Lesson 10 Product and Brand Decisions

1. Lesson 10 Product and Brand Decisions

2. Basic Product Concepts • A product is a good, service, or idea • Tangible Attributes • Intangible Attributes • Product classification • By buyer (consumer, industrial) • By amount of effort put into purchase (low involvement, high involvement) • By durability (durables and non-durables) • By buying motivations (thinking and feeling) • By buyer orientation (convenience, preference, shopping, specialty goods)

3. Product Types • Buyer orientation • Amount of effort expended on purchase • Risk level associated with purchase • Buyer involvement • Convenience • Preference • Shopping • Specialty

4. The Power of Brands Rank Brand bn. $ 2003 1 Coca Cola 70.45 2 Microsoft 65.17 3 IBM 51.77 4 GE 42.34 5 Intel 31.11 Source: Interbrand Useful Article https://www.investopedia.com/articles/financial-theory/11/branding-ultimate-economic-moat.asp

5. The most powerful brands in Britain (in pictures), 2018 • http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9029985/The-most-powerful-brands-in-Britain-in-pictures.html

6. Top 10 - The most powerful brands in Britain (in pictures), 2017 • http://uk.businessinsider.com/the-worlds-10-most-powerful-brands-2017-2

7. Put it in perspective • Greater than the 1995 GDP of Poland ($65.9 bn), Algeria ($69.6 bn), Israel ($58.8 bn), Venezuela ($57.4 bn). • Gross value of Coca Cola company’s 2002 tangible fixed assets – $9 bn. • Personal Income for 2002, for Charlotte-Gastonia-Concord MSA - $46.51 bn – 1.406 mill. people (BEA – US Dept. of Commerce)

8. What does this value indicate • The amount you would have to pay if you wanted to buy the brand (Bills Gates: $40.7 bn. in 2003) • The power to command future sales (Coke’s 2002 sales – $19.56 bn.) • The incredible skew in value placed on an intangible asset (9 bn. Vs. 70.45 bn.) • Lastly, the strength and favorable attitude towards the name in your minds (1985 – Coke’s misadventure)

9. Origins of branding • Derived from old Norse word ‘brandr’ meaning ‘to burn’ • Marks on Chinese porcelain, pottery jars from Greece and Rome and Indian artifacts dating from 1300 BC • Cattle Ranchers • Bakers to mark their bread - English law in 1266 • The Moon & the Stars (1851) – P&G brand • Uneeda biscuits – 1898 – first nationally branded biscuit

10. Advantages • Can be sold prepackaged hence specific quality levels can be assured • Opportunity to communicate specific brand benefits • Opportunity to appeal to specific market segments

11. What is a brand • A differentiated product is a brand.e.g. Nike, Gap, Abercrombie & Fitch, Levis, Citibank, Panthers, Coca Cola, etc. • A brand must satisfy two conditions • Distinctive identity (name, symbol, logo, slogan, etc.) • A distinctive image (e.g. Coke vs. Pepsi)

12. Why is branding important • Push vs. Pull • Financial value of brands in the context of mergers and acquisitions (KKR paid $30 bn. for RJR Nabisco (Oreos, Newtons, Teddy Grahams, Chips Ahoy, etc.) in 1989 – first M&A transaction to recognize value of the brand name)

13. Why is branding important • Jump start sales across product categories e.g. Hooters Airlines, Reebok bottled water • Ability to operate highly profitably on minimal fixed investment (e.g. Sara Lee Corp. – Hanes, Ball Park, Kiwi, Coach, etc. – is an “assetless” company – no manufacturing operations. Also Baskin Robbins, Sam Adams beer, Calvin Klein jeans and Motorola cellphones)

14. Critical features of brands • Intangible • Exist at a perceptual level • Whether a brand has been created or not is determined by the consumer. • (manufacturers may invent the brand – name, advertising and positioning, but if the consumer does not perceive the brand as such (i.e. a differentiated product), a brand HAS NOT been created)

15. Types of brands • Consumer brands (most fall in this category) e.g. Nike, Gatorade, Maytag, Pantene, Tyson chicken, Mercedes, etc. • Industrial brands e.g. Xerox, Caterpillar, Komatsu, Boeing, Airbus, etc. • Service Brands e.g. British Airways, Fedex, UPS, State Farm Insurance, Citibank, etc.

16. Types of brands • Corporate Brands e.g. GE, Disney, Honeywell, etc. • Retail brands e.g. Gap, A&F, JC Penney, Albertsons, etc. • Person brands e.g. Cindy Crawford, Heidi Klum, Michael Jordan, Jennifer Lopez, etc.

17. What are the brand’s benefits? • Functional level – does the product perform as it is supposed to perform – primary benefits e.g. • Does Herbal Essences shampoo clean my hair, give it shine, keep it untangled, protect against dandruff, avoid split-ends, preserve hair color, groom my hair, etc.

18. Exercise • What functional benefits do the following brands give • Nike shoes • Coca Cola • Crest toothpaste

19. Brand benefits • Emotional level – does using this brand give me emotional satisfaction – secondary benefits. • Does L’Oreal make me feel attractive? • Does Herbal Essences make me feel happy after use? • Do my Victorinox jeans make me look sexy?

20. Exercise • Think about a brand and identify its emotional benefits

21. Brand benefits • Self-expressive level – does using this brand make me look good/desirable amongst my peers – tertiary benefits. • Does driving a Corvette make me look “cool” and “hip” amongst my friends? • Would my Porsche tell my friends that I am rich but discriminating in taste?

22. Exercise • Think about a brand and identify its self-expressive benefits

23. Identify the brand with country • News Corp (Fox News) • Solvay • BP • GlaxoSmithKline • Sainsbury • Marks & Spencers • Shell • Phillips • Unilever • Prudential

24. Identify the brand with country • Pemex • Heineken • Carlsberg • LG Electronics • Samsung • Volvo • Ericsson • Nestle • Novartis • ABB • DuPont • Gillette • Bombardier • Sinopec

25. Identify the brand with country • Nokia • Danone • L’Oreal • Michelin • BMW • Chrysler • Lufthansa • LVMH • Fiat • Guinness • Bridgestone • Sharp • Canon

26. Local, International and Global Brands • Local Brands • Sold only in a single national market e.g. Thums Up in India • Entrenched local products/brands can be a significant competitive hurdle to global companies (e.g. Thums Up and Coke in India; Jollibee and McDonalds in Philippines, Li Ning sneakers and Nike in China) • Foreign companies often create local brands (e.g. Ariel detergent in India by P&G, Sokenbicha, a blended tea in Japan by Coca Cola)

27. International Brands • International Brands • Offered in several markets in a particular region • ‘Euro-brands’ • e.g. Daimler Chrysler ‘Smart Car’

28. Global Brands • Global products meet the wants and needs of a global market and is offered in all world regions • Global brands have the same name and similar image and positioning throughout the world • E.g. BMW, Gillette, GE, etc.

29. Global Products and Brands A multinational has operations in different countries. A global company views the world as a single country. We know Argentina and France are different, but we treat them the same. We sell them the same products, we use the same production methods, we have the same corporate policies. We even use the same advertising—in a different language, of course. - Alfred Zeien Former Gillette CEO

30. Key Question • When introducing a product in a foreign country, what are the factors determining using the existing brand name versus a new brand name? • Cultural similarities in TA • Pre-existing knowledge and attitudes to existing name and its country of origin • Legal issues • Cost and profitability considerations

31. Branding Strategies • Leveraging the power of the brand name to cover the market more effectively • Brand associations • Why do we do it? • Phenomenally expensive to create and promote a new brand name (at least 100 – 150 million dollars) • Too many brands out there • Increase productivity of current marketing programs

32. Sub-branding • Creating new brands which are part of the parent brand family – expressed as suffixes of the parent brand. • e.g Nike Air Jordan is a sub-brand of Nike which is the parent brand. Air Trigo, Air Mohawk are sub-brands of Nike Air. • Pro V is a sub-brand of Pantene

33. Network of Brand Associations golf Tiger Woods running NIKE athletic Sweat shops Basket ball Michael Jordan Seattle Rain

34. Flanker Brand • Different brand name – same product line • Purpose: Pre-empt competition, cover the market more completely (protect your flanks) • Problem: some cannibalization is expected. • E.g. Thums Up and Coca Cola in India • Hallmark and Ambassador cards

35. Brand Extension • Same brand name, new product line e.g. Reebok shoes and Reebok water. Nike shoes and Nike casuals. Chevy cars and Chevy men’s cologne. Hooters restaurants and Hooters airline • The concept of congruence determines the success of a brand extension strategy. E.g. Johnson’s baby powder and Johnson’s baby oil – high congruence. But imagine Lysol toilet bowl cleaner and Lysol toothpaste!!!

36. Ingredient branding • Branding an ingredient of the main brand, which is often manufactured by a different company. • E.g. Intel Inside is an ingredient brand on IBM, Dell, Compaq, etc. computers; Breyers Chocolate Ice Cream with Hershey’s pieces / M & Ms; Breyers icecream with Splenda

37. Complementary / Co-branding • When two or more mutually reinforcing brands get together to jointly promote themselves (one is not an ingredient of another). • E.g. co-branded credit cards like Chase MasterCard, OR Harley Davidson and Ford Explorer.

38. Umbrella Branding • Brand acts as an umbrella for new products • Example: The Virgin Group • Virgin Entertainment: Virgin Mega-stores and MGM Cinemas • Virgin Trading: Virgin Cola and Virgin Vodka • Virgin Radio • Virgin Media Group: Virgin Publishing, Virgin Television, Virgin Net • Virgin Hotels • Virgin Travel Group: Virgin Atlantic Airways, Virgin Holidays

39. Developing a Global Brand • Questions to ask when management seeks to build a global brand: • Will anticipated scale economies materialize? • How difficult will it be to develop and coordinate a global brand team? • Can a single brand be imposed on all markets successfully?

40. Global Brand Development Process • Create a compelling value proposition – one that transcends all cultures (e.g. Snickers – “a meal in a bar” or BMW – “the ultimate driving machine”) • Think about all elements of brand identity and select names, marks, and symbols that have the potential for globalization – are any banned, already being used?)

41. Global Brand Development • Organize for a global brand team (communications, research, planning processes, advertising agency, etc.) • Harmonize branding strategies (do you know the architecture of your brands?)

42. Self-actualization External/Internal Esteem Social Safety Physiological Local versus Global Products and Brands: A Needs-Based Approach

43. Country of Origin as Brand Element • Perceptions about and attitudes toward particular countries often extend to products and brands known to originate in those countries (“Made in-”) • Japan (miniaturization and high quality) • Germany (engineering) • France (chic) • Italy (style)

44. Extend, Adapt, Create: Strategic Alternatives in Global Marketing • Extension – offering product virtually unchanged in markets outside of home country • Adaptation – changing elements of design, function, and packaging according to needs of different country markets • Creation – developing new products for the world market

45. Global Product Planning: Strategic Alternatives Communication Product Same Different Strategy 2: Product Extension Communication Adaptation Strategy 4: Dual Adaptation Different Same Strategy 3: Product Adaptation Communication Extension Strategy 1: Dual Extension e.g. industrial products

46. Global Product Planning: Strategic Alternatives • Strategy 1 – Dual Extension • Easiest, least expensive way • Used for products not rooted in cultures e.g. industrial products • Strategy 2 – P extend, C – adapt • Same product, change advertising • Ben & Jerry’s ice cream in UK changed its packaging colors

47. Global Product Planning: Strategic Alternatives • Strategy 3 – P – adapt, C – extend • E.g. Exxon – changes its gasoline formulation to adhere to country regulations and temperatures but keeps the same advertising • P&G markets Tide in India under a different brand name ‘Ariel’ – the product is the same • Strategy 4 – Dual adaptation • Change product specs and advertising

48. Global Product Planning: Strategic Alternatives • Strategy 5 – Invent • When adaptation can go only so far • Products for low income countries • E.g. Whirlpool new line of washing machines (Ideale) for Brazil, China and India

49. What should you guard against? • Two errors that management makes in choosing a strategy • NIH (Not invented here) syndrome means managers ignore the advancements of subsidiaries overseas • Managers impose policies upon subsidiaries because they assume what is right for customers in one market is right in every market

50. Identifying New Product Ideas • Continuous Innovations – faster PCs • Dynamically continuous innovations – Sensor Excel, Mach 3 from Gillette • Discontinuous innovations – internet, CDs, etc.