Today’s Session: The First ‘P’

Product and Branding

From Strategy (3C’s) to Tactics (4P’s)

Session One: Summary
 Overview of Marketing:
 What is Marketing: Different orientations
 3C-4P Framework: Strategy-tactics
 Video Case: Barbie
Session Two: Company
 First C: Company
 Starbucks Case
 Corporate Vision: Why do we exist?
 Marketing Myopia: What business are we in?
 Core Competence: Resource based view
 BCG Portfolio Planning: Growth-share matrix
Session 3: Competitor Analysis
 Understand industry structure: Five Forces
 Red Oceans:
 Identify and target competitors
 Assess their current position and strategy
 Anticipate competitive response
 Formulate your strategy
 Barco case
 Hyper-competition
 Blue Oceans
Session 4: Consumer Decision
Making
 Consumer Buying Process
 Three Product types: Mundane, Utilitarian, Self-
expressive
 Five Stages
 Need Recognition, Information Search, Evaluation of
Alternatives, Choice, Post-Purchase
 Four Aggregation Models: Linear, Lexicographic,
Conjunctive, Elimination by Aspects
Session 5: STP
 Segmentation
 Why segment, Segmentation Variables
 Targeting
 Choosing the right segment, Cannibalization
 Positioning
 Positioning Statement, Perceptual Maps
Plan for Today
 What is a Product
 New Product Development
 Product Life Cycle
 Brands and Brand Equity
 Unilever in Brazil
What is a product?
 A set of tangible and intangible attributes,
including packaging, color, price, quality,
brand name, and seller’s services and
reputation
 Can be a physical object, service, person,
place, organization, idea, or a combination of
these
What is a product?
 Benefits offered: Core Product
 Physical Attributes: Actual Product/ Tangible
Product
 Additional Support/Service: Augmented
Product

“Products are not physical entities so much as

anticipated benefits in the minds of the
consumers”
Product types: Service continuum
Service-dominated
Nursing
item (intangible) Theatre
Advertising agency
Air travel
Television

Balanced

Fast-food restaurant
Tailored suit
Automobile
House Balanced item;
Good-dominated Dog food equally weighed
Necktie between goods
item (tangible) Salt and services
New Product Development Process:
The future is hard to forecast

“There is no reason anyone would want a computer in their home.”

- Ken Olson, chairman and founder of DEC, 1977

“That’s an amazing invention, but who would ever want to use one of
them?”
- US President Rutherford Hayes, 1876, on the telephone

“Everything that can be invented has been invented.”

- Charles Duell, Commissioner, US Office of Patents, 1899
Stages in the New Product
Development Process
Idea
Ideageneration
generation&
&screening
screening
Concept
Conceptdevelopment
development&
&testing
testing
Marketing
Marketingstrategy
strategy
Business
Businessanalysis
analysis
Product
Productdevelopment
development
Test
Testmarketing
marketing

Commercialization
Commercialization
 Expected Cost of a New Product Launch
Chances Expected Average
of Cost Time
success ($m) (months)
Identify 50% 5.4 5
Opportunity
Design 57% 15.8 6

Testing 70% 5.7 12

Introduction 65% 9.0 4

Total 13% 35.9 27

Source: Booz, Allen and Hamilton

Product Adoption and Diffusion
 Process by which new products spread
through a population
 Rate of adoption and diffusion depends
upon the ‘risk-taking’ ability of individuals
 People who buy early tend to influence
those who follow them
Adopter Categories

Early Majority Late Majority

34% 34%
Early Adopters
13.5% Laggards
16%
Innovators
2.5%
The Diffusion Model: Theoretical Basis
 Two types of consumers: Innovators and
Imitators
 Innovators = Early owners who influence others
 Imitators = Those who buy primarily because of
influence of other owners
 Sales forecasting
Yt 1  Yt 1 
St  p(M  Yt 1 )  q(
M
)(M  Yt 1 )   p  q( M )(M  Yt 1 )
 
where
St = sales in period t
Yt-1 = cumulative sales upto period t-1
p = coefficient of innovation
q = coefficient of imitation
M = total market potential
16
 Product Life Cycle
Stage of the product life cycle

Introduction Growth Maturity Decline

Sales revenue
or profit

Total industry
sales revenue

+ Total industry profit

0
–
What is the “product” in PLC?
 Product Classes:
 Cars
 Audio playing devices
 Product Form:
 Compacts, subcompacts, luxury, sports, SUVs
 CDs, tapes, albums
 Brands
 Jaguar, Ford, Cadillac
 Sony, Panasonic, Aiwa
 PLC: “Product” = Product Class/Form (usually)
 Music Industry PLC’s
650
600
550
500
450
Millions of units sold

400 Albums
350
300 Compact
250 disks
200
150
100 Cassettes
50
0
1973

1991

1993

1995
1975

1977

1979

1981

1983

1985

1987

1989
 Stages in the Product Life Cycle
Stage Sales Profits Marketing Marketing
Growth Goals Tactics
Introduction Low Negative Build Advertising,
Awareness, Pricing
Induce Trial
Growth Very high Zero or Maximize New segments,
somewhat market share, Ensure availability,
positive Build loyalty Improve 4 P’s
Maturity Low to Highly Maximize profits, Modify market,
Medium Positive Defend share, Modify products,
Deepen customer Fine-tune 4P’s
Relationships

Decline Low or Somewhat Maximize Profits, Withdraw support,

Negative positive Do not spend Drop weak
Resources on products,
Defending Improve
Share contribution
Product Life Cycle
 Empirical observation
 Valid across product categories
 Cycles becoming shorter over the years
 What happens when you reach decline
stage?
From Products to Brands

“What’s in a name? That which we call a rose by

any other name would smell as sweet.”

- William Shakespeare
From Products to Brands
“What’s in a name? That which we call a rose by
any other name would smell as sweet.”

- William Shakespeare

“Shakespeare was wrong. A rose by any other

name would not smell as sweet … which is why the
single most important decision in marketing of
perfume is the name.”

- Al Ries and Jack Trout

 What is A Brand?
 Derived from the Old Norse word ‘brandr’
which means ‘to burn’: used by owners of
livestock to mark their animals!
 A name, term, sign, symbol, or design, or
combination of them, intended to identify
the goods and services of a seller and to
differentiate them from those of the
competitors
- David Aaker
What is a brand?

 A brand is a set of promises. It implies

consistency and a defined set of
expectations.
 Promise that establishes credibility
over time
 Builds customer relationships
Coca-Cola Marketing Fiasco
 Pepsi’s taste challenge posed a strong threat to
Coke’s supremacy – started in Texas
 Coke felt compelled to act. Modified the taste –
to match the sweeter taste of Pepsi
 Tested on 190,000 consumers – new formula
tasted better.
 Launched New Coke. Rejected by customers.
Coca-Cola Marketing Fiasco
 In Seattle, a real estate investor founded the ‘Old
Cola Drinkers of America’ and set up a hotline for
angry consumers
 In Beverly Hills, a wine merchant bought 500
cases of ‘vintage coke’ and sold at a premium
 Coke received over 8000 calls a day and
truckloads of mail from consumers condemning
Coke’s actions
 Why?
Launch of New Coke
‘The passion for original Coca Cola – and that is
the word for it: passion – was something that
caught us by surprise…’
‘…it is a wonderful American mystery… and you
cannot measure it more than you can measure
love, pride or patriotism’.
- Don Keough, President Coca-Cola
Coca-Cola Marketing Fiasco
 Coke ignored the power of the brand.
 Coke is not just a thirst quenching drink.
It is an icon: it represents Americana,
nostalgia, heritage…
The Concept of Brand Equity
 Brand equity represents the added value
endowed to a product as a result of past
investments in the marketing for the
brand.
 UK taste test: Coke vs. Pepsi
 Blind taste test
 Preferences: Pepsi 51%, Coke 44%
 Test with brand revealed
 Preferences: Coke 65%, Pepsi 23%
The Customer-Brand Relationship
 In today’s environment, marketers must
have a keen understanding of:
 customers
 brand meaning
 the relationship between the two

Critical Insight: The brand resides IN the

customer, not the company!
Brand Equity: Customer level
Academic Research: Brands are
knowledge structures in memory
 Derived from psychological research on
associative network models of memory
 People learn about brands over time
 These well learned knowledge structures
reflect how customers perceive the brand
Example
 “Harley Davidson”
Associations
Motorcycles

Easy Rider Orange and Black

Harley

Tough guys Freedom

The Concept of
Customer-Based Brand Equity

 Customer-based brand equity

 Where it resides: Customer brand knowledge
 Associations

 Why it matters: Differential effect

 Example: Google search results vs. Yahoo
Customer-Based Brand Equity
as a “Bridge”

 Customer-based brand equity

represents the “added value” endowed
to a product as a result of past
investments in the marketing of a
brand.
 Customer-based brand equity provides
direction and focus to future marketing
activities
Why do Brands Matter to
Consumers?
 Identify source of product
 Signal of quality
 Symbolic device: independent source
of quality
 Search cost reducer
 Risk reducer: Search, Experience,
Credence products
 Why do Brands Matter to
Manufacturers?
 Source of competitive advantage
 Build loyal customers
 Larger Margins
 Less elastic consumer responses to price
increases, more elastic to price decreases
 Leverage via brand extensions
 Greater trade cooperation and support
 Licensing opportunities
 Means of legal protection
 Source of financial returns
The Role of Customer Mindset in
Capturing Brand Value
Brand Value Chain

Product Shareholder
Marketing Customer
Market Value
Program Mindset
Performance

- Product - Awareness - Price premiums - Stock price

- Communications - Associations - Price elasticities - P/E ratio
- Trade - Attitudes - Cost savings - Enterprise value
-Other - Attachment - Expansion success - Market capitalization
- Activity - Market share
- Profitability
Components of Customer-Based
Brand Equity

 Easy Part: Customer is aware of and

familiar with the brand
 A start….
 The Hard Part: Customer holds strong,
favorable, and unique brand associations
 Distinctive meaning needed to deliver the
differential response
Sources of Brand Equity

 Consumer is aware of the brand

Sources of Brand Equity
Recall
Awareness
Brand Recognition
Equity
Sources of Brand Equity

 Consumer is aware of the brand

 Brands can be conceptualized as knowledge

structures in memory that reflect how
consumers think about the brand:
 attributes
 benefits
 image/experience (emotions)
Sources of Brand Equity
Recall
Awareness
Recognition
Brand
Equity

Attributes
Types of Benefits
Associations
Emotions
Attitude
Sources of Brand Equity
 Consumer is aware of the brand

 Brands can be conceptualized as knowledge structures in

memory that reflect how consumers think about the
brand:
 attributes
 benefits
 image/experience (emotions)

 Consumer holds some strong, favorable, and unique

brand associations in memory
Sources of Brand Equity
Recall
Awareness
Recognition
Brand
Equity

Attributes
Types of Benefits
Associations
Emotions
Attitude
Important
Strength of Deliverable
Associations
Unique
Measuring Brand Equity
“A set of assets and liabilities linked to a brand, its
name and symbol that add or subtract value to the
product/service being offered.” (Aaker 1991)

 “Added value” from a brand

(e.g. the blind taste test)
Measuring Brand Equity
Interbrand’s Earnings Method

 To estimate brand value, Interbrand

determines:
 Projected future earnings for the brand
 The discount rate to adjust earnings for
inflation & risk.
 Brand earnings are based on a 3-year
weighted average of historical profits
 2009 Brand Values: Top 10 Brands
Brand Value Mkt. Cap Ratio
1. Coca-Cola $68.7 118 58
2. IBM $60.2 160 37
3. Microsoft $56.6 226 24
4. GE $47.7 167 28
5. Nokia $34.9 48 69
6. McDonald’s $32.2 71 41
7. Google $31.9 155 20
8. Toyota $31.3 114 27
9. Intel $30.6 116 26
10. Disney $28.4 67 42

The next 10 brands: HP, Mercedes-Benz, Gillette, Cisco,

BMW, YSL, Marlboro, Honda, Samsung, and Apple.

Source: Interbrand.com $Billions

 Source: Interbrand.com
2013 Brand Values: Top 10 Brands
Brand Value ($ billions)
1. Apple $98.3
2. Google $93.2
3. Coca Cola $79.2
4. IBM $78.8
5. Microsoft $59.5
6. GE $46.9
7. McDonald’s $41.9
8. Samsung $39.6
9. Intel $37.2
10. Toyota $35.3

The next 10 brands: Mercedes, BMW, CISCO, Disney, HP, Gillette,

Louis Vuitton, Oracle, Amazon, Honda.
 Source: Interbrand.com
2016 Brand Values: Top 10 Brands
Brand Value ($ billions)
1. Apple $178.1 (+5%)
2. Google $133.2 (+11%)
3. Coca Cola $73.1 (-7%)
4. Microsoft $72. 8 (+8%)
5. Toyota $53.5 (+9%)
6. IBM $52.5 (-19%)
7. Samsung $51.8 (+14%)
8. Amazon $50.3 (+33%)
9. Mercedes $43.4 (+18%)
10. GE $43.1 (+2%)
The next 10 brands: BMW, McDonald’s, Disney, Intel, Facebook
(+48%), Cisco, Oracle, Nike, Louis Vuitton, H&M.
 Source: Interbrand.com
2019 Brand Values: Top 10 Brands
Brand Value ($ billions)
1. Apple $234.2 (+9%)
2. Google $167.7 (+8%)
3. Amazon $125.2 (+24%)
4. Microsoft $108.8 (+17%)
5. Coca Cola $63.3 (-4%)
6. Samsung $61.1 (+2%)
7. Toyota $56.2 (5%)
8. Mercedes $50.8 (+5%)
9. McDonald’s $45.3 (4%)
10. Disney $44.3 (+11%)
The next 10 brands: BMW, IBM, Intel, Facebook, Cisco, Louis Vuitton,
Oracle, GE, SAP
Measuring Brand Equity
Millward Brown’s Stages of Commitment Approach
 Switchers  Habitual  Committed 
Loyal
 Measuring Brand Equity (BAV)
Young & Rubicam - Brand Asset Valuator
Esteem measures how well the brand is
regarded and respected.
Knowledge measures how familiar and
intimate consumers are with the brand.
Differentiation measures the degree to which
a brand is seen as different from others.
Relevance measures the breadth of a brand’s
appeal.
 Measuring Brand Equity
 Young & Rubicam (Brand Asset
Valuator)
 Brand Stature (Esteem + Knowledge) –
measure of a brand’s past performance
 Brand Strength (Differentiation +
Relevance) – measure of a brand’s future
potential
Measuring Brand Equity
 David Aaker’s Brand Equity Model
 Loyalty (Satisfaction)
 Perceived quality (Differentiation, Price)
 Associations (Feelings, Perceived value, Brand
personality)
 Brand awareness (Considered, Familiar)
 Other (Proprietary assets, competitive
advantage)
Fournier: Consumer Brand
Relationships
 Consumers form relationships with brands
 Brand Relationship Quality
Fournier: Consumer Brand
Relationships
 People don’t buy brands: they choose
lives. Brands add meaning to lives
 Beyond Brand Loyalty – Beyond repeat
purchase, or even emotional commitment

Consumers Form Relationships with Brands

Assess Brand Relationship Quality: BRQ
Fournier: Consumer Brand
Relationships
 Brand Relationship Quality
 Attachments: Love/Passion, Self-Connection
 Behavioral Ties: Interdependence,
Commitment
 Support: Intimacy, Brand Partner Quality
 Brand strategy
 Four brand strategies

Product Line

Existing New
Brand Name

Existing Line extension Brand extension

New Multibrands New brands

Dual Brand Strategy Options
 Unilever in Brazil case
Summary
 Product: What it is, classifications
 New Product: Development process, PLC
 Brand: What it is, Brand Equity – The
Coke Example
 Unilever in Brazil