brand management and new product development section 16 the launch alan l. whitebread

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT

SECTION 16

The Launch

Alan L. Whitebread

BEST CONSUMER TEST MARKETShttp://www.acxiom.com/default.aspx?ID=2521 2004

1. ALBANY-SCHENECTADY-TROY, NY 2. ROCHESTER, NY 3. GREENSBORO--WINSTON-SALEM--HIGH POINT, NC 4. BIRMINGHAM, AL 5. SYRACUSE, NY 6. CHARLOTTE-GASTONIA-ROCK HILL, NC-SC 7. NASHVILLE, TN 8. EUGENE-SPRINGFIELD, OR 9. WICHITA, KS10. RICHMOND-PETERSBURG, VA

http://www.acxiom.com/default.aspx?ID=2521

WORST CONSUMER TEST MARKETShttp://www.acxiom.com/default.aspx?ID=2521 2004

141. EL PASO, TX142. COLUMBIA, MO143. TALLAHASSEE, FL144. BROWNSVILLE-HARLINGEN-SAN BENITO, TX145. PROVO-OREM, UT146. OCALA, FL147. McALLEN - EDINBURG-MISSION, TX148. HONOLULU, HI149. SAN FRANCISCO, CA150. NEW YORK, NY

http://www.acxiom.com/default.aspx?ID=2521

TEST MARKET LAUNCH

• Test all aspects of the product– Functionality– – – Clarity of instructions– …

• Discover problems / improvements–

• Test acceptance rate and forecast assumptions

TEST MARKET LAUNCHCoca-Cola Offers Money-Back Guarantee on New Product Launch

Sep 15, 2005 6:04 AMPROMO Xtra

Coca-Cola is offering the ultimate marketing tool to launch its new sports drink: the money-back guarantee.

Coca-Cola offers guarantee on POWERade

POWERade OPTION, a low-calorie, low-carbohydrate sports drink is now on store shelves nationwide featuring a "Great Taste" money-back guarantee that gives

consumers who don't like the taste a full refund.The company decided to make the offer based on overwhelming positive feedback

on the produce and strong sales, said Mary Herrera, director of marketing for sports & energy drinks, Coca-Cola North America, in a statement.

"Combine this initial feedback with the results from the taste test against Propel, and it was an easy decision to initiate the 'Great Taste' money-back guarantee,"

she said. Propel is made by The Gatorade Co., a division of PepsiCo.Sampling is getting underway at special events in key markets across the country.

POWERade OPTION comes in strawberry, black cherry and lemon flavors and is sold in 32-ounce bottles, 20-ounce single bottles and six-packs.

Print ads, in-store merchandising and promotions as well as public relations and online sponsorship programs support.

http://ad.doubleclick.net/jump/promo.iclick.com/adtarget;page=coca-cola_refund_091505;subss=;subs=breakingnews;area=news;site=promo;spon=primarymag;kw=;sz=180x150;tile=1;pos=rectangle1;ord=123456

http://us.powerade.com/option/

http://www.cocacola.com/

http://www.propelfitnesswater.com/

THE LAUNCH

• The largest expenditure of management time, money, and corporate resources used at any time in the NPD process.

THE LAUNCH: GOALS

• Seamless to the customer– Timing, coordination

• Integration of– Operations ramp– Sales training– Customer service[s]– Maximizing IMC Impact

• The communication plan– TOTAL toothpaste example

» http://www.bizjournals.com/louisville/stories/1998/12/21/story8.html» http://findarticles.com/p/articles/mi_m0BDW/is_38_41/ai_66189159/pg_1» http://www.slideshare.net/Stefano/colgate-palmolive-toothbrush-precision/

http://www.bizjournals.com/louisville/stories/1998/12/21/story8.html

http://findarticles.com/p/articles/mi_m0BDW/is_38_41/ai_66189159/pg_1

http://www.slideshare.net/Stefano/colgate-palmolive-toothbrush-precision/

THE LAUNCH: ROLL-OUT STRATEGY

• – Multiple simultaneous markets or segments

• – A series of launches across markets or

segments [or countries if international]

THE LAUNCH: BACKGROUND

• High risk compared to a product [line] extension or improvement

• Many potential pitfalls– What can go wrong?

• Very high expenditures

THE LAUNCH: POTENTIAL PITFALLS

• The forecast• Supply chain issues

– – Logistical coordination– Out-of-stocks

•

– Manufacturing / vendor flexibility– IMC:

•

LEAN LAUNCH METHOD

• Flexible supply chain– Quickly respond to demand– Reduce lead times to improve response– Postponement

• Time: Forward inventory placements• Form: assembly, packaging, labeling-especially for

multiple products– Computers [WIP]– Neutral base for house paints– International [labels and languages]

IMC AND THE LAUNCH

• Consumer promotion• Direct marketing• Internet activities• Print advertising• Public relations• Radio advertising• Reseller education• Reseller support

materials [collateral, POS, …]

• Sales force promotion• Sales force training• Trade promotion• Trade shows• TV advertising• …

MONITORING THE LAUNCH

• POS sales information

• EDI or its equivalent

• Regional roll-outs

UNDERSTANDING SUCCESS AND FAILURE

• A General Electric study found the three largest new product failure factors are

1. market changes that could not be predicted

2. substitute new products by the competition; and,

3. poor timing caused by excessive time in the commercialization process.

NEW PRODUCT STRATEGIES

TIME

DeclineMaturityIntroduction Growth

SALES

PRODUCT CATEGORY CYCLE

Increasing competition

INNOVATIVE NEW PRODUCT STRATEGY

• Technology-driven• Completely new products• Probably a new brand• Broad initial product assortment is desired• May have new channel members or a new

channel• Skimming price strategy• Capitalize on first-mover advantage

INNOVATIVE NEW PRODUCT STRATEGY

• Continually reinforce that yours is the original.– Coke “the real thing”– Kentucky Fried Chicken …

OFFENSIVE ADDITION STRATEGY

• Innovative, improved products

• Create barriers for competitors

• Expand product assortment

•

DEFENSIVE ADDITION STRATEGY:You are not the market leader

• Less innovative, market-driven product line additions

• Late growth and early maturity stages of the PLC

• Maximize presence in existing market [segments]

• Possible brand extensions• Market penetration strategies• Heavy sales promotion at all levels

WHY DO NEW PRODUCTS SUCCEED?

• Defined NPD process• Written documentation• Excellent research and development• Outstanding implementation• Well defined product concept prior to

development• Technological/marketing fit• Unique, superior product• Feedback loops for rapid response to varying

conditions

WHY DO NEW PRODUCTS FAIL?

• Overestimation of market size

• No major points of difference

• Insufficient quality

• Insufficient access to market segment[s] / poor fit with the firm

• Poor execution of product mix

• Insufficient funding or ROI

• Competitive actions / reactions

REAL LAUNCHES: SONY

• March 24, 2005 SONY Portable Playstation– 1,000,000 PSP Value Pack units in retail

stores across the country for today’s launch

SONY PSP Value Pack

-- PSP(TM) (PlayStation(R) Portable)-- AC Adaptor-- Battery Pack-- Memory Stick Duo(TM) (32 MB)-- Headphone with remote control-- Soft Case-- Wrist Strap-- Cleaning Cloth-- UMD in-pack game/movie/music sampler-- Spider-Man(TM) 2 from Sony Pictures Home Entertainment (for the first 1 Million PSP Value Packs shipped)

CHRISTMAS 2006: SONY• PLAYSTATION 3

– Initially targeted Spring, 2006 [confirmed 2/20/06]• Shortage of blue laser diodes• U.S. production to start May, 2006 - Terre Haute, IN• 750,000 per month building to 5,000,000 per month in

October, 2006– 400,000 in U.S. on delayed Nov. 17 launch date– 2 models: $499 & $599 [Europe €499 & €599]– 600,000 more by year-end– 6,000,000 in the first five months– Ships are usually full from July through November

• 500 20-foot containers or• 60 Boeing 747-400’s or• Volga Dnepr fleet of Anatov 124’s


SECTION 17

Building Successful Brands: The Marketing Plan II

Alan L. Whitebread

NEW PRODUCT GROUPINTRODUCTION STAGE OF THE PLC

Sales Low but accelerating; growth based on market acceptance rates

Costs High initial marginal cost per unit then declining

Profits A function of the cost system; could be negative to low

Marketing objectives

Create awareness and stimulate initial purchases

Product A basic product set-possibly different sizes, colors, flavors, …

Price Usually skimming; do not use cost-plus

Distribution High cost; especially if you are adding new members or a new channel

IMC Strong across all channel members to build awareness and stimulate initial purchases

GROWTH STAGE OF THE PLC

Sales Increase at an increasing rate then at a decreasing rate

Costs Costs continue to fall; begin to approach a minimum cost of production per unit

Profits Marginal and total profits are increasing


Build and solidify market share; strengthen the position in the marketplace

Product Rapidly expand product offering to include sizes, styles, accessories, warranty, …

Price Likely switch to very competitive based on the desired position

Distribution Increase the number of outlets, shelf space, etc. without corrupting the channel[s]

IMC Continue to increase awareness, build interest, and repeat purchase / use

MATURITY STAGE CHALLENGES

• EXPAND THE MARKET SEGMENT[S]– Increase consumption frequency and amount

• •

• MODIFY THE PRODUCT– Expand variety especially quality, features, styles, colors,

…Continually improve the product to push it back toward the growth stage

•


• MODIFY THE MARKETING MIX– Continually change the marketing mix to maximize

sales– Find additional applications

• •


• FIND ADDITIONAL APPLICATIONS– Promote new uses for the product

• WD-40– Cleans through grease and duct tape– Keeps glass and mirrors fog and spot-free– Lubricates and stops squeaks; loosens stubborn zippers – Prevents rust on saws, saw blades, and other tools– Protects silver from tarnishing; untangles jewelry chains– Protects the Statute of Liberty from the elements– Removes lipstick stains and tomato stains from clothing– Removes crayon from walls and stains from stainless steel sinks– Restores and cleans chalkboards, leather dashboards, vinyl

bumpers, and roof racks

MATURITY STAGE OF THE PLC

Sales Reach a maximum

Costs Lowest marginal cost of production

Profits Good but declining marginal profitability; excellent cash cow


Defend/increase market share while seeking to maintain profitability

Product Some additional product line expansion possible – especially early in the maturity stage

Price Maximum competition and very competitive pricing; AUP is likely to decrease over time

Distribution Expand distribution as much as possible without corrupting channels

IMC Stress differentiation and value; possible heavy promotion

DECLINE STAGE OF THE PLC

Sales Declining then declining at an increasing rate

Costs Low, but can start increasing either in production or inventory storage

Profits Declining


Minimize expenditures; seek to improve position

Product Pare product line; eventually divest or discontinue and redeploy assets to a better opportunity

Price Falling

Distribution Shrinking; eliminate poor performing entities

IMC Minimize to retain only loyal customers

NEW PRODUCTS AND BRANDS

• Three choices for a new product1. Create an entirely new brand name

2. Somehow place it with an existing brand name [brand extension]

3. Combine an existing brand with a new name [brand extension or sub-brand]

– Parent brand is the existing one in 2 and 3 above.– If the parent brand has multiple extensions it is a

family brand.

MASTER BRANDS

• Sub-branding– Adds a new element below the brand hierarchy

•

• Super-branding– Adds a new element above the brand hierarchy

•

• Brand building – Also called cross branding or brand bundling

• Citibank AAdvantage Visa Card

• Brand bridging– Use a master brand to introduce a new brand

• Neutrogena … T-Gel therapeutic shampoo

4. Productdiversification

3. Marketdevelopment

Newmarkets

1. Marketpenetration / saturation

Existingmarkets

Existingproducts

2. Productdevelopment

Newproducts

ANSOFF’S PRODUCT / MARKETEXPANSION GRID

Newmarkets


Existingmarkets

Existingproducts

Newproducts


MAXIMIZE

•

•

Newmarkets

Existingmarkets

Existingproducts


Newproducts


EXPAND

•

• market share

•


Newmarkets

Existingmarkets

Existingproducts

Newproducts


DEVELOP

• line extension[s]

•

•


Newmarkets

Existingmarkets

Existingproducts

Newproducts


VERY HIGH RISK

• category extension

•

TAUBER’S GENERAL BRAND EXTENSION CATEGORIES

1. Same product, change of form• Jell-O Pudding Pops

2. Contain brand’s distinctive taste, ingredient, or component

• Haagen-Dazs cream liqueur

3. Companion products• Coleman camping equipment • Duracell Durabeam flashlights

4. Products relevant to the franchise of the brand•


5. Capitalize on firm’s expertise• Canon cameras lead to

– Photocopiers– and ???


6. Reflect the brand’s distinctive benefit, attribute, or feature

•

7. Capitalize on the image or prestige of the brand

• Calvin Klein clothes / accessories • Porsche sunglasses

ADVANTAGES OF BRAND EXTENSIONS

• Improve and expand the brand image

•

• Channels are more willing to accept brand extensions

•

• Lower product introduction costs

DISADVANTAGES OF BRAND EXTENSIONS

•

• Extension success comes with too much cannibalization of the parent brand

• May shift perception away from other family members

•

PRODUCT LINE CHALLENGES

PRODUCT LINE SALES HISTORY

0102030405060708090

100

1 2 3 4 5 6 7 8 9 10 11 12 13 14

A B C D E PL

THE PRODUCT LIFE CYCLE OVERVIEW[Countries or products in boxes]

TIME


SALES

A

I

BC

D

E

E

G H

J

K

Delete products

ITEMS TO EVALUATE

• Category extensions– Colgate toothbrushes– Mars ice cream bars

• Related categories for Vaseline Intensive Care – Clorox laundry detergent– LifeSavers Chewing Gum

GUIDELINES FOR LINE EXTENSIONS

• Outstanding market segmentation and sub-segments

• Thoroughly understand consumer needs and desires

• Line extensions provide price breadth and channel flexibility

•

•


•

• Build trade [reseller] pressure through the breadth of the offering “one-stop shop” concept



Newmarkets


Existingmarkets

Existingproducts


Newproducts


Newmarkets


Existingmarkets

Existingproducts

Newproducts


MAXIMIZE

• market share

• variety

• innovation

Newmarkets

Existingmarkets

Existingproducts


Newproducts


EXPAND

• category extension or new

• market share

• applications & products


Newmarkets

Existingmarkets

Existingproducts

Newproducts


DEVELOP


• new varieties

• new applications


Newmarkets

Existingmarkets

Existingproducts

Newproducts


VERY HIGH RISK


• prefer acquisition of an existing brand






4. Products relevant to the franchise of the brand• Visa traveler’s checks


5. Capitalize on firm’s expertise• Canon core competencies

• Precision mechanics• Fine optics• Microelectronics

• Canon cameras lead to– Photocopiers– and ???



• Lysol deodorizers





• Consumer perceives less risk to purchasing the new item


• Increase IMC efficiency



• May confuse consumers if there are too many of them or not logical

• Extension success may come with too much cannibalization of the parent brand


• May dilute brand meaning


TIME


SALESA

I

BC

D

E

E

G H

J

K

Delete products

ITEMS TO EVALUATE


• Related categories for Vaseline Intensive Care – Clorox laundry detergent [disinfecting]– LifeSavers Chewing Gum [protection]


• Requires outstanding market segmentation and sub-segments



• Can absorb excess capacity

• Rewards with minimal risk


• Improve competitive position and intensity




Newmarkets


Existingmarkets

Existingproducts


Newproducts


Newmarkets


Existingmarkets

Existingproducts

Newproducts


MAXIMIZE

•

•

Newmarkets

Existingmarkets

Existingproducts


Newproducts


EXPAND

•

• market share

•


Newmarkets

Existingmarkets

Existingproducts

Newproducts


DEVELOP


•

•


Newmarkets

Existingmarkets

Existingproducts

Newproducts


VERY HIGH RISK


•






4. Products relevant to the franchise of the brand•


5. Capitalize on firm’s expertise• Canon cameras lead to

– Photocopiers– and ???



•





•


•



•

• Extension success comes with too much cannibalization of the parent brand


•

PRODUCT LINE CHALLENGES

PRODUCT LINE SALES HISTORY

0102030405060708090

100

1 2 3 4 5 6 7 8 9 10 11 12 13 14

A B C D E PL


TIME


SALES

A

I

BC

D

E

E

G H

J

K

Delete products

ITEMS TO EVALUATE


• Related categories for Vaseline Intensive Care – Clorox laundry detergent– LifeSavers Chewing Gum


• Outstanding market segmentation and sub-segments



•

•


•



SECTION 18

Building Successful Brands: Years 2 and beyond

Alan L. Whitebread

PORTFOLIO PLANNING & MANAGEMENT

Strategic Planning

Portfolio Planning

Portfolio Assessment-Capability development-Resource management

-Portfolio review

TechnologyScanning

OpportunityScanning


Strategic Planning

Core competencies

SWOT analysis

Planning models

Organizational structure

Key success factors

Competitive analysis & competitive advantage

Gap analysis


TechnologyScanning

Technology advancement

New technologies

Use a Technology Roadmap to increase capabilities

-Develop internally

-Acquire

-Both

TECHNOLOGY ROADMAP

Technology

area

Last year

This year

+1 year

+2 years

Vision

Weight/size 16-bit chip Micro controller

Integrated unit

Single chip Soft radio

Ease of use 4 line screen

10 line screen

VGA Touch screen

Voice interface

Longevity

Audio quality

Video quality


OpportunityScanning

Market research

Competitive research

Close to the market

Close to the customer

-General needs

-Joint development


Portfolio Planning

Portfolio planning and analysis

Product Generation Map

PRODUCT GENERATION MAP: HP

DeskJet

DeskJet Plus

DeskJet 500C

DeskJet 550C

DeskJet 300

DeskJet 560C

1. Cost reduction

2. Quality improvement

Swap color and black cartridges

One color and one black cartridge

Portable with small footprint

Cost reduction

TIME


Portfolio Assessment-Capability development & NPD

-Resource management-Portfolio review

Gap analysis

Life-cycle analysis

Brand / line extensions

Metrics

MARKET METRICS

• Its all about measurement– Continuous customer feedback– Many topics

• Current products• Emerging needs• Future products• Trends

– In-class exercise: What trends do you expect in the communications field in the next 10 years?


TIME


SALES

A

-I

BC

D

E

E

G H

-J

-K

Most developed nations – stream of new product introductions

BANDAID TIMELINE

http://www.band-aid.com/brand_timeline.shtml March 9, 2007

http://www.band-aid.com/brand_timeline.shtml

DISNEY PRODUCT FAMILIES

ADVANCED BRAND MANAGEMENT TOPICS

• Measuring brand equity

• Building a strong brand and increasing brand equity– – Full range of brand elements– Strong and consistent IMC program– Continual innovation and NPD

• Pharmaceutical example [Merck 12/2005]

ADVANCED BRAND MANAGEMENT TOPICS

• Challenging larger brands / fighting a challenge • Scale generally slows development and/or

implementation– – Focus efforts and concentrate resources–

• •


SECTION 19A

B2B Brands and Issues

Alan L. Whitebread

CHARACTERISTICS OF BUSINESS MARKETS

BUSINESS MARKETS CONSUMER MARKETS

Market Structure

Geographically concentrated

Many types of markets [segments]

Fewer very-high volume buyers

Fluctuating, derived demand

Geographically dispersed

Mass markets

Small volumes

Primary demand

Products Standard / complex / custom

Service etc. are critical

Business applications

Engineering / Quality / Testing involvement

Standard

Service etc. of some note

Personal use

No formal evaluation

Buyer Behavior

Professionally trained

Multiple levels involved

Performance hurdles

Individuals purchasing

Some family influence

Social / psychological drives

Buyer-Seller Relationships

Technical expertise

Close interpersonal relationships

Long-term focus

May be very dependent on each other

Amateur

Impersonal

Immediate / Short-term

CHARACTERISTICS OF BUSINESS MARKETS

BUSINESS MARKETS CONSUMER MARKETS

Supply Chains / Channels of distribution

Predominant

Often shorter [more direct]

Not seen by consumer

Usually indirect

Promotion Often technical

Personal selling

Often involves resellers

Simple

Advertising

Price Professional negotiating / purchasing

Volume sensitive

Complex formalized process

Competitive bid / Many strategies

Individuals limited purchasing skill

Little, if any, leverage

Simple process

N/A

Demand Derived

Inelastic in the short-run

Volatile and discontinuous

Direct

Elastic

Limited volatility

B2B COMPETITION:Sources of Information

• Industry reports

• Government reports

• Industry consultants/experts

• Brokerage reports / various filings– SEC, UCC, state and local, …

• Data bases

• Supplier/customer network

B2B COMPETITION:Analytical Techniques

• Benchmarking

• 5 forces [Porter]

• Patent analysis

• Trend analysis

• Cost analysis

• Risk analysis

• Regression analysis

• Scenario building

B2B COMPETITION:

• Review uncertainties/risks

• Analyze threats

• Anticipate competitive moves

• Understand strategic/tactical alternatives

• Scenario implementation

B2B SEGMENTATION BASES:

• Buying organization characteristics– Size, location, usage rate, …

• Product/Service/Application set– NAICS [or old SIC] category, end market

served, value of use [compared to competitors or substitutes]

• Purchasing Characteristics– Type of buying, stage of the purchase

decision

B2B SEGMENTATION BASES:

• Key buying criteria– Total system cost, compatible systems,

flexibility, supplier capabilities, …

• Importance of purchase– Strategic, high to low, …

• Customer Organization Characteristics– Innovator or follower– Technology level– Sophistication

B2B SEGMENTATION BASES

• Product line

• Geographic region

• Customer industry

• Customer size [company, purchases]

• Customer buying behavior

• Customer technology

• Process and supply chain requirements

B2B SEGMENTATION CRITERIA

1. Measurable– The degree to which you can measure buyer

characteristics

2. Accessible– The ability to focus on target market

segments

3. Substantial– The degree to which target market segments

are large enough and potentially profitable enough to pursue

B2B SEGMENTATION

4. -The extent to which marketing and business

strengths compare to current and expected competitive and technology states

5. -The extent to which target market segments

respond to elements of the marketing mix

B2B SEGMENTATION:Implementing your segmentation

• Sales force [organization, training, …]

• Requirements [technical, customer service, …]

• If services are needed, how will assistance options be provided on a real-time continuous basis?

• If it will be international, is the flexibility built into the design to allow adaptations to be made easily?

B2B SEGMENTATION:Understanding product market dimensions

• Customer function– [meaningful functions [most value], …]

• Technology– [alternative ways to provide the customer function, …]

• Customer segment– Groups served [sales reps, customer service reps,

product managers, …

• Value-added system– Related products and services [potential alliances

and/or threats]

B2B SEGMENTATIONSources of Competition

• Direct competition

•

•

•

• Substitute products/services/materials

• Severed relationships [alliances, joint ventures, etc. that dissolved]

B2B SEGMENTATIONAttractiveness of segments

• Size, growth rate, potential market share

• Ability to reach effectively – distribution & communication channels

• Competitive intensity

• Value

• Strengths match market needs

• Differentiability and positioning

• Strategic fit with the organization

B2B MAKE OR BUY DECISIONS

If any of the following are answered yes, make the product.

• Is it part of a core competence?• Does it involve a core technology?• Must or do we want to protect it?

If any of the above were answered no, then consider making or buying the product.

• Is it sufficiently important for us to make it?• Are the any unacceptable risks to buying the product?

B2B DISRUPTIVE TECHNOLOGIESCreating New Businesses

DIMENSIONS SUSTAINING INNOVATIONS

LOW-END DISRUPTIONS

HIGH-END DISRUPTIONS

Targeted performance [product and/or service]

Most meaningful and valued by the target market segment

Good enough Improved performance in new attributes

Customer or market application

The most profitable customers or target market

Observed customers / market

Target non-consumers

Business model Improves or maintains margins with existing processes and cost structure

Uses a new operating and/or financial approach

Must pass corporate hurdle rates

IMC: Collateral

• Copies of ads

• Sales literature

• Catalogs

• Product brochures

• Data sheets

• Capabilities brochures

• Technical bulletins/specifications

• Application sheets

IMC—THE PROMOTIONAL MIXAND THE PRODUCT LIFE CYCLE:

Purina Dog Chow Example

LO3

18-113

B2B IMCAdvertising evaluation

• Target market coverage

• Key buying motives

• Effectiveness of messages

• Media effectiveness

• Overall results

THE ROLE OF DIRECT MARKETING

OTHER ACCOUNTS

RESELLER ACCOUNTS

NATIONAL ACCOUNT, OEM, DIRECT & FIELD

SALES FORCES

MARKETS OR INDUSTRIES

LARGER ACCOUNTS

SMALLER ACCOUNTS

HOW DO WE COST-EFFECTIVELY REACH TARGET MARKETS OF SMALL ACCOUNTS?

B2B SALES MANAGEMENTTraditional Accounts vs. Key Accounts

TRADITIONAL SELLING KEY ACCOUNT SELLING

Small to medium Large, frequently across multiple SBUs

Regular products and services [core] Core plus customized products, applications, and services

Product/service sales Not just products and services but the long-term strategic fit and associated benefits to both organizations

Sales person is the key link to the Buyer

Multiple relationships across many levels managed by the Key Account Manager

Sales person with limited skill set Experienced pro that is as comfortable on the factory floor as they are in the boardroom. Highly skilled.

B2B SALES MANAGEMENTRole of a B2B Sales Professional

• Build the relationship and trust throughout the Buyer’s organization.

• Lead the communications process between Buyer and Seller.

• Manage the exchange of information.

• Provide problem-solving solutions.

• Effectively negotiate.

• Manage the relationship.

B2B SALES MANAGEMENTKey Account Customer Analysis

• Technologies and processes

• Businesses and product lines

• Markets and customer types

• Their competitors

• Channels of distribution

• Channels of communication

• Preferred relationships

• Culture

B2B SALES MANAGEMENTPotential – Forecast - Actual

• Potential– The total potential sales to the market

[segment]

• Forecast– Sales estimate of sales to each market

[segment] by customer, product, and territory

• Actual– Net sales and net units


SECTION 19B

B2B Brands and Issues:OEM / Private Label Strategies and the Importance

of Services

Alan L. Whitebread

THE B2B MARKETPLACE

• Business marketers often have large customers wielding tremendous

• Customers want solutions and long-term relationships, not just features. Share common goals, objectives, and team solutions.

• Competitive advantage requires a firm to offer the customer a solution set –

THE B2B MARKETPLACE

• The internet has driven the cost of acquiring supplier and product specification information to almost zero.

• Buyers must evaluate the value of services before they are provided. The service provider’s track record, reputation, image, and other inferences are used to make the buying decision.

THE B2B MARKETPLACE

• A service enhancement in an offering keeps on providing value. Its contribution to a long-term relationship and customer lifetime value should exceed the out-of-pocket expense of providing it.

• Procurement needs partners who can ensure reliable supply, high efficiency, and

BUSINESS SERVICES

Source: Christian Homburg and Bernd Garbe, “Towards an Improved Understanding of Industrial Services: Quality Dimensions and Their Impact on Buyer-Seller Relationships” (ISBM Report 9-1999, Working Paper of the Institute for the Study of Business Markets, Smeal College of Business, Pennsylvania State University; 1999).

EVALUATING BUSINESS SERVICES

• The technical competence

• The competence

• The quality of the service delivery [friendliness, thoroughness, response time, time to completion, …]

• Successful outcome

ADDING VALUE TO P/L AND OEM CUSTOMER RELATIONSHIPS

SHORT-TERM VALUE LONG-TERM VALUE

Current product cost reduction

Improved business systems interfaces

Business systems services

UNDERSTANDING BRANDS

• Your main brand

•

• Other brands– OEM– Private Label

BRAND TERMINOLOGY

WHY HAVE A PRIVATE LABEL?

• Provide consumers a cost-effective alternative to the big name brand

• Adds to owner brand power –

• A strong alternative to weak brands – take their shelf space– reason to discontinue slow movers

•

WHY HAVE A PRIVATE LABEL?

• Minimal conflicts with manufacturer’s brand since it is often made by the big brand company

• Provide access to product markets

• Improve market segmentation to include more of the less brand conscious buyers

PRIVATE LABELELLERS ISSUES

•

• Private label strategy– Creativity [product line extensions]– Breadth and depth

COMPETING AGAINST PRIVATE LABEL BRANDS?

• No imitations allowed– IP

• Fakes• Close imitations

– Packaging

• Vigorously defend your positioning

• Reinforce creativity, innovation, originality

• Use promotions

• Stress investment in R&D, NPD

SHOULD WE MAKE BRANDS FOR OTHER FIRMS/

• Additional volume spreads fixed costs

• Benefit from economies of scale– Purchasing power– Especially if only the package is different

• Profitable – Little sales or IMC expense [%]

• Your competitors will likely provide the products if you do not act.


SECTION 20

A Detailed Comparison of Brand Management Approaches

Alan L. Whitebread

BRAND MANAGEMENT4 MAJOR APPROACHES

• Economic approach

• Identity approach

• Consumer-based approach

• Personality approach

• Others approaches exist

4 MAJOR APPROACHES:Assumptions

Economic approach Brand is managed and controlled by the firm.

Identity approach Brand should have identity with visual and behavioral aspects that fit with the strategy.

Consumer-based approach

The brand is a cognitive construct in the mind of the consumer but the marketer is able to control brand value creation.

Personality approach Assumes personality traits are important drivers of emotional bonding between consumers and brands.

4 MAJOR APPROACHES:Theoretical basis

Economic approach 1-The economic man [classical economics]2-Transaction cost theory [stresses optimization of the firm; there are barriers to consumer utility optimization]

Identity approach Brand identity themes [1-corporate identity, 2-behavioral identity, 3-image, 4-reputation]


Cognitive consumer perspective [memory, language, problem-solving, imagery, deduction, and induction]

Personality approach 3 Themes - personality, consumer self, and brand-self congruenceA strong emotional bond should form between the consumer and the brand.

4 MAJOR APPROACHES:Methodologies employed

Economic approach •Mathematical models of empirical data•Investigate causal effects [regression analysis and other methods]

Identity approach •Align the three strategic stars [strategic vision, organization culture, stakeholders images]•Lives in the hearts and minds of the organization


•Brand knowledge is composed of brand awareness [recognition and recall] and brand image [associations linked to the brand]•Employs association maps to understand the relationships

Personality approach •Uses qualitative [free association] and quantitative methods [scaling] to discover brand personality.

4 MAJOR APPROACHES:Managerial implications

Economic approach •Use the marketing mix to implement the brand strategy•Product is always in stock where the consumer wants to purchase it.

Identity approach •Marketing mix is the main instrument for the creation and management of brand equity•The firm and its employees are at the center of brand equity creation and enlargement.


•Marketer should stress brand congruency and consistency•Brand equity begins with brand awareness

Personality approach •Create and manage brand personality through direct and indirect methods.•Brand management must understand consumer identity construction and translate that into a brand personality that is relevant and valuable to the consumer.

4 MAJOR APPROACHES:Behavior of the firm

Economic approach •The firm focuses on price, demand, and supply

Identity approach •Focuses on a single brand identity that is the essence of the organization [Who we are.] and distinctive [Who are the stakeholders?].•The brand is for all stakeholders. It must be created by the firm and its stakeholders


•Brand equity should be a strategic priority so one must take a long-term view of marketing decisions•Focus on implementation excellence.

Personality approach •The company develops a brand personality with a core theme and supports that with the product related attributes.•Characteristics attributed to the brand must be strong, consistent, and resilient.

4 MAJOR APPROACHES:Brand communication

Economic approach •Broadcast mode [PUSH] to the entire market and the consumer will respond•Focus is on brand attributes and benefits

Identity approach •Focus on sending messages


•Brand value creation occurs by molding the consumer's brand associations.•Brand strength comes from strong, unique, and positive associations.

Personality approach •Integrates brand-self congruence, personality, and the consumer self•Uses a central theme [sincerity, excitement, competence, sophistication, ruggedness]


SECTION 21

International Brands and Issues

Alan L. Whitebread

International Brands and Programs

• Global programs and market flexibility

• Differences in – wants, – needs, – desires, – uses, and – cultural issues

INTERNATIONAL BRAND SENSITIVITY

• Cultural environment – – – – Relationships – Language

INTERNATIONAL EXPANSION STRATEGIES

• NARROW FOCUS– concentrated markets / countries

• COUNTRY FOCUS– country-by-country

• COUNTRY DIVERSIFICATION–

• GLOBAL DIVERSIFICATION–

POTENTIAL BARRIERS TO MARKET ENTRY

•

•

• Insufficient scale

• Cost disadvantages unrelated to scale

• Capital requirements

• Government policies and procedures

FOREIGN MARKET ENTRY ALTERNATIVES

DIRECT

EXPORTING

FRANCHISING

INDIRECT

EXPORTING

DIRECT

INVESTMENT

CONTRACTUAL

LICENSING

COPYRIGHT A. WHITEBREAD, 2001-2010

ENTERING FOREIGN MARKETS

ManufacturerAgents / Distributors

[Not in destination country- Usually in home country]


INDIRECT EXPORTING• RISKS

– LIABILITY, CONTROL

– VERY ERRATIC DEMAND

– FIT WITH OPERATIONS

• REWARDS– VERY LITTLE SALES EFFORT

– INCREMENTAL VOLUME AND PROFIT



DIRECT EXPORTING• RISK

– CONTROL OF INDEPENDENT RESELLERS

• REWARD• DIRECT CONTACT WITH LOCAL MARKET

ManufacturerSales

Subsidiary

Resellers[Usually not inhome country]

IndividualAccounts

OEM’s


LICENSING & FRANCHISING• RISK

– CONTROL OF RESELLERS

• REWARDS– MINIMIZE ENTRY RISK

– PROFIT STREAM

ManufacturerLicensees

orFranchisees

Resellers

IndividualAccounts



DIRECT INVESTMENT [ACQUISITION, GREENFIELD, BROWNFIELD]

• RISKS– START-UP OPPORTUNITY COST; INVESTMENT; WC

– COUNTRY STABILITY; CURRENCY EXCHANGE

• REWARDS– DIRECT MARKET CONTACT

– PROFIT STREAM


ManufacturerSubsidiary

(Manufacturing)

Resellers

IndividualAccountsOEMs

ENTERING FOREIGN MARKETSCONTRACTUAL

[JOINT VENTURE, STRATEGIC ALLIANCE, CONTRACT MANUFACTURING]

• RISKS– AUDIT & CONTROL

– START-UP INVESTMENT; WC

• REWARDS– MINIMIZE ENTRY RISK

– PROFIT STREAM

ManufacturerContract

Manufacturing

Resellers

IndividualAccounts


LIKELY ENTRY ALTERNATIVES

SITUATION OPTION[S]

A small firm wants to export only. Indirect or direct exporting

A specialized machinery manufacturer wants to increase their presence in key country markets.

A firm is having difficulty supplying enough goods to a regional market.

A firm wants to aggressively increase its sales in a region

ENTITY OPTIONS

• Sole Proprietorship

• Corporation – C or S in the U.S.

• Partnership – General – Limited Liability Partnership [LLP]

• Limited Liability Company [LLC]

TYPES OF VERTICAL MARKETING SYSTEMS [VMS]

Greater

Lesser

Degreeof

DirectControl

Degreeof

DirectControl

CORPORATECommon Ownership at Different Channel Levels

CONTRACTURALContractual Agreements Among Channel Members

ADMINISTEREDLeadership is Assumed by One or a Few Dominant Members; Contracts are not common

TYPES OF CHANNELS

Corporate

Subsidiaryor JV

Corporate

Subsidiaryor JV

Contractual

Resellers Licensees [Franchisees]

Contractual

Resellers Licensees [Franchisees]

Administered

No agreement

Administered

No agreement

International Vertical Marketing Systems [VMS]

International channels of distribution may use any possible combination of the above systems. There is frequently significant region-to-region variation and sometimes major country-to-country differences. Each

business must build the best combination for their needs.

DISTRIBUTION STRATEGY: INTENSITY

INTENSIVE

EXCLUSIVE

SELECTIVE

CONSUMER CHANNEL MAP[Simple distribution]

Manufacturer’sInternet Site

Wholesaler

Manufacturer

CONSUMERS

MassMerchandiser’s

Internet Site

Retail Store

Indirect distributionDirect distribution

STRUCTURING CHANNELS WITH TERMS & CONDITIONS OF SALE

ACCOUNT TYPE PAYMENT TERMS DELIVERY TERMS SPECIAL TERMS PROMOTION AND INCENTIVES

Regional Distributor

Choose from:Net _ daysPrompt pay discount…

Choose from:FOB [Ex works]TimeSpecial chargesShipping feesDrop ship…

Choose from:Inventory

adjustmentMinimum order size…

Choose from:Co-op advertisingSales promotions…

Distributor

Dealer

B2B Consumer

MEXICO BEARING INDUSTRY - 2000Domestic Mfgs.

Foreign Mfgs. + subs.

Wholesalers (also V. Large End-Usersmajor importers) (auto assembly, …)

53% of consumption

Distributors <(20-30% MU)(11,000) brands

Retailers or Dealers(20,000)

(20-30% MU)Major End-Users(few in number)

Sm. & Med. End-Users(???)

Copyright A. Whitebread 3/1/98, updated 12/1/05

$1.00

$1.25

$1.56

$1.95

Channel Map Channel Map -- Food Food ProcessorProcessor

Manufacturer

Brokers/Agents National Account Sales

Company Sales ForceMilitary Distributors

MilitaryInstallations

FoodserviceDistributors

Full-serviceWholesalers

Cash & CarryWholesalers

Hospitals

Super markets, mass merchants, etc.

ConsumersSchoolsRestaurants


• Differences in– Product development– Competitive environment– Legal environment– Government regulations

• • •


• International Product Standards• How should we enter a foreign market?


• Global programs and market flexibility

• Differences in wants, needs, desires, uses, and cultural issues

• Sometimes limited marketing tools

CONSUMER PROMOTIONSGermany Italy

Multi-purchase offers M Y

Extra product M Y

Free product Y Y

Mail-in offers N Y

Purchase-with-purchase N Y

Contests M Y

Sweepstakes N M

Money-off coupons N M

Next-purchase coupons N M

Cash rebates M N

In-store demos Y Y

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

THE INTERNATIONAL PRODUCT LIFE CYCLE: AN OVERVIEW

TIME


SALES

A

-I

BC

D

E

E

G H

-J

-K

Most developed nations – stream of new product introductions

Medium developed

nations – trailing introduction

Least developed nations – simple product version

IMPLEMENTING THE MARKETING MIX

Country #1Marketing Mix

Country #2

Country #3

Country #4

Country #5Every country will likely have a unique marketing mix.

Sometimes a regional marketing approach will work. There may still be some changes in the marketing mix – especially with the IMC.

TYPES OF SALES FORCES

FIELD

DIRECT SALES

NATIONAL ACCOUNTS

OEM

GOVERNMENT

HOUSE

DIRECT MARKETING

TELESALES

DIRECT MAIL

CATALOG

INTERNET

SUBSIDIARIES

MANUF. REP’S

FRANCHISES

LICENSEES

JOINT VENTURES

AFFILIATES

Copyright A. Whitebread, 2001-2010.

brand management and new product development section 16 the launch alan l. whitebread

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