equity and Brand Management
  • Creating and Valuing Brand Equity
  • Branding Decisions
  • Brand Growth Strategies

4
Importance of the Offering
  • The ultimate profitability of an organization
    depends on its product or service offering(s) and
    the strength of its brand(s).

5
Basic Offering-Related Decisions
Modifying the Offering Mix
Positioning Offerings
Branding Offerings
6
The Offering Concept
What is an offering? It consists of
  • Tangible product or service
  • Related services (e.g., delivery and setup)
  • Brand name(s)
  • Warranties or guarantees
  • Packaging

7
The Offering Mix (Portfolio)
The totality of a companys offerings is known as
its product or service offering mix or portfolio
  • Consists of distinct offering lines (product line
    width)
  • Each line consists of individual offers or items
    (product line depth)

8
The Offering Portfolio
  • Bundling enhancing the offering mix by
    providing two or more product or service items as
    a package deal
  • McDonalds value meal
  • Travelocitys vacation packages
  • IBM hardware, software, and maintenance contracts

9
Modifying the Offering MixMajor Decisions
Should the offering mix be modified?
If yes, what should be added, modified,
harvested, or eliminated?
10
Modifying the Offering MixAdditions to the
Offering Mix
  • How consistent is the new offering with existing
    offerings?
  • Does the organization have the resources to
    adequately introduce and sustain the offerings?
  • Is there a viable market niche for the offering?

11
Modifying the Offering MixAdditions to the
Offering Mix
How consistent is the new offering with existing
offerings?
  • Cannibalization (Kodak cameras)
  • Fit with sales and distribution strategies
    (Metropolitan Life Insurance)
  • Consistency with target markets

12
Modifying the Offering MixAdditions to the
Offering Mix
Does the organization have the resources to
adequately introduce and sustain the offerings?
  • Financial strength outlays for research,
    development, and marketing (Gillette)
  • Market Growth (Miller Lite)
  • Competitive response (RC Cola)

13
Modifying the Offering MixAdditions to the
Offering Mix
Is there a viable market niche for the offering?
  • Is there a relative advantage over existing
    competitive offerings?
  • Does a distinct buyer group exist that is not
    being satisfied with current offerings?

14
Modifying the Offering MixNew-Offering
Development Process
  • Idea generation/idea screening employees, buyers,
    competitors
  • Business analysis forecasting sales, costs,
    profitability
  • Market testing laboratory or field market
    tests
  • Commercialization full-scale introduction of
    offering to market

15
New-Offering Development ProcessIdea Generation
Screening
  • Does the offering have a relative
  • advantage?
  • Is the offering compatible with buyers
  • use or consumption behavior?
  • Is the offering simple enough for buyers to
  • understand and use?
  • Can the offering be tested on a limited
  • basis prior to actual purchase?
  • Are there immediate benefits from the
  • offering, once it is used or consumed?

16
New-Offering Development ProcessBusiness Analysis
  • Sales Forecasts
  • Profitability Analysis
  • Investment requirements
  • Breakeven analysis
  • Payback period
  • Return on investment (ROI)

17
New-Offering Development ProcessTest Marketing
  • Generate benchmark data for assessing sales
    volume
  • Relative effectiveness of alternative marketing
    programs can be examined
  • Incidence of offering trial by potential buyers,
    repeat-purchasing behavior, and quantities
    purchased
  • Results in a competitive response

18
Modifying the Offering MixLife-Cycle Concept
A life cycle plots sales of an offering or a
product class over a period of time.
  • There are FOUR main stages
  • Introduction
  • Growth
  • Maturity (Saturation)
  • Decline

19
Modifying the Offering MixLife-Cycle Concept
Sales
Sales
Profits
Introduction
Growth
Maturity
Decline
20
Modifying the Offering MixLife-Cycle Concept
The sales curve can be viewed as being the
result of offering trial and repeat-purchasing
behavior.
  • Sales volume (number of triers x average
    purchase amount x price) (number of repeaters x
    average purchase amount x price)

21
Modifying the Offering MixModification
Trading up Improving the product and increasing
the price
Trading down Reducing the number of features or
quality and reducing the price
22
Modifying the Offering MixHarvesting
Harvesting should be considered when
  • The market for the offering is stable
  • The offering is not producing good profits
  • Market share is becoming difficult to maintain
  • The offering provides other benefits to the
    organization

23
Modifying the Offering MixElimination
Elimination is appropriate when the answer to
the following questions is very little or
none
  • What is the future sales potential of the
    offering?
  • How much is the offering contributing to the
    overall profitability of the offering mix?

24
Modifying the Offering MixElimination
  • How much is the offering contributing to the
    sales of other offerings in the mix?
  • How much could be gained by modifying the
    offering?
  • What would be the effect on channel members and
    buyers?

25
Positioning Offerings
  • The act of designing an organizations offering
    and image so that it occupies a distinct and
    valued place in the target customers mind
    relative to competitive offerings.

26
Positioning OfferingsPositioning Strategies
  • By attribute or benefit
  • By price and quality
  • By use or application
  • By user
  • By product or service class
  • Against competition

27
Example of Positioning by Attributes
28
Positioning OfferingsRepositioning
Necessary when the initial positioning is no
longer competitively sustainable or profitable,
or when better positioning opportunities arise
  • St. Josephs aspirin for babies to Low Strength
    Aspirin for adults
  • Carnival Cruise Lines vacation alternative for
    older people to a Fun Ship for younger adults
    and families

29
Positioning Offerings
Making the Positioning Strategy Decision
  • What position do we want to own?
  • What competitors must be outperformed if we are
    to establish the position?
  • Do we have the marketing resources to occupy and
    hold the position?

30
Brand Equity Brand Management
Brand Name Any word, device (design, sound,
shape, or color), or combination of these used
to identify an offering and set it apart from
competing offerings.
Brand Equity The added value a brand name bestows
on a product or service beyond the functional
benefits provided.
31
Brand Equity Brand ManagementCreating and
Valuing Brand Equity
Develop positive brand awareness and name-product
association (Gatorade, Kleenex)
32
Customer-Based Brand Equity Pyramid
Relationships What about you and me?
Intense, active loyalty
Consumer Brand Resonance
Response What about you?
Positive, accessible reactions
Consumer Judgments
Consumer Feelings
Meaning What are you?
Strong, favorable, and unique brand association
Brand Performance
Brand Imagery
Identity Who are you?
Deep, broad brand awareness
Brand Salience
33
Brand Equity and Brand ManagementBranding
Decisions
  • Assign one brand name all of the organizations
    offerings (GE, Sony)
  • OR
  • Assign one brand name to each line of offerings
    (Sears, Craftsman Tools)
  • OR
  • Assign individual names to each offering (PG,
    Unilever)

34
Brand Equity Brand ManagementBranding
Decisions
  • Using a single brand name
  • Advantage
  • Easier to introduce new offerings when the brand
    name is familiar to buyers
  • Disadvantage
  • Can have a negative effect on existing offerings
    if a new offering fails
  • Sub-brandingcombining a family brand with a
    new brand

35
Brand Equity Brand ManagementBranding
Decisions
  • Decide whether or not to supply an intermediary
    with its own brand name.
  • What are the costs/revenues?
  • Is there excess capacity?
  • If we dont manufacture the brand, will a
    competitor produce it?

36
Brand Equity Brand MgmtBrand Growth Strategies
Existing products
New products
New Brand Strategy
Fighting/Flanker Brand Strategy
New Brand
Brand Extension Strategy
Line Extension Strategy
Existing Brand
37
Brand Equity Brand MgmtLine Extension Strategy
  • Adding offerings with the same brand in a product
    class that an organization currently serves
  • Respond to customers desire for variety
  • Eliminate gaps in the product line
  • Lowers advertising and promotion costs
  • Consider possibilities of product cannibalism and
    proliferation of offerings (Coke and Vanilla Coke)

38
Brand Equity Brand MgmtBrand Extension Strategy
  • The practice of using a current brand name to
    enter a completely different product class
  • Reduced risk due to brand equity
  • Success depends on perceptual fit with the
    original product class
  • e.g., Yamaha makes motorcycles, sound equipment,
    computer peripherals, and musical instruments

39
Brand Equity Brand MgmtBrand Extension
Strategy Co-branding
  • Co-branding
  • Pairing two brand names of two manufacturers on
    a single product
  • e.g., General Mills and Hershey Foods Reeses
    Peanut Butter Puffs

40
Brand Equity Brand MgmtNew Brand Strategy
Involves the development of a new brand and
often a new offering for a product class that
has not been previously served by the
organization.
  • Most challenging strategy
  • Most costly
  • e.g., Lexus by Toyota

41
Brand Equity Brand MgmtFlanker/Fighting Brand
Strategy
  • Flanker Brand Strategy
  • Involves adding a new brand on the high or low
    end of a product line based on a price-quality
    continuum (Marriott Hotels).
  • Fighting Brand Strategy
  • Involves adding a new brand whose sole purpose is
    to confront competitive brands in a product class
    being served by an organization. (Frito-Lays
    Santitas used to fight regional tortilla chip
    brands).
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