CHAPTER

Developing A Product/Brand Strategy: - Setting Objectives - Choosing a Marketing Strategy

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Quick Review
Ch.2: Boundary of your business domain Chs. 3-5: Analysis of Major Stakeholders

Ch. 6: Your prediction about future Potential and Forecasting Ch. 7: Strategy (to achieve your objectives) Target (Competitor & Customer) Positioning (Value Proposition)
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Key Topics of Ch. 7

Strategy as an Action Plan Elements of a Product Strategy** Making Sense of a Strategy Jungle Research In Progress: Kim and Lim
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Action Plan
Where are we heading to? How will we get there?* What will we do?

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A Successful Strategy:
Helps achieve coordination among functional areas of the organization. Defines how resources are to be allocated. Leads to a superior market position.

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Elements of a Product Strategy**

1. 2. 3. 4. 5. 6. 7. Statement of the objective(s) the product should attain* Selection [Consideration] of strategic alternative(s) Selection of customer targets Choice of competitor targets Statement of the core strategy* Description of supporting marketing mix. Description of supporting functional programs

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Hierarchy of Objectives
Company mission/vision

Level 0
Corporate objectives

Level I
Corporate strategies

Divisional objectives

Level II
Divisional strategies Product/brand objectives Brand strategies

Level III

Program objectives

Level IV
Tactics
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1. Setting Objectives
1. Characteristics of Good Objectives
1. Quantified standards 2. Challenging 3. Have Milestones

2. Two Major Decisions

1. Which Objective to Pursue? 2. How High it should be?
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2. Consideration of Strategic Alternatives

1. Corporate Objectives
2. Two Major Paths
1. Increasing Sales/Market Share*
1. Market Development Strategy 2. Market Penetration Strategy

2. Increasing Profitability
1. Decreasing Inputs 2. Increasing Outputs

* 2X2 matrix on growth strategy

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Strategic Alternatives
Long-term profits

Growth in sales or market share

Efficiency, short-run profits

Market development

Market penetration

Decrease inputs

Increase outputs

New segments

Existing customers

Reduce costs

Increase price

Convert nonusers

Competitors customers

Improve asset utilization

Improve sales mix

New product development McGraw-Hill/Irwin

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Criteria for Evaluating Strategic Alternatives

Size/growth of the segment

Opportunities for obtaining competitive advantage Know Yourself Resources available to penetrate the segment

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3. Targeting and Positioning

Choice of Customer Targets: Single or multiple* of Competitor Targets

Choice

Statement

of the Core Strategy =Value Proposition*

Economic

(cost/price) Advantage Functional Advantage Psychological Advantage

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Ex) Target Segments for Handspring

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3. Targeting and Positioning (contd)

Five Areas of Differentiation Quality* Convenience and Service Status and Image Branding* Distribution Channels Combination of the Above

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Joint Space for Colas

Cola Segment 3 Diet Pepsi RC Cola Pepsi

Diet Rite Diet

Tab

Fresca

Segment 2

Segment Dr 1 Peppe r Coke 7-Up Noncola

Nondiet

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Positioning Decision Steps

1. Identifying alternative positioning themes 2. Screening alternatives according to whether they are meaningful to and believable by customers feasible given the firm and product resources competitively sensible helpful for meeting the product objective

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Positioning Decision Steps (Contd.)

3. Selecting the position that best satisfies these criteria 4. Implementing programs consistent with the product position selected

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Total Product Concept

Potential product Generic product

Expected product Augmented product

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Managing Brand Equity

Reduced marketing costs Trade leverage 4. Brand Brand loyalty loyalty Attracting new customers
Create awareness Reassurance

Time to respond to competitive threats Anchor to which other associations can be attached 1. Brand Brand loyalty awareness Familiarity-liking Signal of substance/ commitment Brand to be considered Brand Brandequity loyalty
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Provides value to customer by enhancing customers:

Interpretation/ processing of information

Confidence in the purchase decision

Use satisfaction

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Brand Equity (contd).

Brand Brandequity loyalty 3. Perceived Brand loyalty quality Reason-to-buy Differentiate/position Price Channel member interest Extensions Provides value to firm by enhancing:
Efficiency and effectiveness of marketing programs Brand loyalty Prices/margins

Help process/ retrieve information 2. Brand Brand loyalty associations Reason-to-buy Create positive attitude/feelings Extensions Other proprietary Brand loyalty brand assets
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Brand extensions Trade leverage Competitive advantage

Competitive advantage
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3. Targeting and Positioning (contd)

Values

Being Sought by Customers (by Rackham)

Transactional

Sales: Intrinsic Value Consultative Sales: Extrinsic Value Enterprise Sales: Strategic Value
Relationship
Customer

Life Cycle and Strategy

Acquisition Customer Retention Customer Expansion Customer Deletion*

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Making Sense of A Strategy Jungle

Strategy at different levels

Corporate
Cost

or Business Level: Porters Generic Strategy

Leadership: Fixed Cost and Variable Cost Differentiation: Supply side and Demand side Focus: Segmentation and Targeting
Functional

Level Strategies: Relationship Life Cycle-based Strategy

Product
First

Life Cycle-based Strategy:*

mover advantage vs. Second mover advantage

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Strategy Over the Life Cycle

Ex) Pharmaceutical industry (patent expiration in 20 years)

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4. Supporting Marketing Mix & Programs

Product

and Brand Program: Product feature & brand meaning Pricing Program: price points Marketing Channels Program: Level, intensity, and ownership/function Communication Program: ex) Advertising and Sales Promotion (Incentives)

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Multiple Effects of Consumer Promotions on Car Sales by Steve Kim and J. Lim

Consumer promotions
- Advertising - Incentives H3 & H4

Firm performance
Car Sales Change - Immediate -Total

H1 & H2

Product Quality

Product variable
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Effects of Advertising and Incentives on Car Sales

Advertising Effect Immediate effect .013 Incentive Effect .108 t-test

**

Fluctuation Until stabilization

Total Effect

.002

-.059

**

.014

.049

**

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Effects of Incentives Under Different Quality

Incentive Effect for Low quality Immediate effect Fluctuation Until stabilization Total Effect .102 Incentive Effect for High quality .116 T-test

-.069

-.046

.034

.07

**

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Effects of Advertising Under Different Quality

Advertising Effect for Low quality Immediate effect Fluctuation Until stabilization Total Effect .028 Advertising Effect for High quality -.008 T-test

**

.003

.001

.031

-.007

**

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Illustration: Handsprings Product Strategy

Objective: To capture 15 percent of the PDA market by the end of year 2 Customer Targets: Price-conscious professionals Nonbusiness professionals Nonprofessionals Competitive Targets: Palm Sharp Core Strategy: Simplicity/convenience Low price Expandability (via expansion slot)

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