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- 1. Product & Brand Management (50) Dr. A. Kaul
- 2. Syllabus 1. Introduction to Product Management 2. Role and Operation of Product Management in Marketing 3. Product Analysis: Category/Competition/Customer/Demand 4. New Product Development – Process and Role of Product Manager 5. Brand vs. Product, Brand Elements Dr. A. Take Notes
- 3. Syllabus Syllabus 6. Brand Extension/Brand Relationships Spectrum 7. Brand Identity 8. Brand Equity 9. Brand Building Strategies Dr. A. Take Notes
- 4. Reference Texts 1. Product Management – Lehmann 2. Strategic Brand Management – David Aaker 3. Strategic Brand Management – Noel Kapferer 4. Building Strong Brands - Keller Dr. A. Take Notes
- 5. Introduction to Product 11 Management • 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 Dr. A.
- 6. 11 • What type of Products are Marketed? Physical Goods – Cars, Shampoos Services – Financial, Repair Persons – Movie Stars, Political Leaders Places – Switzerland, Nanital Organizations – Girl Scouts, Political Parties Ideas – Family Planning, Driving in Single Lanes Dr. A.
- 7. 11 Product Classification • Products are classified into 3 groups according to their durability and tangibility Non-Durable – Few uses – soaps, salt Durable – Many uses – clothing, cooking range Services – Intangibles – banking, brokerage Dr. A.
- 8. 11 Consumer Goods • Convenience Goods Frequently used, purchased with minimum effort – bread, cooking oil • Shopping Goods Purchased less often, comparison on price, quality, and style – TV, Mobile Phone Dr. A.
- 9. 11 Consumer Consumer Goods Goods • Specialty Goods Purchased as desired, branded products – anti-aging cream, shampoos • Unsought Goods Purchased on perceived need, can do without – food processor, water filter Dr. A.
- 10. 11 FMCG • Fast Moving Consumer Goods (FMCG) Groceries Snacks Detergent Hair Oil Dr. A.
- 11. 11 Industrial Goods • Capital Goods Plant Equipment, Computers • Materials and Parts Plastics, Auto Parts • Supplies Paper, Toner • Business Services Market Research, Patent Services Dr. A.
- 12. 11 Product-Focused Organization Head of Company/ Division Corporate Manufacturing Marketing Finance Communications Marketing Marketing Product Product Support Support Research Research Management Management Manager Manager Manager Manager Manager Manager Product A Product A Product B Product B Product C Product C Dr. A.
- 13. 11 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’ Dr. A.
- 14. 11 Characteristics Characteristics • 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 Dr. A.
- 15. 11 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 Dr. A.
- 16. 11 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 Dr. A.
- 17. 11 Examples • P&G • General Foods • Adobe • Ford • Mitsubishi • GM (adopted – 1995, dropped – 2002) Dr. A.
- 18. 11 Market-Focused Organization Head of Company/ Division Corporate Manufacturing Marketing Finance Communications Manager Manager Manager Manager Manager Manager Market A Market A Market B Market B Market C Market C Dr. A.
- 19. 11 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 Dr. A.
- 20. 11 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 Dr. A.
- 21. 11 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 Dr. A.
- 22. 11 Examples • Levi • Bell Dr. A.
- 23. 11 Function-Focused Organization Head of Company/ Division Corporate Manufacturing Marketing Finance Communications Product Product Sales Sales Marketing Marketing Advertising Advertising Planning Planning Promotion Promotion Research Research Dr. A.
- 24. 11 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 Dr. A.
- 25. 11 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 Dr. A.
- 26. 11 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.
- 27. 11 Examples • Intel • Apple • HP Dr. A.
- 28. Dr. A.
- 29. Role and Operation of Product 22 Management in Marketing Dr. A.
- 30. 22 Factors Influencing Competitive Success Environmental Factors Environmental Factors Rate of Technology Change Rate of Technology Change Nature of Competition Nature of Competition Intensity of Competition Intensity of Competition Organizational Factors Organizational Factors Strategic Factors Strategic Factors Size Size Long-term Objectives Long-term Objectives Structure Structure Strategic Time Horizon Strategic Time Horizon Culture Culture Product-Market Strategy Product-Market Strategy Manufacturing Capability Manufacturing Capability Managerial Factors Managerial Factors Marketing Factors Marketing Factors Leadership Style Leadership Style Product Quality Product Quality Communication Communication Customer Service Customer Service Attitude Attitude Market Research Market Research Product or Product or Business Performance Business Performance Dr. A.
- 31. 22 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 Dr. A.
- 32. 22 Potential Interactions of a Product Manager Advertising Advertising Publicity Publicity Agency Agency Media Media Legal Legal Promotion Promotion Services Services Fiscal Fiscal Product Product Manager Manager Packaging Packaging Research Research and and Dev. Dev. Purchasing Purchasing Manuf. Manuf. and and Market Market Distrib. Distrib. Sales Sales Research Research Dr. A.
- 33. 22 Three Levels of a Product Augmented Warranty Warranty Product Tangible Brand Product Brand Core Name Name Product After-Sales After-Sales Core Core Delivery Delivery Service Service Benefit Benefit Features Features And And Packaging Packaging or or Credit Credit Service Service Quality Quality Styling Styling Installation Installation Dr. A.
- 34. Dr. A.
- 35. Product Analysis 33 1. Category 2. Competitor 3. Customer 4. Demand Dr. A.
- 36. 33 1. Category Attractiveness Analysis • Aggregate Category Factors • Category Factors • Environmental Factors Dr. A.
- 37. 33 Aggregate Category Factors • Category Size • Category Growth • Stage in the PLC • Sales Cyclicity • Seasonality • Profits Dr. A.
- 38. 33 Aggregate Aggregate Category Category Factors Factors • Category Size Measured in units and monetary value Will revenues support investment? Large markets are better Large categories offer more opportunities for segmentation Large size tends to draw competitors Dr. A.
- 39. 33 Aggregate Aggregate Category Category Factors Factors • Category Growth Current growth are important Growth projections are crucial Fast-growing support high margins and sustain future profits Attract competitors Cause dramatic shift in market share survivability of product Dr. A.
- 40. 33 Aggregate Aggregate Category Category Factors Factors • Stage in the PLC The introduction stage is unattractive for new entrants The growth stage is attractive The maturity stage may be attractive for some categories The decline is unattractive to new entrants and low market share holders may exit Dr. A.
- 41. 33 Category Attractiveness Aggregate Aggregate Category Category over the PLC Factors Factors Sales Stage Intro. Growth Maturity Decline Years Size Small Moderate Large Moderate Growth Low High Low Negative Attract - Low High Low/ Low ivenes High Dr. A.
- 42. 33 Aggregate Aggregate Category Category Factors Factors • Sales Cyclicity Due to inter-year variation in demand General Economic conditions introduce peaks and valleys in sales as GDP varies Swing in sales, profits, employment, cash available for new product development Dr. A.
- 43. 33 Aggregate Aggregate Category Category Factors Factors • Seasonality Intra-year cycles in sales Clothes, sweets, fire-crackers, and toy sales during festivals Generates price wars Many products are seasonal like cold remedies, skin creams, ice cream Dr. A.
- 44. 33 Aggregate Aggregate Category Category Factors Factors • Profits Vary across products or brands in a category, and over time Inter-industry differences also exist Average profit margins for footwear is about 6%, personal care 20%, and biotechnology 50% Chronic low profitability is less attractive Variation used as industry risk Dr. A.
- 45. 33 Attractiveness of Market Aggregate Aggregate Category Category Factors Factors Factors Attractiveness Factor High Low Category Size + - Category Growth + - Sales Cyclicity - + Seasonality - + Profit + - Profit Variability - + Dr. A.
- 46. 33 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 Dr. A.
- 47. 33 Category Category Factors Factors • Threat of New Entrants If high, attractiveness diminishes In early stages of market development it can help a market to expand Usually it heightens competitiveness and reduces profit margins Offset by setting up barriers to entry Dr. A.
- 48. 33 Category Category Factors Factors 1. Potential Barriers to Entry Economies of Scale Product Differentiation Capital Requirements Switching Costs Distribution Dr. A.
- 49. 33 Category Category Factors Factors • Bargaining Power of Buyers Distributors, 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 Dr. A.
- 50. 33 Category Category Factors Factors • Bargaining Power of Suppliers Is a mirror image of buyer power High if – suppliers are concentrated, no substitutes, differentiated product, built in switching costs, supply is limited Dr. A.
- 51. 33 Category Category Factors Factors • Amount of Intra-category Rivalry Intense category competition is not attractive Escalates marketing expenditures, price, employee switch High 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.
- 52. 33 Category Category Factors Factors • Threat of Substitute Products or Services Large number is less attractive Threat from generics Threat generally in all categories High rates of returns when few Dr. A.
- 53. 33 Category Category Factors Factors • Category Capacity Chronic overcapacity is not a positive sign for long-term profitability Operating at capacity – costs stay low, supplier bargaining power high Indicates health of category Recession may lead to overcapacity Dr. A.
- 54. 33 Porter’s Five Forces Model Category Category Factors Factors Bargaining Bargaining Power of Power of Supplier Supplier Threat of Threat of Threat of Threat of Amount of Amount of New New Substitute Substitute Intra- Intra- Entrants –– Entrants Products or Products or Category Category Barriers to Barriers to Services Services Rivalry Rivalry Entry Entry Bargaining Bargaining Power of Power of Buyer Buyer Dr. A.
- 55. 33 Attractiveness of Category Category Category Factors Factors Factors Attractiveness Factor High Low Threat of New Entrants - + Bargaining Power of Buyers - + Bargaining Power of Suppliers - + Amount of Intra-Category Rivalry - + Threat of Substitute Products or - + Services Unused Capacity - + Dr. A.
- 56. 33 Environmental Factors • Technological • Political • Economic • Regulatory • Social Dr. A.
- 57. 33 Environmental Environmental Factors Factors • Technology If weak – vulnerable to new product and global competition If well positioned – firm can take advantage of change Dr. A.
- 58. 33 Environmental Environmental Factors Factors • Political Affects products with global sales Product manager must assess political risk Free market – affected by political party in power Dr. A.
- 59. 33 Environmental Environmental Factors Factors • Economic Interest rate fluctuations – short-term financing Currency exchange rates – global markets Employment conditions – availability of skilled labor Recession – sales, GDP growth declines Inflation rates – consumer buying power diminishes Dr. A.
- 60. 33 Environmental Environmental Factors Factors • Regulatory Restrict industry from specific media use Stringent testing requirements Air, water, soil pollution Intervene in global competition - dumping Dr. A.
- 61. 33 Environmental Environmental Factors Factors • Social Trends in demographics, lifestyles, attitudes, and personal values Trends affect B2B due to derived demand Young adults Mature consumers Children as consumers Shift of power from seller to consumer Dr. A.
- 62. 33 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.
- 63. 33 Determining the Competitor Set • From Commercial and Government Data • Managerial Judgment – experience, internal sources • Customer-Based Measures – behavioral data • Customer Judgments - surveys Dr. A.
- 64. 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.
- 65. 33 Using Using Customer Customer Judgments Judgments • 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.
- 66. 33 Defining Competitive Set with Perceptual Mapping Formal Desert Formal Desert Moist Moist Needs Refrigeration Needs Refrigeration Long Time to Prepare Long Time to Prepare Tea/Coffee Break Tea/Coffee Break Between Meal Snack Between Meal Snack Easy to Carry Easy to Carry At School/Work At School/Work Dr. A.
- 67. 33 Corporate Intelligence Rank US Company 1 Microsoft 2 Motorola 3 IBM 4 P&G 5 GE, HP 6 Coca-Cola, Intel Dr. A.
- 68. 33 Competitor Analysis Steps • Data Collection • Data Analysis Dr. A.
- 69. 33 Data Secondary Sources of Information Data Collection Collection Internal Internal Newspapers Newspapers Customer Customer Sources Sources Communications Communications Annual Annual Reports Reports Consultants Consultants Patent Patent Filings Filings Trade Trade Press Press Secondary Secondary Financial Audit Financial Audit Data Data Filings Filings Promotional Promotional Literature Literature Business Business Press Press Trade Trade Associations Associations Government Government News News Computer Computer Releases Releases Internet Internet Databases Databases Dr. A.
- 70. 33 Data Primary Sources of Information Data Collection Collection Investment Investment Bankers Bankers Consultants Consultants Sales Sales Force Force Specialized Specialized Firms Firms Primary Primary Data Data Suppliers Suppliers Employees Employees Customers Customers Dr. A.
- 71. 33 Other Sources of Information Data Data Collection Collection • Classified Ads • Trade Shows • Plant Tours • Reverse Engineering • Monitoring test Markets • Hiring Senior Employees Dr. A.
- 72. 33 Competitor Analysis Model Data Data Analysis Analysis Primary Data Primary Data Secondary Data Secondary Data Key Questions Key Questions Who are they? Who are they? What are the competing What are the competing product features? product features? What do they want? What do they want? What is their current strategy? What is their current strategy? Differential Competitor Differential Competitor Advantage Analysis Advantage Analysis Who has the competitive Who has the competitive product advantage? product advantage? Competitor Marketing Plan Competitor Marketing Plan What are they going to do? What are they going to do? Dr. A.
- 73. 33 Data Analysis Questions Data Data Analysis Analysis • 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.
- 74. 33 Product Features/Attribute Matrix Competitor Features/Attributes Memory Price Processor A B C D Dr. A.
- 75. 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.
- 76. 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.
- 77. 33 Determining the Objectives • Growth Objective Improve market share at the expense of short-term profits The following will occur: A cut in price Increase in advertising expenditures Increase in promotions to consumers and distributors Increase in distribution expenses Dr. A.
- 78. 33 Determining Determining the the Objectives Objectives • Harvest Objective Focus on profitability – brand marketed in the opposite way The following will occur: Increase in price Decrease in marketing budgets Dr. A.
- 79. 33 Examples of Objectives • Global Competitor May 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.
- 80. 33 • Mergers, Acquisitions, LBO Retain market share • Firms Operating Philosophy Minimize capital investment Dr. A.
- 81. 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 Strategy Differential Advantage Analysis Competitor’s Will Dr. A.
- 82. 33 Marketing Strategy • Three Major Components: Target Market Selection Core Strategy Positioning, Differentiating Implementation Supporting Marketing Mix Dr. A.
- 83. 33 Marketing Mix • The mix provides insight into the basic strategy of the competitor and special tactical decisions • 4P’s Dr. A.
- 84. 33 Marketing Marketing Mix Mix • Product Physical product or service and how it is sold • Price Highly visible • Promotion Which type and how often • Place Which channels are being emphasized? Dr. A.
- 85. 33 Tracking Competitors’ Strategies • Industrial Products Product sales literature The company’s own sales force Trade advertising • Consumer Products Tracking Ads Dr. A.
- 86. 33 Comparing Value Chains Firms Infrastructure Firms Infrastructure Support Support Human Resources Management Human Resources Management M Activities Activities M Technology Development Technology Development AA Procurement Procurement RR GG II Primary Inbound Operations Outbound Marketing Primary Inbound Operations Outbound Marketing Service Service N N Activities Logistics Activities Logistics Logistics And Sales Logistics And Sales Dr. A.
- 87. 33 Technology Strategy • Framework of Six Criteria Technology Specialization Level of Competence Sources of Capability – Internal/External R&D Investment Level Competitive Timing – Initiate/Respond R&D Organization and Policies Dr. A.
- 88. 33 Product Entry Decisions Decision R&D Marketing Timing First State-of-the- Stimulating Early-entry To 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 During to Market Applications Segmentation PLC Growth Late Skill in Process Minimizing Selling Entry Late in To Market Development and Distribution PLC Growth Cost Dr. A.
- 89. 33 Competitive Product Analysis Matrix Marketing Competitor A Competitor B Mix Brand A Brand B Product 1 Product 2 1. Product Targeted Segment 2. Price 3. Promotion Advertising 4. Place 5. Technology Strategy Dr. A.
- 90. 33 Differential Advantage Analysis – Capabilities Matrix Ability To Firm/Product Own A B C Product Conceive/Design Produce Market Finance Manage Dr. A.
- 91. 33 Differential Advantage Analysis – Success Matrix Critical Success Firm/Product Own Factors A B C Product 1 2 3 4 5 Overall Rating Dr. A.
- 92. 33 Assessing A Competitor’s Will • 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.
- 93. 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 continue Link Capabilities/Resources with Strategy • Simulate by Role-Play Dr. A.
- 94. 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.
- 95. 33 Segmentation Variables for 1. Who 1. Who Buys and Buys and Consumer Markets Uses? Uses? • Demographics Age, gender, geographic location • Socio-graphics Income, education, occupation, social class • Personality traits – ambitious, extrovert • Psychographics and Value lifestyle – activities, interests, opinions Dr. A.
- 96. 33 1. Who 1. Who Lifestyle Topology Buys and Buys and Uses? Uses? • Strivers • Achievers • Pressured • Adapters • Traditionalists Dr. A.
- 97. 33 1. Who 1. Who Value Topology Buys and Buys and Uses? Uses? • Self-respect • Security • Warm relationship with others • Sense of accomplishment • Self-fulfillment • Sense of belonging • Respect for others • Fun and enjoyment • Excitement Dr. A.
- 98. 33 Segmentation Variables for 1. Who 1. Who Buys and Buys and Business Markets Uses? Uses? • Demographics Industry, company size, location • Operating Variables Customer technology, use status, service • Purchasing Approaches Structure, power, purchasing criteria • Situational Factors Size of order, just-in-time delivery • Personal Characteristics Attitude to risk, loyalty to supplier Dr. A.
- 99. 33 2. What 2. What Benefits Customers Customers Buy and Buy and Use? Use? • 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 Dr. A.
- 100. 33 Distinction Between Features 2. What 2. What Customers Customers and Benefits - Cadillac Buy and Buy and Use? Use? Features Benefits 300-HP Engine Ability to pull away safely Northstar Engine Smooth-running engine Adjustable Seats Stay fit, alert, comfortable ABS Brakes Wheels won’t lock and skid Dr. A.
- 101. 33 2. What 2. What Purchase Pattern Customers Customers Buy and Buy and Use? Use? • 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.
- 102. 33 2. What 2. What Potential Customers Customers Customers Buy and Buy and Use? Use? • Continuum Relating to the Product Unaware Aware Accepting – Willing to use the product Attracted – Positive towards the product Active – Buy and/or plan to buy Advocates - Encourage others to buy Dr. A.
- 103. 33 2. What 2. What Product Assortment Customers Customers Buy and Buy and Use? Use? • Different Brands Purchased by the Customers for the category in the Segments • Create Switching Tables • Different Vendors used by Businesses – Industrial products Dr. A.
- 104. 33 2. What 2. What Use Customers Customers Buy and 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.
- 105. 33 3. Where 3. Where Channels of Distribution Customers Customers Buy? Buy? • Customers Migrate to Other Channels Specialty retailer to Discount Discount to Department Store Neighborhood to Superstore Small Retailer to Large-Volume retailer Brick-and-Mortar to Internet Dr. A.
- 106. 33 4. When 4. When Timing Issue Customers Customers Buy? Buy? • 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 Dr. A.
- 107. 33 Customers Compare 5. How 5. How Customers Customers Alternatives Choose? Choose? • Information Media Advertisements In-store personnel Word-of-Mouth Internet • Decision Process Emotional Impulse Rational Dr. A.
- 108. 33 5. How 5. How Multi-attribute Model Customers Customers Choose? Choose? • The process of how customers make decisions Attributes – used by customer to define the product Perceptions – amount of attributes possessed by each brand or product in the category Importance Weights – weights given by customer for each attribute Dr. A.
- 109. 33 5. How 5. How Attributes Customers Customers Choose? Choose? • Identifying the relevant set is not easy • Managerial judgment alone can cause misestimates • Collect information: Focus-Groups Survey/Questionnaire – Open-ended or close-ended Dr. A.
- 110. 33 Perceptual or Positioning 5. How 5. How Customers Customers Map – Bank Choose? Choose? Courteous Personnel F A D Inconvenient Convenient C B ATM Locations Un-courteous Dr. A.
- 111. 33 5. How 5. How Importance Weights Customers Customers Choose? Choose? • 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.
- 112. 33 Decision Making by Manager 5. How 5. How Customers Customers for Each Brand Choose? Choose? Segment 1 Segment 2 Attribute A Weight x Rating = Score Attribute B Attribute C Attribute D Segment Score ∑ Dr. A.
- 113. 33 Rules Available to the ProductCustomers 5. How 5. How Customers Manager Choose? Choose? • Compensatory Rule – Multivariate Model All attributes are considered and weakness in one can be compensated for by strength in another Dr. A.
- 114. 33 5. How 5. How Customers Customers Choose? Choose? • Lexicographic Rule Compares the products on the most important attributes alone and eliminates those which are not at the top Dr. A.
- 115. 33 5. How 5. How Customers Customers Choose? Choose? • Conjunctive Rule Assumes the customer sets minimum cutoffs on each dimension and rejects a product if it has any attributes below the cutoff Dr. A.
- 116. 33 5. How 5. How Conjoint Analysis Customers Customers Choose? Choose? • An alternative to weights, conjoint analysis permits the product manager to infer the importance of different product attributes in terms of importance Dr. A.
- 117. 33 Conjoint Analysis – 5. How 5. How Customers Customers Laptops Computers Choose? Choose? • Three Attributes Weight – 1 kg or 2 kg Battery Life – 2 hr or 4 hr Brand – HP or LG • Task: Rank in order the following combinations from 1 = most preferred to 8 = least preferred Dr. A.
- 118. 33 Customer Response – 5. How 5. How Customers Customers Laptop Computers Choose? Choose? Combination Rank 1 kg, 2 hr, HP 4 1 kg, 2 hr, LG 2 1 kg, 4 hr, HP 3 1 kg, 4 hr, LG 1 2 kg, 2 hr, HP 8 2 kg, 2 hr, LG 6 2 kg, 4 hr, HP 7 2 kg, 4 hr, LG 5 Dr. A.
- 119. 33 Analysis – 5. How 5. How Customers Customers Laptop Computers Choose? Choose? • Preference 1 kg, 4 hr, LG with rank 1 – most 2 kg, 2 hr, HP with rank 8 – least • Average Ranking: 1 kg option = 2.5 = (1 + 2 + 3 + 4)/4 2 kg option = 6.5 = (5 + 6 + 7 + 8)/4 2 hr option = 5.0 4 hr option = 4.0 HP = 5.5 LG = 3.5 Dr. A.
- 120. 33 5. How 5. How Customers Customers Choose? 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.
- 121. 33 Customer as Problem 5. How 5. How Customers Customers Solver Choose? Choose? • 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.
- 122. 33 6. Why 6. Why Customer Value Customers Customers Prefer aa Prefer Product? Product? • Critical Component of Customer Analysis Benefit – Customer’s perspective Cost – price, maintenance • Sources of Customer Value Economic Functional Psychological Dr. A.
- 123. 33 Manifestation of Customer 6. Why 6. Why Customers Customers Value Prefer aa Prefer Product? Product? • 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.
- 124. 33 6. Why 6. Why Customers Customers Prefer aa Prefer Product? 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.
- 125. 33 Assessing Value of the 6. Why 6. Why Customers Customers Product Category Prefer aa Prefer Product? Product? • 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.
- 126. 33 Assessing the Value of he 6. Why 6. Why Customers Customers Brand/Product/Service Prefer aa Prefer Product? Product? • Assessing the total value of a brand can be done indirectly • A high-value brand has: High Market Share High Repeat Purchase Rate Low Elasticity with respect to Price Limited Competitive Brand Shopping Dr. A.
- 127. 33 6. Why 6. Why Customers Customers Prefer aa Prefer Product? Product? • Using customer responses to estimate the value of a brand directly: Ratings for competing products Constant sum ratings across brands Graded paired comparisons Conjoint analysis Dr. A.
- 128. 33 7. How 7. How Customer Response Customers Customers Respond to Respond to Marketing Marketing Programs? Programs? • Sensitivity and Preference Varies by Customer: To Price – and to means of payment Distribution and Availability – including the effect of direct marketing Advertising Promotion Service Dr. A.
- 129. 33 7. How 7. How Assessing Sensitivity Customers Customers Respond to Respond to Marketing Marketing Programs? Programs? • 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 Dr. A.
- 130. 33 8. Why 8. Why Decision to Purchase Customers Customers Buy It Buy It (Again?) (Again?) • 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.
- 131. 33 8. Why 8. Why Quality - Satisfaction Customers Customers Buy It Buy It (Again?) (Again?) • 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.
- 132. 33 Measurement of 8. Why 8. Why Customers Customers Satisfaction Buy It Buy It (Again?) (Again?) • Three Key Aspects Expectations of Performance/Quality Perceived Performance/Quality The Gap between Expectations and Performance Dr. A.
- 133. 33 8. Why 8. Why Customers Customers Buy It Buy It (Again?) (Again?) • Indirect Measures Word-of-Mouth Comments Complaints Compliments Repeat purchase – or lack thereof Dr. A.
- 134. 33 8. Why 8. Why Why Satisfaction? Customers Customers Buy It Buy It (Again?) (Again?) • Leads to Loyalty • Customer Retention • Intention to Purchase Dr. A.
- 135. 33 8. Why 8. Why Customers Customers Buy It Buy It (Again?) (Again?) • Satisfied but No Repurchase Due to Poor Product Supply Variety Seeking or Multiple Sourcing Large Promotional Deals • Unsatisfied but Continue to Purchase Monopoly Convenience Dr. A.
- 136. 33 Segmentation • Each Customer is Unique • Mass Marketing is Generic • Each Customer Strategy Time-Consuming Not Very Profitable • Group Customers into Segments • A Compromise Dr. A.
- 137. 33 Segmentation Segmentation • 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.
- 138. 33 Criteria for Segmentation • Sizeable • Identifiable • Reachable • Respond Differently • Coherent • Stable Dr. A.
- 139. 33 Methods for Market Segmentation • Simple to Apply, Easy-to-Use software, and require Descriptive and Behavioral Data Cluster Analysis Tabular Analysis Regression Analysis Latent Class Analysis Dr. A.
- 140. 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 Cluster Cluster Purchase AA CC Quantity Cluster BB Age Dr. A.
- 141. 33 Cluster Cluster Analysis Analysis • Phone company employed Cluster Analysis to understand its regional customers • Six segments based on clustering households Low Income/Blue Collar – Fledglings Frugal/Retired – Thrifties Contended Middle Class – Contenteds Aspiring M-C Status Seekers – Climbers Technology –Driven Strivers – Techies Contended Upper Middle-Class - Executives Dr. A.
- 142. 33 Cluster Cluster Analysis Analysis • 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 suppliers Bargain Hunters – large buyers, lowest prices, highest service levels Dr. A.
- 143. 33 Also Called Also Called Tabular Analysis Cross-Tabular Cross-Tabular Analysis Analysis • This analysis uses categorical variables based on customer responses • Descriptor Variables – related to attitude, independent variables Convenience Oriented Enthusiastic Disinterested • Behavioral Variables – dependent variables Small/Light, Medium, Large/Heavy Dr. A.
- 144. 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.
- 145. 33 Regression Regression Analysis Analysis • 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.
- 146. 33 Regression Regression Analysis Analysis • 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.
- 147. 33 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.
- 148. 33 Judgment-Based Segmentation • 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 Dr. A.
- 149. 33 Environmental Influences On Consumer Behavior Dr. A.
- 150. 33 Consumer Motivation - Maslow’s Hierarchy of Needs Dr. A.
- 151. 33 Consumer Decision-Making Process Post- Problem Information Alternative Purchase Purchase Recognition Search Evaluation Decision Evaluation Dr. A.
- 152. 33 Consumer’s Internal Psychological Processes Attitude Motivation Perception Integration Learning Formation Dr. A.
- 153. 33 Percentage of Users Loyal to One Brand in the Category Product % Toothpaste 61 Automobile 47 Perfume/After Shave 46 Shampoo 44 Soft Drink 44 Athletic Shoes 27 Dr. A.
- 154. 33 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 Dr. A.
- 155. 33 Demand Analysis • Three Broad Categories of Demand Effective – demand backed by purchasing power Potential – 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 Dr. A.
- 156. 33 Classic Demand Curve Price Quantity Dr. A.
- 157. 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.
- 158. 33 General Demand Influencers • Three broad Factors Demographics – effective demand is related population Buyer Behavior – demand reflects the aggregate needs and wants of individuals in the population Availability – supply and channels of distribution Price Dr. A.
- 159. 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.
- 160. Dr. A.
- 161. New Product Development 44 • Slightly New Products - Modification Change of Ingredients Adding Features Resembling Competitor Products • New Products Offensive – gain sales or share Defensive – match or block competitors • Really New Products Create/Expand a New Category Dr. A.
- 162. 44 Development Stages 1. Idea Generation 2. Concept Development 3. Feasibility Screening 4. Concept Testing 5. Product Development 6. Product Testing 7. Market Testing 8. Go-No Go Decision Dr. A.
- 163. 44 Model for New Product Development ivee n yyObjeectiv Obj ct Compaan Comp n xpl loatio n EExporratio g 1,2 SScreenn g creeni in siss 3,4 s An lyysi nee ssAnaal Bu i Bussin entt vel lopm n Deeveopm e D 5 TTestngg esti in on n 6,7 Comm rci i l i ati o eercaailzzati Comm 8 s ceess PProd r u t uc c oducctSSuc The Booz, Allen and Hamilton Model Dr. A.
Notas do Editor
- . When we say product we usually mean physical goods, but services are also included in them; yet to clarify we can say product and services; also called offering . Ideally a manager does not do anything individually; rather uses resources like human, material, and financial to achieve the objectives of the firm; in practice there is a balance between coordination and hands-on work, which will vary from firm to firm and within the same firm based on the leadership style of the manager
- . Perceived need – may occur when an ad or a sales representative makes a convincing pitch . May be both non-durable and durable
- . The advertising manager is responsible for all promotion activities except sales . In some companies the ad manager has the title of Marketing Communications Manager . Classic brand management structure developed by P&G in 1930s . Commonly used where different products use the same channels of distribution
- . Product or brand champion
- . Narrow – inability to step back and ask more fundamental questions about customer needs . Centralized – may lose geographic/regional focus on product benefits to target customers . Short-term – due to this there has been a dramatic increase in the use of short-term marketing tools such as sales promotions for consumer packaged goods, may stifle innovation . Several salespersons – particularly for industrial products, overload marketing data information . Managers will have individual budgets, ad agencies, media channels partners
- . The advertising manager is responsible for all promotions activities except sales . In some companies the ad manager has the title of Marketing Communications Manager
- . Segments - may be industry, channel, region of the country or world, or customer size . Differences – lead to differences in the marketing strategies and tactics used to appeal to the customers in the segments
- . The advertising manager is responsible for all promotional activities except sales . In some companies the ad manager has the title of Marketing Communications Manager
- . Embedded – it is common for sales and marketing research to be separate functions in most organizations
- . The Web is a new channel of distribution - early 1990s, communication medium, way of creating a community around a brand; can be used for both customer acquisition and retention, and brand building; the Web needs to be integrated into the marketing and communication plan . IS – better and more timely information on market share, sales and distribution ; scanners, database marketing, data mining . A major trend started in the 1990s was the realization that one of the greatest assets a company has is its set of brands and the image and confidence the consumers have in them, brand equity – the value of the brand name, not just descriptive labels but are product attributes that require consistent investment for maintenance and enhancement . Balance of power has shifted from manufacturer to retailer . Lifetime value of a customer concept, stream of income from future purchases . Worldwide competition; need for international experience and knowledge of marketing in different cultures and regions; formation of trading blocks, NAFTA, EU, MERCOSUR .
- . At the center is the core or physical product, distinctiveness or differentiation is based on the outer layers which are subjective, and the service factors are on the outermost, especially if the physical product features have low differentiation
- . 6 major market factors impact market attractiveness . PLC – product life cycle
- . Is an important piece of data about any market . It is clearly an important determinant of the likelihood that a product will generate revenues to support a given investment . Both large firms and entrepreneurial firms might find large markets attractive . Large markets tend to draw competitors with considerable resources making it unattractive for small firms . Thus, absolute size by itself is not sufficient to warrant new or continued investment
- . P&G developed the US market for disposable diapers, but the high growth rate supported the entry of other firms such as J&J and Kimberly Clark . In technology firms fast-growth means dramatic shift in market share and virtual disappearance of rival products . In the Internet browser market, Netscape had 13% of the market and Mosaic 60%; by 2002 Netscape had 8%, Mosaic had disappeared, and Microsoft’s Internet Explorer held 91% . Thus, growth brings the prospects of increasing revenues but also dynamic market structures in terms of competitors
- . In the introduction and growth stages the sales grow rapidly, in maturity it levels off, in decline it drops steadily . In maturity the sales volume is high, growth rate is low, market is at its peak – large Rs volume with slow growth – like in the consumer packaged goods – classic patern for soft drinks, fast food . Not always clear – introduction and growth may be attractive to pioneers from a long-run market share perspective . Product in the growth phase are not ensured success – failures of Osborne and Commodore personal computers, and AT&T and HP in the home PC market
- . Inter-year – like ice cream, woolen clothes, rain gear, agriculture is affected by climate . High capital intensive businesses such as automobiles, steel, machine tools are often affected by . Businesses tied to interest rates such as real estate, financial services are also susceptible to cycles general business conditions . Many firms attempt to develop products and acquire other businesses to eliminate or offset inter-year sales cyclicity
- . Differences in profitability across industries is due to a variety of underlying factors like factors of production (capital, labor, raw materials), manufacturing technology, and competitive rivalry . Profitability varies with time, variance in profitability is often used as a measure of industry risk . Semiconductors offer abnormally high returns when demand is good but poor returns when it slumps . Food related industry on the other hand produce relatively steady, if unspectacular, profits . Product managers must make a risk-return trade off, evaluating expected returns against the variability in those returns
- . + is positive, desirable, - is negative, undesirable
- . How are barriers to entry set up?
- . Scale – barrier in the automobile industry, Ferrari is content to serve the high priced market segment; in non-manufacturing – hospital supplies – profit margins are better for larger orders; in service industry – it costs about the same to set up for a few customers or retailers as for many, large advertisers usually get quantity discounts when buying block media time on TV, radio, others, so it is hard for a new entrant to compete . Large capita – for manufacturing, chain of stores, or marketing programs . Switching – cost of switching form one supplier to another, high in the computer industry, FedEx has given its corporate customers software with they can track their own packages, so it is difficult for another delivery company to make the FedEx corporate customer switch; airline industry offers mileage program so customers get a free trip after a certain number of miles; it is hard to create switching barriers in the consumer products industry, consumer change brands frequently . Distribution – new entrants can find it difficult to obtain shelf space to compete with multinationals; supermarkets may charge slotting fee; CP and P&G copied Minnetonka, Inc’s innovative pump for hand soap; barriers change over time due to expiration of patent; lock up distribution and supply arrangements . A product manager can ask: is there anything I can to make it more difficult for a new entrant or a current competitor to compete against me legally?
- . Low profits means supplier cannot charge more . Backward integration – if computer manufacturers make their own chips, forward if they open their own retail stores . Buyers – say customer – has detailed pricing information on cars can negotiate the sticker price by choosing the right manufacturers options available . The product manager’s objective is to decrease buyer power by increasing product diff., helping customers become more profitable through services such as technology assistance or manufacturing/product dev./marketing related consulting, and building switching costs . Buying power of individual consumers in not substantial, but as a group or co-operative it can be high; industrial businesses can have high buying power . High buying power is not attractive if you are or want to be one of the competitors in the markets because buyers can force down prices, and play competitors against one another . Governments have high buyers power generally
- . High supplier power is not attractive as they can dictate price, delivery conditions to the buying category . Concentrated – dominated by a few firms, few microprocessor manuf. - like Intel, AMD; few supercomputer manuf. – like IBM, Cray, NEC . No substitutes – OPEC power increases and decreases, is now on the rise, they produce oil and natural gas, and the global requirements for energy is such that coal and other sources are not strong substitutes . Differentiation – AK Steel supplier to GM – offers delayed payment plan, guarantee of no work stoppages, a demonstration of cheaper steel can be used in certain areas, extra services such as supplying steel with adhesives for certain applications . Supply limited – demand is high, buyer has little option to extract special terms . To counter it – product managers can look for new sources of supply, substitute materials, other strategies
- . Rivalry – Compaq – Dell in the PC business, Intel – AMD in the microprocessor business, Disney – Six Flags in amusement parks, Sony – Matsushita in consumer electronics . Many or balanced – fast-food, automobiles, PCs; Boeing and Airbus (EU) became balanced by Boeings acquisition of McDonnell Douglas . Slow growth – in a mature market slow growth can come only from a competitor . High FC – pressure to run at full capacity to reduce unit costs – so capital-intensive industries like paper and chemicals are highly competitive . Lack of differentiation – product looks like a commodity . Personal – Sun’s Scott McNealey and Microsoft’s Bill Gates; Oracle’s Larry Ellison and Siebel’s Tom Siebel, even thoguh Siebel woked for Oracle
- . Soft drinks high – more generic, broadcast media, tractors few
- . Travel industry – during recession resorts are empty, rates drop
- . (+) is positive, desirable, (-) is negative, undesirable . Helps to decide whether firm should be or continue to be in the category, product manager can compete better in the particular product category
- . These factors are outside the control of both the firm and the industry, though the industry may have some leverage – external . External factors are unrelated to the product’s customers and the competitors that affect marketing strategies . Vulnerability of a product category to changes in the environment is an unattractive characteristic, to be dealt with . Changes in the environment can be opportunities to gain competitive advantage
- . High-tech – computers, technology changes in 18 months . Home banking has not become very popular – customers have a desire for customer service . Packaged goods industry – although packaging technology improves – the sales are driven by marketing programs
- . Interest rates – affects capital goods industries – machine tools, farm equipment, mainframe computers
- . Alcohol, tobacco . Pharmaceutical . Intervention – helpful to the industry, auto and textile dumping, agro restrictions helps
- . Trends – important to consumer product companies . Derived demand – generated by the consumer for B2B . Young adults – affluence – furniture, electronics, appliances, upscale fast-food, clothing, financial services, travel services . Mature adults – want to reduce their psychological age – sports cars, clothing, financial services, travel services, over 40 years . Children – indirect purchasers . It is said that – today customers can pretty much have what they want when they want it and at the price they wish to pay – airline ticket booking via Internet, due to information . Socio-economic trends
- . Commercial data services, standard industrial classification, SIC code, used by the US Govt. . Managerial judgment – using primary data – talking to distributors; using secondary data – salespersons reports . Behavioral data – secondary data from commercial firms – A. C. Nielsen or Information Resources, Inc.; households are enrolled with the firms and their scanning data at the store is analyzed by them . Customer judgments – primary data
- . Generic category of deserts; developed through focus group research that identifies products satisfying a given need . Product brands are placed near the vectors; then a judgment can be made as to what the competitor set might be . 1) judged overall similarity – for a pair of products . 2) similarity within consideration set – large set of products divided into groups in which each is a substitute for another . 3) 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 . 4) substitution in use . Perceptual mapping – is part of using customer judgment – judged overall similarity measure
- . C I gathering is for large as well as small firms . Microsoft deployed a team of engineers and marketers specifically to track Linux, the fast-growing, free operating system that had become popular . The team has attempted to convince potential corporate users that Linux is nota real competitor to windows . Frontier Airlines hired former United Airlines planning executive and its planning director to get ‘ inside’ United’s corporate head; instead of scheduling more flights Frontier learned that if it flew only twice a day to a city, United was not likely to increase its capacity on that route . Tom Sternburg, founder and CEO of Staples, the office supply superstore, drops by one of his stores and a competitor’s; focuses on what the competitor is doing well – customer service, store visibility, displays, how easily the prices can be read
- . Product managers should always begin a competitor analysis with a search of secondary sources of information . Internal sources – information about competing products already exists within the company or division in past marketing plans, special strategic studies, lying around in someone’s office . Audits – for publicly held companies – stock market companies . Government – regulated industries like power, insurance, infrastructure development have to reveal a lot of information to the govt. like pricing, or to obtain contracts and bids, which are public information
- . Most underutilized source, interact with the customer on a regular basis, are in an excellent position to find out about sales pitches, pricing, delivery schedules on a routine basis, merely by observing, can send information to corporate wirelessly with a notebook or laptop, sales report sheets can have a competitor tracking section for intelligence gathering . Suppliers – are willing to give information about competitors to impress potential buyers and high volume clients, carton manufacturers name and address is on the carton – calling them can provide information on the volumes on account of the number of cartons purchased by the customer . Customers – may feel it is not ethical or in their interest of time and effort, but some may give their opinion about the product they have used or someone they know has used . Employee can observe changes in packaging, price, shelf display at the supermarket or store . Firms develop reports, forecasts – as part of their business – e.g. media spending by brands, advertiser spending in the various media . Consultants – can be hired to develop special reports, as opposed to generic reports used in secondary data . Investment bankers – develop detail analysis of prospects, they can provide information to a potential new client, can be part of secondary data as well
- . Reverse – purchase the product and take it apart, or try it, or taste it; one can purchase and use the software, open a bank account; the information can be used as bench-marking for quality and cost of manufacturing or assembly; Xerox benchmarked Canon copiers and tried to beat each component of the latter’s machines on cost and quality; in designing the Lexus, Toyota bought competitor’s cars, including 4 Mercedes, a Jaguar XJ6, and 2 BMW’s, put them through performace tests, and then them apart . Test markets – some companies test market products in limited areas of the country or the world to better understand decisions about pricing, advertising, and distribution . Hiring – when hired new employees are required to sign a non-disclosure agreement, so when they leave they cannot reveal any company information; HP does it with a training program, video, that defines how HP interprets ‘trade secrets’; knowledge on marketing strategies and plans may help a newly hired senior manager in competitor analysis for the new employer
- . Primary – collected directly . Secondary – collected by someone else, library, internet, published information
- . Relative importance of the attribute is indicated by weights – an index can be computed which can give a good idea of strength and weakness of your own product
- . Capabilities – dose the competitor have the resources to pursue such an objective
- . These are at product level; at corporate level they may be return on investment or others . In 1998 Boeing announced in a business publication that it was going to emphasize profits over market share – who is the competition – this was good news for Airbus, can focus on global market share
- . A product manager can monitor these actions by rival brand managers
- . Can be interpreted as a retreat, perhaps only temporarily, from active and aggressive competition in the market
- . Companies from Japan, Korea, Singapore have done that – in the US
- . Leveraged buyout . Federal Express bought its own planes in mid-1970’s – Emery Air Freight was slow to respond
- . The key is to find which customer groups the competitors have targeted; can avoid segments in which there is intense competition and one can determine under-targeted or non-targeted segments that may represent opportunities . Core – is the basis on which the rival is competing, its key claimed differential advantage, which is a critical component of strategy because it forms the basic selling proposition around which the brand’s communication are formed; also called the brands positioning or value proposition . Two types of differential advantage: based on price/cost or on product features; products are usually positioned on price and quality dimensions, although some choose a value positioning with midrange price and quality; price differences – Boston Consulting Group – cost goes down with volume so price can be lowered and margins can be maintained; quality difference – real pr psychological or perceptual difference – such as service, packaging, delivery as well as material – IBM’s core strategy since its inception has been service based – Reebok’s ‘U B U’ campaign stresses individuality . Physical product differences stressed in industrial, durable, or new frequently purchased product; mature products or products with similar physical attributes or commodities often emphasize perceptual differences
- . Customers see these decisions in the marketplace, but they are neither exposed to nor do they particularly care about a product’s marketing strategy; customers are exposed to price, advertising, and other marketing mix elements
- . Product – a major determinant of a firm’s capabilities, at least in the short run; less easily changed than price or advertising , . Is price uniform in all markets, is there a quality price differential the competitor has, are discounts being offered . Are sales people aggressive in obtaining ne accounts, what are their commission rates?, what media are being used for ad . Have channels of distribution shifted? – is competitor changing the entire system – opening its own retail, direct marketing
- . Internet, brochures, provides information on the brands major strengths , positioning information – provides information on core strategy . Sales force – informal contacts, trade shows . Trade ad – reveals the segments being targeted (location and media used) and the differential advantage (from ad copy) being touted . Tracking services or yourself, TV ad messages (differential advantage) and programs they appear in (target segments) – TV ad good for determining core strategy because the nature of the medium prohibits communicating all but the most important messages – print may deliver more core information . Implementing strategy information – distributors, salespeople, customers, ad agencies, company’s own employees, stockholder mailings, use of the product; it takes market sensitivity, sophisticated management information systems can also be used
- . Michael Porter – Competitive Advantage – developed (1985) a concept called value chain that can be used to compare a brand or company’s strengths and weakness against another . An important point made by the value chain is that differentiation can be obtained through efforts of the whole corporation, not just through marketing . One way to differentiate is through inbound logistics, that is, through the selection of the highest-quality raw materials and other inputs including technology – Cray in supercomputers . Second – through operations advantages – McDonald’s has been the fast food market leader throughout the world due to its significant investments in training programs that produce consistency in service and product quality . Outbound – third basis – speedy and on-time delivery such as FedEx ‘absolutely and positively overnight’, Premier Industrial Corporation distributes nuts and bolts, seemingly a commodity, but differentiates by agreeing to ship in any quantity desired by the customer, and has higher margins . Marketing – also serve to differentiate – IBM sales are able to satisfy the customer better than competitors . Service – is an important differentiator – as has retailer Nordstrom found . The product manager can use the value chain concept to check at each step of the process if and how a competitor is gaining competitive advantage in the category
- . Blank audio cassette market – early 1970 – early stage of the PLC; Gillette’s Safety Razor Division was considering entering the market, as was Memorex, a manufacturer of computer tape and related products; G had competitive advantage over M in marketing finance, but at a disadvantage in terms of R&D, manuf., and the apparent match of skills and image to the cassette category, in the minds of the customer; M succeeded and G failed in test marketing
- . 1) quality, value chain, benefits who, where, when, why . 2) retail, to trade . 3) total effort in Rs., methods strategy/copy, media, timing, total effort in Rs. . 4) distribution method/coverage . 5) entry stage in PLC . While doing the Competitor Analysis the product manager should not lose focus on the customer; it may be better to concentrate directly on the customer instead or ignoring them; if a balance is desired – concentrate 70/30 on customer/competitor, or at the most 50/50
- . Technology, scientists/engineers, funding; quality of competitor’s new product development efforts, a long-term threat in a product category – total quality management improves this capability . Manufacturing, skilled employees: physical, human resources; for a service firm it is the ability to deliver the service . Sales force, distribution, advertising, funding; how aggressive, inventive . Debt, liquidity, cash flow, budgeting system; limited financial resources hamper effective competition – how the limited or sufficient resources is allocated among the product categories is critical . Profile of key people, decision process, planning, staffing, organizational structure; P&G replaced the manager for its coffee business in the US with a coffee general manager from the UK with a reputation for developing new products – he launched 4 new products in 15 months
- . The factors are listed descriptively; a rating is given say from 1-10 for each factor; the manager is forced to evaluate own product honestly on a factor-by-factor basis; the overall rating gives a more global feel for the toughest competitors in the market, especially for the future, which may not necessarily be reflected in the current market shares or profits
- . To unseat a market leader by frontal attack in its primary market segment is to provoke violent reactions; whereas a strategy that nibbles away at secondary markets (niche) is more likely to go unmatched. eBay’s key product is online auctions – attempts by Amazon.com and others to enter online auctions are considered to be a strong threat to eBay’s viability and are met with increased promotions and advertising and expansion in the number of auction categories . Coca-Cola launched new coke which failed on the basis of taste – the original coke was reintroduced as coke classic – Coca-Cola held on to new coke and repositioned it several times even though it did not sell well after its introduction
- . Trend continue – high-quality, high-price; appealing to mature consumers . Link - Bethlehem steel spent billions to upgrade its manufacturing; competitors could forecast that B would be able to simultaneously cut price and protect margins . Simulate – Corning Glass – Corning Ware line was coming off patent – used role-play by own managers as to how Libby-Owens-Ford and Anchor Hocking would enter the business to preempt their entry strategy; Charles Schwab and Company – brokerage – eSchwab online business – Merrill Lynch’s interest in entering the Web business Schwab managers – role-play
- . Customer relationship management – CRM – systems that emphasize IT apparently have not paid off, with a $100 M investment in recent years . Relationship marketing is important with a focus on understanding customers rather than data collection and warehousing
- . These are descriptive variables: . Not clearly differentiated in terms of their behavior to the product . Relationship between these variables and purchase behavior can be weak . Even less useful than the above two . Widely used as a basis for segmentation and advertising themes; values and lifestyle – VALS typology
- . The topologies are often related to purchasing patterns and afford the product manager the opportunity to match potential buyers with the appropriate media and message to communicate with them
- . These are descriptive variables: . Use – light, medium, heavy . Service – more or less . Purchasing – quality, price, service . Many of the same variable sare used to segment for consumer and industrial goods in global markets
- . Company may not have dreamed of the use; customer may have purchased the product for a different reason – backing soda for backing, not leaving in the refrigerator or putting in the drain to deodorize . Used at home, office, outdoors – where; how
- . For rational decisions, customers essentially compare alternatives on features via a multi-attribute model
- . Done by using focus groups . Done by direct questioning . Done by direct questioning
- . Two Dimensional Map for a Bank . Any two attributes or dimensions can be looked at . For example – brands of cars – a map may be created based on quality and performance . Another two attributes may be – safety and performance . A – market leader . F – bank . Firms product, car, it may have high quality and high performance but may be less than the market leader A, or the quality may be better but not performance, or performance may be better but not the quality, the firm must objectively determine this before positioning the product . One can have low performance and high quality if the product is launched but not ready for the market . One can have low quality and low performance if the product is not formulate or designed well and the materials or components and finish are not of high quality . One can have low quality and high performance if the components are substandard but the technology is new, innovative, and leading-edge
- . While the actual analysis and design of conjoint studies are more complicated than this, the basic ideas are the same
- . Routine – if a product has little market share and the objective is to increase it, the product manager must ‘shock’ the customer into considering the product to break the routine; promotions, significant price breaks, and free samples are useful shock devices
- . Essentially it is the net financial benefit to the customer from using one product versus another . Value is provided by the performance features of a product, and the before, during, and after-sales service . Source of value is basically the image of the product, including how the product ‘feels’ – sporty, luxurious, high-tech – and whether that feeling matches the image the customer wants to project; price is a part of product image, some prefer high-price – sign of quality or status, others low-price
- . If sales are constant with increase in price - is generally of greater value than one for which demand slumps . Difficult to track compared to directly spoken and written comments
- . New-products – indicate that the total gap between customer value and company costs is sufficiently large to allow for profits even when more companies divide the market
- . Importance – this estimate could focus on individual customers or market segments and may simply be projected sales to the segment . The main value of this exercise is to generate broad indicators towards which particular uses of the product could be targeted, since relative effectiveness is hard to quantify
- . How good is brand A compared to brand B, rate from 1-5 . Please rate the following brands dividing 10 points among them . Requires customers to indicate which of a pair of products they prefer and by how much – in terms of Rs . Customer ratings of products described in terms of attributes including price and brand name; through this analysis, regression analysis, the relative importance of the attributes, as well as the values of different levels of these attributes, are determined
- . These are fundamental aspects of marketing
- . Direct questioning – how important is …..? . Controlled settings – shopping malls, in-store, conference rooms . Individual records - scanner data, credit card purchases; such analysis often use regression analysis to predict sales as a function of mix elements or logit analysis – a type of regression – to assess the impact of mix elements on market share or individual choice probabilities . Assessing sensitivity to elements of the marketing mix is a large, ongoing task; output of this assessment has implications primarily for the tactical/programmatic elements of marketing – how much to spend on advertising
- . Quality helps to create and maintain a customer – basic principle of marketing . Long-term – single transaction – sale – is not the ultimate goal . Quality is ultimately measured in terms of customer satisfaction
- . Repeat – perhaps most important
- . Hence, measures of intended or actual repeat purchasing provide a useful way to simultaneously measure satisfaction and its impact . Intentions are an imprecise predictors of future purchase and a staple input to sales forecasts
- . Mass customization – one-to-one marketing – Levis custom tailored jeans for women; Dell – customer configured PCs by direct marketing, Internet – businesses offer customization . Segmentation is a compromise between treating each customer as unique and assuming all customers are the same – mass marketing . Provides insights about different kinds of customer behavior and make marketing programs more efficient
- . Segments must be of sufficient size in terms of potential sales . Identity provides an aid to strategic and tactical decisions, name rather than Segment A . For purposes of planning the marketing mix, e.g. advertising, it is useful to be able to target efforts on a segment; sports-minded segments can be reached by specific media – sports magazine, sports games on TV . Segments should respond differently to at least some of the elements of the offering; if all the segments respond the same, then there is no segmentation – some customers may be sensitive to price and unaffected by advertising, others may be unconcerned about the price but may be sensitive to ads; this forms a useful basis for both describing the overall market and defining the segment . It is assumed that all members of the segment are homogeneous – but actually not true; however, it is important that the average member be reasonably close to the rest of the members; within- segment variation in behavior is small compared to between-segment variation . Fairly stable over time since future plans are based on past data
- . Product manager has customer data form surveys or other sources measuring both descriptive information and information about behavior towards the product; customer – former, potential, current
- . Each cluster, a, b, c represents a combination of factors – age and purchase quantity; a product manager can conclude form this analysis that the young customers purchase the most, the oldest second most, and the middle-aged the least . Cluster analysis programs are widely available in commercial computer software packages such as SAS and SPSS, however, such clear clusters rarely emerge
- . Company collected information on descriptors, attitudes, and behavior – as usage measured in $
- . Do not consider the product important . Loyal to supplier . The product is important . Bargain for both price and service
- . Chi-square test to determine statistically significant relationship the independent variable – attitude and the dependent variable – usage quantity is used; and SAS; results presented in the form of a table . Also called cross-tabular analysis
- . The broadest and most abstract of external factors that influence consumer behavior . Culture is the complexity of learned meanings, values, norms, and customs shared by members of a society .Cultural norms offer direction and guidance to members of a society in all aspects of their lives, including their consumption behavior . Increasingly important in international marketing efforts . Sub-culture – within a given culture, smaller groups or segments whose beliefs, values, norms, and patterns of behavior set them apart from mainstream Sub-cultures many be based on age, geography, religious, racial and/or ethnic differences . Social Class – societies exhibit stratification, individuals assigned to a special social category on the basis of criteria important to members of that society, refers to relative homogeneous divisions, people sharing similar lifestyles, values, norms, interests, and behavior can be grouped . Class structures can be based on occupational status, educational attainment, and income . Sociologists – in US, 3 broad levels, upper (14%), middle (70%), lower (16%) Important to marketers – in each class, similar values, lifestyles, buying behavior Social Class groups provide a natural basis for market segmentation . A Reference Group is a group whose presumed perspectives or values are being used by an individual as the basis for his or her judgments, opinions, and actions . A guide to individual behavior even when the group is not present – party group, classmates, family, and co-workers, or a group to which an individual aspires . Situational Determinants – specific situations in which a consumers plan to use the product or brand which directly affects their perceptions, preferences, and purchasing behaviors . 3 situations – the specific usage situation (private, public, commercial), the purchase situation (environment at the time of purchase, and the communication situation (condition in which an advertising exposure occurs, TV, car radio, friends)
- . Which need would you place Development in ? . Accomplishment, respect . Affection . Safety . Clothing . Abraham Maslow, 1948
- . Attainment of a more positive situation, when a consumer has a felt-need it creates a want . To make a purchase decision, internal – routine purchase base on memory, external – personal sources (friends, coworkers, relatives, etc.), commercial sources (ad, point-of-sale, Internet, etc), public sources (newspapers, magazines, news on TV, etc.), personal experience (examining, handling, testing a product) . Comparison of various brands or products and services . Making the purchase based on intention to purchase or predisposition to buy a certain brand . How the consume feels about the purchase after using it for a little while, evaluates performance, is satisfied or dissatisfied
- . Motivation to solve the problem – then need or want . Process of how the consumer receives, selects, organizes, and interprets information to create a meaning, perceptions can be subliminal – unconsciously aware . Attitudes are learned predispositions towards anything – issues, products, services – overall feelings towards and evaluation of the situation - . The way knowledge, meaning, and beliefs are combined to evaluate two or more alternatives . The process by which the knowledge gained and experience obtained is applied to future related decisions
- . The purchase decisions are such that for many products fewer than 50% of consumers are loyal to one brand
- . Quantity demand varies with price – the product manager would like to know what is the effective demand for the product at any given price . May b thought of as that part of the total market or effective demand for an existing product which a firm might anticipate securing through the introduction of a new competitive product . Related to available disposable income, lack of availability reflects marketing opportunity for a product manager
- . Simple demand curve, for an undifferentiated product
- . Out of these assumptions only 2 and 3 seem likely to be true with any frequency in the real world . Consumer demand is fickle and changes frequently . Total knowledge may be possible about prices or many not . May spend money as resource permit and desired . Consumer will try to maximize satisfaction – objectively and subjectively (which is not rational)
- . Demand is direct – consumption by individuals or derived – when crating final consumption goods . Effective demand is related to the population, can be forecasted with forecast in population . For latent demand to become effective, other factors come into play, less easy to predict; Maslow’s hierarchy of Human Needs – basic understanding of tastes; Engels laws – guidance on how . Needs – transportation, energy, entertainments; specific wants – cars, solar power, satellite TV . The remaining factors which influence demand – price, distribution, stocks – really have more to do with achieving some kind if equilibrium between demand and supply than in shaping long-term demand changes people’s expenditure will change as their income rises
- . Product modification – can occur not just in the physical product but in any aspect of the offering – changing distribution channels, lowering the price, changing the ad focus, changing the service experience – an ordinary flower becomes special when it is delivered personally door-to-door
- . New Coke – loyal coke buyers did not even try it . It is possible that though the original concept is faulty, a better one is found through the concept tests; it would reenter the development process at the screening stage - 4 . Ideas generated have to be managed – 1 . Ideas screened turn into a more clearly specified concept – 2 . Initial assessment of the extent of demand for the idea – 3 . Prototypes are physically made – 5 . Tested with potential customers to assess the overall impression of the test product – 6 . Penultimate stage in the development cycle – small-scale tests with customers in the market, the real world – 7 . Last stage - commercialization stage – very costly – decisions when to launch, where to launch, how and to whom to launch have to be made – 8
- . The usefulness of the process models, such as the BAH, lies in the way in which they provide an indication of the magnitude of the project required in order to develop and launch a new product . For a slightly, versus, new, versus really new product the complexity, risk and uncertainty, and the budget will increase . A roadmap is used by the best performers, about 40%, more often than the worst, about 20% . A product manager will walk the path of the model which will be different from firm to firm
- . The sources of information for this stage are both internal and external, incorporating any market or technical research carried out thus far . The output of this stage will be a development plan with budget and an initial marketing plan
- . These decisions are based on information collected throughout the development process
- . Launch strategy – ad, trade promotions, sales promotions, sales training
- . How many different Honda Civics should there be to capitalize on the original brand’s equity; Toyota introduced Lexus to sell a luxury-prices Toyota
- . How many different Honda Civics should there be to capitalize on the original brand’s equity; Toyota introduced Lexus to sell a luxury-prices Toyota
- . Companies maintain facilities where customers are less obtrusively observed using company products; Sony – Michigan Ave in Chicago, Whirlpool – at its HQ . RC Cola first introduced diet cola – not Coke or Pepsi
- . Non-rep customers – customers in a different market segment or purchasing a different category of products . The style is different – new products – emphasis is fixing or improving existing products; for really new – taking an outsider’s view, doing things differently, disrupting current behavior, and using different or new technologies, process reengineering, discovery by scientists and engineers
- . Surveys – large samples can be obtained . Focus – as predictors of actual sales, they are fairly inaccurate due to their small size . Demo – ask questions after the ‘story’
- . Eliminate serious problems . Customers given products to use . May last for two months – advantage is that the results allow both for the initial expectations to wear out and for problems thatmanifest themdelves only over time to develop
- . This precludes test marketing products with high initial fixed cost or investment requirements – in this case a prototype is tested in collaboration with a potential customer, especially for industrial products . Projections are typically made for both share and actual sales, approximately adjusted to national levels
- . This precludes test marketing products with high initial fixed cost or investment requirements – in this case a prototype is tested in collaboration with a potential customer, especially for industrial products . Projections are typically made for both share and actual sales, approximately adjusted to national levels
- . Standards for evaluating the tests should be set up in advance, including when to stop the test, continue the test, revamp the product, go national . Is a serious problem – for consumer products tests are done in 2 to 3 cities, areas that are self-contained in terms of media are preferred; basis is representing market segment, ability to gain distribution channels and media exposure, availability of good research suppliers . Effort should be to simulate a national or regional launch – in terms of dist. Channels, trade discounts, price breaks to the customer . Not easily answered – cost consideration, competitor counter is quick if long . Ad and promotions account for 65-75 % of the test marketing budget . A variety of information is gathered – 1) actual sales – typically from 40 stores, plus dist., promotion; 2) surveys that measure awareness, attitude; 3) panels that report actual purchase and allow monitoring of trial and repeat rates
- . Silk and Urban’s (1978) – assessor – currently the most prominent – uses a simulated shopping trip following ad exposure and an in-home use period, bases . Blackburn and Clancy’s (1980) – litmus – uses pretest market data plus a large database of past new products to calibrate the results; movement from awareness to trial and trial to repeat is estimated based on a laboratory experiment . Less expensive but less reliable than actual market test
- . All stages of the process are to be managed . To combine technical and marketing expertise a number of company functions have to be involved : R&D, manufacturing, engineering, marketing, sales . Technical and market information provided to the development team appropriately and timely . Quick enough to capitalize on new product opportunity before the competitors do . Facilitates efficiency and cooperation . So people stay focused
- . In other words, the structures, culture, and even strategies of Sony have remained locked to the formulae of the successes of the 1970s – 1980s, rather than moving on to understand what the changing market and technologies demand for the 21 st -century innovative organization
- . It can be a name, trademark, logo, or other symbol . Under trademark law the seller is granted exclusive rights to the use of the brand name in perpetuity . Brand is an asset, like other assets like patents and copyrights . Like a patent, brand does not expire
- . One of the most important function a company does is market its products or services . If not a marketing-oriented company, a company ought to be a market oriented company . Everything starts with the market, the consumer, especially for consumer oriented products . The reason for innovation comes from the market . Focusing on product innovation and quality is a great way for a brand to start, or extend the PLC . Focus on brand identity – Nike brand – to represent sports and fitness activities, misjudged the aerobics market to Reebok, outgrew its own capacity to manage at the $1B revenue mark, and made a disastrous move into casual shoes . Nike created a whole new segment within – basketball shoes – Air Jordan, still requires performance which is Nike’s core competency with the running shoes, further Nike created two segments in the basketball segment – Force – for an aggressive and muscular player and Flight – for a more flexible, quick, high-flying style, and light weight player . Create a new umbrella of products by acquiring like Nike did – Cole-Hann, a maker of dress shoes, the Nike name is not involved, save time to create the product and ad expense by acquiring a company with growth potential in the market . Emotional ties with the customer, long-term relationship, loyalty
- . 6 levels of meaning that can be used for positioning – brand can have a deep meaning or a shallow meaning . Japanese corporate culture of quality . Hero Honda – motorcycles, swift and agile like a cheetah . The 4 p’s of marketing lend themselves to brand positioning . Brand Personality – consumers may select brands due to congruity between their self-image and the brand’s personality, this self-definition rational would be stronger in some product categories than in others . Consumers are more likely invest their sense of self in product categories such as cars and clothing than in paper towels . Image congruency is specially important in those situations in which the product is socially conspicuous, our sense of self is supposed to grow due to reactions of others important to us . Psychologists call people who are constantly modifying their own personalities to appear more likeable to others high self-monitors – are more sensitive to imagery ad appeals than are low self-monitors . Endorsers and celebrities (user imagery), execution elements (media), symbols (McDonald’s golden arches, Merrill Lynch’s bull, Prudential’s rock), consistency (over time), and marketing elements (pricing, promotions, distribution, and line extensions are important to create brand personality associations and to to support and reinforce a brands basic personality
- . The challenge for a brand manager is to deeply anchor the brand identity
- . CDI of 100 or less suggests that the category potential is low . BDI of greater than 100 suggests that the brand potential is good relative to other brands . One can determine what media weight (quantity of ad) to apply to the product category and the brand in terms of the advertising budget to gain additional market share
- . CDI of 100 or less suggests that the category potential is low . BDI of greater than 100 suggests that the brand potential is good relative to other brands . One can determine what media weight (quantity of ad) to apply to the product category and the brand in terms of the advertising budget to gain additional market share
- . Emotional Bonding . How consumers think about brands in respect to product benefits, through a rational learning process, can be measured, consumers are not very loyal and brand switching is common . A brand may be thought of as self-assured, aggressive, adventurous, as opposed to compliant and timid, the consumer’s judgment of the brand has moved beyond its attributes or delivery of product/service benefits, consumer judges the personality of a brand on the basis of an assessment of overt or covert cues found in its advertising . Master Card – priceless, L’Oreal – I am worth it . Reminder Advertising can be in any type – rational, emotional, rational and emotional
- . Difficult to find a major selling idea . Image advertising – major selling idea – soft drinks, beer, cars, airlines, financial services, perfumes/colognes, clothing
- . There is reduced risk associated with a familiar brand for the customer . Overall quality, specific product attributes, user characteristics – young, hip – impact the reaction to a brand . Inclusion in the consideration set is a critical part of brand equity – willingness to consider buying the brand, similar to being on an approved supplier list in B2B marketing . Is the strongest type of brand equity and the most beneficial for sellers; may pass from one generation to the next . Advocacy the strongest fans of a brand become advocates, word of mouth, encouraging channels to stock the brand
- . If sales are constant with increase in price - is generally of greater value than one for which demand slumps . Difficult to track compared to directly spoken and written comments
- . New-products – indicate that the total gap between customer value and company costs is sufficiently large to allow for profits even when more companies divide the market
- . 2008 – source Interbrand Corp., $ figures rounded . 1994 – Coca-Cola brand value was 35 $B, doubled in 10 years, reason the brand equity is high is its efficient worldwide distribution, the company says that it wants to be an ‘ within an arm’s reach of desire’
- . Rank 21, Samsung, $18B . Rank 25, Sony, $13B . Rank 26, Pepsi, $13B . Rank 57, Colgate, $6B . Rank 100 Visa, $3B
- . Coke brands in India
- . David A Aaker, Managing Brand Equity, a brand can have high equity or value as a tradable asset for many reasons: high awareness, many loyal customers, a high reputation for perceived quality, proprietary brand assets such as access to scarce distribution channels or to patents, or brand association such as personality associations . The equity is captured in the name and symbol of the brand
- . Positioning by: . Using product characteristics or customer benefits – Colgate – cavity fighter . Price and quality – Hipercity is a value store . Use or application - DeCold is for cough and fever . Product user – Maruti is for the common man . Product class – 7-Up is a soft drink like the colas, but not a cola or a mixer . Cultural symbols – IPL cricket league . Competitor - Pepsi positions itself against Coke . Identifying the competitor – not as simple as it might seem . Pepsi might define its competitors as follows: 1) other cola drinks 2) non- diet soft drinks 3) all soft drinks 4) non-alcoholic beverages 5) all beverages except water, may be even including water
- . Other pain relievers – Balms for headaches, Tiger . Postal Services, other couriers . Dettol – antiseptic but stings, children (major customers) don’t like it . Mercedes – offering mostly luxury in 1974, BMW has sold bullet proof sedans for the Indian Govt.
- . Two Dimensional Map . Any two attributes or dimensions can be looked at . For example – brands of cars – a map may be created based on quality and performance . Another two attributes may be – safety and performance . A – market leader . F – firms product, car, it may have high quality and high performance but may be less than the market leader A, or the quality may be better but not performance, or performance may be better but not the quality, the firm must objectively determine this before positioning the product . One can have low performance and high quality if the product is launched but not ready for the market . One can have low quality and low performance if the product is not formulate or designed well and the materials or components and finish are not of high quality . One can have low quality and high performance if the components are substandard but the technology is new, innovative, and leading-edge
- . The basic tools of the marketing-mix are the same in rural and urban markets, but the rural challenges are unique . HL – the first multinational to enter the rural market – Lifebuoy 50g, Rs 2 . Coca-Cola – returnable 200ml glass bottle, Rs 5, 80% of new customers from rural; Sunfill – powdered soft-drink concentrate, instant ready-to-mix single-serve sachet 25g, Rs 2 . Videocon – washing machine, Rs 3,000 . Godrej – Cinthol, Fair Glow and Godrej soap, 50g, Rs 5
- . Mkt. mix – 4Ps and 4Cs . IMC promotional mix – broader perspective . Advertising means paid and non-personal (mass media) . Sales promo. – consumer-oriented includes couponing, sampling, rebates, contests, sweepstakes, point-of-sale materials – trade-oriented targets intermediaries such as wholesalers, distributors, and retailer and includes promotional and merchandising allowances, price deals, sales contests, and trade shows to encourage trade to stock and promote company’s products . Publicity refers to non-personal communications regarding an organization, product, service, or ides not directly paid for or run under identified sponsorship and includes new story, editorial, or announcement about company, products, services . Attempts media to cover or run a favorable story to affect awareness, knowledge, opinions, and/or behavior . Techniques used to gain publicity include news releases, press conferences, feature articles, photographs, films, and videos . Pub. Relations is defined as the management function which evaluates public attitudes, identifies the policies and procedures of an individual or organization with the public interest, and executes a program of action to earn public understanding and acceptance, tools include special publications, participation in community activities, fund-raising, sponsorship fo special events, and various public affairs activities, als advertising as a PR tool . A form of person-to-person communication in which a seller attempts to assist and/or persuade prospective buyers to purchase the company’s product or service or to act on an idea Direct contact between buyer and seller, face-to-face or telecommunications . DM not traditionally considered part of the mix But had become important and involves separate objectives, budgets, and strategies Direct mail and mail-order catalogs, database management, direst selling, telemarketing, direct response ads through direct mail, the Internet, various broadcast and print media – Amway, Tupperware, L.L. Bean, Dell . Internet – is interactive, real time exchange – other than www interactive includes CD-ROMs, kiosks, interactive TV
- . The advertising manager is responsible for all promotions activities except sales . In some companies the ad manager has the title of Marketing Communications Manager
- Brand managers may choose different ad agencies. Ad Dept. would be involved in sales promo, package design, and merchandizing. Brand managers will work directly with the Ad Dept. P&G, Gillette Co., Nestle assign each product ot brand to a brand manager.
- . Different brand managers many have their own ad agency . Tide and ERA, P&G, compete with each other for a share of the laundry detergent market – why? . The ad dept. is part of marketing services and supports the brand manager . P&G – decentralized system, generally referred to as a Category Management System, includes category managers, brand managers, and ad managers . Category manager oversees the entire product category . The ad manager many, advise and consult with the brand manager, and may have the authority to override the brand managers decision on advertising . Advantage – each brand receives concentrated managerial attention, resulting in faster response to both threats and opportunities, flexible system – easier to adjust various aspects of the ad and promotional program, such as creative platforms and media and sales promotion schedules . GM uses the brand manager system – 40-plus models or cars, trucks, minivans, and sports utility vehicles, brand manager is responsible for marketing the brand, identifying the target market, developing integrated communications programs that will differentiate the brand . Disadvantages – brand managers lack training and experience, may develop short-term programs, may not understand the advertising aspect or sales promotion, competing for top management attention and resources, potential rivalry and misallocation of funds . For this reason P&G switched to category management system – ad and sales promotion decision making involves the ad and/or sales promotion manager, the brand manager, and the marketing director
- . Tools used by Foster’s included billboards, videos, point-of-sale promotions, TV spots . DAGMAR objectives must be measurable like Midwest Airline asked passengers if their airfares were higher than those of compet
- . Any of these can spark a major selling idea . Pennzoil and Quaker State merger – the company now creates separate ads, Pennzoil positioned for protection – we’re driving protection; Quaker State for performance – stay tuned . The USP, brand image, inherent-drama, and positioning approaches are often used as the basis of the creative strategy for ad campaigns . Today’s creative kings don’t write books, rarely give interviews, or lay out their theories on advertising, they’ve endorsed no set of rules, professed no simple maxims, what’s replaced them is a conscious desire to lift the intelligence level of advertising, today’s leaders see advertising as an uplifting social force, as a way to inspire and entertain . Advertising works best when it speaks into people’s lives, when it doesn’t look or feel like advertising, treating people best, not common denominator to make money, that at the same time has a sales pitch, understand the sociocultural realities of people and how they interact with the media, messages that connect with people or that people can connect with . If the major selling idea is some other approach – use it as a guide in developing an effective creative strategy
- . Selected by Advertising Age . Ad campaign plans are short-term, like IMC is annual . Campaign themes – usually intention of being used for a longer time, unfortunately last for a short time ineffective or market conditions and/or competitive developments in the marketplace change . Some marketers change theme often, a successful theme may last for years . Philip Morris – Marlboro country – 40 years . General Mills – Breakfast of Champions – decades . BMW – Ultimate driving machine – since 1774, changed agencies several times in the past 3 decades, the classic tag line has been retained