Brand Management and New Product Planning

1. Brand Management and New Product Planning

2. Brand Management and New Product Planning • Firms build and maintain identity and competitive advantage for their products through branding • Firms grow when they provide innovative and useful new products to fill customer needs

3. Figure 11.10 Overlapping Life Cycles for Two Products Introduction Growth Maturity Decline Product A Industry Sales Product B Time

4. Table 11.3a The American Brands Product Mix Tobacco Products Distilled Spirits Office Products Home Improvement and Hardware Golf and Leisure PRODUCTS Cigarettes Bourbon Day-Timer calendars Tool chests Golf clubs Cigars Cordials Arts and crafts supplies Sinks Golf clothing Pipe tobacco Whiskey Appointment books Tool boxes Golf bags Roll-your-own supplies Gin Time management seminars Locks Vodka Binders Workbenches Golf balls Rum Fastener, paper clips Hospital carts Golf shoes Computer accessories and supplies Kitchen cabinets Office equipment Faucets Plumbing supplies

5. Table 11.3b The American Brands Product Mix Tobacco Products Distilled Spirits Office Products Home Improvement and Hardware Golf and Leisure BRANDS Benson & Hedges Jim Beam Day-Timer Master Lock Cobra Mayfair Ronrico AOOO Moen Hamlet Calvert Wilson-Jones Aristobraft Foot-Joy Old Holborn Titleist Gilbey’s Source: Data from American Brands, Inc., Annual Report, 1995; and American Brands Web page, http://www.ambrands.com, downloaded December 1, 1996.

6. Figure Types of Brands Generic Products No name cigarettes Manufacturer Brand Kodak, Heinz Private Brand Kenmore, DieHard Cragmont Family Brand KitchenAid Appliances, Johnsons & Johnson products Individual Brand Lever’s Aim, Close-Up & Pepsodent Toothpastes

7. Figure 12.3 Dimensions of Brand Equity: The Young & Rubicam Mode DIFFERENTIATION RELEVANCE ESTEEM KNOWLEDGE

8. Figure 12.8 Alternative Product Development Strategies Old Product New Product Market Penetration Product Development Old Market Market Development Product Diversification New Market

9. Stages in the adoption process 1. Awareness. Individuals first learn of the new product, but they lack full information about it. 2. Interest. Potential buyers begin to seek information about it. 3. Evaluation. They consider the likely benefits of the product. 4. Trial. They make trial purchases to determine its usefulness. 5. Adoption/Rejection. If the trial purchase produces satisfactory results, they decide to use the product regularly.* Everett M. Rogers and F. Floyd Shoemaker, Communication of Innovation (New York: Free Press, 1971), pp. 135-157. Rogers later relabeled his model as an innovation-decision process. He called the five steps knowledge, persuasion, decision, implementation, and confirmation. See Everett M. Rogers, Diffusion of Innovations, 3rd ed. (New York: Free Press, 1983), pp. 164-165.

10. Figure 12.10 Categories of Adopters Based on Relative Times of Adoption Time of Adoption of New Product Early Adopters 13.5% Early Majority 34% Consumer Innovators 2.5% Late Majority 34% Laggards 16%

11. Rate of Adoption Determinants • Relative Advantage • Compatibility • Complexity • Possibility of Trial Use • Observability

12. Managing Brands for Competitive Advantage • Creating and protecting a strong identity for products and product lines is a potentially powerful influence on consumer behavior • Brand • a name, term, sign, symbol, design, or some combination of these • used to identify the products of one firm from another

13. Brand Loyalty • Consumers respond to branding by making repeat purchases of the same product • Brand loyalty can be measured in three ways: • Brand recognition - familiar to the consuming public • Brand preference - it will be chosen over competitors’ brands • Brand insistence - substitutes not accepted

14. Types of Brands • Generic product • Manufacturer’s brand • Private brand • Family brand • Individual brand

15. Types of Brand • Generic product • an item characterized by a plain label, with no advertising and no brand name • Manufacturer’s brand • brand name owned by a manufacturer or other producer • Private brand • a brand name placed on products marketed by a wholesaler or retailer

16. Types of Brand • Private brand (cont) • private brands may end up with as much as 45% of the market • private brands are very popular in Europe and are growing there • Family brand • a brand name that identifies several related products

17. Types of Brand • Individual brand • a unique brand name that identifies a specific offering within a firm’s product line to avoid grouping it under a family brand

18. The Value of Brand Equity • Brand Equity • the added value that a certain brand name gives to a product in the marketplace • brand equity provides a competitive advantage for a firm, because people are more likely to buy a product that carries a respected, well-known brand name

19. The Value of Brand Equity • Brand equity can be evaluated by four criteria • differentiation - esteem • relevance - knowledge • Brand concepts can apply to nontraditional products (e.g. sports teams) • Brand managers manage brand market strategies

20. Product Identification - Brand Names and Brand Marks • Brand Name • the part of the brand consisting of works or letters that can be vocalized • Brand Mark • a firm’s distinguishing symbol • Brand names must be unique enough to quality for legal protection • Generic product names fail the test of uniqueness (e.g. aspirin)

21. Brand Names and Brand Marks • Brand names should communicate a correct connotation (e.g. Uneeda biscuits) • Brand names must be carefully chosen for other countries to avoid embarrassing translations or idiomatic connotations (Martin - equally English or Spanish)

22. Trademarks • Trademark • a brand for which the owner claims exclusive legal protection • trademark protection is important to ensure the differentiation of a brand in consumers’ minds • protecting trademarks abroad can be difficult and expensive

23. Packaging • Packages have three general goals: • to protect against damage, spoilage, and pilferage • to assist in marketing the product • to be cost-effective, marketers are increasingly adopting the metric system in their packaging decisions

24. Labeling • Package labels generally contain: • brand name or symbol • name and address of the manufacturer or distributor • product composition and size • recommended uses for product

25. Labeling • Fair Packaging and Labeling Act (1996) • label must offer adequate information concerning product contents • package design must facilitate comparisons among competitive products • Food and Drug Administration • nutritional contents must be listed on the label of any food product to which a nutrient has been added or for which a nutritional claim has been made

26. Labeling • Nutrition Labeling and Education Act of 1990 • food manufacturers and processors must provide detailed nutritional information on most foods • International marketing • must design labels that conform to regulations of each country in which product is marketed • “green” labeling - use of product seals to designate environmentally safe products

27. Labeling • Universal Product Code (UPC) • introduced in 1974 • method for cutting expenses in supermarket industry by reading optical scanner code and printing item and price on cash register receipt

28. Brand Extensions, Brand Licensing, and Co-Branding • Brand extensions • place brand names on product lines to benefit from existing brand equity • this is NOT product line extension • Brand licensing • firm accepts payment for use of a brand name • expands firm’s exposure in marketplace • Co-branding • combines power of two brand names (snacks)

29. New Product Planning • Steady flow of new product entries must be available if firm is to survive • Some new products may involve major technological breakthroughs; others are simply product line extensions • Only 10% of new products are truly “new” • Failure rate of new products is 80%

30. New Product Planning • Four forms of product development: • market penetration • market development • product development • product diversification

31. Consumer Adoption Process • Consumer adoption process has five steps: • awareness • interest • evaluation • trial • adoption/rejection

32. Consumer Adoption Process • Adoption process focuses on the individual and how fast he/she moves through the various stages in deciding whether to adopt a new good/service/idea • Five categories of adopters: • innovators - late majority • early adopters - laggards • early majority

33. Consumer Adoption Process • Diffusion Process • focuses on acceptance of new products by the members of a community or social system • First adopters tend to: • be younger • have higher social status • be better educated • have a higher income • be more mobile

34. Consumer Adoption Process • Adoption rate is influenced by five characteristics of the innovation: • relative advantage • compatibility • complexity • possibility of trial use • observability

35. Organizing for New Product Development • New Product Committees • most common organizational arrangement for new product development • composed of top management representatives from various functional areas • concerned with reviewing and approving new product plans

36. Organizing for New Product Development (cont) • New Product Departments • responsible for all phases of new product development on a permanent, full-time basis • Product Managers (brand managers) • responsible for determining one product or product line’s objectives and marketing strategy • Venture Teams • composed of specialists from different areas • develop new product or product line • not tied to traditional functional departments

37. New Product Development Process • Six Stages • Idea Generation • Screening • Business Analysis • Product Development • Testing • Commercialization

38. New Product Development Process • Idea Generation • consumer hotlines are source of many new product ideas • other avenues • Screening • involves separating ideas with potential from those incapable of meeting company objectives

39. New Product Development Process • Business Analysis • product ideas that survive the initial screening are subjected to a business analysis • concept testing • marketing research that attempts to measure consumer attitudes and perceptions relevant to the new product idea • Product Development • process of converting a potentially profitable idea into a physical product • responsibility of development engineering and marketing

40. New Product Development Process • Testing • determination of consumer reactions to a product under normal circumstances • test marketing • the process of selecting a specific city or television area that is considered reasonably typical of the total market and introducing the good/service with a complete marketing campaign in this area

41. New Product Development Process • Commercialization • establishing marketing programs • preparing production facilities • acquainting sales force, marketing intermediaries, and potential customers with the product

42. New Product Development Process • Traditionally, most new products are developed through phased development - in an orderly series of steps • Currently, many firms are moving toward the parallel approach • team members work on the six steps concurrently rather than sequentially • using scheduling methods like PERT and • Program Evaluation and Review Technique • Critical Path Method