Title: Product and Service Strategy and Brand Management
1Chapter 5
- Product and Service Strategy and Brand Management
2In 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
3In 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
4Importance of the Offering
- The ultimate profitability of an organization
depends on its product or service offering(s) and
the strength of its brand(s).
5Basic Offering-Related Decisions
Modifying the Offering Mix
Positioning Offerings
Branding Offerings
6The 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
7The 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)
8The 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
9Modifying the Offering MixMajor Decisions
Should the offering mix be modified?
If yes, what should be added, modified,
harvested, or eliminated?
10Modifying 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?
11Modifying 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
12Modifying 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)
13Modifying 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?
14Modifying 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
15New-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?
16New-Offering Development ProcessBusiness Analysis
- Sales Forecasts
- Profitability Analysis
- Investment requirements
- Breakeven analysis
- Payback period
- Return on investment (ROI)
17New-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
18Modifying 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
19Modifying the Offering MixLife-Cycle Concept
Sales
Sales
Profits
Introduction
Growth
Maturity
Decline
20Modifying 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)
21Modifying 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
22Modifying 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
23Modifying 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?
24Modifying 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?
25Positioning 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.
26Positioning OfferingsPositioning Strategies
- By attribute or benefit
- By price and quality
- By use or application
- By user
- By product or service class
- Against competition
27Example of Positioning by Attributes
28Positioning 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
29Positioning 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?
30Brand 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.
31Brand Equity Brand ManagementCreating and
Valuing Brand Equity
Develop positive brand awareness and name-product
association (Gatorade, Kleenex)
32Customer-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
33Brand 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)
34Brand 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
35Brand 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?
36Brand 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
37Brand 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)
38Brand 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
39Brand 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
40Brand 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
41Brand 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).