product management_kerala university syllabus based study material

8/3/2019 Product Management_Kerala University Syllabus Based Study Material

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Unit-5

What is Co-branding

Co branding is the utilization of two or more brands to name a new product. The ingredient

brands help each other to achieve their aims. The overall synchronization between the brandpair and the new product has to be kept in mind. Example of co-branding - Citibank co-branded with MTV to launch a co-branded debit card. This card is beneficial to customerswho can avail benefits at specific outlets called MTV Citibank club.

Types of Co-branding

Co-branding is of two types: Ingredient co-branding and Composite co-branding.

1. Ingredient co-branding implies using a renowned brand as an element in theproduction of another renowned brand. This deals with creation of brand equity for

materials and parts that are contained within other products. Theingredient/constituent brand is subordinate to the primary brand. For instance - Dellcomputers has co-branding strategy with Intel processors. The brands which areingredients are usually the companys biggest buyers or present suppliers. Theingredient brand should be unique. It should either be a major brand or should be

protected by a patent. Ingredient co-branding leads to better quality products, superiorpromotions, more access to distribution channel and greater profits. The seller ofingredient brand enjoys long-term customer relations. The brand manufacture can

benefit by having a competitive advantage and the retailer can benefit by enjoying apromotional help from ingredient brand.

2. Composite co-branding refers to use of two renowned brand names in a way thatthey can collectively offer a distinct product/ service that could not be possibleindividually. The success of composite branding depends upon the favourability of theingredient brands and also upon the extent on complementarities between them.

Advantages and Disadvantages of Co-branding

Co-branding has various advantages, such as - risk-sharing, generation of royalty income,more sales income, greater customer trust on the product, wide scope due to joint advertising,technological benefits, better product image by association with another renowned brand, andgreater access to new sources of finance. But co-branding is not free from limitations. Co-

branding may fail when the two products have different market and are entirely different. Ifthere is difference in visions and missions of the two companies, then also composite

branding may fail. Co-branding may affect partner brands in adverse manner. If thecustomers associate any adverse experience with a constituent brand, then it may damage thetotal brand equity.

Brand Positioning


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Brand Positioning - Definition and Concept

Brand positioning refers to target consumers reason to buy your brand in preference

to others. It is ensures that all brand activity has a common aim; is guided, directed and

delivered by the brands benefits/reasons to buy; and it focusses at all points of contact with


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the consumer.

Brand positioning must make sure that:

Is it unique/distinctive vs. competitors ?

Is it significant and encouraging to the niche market ? Is it appropriate to all major geographic markets and businesses ? Is the proposition validated with unique, appropriate and original products ? Is it sustainable - can it be delivered constantly across all points of contact with the

consumer ? Is it helpful for organization to achieve its financial goals ?

Is it able to support and boost up the organization ?

In order to create a distinctive place in the market, a niche market has to be carefully chosenand a differential advantage must be created in their mind. Brand positioning is a mediumthrough which an organization can portray its customers what it wants to achieve for themand what it wants to mean to them. Brand positioning forms customers views and opinions.

Brand Positioning can be defined as an activity of creating a brand offer in such a mannerthat it occupies a distinctive place and value in the target customers mind. For instance-Kotak Mahindra positions itself in the customers mind as one entity- Kotak - which can

provide customized and one-stop solution for all their financial services needs. It has anunaided top of mind recall. It intends to stay with the proposition of Think Investments,Think Kotak. The positioning you choose for your brand will be influenced by thecompetitive stance you want to adopt.

Brand Positioning involves identifying and determining points of similarity and difference toascertain the right brand identity and to create a proper brand image. Brand Positioning is thekey of marketing strategy. A strong brand positioning directs marketing strategy byexplaining the brand details, the uniqueness of brand and its similarity with the competitive

brands, as well as the reasons for buying and using that specific brand. Positioning is the basefor developing and increasing the required knowledge and perceptions of the customers. It isthe single feature that sets your service apart from your competitors. For instance- Kingfisherstands for youth and excitement. It represents brand in full flight.

There are various positioning errors, such as-

1. Under positioning- This is a scenario in which the customers have a blurred andunclear idea of the brand.

2. Over positioning- This is a scenario in which the customers have too limited aawareness of the brand.

3. Confused positioning- This is a scenario in which the customers have a confusedopinion of the brand.

4. Double Positioning- This is a scenario in which customers do not accept the claimsof a brand.


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5 Factors of Brand Positioning

1. Brand Attributes

What the brand delivers through features and benefits to consumers.

2. Consumer Expectations

What consumers expect to receive from the brand.

3. Competitor attributes

What the other brands in the market offer through features and benefits to consumers.

4. Price

An easily quantifiable factor Your prices vs. your competitors prices.

5. Consumer perceptions

The perceived quality and value of your brand in consumers minds (i.e., does your brandoffer the cheap solution, the good value for the money solution, the high-end, high-price tagsolution, etc.?).

Unit-3

Introduction

Product Planningrefers to the systematic decision making related to all aspects of thedevelopment and management of a firms products including branding and packaging.

Each product includes a bundle of attributes capable of exchange and use.

Product definition:A product is a good, service, or idea consisting of a bundle of tangible and intangibleattributes that satisfies consumers and is received in exchange for money or some other unitof value.

Differences between Goods and ServicesGoods are tangible. You can see them, feel them, touch them etc.

Services are intangible. The result of human or mechanical efforts to people or objects.
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Major distinguishing characteristics of Services:

Intangibility-major component of a service is intangible Pershibality-many cannot be stored for future sales Airline/Amusement

ride

Number of hair cut hours in one week: i.e., if Christies employs 3 people,who work forty hours per week, they have potentially 120 hair cut hours tooffer. If they do not have any customers at a particular period during theday, they will lose the opportunity to cut hair at that time and thereforethe opportunity to generate revenue...the opportunity has perished...theyno longer have the ability to earn revenue from 120 hair cut hours thatweek!!

Inseparability-customer contact is often the integral part of theservice...Legal services/hair dresser, therefore often a direct channel ofdistribution.

Variability-in service quality, lack of standardization, because services arelabor intensive.

Sales of goods and services are frequently connected, i.e. a product will usually

incorporate a tangible component (good) and an intangible component.

Levels of ProductThere are 3 levels of products

Core Product- Marketers must first define what the core BENEFITS theproduct will provide the customer.

Actual Product-Marketer must then build the actual product around thecore product. May have as many as five characteristics:

o Quality levelo Featureso Brand nameo Packaging

all combined to carefully deliver the core benefit(s).

Augmented Product-offer additional consumer benefits and services.o Warrantyo Customer training

EXAMPLE SONY CAMCORDER:

Core--the ability to take video pictures conveniently Actual--Sony Handycam (brand name), packaged, convenient design so

you can hold it, play back features etc. that provide the desired benefits,high quality etc.

Augmented--receive more than just the camcorder. Give buyers awarranty on parts and workmanship, free lessons on how to use thecamcorder, quick repair service when needed and toll free telephonenumber when needed.

Marketers must first identify the core consumer needs (develop core product),then design the actual product and find ways to augmentit in order to create the
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bundle of benefits that will best satisfy the customer.

Classifying ProductsProducts can be classified depending on who the final purchaser is.

Components of the marketing mix will need to be changed depending on whothe final purchaser is.

Consumerproducts: destined for the final consumer for personal, familyand household use.

Business to business products: are to satisfy the goals of the organization.

The same product can be purchased by both, for example a computer, for the

home or the office.

The following are classifications for consumer products:

Convenience: Packaging is important to sell the product. Consumers willaccept a substitute. Marketers focus on intense distribution, time utility.Convenience products can be categorized into staple (milk), impulse (notintended prior to shopping trip).

Shopping: Consumers expend considerable effort planning and makingpurchase decisions. IE appliances, stereos, cameras. Consumers are notparticularly brand loyal. Need producer intermediary cooperation, highmargins, less outlets than convenience goods. Use of sales personnel,communication of competitive advantage, branding, advertising, customerservice etc. Attribute based (Non Price Competition), product with the best

set of attributes is bought. If product attributes are judged to be similar,then priced based. Specialty: Buyer knows what they want and will not accept a substitute, IE

Mercedes. Do not compare alternatives. Brand, store and person loyal. Willpay a premium if necessary. Need reminder advertising.

Unsought: Sudden problem to resolve, products to which consumers areunaware, products that people do not necessary think of purchasing.Umbrellas, Funeral Plots, Encyclopedia!!

The following are classifications for Business to Business products:

Production Goodso Raw Materials:o Component parts: becomes part of the physical producto Process materials: not readily identifiable part of the production of

other products Support Goods

o Major Equipment:o Accessory Equipment: Type writers and toolso Consumable Supplies: IE Paper, pencils or oilso Business to Business services: Financial, legal marketing research

etc.

Elements of a Product MixIf an organization is marketing more than one product it has a product mix.
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Product item--a single product Product line--all items of the same type Product mix--total group of products that an organization markets

Depth measures the # of products that are offered within each product line.

Satisfies several consumer segments for the same product, maximizes shelfspace, discourages competitors, covers a range of prices and sustains dealer

support. High cost in inventory etc.

Width measures the # of product lines a company offers. Enables a firm to diversify products,appeals to different consumer needs and encourages one stop shopping.

Proctor & Gamble example in class.Why so many different products?Different needs of different target markets for the same product. Channels of distributioneconomies etc.

Product Positioning and Product RepositioningDefinition:

This refers to a place a product offering occupies in consumers' minds on

important attributes, relative to competing offerings.

How new and current items in the product mix are perceived, in the minds of the consumer,therefore reemphasizing the importance ofperception!!

New Product--need to communicate benefitsEstablished Products--need to reinforce benefits

Ideal Characteristics

Need to introduce products that possess characteristics that the target market

most desires, ideal. Product positioning is crucial.

Consumers desires refer to the attributes consumers would like the products to possess--IDEAL POINTS.Whenever a group of consumers has a distinctive "ideal" for a product category theyrepresent a potential target market segment.A firm does well if its attributes (of the product) are perceived by consumers as being close totheir ideal. The objective is to be "more ideal" than the competitors.

Each product must provide some unique combination of new features desired by the targetmarket.

Instead of allowing the customer to position products independently, marketers try toinfluence and shape consumers concepts and perceptions.

Marketers can use perception maps.
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Existing Products

Handout...Here Comes the Sun to Confound Health-Savvy Lotion Makers^

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Old Position | New Position

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Glamour--------------------------------------------------Health

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Traditional sun tan lotion positioned as aiding in getting a very glamorous deep

tan etc.

Dermatologist reports...skin cancer etc.

Lifestyle needs change, move to more health conscious (previously discussed)

Need to reposition sun tan lotion as a healthy way to be exposed to the sun.

Target market has shifted from the left quartile to the right quartile as far as

needs are concerned.

Sun tan marketers need to do same as far as changing consumers perception for

the product.

How?

Change Promotion: "Tan don't Burn" The St. Tropez Tan vs. Ultra SweatProof Serious tan for...Be Sun Smart

Change Product: Sunscreen and sunless tanning agent.

Handout...BMW Banks on Affordability...^

Very Safe

| Lexus/infiniti

| Mercedes

| BMW

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|Cheap--------------------------------------------------Expensive

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Very Unsafe

BMW, to reposition up to the left

Due to the exchange rate, Lexus moves to the right
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Why did they repositition?SafetyAffordabilityCompetitors include Infiniti, Lexus, Mercedes Benz and Aurora

If you already have a brand in the market, must be sure to avoid cannibalization. Attributesand brand image should give a product distinct appeal.

New Product PositioningWhen developing a new product, a company should identify all the features that

are offered by all its major competitors.

Second, identify important features/benefits used in making purchase decisions.

Determine the overall ranking of features by importance and relate the importance of each

feature to its "uniqueness".

For example you wouldn't buy a spreadsheet program that if it didn't perform basic math, sobasic math is very important.However since every spreadsheet has that its an "important fundamental feature", instead ofan "important differentiating feature".

The flip side would be a spreadsheet that displays all numbers in binary (0-1) instead of"normal" numbers (0-9). This is unique but not important.

The evaluation becomes a 2 x 2 matrix with uniqueness on the X-axis and importance on the

Y-axis.

^

X Important to TM (Stockbroker) X

Math functions | Import Data

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----------------------------------------------------------Unique

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Binary Data

If the feature is in the upper right hand corner then you have probably got a

winning feature.

This is known as feature positioning, as opposed to product positioning. One can then seewhat type of customer needs the important (and perhaps unique) features.


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If your spreadsheet accepts continuous data in real-time (such as stock market data) whileLotus 1-2-3 doesn't, you'd position your spreadsheet as a "real-time spreadsheet with allcalculations needed by Wall Street."

Its a claim that tells something unique about your product, who it's for, and by implication,

that Lotus 1-2-3 can't do it.

Developing and Managing ProductsTo compete effectively and achieve goals of an organization, the organization

must be able to adjust its product mix.

Need to understand competition and customer attitudes and preferences.

Handout...At Timex, They're...

1982, Timex turned down the opportunity to market "Swatches". Timex was

resting on its laurels, simple low cost watches. Digital revolutionized industry(technological change), Timex stuck with analog.

DID NOT KEEP UP WITH WATCHES EVOLUTION FROM A FUNCTIONAL OBJECT TO

A FASHION ACCESSORY.

Now consumer owns 5 watches up from 1.5 30 years ago (emphasizing fashion need). Timexhas acquired Guess and Monet Jewellers (distribution outlets) in an effort respond to change.Product mix:Dressy watches to Walt Disney Character watches, Indigo. Now have 1,500 styles, 300 in1970.

Developing New ProductsNeed to develop new products. A new product can be:

Continuous Innovation...No new buyer behavior to learn, i.e. -products notpreviously marketed by the firm, but by others

Dynamic Continuous Innovation...minor education needed for consumersto adopt product

Discontinuous Innovation...entirely new consumption patterns

Handout...In Battle over Video Disk Standard

What will be the winning format?

New Product (Technology)

Need to appeal to:

o Hollywoodo Ultimate consumers

Battle between:

o Sony and Phillips
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o Toshiba, Pioneer and Time Warner

Swing voter...Matsushita Electric Industry (Toshiba/Pioneer)

DVD could transform movie business (like CDs for music) Movie studios

can resell all movies in new format therefore very important to them, also

sell through market, video rentals are decreasing, due to competingservice.

Set of requirements:

o 135 mins on 1 disco quality superior to vhso cd quality audioo able to add multiple languageso parent lockout systemo iron clad copying protection

Sony announced going ahead (Vaporware!)

If 2 systems go to market, best system will win, only one technology can

survive, WINNER WINS BIG...LOSER LOSES BIG (DUE TO INVESTMENT) VHS

vs Betamax

For a new product to succeed it must have:

desirable attributes be unique

have its features communicated to the consumer (mkt support necessary)

Developing new products is expensive and risky.

Failure not to introduce new products is also risky. IETimex

Firms develop new products in two ways:

By acquisition, i.e. Timex bought Guess and Monet Jewellers in 1992,bringing in new products to their product mix.

Internal development, this is what we are going to focus on.

17,363 (8,077 food) new items hit supermarket and drug stores in 1993,according to marketing experts, a 9.3% increase over 1992.

Launching a new product name along with new product is very risky and

expensive therefore 75% of new products were brand-extension brands in 1993,

up from 68% in 1992 (continuous innovations)

Why New Products Fail

Lack of differentiating advantage Poor marketing plan Poor timing

Target market too small Poor product quality
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No access to market

Seven phases to new product development:

New Product Strategy Development

Only a few ideas are good enough to reach commercialization. Ideas can

be generated by chance, or by systematic approach. Need a purposeful,

focused effort to identify new ways to serve a market. New opportunities

appear from the changes in the environment.

Idea Generation

Continuous systematic search for new product opportunities.

o Marketing oriented sources--identify opportunities based onconsumer needs, lab research is directed to satisfy that research. 1-800#s, research etc.

o Laboratory oriented sources--identify opportunities based on pureresearch or applied research.

o Intrafirm devises--brain storming, incentives and rewards for ideas.3Ms Post it, from choir practice. Hewlett Parkards lab is open 24 hrs.day. Analyzing existing products, reading trade publications.Brainstorming for your group project. Ideas should not be criticized,no matter how off-beat they are.

Product Screening and Evaluation

New product check list; list new product attributes considered most

important and compare each with these attributes. Check list is

standardized and allows ideas to be compared.

--General characteristics, Marketing Characteristics and Production

Characteristics.

Ideas with the greatest potential are selected for further research.

Do they match the organizations goals(DuPont and ICI have many patents that they

have not exploited for this very reason.)

Look at companies ability to produce and market the product.

Need to look at the nature and wants of the buyers and possible environmentalchanges.

Concept Testing

Sample of potential buyers is presented with the product idea through a

written or oral description to determine the attitudes and initial buying

intentions.
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This is done before investing considerable sums of money and resources in Researchand Development.

Can better understand product attributes and the benefits customers feel are mostimportant.

Would you buy the product?Would you replace your current brand with the new product?Would this product meet real needs?Return to Contents

Business Analysis

Analyze potential contribution to sales, costs and profits.

Does the product fit into the current product mix?

What kind of environmental and competitive changes can be anticipated?How will these changes effect sales etc.?Are the internal resources adequate?Cost and time line of new facilities etc.?Is financing available?Synergies with distribution channel etc.MIS to determine the market potential sales etc.Patentability should be determined, last 17 years, 14 years for a pharmaceutical

product.Find out if it is technically feasible to produce the new product.If you can produce the new product at a low enough cost so as to be able to make a

profit.Return to Contents

Product Development

Develop a prototype, working model, lab test etc.

Attributes that consumers have identified that they want must be communicatedthrough the design of the product.

Return to Contents

Test Marketing

Can observe actual consumer behavior.

Limited introduction in geographical areas chosen to represent intended

market.

Aim is to determine the reaction of probable buyers.

It is the sample launch of the Marketing Mix.

Determine to go ahead, modify product, modify marketing plan or drop

the product.

PROS are:
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o Lessens the risk of product failure.o Reduces the risk of loss of credibility or undercutting a profitable

product.o Can determine the weaknesses in the MM and make adjustments.o Can also vary parts of the MM during the test market.

o Need to select the appropriate MM and check the validity.

CONS are:

o Test market is expensive.o Firm's competitors may interfere.o Competitors may copy the product and rush it out. IE Clorox

detergent with bleach P&G. "In a live test you've tipped your hand,and believe me, the competition is going to come after you. Unlessyou have patented chemistry, they can rip you off and beat you to anational launch" -Director of Marketing at Gillette's Personneldivision.

Alternatively can use a simulated test market. Free samples offered in the

mall, taken home and interviewed over the telephone later.

Handout...Miller's Momemtum....

Return to Contents

Commercialization

Corresponds to introduction stage of the Product Life Cycle.Plans for full-scale marketing and manufacturing must be refined and

settled.

Need to analyze the results of the test market to determine any changes

in the marketing mix.

Need to make decisions regarding warranties etc (reduces consumers

risk). Warranties can offer a competitive advantage.

Spend alot of $s on advertising, personnel etc. Combined with capital expendituremakes commercialization very expensive.

Handout...American Express To Try a Credit Card...

All stages above are identified in this article except market testing.

Need to consider:

the speed of acceptance among consumers and channel members; intensity of distribution, production capabilities, promotional capabilities,

prices, competition,
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time period to profitability and commercialization costs.

Return to Contents

Buyers' Product Adoption Process

Awareness

Buyers become aware of the product

Interest

Buyers seek information and is receptive to learning about product

Evaluation

Buyers consider product benefits and determines whether to try it

Trial

Buyers examine, test or try the product to determine usefulness relative

to needs

Adoption

Buyers purchase the product and can be expected to use it when the need

for the general type of product arises.

Rate of adoption depends on consumer traits as well as the product and the

firm's marketing efforts.

Return to Contents

Diffusion ProcessThe manner in which different members of the target market often accept and

purchase a product (go through the adoption process)

Innovators

Techno-savvies first customers to buy a product, 2.5 % of consumers

Early Adopters

Tend to be opinion leaders. Adopt new products but use discretion, 13.5%

Early Majority

34% of consumers, first part of the mass market to buy the product

Late Majority
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Less cosmopolitan and responsive to change, 34%

Laggards

Price conscious, suspicious of change, 16%, do not adopt until the product

has reached maturity.

LAUNCHING A NEW PRODUCT

Once the product-line architecture has been established and a new product is beingdeveloped, it is time for a company to think about how to successfully launch the product in

its target market. This is the stage where an advertising or public relations agency can comeinto play, especially for small businesses without the internal resources to handle such a jobthemselves. When using an outside agency to launch a product, a company should:

Have a well-defined product concept (which is where product-linearchitecture comes into play).

Provide the agency with background information on its products and goals. Conduct necessary patent research, applying for new patents as needed. Have the manufacturing process in place and ready to go, either internally

or via outsourcing. Have a formal business plan in place that defines funding of the project.

Determine who will approve the marketing or advertising plan that theagency creates (the fewer people communicating with the agency, thebetter).

Determine the proper timing for the launch.

SPEED-TO-MARKET AND PRODUCT DEVELOPMENT

In today's technology-fueled business environment, the always-important speed to marketfactor has become perhaps the most critical factor in new product development. Today,however, speed to market is perhaps the most crucial part of product development. Improvedcommunication (especially the Internet), increased globalization, and rapid changes intechnology have put tremendous pressure on companies to get their product to market first.To improve speed to market, a company should first make sure that it is making the best

possible use of available technology. If it is, then there are other steps that can be taken tospeed product development through efficient, market-oriented product planning that takes thecustomer into account:

SERVICE COMPANIES AND NEW PRODUCTS

Service companies should take a disciplined, analytical approach to developing new services,relying on targeted customer input just as companies outside the service sector do.

Companies in the service industry know that they are competing for customers based onperceived value as much as actual price. If a customer feels they are getting better treatment,


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or more service options, or more "free" services as part of their purchase, they are more likelyto remain a client of that company. If, however, a company stops innovating and adding newservices to its core business, then the service becomes a commodity and clients look at onlyone thingpricewhen deciding on what company to choose.

Service companies should routinely ask themselves a series of questions:

Could current services be presented in a different way? Could they be offered to new customer groups? Are their little things that can be tweaked to freshen or update a service? Could services be improved or changed?

Because by their very nature services are easy to copy (no materials or product knowledge isneeded), service companies actually face more pressure to innovate and develop new

products than manufacturers. By continually asking the above questions and by following thesame models manufacturing companies follow when pursuing product development, service

companies can stay ahead of their competitors and make their services clearly identifiable toconsumers.

PITFALLS TO PRODUCT DEVELOPMENT

Finally, when embarking on the product development process, try to remember in advancewhat the obstacles to success are. These pitfalls are many and varied, and can include:

Inadequate market analysis. Inadequate cost analysis. Strong competitor reaction. Undue infatuation with your company's own technology and expertise. Overreaching to make products beyond your company's financial and

knowledge grasp. Technical staff too attached to a project and too proud to admit defeat,

even when a project can not be justified according to preestablishedcriteria.

Problems with patent, license, or copyright issues. No real criteria for deciding if a project is good or bad. Changes in strategy at the corporate level are not conveyed to the

product development team. Low product awareness.

Money and staff allocated to a project are hidden in the budget of anotherproject. Company decision-makers blinded by the charisma or charm of the person

presenting the new product idea. Project accepted on the basis of who gets it first.

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Causes of New Product Failures

Overestimation of Market Size

Product Design Problems


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Product Incorrectly Positioned, Priced or Advertised

Costs of Product Development

Competitive Actions

To create successful new products, the company must:

understand its customers, markets and competitors

develop products that deliver superior value to customers.

New Product Development Process

1.Idea Generation

Systematic Search for New Product Ideas

Internal sources

Customers

Competitors

Distributors

Suppliers

2.Idea Screening

Process to spot good ideas and drop poor ones

Criteria

Market Size

Product Price

Development Time & Costs

Manufacturing Costs

Rate of Return

Step 3. Concept Development & Testing


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Step 4. Marketing Strategy Development

Marketing Strategy Statement Formulation

Step 5. Business Analysis

Step 6. Product Development


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Step 7. Test Marketing

Product Life Cycle


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New Product Adoption and Diffusion

Adoption process:The decision-making activity ofan individual through

which the new product is accepted.

Diffusion:The process by which an innovation is spread through a social

system over time.

Stages in the Adoption Process

awareness: customer is exposed to the product

interest: interest and information seeking

evaluation : assessment of the advantages and disadvantages of the new

product

trial: customer tries the product in low-risk situation; may be a sample or

test drive

adoption : customer decides to buy the product

confirmation: customer decides to stay with the product; attemptsdissonance reduction

Researchers have identified five categories of individual adopters

for new products:

Innovators 3% of the market.

Early adopters 13% of the market.

Early majority 34% of the market.

Late majority 34% of the market.


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Laggards 16% of the market.

In addition, some individuals nonadopters never accept the

innovation

Five Characteristics Affecting Adoption Rate: Example

Evaluation of new safer baseball for youngsters:

1. Relative advantagesuperior to current balls in terms of safety but not

tradition.

2. Compatibilitycoincides with cultural values and experiences of parents but

not of coaches.

3. Complexityno problem understanding.

4. Trialabilityball can be easily tested.

5. Observabilitycan see a youngster whos hit with the new ball dust off and

trot to first base.

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Unit-4

Brand Extension - Meaning, Advantages and Disadvantages

Brand Extension is the use of an established brand name in new product categories. This newcategory to which the brand is extended can be related or unrelated to the existing productcategories. A renowned/successful brand helps an organization to launch products in newcategories more easily. For instance, Nikes brand core product is shoes. But it is nowextended to sunglasses, soccer balls, basketballs, and golf equipments. An existing brand thatgives rise to a brand extension is referred to as parent brand. If the customers of the new

business have values and aspirations synchronizing/matching those of the core business, and ifthese values and aspirations are embodied in the brand, it is likely to be accepted by customersin the new business.

Extending a brand outside its core product category can be beneficial in a sense that it helpsevaluating product category opportunities, identifies resource requirements, lowers risk, andmeasures brands relevance and appeal.

Brand extension may be successful or unsuccessful.

Instances where brand extension has been a success are-

i. Wipro which was originally into computers has extended into shampoo, powder, andsoap.

ii. Mars is no longer a famous bar only, but an ice-cream, chocolate drink and a slab of

chocolate.


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Instances where brand extension has been a failure are-

i. In case of new Coke, Coca Cola has forgotten what the core brand was meant to standfor. It thought that taste was the only factor that consumer cared about. It was wrong.The time and money spent on research on new Coca Cola could not evaluate the deep

emotional attachment to the original Coca- Cola.ii. Rasna Ltd. - Is among the famous soft drink companies in India. But when it tried to

move away from its niche, it hasnt had much success. When it experimented withfizzy fruit drinkOranjolt, the brand bombed even before it could take off. Oranjoltwas a fruit drink in which carbonates were used as preservative. It didnt work out

because it was out of synchronization with retail practices. Oranjolt need to berefrigerated and it also faced quality problems. It has a shelf life of three-four weeks,while other soft- drinks assured life of five months.

Advantages of Brand Extension

Brand Extension has following advantages:

1. It makes acceptance of new product easy.a. It increases brand image.

b. The risk perceived by the customers reduces.c. The likelihood of gaining distribution and trial increases. An established brand

name increases consumer interest and willingness to try new product havingthe established brand name.

d. The efficiency of promotional expenditure increases. Advertising, selling andpromotional costs are reduced. There are economies of scale as advertising forcore brand and its extension reinforces each other.

e. Cost of developing new brand is saved.f. Consumers can now seek for a variety.g. There are packaging and labeling efficiencies.h. The expense of introductory and follow up marketing programs is reduced.

2. There are feedback benefits to the parent brand and the organization.a. The image of parent brand is enhanced.

b. It revives the brand.c. It allows subsequent extension.d. Brand meaning is clarified.e. It increases market coverage as it brings new customers into brand franchise.

f. Customers associate original/core brand to new product, hence they also havequality associations.

Disadvantages of Brand Extension

1. Brand extension in unrelated markets may lead to loss of reliability if a brand name isextended too far. An organization must research the product categories in which theestablished brand name will work.

2. There is a risk that the new product may generate implications that damage the imageof the core/original brand.

3. There are chances ofless awareness and trial because the management may not

provide enough investment for the introduction of new product assuming that the spin-off effects from the original brand name will compensate.


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4. If the brand extensions have no advantage over competitive brands in the newcategory, then it will fail.

UNIT II

PRODUCT PORTFOLIO MODELS

Product portfolio - the Boston Matrix (or Boston Box)

Introduction

The business portfolio is the collection of businesses and products that make up the company. The best businessportfolio is one that fits the company's strengths and helps exploit the most attractive opportunities.

The company must:

(1) Analyse its current business portfolio and decide which businesses should receive more or less investment,and

(2) Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same timedeciding when products and businesses should no longer be retained.

Methods of Portfolio Planning

The two best-known portfolio planning methods are from the Boston Consulting Group (the subject of this

revision note) and by General Electric/Shell. In each method, the first step is to identify the various StrategicBusiness Units ("SBU's") in a company portfolio. An SBU is a unit of the company that has a separate missionand objectives and that can be planned independently from the other businesses. An SBU can be a companydivision, a product line or even individual brands - it all depends on how the company is organised.

The Boston Consulting Group Box ("BCG Box")


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Using the BCG Box (an example is illustrated above) a company classifies all its SBU's according to twodimensions:

On the horizontal axis: relative market share - this serves as a measure of SBU strength in the market

On the vertical axis: market growth rate - this provides a measure of market attractiveness

By dividing the matrix into four areas, four types of SBU can be distinguished:

Stars - Stars are high growth businesses or products competing in markets where they are relatively strongcompared with the competition. Often they need heavy investment to sustain their growth. Eventually theirgrowth will slow and, assuming they maintain their relative market share, will become cash cows.

Cash Cows - Cash cows are low-growth businesses or products with a relatively high market share. These aremature, successful businesses with relatively little need for investment. They need to be managed for continued

profit - so that they continue to generate the strong cash flows that the company needs for its Stars.

Question marks - Question marks are businesses or products with low market share but which operate in highergrowth markets. This suggests that they have potential, but may require substantial investment in order to growmarket share at the expense of more powerful competitors. Management have to think hard about "questionmarks" - which ones should they invest in? Which ones should they allow to fail or shrink?

Dogs - Unsurprisingly, the term "dogs" refers to businesses or products that have low relative share inunattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever,worth investing in.

Using the BCG Box to determine strategy

Once a company has classified its SBU's, it must decide what to do with them. In the diagram above, thecompany has one large cash cow (the size of the circle is proportional to the SBU's sales), a large dog and two,smaller stars and question marks.

Conventional strategic thinking suggests there are four possible strategies for each SBU:

(1) Build Share: here the company can invest to increase market share (for example turning a "question mark"into a star)

(2) Hold: here the company invests just enough to keep the SBU in its present position

(3) Harvest: here the company reduces the amount of investment in order to maximise the short-term cash flowsand profits from the SBU. This may have the effect of turning Stars into Cash Cows.

(4) Divest: the company can divest the SBU by phasing it out or selling it - in order to use the resourceselsewhere (e.g. investing in the more promising "question marks").

However, the approach has received some negative criticism for the following reasons:

The link between market share and profitability is questionable since increasing market sharecan be very expensive.

The approach may overemphasize high growth, since it ignores the potential of decliningmarkets.

The model considers market growth rate to be a given. In practice the firm may be able togrow the market.


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Shells Directional portfolio matrix

Each of thezones is described as follows:

Leader - major resources are focused upon the SBU. Try harder - could be vulnerable over a longer period of time, but fine for now. Double or quit - gamble on potential major SBU's for the future. Growth - grow the market by focusing just enough resources here. Custodial - just like a cash cow, milk it and do not commit any more resources. Cash Generator - Even more like a cash cow, milk here for expansion elsewhere.

Phased withdrawal - move cash to SBU's with greater potential. Divest - liquidate or move these assets on a fast as you can.

Product Positioning Strategies

Positioning is what the customer believes about your product's value, features, and benefits; itis a comparison to the other available alternatives offered by the competition. These beliefs

tend to based on customer experiences and evidence, rather than awareness created by


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advertising or promotion.

Marketers manage product positioning by focusing their marketing activities on a positioningstrategy. Pricing, promotion, channels of distribution, and advertising all are geared to

maximize the chosen positioning strategy.

Generally, there are six basic strategies for product positioning:

1. By attribute or benefit- This is the most frequently used positioning strategy. For a lightbeer, it might be that it tastes great or that it is less filling. For toothpaste, it might be the minttaste or tartar control.

2. By use or application- The users of Apple computers can design and use graphics moreeasily than with Windows or UNIX. Apple positions its computers based on how thecomputer will be used.

3. By user- Facebook is a social networking site used exclusively by college students.Facebook is too cool for MySpace and serves a smaller, more sophisticated cohort. Onlycollege students may participate with their campus e-mail IDs.

4. By product or service class- Margarine competes as an alternative to butter. Margarine ispositioned as a lower cost and healthier alternative to butter, while butter provides better tasteand wholesome ingredients.

5. By competitor- BMW and Mercedes often compare themselves to each other segmenting

the market to just the crme de la crme of the automobile market. Ford and Chevy need notapply.

6. By price or quality- Tiffany and Costco both sell diamonds. Tiffany wants us to believethat their diamonds are of the highest quality, while Costco tells us that diamonds arediamonds and that only a chump will pay Tiffany prices.

7 . Positioning strategy based on Product Process Another positioningapproach is to associate the product with its users or a class of users. Makes ofcasual clothing like jeans have introduced designer labels to develop a fashionimage. In this case the expectation is that the model or personality will influence

the products image by reflecting the characteristics and image of the model orpersonality communicated as a product user. Lets not forget that Johnson andJohnson repositioned its shampoo from one used for babies to one used by peoplewho wash their hair frequently and therefore need a mild people who wash theirhair frequently and therefore need a mild shampoo. This repositioning resulted ina market share.

Product Differentiation Strategy

Successful companies strive to distinguish their products from competitors

through differentiation strategies. In an often crowded product market, customers


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crave product distinctions to help them make purchasing decisions. By offering

greater values, customization features and convenience options, you can

influence a customer to purchase your products. The best product differentiation

strategies increase your brand image, cater to customer preferences and

increase sales.

Customizationo Offer customization options for your products to set them apart from generic

competitor offerings. Savvy consumers research their purchases and knowwhat components and features they want prior to making a purchase. Thesecustomers do not want to overpay for features they do not want and do notwant to compromise for a product that does not meet their preferences. Allowcustomers to tailor your products to their desires. From choosing colors to

product features, a customized product will differentiate your offering fromyour competitors and can lead to greater market share. Consider integrating

customization options into your website for maximum benefit. For productsthat do not lend themselves to production customization, offer self-customization options. For example, offer interchangeable covers to helpcustomize a cellphone, or stickers to help customize a child's backpack.

Convenience

o Position your products for customer convenience as a differentiation strategy.

Offer multiple shipping options that cater to customers' schedule andpreferences. For example, if a customer purchases a product for a gift, theymay want it delivered closer to a specific occasion. Customers will appreciateyour ability to deliver on their preferred schedule, which can increase customerloyalty.

Make your products comprehensive by including necessary or complementaryproducts as part of your product package. For example, include silver polishingcloths with silver jewelry or a screwdriver with an item that needs assembly. Ifyou include items that make using your product more convenient for yourcustomer, you will distinguish your products from similar product offers.

Value

o Differentiate your products by providing the highest customer value. Offer

features that higher priced competitors offer on their products, but at a lowerprice point. This differentiation strategy does not mean to compete withgeneric or low-priced products, but rather provide customers with the bestoverall value out of all your product competition. Consider using promotions toincrease value-based differentiation. Use buy-one, get-one free offers, free add-on products, increased size offers and immediate-use coupons. When acustomer feels she is receiving a quality product at a discount rate, she will bemore satisfied with her purchase and will be more likely to make a repeat

purchase.


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Perceptual mapping provides answers to these vital questions:

What is your market position relative to your competitors? What are your strengths and weaknesses? Where are there gaps in the market? How do you measure up to the ideal? What strategies will improve your competitive position so that you are both relevant to

the market and differentiated from competitors?

An Example of Perceptual Mapping

This hypothetical example of the beverage market illustrates one of the primary results of aperceptual mapping studythe map itself. For illustrative purposes, this example uses typesof beverages instead of actual beverage brands.

In the perceptual map below, both functional attributes (sparkling) and emotional attributes(youthful) are included. Each attribute is represented by an arrow. Attributes that are closeto one another are related, and the types of beverages are positioned near the attributes that

best describe them.


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