C H A P T E R

1. 7 C H A P T E R Developing A Product/Brand Strategy: - Setting Objectives - Choosing a Marketing Strategy

2. 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)

3. 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

4. Action Plan • Where are we heading to?  • How will we get there?*  • What will we do? 

5. 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.

6. Elements of a Product Strategy** • 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

7. Hierarchy of Objectives Company mission/vision Level 0 Corporate objectives Level I Corporate strategies Divisional objectives Level II Divisional strategies Product/brand objectives Level III Brand strategies Program objectives Level IV Tactics

8. 1. Setting Objectives • Characteristics of Good Objectives • Quantified standards • Challenging • Have Milestones • Two Major Decisions • Which Objective to Pursue? • How High it should be?

9. 2. Consideration of Strategic Alternatives • Corporate Objectives • Two Major Paths • Increasing Sales/Market Share* • Market Development Strategy • Market Penetration Strategy • Increasing Profitability • Decreasing Inputs • Increasing Outputs * 2X2 matrix on growth strategy

10. Increase outputs Decrease inputs Increase price Reduce costs Improve sales mix Improve asset utilization Strategic Alternatives Long-term profits Efficiency, short-run profits Growth in sales or market share Market development Market penetration New segments Existing customers Convert nonusers Competitors’ customers New product development

11. Criteria for Evaluating Strategic Alternatives • Size/growth of the segment • Opportunities for obtaining competitive advantage  Know Yourself • Resources available to penetrate the segment

12. 3. Targeting and Positioning • Choice of Customer Targets: Single or multiple* • Choice of Competitor Targets • Statement of the Core Strategy =Value Proposition* • Economic (cost/price) Advantage • Functional Advantage • Psychological Advantage

13. Ex) Target Segments for Handspring

14. 3. Targeting and Positioning (cont’d) • Five Areas of Differentiation • Quality* • Convenience and Service • Status and Image • Branding* • Distribution Channels  Combination of the Above

15. Cola RC Cola • Segment 3 • Diet Pepsi • Diet Rite • Pepsi • Nondiet Diet • Segment 1 Segment 2 • • Dr Pepper • Tab • Fresca • Coke • 7-Up Noncola Joint Space for Colas

16. 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

17. Positioning Decision Steps (Contd.) 3. Selecting the position that best satisfies these criteria 4. Implementing programs consistent with the product position selected

18. Total Product Concept Potential product Generic product Expected product Augmented product

19. Reduced marketing costs • Trade leverage • Attracting new customers • Create awareness • Reassurance • Time to respond to competitive threats Anchor to which other associations can be attached Familiarity-liking Signal of substance/ commitment Brand to be considered • Provides value to customer by enhancing customer’s: • Interpretation/ processing of information • Confidence in the purchase decision • Use satisfaction 4. Brand loyalty 1. Brand awareness Brand equity Brand loyalty Brand loyalty Brand loyalty Managing Brand Equity

20. Reason-to-buy Differentiate/position Price Channel member interest Extensions Help process/ retrieve information Reason-to-buy Create positive attitude/feelings Extensions • Provides value to firm by enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices/margins • Brand extensions • Trade leverage • Competitive advantage Competitive advantage 3. Perceived quality 2. Brand associations Brand equity Other proprietary brand assets Brand loyalty Brand loyalty Brand loyalty Brand loyalty Brand Equity (cont’d).

21. 3. Targeting and Positioning (cont’d) • Values Being Sought by Customers (by Rackham) • Transactional Sales: Intrinsic Value • Consultative Sales: Extrinsic Value • Enterprise Sales: Strategic Value • Relationship Life Cycle and Strategy • Customer Acquisition • Customer Retention • Customer Expansion • Customer Deletion*

22. Making Sense of A “Strategy Jungle” • Strategy at different levels • Corporate or Business Level: Porter’s Generic Strategy • Cost 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 Life Cycle-based Strategy:* • First mover advantage vs. Second mover advantage

23. Strategy Over the Life Cycle Ex) Pharmaceutical industry (patent expiration in 20 years)

24. 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)

25. Multiple Effects of Consumer Promotions on Car Salesby Steve Kim and J. Lim Firm performance Consumer promotions • Car Sales Change • - Immediate • Total • Advertising • Incentives H1 & H2 H3 & H4 Product Quality Product variable

26. Effects of Advertising and Incentives on Car Sales

27. Effects of Incentives Under Different Quality

28. Effects of Advertising Under Different Quality

29. Illustration: Handspring’s 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)