PRODUCT STRATEGY AND BRANDING Professor Chip Besio Cox School of Business Southern Methodist University

WHAT ARE PRODUCTS AND SERVICES? GOODS, SERVICES, AND IDEAS  Good  Services Nondurable Goods Durable Goods  Product  Ideas

 Product Item  Product Line  Product Mix Stock Keeping Unit (SKU) WHAT ARE PRODUCTS AND SERVICES? PRODUCT ITEMS, LINES, AND MIXES 10-3

Brand Name Quality Level Packaging Design Features Delivery& Credit Installation Warranty After- Sale Service Core Benefit or Service Core Benefit or Service Actual Product Core Product Augmented Product Source: Prentice Hall WHAT IS A PRODUCT?

How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions

Stages of the product life cycle and its total industry sales and total industry profit

How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions

CHARTING THE PRODUCT LIFE CYCLE INTRODUCTION STAGE  Primary Demand  Selective Demand  Skimming Strategy  Penetration Pricing

Product life cycle for the stand-alone fax machine for business use:

CHARTING THE PRODUCT LIFE CYCLE GROWTH STAGE  Rapid Sales Growth  Repeat Purchasers  New Features  Broad Distribution  More Competitors

CHARTING THE PRODUCT LIFE CYCLE MATURITY STAGE  Product Differentiation  Fewer Competitors  Industry/Product Sales Slow  Profit Declines

CHARTING THE PRODUCT LIFE CYCLE DECLINE STAGE  Deletion  Harvesting  Environmental Changes  Industry/Product Sales Drop

CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS  Length of the Product Life Cycle  Shape of the Product Life Cycle Generalized Life Cycle High-Learning Product Fashion Product Fad Product Low-Learning product

Alternative product life cycle curves based on product types

 The Product Level: Class and Form Product Class Product Form CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS

Prerecorded music product life cycles by product form

 The Life Cycle and Consumers Diffusion of Innovation  Innovators  Early Adopters  Early Majority  Late Majority  Laggards CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS

Five categories and profiles of product adopters (diffusion of innovation)

 The Life Cycle and Consumers Barriers to Adoption  Usage  Value  Risk  Psychological CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS 11-19

MANAGING THE PRODUCT LIFE CYCLE ROLE OF A PRODUCT MANAGER  Product/Brand Manager Responsibilities Product Life Cycle Marketing Program Implementation New Product Development Data Analysis  CDI  BDI 11-20

MANAGING THE PRODUCT LIFE CYCLE MODIFYING THE PRODUCT OR MARKET  Product Modification Product Bundling New Characteristics  Market Modification Finding New Customers Increasing a Product’s Use Creating a New Use Situation 11-21

MANAGING THE PRODUCT LIFE CYCLE REPOSITIONING THE PRODUCT  Product Repositioning  Reaching a New Market  Reacting to a Competitor’s Position  Catching a Rising Trend 11-22

The Milk Processor Education Program What factor triggered its repositioning? 11-23

 Changing the Value Offered Trading Up Trading Down Downsizing MANAGING THE PRODUCT LIFE CYCLE REPOSITIONING THE PRODUCT 11-24

 Branding  Brand Name Logotype (Logo) Product Counterfeiting BRANDING AND BRAND MANAGEMENT  Trade Name  Trademark ® ™ 11-25

 Brand Personality  Brand Equity BRANDING AND BRAND MANAGEMENT BRAND PERSONALITY AND BRAND EQUITY Provides a Competitive Advantage Consumers Willing to Pay a Premium 11-26

GATORADE: QUENCHING THE ACTIVE THIRST WITHIN YOU

Göt2b Hair Products and Degree Deodorant What are their brand personalities?

The customer-based brand equity pyramid

BRANDING AND BRAND MANAGEMENT BRAND PERSONALITY AND BRAND EQUITY  Creating Brand Equity Develop Positive Brand Awareness Establish a Brand’s Meaning Elicit the Proper Response Create Intense Brand Loyalty

 The value your customers perceive to be uniquely associated with your brand AwarenessAssociations = Awareness + Associations  Awareness –Recall –Recognition  Associations –Perceived Quality –Image BRAND EQUITY

BRAND AWARENESS RECOGNITION

Free publicity in the Wall Street Journal BRAND AWARENESS RECOGNITION

 Essential for memory-based choice and customer-initiated contact Order of Recall (movie data) 0% 5% 10% 15% 20% 25% 30% 35% Recalled 1st (top of mind) Recalled 2nd or 3rd Recalled 4th or 5th Recalled 6th or 7th Recalled 8th or 9th Percent seeing film before 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Percent seeing film after Seen before recallSeen after recall Source: Wes Hutchinson BRAND AWARENESS RECALL

Profitability (ROI): PERCEIVED RELATIVE QUALITY inferiormoderatesuperior RELATIVEhigh21%27%38% MARKETmedium14%20%29% SHARE low7%13%20% SOURCE: PIMS (Profit Impact of Market Strategies; based on 2,200 business units) Future Profitability (Stock Price): Stock Price = f(ROI, perceived quality) * ROI and perceived quality exert approximately equal effects * SOURCE: Aaker, D. A. and R. Jacobson (1994; based on daily measures of NYSE, AMEX, and NASDAQ). BRAND ASSOCIATIONS PERCEIVED QUALITY

 Brand image is the integration of all experiences with and information about a brand as perceived and remembered by customers The whole is more than the sum of its parts easy to create impossible to change  Brand image is relative easy to create, but almost impossible to change! BRAND ASSOCIATIONS IMAGE

Brand loyalty - the probability of choosing a brand given that you are a user of that brand - can result from:  Inertia  Inertia: the general tendency to repeat previous purchases due to high switching costs, convenience, or habit  Preference  Preference: an enduring preference for a brand over and above what would be expected based on the benefits derived from the product or from a long-term relationship with the brand BRAND EQUITY  BRAND LOYALTY

 In 1983, six people in Chicago died of cyanide poisoning from tampered TYLENOL capsules. J&J reacted quickly and appropriately withdrawing all capsules from the market. Tylenol shared dropped only from 37% to 35% and eventually recovered completely. BRAND LOYALTY AN EXAMPLE

Brands PriceMarket Share Toothpastes (6 oz.) Price PremiumShare Premium Crest$2.19$ %17.3% Colgate$2.19$ %12.2% Aqua-fresh$2.19$ %6.6% Close-Up$2.14$ %8.0% SOURCE: Park, C. S. and V. Srinivasan (1994; based on survey results) BRAND EQUITY  BETTER BUSINESS RESULTS

Brands PriceMarketShare Mouthwashes (24 oz.)Price Premium Share Premium Scope$3.83$ %13.7% Listerine$3.79$ %11.1% Close-Up$5.02$.232.3%.8% Plax$4.29$ %3.4% Colgate$5.22$.101.4%.2% SOURCE: Park, C. S. and V. Srinivasan (1994; based on survey results) BRAND EQUITY  BETTER BUSINESS RESULTS

BRANDING AND BRAND MANAGEMENT BRAND PERSONALITY AND BRAND EQUITY  Valuing Brand Equity Provides a Financial Advantage Brand Licensing

BRANDING AND BRAND MANAGEMENT PICKING A GOOD BRAND NAME  Should Suggest Product Benefits  Should Fit the Company or Product Image  Should Be Memorable and Positive  Should Have No Legal or Regulatory Restrictions  Should Be Simple and Emotional

ALTERNATIVE BRANDING STRATEGIES

BRANDING AND BRAND MANAGEMENT BRANDING STRATEGIES  Multiproduct Branding (Family or Corporate Branding) Product Line Extensions Subbranding Brand Extension Co-Branding

BRANDING AND BRAND MANAGEMENT BRANDING STRATEGIES  Multibranding Fighting Brands  Private Branding (Private Labeling or Reseller Branding)  Mixed Branding

Line Extension Multi-brand Brand Extension New Brand Brand Name Currently ServedNew Product Category Existing New Source: Prentice Hall BRANDING STRATEGY

 Line Extension –Existing brand names extended to new forms, sizes, and flavors of an existing product category  Brand Extension –Existing brand names extended to new product categories  Multi-brands –New brand names introduced in the same product category  New Brands –New brand names in new product categories Source: Prentice Hall BRANDING STRATEGY

Kimberly-Clark’s Huggies What branding strategy is used?

Black & Decker and DeWalt Tools What branding strategy does each use?

 Attributes  Packaging  Labeling  Product Support INDIVIDUAL PRODUCT STRATEGY DECISIONS

FeaturesFeatures DesignDesign Source: Prentice Hall QualityQuality PRODUCT ATTRIBUTES WHERE DO THEY COME FROM?

PACKAGING AND LABELING PRODUCTS CREATING CUSTOMER VALUE AND COMPETITIVE ADVANTAGE  Packaging  Label  Communication Benefits  Functional Benefits  Perceptual Benefits

PromotesIdentifies Competitive Advantages Describes Sales Tasks Product Safety Packaging Labeling Packaging Labeling Source: Prentice Hall PACKAGING

“?” and Heinz Ketchup What are the packaging benefits for each?

Lay’s STAX, Pringles and Celestial Seasonings What are the packaging benefits for each?

PACKAGING AND LABELING PRODUCTS PACKAGING AND LABELING CHALLENGES AND RESPONSES  Environmental Concerns  Health, Safety, and Security Issues  Cost Reduction  Connecting with Customers Shelf Life

BRANDING AND BRAND MANAGEMENT  Warranty Express Warranties Limited Coverage Warranties Full Warranties Implied Warranties

Product Mix - all the product lines offered Product Mix - all the product lines offered Variety Variety - number of different product lines Assortment Assortment - number of items within product lines Assortment Assortment - number of items within product lines PRODUCT MIX