Chapter 5

Product Strategies
Colgate and Its Valiant Attempts to Stretch the Brand
Colgate has been (and probably always will be) known as a brand for oral care. In fact, this
is its core strength. Colgate brand of toothpaste is the leader in many markets globally while the
Colgate brands of toothbrushes and mouthwashes can always be relied upon to be either number
one or number two in their respective categories.

But if you were an ambitious marketer, you would be seeing this success from a different
perspective: you would think that Colgate is such a powerful brand that it deserves to be on more
products. By not doing this, it would be a waste of brand potential.

So, in 1982, the company launched Colgate Kitchen Entrees that was a line of frozen foods
which hoped to capitalize on the growing demand for microwaveable meals. Furthermore, the idea
here was that after eating a Colgate meal, the happy consumers would move on to brush their teeth
with Colgate products.

Result: Not only did the product turn out to be a horrendous flop but it also dragged the
entire Colgate oral care line down with it as sales for Colgate toothpaste and related products fell.

The lesson here was that if your brand is heavily associated with a particular product
category, trying to stretch it toward other categories may only end up hurting your flagship
products as the association of the brand with the original category gets diluted.

Postscript: This did not stop Colgate from trying again and again. They will eventually
experiment with Colgate shaving cream, Colgate deodorant, and even Colgate foot powder---none of
which succeeded in the market (thankfully).

“The brand is the repository of a product’s market value. It is the marketer’s primary duty to protect
the brand.”

There are traditionally four “P’s” that are used for communicating the essence of a product
and its brand---product, price, place, and promotions. Together, these form what is known as the
marketing mix, or the mix of Ps that makes up the communication strategy. This chapter covers the
first of these four “Ps,” Product, and includes issues such as new product development, and product
mix management.
LESSON 1

New Product
Strategy
The New Product

How do you make something truly marketable?

Have you ever had a seemingly brilliant idea for a new product at one time or
another? Here is a harsh truth that we will have to swallow: anybody can have a great
product idea. But unless you do something about it, then it will always remain as just an
idea. Pretty soon, someone will come along who will think up the same idea but this time
will do something about it. Then, that idea will no longer be yours.

The new product development certainly begins with the idea, but that is just the
tiniest bit of the iceberg. Most of the work involves the hardy task of building the real
business around the idea. This includes the preparation of the business plan, market
studies, demand estimation, and marketing strategy. This is where the real value of the idea
gets created.

Creating the Business Model

Business model refers to the mode by which the product concept seeks to make
money so that it can have a sustainable operation. You can think of a business as a machine
that generates revenues. In order for it to continue going, it should be generating enough
revenues to cover both its costs of operations, as well as providing a decent return on its
investment. If business cannot accomplish this, then it will not survive.

The business model should therefore involve a way of making money that best fits
the nature of the product idea. The following are some examples of alternative business
models:

• Facebook began its first years purely as a social media site with no clear business
model in place. But eventually the model became clear: claim as many users as
possible (now over a billion worldwide) and then utilize them as a massive pool of
captive viewers for attracting advertising revenues.

• Newspapers and magazines have always been funded by advertising placements.

But as fewer and fewer people read the papers (because of TV and the Internet),
advertising here has become less and less attractive. Print publishers are therefore
struggling to find a suitable business model for going online, leading to some hits
and a lot of misses. Newsweek, which was formerly a weekly news magazine, has
completely shut down its historical ad-based print business model. Instead, it has
been retooled into an aesthetically pleasing online magazine that hopes to draw
loyal readers through well researched long-form articles---something that is
 uncommon on the Internet---and going for less obtrusive sponsorships rather than
advertising (which can be eyesores).

• Buffets have become very popular as alternatives to a la carte fare in restaurants.

Places such as Vikings and Buffet 101 use a business model that is based on a bit of
statistic: their gamble is that, even on their “eat all you can” spreads, the average
person will not be able to consume an amount of food that costs more than what
was paid for. While some people with big appetites will be able to, most people will
not. The trick is to find the proper balance of attractive food choices and a price
point that still allows the business to make a decent profile.

Businesses do not need to be dependent on actual consumer purchases for their

business model. Here are some alternative forms of revenue generation that may be
considered:

• Advertising. You get to consume the product with no cash outlay and with the costs
of providing the product being covered for by a number of third party advertisers.
This has always been the business model for much of print, radio, and television
enterprises.

• Sponsorship. Alternately, instead of constantly finding a number of small

advertisers to support ad-based businesses, you may opt to focus on a few big
sponsors instead. This leads to less “clutter” on the media (as there are fewer
advertisers) and more focused messages from the sponsors.

• Donations. This is often the business model of choice for non-profit organizations
but also the model that fuels a number of online and mobile products such as games
and productivity apps. These organizations and developers hope that while their
products or services are being offered for free, enough people will be grateful and
provide a sufficient pool of funding to keep the services going on.

• Rent or Lease. For expensive assets, such as machinery or vehicles, they sometimes
become more attractive for the market to consider through renting rather than
outright ownership. This is because ownership represents significantly large cash
outlays while rents or lease options allows spacing out payments in predictable and
manageable regular amounts. This works best when dealing with established
businesses because long-term relationships can be built.
 The critical part of the business modelling would be the balancing act between the
target number of consumers, the profit margin goal per unit sold, and the
acceptability of the resulting price. This is where the proper selection of a target market
comes in.

If you are selling high quality spa services with highly paid attendants and plush
amenities, then there will be a need for high prices in order to cover the high overhead.
Therefore, it may be best to focus all sales efforts toward an upscale clientele. Otherwise,
average consumers may find the prices to prohibitive. Part of the business modelling then
includes the development of strategies for reaching out and attracting an upscale market.

Also, you will need to balance sales volume with profit margins. As a rule, if
you are selling in low volumes, then you will need high margins. If you are selling
high volumes of you product, then you can afford to have low margins. Of course, if
you can somehow manage to have high volume and high margins, then this is the sweet
spot that you would want to always be in (though it is uncommon). If you have low volume
and low margin, then your business is unlikely to survive.

The Business Plan

A plan rarely comes to fruition exactly as conceptualized but this is not a reason to
not plan everything out. The business plan serves as the road map for bringing the
product idea to life and it specifies the details that would help to make the selected
business model work.

A business plan would best contain the following at the very least:

 Statement of opportunity. This refers to the identified market opportunity that the
proposed business seeks to address.
 Environmental analysis. Key issues and trends in the environment, both macro
and micro, that should be noted when assessing the business proposal.
 Market estimates and market segments. Estimate3d size of the total potential
market along with descriptions of the different possible market segments and their
estimated sizes.
 Competitive analysis. A round up of the existing competition along with existing
substitutes and potential substitutes together with their strengths and weaknesses.
 Business strategy. A detail of the proposed business includes the product concept,
the logistics required for its mobilization.
 Risk analysis. Informally speaking, this is a list of things that can go wrong along
with a corresponding list of safeguards and contingence actions to address these.
  Financial forecasts. Estimates of financing required for initial capitalization, asset
acquisition, working capital, overbroad, an inventory.

Competitive Strategies

There are genres competitive strategies that can you can consider when developing
your business idea. These are (1) least cost, (2) differentiation, (3) niche strategies.

 Least cost. This strategy involves producing goods or services at the least possible
cost, and then passing these to consumers through low-priced, affordable products.
A recognized low-cost leader such as CD-R Kings for instance, has invested in
building supply-chain relationships with economic gadgets manufacturers in China.
 Differentiation. This strategy involves a lot of brand-building, with an effective to
get the market to associate the brand with particular benefits that, hopeful will be
distinctly associated with the brand.
 Niche. Focuses on the needs of a very specific target market, usually a market that
is small enough that it requires particular expertise.

Goods vs. Services

Goods refer to tangible products that consumers can actually observe with their
sense. Goods are objects with physical manifestations and attributes that can be detected
by our senses.

Services on the other hand, refer to intangible offerings that are abstract in nature
and cannot be observed with our sense. In fact, a key characterized of service is that the act
of delivery itself is the product.
LESSON 2

Service Strategies
Types of service process

Table 1
Types of Service Process
Directed at People Directed at Possessions
Tangible People Processing Possession Processing
Acts
Airlines, hospitals, hotels, Freight, repair, cleaning, landscaping,
restaurants retail
Intangible Mental Stimulus Processing Information Processing
Acts
Broadcasting, consulting, Accounting, banking, insurance, legal,
education, therapy research

Building up the Service Experience

Since consumers will have difficulty in assessing the technical quality of service,
good customer engagement matters. Again, this is because customers will tend to evaluate
services based on the quality of their interaction rather than merits of the actual service
itself.

The following are service elements that should be taken into consideration in order
to build an excellent experience:

 Personnel Selection and Training

For services that are delivered through personnel, great attention should be given to
the selection and training of sales and front-liners as they serve as the primary
conduits between the business and the clients. Personnel must be trained to
converse confidently with the target market and to speak their language as best they
can. Personality will also have to be taken into account. Personnel may in fact have
to be put through exercises that evaluate how well they can perform under duress
or under performance-level situations.
 Users Interface
For services that are delivered through automated means such as ATM’s and online
services, the quality of the service will be assessed based on the ease of use of the
service.
 Points of Contact
All points of contact or avenues for interacting with customers should be managed
and controlled.
 Tangible Mementos
Mementos can be in the form of thank you cards, small giveaway gift bags with the
branding of the service, or even complementary low-cost items.
LESSON 3

Branding
What is in Brand?

A Brand is a mark of distinction that can be sensed usually in the form of names or
terms, signs or symbols, design elements, or even a combination of these, and is utilized for
the purpose of identifying and distinguishing the goods or services of one provider from
another.

The following are the functions of a brand:

 It identifies he product or service, enabling consumers to accept, reject, or

communications their opinions about it to others
 It communicates messages, to the markets and to the public is large, whether the
messages are intentionally or unintentionally generated.
 It functions as a legal property, allowing its owners to invest the building up the
value of the brand.

Origins of Branding

The etymology of the word brand itself provides glimpses into the origins of
branding. Back in the days of Medieval Europe, it was a common practice to claim
ownership of cattle and other chattel by branding or marking them with a hot iron (brand =
burn in German). Since literacy was rare, brands were generally in the form of visual
symbols. This also held true for heraldry, which was the complex system of coats of arms
and heraldic badges that we used to signify membership to a particular family, location, or
organization.

Elements of the Brand

A brand is not just a name. Today’s brands are composites of various elements including:

 Trade name. The trademarked name by which the product is to be known as such
as Coca-Cola, Google, and Jollibee. Trade names are registered through the
Intellectual Property Office.
 Generic category. The category in which the brand would fall under, such as
beverages, search engine, or quick service restaurants. The Intellectual Property
Office requires that brands explicitly specify the categories that they would fall
under.
  Logo. The visual symbols or image that will identify the product, such as the
distinctive partially bitten apple image for apple, the stylized script letters of Coca-
Cola, or the three-point star of Mercedes-Benz. Logos are also registered alongside
the trade name.
 Tagline. An optional catchphrase, such as BDO’s “We Find Ways.”
 Visual Cues. Aside from the actual logo, brands can also be represented with
distinctive visual identifiers, such as the red and green bands that wrap around the
outside of a Seven-Eleven store.
 Shapes. The actual shape or form of the product or packaging, such as the pinched
contour of a bottle of Yakult.
 Colors. A Yellow Cab store is quickly distinguishable from afar thanks to its bold
yellow signs with black letterings.
 Sounds. Such as advertising jingles, or even very short into sound such as those
heard upon starting up a computer.
 Scents. Establishments such as Rustan’s and the Shangri-La Hotel have signature
fragrances made that help to create distinctive atmospherics in their premises.
 Tastes. This includes special recipes or secret ingredients, such as Max’s distinctive
fried chicken formulation.

Elements of the Logo Design

Graphic design guide Logo Design Love gives important tips on what makes for a
great brand logo:

 Keep it simple. Simplicity gives the logo design versatility, allowing it to be used in
a wide range of media---from business cards to billboards.
 Make it relevant. The design be appropriate to the business it is identifying---to the
industry, to the market, and to the audience it is addressing.
 Incorporate tradition. Logos should not strive to be trendy but rather contain the
symbolic elements that are timeless as far as the nature of the business is
concerned.
 Aim for distinction. The logo should easily stand out versus the competition.
Prioritize shape and form over color. A tip is to work first in just black and white so
that distinct from is emphasized over anything else.
 Commit to memory. Great logos should be memorable even after just one quick
glance.
 Think small. Logos may look great on a billboard but they should also be
recognized in small executions, which will be useful when placing the logo on small
items such as zippers and coffees stirrers.
  Focus on one thing. The most iconic logos have just one feature that helps them to
stand out.

Levels of Meaning

A brand is just a signifier. But as a signifier, it can manage to have several layers of
meaning. The following are six levels of meanings that a brand can have:

 Attributes. Characteristics of the product itself, such as softness, engine power,

physical size, friendliness (for service), locations, design, and colors.
 Benefits. What consumers stand to gain from patronizing the brand, such as shinier
hair, peace of mind, comfort, time savings and happiness.
 Values. The core values that the brand is identified with, such s family ties,
independence, creativity, innovations, and risk-taking.
 Culture. The culture or sub-culture that a brand is identified with. Culture and
values have a lot of interdependencies but culture can refer to regional identifies,
such as Bacolod Chicken Inasal being expressly associated with its titular province.
Group 1
Groupmates:
1. Patricia Nicole Pongos
2. Jovan Bertes
3. Mae Hyacinth Tangayan
4. Jeswin Medalle
5. Arvin Villafuerte
6. Nicole Mahusay