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Key Learning Points
• Product Life Cycle and Product & Brand Strategies • Modifying The Offering Concept & Positioning Strategies • Customer-Based Brand Equity • Forecasting new product sales
Product & Brand Decisions
• Many Product & Brand Decisions are Related to the Product Life Cycle (PLC), Technology Diffusion, & LongTerm Expectations for Product Category Evolution The PLC sketches the sales history of a product category over time. Strategy and segmentation options and the importance of marketing mix variables vary across each stage of the PLC. Not all product categories follow the standard PLC curve across time in a linear manner.
Beer Market Evolution for Selected Countries & Regions .
The Product Life Cycle Two Critical Inflection Points Greatest Customer Complexity Greatest Competitor Complexity Key Segment Strategic Emphasis Early Market Early Majority/ Mainstream First-time Purchase Pragmatists Repurchase Product Differentiation Brand Differentiation Cost Leadership Customer Acquisition Customer Retention & Expansion .
Marketing Strategies Over the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Market size small and growth rate is increasing. Pricing: skimming targets innovators/visionaries & LT Product (quality-based) differentiation Advertising: product category advantages. Distribution & Selling : PUSH . Product: disruptive technology that creates new product category.
Percent of Sales by New Products Developed in Last 5 Years .
Marketing Strategies Over the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Moving Mainstream – Increasing competition – Market segmentation Positioning for LT advantage − Continue to emphasize Product differentiation (innovation & quality) & market growth or niche of maturing market − Shift to brand differentiation/ customer responsiveness with product improvements .. proliferation as market matures (i.e. late growth) .
e.e. multiproduct or corporate branding) Consistent with Performance Superiority. Innovation or Quality-Based Differentiation ... Turbulent Categories with Rapid Cycles & Permanent Growth: – Product Line Strategies focus on Product Innovation that replaces (i.Product & Brand Strategies… • In the Growth Stage or in Hi-Tec. cannibalizes) current offerings – Branding strategies deemphasize specific products/features and focus on organizational competencies & differentiation (i.
. the company has received over $3 billion worth of advertising exposure showing the Intel Inside logo.Intel’s Co-branding Efforts Since the “Intel Inside” branding campaign began 1991. The logo appears in POP displays too.
branding. service.. . proliferation. intangibles (e. product improvements . advertising) or − Emphasize cost efficiencies to establish Cost Leadership advantage in fully mature market. − Innovator attempts to jumpstart new cycle of Growth (Apple).Marketing Strategies Over the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Fully Mainstream – Oligopoly market structure – Well-defined segments with sophisticated consumers Positioning for advantage − Emphasize brand differentiation/ customer responsiveness.g.
Consistent with Customer Responsiveness. multibranding).Product & Brand Decisions… • In the Maturity/Decline Stage: – Product Line Strategies focus on Product Proliferation that extends current offerings to: • Eliminate competitors &/or erect entry barriers • Provide one-stop shop for downstream collaborators • Satisfy increasingly segmented customer base – Branding strategies emphasize distinct product brands and features (i..e. Marketing or Image-Based Differentiation . sometimes applied to entire lines.
P&G’s Product Proliferation & Multibranding Strategy P&G Controls Over 60% Market Share in the Laundry Care Category Key Management Challenge: How to organize. manage & market all the brands? 15 .
P&G’s Product Proliferation Multibranding Strategy .
. for example.Marketing Strategies Over the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Many strategies for reviving mature product categories can be applied to those in decline. Being the “last iceman” in a truly dying market can be profitable… to a point. Sometimes product categories revive due to serendipity. product enhancements and line extensions for segments still buying category.
Modifying the Offering Mix • How consistent is the new offering with existing offerings – Complementarities versus cannibalization • Does the organization have the resources & capabilities to introduce & sustain the offering? • Is there a viable market for the offering? What share is required? • What position do we currently own and do we want to own? • What type of branding strategy do we implement? .
brand name.. and marketing budget allocations do you recommend? • What marketing mix capabilities are necessary for a successful introduction? Does Paramount currently possess these capabilities? .Clean Edge • What are Paramount’s key resources and capabilities? What is its competitive advantage? • What changes are occurring in the nondisposable razor category? What stage of the product life cycle is the nondisposable razor category in? What are the strategic challenges (e. • What are/should be the objectives for the Clean Edge launch? • What are the pros and cons for launching Clean Edge as (a) a niche or (b) mainstream brand? Which do you recommend? What assumption changes would lead you to change your recommendation? • What are the strategic and tactical implications of your recommendation? For example.g. threats) for Paramount’s current products as well as for Clean Edge? • How is the nondisposable razor market segmented? Explore consumer behavior for nondisposable razors. what positioning statement.
Cartridges 4 Dollar sales .Cartridges 5 Total dollar sales 6 Production costs Razors 7 Production costs Cartridges 8 Capacity costs 9 Advertising and Promotion 10 Total costs 11 Operating Profit 12 Profits as % of sales Cannibalization % & Cost 13 Razors Cannibalization % & Cost 14 Cartridges 15 Profit after cannibalization Niche Year 1 Year 2 1.18 1.54 $ $ $ $ $ $ 15.06 8.00 30.62 $ 3.Razors 2 Dollar sales .64 22.42 $ 167.92 9.3 4 $ 25.5 $ 9.89 $ 7% 3.16 $ 21% 0.14 $ $ $ $ $ $ 5.50 24.22 36.47 58.96 49.63 $ $ (14.9 $ 61.09 $ 13.00 109.48 $ 35% $ 35% $ $ 60% 60% $ $ 16.62 $ 5.49 $ 87.22 $1.61 15.00 48. % 1 Unit sales .32 9.33 $ $ $ $ $ 7.80 27.00 81.0 $ 29.50 $ 38.07 35% 4.06 2.71 42.16 .87 16.72 0.92 $ 3.0 1.79 17.74 % Mainstream Year 1 Year 2 3.00 9.Aaron Shiffler et al.23) $ NPV @ 10% $26.Razors 3 Unit sales .67 38.45 39.47 44% 0.0 10.64 4.84 $ 31.58 $ 136.40 $ 73.22 $ 87.30 0.9 21.53 $ $ $ $ $ 18.
Benefit Segment Descriptions and Product Types Market Share Benefit Segments Product Volume Dollar Types 25% 34% SuperPremium Social/Emotional Value (39%) 19% Aesthetic (28%) 6% Uninvolved (33%) 43% 44% Moderate 20% 20% 3% 32% 22% Value 0% 2% 30% .
00 $25.Mainstream Cannibalization % $40.00) Mainstream Cannibalization % Niche NPV NPV $M Recommend Mainstream Recommend Niche .00 $30.00 $10.00 $0.00 $35.00 $15.00) ($10.00 $20.00 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% ($5.00 $5.
Cleaning. Avail) and product lines New product may cannibalize (35(Health. Market Data Acquisition & Interpretation: Operating profit (15%) lags behind demonstrated ability to use focus group key competitors such as Prince data to develop customer segmentation (20%) & strategically target profitable segments Resources Resources Lack of customer information Customer knowledge (segmentation database studies) No retail locations High-quality product (best shave) Brand trademarks/awareness/equity What is Paramount’s Competitive Advantage? . Grooming) 60%) current offerings.Strengths Weaknesses Capabilities Capabilities Product Management: new product Lack of is Customer Relationship $12.99 highest price in the market development capability creating a Management implementation superior nondisposable razor Inexperience in super-premium Communications Management: brandsegment building capability creating the #1 market share brand (Pro) Marketing Planning: demonstrated forecasting ability Program Management: demonstrated Current offerings create “bargainability to effectively support multiple brand” perception among customers brands (Pro. Beauty.
Opportunities Customers Men increasingly conscious of and open to grooming products Increase in cartridge purchase frequency (2%) Collaborators Retailer willingness to increase shelf space for new SKUs Competition No dominant competitor (~20% largest share) Threats Customers Customers demanding technological innovation & higher quality Collaborators Shift in mix outside traditional food and drug stores to lower margin channels Competition Key competitors already have SuperPremium and Mainstream products Large (39%) increases in Advertising expenditures New Super-Premium entrants bring social/emotional positioning advantage Context Context Super-premium product market Rate of new entrants and new product growing introductions could saturate mature razor Which stage of the PLC is the razor product market. leading to price wars product category in? and shakeout Value product market in decline What does that say regarding which positioning strategy to use? Aging population prefers electric shaver .
High Price ($) $14 Cogent Plus Naiv Vitric Tempest Advanced Vitric Master Narrow Appeal 2% 6% $12 ? Cogent (Share) $10% 14% Vitric 18% Paramount Pro Broad Appeal (Share) $8 Paramount Avail $6 Low Price ($) .
Niche Objectives (Use the Pro Forma analysis to inform your objectives) Customer Targets Use behavior segmentation detail Mainstream Key Competitors’ Strategy Objectives Product-Market Strategy *Competitive advantage Core capability Weaknesses Likely response? Paramount Growth Strategy (Ex. 1.2) Branding Strategy (K&P 149-51) *Competitive advantage Core capability Positioning Statement (K&P 146) ______________________ based on ______________________ based on For______________________ For _________________________ Clean Edge is a ____________ Clean Edge is a _______________ that ______________________ that _________________________ .
soft to a baby’s Value. MEANING = Brand Brand of facialWhat hair Edge is a technologically Performance Imagery areand you? smooth skin. RELATIONSHIPS = What about you & me? DEEP RELEVANCE INTENSE. price personality and smoothest shave. touch. BROAD BRAND AWARENESS . when. and Excitement. that provides the closest. advanced vibrating razor Characteristics. Clean design. RESPONSE = Consumer Consumer ritual. 1. IDENTITY = Who are you? RATIONAL & EMOTIONAL REACTIONS POINTS-OF-PARITY & POINTS-OFDIFFERENCE Brand Salience Purchase/Consumption Recognition Consideration & Recall DEEP. fun For highly-involved shavers who seek effective removal 2. relevance. ACTIVE LOYALTY For socially and emotionally involved shavers who seek complete confidence in the effectiveness of their grooming 3.smooth. cleanest. Clean Edge is a technologically advanced vibrating Judgments Feelings What about you? razor that leaves your skin toned. Who uses.Customer-Based Brand Equity Model ConsumerBrand Resonance Behavior/Affective Commitment 4. differentiation security.
target customer & competitors.. including type of growth & branding strategy. which brand name & positioning concept you choose) and the type of core strategy it represents. Turn in a one-page memo that describes the recommended course of action (i.e. objectives. and positioning statement. .Saxonville’s Italian Sausage • This case addresses a sausage company’s attempt to develop optimal positioning for a national brand of Italian sausage. all in the first paragraph (see SaxonvilleStrategy).
– Forecasts for frequently-purchased items combine test market or early sales data with brand awareness. • Estimating Company Sales Potential – Multiply market potential by desired or “best” market share. – Determine # of customers in each group of buyers. • Sales Forecast – Use purchase intention surveys/qualitative methods. or usage rate data . & Sales Forecasting • Estimating Market Sales Potential: – Determine the potential buyers /users of the products. trial. Sales Potential. repeat purchase.Market Potential. – Estimate the potential purchasing/usage rate.
– Introduces product in a single market to predict sales and profits. – Results of trial. and test the marketing mix prior to full-scale launch. – Extended in-home product use test.Forecasting Demand for New Products • Types of product use tests. repeat purchase. . – Limited time horizon consumer test. and usage rates are used to help project market share and sales on a national or international level. • Market tests. – Diagnostic small sample tests.
Estimating Year-1 Sales Volume Focus Group Definitely Probably Maybe Adjusted for Bias 80% 30% ??? % Awareness Depends on Consumer Promotion % Distribution Depends on Trade CRM/ Promotion =% Trial Rate % Trial Rate From Above Repeat Rate % Excellent product (~64%) Average product (~46%) Market Share % Trial x Repeat Rate Poor product (~37%) .
.Product Performance & Repeat Rates Use these figures in the Saxonville Case to project first year market shares. See Sales Projections Sample Final Exam Question.
in Saxonville. Perfecto? . differentiation security. when. price personality Brand Brand Brand Largely Recognition a function of Awareness what Purchase/Consumption you do in terms of positioning. Excitement. in Saxonville.Brand Associations & Brand Equity Feeds directly into the positioning statement Consumer Deep psychological bond – Loyalty Core Value in Saxonville. Consideration WalMart… & Vivio Italy’s Best. relevance. & Recall placement. fun Function of your message’s Attributes Imageryfocus – attributes Characteristics. Who uses. Behavior/Affective Commitment How customer’s respond– Consumer Consumer Benefits Feelings Functional & Emotional Benefits Value. Primo. advertising. design.
and strategic emphases for each stage of the product life cycle? • What are the key questions to ask when making offering modification decisions? • Identify the four levels in the customer-based brand equity model. growth strategies.Review Questions • What are the key customer segments. .
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