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Product & Brand Management

Introduction to Product 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

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

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

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

Specialty Goods Purchased as desired, branded products anti-aging cream, shampoos Unsought Goods Purchased on perceived need, can do without food processor, water filter

FMCG
Fast Moving Consumer Goods (FMCG) Groceries Snacks Detergent Hair Oil

Industrial Goods
Capital Goods Plant Equipment, Computers Materials and Parts Plastics, Auto Parts Supplies Paper, Toner Business Services Market Research, Patent Services

Product-Focused Organization
Head of Company/ Division

Manufacturing

Marketing

Finance

Corporate Communications

Marketing Research
Manager Product A

Product Management
Manager Product B

Support

Manager Product C

Characteristics
Classic brand management structure developed by P&G in 1930s Commonly used where different products use the same channels of distribution

Product Manager acts as a Mini-CEO

Product Manager has the ultimate responsibility for the brand Associate Product Manager develops brand extensions or manages a small brand Assistant Product Manager is responsible for market and share forecasting, budgeting, coordinating with production, executing promotions, and packaging

Advantages
Center of responsibility is clear Clear who to turn to for information on the product Product has an advocate with training, experience, persuasion, and communication skills Breeding ground for senior executives

Disadvantages
Narrow focus on one product Induces a centralized structure Quest for quarterly or short-term sales and market share goals Several salespeople representing different products calling on the same customer Inefficient use of marketing funds to build brand name

Examples
P&G General Foods Adobe Ford Mitsubishi GM (adopted 1995, dropped 2002)

Market-Focused Organization
Head of Company/ Division

Manufacturing

Marketing

Finance

Corporate Communications

Manager Market A

Manager Market B

Manager Market C

Characteristics
Marketing authority by market segment Useful when there are significant differences in buyer behavior in the market segments Does not give managers full responsibility for the services or products delivered

Advantages
Focus on the customer as an asset Easier to justify product modification or elimination Useful when bundling different products or when consumer purchases many different products form the same company Enhances product manager interactions due to specific knowledge in the particular segment

Disadvantages
Possible conflict with the product management structure that may lie below Mini-CEO training and experience of traditional product managers may be lost

Most product management skills need to be sustained

Examples
Levi Bell

Function-Focused Organization
Head of Company/ Division

Manufacturing

Marketing

Finance

Corporate Communications

Product Planning

Advertising

Sales Promotion

Marketing Research

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-today marketing activities of the product Marketing strategies are designed and implemented through coordinated efforts

Advantages
Administratively simple Useful if company has few products The structure is logical with normal marketing activities Functional training is easier to deliver Managers become functional experts

Disadvantages
Product responsibility is shared so no one down the line can be held accountable Requires substantial time in cross-functional meetings Training is limited to function Marketing VP or head needs to do much of the planning

Dr. A. Kaul

Examples
Intel Apple HP

Dr. A. Kaul

Factors Influencing Competitive Success


Environmental Factors Rate of Technology Change Nature of Competition Intensity of Competition Organizational Factors Size Structure Culture Manufacturing Capability Marketing Factors Product Quality Customer Service Market Research Product or Business Performance Strategic Factors Long-term Objectives Strategic Time Horizon Product-Market Strategy Managerial Factors Leadership Style Communication Attitude

Changes Affecting Product Management


The Web IS Database Management Increased Emphasis on Brands Shift in Balance of Channel Power Increased Importance of Customer Retention Increased Global Competition

Potential Interactions of a Product Manager


Publicity Advertising Agency

Media
Promotion Services

Legal

Fiscal

Product Manager

Packaging

Research and Dev. Manuf. and Distrib. Market Research

Purchasing

Sales

Three Levels of a Product


Warranty Brand Name After-Sales Service Core Benefit or Service Augmented Product Tangible Product Core Product

Packaging

Features

Delivery And Credit

Styling

Quality

Installation

Product Analysis
1. 2. 3. 4. Category Competitor Customer Demand

1. Category Attractiveness Analysis


Aggregate Category Factors Category Factors Environmental Factors

Aggregate Category Factors


Category Size Category Growth Stage in the PLC Sales Cyclicity Seasonality Profits

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

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

3 Aggregate Category 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

Category Attractiveness over the PLC


Sales

Aggregate Category Factors

Stage Size Growth Attract ivenes

Intro. Small Low Low

Growth Maturity Decline Moderate Large High Low High Low/ High Moderate Negative Low

Years

3 Aggregate Category 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

3 Aggregate Category 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

3 Aggregate Category 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

Attractiveness of Market Factors


Factor
Category Size Category Growth Sales Cyclicity Seasonality Profit Profit Variability Attractiveness High Low + + + + + +

Aggregate Category Factors

Category Factors
Threat of New Entrants Bargaining Power of Buyers Bargaining Power of Suppliers Amount of Intra-category Rivalry Threat of Substitute Products or Services Category Capacity

Category 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

Category Factors

1. Potential Barriers to Entry Economies of Scale Product Differentiation Capital Requirements Switching Costs Distribution

Category Factors

Bargaining Power of Buyers Distributors, original equipment manufacturers (OEMs) or end users High if product bought is a large % of buyers cost, product is undifferentiated, buyers earn low profits, buyer can backward integrate, buyer has full information, when substitutes exist

Category 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

Category 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. Kaul

Category 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. Kaul

Category 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. Kaul

Porters Five Forces Model


Bargaining Power of Supplier

Threat of New Entrants Barriers to Entry

Amount of IntraCategory Rivalry

Threat of Substitute Products or Services

Bargaining Power of Buyer Dr. A. Kaul

Attractiveness of Category Factors


Factor
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

Category Factors

Attractiveness High Low + + + + + +

Dr. A. Kaul

Environmental Factors
Technological Political Economic Regulatory Social

Dr. A. Kaul

Environmental Factors

Technology If weak vulnerable to new product and global competition If well positioned firm can take advantage of change

Dr. A. Kaul

Environmental Factors

Political Affects products with global sales Product manager must assess political risk Free market affected by political party in power

Dr. A. Kaul

Environmental 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. Kaul

Environmental Factors

Regulatory Restrict industry from specific media use Stringent testing requirements Air, water, soil pollution Intervene in global competition - dumping

Dr. A. Kaul

Environmental 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. Kaul

2. Competitor Analysis
To analyze competitors, a commitment to developing a competitive strategy that includes a willingness to expend resources on collecting data is necessary

Dr. A. Kaul

Determining the Competitor Set


From Commercial and Government Data Managerial Judgment experience, internal sources Customer-Based Measures behavioral data Customer Judgments - surveys

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Using Customer Judgments


Judged Overall Similarity for a pair of products Similarity within Consideration Set large set of products divided into groups in which each is a substitute for another

Dr. A. Kaul

3 Using Customer 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. Kaul

Defining Competitive Set with Perceptual Mapping


Formal Desert Moist Needs Refrigeration Long Time to Prepare

Tea/Coffee Break Easy to Carry At School/Work Dr. A. Kaul

Between Meal Snack

Corporate Intelligence
Rank 1 2 3 4 5 6
Dr. A. Kaul

US Company Microsoft Motorola IBM P&G GE, HP Coca-Cola, Intel

Competitor Analysis Steps


Data Collection Data Analysis

Dr. A. Kaul

Secondary Sources of Information


Customer Communications Consultants Internal Sources Newspapers

Data Collection

Annual Reports Patent Filings

Trade Press Promotional Literature Trade Associations News Releases

Secondary Data

Financial Audit Filings Business Press

Government Internet Computer Databases

Dr. A. Kaul

Primary Sources of Information


Investment Bankers Consultants Sales Force Specialized Firms

Data Collection

Primary Data
Suppliers

Employees
Customers

Dr. A. Kaul

Other Sources of Information


Classified Ads Trade Shows Plant Tours Reverse Engineering Monitoring test Markets Hiring Senior Employees

Data Collection

Dr. A. Kaul

Competitor Analysis Model


Primary Data Secondary Data

Data Analysis

Key Questions Who are they? What are the competing product features? What do they want? What is their current strategy?
Differential Competitor Advantage Analysis Who has the competitive product advantage? Competitor Marketing Plan What are they going to do? Dr. A. Kaul

Data Analysis Questions

Data 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. Kaul

Product Features/Attribute Matrix


Competitor A B C D Features/Attributes Memory Price

Processor

Dr. A. Kaul

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

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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

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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
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3 Determining the 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. Kaul

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. Kaul

Mergers, Acquisitions, LBO Retain market share Firms Operating Philosophy Minimize capital investment

Dr. A. Kaul

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 Competitors Will

Dr. A. Kaul

Marketing Strategy
Three Major Components: Target Market Selection Core Strategy Positioning, Differentiating Implementation Supporting Marketing Mix
Dr. A. Kaul

Marketing Mix
The mix provides insight into the basic strategy of the competitor and special tactical decisions 4Ps

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Marketing 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?
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Tracking Competitors Strategies


Industrial Products Product sales literature The companys own sales force Trade advertising Consumer Products Tracking Ads

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Comparing Value Chains


Firms Infrastructure Support Activities Human Resources Management Technology Development M A R G I N

Procurement
Primary Inbound Operations Outbound Marketing Activities Logistics Logistics And Sales Service

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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
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Product Entry Decisions


Decision First To Market Second To Market Next to Market R&D State-of-theart Advanced, Responsive Ability in Applications Marketing Stimulating Primary Demand Differentiating the Product Market Segmentation Timing Early-entry in the PLC Entry Early in PLC Growth Entry During PLC Growth

Late To Market

Skill in Process Minimizing Selling Development and Distribution Cost

Entry Late in PLC Growth

Dr. A. Kaul

Competitive Product Analysis Matrix


Marketing Mix Competitor A Brand A Product 1 Competitor B Brand B Product 2

1. Product Targeted Segment 2. Price 3. Promotion Advertising 4. Place 5. Technology Strategy

Dr. A. Kaul

Differential Advantage Analysis Capabilities Matrix


Ability To Conceive/Design Produce Market Finance Manage Firm/Product A B C Own Product

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Differential Advantage Analysis Success Matrix


Critical Success Factors 1 2 3 4 5 Overall Rating
Dr. A. Kaul

Firm/Product A B C

Own Product

Assessing A Competitors 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. Kaul

Predicting Future Strategies


Competitor signals with an announcement Use historical information to forecast: Competitors 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. Kaul

3. Customer Analysis
What we need to know about current and potential customers: 1. Who buys and uses the product? 2. What customers buy and how they use it? 3. Where customers buy? 4. When customers buy? 5. How customers choose? 6. Why customers prefer a product? 7. How customers respond to marketing programs? 8. Will customers buy it (again)?
Dr. A. Kaul

Segmentation Variables for Consumer Markets

1. Who Buys and 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. Kaul

Lifestyle Topology
Strivers Achievers Pressured Adapters Traditionalists

1. Who Buys and Uses?

Dr. A. Kaul

Value Topology
Self-respect Security Warm relationship with others Sense of accomplishment Self-fulfillment Sense of belonging Respect for others Fun and enjoyment Excitement

1. Who Buys and Uses?

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Segmentation Variables for Business Markets


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

1. Who Buys and Uses?

Dr. A. Kaul

Benefits

3 2. What Customers Buy and 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. Kaul

Distinction Between Features and Benefits - Cadillac


Features 300-HP Engine Northstar Engine Adjustable Seats ABS Brakes Benefits

3 2. What Customers Buy and Use?

Ability to pull away safely Smooth-running engine Stay fit, alert, comfortable Wheels wont lock and skid

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Purchase Pattern

3 2. What Customers Buy and 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 customers purchases in terms of profits?
Dr. A. Kaul

Potential Customers

3 2. What Customers Buy and 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
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Product Assortment

3 2. What Customers Buy and Use?

Different Brands Purchased by the Customers for the category in the Segments Create Switching Tables Different Vendors used by Businesses Industrial products

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Use

3 2. What Customers Buy and Use?

Sweets Festivals Rainwear Rainy season Sunscreen Summer Customer Suggestions Baking soda to deodorize drains Lime juice to clean cooking range

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Channels of Distribution

3. Where Customers 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. Kaul

Timing Issue

4. When Customers 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

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Customers Compare Alternatives


Information Media Advertisements In-store personnel Word-of-Mouth Internet Decision Process Emotional Impulse Rational
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5. How Customers Choose?

Multi-attribute Model

5. How Customers 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. Kaul

Attributes

5. How Customers 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. Kaul

Perceptual or Positioning Map Bank

5. How Customers Choose?

Inconvenient

Courteous Personnel F A D Convenient C B ATM Locations Un-courteous

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Importance Weights
Direct Questioning On a scale of 1-to-7 with 7 being very important and 1 not important, how important is the attribute .. in your purchase decision

5. How Customers Choose?

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3 5. How Decision Making by Manager Customers Choose? for Each Brand

Segment 1 Attribute A Attribute B Attribute C Attribute D

Segment 2

Weight x Rating = Score

Segment Score
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3 5. How Rules Available to the ProductCustomers Choose? Manager

Compensatory Rule Multivariate Model All attributes are considered and weakness in one can be compensated for by strength in another

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3 5. How Customers Choose?

Lexicographic Rule Compares the products on the most important attributes alone and eliminates those which are not at the top

Dr. A. Kaul

3 5. How Customers 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. Kaul

Conjoint Analysis

5. How Customers 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. Kaul

Conjoint Analysis Laptops Computers

5. How Customers 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. Kaul

Customer Response Laptop Computers


Combination 1 kg, 2 hr, HP 1 kg, 2 hr, LG 1 kg, 4 hr, HP 1 kg, 4 hr, LG 2 kg, 2 hr, HP 2 kg, 2 hr, LG 2 kg, 4 hr, HP 2 kg, 4 hr, LG Rank 4 2 3 1 8 6 7 5

5. How Customers Choose?

Dr. A. Kaul

Analysis Laptop Computers


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

5. How Customers Choose?

Dr. A. Kaul

3 5. How Customers Choose?

Difference in the Average Ranks: Weight = 4.0 (6.5 2.5) Battery Life = 1.0 (5 4) Brand = 2.0 = (5.5 3.5) The most important attributes to this customer is weight, followed by brand, and then battery life

Dr. A. Kaul

Customer as Problem Solver

5. How Customers 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

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Customer Value
Critical Component of Customer Analysis Benefit Customers perspective Cost price, maintenance Sources of Customer Value Economic Functional Psychological
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3 6. Why Customers Prefer a Product?

Manifestation of Customer Value

3 6. Why Customers Prefer a Product?

Price firms assessment of the products value Price Sensitivity sales change with price Satisfaction Indicated in surveys used as standard practice Complaints and Compliments Number Word-of-Mouth Difficult to track

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3 6. Why Customers Prefer a Product?

Margin/Profit Contribution Higher margins Sales Value assessed by the market Competitive Activity New-product introductions Repeat Purchase Rate High loyalty indicates high brand value

Dr. A. Kaul

Assessing Value of the Product Category


3 6. Why Customers Prefer a 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. Kaul

Assessing the Value of he Brand/Product/Service

3 6. Why Customers Prefer a 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. Kaul

3 6. Why Customers Prefer a 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

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Customer Response

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

3 7. How Customers Respond to Marketing Programs?

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Assessing Sensitivity

Expert Judgment using knowledge of managers, sales-force Customer Survey including both direct questioning and more subtle approaches as conjoint analysis Experiments both controlled settings and actual market segments Analyses of Past Data across market segments or individual customer records
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3 7. How Customers Respond to Marketing Programs?

Decision to Purchase

8. Why Customers Buy It (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. Kaul

Quality - Satisfaction

8. Why Customers Buy It (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 companys product more or less satisfied than customers of a competitors?
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Measurement of Satisfaction
Three Key Aspects Expectations of Performance/Quality Perceived Performance/Quality The Gap between Expectations and Performance

8. Why Customers Buy It (Again?)

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3 8. Why Customers Buy It (Again?)

Indirect Measures Word-of-Mouth Comments Complaints Compliments Repeat purchase or lack thereof

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Why Satisfaction?
Leads to Loyalty Customer Retention Intention to Purchase

8. Why Customers Buy It (Again?)

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3 8. Why Customers Buy It (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
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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. Kaul

3 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

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Criteria for Segmentation


Sizeable Identifiable Reachable Respond Differently Coherent Stable

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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

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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 A Purchase C Quantity Cluster
B

Age
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Cluster 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. Kaul

Cluster 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. Kaul

Tabular Analysis

Also Called Cross-Tabular 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
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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

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Regression 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

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Regression 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
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Latent Class Segmentation


Begins with the market as a whole and then determines what segmentation pattern best trades off few segments and the ability to explain behavior The previous methods begin with individuals and then aggregate them Is recent, intriguing, requires sophistication not widely used
Dr. A. Kaul

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

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Environmental Influences On Consumer Behavior


Culture Sub-Culture

Social Class Reference Groups

Situational Determinants

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Consumer Motivation - Maslows Hierarchy of Needs


SELF-ACTUALIZATION
(Fulfillment, Potential)

ESTEEM
(recognition, status)

SOCIAL
(Belonging, Acceptance)

SAFETY
(Security, Protection)

PSYCHOLOGICAL
(Food, Shelter)

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Consumer Decision-Making Process

Problem Recognition

Information Search

Alternative Evaluation

Purchase Decision

PostPurchase Evaluation

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Consumers Internal Psychological Processes

Motivation

Perception

Attitude Formation

Integration

Learning

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Percentage of Users Loyal to One Brand in the Category


Product Toothpaste Automobile Perfume/After Shave Shampoo Soft Drink Athletic Shoes
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% 61 47 46 44 44 27

Consumer Attitude
Important to Marketers Summarize a Consumers Evaluation of a Brand or Company Represent Positive or Negative Feelings Are Related to Consumers Purchase Behavior

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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
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Classic Demand Curve


Price

Quantity

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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
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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
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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

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New Product Development


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
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Development Stages
1. 2. 3. 4. 5. 6. 7. 8.
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Idea Generation Concept Development Feasibility Screening Concept Testing Product Development Product Testing Market Testing Go-No Go Decision

Model for New Product Development


1,2 3,4

5 6,7 8 The Booz, Allen and Hamilton Model

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Business Analysis

Model for New Product Development

First Major Decision Stage Is venture potentially worthwhile, since expenditures will increase dramatically after this stage? Market Analysis Explicit Statement Explanation

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Business Analysis

Market Analysis Detailing potential total market Estimated market share with specific time horizon Competing products if any Likely price, break-even volume Identification of early adopters, specific market segments
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Business Analysis

Explicit Statement Technical Aspects Costs Production Implications Supplier Management Further R&D

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Business Analysis

Explanation How the Project Fits with Corporate Objectives?

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Commercialization
The Second Major Decision Stage is the Commercialization Stage Launch Stage Last Stage in the Development Cycle Decisions to be made: When to launch the product? Where to launch it? How and to whom to launch it?

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Important Considerations

Commercialization

Seasonality of the product Whether the launch should fit any trade or commercialization event Whether the new product is a replacement for the old one Whether it is advantageous to be first to market Launch location Launch strategy
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Line Extension
Line Extension Product variant in the same category using the existing brand name

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Line Extension

Line Extension Allow Full Line of Products Appeal to Multiple Segments Increase Potential Sales customer base Allow Price Discrimination among users with different needs and preferences Can Confuse Customers Can Dilute/Weaken Brand Equity
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Brand Extension
Brand Extension Product in a different category using the existing brand name

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Brand Extension

Brand Extension Riskier than Line Extensions Brand must Fit in the New Category Image Match

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Brand Extension

Brand Risk/Fit/Image Pepsi Tofu artificial drink doesnt go with natural food IBM Pens why would they bother?; what do know about making pens? Minute Maid Cranberry Juice dont they make this already?
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Brand Extension

Tide Facial Cleanser makes me think of sandpaper rubbing on my skin McDonalds Film Processing I see chemicals in my food

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Really New Products


Create or Expand a New Category Are New to Customers Raise Issues of Channels of Distribution and Organizational Responsibility May Create a Need for Infrastructure

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Examples of Really New Products


Consumer Goods Packaged Goods bottled tea, frozen vegetables Durable Goods microwave ovens, rooms air conditioners Industrial Products microprocessor chips, mobile phones Services ATMs, credit cards, Internet
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Getting Ideas for New Products


Customer Analysis surveys of attitudes and attribute importance unstructured (focus groups) structured (conjoint analysis) Competitor Analysis most new products are copies of competitors products

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4 Getting Ideas for New Products

Active Search new products and processes in other areas Category Analysis examining social trends, technologies Brainstorming generating ideas for new products can be difficult

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4 Getting Ideas for New Products

Brainstorming New Market/Customer Acquisition who else can we sell it to? Customer Expansion what else can we sell them?

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4 Brainstorming

Product Variants/Line extensions what different features can we add or replace Value Chain Changes how else can we get it to the customer?

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Getting Ideas for Really New Products


Similar to New Products but with a certain radical quality Asking or listening to dissatisfied customers Asking non-representative customers Open-ended qualitative surveys Involving customers as co-developers Listening to newcomers and non-experts Scanning the literature
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Testing New Products


Concept Testing Surveys useful for forecasting Focus Groups detailed diagnosis Demonstrations present the concept Product Testing Market Testing

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4 Testing New Products

Product Testing 1. Product Tests Uncover product shortcomings Evaluate commercial prospects Evaluate alternative formulations Uncover the appeal Gain ideas for marketing-mix
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Product Testing

Types of Product Tests Small Samples employees Limited-Time Horizon forced-trial Placement of Product in Homes - elaborate

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2. Discrimination and Preference Testing Discrimination is the ability to correctly identify differences from the product alone, without cues such as brand name and ingredients

Preference can be the result of true discrimination or of random guessing


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3. Market Testing The purpose of such tests is to predict sales and profits from a major product launch

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Market Testing

Practice so that marketing,


distribution, and production skills are developed before entering full-scale operations Projections are made for both share and actual sales
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Market Testing

Test Design Requirements Action Standards Where to Test What to Do How Long Cost Information Gathering
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4. Quasi-Market Tests Market tests tend to be expensive They take time and tip off competitors Simulated Test Methods ASSESOR BASES LITMUS
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Evaluation Criteria for Really New Products


Customer Level Do customers like it? Is it unique? Will they buy it? How soon/fast will they buy it?

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4 Evaluation Criteria for Really New Products

Firm Level 1. Does it add to our customer base through Acquisition? Expansion Loyalty/retention? Enhanced brand equity?

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4 Evaluation Criteria for Really New Products

2. Does it detract from our customer base through Cannibalization? Customer defections? Lowered brand equity?

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4 Evaluation Criteria for Really New Products

3. Do we have the capabilities to Develop it? Produce it? Distribute and sell it? Buy or partner to do the above?

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4 Evaluation Criteria for Really New Products

4. Will it be profitable On a stand-alone basis? Long-run impact on product line? 5. Are there other benefits associated with it Learning/capability enhancement? PR?

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4 Evaluation Criteria for Really New Products

6. Are there other costs associated with it? Legal liability? PR?

7. Can we control the market in the short and long-run Against the new entrants? Against the entire competition?

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Typical Penetration For New Brand Over Time


Penetration, %
Ultimate Penetration Level 45%

Time

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Typical Repeat Rate For New Brand Over Time


Repurchase, %

Ultimate Repeat Rate 15%

Time

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Role of Product Development Manager


Manages the entre process Need for interdisciplinary inputs Need to develop product advantage Need for speed in the process Need to manage the information flow Need to manage the people

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Factors Affecting Success


Process Timing Pre-Development Activities Development Activities Marketing Activities Launch Activities Information Marketing External Communication Technical People Multifunctional Coordination Product Champion Communication

Successful New Product

Strategy Clear Objectives Innovation Culture Technology/Marketing Synergy/Risk

Organizational Structure Flexible Participative Interdisciplinary Teams Face-to-Face Communications Non-Hierarchical

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Management Top Commitment Set Cultural Climate Technology Support Inter-Level Communication

Sony
Has lost its leading-edge in new product development ,and in bringing new products to market What are the reasons?

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Sony

Apples iPod Samsungs flat screen TVs Korean digital cameras Chinese pen drives and multimedia players These companies and sources continue to push Sony out of its core consumer electronics market

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This problem is partly due to Sonys corporate culture, where business units are run separately, discouraging agility, cross fertilization, and anticipation of consumer needs

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Brand vs. Product, Brand Elements

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What is a Brand?
A brand is a name, terms, sign, symbol, design, or a combination intended to identify goods or services of a firm and differentiate them from the competitors

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What is a Brand?
Name a: Company Product Service Why?

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A Brand Conveys:
A Promise A Warranty

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Brands 6 Levels of Meaning


1. Attributes Expensive, Durable , WellEngineered 2. Benefits Expensive Prestige, Status Durability Long Lasting Well- Eng. Safety 3. Values Sellers Matches Buyers 4. Culture Firms Culture Quality 5. Personality Motorcycles Swift, Agile Animal 6. User Type of Customers Demographics
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Brand Meaning
Deep Positioning On: Values Culture Personality Shallow Positioning Just On: Attributes Benefits Users

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Using BDI and CDI Indexes


BDI HIGH HIGH High Market Share Good Market Potential High Market Share Monitor for Sales Decline LOW Low Market Share Good Market Potential Low Market Share Poor Market Potential

CDI
LOW

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Using BDI and CDI Indexes


BDI HIGH HIGH LOW

Good Sales Potential for both Product Category and the Brand

CDI LOW The Category is not selling well, but Brand is, good market to advertise but Monitor for Sales Decline

Category shows High Potential but Brand is not doing well, the Reasons should be Determined
Both Category and Brand are doing Poorly, not a good area for Advertising

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Levels of Relationships with Brands


Emotions

Personality

Product Benefits

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Creating a Brand Image


Competing Brands are Similar Difficult to Find a Unique Attribute or Benefit Differentiation on Functional or Performance Basis not Easy

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Creating a Brand Image


Develop Strong, Memorable Identity for the Brand through Image Advertising Image or Personality of the Brand is Particularly Important when the Brands are Similar

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Brand Equity

Brand Equity is the value of a product beyond that explainable by economic and functional attributes Brand equity represents value to the manufacturer and is represented by the premium a customers would pay for one product over another when economic and functional attributes are identical
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Measuring Brand Equity


At the Customer Level: Awareness Necessary for purchase Associations Reactions to the brand Attitude Favorability, acceptability Attachment Loyalty to the brand Activity Spreading positive word

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Manifestation of Customer Value


Price firms assessment of the products value Price Sensitivity sales change with price Satisfaction Indicated in surveys used as standard practice Complaints and Compliments Number Word-of-Mouth Difficult to track

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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

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Indias Trusted Brands


1. Colgate 2. Lux 3. Dettol 4. Ponds 5. Tata Salt 6. LIC 7. Vicks 8. Britannia 9. Rin 10. Bata

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The Worlds Most Valuable Brands


Rank 1 2 3 4 5 6 7 8 9 10
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Brand Coca-Cola IBM Microsoft GE Nokia Toyota Intel McDonalds Disney Google

Brand Value, $B 67 59 59 53 36 34 31 31 29 26

Top 20 Brands
Rank 11 12 13 14 15 16 17 18 19 20 Brand Mercedes Benz HP BMW Gillette American Express Louis Vuitton Cisco Marlboro Citi Honda Brand Value, $B 26 23 23 23 22 22 21 21 20 19

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Coca-Cola Brands

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Factors Affecting Brand Equity


NAME AWARENESS PERCEIVED QUALITY BRAND EQUITY Name Symbol BRAND ASSOCIATIONS

BRAND LOYALTY

BRAND ASSETS
Value to Firm BRAND LOYALTY Efficient and Effective Marketing Programs Price/Margins Brand Extensions Trade Leverage Competitive Advantage

VALUE TO CUSTOMER Easier to Interpret Benefits Feel Confident in the Purchase Decision Get more Satisfaction in Use Dr. A. Kaul

Brand Positioning
Is the act of designing the companys offering and image to occupy a distinctive place in the mind of the target market

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Positioning Strategy
Competitive Frame of Reference MOOV, back pain for women PointsofDifference FedEx, overnight delivery nationally PointsofParity Savlon, antiseptic no sting Redefining Category BMW, both luxury and performance
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Introductory Branding Strategy


PROMOTION HIGH HIGH Rapid Skimming (Profits) Rapid Penetration (Profits in ShortTerm) LOW Slow Skimming (Profits) Slow Penetration (Profits in LongTerm)

PRICE
LOW

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Perceptual or Positioning Map


High Quality F A D

Low Performance

B Low Quality

High Performance

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4P Marketing Mix 4A Rural Challenges


4Ps Product Price Place Promotion 4As Acceptability Affordability Availability Awareness

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Elements of Promotional Mix


Advertising Sales Promotion Publicity and Public Relations Personal Selling Direct Marketing Internet Marketing

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Corp. Marketing Dept. Centralized


Marketing

Product Planning

Advertising

Sales Promotion

Marketing Research

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Corp. Marketing Dept. Decentralized


Marketing

Sales

Product Management Marketing Marketing Services Services Brand Manager Brand Manager Advertising Department Marketing Research

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Brand Manager
Responsible for Ad and Promotions Works closely with Outside Ad Agency and other Marketing Communication Specialists May have own Ad Agency May Compete with other, even in the same Product Category

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Concrete Objectives Fosters Beer


Strengthen the Brands Image Maximize Brand Presence Broaden the Market Base Beyond Traditional Import Beer Drinkers Increase Sales

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Positioning
In the Minds of the Consumer For Companies as well as Brands Distinctive Attribute Price/Quality Usage/Application Product Users/Class Creative Strategy for Multiple Brands in the same Market Segment
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Top 10 Advertising Slogans of the Century


Company/Brand 1. DeBeers 2. Nike 3. Coca-Cola 4. Miller Lite 5. Avis 6. Maxwell House 7. Wheaties 8. Clairol 9. Morton Salt 10. Wendys Campaign Theme Diamonds are forever Just do it The pause that refreshes Tastes great, less filling We try harder Good to the last drop Breakfast of champions Does she..or doesnt she When it rains it pours Wheres the beef?

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