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Product & Brand Management
Introduction to ProductManagement
• What is a Product?A product is anything that can be offered to a market to satisfy a want or a need
• What is Management?Management is coordination of the
resources of the firm to produce goods and services
• What type of Products are Marketed?Physical Goods – Cars, ShampoosServices – Financial, RepairPersons – Movie Stars, Political LeadersPlaces – Switzerland, NanitalOrganizations – Girl Scouts, Political
PartiesIdeas – Family Planning, Driving in Single
Lanes
Product Classification
• Products are classified into 3 groups according to their durability and tangibility
Non-Durable – Few uses – soaps, saltDurable – Many uses – clothing, cooking rangeServices – Intangibles – banking,
brokerage
Consumer Goods
• Convenience Goods Frequently used, purchased with
minimum effort – bread, cooking oil
• Shopping GoodsPurchased less often, comparison on
price, quality, and style – TV, Mobile Phone
• Specialty GoodsPurchased as desired, branded products
– anti-aging cream, shampoos
• Unsought GoodsPurchased on perceived need, can do
without – food processor, water filter
FMCG
• Fast Moving Consumer Goods (FMCG)GroceriesSnacksDetergentHair Oil
Industrial Goods
• Capital GoodsPlant Equipment, Computers
• Materials and PartsPlastics, Auto Parts
• SuppliesPaper, Toner
• Business ServicesMarket Research, Patent Services
Product-FocusedOrganization
Head ofCompany/
Division
Manufacturing Marketing Finance CorporateCommunications
ProductManagement
ProductManagement
MarketingResearch
MarketingResearch SupportSupport
ManagerProduct BManagerProduct B
ManagerProduct AManagerProduct A
ManagerProduct CManagerProduct C
Characteristics
• Classic brand management structure developed by P&G in 1930s
• Commonly used where different products use the same channels of distribution
• Product Manager acts as a ‘Mini-CEO’
• Product Manager has the ultimate responsibility for the brand
• Associate Product Manager develops brand extensions or manages a small brand
• Assistant Product Manager is responsible for market and share forecasting, budgeting, coordinating with production, executing promotions, and packaging
Advantages
• Center of responsibility is clear• Clear who to turn to for information on the
product• Product has an advocate with training,
experience, persuasion, and communication skills
• Breeding ground for senior executives
Disadvantages
• Narrow focus on one product• Induces a centralized structure• Quest for quarterly or short-term sales and
market share goals• Several salespeople representing different
products calling on the same customer• Inefficient use of marketing funds to build
brand name
Examples
• P&G• General Foods• Adobe• Ford• Mitsubishi• GM (adopted – 1995, dropped – 2002)
Market-FocusedOrganization
Head ofCompany/
Division
Manufacturing Marketing Finance CorporateCommunications
ManagerMarket BManagerMarket B
ManagerMarket AManagerMarket A
Manager Market CManager Market C
Characteristics
• Marketing authority by market segment
• Useful when there are significant differences in buyer behavior in the market segments
• Does not give managers full responsibility for the services or products delivered
Advantages
• Focus on the customer as an asset• Easier to justify product modification or
elimination• Useful when bundling different products or
when consumer purchases many different products form the same company
• Enhances product manager interactions due to specific knowledge in the particular segment
Disadvantages
• Possible conflict with the product management structure that may lie below
• ‘Mini-CEO’ training and experience of traditional product managers may be lost
• Most product management skills need to be sustained
Examples
• Levi• Bell
Function-FocusedOrganization
Head ofCompany/
Division
Manufacturing Marketing Finance CorporateCommunications
AdvertisingAdvertisingProductPlanningProductPlanning
SalesPromotion
SalesPromotion
MarketingResearch
MarketingResearch
Characteristics
• Aligned by marketing functions• Product and market-focused organizations
have aspect of this structure embedded in their organizations
• A single manager is not responsible for day-to-day marketing activities of the product
• Marketing strategies are designed and implemented through coordinated efforts
Advantages
• Administratively simple• Useful if company has few products• The structure is logical with normal marketing
activities• Functional training is easier to deliver• Managers become functional experts
Disadvantages
• Product responsibility is shared so no one down the line can be held accountable
• Requires substantial time in cross-functional meetings
• Training is limited to function• Marketing VP or head needs to do much of
the planning
Dr. A. Kaul
Examples
• Intel• Apple• HP
Dr. A. Kaul
Factors InfluencingCompetitive Success
Environmental FactorsRate of Technology ChangeNature of CompetitionIntensity of Competition
Environmental FactorsRate of Technology ChangeNature of CompetitionIntensity of Competition
Organizational FactorsSizeStructureCultureManufacturing Capability
Organizational FactorsSizeStructureCultureManufacturing Capability
Marketing FactorsProduct QualityCustomer ServiceMarket Research
Marketing FactorsProduct QualityCustomer ServiceMarket Research
Managerial FactorsLeadership StyleCommunicationAttitude
Managerial FactorsLeadership StyleCommunicationAttitude
Strategic FactorsLong-term ObjectivesStrategic Time HorizonProduct-Market Strategy
Strategic FactorsLong-term ObjectivesStrategic Time HorizonProduct-Market Strategy
Product orBusiness Performance
Product orBusiness Performance
Changes Affecting Product Management
• The Web• IS Database Management• Increased Emphasis on Brands• Shift in Balance of Channel Power• Increased Importance of Customer Retention• Increased Global Competition
Potential Interactions of aProduct Manager
Product ManagerProduct
Manager
AdvertisingAgency
AdvertisingAgency
MediaMedia
PromotionServices
PromotionServices
PackagingPackaging
PurchasingPurchasing
SalesSalesMarket
ResearchMarket
Research
Manuf. and
Distrib.
Manuf. and
Distrib.
ResearchandDev.
ResearchandDev.
FiscalFiscal
LegalLegal
PublicityPublicity
Three Levels of a Product
CoreBenefit
or Service
CoreBenefit
or Service
BrandNameBrandName
QualityQualityStylingStyling
FeaturesFeaturesPackagingPackaging
WarrantyWarranty
After-SalesService
After-SalesService
DeliveryAnd
Credit
DeliveryAnd
Credit
InstallationInstallation
AugmentedProduct
TangibleProduct
CoreProduct
Product Analysis
1. Category2. Competitor3. Customer4. Demand
1. Category AttractivenessAnalysis
• Aggregate Category Factors• Category Factors• Environmental Factors
Aggregate Category Factors
• Category Size• Category Growth• Stage in the PLC• Sales Cyclicity• Seasonality• Profits
• Category SizeMeasured in units and monetary valueWill revenues support investmentLarge markets are betterLarge categories offer more
opportunities for segmentationLarge size tends to draw competitors
• Category GrowthCurrent growth are importantGrowth projections are crucialFast-growing support high margins and
sustain future profitsAttract competitorsCause dramatic shift in market share
survivability of product
• Stage in the PLCThe introduction stage is unattractive for
new entrantsThe growth stage is attractiveThe maturity stage may be attractive for
some categoriesThe decline is unattractive to new entrants
and low market share holders may exit
33
Aggregate Category Factors
Aggregate Category Factors
Category Attractivenessover the PLC
Sales
Stage Intro. Growth Maturity Decline Years
Size Small Moderate Large ModerateGrowth Low High Low NegativeAttract - Low High Low/ Lowivenes High
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Aggregate Category Factors
Aggregate Category Factors
• Sales CyclicityDue to inter-year variation in demandGeneral Economic conditions introduce
peaks and valleys in sales as GDP varies
Swing in sales, profits, employment, cash available for new product development
33
Aggregate Category Factors
Aggregate Category Factors
• SeasonalityIntra-year cycles in salesClothes, sweets, fire-crackers, and toy
sales during festivalsGenerates price warsMany products are seasonal like cold
remedies, skin creams, ice cream
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Aggregate Category Factors
Aggregate Category Factors
• ProfitsVary across products or brands in a
category, and over timeInter-industry differences also existAverage profit margins for footwear is
about 6%, personal care 20%, and biotechnology 50%
Chronic low profitability is less attractiveVariation used as industry risk
33
Aggregate Category Factors
Aggregate Category Factors
Attractiveness of MarketFactors
AttractivenessFactor High Low
Category Size + -Category Growth + -Sales Cyclicity - +Seasonality - +Profit + -Profit Variability - +
33
Aggregate Category Factors
Aggregate Category Factors
Category Factors
• Threat of New Entrants• Bargaining Power of Buyers• Bargaining Power of Suppliers• Amount of Intra-category Rivalry• Threat of Substitute Products or Services• Category Capacity
• Threat of New EntrantsIf high, attractiveness diminishesIn early stages of market development it
can help a market to expandUsually it heightens competitiveness and
reduces profit marginsOffset by setting up barriers to entry
33
Category Factors
Category Factors
1. Potential Barriers to EntryEconomies of ScaleProduct DifferentiationCapital RequirementsSwitching CostsDistribution
33
Category Factors
Category Factors
• Bargaining Power of BuyersDistributors, original equipment
manufacturers (OEMs) or end users
High if – product bought is a large % of buyer’s cost, product is undifferentiated, buyers earn low profits, buyer can
backward integrate, buyer has full information, when substitutes exist
33
Category Factors
Category Factors
• Bargaining Power of SuppliersIs a mirror image of buyer powerHigh if – suppliers are concentrated, no substitutes, differentiated product, built
in switching costs, supply is limited
33
Category Factors
Category Factors
• Amount of Intra-category RivalryIntense category competition is not
attractiveEscalates marketing expenditures, price,
employee switchHigh if – many or balanced competitors,
slow growth, high fixed costs, lack of differentiation, personal rivalry
Difficult for a product manager to have an impact on category rivalry
Dr. A. Kaul
33
Category Factors
Category Factors
• Threat of Substitute Products or Services Large number is less attractiveThreat from genericsThreat generally in all categoriesHigh rates of returns when few
Dr. A. Kaul
33
Category Factors
Category Factors
• Category CapacityChronic overcapacity is not a positive
sign for long-term profitabilityOperating at capacity – costs stay low,
supplier bargaining power highIndicates health of categoryRecession may lead to overcapacity
Dr. A. Kaul
33
Category Factors
Category Factors
Porter’s Five Forces Model
Amount of Intra-
Category Rivalry
Amount of Intra-
Category Rivalry
Bargaining Power of Supplier
Bargaining Power of Supplier
Threat of Substitute Products or Services
Threat of Substitute Products or Services
Bargaining Power of
Buyer
Bargaining Power of
Buyer
Threat of New Entrants – Barriers to Entry
Threat of New Entrants – Barriers to Entry
Dr. A. Kaul
Attractiveness of CategoryFactors
AttractivenessFactor High
Low
Threat of New Entrants - +Bargaining Power of Buyers - +Bargaining Power of Suppliers - +Amount of Intra-Category Rivalry - +Threat of Substitute Products or - +
ServicesUnused Capacity - +
Dr. A. Kaul
33
Category Factors
Category Factors
Environmental Factors
• Technological• Political• Economic• Regulatory• Social
Dr. A. Kaul
• TechnologyIf weak – vulnerable to new product and
global competitionIf well positioned – firm can take
advantage of change
Dr. A. Kaul
Environmental Factors
Environmental Factors
• PoliticalAffects products with global salesProduct manager must assess political
riskFree market – affected by political party
in power
Dr. A. Kaul
Environmental Factors
Environmental Factors
• EconomicInterest rate fluctuations – short-term
financingCurrency exchange rates – global marketsEmployment conditions – availability of
skilled laborRecession – sales, GDP growth declinesInflation rates – consumer buying power
diminishes
Dr. A. Kaul
Environmental Factors
Environmental Factors
• RegulatoryRestrict industry from specific media useStringent testing requirementsAir, water, soil pollutionIntervene in global competition -
dumping
Dr. A. Kaul
33
Environmental Factors
Environmental Factors
• SocialTrends in demographics, lifestyles,
attitudes, and personal valuesTrends affect B2B due to derived
demandYoung adultsMature consumersChildren as consumersShift of power from seller to consumer
Dr. A. Kaul
33
Environmental Factors
Environmental Factors
2. Competitor Analysis
• To analyze competitors, a commitment to developing a competitive strategy that includes a willingness to expend resources on collecting data is necessary
Dr. A. Kaul
33
Determining the CompetitorSet
• From Commercial and Government Data• Managerial Judgment – experience, internal
sources• Customer-Based Measures – behavioral data• Customer Judgments - surveys
Dr. A. Kaul
33
Using Customer Judgments
• Judged Overall Similarity – for a pair of products
• Similarity within Consideration Set – large set of products divided into groups in which each is a substitute for another
Dr. A. Kaul
33
• Product Deletion – in a group that are substitutes for each other, if one is deleted or not available, which one would the customer select from the choice set or the rest
• Substitution in Use – judged similarities in usage context, use and substitutes are indicated for the target product
Dr. A. Kaul
Using Customer Judgments
Using Customer Judgments
33
Defining Competitive Set with Perceptual Mapping
Dr. A. Kaul
MoistMoistNeeds RefrigerationNeeds Refrigeration
Between Meal SnackBetween Meal Snack
Easy to CarryEasy to CarryAt School/WorkAt School/Work
Tea/Coffee BreakTea/Coffee Break
Long Time to PrepareLong Time to Prepare
Formal DesertFormal Desert
33
Corporate Intelligence
Rank US Company
1 Microsoft2 Motorola3 IBM4 P&G5 GE, HP6 Coca-Cola, Intel
Dr. A. Kaul
33
Competitor Analysis Steps
• Data Collection• Data Analysis
Dr. A. Kaul
33
Secondary Sources of Information
SecondaryData
SecondaryData
InternalSourcesInternalSources NewspapersNewspapers
AnnualReportsAnnualReports
PatentFilingsPatentFilings
Financial AuditFilings
Financial AuditFilings
BusinessPress
BusinessPress
GovernmentGovernmentComputerDatabasesComputerDatabasesInternetInternet
NewsReleases
NewsReleases
TradeAssociations
TradeAssociations
PromotionalLiterature
PromotionalLiterature
TradePressTradePress
ConsultantsConsultants
CustomerCommunications
CustomerCommunications
Dr. A. Kaul
33
Data Collection
Data Collection
Primary Sources of Information
PrimaryData
PrimaryData
InvestmentBankers
InvestmentBankers
SalesForceSalesForce
SuppliersSuppliers
CustomersCustomers
EmployeesEmployees
SpecializedFirms
SpecializedFirms
ConsultantsConsultants
Dr. A. Kaul
33
Data Collection
Data Collection
Other Sources of Information
• Classified Ads• Trade Shows• Plant Tours• Reverse Engineering• Monitoring test Markets• Hiring Senior Employees
Dr. A. Kaul
33
Data Collection
Data Collection
Competitor Analysis ModelPrimary DataPrimary Data Secondary DataSecondary Data
Key QuestionsWho are they?What are the competing product features?What do they want?What is their current strategy?
Key QuestionsWho are they?What are the competing product features?What do they want?What is their current strategy?
Differential Competitor Advantage Analysis
Who has the competitive product advantage?
Differential Competitor Advantage Analysis
Who has the competitive product advantage?
Competitor Marketing PlanWhat are they going to do?
Competitor Marketing PlanWhat are they going to do?
Dr. A. Kaul
33
Data Analysis
Data Analysis
Data Analysis Questions
• Who are the major competitors?• How do the competing products or services stack
up against each other?• What are the objectives of the major competitor
products?• What is the current strategy being employed to
achieve the objectives?• Who has the competitive edge?• What are they likely to do in the future?
Dr. A. Kaul
33
Data Analysis
Data Analysis
Product Features/AttributeMatrix
Competitor Features/AttributesMemory Price
ProcessorABCD
Dr. A. Kaul
33
Assessing Competitors’ Current Objectives
• Is a critical first step in a competitor analysis for major competitor products
• Gives valuable information on intended aggressiveness of the competitors in the future
• Helps to assess the capabilities of the competitors
Dr. A. Kaul
33
Define the Terms
• Growth Objective – increase unit sales or market share
• Hold Objective – brand losing market share, stop the slide
• Harvest Objective – profit is paramount relative to market share
Dr. A. Kaul
33
Determining the Objectives• Growth Objective
Improve market share at the expense of short-term profits
The following will occur:A cut in priceIncrease in advertising expendituresIncrease in promotions to consumers and
distributorsIncrease in distribution expenses
Dr. A. Kaul
33
• Harvest ObjectiveFocus on profitability – brand marketed
in the opposite way
The following will occur:Increase in priceDecrease in marketing budgets
Dr. A. Kaul
33
Determining the
Objectives
Determining the
Objectives
Examples of Objectives
• Global CompetitorMay be interested in establishing market position even with short-term losses
• Private Firm on Stock Exchange – long-term profits
• Private Family Owned – short-term profits• Public Firm– foreign exchange, employment,
providing services
Dr. A. Kaul
33
• Mergers, Acquisitions, LBORetain market share
• Firms Operating PhilosophyMinimize capital investment
Dr. A. Kaul
33
Assessing the Competitors’Current Strategies
• The important second step in competitor analysis is to determine how competitors are attempting to achieve their objectives
Marketing StrategyDifferential Advantage AnalysisCompetitor’s Will
Dr. A. Kaul
33
Marketing Strategy
• Three Major Components:
Target Market SelectionCore Strategy
Positioning, DifferentiatingImplementation
Supporting Marketing Mix
Dr. A. Kaul
33
Marketing Mix
• The mix provides insight into the basic strategy of the competitor and special tactical decisions
• 4P’s
Dr. A. Kaul
33
• ProductPhysical product or service and how it is sold
• PriceHighly visible
• PromotionWhich type and how often
• PlaceWhich channels are being emphasized?
Dr. A. Kaul
33
Marketing Mix
Marketing Mix
Tracking Competitors’Strategies
• Industrial ProductsProduct sales literatureThe company’s own sales forceTrade advertising
• Consumer ProductsTracking Ads
Dr. A. Kaul
33
Comparing Value Chains
Firms InfrastructureFirms Infrastructure
InboundLogisticsInboundLogistics
Human Resources ManagementHuman Resources Management
Technology DevelopmentTechnology Development
ProcurementProcurement
OperationsOperations OutboundLogistics
OutboundLogistics
MarketingAnd SalesMarketingAnd Sales
ServiceService
SupportActivitiesSupportActivities
PrimaryActivitiesPrimary
Activities
MARGIN
MARGIN
Dr. A. Kaul
33
Technology Strategy
• Framework of Six CriteriaTechnology SpecializationLevel of CompetenceSources of Capability – Internal/ExternalR&D Investment LevelCompetitive Timing – Initiate/RespondR&D Organization and Policies
Dr. A. Kaul
33
Product Entry DecisionsDecision R&D Marketing TimingFirst State-of-the- Stimulating Early-entryTo Market art Primary Demand in the PLC
Second Advanced, Differentiating Entry Early in
To Market Responsive the Product PLC Growth
Next Ability in Market Entry Duringto Market Applications Segmentation PLC Growth
Late Skill in Process Minimizing Selling Entry Late inTo Market Development and Distribution PLC Growth
Cost
Dr. A. Kaul
33
Competitive Product AnalysisMatrix
Marketing Competitor A Competitor BMix Brand A Brand B
Product 1 Product 21. Product
Targeted Segment2. Price3. Promotion
Advertising4. Place5. Technology Strategy
Dr. A. Kaul
33
Differential Advantage Analysis– Capabilities Matrix
Ability To Firm/Product OwnA B C Product
Conceive/Design
Produce
Market
Finance
Manage
Dr. A. Kaul
33
Differential Advantage Analysis– Success Matrix
Critical Success Firm/Product OwnFactors A B C Product
12345Overall Rating
Dr. A. Kaul
33
Assessing A Competitor’sWill
• A strong competitor can be overcome• A weak competitor can cause damage
Assess:How crucial is this product to the firm?How visible is the commitment to the market?How aggressive are the managers?
Dr. A. Kaul
33
Predicting Future Strategies
• Competitor signals with an announcement• Use historical information to forecast:
Competitor’s Strategy – dependent variable
Capabilities and Resource – independent variable
Extrapolate that the trend may continueLink Capabilities/Resources with Strategy
• Simulate by Role-Play
Dr. A. Kaul
33
3. Customer Analysis• What we need to know about current and potential
customers:1. Who – buys and uses the product?2. What – customers buy and how they use it?3. Where – customers buy?4. When – customers buy?5. How – customers choose?6. Why – customers prefer a product?7. How – customers respond to marketing
programs?8. Will – customers buy it (again)?
Dr. A. Kaul
33
Segmentation Variables for Consumer Markets
• DemographicsAge, gender, geographic location
• Socio-graphicsIncome, education, occupation, social
class• Personality
traits – ambitious, extrovert• Psychographics and Value
lifestyle – activities, interests, opinions
1. Who Buys and
Uses?
1. Who Buys and
Uses?
Dr. A. Kaul
33
Lifestyle Topology
• Strivers• Achievers• Pressured• Adapters• Traditionalists
Dr. A. Kaul
33
1. Who Buys and
Uses?
1. Who Buys and
Uses?
Value Topology• Self-respect• Security• Warm relationship with others• Sense of accomplishment• Self-fulfillment• Sense of belonging• Respect for others• Fun and enjoyment• Excitement
Dr. A. Kaul
33
1. Who Buys and
Uses?
1. Who Buys and
Uses?
Segmentation Variables forBusiness Markets
• DemographicsIndustry, company size, location
• Operating VariablesCustomer technology, use status, service
• Purchasing ApproachesStructure, power, purchasing criteria
• Situational FactorsSize of order, just-in-time delivery
• Personal CharacteristicsAttitude to risk, loyalty to supplier
Dr. A. Kaul
33
1. Who Buys and
Uses?
1. Who Buys and
Uses?
Benefits
• The Firm Produces Features• The Customer Purchases Benefits• Technology Firms – User friendly• Drill Manufacturer – Sells holes, not drills• Product Manager – Understand the benefits
customers are seeking in the market segment
2. What Customers
Buy and Use?
2. What Customers
Buy and Use?
Dr. A. Kaul
33
Distinction Between Featuresand Benefits - Cadillac
Features Benefits
300-HP Engine Ability to pull away safelyNorthstar Engine Smooth-running engineAdjustable Seats Stay fit, alert, comfortableABS Brakes Wheels won’t lock and
skid
Dr. A. Kaul
332. What
Customers Buy and
Use?
2. What Customers
Buy and Use?
Purchase Pattern• Database Marketers use three criteria for
evaluating and segmenting customers in their databases
Recency – how recently has the customer bought brand?
Frequency – How many different products does the customer buy, and what are the time intervals?
Monetary Value – What is the value of the customer’s purchases in terms of profits?
Dr. A. Kaul
332. What
Customers Buy and
Use?
2. What Customers
Buy and Use?
Potential Customers
• Continuum Relating to the ProductUnawareAwareAccepting – Willing to use the productAttracted – Positive towards the productActive – Buy and/or plan to buyAdvocates - Encourage others to buy
Dr. A. Kaul
332. What
Customers Buy and
Use?
2. What Customers
Buy and Use?
Product Assortment
• Different Brands Purchased by the Customers for the category in the Segments
• Create Switching Tables• Different Vendors used by Businesses –
Industrial products
Dr. A. Kaul
332. What
Customers Buy and
Use?
2. What Customers
Buy and Use?
Use
• Sweets – Festivals • Rainwear – Rainy season• Sunscreen – Summer • Customer Suggestions – Baking soda to
deodorize drains – Lime juice to clean cooking range
Dr. A. Kaul
332. What
Customers Buy and
Use?
2. What Customers
Buy and Use?
Channels of Distribution
• Customers Migrate to Other ChannelsSpecialty retailer to DiscountDiscount to Department StoreNeighborhood to SuperstoreSmall Retailer to Large-Volume retailerBrick-and-Mortar to Internet
3. Where Customers
Buy?
3. Where Customers
Buy?
Dr. A. Kaul
33
Timing Issue
• Sales or Price Breaks and Rebates• Fast-Food – Breakfast, lunch, snack, dinner• Woolens – Winter• Capital Equipment – Near fiscal year end• Cold Remedies – Before and during winter
4. When Customers
Buy?
4. When Customers
Buy?
Dr. A. Kaul
33
Customers CompareAlternatives
• InformationMedia AdvertisementsIn-store personnelWord-of-MouthInternet
• Decision ProcessEmotionalImpulseRational
5. How Customers Choose?
5. How Customers Choose?
Dr. A. Kaul
33
Multi-attribute Model
• The process of how customers make decisionsAttributes – used by customer to define
the productPerceptions – amount of attributes
possessed by each brand or product in the category
Importance Weights – weights given by customer for each attribute
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Attributes
• Identifying the relevant set is not easy• Managerial judgment alone can cause
misestimates• Collect information:
Focus-GroupsSurvey/Questionnaire – Open-ended or
close-ended
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Perceptual or PositioningMap – Bank
Courteous Personnel F A
DInconvenient Convenient
C B ATM Locations
Un-courteous
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Importance Weights
• Direct Questioning• On a scale of 1-to-7 with 7 being very
important and 1 not important, how important is ‘the attribute …..’ in your purchase decision
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Decision Making by Manager for Each Brand
Segment 1 Segment 2
Attribute A Weight x Rating = ScoreAttribute BAttribute CAttribute D
Segment Score ∑
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Rules Available to the Product Manager
• Compensatory Rule – Multivariate ModelAll attributes are considered and
weakness in one can be compensated for by strength in another
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
• Lexicographic RuleCompares the products on the most
important attributes alone and eliminates those which are not at the top
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
• Conjunctive RuleAssumes the customer sets minimum
cutoffs on each dimension and rejects a product if it has any attributes below the cutoff
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Conjoint Analysis
• An alternative to weights, conjoint analysis permits the product manager to infer the importance of different product attributes in terms of importance
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Conjoint Analysis – Laptops Computers
• Three AttributesWeight – 1 kg or 2 kgBattery Life – 2 hr or 4 hrBrand – HP or LG
• Task:Rank in order the following
combinations from 1 = most preferred to 8 = least preferred
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Customer Response – Laptop Computers
Combination Rank
1 kg, 2 hr, HP 41 kg, 2 hr, LG 21 kg, 4 hr, HP 31 kg, 4 hr, LG 12 kg, 2 hr, HP 82 kg, 2 hr, LG 62 kg, 4 hr, HP 72 kg, 4 hr, LG 5
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Analysis – Laptop Computers
• Preference1 kg, 4 hr, LG with rank 1 – most2 kg, 2 hr, HP with rank 8 – least
• Average Ranking:1 kg option = 2.5 = (1 + 2 + 3 + 4)/42 kg option = 6.5 = (5 + 6 + 7 + 8)/42 hr option = 5.04 hr option = 4.0HP = 5.5LG = 3.5
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
• Difference in the Average Ranks:Weight = 4.0 (6.5 – 2.5)Battery Life = 1.0 (5 – 4)Brand = 2.0 = (5.5 – 3.5)
• The most important attributes to this customer is weight, followed by brand, and then battery life
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Customer as ProblemSolver
• Extensive Problem Solving – First-time buyers or high-technology products
• Limited Problem Solving – Customer understands functioning and competitors, evaluates on small number of attributes
• Routine Response Behavior – routine purchases with low or high price tag
Dr. A. Kaul
33
5. How Customers Choose?
5. How Customers Choose?
Customer Value
• Critical Component of Customer AnalysisBenefit – Customer’s perspectiveCost – price, maintenance
• Sources of Customer ValueEconomicFunctionalPsychological
Dr. A. Kaul
6. Why Customers
Prefer a Product?
6. Why Customers
Prefer a Product?
33
Manifestation of Customer Value
• Price – firm’s assessment of the product’s value
• Price Sensitivity – sales change with price• Satisfaction – Indicated in surveys used as
standard practice• Complaints and Compliments – Number• Word-of-Mouth – Difficult to track
Dr. A. Kaul
336. Why
Customers Prefer a Product?
6. Why Customers
Prefer a Product?
• Margin/Profit Contribution – Higher margins• Sales – Value assessed by the market• Competitive Activity – New-product
introductions• Repeat Purchase Rate – High loyalty indicates
high brand value
Dr. A. Kaul
336. Why
Customers Prefer a Product?
6. Why Customers
Prefer a Product?
Assessing Value of theProduct Category
• Determine the uses of the product• Estimate the importance of the uses• List competing products for the uses• Determine the relative effectiveness of the
product category in each usage situation
Dr. A. Kaul
336. Why
Customers Prefer a Product?
6. Why Customers
Prefer a Product?
Assessing the Value of he Brand/Product/Service
• Assessing the total value of a brand can be done indirectly
• A high-value brand has:High Market ShareHigh Repeat Purchase RateLow Elasticity with respect to PriceLimited Competitive Brand Shopping
Dr. A. Kaul
336. Why
Customers Prefer a Product?
6. Why Customers
Prefer a Product?
• Using customer responses to estimate the value of a brand directly:
Ratings for competing productsConstant sum ratings across brandsGraded paired comparisonsConjoint analysis
Dr. A. Kaul
336. Why
Customers Prefer a Product?
6. Why Customers
Prefer a Product?
Customer Response
• Sensitivity and Preference Varies by Customer:
To Price – and to means of paymentDistribution and Availability – including
the effect of direct marketingAdvertisingPromotionService
Dr. A. Kaul
7. How Customers Respond to Marketing Programs?
7. How Customers Respond to Marketing Programs?
33
Assessing Sensitivity
• Expert Judgment – using knowledge of managers, sales-force
• Customer Survey – including both direct questioning and more subtle approaches as conjoint analysis
• Experiments – both controlled settings and actual market segments
• Analyses of Past Data – across market segments or individual customer records
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33
7. How Customers Respond to Marketing Programs?
7. How Customers Respond to Marketing Programs?
Decision to Purchase
• Critical Issue – whether new or current customer will purchase the product in the future
• Quality Program – satisfy and retain customers
• Relationship Marketing – long-term, lifetime, value of a customer
Dr. A. Kaul
8. Why Customers
Buy It (Again?)
8. Why Customers
Buy It (Again?)
33
Quality - Satisfaction
• Quality is ultimately measure in terms of customer satisfaction
• Satisfaction has a strong relative component to quality
Are customers of the product category more or less satisfied than those of a different but potentially substitutable one?
Are customers of the company’s product more or less satisfied than customers of a competitor’s?
Dr. A. Kaul
33
8. Why Customers
Buy It (Again?)
8. Why Customers
Buy It (Again?)
Measurement ofSatisfaction
• Three Key AspectsExpectations of Performance/QualityPerceived Performance/QualityThe Gap between Expectations and
Performance
Dr. A. Kaul
33
8. Why Customers
Buy It (Again?)
8. Why Customers
Buy It (Again?)
• Indirect MeasuresWord-of-Mouth CommentsComplaintsComplimentsRepeat purchase – or lack thereof
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33
8. Why Customers
Buy It (Again?)
8. Why Customers
Buy It (Again?)
Why Satisfaction?
• Leads to Loyalty• Customer Retention• Intention to Purchase
Dr. A. Kaul
33
8. Why Customers
Buy It (Again?)
8. Why Customers
Buy It (Again?)
• Satisfied but No Repurchase Due to Poor Product SupplyVariety Seeking or Multiple SourcingLarge Promotional Deals
• Unsatisfied but Continue to PurchaseMonopolyConvenience
Dr. A. Kaul
33
8. Why Customers
Buy It (Again?)
8. Why Customers
Buy It (Again?)
Segmentation
• Each Customer is Unique• Mass Marketing is Generic• Each Customer Strategy
Time-ConsumingNot Very Profitable
• Group Customers into Segments• A Compromise
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33
• Insights into Different Kinds of Customer Behavior
• Makes Marketing Programs more Efficient• With IT one-to-one Marketing is Viable• But Segmentation is the Norm
Dr. A. Kaul
SegmentationSegmentation
33
Criteria for Segmentation
• Sizeable• Identifiable• Reachable• Respond Differently• Coherent• Stable
Dr. A. Kaul
33
Methods for MarketSegmentation
• Simple to Apply, Easy-to-Use software, and require Descriptive and Behavioral Data
Cluster AnalysisTabular AnalysisRegression Analysis
Latent Class Analysis
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33
Cluster Analysis
• Examines the values of the variables for each respondent , from a sample of customers, and then groups the respondents with similar values
PurchaseQuantity
Age
Dr. A. Kaul
AA
BB
CC
Cluster
Cluster
Cluster
33
• Phone company employed Cluster Analysis to understand its regional customers
• Six segments based on clustering householdsLow Income/Blue Collar – FledglingsFrugal/Retired – ThriftiesContended Middle Class – ContentedsAspiring M-C Status Seekers – ClimbersTechnology –Driven Strivers – TechiesContended Upper Middle-Class - Executives
Dr. A. Kaul
Cluster AnalysisCluster Analysis
33
• Industrial-products company segmented its national accounts based on trade-offs between price and service to form four segments
Programmed Buyers – small customer, routine purchases
Relationship Buyers – small buyers, loyal, pay low prices and obtain high service levels
Transaction Buyers – large buyers, obtain price discounts, expect high service levels,
switch suppliersBargain Hunters – large buyers, lowest prices,
highest service levels
Dr. A. Kaul
Cluster AnalysisCluster Analysis
33
Tabular Analysis
• This analysis uses categorical variables based on customer responses
• Descriptor Variables – related to attitude, independent variables
Convenience OrientedEnthusiasticDisinterested
• Behavioral Variables – dependent variablesSmall/Light, Medium, Large/Heavy
Dr. A. Kaul
Also Called Cross-Tabular
Analysis
Also Called Cross-Tabular
Analysis
33
Regression Analysis
• Is used when the product manager can specify an explicit relationship between behavioral, dependent variable, and one or more descriptor, independent variable
• However, unlike tabular analysis it assumes a continuously measured dependent variable, quantity rather than category of usage
Dr. A. Kaul
33
• Usage = f (price, convenience oriented, enthusiastic, disinterested, low, medium, high income)
• Regression performed using regression coefficients to represent the regression model in an equation form
• U = aP + bC + cE + eD + fL + gM + hH
Dr. A. Kaul
Regression Analysis
Regression Analysis
33
• Results may suggest:Price sensitivity depends on various
service characteristics – quality, support
Price responsiveness exists across counties and continents – segmentation based n responsiveness rather than country
boundaries are useful for global marketing
Dr. A. Kaul
33
Regression Analysis
Regression Analysis
Latent Class Segmentation
• Begins with the market as a whole and then determines what segmentation pattern best trades off few segments and the ability to explain behavior
• The previous methods begin with individuals and then aggregate them
• Is recent, intriguing, requires sophistication – not widely used
Dr. A. Kaul
33
Judgment-BasedSegmentation
• Useful because segments are readily identifiable and reachable
Heavy, Light, Non-Users• Can be used as a basis for comparison with
results of computer-based analysis• Segments based on intuition may exist only in
the mind of a manager and not in the market
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33
Environmental Influences On Consumer Behavior
33
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Consumer Motivation - Maslow’sHierarchy of Needs
33
Dr. A. Kaul
Consumer Decision-MakingProcess
Problem Recognition
Information Search
Alternative Evaluation
Purchase Decision
Post-Purchase
Evaluation
33
Dr. A. Kaul
Consumer’s InternalPsychological Processes
Motivation Perception Attitude Formation Integration Learning
33
Dr. A. Kaul
Percentage of Users Loyal toOne Brand in the Category
Product %
Toothpaste 61Automobile 47Perfume/After Shave 46Shampoo 44Soft Drink 44Athletic Shoes 27
33
Dr. A. Kaul
Consumer Attitude
• Important to Marketers• Summarize a Consumer’s Evaluation of a
Brand or Company• Represent Positive or Negative Feelings• Are Related to Consumer’s Purchase Behavior
33
Dr. A. Kaul
Demand Analysis
• Three Broad Categories of DemandEffective – demand backed by purchasing
powerPotential – customer possesses
purchasing power but is not currently buying
Latent – one which the customer is unable to satisfy, usually for lack of purchasing power, or availability
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33
Classic Demand Curve
Price
Quantity
Dr. A. Kaul
33
Economic Assumptions of Consumer Demand
• The Consumer wants remain unchanged• Has a fixed amount of money available• Is one of many buyers• Knows the price of all good, which are
homogeneous• If wishes, spends money in very small
amounts• Acts rationally
Dr. A. Kaul
33
General DemandInfluencers
• Three broad FactorsDemographics – effective demand is
related populationBuyer Behavior – demand reflects the
aggregate needs and wants of individuals in the population
Availability – supply and channels of distribution
Price
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33
Decline in Demand
• The reduction in promotional support will often lead to contraction in overall demand as the product loses the front-of-mind awareness, stimulated by advertising, so that usage will gradually decline
Dr. A. Kaul
33
Dr. A. Kaul
New Product Development• Slightly New Products - Modification
Change of IngredientsAdding FeaturesResembling Competitor Products
• New ProductsOffensive – gain sales or shareDefensive – match or block competitors
• Really New ProductsCreate/Expand a New Category
44
Dr. A. Kaul
Development Stages
1. Idea Generation2. Concept Development3. Feasibility Screening4. Concept Testing5. Product Development6. Product Testing7. Market Testing8. Go-No Go Decision
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44
Model for New ProductDevelopment
Dr. A. Kaul
Company ObjectiveCompany Objective
ExplorationExploration
Product SuccessProduct Success
ScreeningScreening
Business AnalysisBusiness Analysis
DevelopmentDevelopment
TestingTesting
CommercializationCommercialization
The Booz, Allen and Hamilton Model
1,2
3,4
5
6,7
8
44
Business Analysis
• First Major Decision StageIs venture potentially worthwhile, since expenditures will increase dramatically after this stage?
Market AnalysisExplicit StatementExplanation
Dr. A. Kaul
Model for New Product Development
Model for New Product Development
44
Market AnalysisDetailing potential total marketEstimated market share with specific
time horizonCompeting products if anyLikely price, break-even volumeIdentification of early adopters, specific
market segments
Dr. A. Kaul
Business AnalysisBusiness Analysis
44
Explicit StatementTechnical AspectsCostsProduction ImplicationsSupplier ManagementFurther R&D
Dr. A. Kaul
Business AnalysisBusiness Analysis
44
ExplanationHow the Project Fits with Corporate
Objectives?
Dr. A. Kaul
Business AnalysisBusiness Analysis
44
Commercialization
• The Second Major Decision Stage is the Commercialization Stage – Launch Stage
• Last Stage in the Development Cycle• Decisions to be made:
When to launch the product?Where to launch it?How and to whom to launch it?
Dr. A. Kaul
44
ImportantConsiderations
• Seasonality of the product• Whether the launch should fit any trade or
commercialization event• Whether the new product is a replacement for
the old one• Whether it is advantageous to be first to market• Launch location• Launch strategy
Dr. A. Kaul
CommercializationCommercialization
44
Line Extension
• Line ExtensionProduct variant in the same category
using the existing brand name
Dr. A. Kaul
44
• Line ExtensionAllow Full Line of ProductsAppeal to Multiple SegmentsIncrease Potential Sales – customer baseAllow Price Discrimination – among
users with different needs and preferences
Can Confuse CustomersCan Dilute/Weaken Brand Equity
Dr. A. Kaul
Line Extension
Line Extension
44
Brand Extension
• Brand ExtensionProduct in a different category using the existing brand name
Dr. A. Kaul
44
• Brand ExtensionRiskier than Line ExtensionsBrand must Fit in the New CategoryImage Match
Dr. A. Kaul
Brand Extension
Brand Extension
44
• Brand Risk/Fit/Image
Pepsi Tofu – artificial drink doesn’t go with natural food
IBM Pens – why would they bother?; what do know about making pens?
Minute Maid Cranberry Juice – don’t they make this
already?
Dr. A. Kaul
Brand Extension
Brand Extension
44
Tide Facial Cleanser – makes me think of sandpaper rubbing on my skin
McDonald’s Film Processing – I see chemicals in my food
Dr. A. Kaul
Brand Extension
Brand Extension
44
Really New Products
• Create or Expand a New Category• Are New to Customers• Raise Issues of Channels of Distribution and
Organizational Responsibility• May Create a Need for Infrastructure
Dr. A. Kaul
44
Examples of ReallyNew Products
• Consumer GoodsPackaged Goods – bottled tea, frozen
vegetablesDurable Goods – microwave ovens,
rooms air conditioners• Industrial Products – microprocessor chips,
mobile phones• Services – ATM’s, credit cards, Internet
Dr. A. Kaul
44
Getting Ideas for NewProducts
• Customer Analysis – surveys of attitudes and attribute importance – unstructured (focus groups) – structured (conjoint analysis)
• Competitor Analysis – most new products are copies of competitors’ products
Dr. A. Kaul
44
• Active Search – new products and processes in other areas
• Category Analysis –examining social trends, technologies
• Brainstorming – generating ideas for new products can be difficult
Dr. A. Kaul
Getting Ideas for
New Products
Getting Ideas for
New Products
44
• Brainstorming
New Market/Customer Acquisition – who else can we sell it to?
Customer Expansion – what else can we sell them?
Dr. A. Kaul
44Getting
Ideas for New
Products
Getting Ideas for
New Products
Product Variants/Line extensions – what different features can we add or replace
Value Chain Changes – how else can we get it to the customer?
Dr. A. Kaul
BrainstormingBrainstorming
44
Getting Ideas for Really New Products
• Similar to New Products but with a certain radical quality
Asking or listening to dissatisfied customers
Asking non-representative customersOpen-ended qualitative surveysInvolving customers as co-developersListening to newcomers and non-expertsScanning the literature
Dr. A. Kaul
44
Testing New Products
• Concept TestingSurveys – useful for forecastingFocus Groups – detailed diagnosisDemonstrations – present the concept
• Product Testing• Market Testing
Dr. A. Kaul
44
• Product Testing1. Product Tests
Uncover product shortcomingsEvaluate commercial prospectsEvaluate alternative formulationsUncover the appealGain ideas for marketing-mix
Dr. A. Kaul
Testing New
Products
Testing New
Products
44
Types of Product Tests
Small Samples – employeesLimited-Time Horizon – forced-trialPlacement of Product in Homes -
elaborate
Dr. A. Kaul
Product TestingProduct Testing
44
2. Discrimination and Preference TestingDiscrimination is the ability to correctly identify differences from the product alone, without cues such as brand name and ingredients
Preference can be the result of true discrimination or of random guessing
Dr. A. Kaul
44
3. Market TestingThe purpose of such tests is to predict
sales and profits from a major product launch
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44
‘Practice’ so that marketing, distribution, and production skills are developed before entering full-scale operations
Projections are made for both share and actual sales
Dr. A. Kaul
Market TestingMarket Testing
44
Test Design RequirementsAction StandardsWhere to TestWhat to DoHow LongCostInformation Gathering
Dr. A. Kaul
Market TestingMarket Testing
44
4. Quasi-Market TestsMarket tests tend to be expensiveThey take time and tip off competitors
Simulated Test MethodsASSESORBASESLITMUS
Dr. A. Kaul
44
Evaluation Criteria for ReallyNew Products
• Customer LevelDo customers like it?Is it unique?Will they buy it?How soon/fast will they buy it?
Dr. A. Kaul
44
• Firm Level1. Does it add to our customer base through
Acquisition?ExpansionLoyalty/retention?Enhanced brand equity?
Dr. A. Kaul
Evaluation Criteria for Really New
Products
Evaluation Criteria for Really New
Products
44
2. Does it detract from our customer base through
Cannibalization?Customer defections?Lowered brand equity?
Dr. A. Kaul
Evaluation Criteria for Really New
Products
Evaluation Criteria for Really New
Products
44
3. Do we have the capabilities toDevelop it?Produce it?Distribute and sell it?Buy or partner to do the above?
Dr. A. Kaul
Evaluation Criteria for Really New
Products
Evaluation Criteria for Really New
Products
44
4. Will it be profitableOn a stand-alone basis?Long-run impact on product line?
5. Are there other benefits associated with itLearning/capability enhancement?PR?
Dr. A. Kaul
Evaluation Criteria for Really New
Products
Evaluation Criteria for Really New
Products
44
6. Are there other costs associated with it?Legal liability?PR?
7. Can we control the market in the short and long-run
Against the new entrants?Against the entire competition?
Dr. A. Kaul
Evaluation Criteria for Really New
Products
Evaluation Criteria for Really New
Products
44
Typical Penetration For NewBrand Over Time
Penetration, %
Time
Dr. A. Kaul
Ultimate Penetration Level – 45%
44
Typical Repeat Rate For NewBrand Over Time
Repurchase, %
Time
Dr. A. Kaul
Ultimate Repeat Rate – 15%
44
Role of Product DevelopmentManager
• Manages the entre process• Need for interdisciplinary inputs• Need to develop product advantage• Need for speed in the process• Need to manage the information flow• Need to manage the people
Dr. A. Kaul
44
Factors Affecting Success
Dr. A. Kaul
Successful New ProductSuccessful New Product
ProcessTimingPre-Development ActivitiesDevelopment ActivitiesMarketing ActivitiesLaunch Activities
ProcessTimingPre-Development ActivitiesDevelopment ActivitiesMarketing ActivitiesLaunch Activities
PeopleMultifunctionalCoordinationProduct ChampionCommunication
PeopleMultifunctionalCoordinationProduct ChampionCommunication
StrategyClear ObjectivesInnovation CultureTechnology/MarketingSynergy/Risk
StrategyClear ObjectivesInnovation CultureTechnology/MarketingSynergy/Risk
InformationMarketingExternalCommunicationTechnical
InformationMarketingExternalCommunicationTechnical
ManagementTop CommitmentSet Cultural ClimateTechnology SupportInter-Level Communication
ManagementTop CommitmentSet Cultural ClimateTechnology SupportInter-Level Communication
Organizational StructureFlexibleParticipativeInterdisciplinary TeamsFace-to-Face CommunicationsNon-Hierarchical
Organizational StructureFlexibleParticipativeInterdisciplinary TeamsFace-to-Face CommunicationsNon-Hierarchical
44
Sony
• Has lost its leading-edge in new product development ,and in bringing new products to market
• What are the reasons?
Dr. A. Kaul
• Apple’s iPod• Samsung’s flat screen TV’s• Korean digital cameras• Chinese pen drives and multimedia players
These companies and sources continue to push Sony out of its core consumer electronics market
Dr. A. Kaul
SonySony
• This problem is partly due to Sony’s corporate culture,where business units are run separately, discouragingagility, cross fertilization, and anticipation of consumer needs
Dr. A. Kaul
Dr. A. Kaul
Brand vs. Product, Brand Elements 55
Dr. A. Kaul
What is a Brand?
• A brand is a name, terms, sign, symbol, design, or a combination intended to identify goods or services of a firm and differentiate them from the competitors
55
Dr. A. Kaul
What is a Brand?
• Name a: Why?CompanyProductService
55
Dr. A. Kaul
A Brand Conveys:
• A Promise• A Warranty
55
Dr. A. Kaul
Brands – 6 Levels ofMeaning
1. Attributes – Expensive, Durable , Well-Engineered2. Benefits – Expensive Prestige, Status
Durability Long Lasting Well- Eng. Safety
3. Values – Seller’s Matches Buyer’s4. Culture – Firms Culture Quality5. Personality – Motorcycles Swift, Agile
Animal6. User – Type of Customers Demographics
55
Dr. A. Kaul
Brand Meaning• Deep
Positioning On:ValuesCulturePersonality
• ShallowPositioning Just On:
AttributesBenefitsUsers
55
Dr. A. Kaul
Using BDI and CDI Indexes
BDI
CDI
HIGH LOW
HIGHHigh Market Share
Good Market Potential
Low Market ShareGood Market
Potential
LOWHigh Market ShareMonitor for Sales
Decline
Low Market Share Poor Market
Potential
55
Dr. A. Kaul
Using BDI and CDI Indexes
BDI
CDI
HIGH LOW
HIGHGood Sales
Potential for both Product Category
and the Brand
Category shows High Potential but Brand is not doing well, the Reasons
should be Determined
LOWThe Category is not
selling well, but Brand is, good
market to advertise but Monitor for
Sales Decline
Both Category and Brand are doing
Poorly, not a good area for Advertising
55
Dr. A. Kaul
Levels of Relationshipswith Brands
66
Dr. A. Kaul
Creating a Brand Image
• Competing Brands are Similar• Difficult to Find a Unique Attribute or Benefit• Differentiation on Functional or Performance
Basis not Easy
77
Dr. A. Kaul
Creating a Brand Image
• Develop Strong, Memorable Identity for the Brand through Image Advertising
• Image or Personality of the Brand is Particularly Important when the Brands are Similar
77
Dr. A. Kaul
Brand Equity
• Brand Equity is the value of a product beyond that explainable by economic and functional attributes
• Brand equity represents value to the manufacturer and is represented by the premium a customers would pay for one product over another when economic and functional attributes are identical
88
Dr. A. Kaul
Measuring Brand Equity
• At the Customer Level:Awareness – Necessary for purchaseAssociations – Reactions to the brandAttitude – Favorability, acceptabilityAttachment – Loyalty to the brandActivity – Spreading positive word
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88
Manifestation of Customer Value
• Price – firm’s assessment of the product’s value
• Price Sensitivity – sales change with price• Satisfaction – Indicated in surveys used as
standard practice• Complaints and Compliments – Number• Word-of-Mouth – Difficult to track
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88
• Margin/Profit Contribution – Higher margins• Sales – Value assessed by the market• Competitive Activity – New-product
introductions• Repeat Purchase Rate – High loyalty indicates
high brand value
Dr. A. Kaul
88
India’s Trusted Brands1. Colgate2. Lux3. Dettol4. Pond’s5. Tata Salt6. LIC7. Vicks8. Britannia9. Rin10. Bata
88
Dr. A. Kaul
The World’s Most ValuableBrands
Rank Brand Brand Value,$B
1 Coca-Cola 672 IBM 593 Microsoft 594 GE 535 Nokia 366 Toyota 347 Intel 318 McDonald’s 319 Disney 2910 Google 26
88
Dr. A. Kaul
Top 20 BrandsRank Brand Brand Value, $B11 Mercedes Benz 2612 HP 2313 BMW 2314 Gillette 2315 American Express 2216 Louis Vuitton 2217 Cisco 2118 Marlboro 2119 Citi 2020 Honda 19
88
Dr. A. Kaul
Coca-Cola Brands88
Dr. A. Kaul
Factors Affecting BrandEquity
BRAND EQUITYName
Symbol
BRAND EQUITYName
Symbol
BRAND LOYALTYBRAND
LOYALTY
NAME AWARENESS
NAME AWARENESS
BRAND ASSOCIATIONS
BRAND ASSOCIATIONS
PERCEIVED QUALITY
PERCEIVED QUALITY
BRAND ASSETSBRAND ASSETS
VALUE TO CUSTOMEREasier to Interpret
BenefitsFeel Confident in the
Purchase DecisionGet more Satisfaction
in Use
VALUE TO CUSTOMEREasier to Interpret
BenefitsFeel Confident in the
Purchase DecisionGet more Satisfaction
in Use
Value to FirmBRAND LOYALTY
Efficient and Effective Marketing
ProgramsPrice/Margins
Brand ExtensionsTrade Leverage
Competitive Advantage
Value to FirmBRAND LOYALTY
Efficient and Effective Marketing
ProgramsPrice/Margins
Brand ExtensionsTrade Leverage
Competitive Advantage
88
Dr. A. Kaul
Brand Positioning
• Is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market
99
Dr. A. Kaul
Positioning Strategy
• Competitive Frame of ReferenceMOOV, back pain for women
• Points–of–DifferenceFedEx, overnight delivery nationally
• Points–of–ParitySavlon, antiseptic no sting
• Redefining CategoryBMW, both luxury and performance
99
Dr. A. Kaul
Introductory BrandingStrategy
PROMOTION
PRICE
HIGH LOW
HIGHRapid
Skimming(Profits)
SlowSkimming(Profits)
LOWRapid
Penetration(Profits in Short-
Term)
SlowPenetration
(Profits in Long-Term)
99
Dr. A. Kaul
Perceptual or PositioningMap
High Quality F A
DLow HighPerformance C B Performance
Low Quality
99
Dr. A. Kaul
4P Marketing Mix – 4A Rural Challenges
4Ps 4As
Product AcceptabilityPrice AffordabilityPlace AvailabilityPromotion Awareness
99
Dr. A. Kaul
Elements of PromotionalMix
• Advertising• Sales Promotion• Publicity and Public Relations• Personal Selling• Direct Marketing• Internet Marketing
99
Dr. A. Kaul
Corp. Marketing Dept. –Centralized
Marketing
ProductPlanning Advertising Sales
PromotionMarketing Research
99
Dr. A. Kaul
Marketing Services
Corp. Marketing Dept. –Decentralized
Marketing
SalesProduct
Management
Brand Manager
Brand Manager
AdvertisingDepartment
Marketing Research
Marketing Services
99
Dr. A. Kaul
Brand Manager
• Responsible for Ad and Promotions• Works closely with Outside Ad Agency and
other Marketing Communication Specialists• May have own Ad Agency• May Compete with other, even in the same
Product Category
99
Dr. A. Kaul
Concrete Objectives –Foster’s Beer
• Strengthen the Brands Image• Maximize Brand Presence• Broaden the Market Base Beyond Traditional
Import Beer Drinkers• Increase Sales
99
Dr. A. Kaul
Positioning
• In the Minds of the Consumer• For Companies as well as Brands• Distinctive Attribute
Price/QualityUsage/ApplicationProduct Users/Class
• Creative Strategy for Multiple Brands in the same Market Segment
99
Dr. A. Kaul
Top 10 Advertising Slogansof the Century
Company/Brand Campaign Theme1. DeBeers Diamonds are forever 2. Nike Just do it3. Coca-Cola The pause that refreshes4. Miller Lite Tastes great, less filling5. Avis We try harder6. Maxwell House Good to the last drop7. Wheaties Breakfast of champions8. Clairol Does she…..or doesn’t she9. Morton Salt When it rains it pours10.Wendy’s Where’s the beef?
99
Dr. A. Kaul