Mm.09.10

04/10/23 10:07 Prof. U.M. Amin, CMS, JMI University, New Delhi

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Marketing ManagementMBA CP 205


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Crafting the Brand Positioning


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Learning Objectives:

• Know how a firm can choose and communicate an effective positioning in the market.• Know how brands are differentiated.• Know what marketing strategies are appropriate at each stage of the product life-cycle.• Know what are the implications of market evolution for marketing strategies.



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Positioning

Act of designing the company’soffering and image to occupy

a distinctive place in the mind ofthe target market.



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Writing a Positioning statement

Mountain Dew: To young, activesoft-drink consumers who have

little time for sleep, Mountain Dewis the soft drink that gives you

more energy than any other brandbecause it has the

highest level of caffeine.



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• Positioning requires that similarities and differences between brands be defined and communicated.

• Deciding on positioning requires determining a frame of reference by identifying the target market, competition, ideal POPs and PODs.

• Defining competitive frame of reference involves determining category membership.

• Category membership refers to all products with which a brand competes including the substitutes.



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Defining Associations

Points-of-parity (POPs)

• Associations that are not necessarily unique to the brand but may be shared with other brands.

Points-of-difference (PODs)

• Attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe they could not find, to the same extent, with a competitive brand.


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• POPs are classified in two types: Category and Competitive.

•Category POPs are associations consumers view as essential to be a legitimate and credible offering within a certain product category.

• These represent necessary but not necessarily sufficient conditions for brand choice and may change over time due to technological advances, legal developments or consumer trends.

• Competitive POPs are associations designed to negate competitors’ PODs.

• The key to successful positioning is not so much in achieving a POD as in achieving POPs.



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Conveying Category membership

Announcing category benefits

Announcing category benefits

Comparing to exemplarsComparing to exemplars

Relying on the product descriptor

Relying on the product descriptor



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Consumer desirability Criteria for PODs

RelevanceRelevance

DistinctivenessDistinctiveness

BelievabilityBelievability



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Deliverability Criteria for PODs

FeasibilityFeasibility

CommunicabilityCommunicability

SustainabilitySustainability



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Examples of negatively correlated attributes and Benefits

• Powerful vs. Safe• Strong vs. Refined• Ubiquitous vs.

Exclusive• Varied vs. Simple

• Low-price vs. High quality• Taste vs. Low calories• Nutritious vs. Good

tasting• Efficacious vs. Mild


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Differentiation Strategies

Product

Channel Image

Personnel



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Product Differentiation

• Style• Design• Ordering ease• Delivery• Installation• Customer training• Customer consulting• Maintenance

• Product form• Features• Performance• Conformance• Durability• Reliability• Reparability


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Personnel Differentiation Singapore Airlines


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• Personnel differentiation enables companies to gain competitive advantage through having better trained people.

• Better trained people exhibit six characteristics: competence, courtesy, credibility, reliability, responsiveness & communication.

• Channel differentiation: Companies can achieve competitive advantage through the way they design distribution channels’ coverage, expertise and performance.

• Image differentiation: Consumers respond differently to company and brand images. Image should be distinguished from identity.



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Identity and Image

Image: The way the

public perceivesthe company or its

products.

Identity: The way a

company aims to identify or

position itself.



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• An effective identity does three things:

1. It establishes the product’s character and value proposition.

2. It conveys this character in a distinct way.

3. It delivers emotional power beyond a mental image.

• For the identity to work it must be conveyed through every available communication vehicle and brand contact.



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Product Life Cycle (PLC)

• A product has a life cycle means that:

Products have a limited life. Product sales pass through distinct stages each throwing

different

opportunities, threats and challenges to the marketer. Profits rise and fall at different stages of the PLC. Products require different marketing, financial, operations

and HR

strategies in each stage of PLC.



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Sale

s &

Pro

fits

Introduction Growth Maturity Decline

Profit

Sales

Time



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Sale

s &

Pro

fits

TimeIntroduction Growth Maturity Decline

Sales

*Internet Radios/Smart phones

*Color copiers

*Cell phones

*DVD Players

*Dot matrix printers

Examples:

Profit



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• The PLC concept can be used to analyze a product category, a product form, a product or a brand.

• Product categories have the longest life cycles. • Product forms follow the standard PLC more faithfully. • Products follow either the standard PLC or one of the salient variants.

• Branded products can have a short or long PLC.



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Common PLC Patterns



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Style, Fashion and Fad Life Cycles



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MARKETING STRATEGIES

INTRODUCTION STAGE:

• Sales growth tends to be slow due to:

Initial teething technological problems, Delay in increasing production capacity, Delay in getting adequate distribution through retail outlets and Customer reluctance to change existing buying behaviors. • Profits are low or negative due to low sales and heavy distribution & promotion expenses.



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• Promotional expenditures are high because of need to

Inform potential consumers, Induce product trials and Secure distribution in retail outlets.

• During this stage, prices tend to be high due to relative low output, technological problems in production and high required margins to support higher promotional expenses.

• Marketers, therefore, focus their efforts on consumers who are ready to buy, usually higher income groups.



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• Marketers can set high or low level for each element of the

marketing mix.

• Considering Price and Promotion only, marketers can pursue

any one of the following strategies:

1. Rapid skimming2. Slow skimming3. Rapid penetration and4. Slow penetration

• Rapid skimming involves launching the product at a high price and high promotion.



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• The strategy is appropriate when large part of potential buyers is unaware of the product, those who become aware are eager to have the product and pay the asking price.

• Also suitable when the firm faces potential competition and wants to build brand preference.

• Slow skimming involves launching the new product at a high price and low promotion.

• Suitable when market is of limited size, most of the buyers are aware of the product & are willing to pay a higher price and there is no imminent potential competition.



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• Rapid penetration strategy calls for introducing the product at a low price and heavy promotion.

• Suitable when market size is large, buyers are unaware of the product & are price sensitive, there is strong potential competition and learning curve & scale economy factors result in decrease in manufacturing costs.

• Slow penetration involves launching the new product at low price and low level of promotion.

• Suitable when market is large, most of the buyers are aware of the product & are price sensitive and there is some potential competition.



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• Decision as to when to enter the market with a new product is crucial for a company.

• Being a first mover can be highly rewarding but risky and expensive.

• Late entrants must ensure that they bring superior technology, quality or possess brand strength.

• The first mover or the pioneer company realizes that the competition will eventually enter and will result in fall in its prices and market share.



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• The Competitive Cycle, that the pioneer must anticipate, consists of five stages:

1. Sole Supplier

2. Competitive penetration

3. Share stability

4. Commodity competition

5. Withdrawal



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STAGES OF COMPETITIVE CYCLE

Sole Supplier

Competitive penetration

Share Stability

Commodity Competition

Withdrawal

Market share

Production costs

Price premium

100%



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• Many companies who were market pioneers were overtaken by late entrants.

• Some research findings have cast further doubts about pioneer advantage.

• A distinction must be made between:

1. Inventor (First to develop patents in a given category).2. Product pioneer (First to develop a working model).3. Market pioneer (First to sell in the new product category).

• Research has revealed that a large no. of early market leaders, though not pioneers succeed.



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Long range Product Market Expansion

Strategy



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GROWTH STAGE:

• The growth stage is marked by rapid increase in sales as early adopters like the product and new consumers start buying the product.

• New competitors enter the market attracted by opportunities. New products features are introduced and distribution expanded. Prices are maintained or fall slightly depending on demand growth rate.

• Promotional expenditures are maintained or increased slightly to meet competition & continue educating the market. • Profits increase as promotion expenses get distributed over increased volume of sales – promotion/sales ratio declines.



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Also unit cost of manufacturing declines due to producer learning curve effect.• Marketers use various strategies to sustain rapid market growth. Some of these are:

Improve product quality and incorporate new product features. Add new models and carry out product changes like changing sizes, flavors etc. Enter new market segments. Increase distribution coverage and enter new distribution channels. Shift product awareness advertising to product preference advertising.



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Lower prices to attract next layer of price sensitive buyers.

• These market expansion strategies consolidate the

firm’s competitive position.

• The firm, however faces a trade off between high market share and current high profit.

• It has to decide whether it should incur expenses on product improvement, promotion and distribution to capture market dominant position thus compromising on current level of high profits.



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MATURITY STAGE: • The stage is marked by slowing down of sales growth

rate. Most products fall in this stage.

• The stage lasts longer than the previous stages and poses enormous challenges to the marketers.

• Maturity stage can be divided into three phases:

Growth maturity phase Stable maturity phase and Decaying maturity phase



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• In the first phase, the growth rate starts to decline. There are no new distribution channels to fill.

• Sales on a per capita basis hit a plateau in the second phase due to market saturation. Most consumers have tried the product and future growth depends on population growth & repeat purchase.

• In the last phase, absolute level of sales declines and consumers begin to switch to other products and substitutes.

• The slow down creates overcapacity in the industry that leads to intensified competition.



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• This leads to competitors resorting to price cuts, increase advertising, trade & advertising promotion and R&D budgets to improve product features & quality.

• A shakeout begins, weaker competitors withdraw and only few giant firms survive. These consist of may be a quality, a service or a cost leader that serve the whole market who earn their profits through high volumes and lower costs.

• Around the big players are a number of niche players who may be product specialists and customizing firms.



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• The challenge the marketers face is whether to strive to be among the big players or to be a niche player.

• Companies pursue three strategies in the maturity stage:

Market modification Product modification and Marketing mix modification

• Market modification is achieved by trying to expand the market for the firm’s mature brand by working with the two factors that make up the sales volume i.e. no. of brand users and usage rate per user. Sales Volume= No. of brand users X Usage rate per user



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• The company can try to increase the no. of users in three ways:

Convert non-users. Enter new market segments. Win competitors’ customers.

• Sales volume can also be increased by convincing current users to increase usage rate: This can be done in three ways:

Try to get the customer use the product more frequently. Try to interest customers to use more product on each occasion. Try to discover new product uses.



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• Product modification is achieved through quality, feature and style improvement.

• Quality improvement can be effected by increasing product’s functional performance - i. e. durability, reliability, speed, taste etc.

• New features build a company’s image as an innovator and win customer loyalty. However, new features get imitated by competitors fast.

• Style improvement aims to increase the aesthetic appeal of the product. Care should be taken to keep in mind consumer’s preferences in this regard.



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• Marketing mix modification can be achieved by modifying marketing mix elements.

• Price: Will a price cut result in the customers buying more? Whether discounts be offered or list price lowered? Price could also be raised to signal better quality.

• Distribution: Can the firm obtain more product support and visibility in existing outlets, more penetration in existing outlets and introduce products in new distribution channels?

• Advertising: Should the firm change message, media mix, timing, frequency or size of ads and increase ad spend?



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• Sales promotion: Whether sales promotion ( Trade, rebate, discount coupons warranties and gifts etc.) be stepped up? • Personal selling: Firm may consider increasing sales force, revising territories & sales force incentives and take steps to improve sales call planning.

• Services: Firm takes steps to improve delivery and extend improved credit and technical support.

• A major issue with marketing mix modifications is that these can be easily imitated by rival firms.



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DECLINING STAGE:

• Sales for most of the products eventually decline – for some it could be slow for others it could be rapid. • The decline could be due to technological advances, shift in consumer tastes and increased competition.

• These lead to over capacity, price cutting and reduced profits.

• Most of the companies do not devise adequate strategies to handle aging products. Some wait for the economic conditions to improve or hope that sales will grow with product improvements.



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• Five strategies can be considered for the declining stage: Increase firm’s investment to dominate the market. Maintain current level of investment till business uncertainties are resolved. Decrease investment selectively by dropping unprofitable customer groups and strengthening the niche segments. Harvesting the firm’s investment to recover cash quickly. Divesting by getting out of the market quickly and disposing off assets.

• The appropriate strategy depends on the industry’s relative attractiveness and the firm’s competitive strength.



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SUMMARY OF LIFE CYCLE CHARACTERISTICS

Characteristics Introduction Growth Maturity Decline

Sales Low Rapidly rising

Peak Declining

Cost percustomer

High Average Low Low

Profits Negative Rising High Declining

Customers Innovators Early adopters

Middle majority Laggards

Competitors Few Growing Stable tending to decline

Declining



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Reduce expenditure and milk the

brand

Maximize market share

while defending

market share

Maximize market share

Create product

awareness and trial

MarketingObjectives

DeclineMaturityGrowthIntroductionLife Cycle stage

SUMMARY OF LIFE CYCLE MARKETING OBJECTIVES



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Strategies Introduction Growth Maturity Decline

Product Offer a basic product

Offer product extensions

Diversify brands and

items

Phase out weak models

Price Charge cost plus

Price to penetrate

market

Price to match competitors

Cut price

Distribution Selective distribution

Intensive distribution

More intensive Go selectivePhase out

unprofitable outlets

Sales Promotion Use heavy sales

promotion to entice trial

Reduce to take advantage of

heavy demand

Increase to encourage

brand switching

Reduce to minimal level

SUMMARY OF LIFE CYCLE STRATEGIES



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MARKET EVOLUTION:

• PLC focuses on the product and hence gives a product oriented picture. • Firm’s also need to visualize and analyze market evolution as it is affected by new needs, competitors, technology and channels etc.

• Markets also evolve through four stages:

Emergence Growth Maturity Decline



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• Emergence: It begins on launching the product. Before a market materializes, it exists as a latent market. Initially, consumers preferences are wide and scattered. Such a market is called a diffused preference market. • To design an optimal product, the firm has three options:

New product can be developed for one part of the market (Single niche strategy). Two or more products can be simultaneously launched to capture two or more parts of the market (Multiple niche strategy). New product developed for the middle of the market (Mass market strategy).



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• Growth: If sales of the new product is good, new firms enter the market, ushering in market growth stage. • If the pioneer has established in the center, the second firm entering the market has three options:

It can pursue single niche strategy. It can position its brand next to the leader (Mass market strategy) It can pursue multiple niche strategy.

• If the second firm is small it should pursue single niche strategy.

• If the second firm is large, mass market strategy is followed.



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• Maturity: When the competitors cover and serve major market segments, the market enters the maturity stage. • The competitors go ahead and make foray into each other’s market segments thereby reducing profitability of all.

• As market growth slows down, the market splits into finer segments resulting in high market fragmentation.

• Market fragmentation is followed by a market consolidation. It is caused by a new product attribute that has strong appeal.



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Market Fragmentation and Consolidation


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• Market consolidation may not last long as competitors imitate the product attribute.

• Mature markets swing between fragmentation and consolidation.

• Decline: The demand for current products eventually begins to decrease and the market enters decline stage.

• Either the need level of the total market declines or the new technology replaces the old one.



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Recap:

• How a firm can choose and communicate an effective positioning in the market.• How brands are differentiated.• What marketing strategies are appropriate at each stage of the product life-cycle.• What he implications are of market evolution for marketing strategies.


Date post:	13-Jan-2015
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