UNIT 2

Product Management: Introduction

Product Management is an organizational function that guides every step of a product’s
lifecycle: from development, to positioning and pricing, by focusing on the product and its
customers first and foremost. To build the best possible product, product managers
advocate for customers within the organization and make sure the voice of the market is
heard and heeded.

Product Management is the development, marketing and sale of a product to a customer.

Product management starts from when a product is merely just an idea and continues all
the way through the lifecycle of a product, including when the product arrives in the
customer’s home. A product manager drives the strategy for a product or group of
products. Product managers are often responsible for educating the executive staff on the
need for the product in the market.

Product management differs based on the company and type of products. However one
thing is consistent, the product manager represents the customers’ needs. The product
manager is responsible for bringing together the technology, business, and users. The
technology includes the actual product itself. The business represents those that have the
ability to bring the product to market, and the user is the customer that has a desire for this
product. Other than the chief executive officer (CEO), the product manager is the only other
person in the company who has a focus on bringing all the aspects of a product together.

Example

Imagine you work for an established shoe company. You have taken on the role of a
product manager for the specialty market in tennis shoes. After researching the market you
learn that there is a growing trend for breast cancer survivors and their family members to
become more physically fit. Several of the company’s well-known competitors have already
released a new line of pink gear into the market. You bring the idea of creating a line for that
cause to your executive staff, indicating a desire to tap into that market as well.

You work with the research department to survey customers about their interest in this
potential line. After receiving favorable feedback, you work with the product design team to
develop a new shoe which is layered in three shades of pink and white. Unlike the
competitors, you convince your team to imprint a word on the heal of each shoe, such as
‘hope’, ‘freedom’ and ‘life’ to make a lasting statement. After receiving a prototype for the
line of shoes, you work with the marketing department to create a line of print ads that
picture women’s shoes running through dirt leaving an imprint of a word behind. You then
track the daily sales of the new shoe line and provide reporting back to the executive staff.
Phases of Product Management

A product manager is the product champion, meaning that they are the person who stands
behind all phases of the product from inception to development to release. Although the
roles vary by company the phases are similar for each product manager.

A product manager role starts with an idea that is walked through these product stages:

(I) Define market and customer

(II) Define problem and value proposition

(III) Define requirements

(IV) Research competitors and products

(V) Sales and marketing launch

(VI) Stakeholder communications

(VII) Report and analyze results

 Business: Product management helps teams achieve their business objectives by
bridging the communication gap between dev, design, the customer, and the business.
 UX: Product management focuses on the user experience, and represents the
customer inside the organization. Great UX is how this focus manifests itself.
 Technology: Product management happens, day to day, in the engineering
department. A thorough understanding of computer science is paramount.

The history of product management

Product management was born during the great depression, when a 27-year-old marketer
proposed the idea of a “brand man”– an employee to manage a specific product rather than
a traditional business role. Since the 1930s, the continued success of this function has led
to the growth of product organizations across industries and geographies.
 1931 — Neil H. McElroy, a marketing manager at Proctor & Gamble, writes a 300-
page memo on the need for “brand men,” who manage specific products.
 Late 1930s — McElroy is an advisor at Stanford University, where he influences two
young visionaries: Bill Hewlett and David Packard.
 1943-1993 — Hewlett-Packard sustains 50 years of 20% Y/Y growth by
implementing the “brand man” philosophy in their new company.
 Late 1940s — Toyota develops JIT manufacturing principles, later adopted by
Hewlett-Packard.
 1953 — Toyota develops the kanban method.
 1970s — Tech companies in the U.S. start developing lightweight processes, in
opposition to cumbersome processes that emerged from manufacturing industries.
 1980s — Developing agile processes, combined with greater acceptance of “brand
management” roles, takes hold in many technology and software companies.
 2001 — The Agile Manifesto is written, which, in large part, broke down department
silos and outdated process, to make room for a unified product management role.

Level of Products
According to Philip Kotler, who is an economist and a marketing guru, a product is more
than a tangible ‘thing’. A product meets the needs of a consumer and in addition to a
tangible value this product also has an abstract value. For this reason Philip Kotler states
that there are five product levels that can be identified and developed. In order to shape this
abstract value, Philip Kotler uses five product levels in which a product is located or seen
from the perception of the consumer. These 5 Product Levels indicate the value that
consumers attach to a product. The customer will only be satisfied when the specified value
is identical or higher than the expected value.

 Need: A lack of a basic requirement.

 Want: A specific requirement of products to satisfy a need.
 Demand: A set of wants plus the desire and ability to pay for the product.

Customers will choose a product based on their perceived value of it. Satisfaction is the
degree to which the actual use of a product matches the perceived value at the time of the
purchase. A customer is satisfied only if the actual value is the same or exceeds the
perceived value. Kotler attributed five levels to products:
 The five(5) product levels are:

1. Core Benefit

The fundamental need or want that consumers satisfy by consuming the product or service.
For example, the need to process digital images.

2. Generic/Basic Product

A version of the product containing only those attributes or characteristics absolutely

necessary for it to function. For example, the need to process digital images could be
satisfied by a generic, low-end, personal computer using free image processing software or
a processing laboratory.

3. Expected Product

The set of attributes or characteristics that buyers normally expect and agree to when they
purchase a product. For example, the computer is specified to deliver fast image processing
and has a high-resolution, accurate colour screen.

4. Augmented Product

The inclusion of additional features, benefits, attributes or related services that serve to
differentiate the product from its competitors. For example, the computer comes pre-loaded
 with a high-end image processing software for no extra cost or at a deeply discounted,
incremental cost.

5. Potential Product

This includes all the augmentations and transformations a product might undergo in the
future. To ensure future customer loyalty, a business must aim to surprise and delight
customers in the future by continuing to augment products. For example, the customer
receives ongoing image processing software upgrades with new and useful features.

Added value of the Five Product Levels

Each level of the five product levels adds value for the customer. The more efforts
production companies make at all levels, the more likely they are to stand a chance to be
distinctive. At the Augmented Product level, the competition is observed in order to copy
certain techniques, tricks and appearance of each other’s products. This makes it
increasingly difficult for a consumer to define the distinctiveness of a product. To be able to
tower over the competition, production companies focus on factors which consumers attach
extra value to such as extreme packaging, surprising advertisements, customer-oriented
service and affordable payment terms. This is not just about satisfying the customers and
exceeding their expectations but also about surprising them.

What benefits does the model provide?

Kotler’s Five Product Level model provides businesses with a proven method for structuring
their product portfolio to target various customer segments. This enables them to analyse
product and customer profitability (sales and costs) in a structured way. By organizing
products according to this model, a business’ sales processes can be aligned to its
customer needs and help focus other operational processes around its customers – such as
design and engineering, procurement, production planning, costing and pricing, logistics,
and sales and marketing. Grouping products into product families that align with customer
segments helps modelling and planning sales, as well as production and new product
planning.

Classification of Product
Classifying Products into meaningful categories helps marketers decide which strategies
and methods will help promote a business’s product or service. Many types of classification
exist. For example, marketers might categorize products by how often they are used. One-
time-use products, such as vacation packages, require completely different marketing
strategies than products customers use repeatedly, such as bicycles. Product classification
helps a business design and execute an effective marketing plan.
1. Convenience Products

Convenience products involve items that don’t require much customer effort or forethought.
Food staples often fall into this category, because customers can buy them nearly
everywhere and at roughly the same prices. Marketing convenience products can be a
challenge if there are many similar products competing for the customer’s attention and
driving down the price.

Following are the main features of Convenience products:

(i) These products are easily available and require minimum time and effort.

(ii) They are available at low prices.

(iii) These are essential goods; so their demand is regular and continuous.

(iv) They have standardized price.

(v) The supply of these goods is more than the demand; therefore competition for these
products is very high.

(vi) Sales promotion schemes such as discount, free offer, rebate etc. help in marketing of
these products.

2. Shopping Products

Customers are willing to invest time and effort to buy shopping products. For example, a
customer might compare ingredients, prices and safety information for a variety of
deodorants before making a final purchase. Often, the most effective marketing approach is
 to use advertising and heavy promotions to develop brand preference and loyalty among
customers, according to the book “Principles of Marketing,” by Ashok Jain

Following are the main features of shopping products:

(i) They are durable in nature

(ii) These goods have high unit price as well as profit margin.

(iii) Before making final purchase, consumer compares the products of different companies.

(iv) Purchases of these products are pre planned.

(v) An important role is played by the retailer in the sale of shopping products.

3. Specialty Products

Specialty products require significant thought or effort. For example, a well-known luxury car
model might be available at just a few local dealerships, meaning an interested customer
has restricted options. Specialty products tend to be expensive, durable goods, often
involving authorized dealerships and personal selling.

Following are the main features of specialty products:

(i) The demand for such products is relatively infrequent.

(ii) These products are very costly.

(iii) These are available for sale only at few places.

(iv) An aggressive promotion is essential for the sale of such products.

(v) Many of the specialty product require after sales service too.

4. Unsought Products

Unsought products are items customers aren’t aware of or don’t often think about. New
products that have no brand recognition fall under this classification, as do certain types of
insurance. The marketing problems presented by an unsought product are as follows. First,
you must convince customers they need the product or service. Second, you must convince
customers to buy the product or service from you and not your competitor.
 Following are some examples of unsought products

 Those innovative and new products you don’t know

 Life Insurance Policy
 Prepaid funeral Services
 Accidental and health insurance
 Smoke detectors
 Survival gears

Product Hierarchy
Product hierarchy is the classification of a product into its essential components. It is
inevitable that a product is related or connected to another. The hierarchy of the products
stretches from basic fundamental needs to specific items that satiate the particular needs.
Product hierarchy is better understood by viewing the business as a whole as opposed to
looking at a specific product. Product hierarchy is usually mentioned in the same sentence
with product classification and therefore can be viewed as a way of product classification.
 Product hierarchy Levels

Product hierarchy is divided into several levels which are best understood using examples.

These product hierarchy levels include:-

 Product need: The product need is the primary reason for the existence of a
product. For example, motor vehicles exist because people have to and want to travel. This
is the core product need, for example, Toyota vehicles.
 Product family: in product family, the core need satisfied by a product is the focus.
This means that the attention should not be on the individual market but rather the entire
business market. For example, if travelling is the core need, then it can be satisfied by
planes, trains or ships. In this particular case, the product family is travel and for Toyota, the
product family is vehicles.
 Product class: product class occurs when categories are drawn from the same
company. It is similar to product family only that product class doesn’t go outside the
company, unlike product family. Personal computers constitute an instance of product class.
 Product line: A product line consists of the entire group of products included in a
class of products and these products are related because they perform a comparable
 function, are purchased by the same group of customers or fall within a certain price range.
An example of a product line is a laptop, which is a portable and wireless type of personal
computer.
 Product type: This refers to the various products within a product line. For example,
under Hyundai I20 product line, we have product types such as I20Astana, I20 sportz and
I20 Magna.
 Product unit: This is also referred to as the stock keeping unit (SKU) and it is a
discrete item within a product type of brand that can distinguish itself by size, price or any
other feature. A product becomes an individual product unit if it is independent and no other
product type is dependent on it.

Product Mix Strategies

Product mix, also known as product assortment, is the total number of product lines that a
company offers to its customers. The product lines may range from one to many and the
company may have many products under the same product line as well. All of these product
lines when grouped together form the product mix of the company.

The product mix is a subset of the marketing mix and is an important part of the business
model of a company.

Product Mix depends on many factors like

 Company Age
 Financial Standing
 Area of Operation
 Brand identity, etc.

Many new companies start with a limited width, length, depth and high consistency of the
product mix, while companies with good financial standing have wide, long, deep and less
consistency of the product mix. Area of operation and brand identity also affects its product
mix.
 PRODUCT MIX STRATEGY

The major product mix strategies (given by William Stanton and others) have been
discussed briefly as under:

1. Expansion of Product Mix

Expansion of product mix implies increasing the number of product lines. New lines may be
related or unrelated to the present products. For example, Bajaj Company adds car
(unrelated expansion) in its product mix or may add new varieties in two wheelers and three
wheelers. When company finds it difficult to stand in market with existing product lines, it
may decide to expand its product mix.

For example, Hindustan Unilever Limited has various products in its product mix such as:

 Toilet soaps, detergent cakes, washing powders, etc.

 Cosmetic products,
 Edible items,
 Shaving creams and blades,
 Pesticides, etc.
If company adds soft drink as a new product line, it is the example of expansion of product
mix.

2. Contraction of Product Mix

Sometimes, a company contracts its product mix. Contraction consists of dropping or

eliminating one or more product lines or product items. Here, fat product lines are made
thin. Some models or varieties, which are not profitable, are eliminated. This strategy results
into more profits from fewer products. If Hindustan Unilever Limited decides to eliminate
particular brand of toilet shop from the toilet shop product line, it is example of contraction.

3. Deepening Product Mix Depth

Here, a company will not add new product lines, but expands one or more excising product
lines. Here, some product lines become fat from thin. For example, Hindustan Unilever
Limited offering ten varieties in its editable items decides to add four more varieties.

4. Alteration or Changes in Existing Products

Instead of developing completely a new product, marketer may improve one or more
established products. Improvement or alteration can be more profitable and less risky
compared to completely a new product. For example, Maruti Udyog Limited decides to
improve fuel efficiency of existing models. Modification is in forms of improvement of
qualities or features or both.

5. Developing New Uses of Existing Products

This product mix strategy concerns with finding and communicating new uses of products.
No attempts are made to disturb product lines and product items. It is possible in terms of
more occasions, more quantity at a time, or more varied uses of existing product. For
example, Coca Cola may convince to use its soft drink along with lunch.

6. Trading Up

Trading up consists of adding the high-price-prestige products in its existing product line.
The new product is intended to strengthen the prestige and goodwill of the company. New
prestigious product increases popularity of company and improves image in the mind of
customers. By trading up product mix strategy, demand of its cheap and ordinary products
can be encouraged.

7. Trading Down

The trading down product mix strategy is quite opposite to trading up strategy. A company
producing and selling costly, prestigious, and premium quality products decides to add
lower- priced items in its costly and prestigious product lines.
Those who cannot afford the original high-priced products can buy less expensive products
of the same company. Trading down strategy leads to attract price-sensitive customers.
Consumers can buy the high status products of famous company at a low price.

8. Product Differentiation

This is a unique product mix strategy. This strategy involves no change in price, qualities,
features, or varieties. In short, products are not undergone any change. Product
differentiation involves establishing superiority of products over the competitors.

By using rigorous advertising, effective salesmanship, strong sales promotion techniques,

and/or publicity, the company tries to convince consumers that its products can offer more
benefits, services, and superior performance. Company can communicate the people the
distinct benefits of its products.

Product Mix Example

Coca-Cola has product brands like Minute Maid, Sprite, Fanta, Thumbs up, etc. under its
name. These constitute the width of the product mix. There are a total of 3500 products
handled by the Coca-Cola brand. These constitute the length. Minute Maid juice has
different variants like apple juice, mixed fruit, etc. They constitute the depth of the product
line ‘Minute Maid’. Coca-Cola deals majorly with drinking beverage products and hence has
more product mix consistency.

Product Line Strategies

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Product Line

A product line is a group of related products under a single brand sold by the same company.
Companies sell multiple product lines under their various brands. Companies often expand their
offerings by adding to existing product lines, because consumers are more likely to purchase
products from brands with which they are already familiar.
A product line is a group of items manufactured by a company which are similar or related.
Companies may develop one product line, or may diversify to appeal to the masses. Product line
strategies help the company determine which items to produce and how they should be marketed.

Examples of Famous Product Lines

Microsoft Corporation as a brand sells several highly recognized product lines including
Windows, Office, Xbox and SharePoint. Nike Inc. has product lines for various sports, such as
track and field, basketball, and soccer. The company’s product lines include footwear, clothing
and equipment. Starbucks Corporation’s product lines include coffee, ice cream and drinkware.

Product Line Strategy

In most businesses, strategic decisions are implemented by changes in the components of the
product line or shifts in emphasis within a product line. In fact, most products actually belong to
a line sold through the same distribution channel and this is true for cars, dog foods, electronic
equipment, or even raw materials or travel tour packages. Also, each individual product is a quite
rigid offering which cannot easily meet the changes in the market place. Thus gradual changes in
emphasis within a product line make possible adaptive strategic moves that satisfy the needs for
continuity in the business and for discretion in respect to competitors. But this fundamental
business aspect is often overlooked. Marketeers wonder if they should decrease the price of their
existing products to make room for a newcomer. They wonder if they have enough products in
the line. They wonder if they should advertise the highest or the lowest part of their product line,
and do not find easy ready answers. In fact, most business or marketing concepts seem to be
related to individual products or different markets. Dealing with product line strategies is
nevertheless one of the most important areas in market strategy.

Packaging and Labeling

PACKAGING

Packaging is the science, art and technology of enclosing or protecting products for
distribution, storage, sale, and use. Packaging also refers to the process of designing,
evaluating, and producing packages. Packaging can be described as a coordinated system
of preparing goods for transport, warehousing, logistics, sale, and end use. Packaging
contains, protects, preserves, transports, informs, and sells. In many countries it is fully
integrated into government, business, institutional, industrial, and personal use.

Packaging has four distinct marketing functions, according to the book “Essentials of
Marketing,” by Charles W. Lamb and colleagues. It contains and protects your product. It
promotes your product. It helps consumers use your product — for example, by allowing
them to reseal it between uses. Finally, packaging facilitates recycling and reduces
environmental damage.

Packaging Types

Packaging consists of several different types. For example, a transport package or

distribution package is the package form used to ship, store, and handle the product or
inner packages. Some identify a consumer package as one that is directed toward a
consumer or household.

It is sometimes convenient to categorize packages by layer or function: “Primary,”

“secondary,” etc.

(i) Primary packaging is the material that first envelops the product and holds it. This
usually is the smallest unit of distribution or use and is the package that is in direct contact
with the contents. Primary packaging examples- Aerosol spray can, Bags-In-Boxes,
Beverage can, Wine box, Bottle, Blister pack, Carton, Cushioning, Envelope, Plastic bag,
Plastic bottle.

(ii) Secondary packaging is outside the primary packaging—perhaps used to group

primary packages together. Secondary packaging examples– Box, Carton, Shrink wrap

(iii) Tertiary packaging is used for bulk handling and shipping. Tertiary packaging

examples– Bale, Barrel, Crate, Container, Edge protector, Intermediate bulk, container,
Pallet, Slip sheet, Stretch wrap.
LABELING

Your product’s label delivers your sales message. You can explain what benefits you offer
that competitors don’t, for example, or promote a prize or discount. You also can develop
brand goodwill by showing customers you share their values. For instance, images of happy
families, healthy athletes and green pastures each speak to different types of consumers.

Labels also must fulfill your legal obligations. Food manufacturers, for example, must
publish detailed nutritional information in a specific format and employ marketing terms —
such as “low-fat” or “reduced cholesterol” — that conform to federal regulations. Finally,
your product might need a UPC, or universal product code, especially if it will be sold in
high-volume retail outlets.

The objectives of packaging and package labeling

(i) Physical Protection: The objects enclosed in the package may require protection from,
among other things, shock, vibration, compression, temperature, etc.

(ii) Barrier Protection: A barrier from oxygen, water vapor, dust, etc., is often required.
Package permeability is a critical factor in design. Some packages contain desiccants, or
oxygen absorbers, to help extend shelf life. Modified atmospheres or controlled
atmospheres are also maintained in some food packages. Keeping the contents clean,
fresh, and safe for the intended shelf life is a primary function.

(iii) Containment or Agglomeration: Small objects are typically grouped together in one

package for reasons of efficiency. For example, a single box of 1,000 pencils requires less
physical handling than 1,000 single pencils. Liquids, powders, and flowables need
containment.
(iv) Information transmission: Packages and labels communicate how to use, transport,
recycle, or dispose of the package or product. With pharmaceutical, food, medical, and
chemical products, some types of information are required by governments.

(v) Marketing: The packaging and labels can be used by marketers to encourage potential
buyers to purchase the product. Package design has been an important and constantly
evolving phenomenon for dozens of years. Marketing communications and graphic design
are applied to the surface of the package and (in many cases) the point of sale display.

(vi) Security: Packaging can play an important role in reducing the security risks of
shipment. Packages can be made with improved tamper resistance to deter tampering and
also can have tamper-evident features to help indicate tampering. Packages can be
engineered to help reduce the risks of package pilferage: Some package constructions are
more resistant to pilferage and some have pilfer-indicating seals. Packages may include
authentication seals to help indicate that the package and contents are not counterfeit.
Packages also can include anti-theft devices, such as dye-packs, RFID tags, or electronic
article surveillance tags which can be activated or detected by devices at exit points and
require specialized tools to deactivate. Using packaging in this way is a means of loss
prevention.

(vii) Convenience: Packages can have features that add convenience in distribution,

handling, display, sale, opening, re-closing, use, and reuse.

(viii) Portion Control: Single-serving or single-dosage packaging has a precise amount of

contents to control usage. Bulk commodities (such as salt) can be divided into packages
that are a more suitable size for individual households. It also aids the control of inventory:
Selling sealed one-liter bottles of milk, rather than having people bring their own bottles to
fill themselves.

New Product Development Process

In order to stay successful in the face of maturing products, companies have to obtain new
ones by a carefully executed new product development process. But they face a problem:
although they must develop new products, the odds weigh heavily against success. Of
thousands of products entering the process, only a handful reach the market. Therefore, it is
of crucial importance to understand consumers, markets, and competitors in order to
develop products that deliver superior value to customers. In other words, there is no way
around a systematic, customer-driven new product development process for finding and
growing new products. We will go into the eight major steps in the new product
development process.
 The New Product Development Process are-

1. Idea Generation

The new product development process starts with idea generation. Idea generation refers to
the systematic search for new-product ideas. Typically, a company generates hundreds of
ideas, maybe even thousands, to find a handful of good ones in the end. Two sources of
new ideas can be identified:
 Internal idea sources: The Company finds new ideas internally. That means R&D,
but also contributions from employees.
 External idea sources: The Company finds new ideas externally. This refers to all
kinds of external sources, e.g. distributors and suppliers, but also competitors. The most
important external source are customers, because the new product development process
should focus on creating customer value.

2. Idea Screening

The next step in the new product development process is idea screening. Idea screening
means nothing else than filtering the ideas to pick out good ones. In other words, all ideas
generated are screened to spot good ones and drop poor ones as soon as possible. While
the purpose of idea generation was to create a large number of ideas, the purpose of the
succeeding stages is to reduce that number. The reason is that product development costs
rise greatly in later stages. Therefore, the company would like to go ahead only with those
product ideas that will turn into profitable products. Dropping the poor ideas as soon as
possible is, consequently, of crucial importance.

3. Concept Development and Testing

To go on in the new product development process, attractive ideas must be developed into
a product concept. A product concept is a detailed version of the new-product idea stated in
meaningful consumer terms. You should distinguish

 A product idea is an idea for a possible product

 A product concept is a detailed version of the idea stated in meaningful consumer
terms
 A product image is the way consumers perceive an actual or potential product.

Let’s investigate the two parts of this stage in more detail.

Concept Development: Imagine a car manufacturer that has developed an all-electric car.

The idea has passed the idea screening and must now be developed into a concept. The
marketer’s task is to develop this new product into alternative product concepts. Then, the
company can find out how attractive each concept is to customers and choose the best one.
Possible product concepts for this electric car could be:

 Concept 1: an affordably priced mid-size car designed as a second family car to be

used around town for visiting friends and doing shopping.
 Concept 2: a mid-priced sporty compact car appealing to young singles and couples.
 Concept 3: a high-end midsize utility vehicle appealing to those who like the space
SUVs provide but also want an economical car.

As you can see, these concepts need to be quite precise in order to be meaningful. In the
next sub-stage, each concept is tested.
 Concept Testing: New product concepts, such as those given above, need to be tested
with groups of target consumers. The concepts can be presented to consumers either
symbolically or physically. The question is always: does the particular concept have strong
consumer appeal? For some concept tests, a word or picture description might be sufficient.
However, to increase the reliability of the test, a more concrete and physical presentation of
the product concept may be needed. After exposing the concept to the group of target
consumers, they will be asked to answer questions in order to find out the consumer appeal
and customer value of each concept.

4. Marketing Strategy Development

The next step in the new product development process is the marketing strategy
development. When a promising concept has been developed and tested, it is time to
design an initial marketing strategy for the new product based on the product concept for
introducing this new product to the market.

The marketing strategy statement consists of three parts and should be formulated
carefully:

 A description of the target market, the planned value proposition, and the sales,
market share and profit goals for the first few years
 An outline of the product’s planned price, distribution and marketing budget for the
first year
 The planned long-term sales, profit goals and the marketing mix strategy.

5. Business Analysis

Once decided upon a product concept and marketing strategy, management can evaluate
the business attractiveness of the proposed new product. The fifth step in the new product
development process involves a review of the sales, costs and profit projections for the new
product to find out whether these factors satisfy the company’s objectives. If they do, the
product can be moved on to the product development stage.

In order to estimate sales, the company could look at the sales history of similar products
and conduct market surveys. Then, it should be able to estimate minimum and maximum
sales to assess the range of risk. When the sales forecast is prepared, the firm can estimate
the expected costs and profits for a product, including marketing, R&D, operations etc. All
the sales and costs figures together can eventually be used to analyses the new product’s
financial attractiveness.

6. Product Development

The new product development process goes on with the actual product development. Up to
this point, for many new product concepts, there may exist only a word description, a
drawing or perhaps a rough prototype. But if the product concept passes the business test,
it must be developed into a physical product to ensure that the product idea can be turned
 into a workable market offering. The problem is, though, that at this stage, R&D and
engineering costs cause a huge jump in investment.

The R&D department will develop and test one or more physical versions of the product
concept. Developing a successful prototype, however, can take days, weeks, months or
even years, depending on the product and prototype methods.

Also, products often undergo tests to make sure they perform safely and effectively. This
can be done by the firm itself or outsourced.

In many cases, marketers involve actual customers in product testing. Consumers can
evaluate prototypes and work with pre-release products. Their experiences may be very
useful in the product development stage.

7. Test Marketing

The last stage before commercialization in the new product development process is test
marketing. In this stage of the new product development process, the product and its
proposed marketing programme are tested in realistic market settings. Therefore, test
marketing gives the marketer experience with marketing the product before going to the
great expense of full introduction. In fact, it allows the company to test the product and its
entire marketing programme, including targeting and positioning strategy, advertising,
distributions, packaging etc. before the full investment is made.

The amount of test marketing necessary varies with each new product. Especially when
introducing a new product requiring a large investment, when the risks are high, or when the
firm is not sure of the product or its marketing programme, a lot of test marketing may be
carried out.

8. Commercialisation

Test marketing has given management the information needed to make the final decision:
launch or do not launch the new product. The final stage in the new product development
process is commercialisation. Commercialisation means nothing else than introducing a
new product into the market. At this point, the highest costs are incurred: the company may
need to build or rent a manufacturing facility. Large amounts may be spent on advertising,
sales promotion and other marketing efforts in the first year.

Some factors should be considered before the product is commercialized:

 Introduction timing. For instance, if the economy is down, it might be wise to wait

until the following year to launch the product. However, if competitors are ready to introduce
their own products, the company should push to introduce the new product sooner.
 Introduction place. Where to launch the new product? Should it be launched in a
single location, a region, the national market, or the international market? Normally,
companies don’t have the confidence, capital and capacity to launch new products into full
national or international distribution from the start. Instead, they usually develop a planned
market rollout over time.

In all of these steps of the new product development process, the most important focus is
on creating superior customer value. Only then, the product can become a success in the
market. Only very few products actually get the chance to become a success. The risks and
costs are simply too high to allow every product to pass every stage of the new product
development process.

Why New Products Fail

15 Reasons for New Products Failure:

(i) No Product Point-of-Difference

For a new product to win initial trials and then ongoing repeat business, it needs to bring
something new to the marketplace. Potential customers need an incentive – such as
additional benefits or some form of variety – to be persuaded to try and buy a new product.
Without any real point of difference, the new product is likely to fail.

(ii) Limited Retailer Support

Most retailers are pretty happy with their existing merchandising mix and also need to be
persuaded that the new product has value for them and their customers. Many new
products will fail because they do not obtain the necessary distribution and market coverage
to be viable, due to lack of interest from most retailers.

(iii) Poor Product Design

Virtually all products that are put to development and launch sound good on paper.
However, during the development phase when final design decisions are made at the
product is actually developed and produced, this may not go exactly to plan. The end result
is a poorly designed or poor quality product, which is unlikely to generate a large number of
repeat sales.

(iv) Established Customer Loyalty in the Market

The success of new products will rely upon existing consumers being willing to switch from
their current purchases OR entering a market where there are a significant proportion of
first-time customers without any established brand loyalty. In many cases, existing customer
inertia – the unwillingness to switch brands – will limit the potential success of a new
product. Clearly this phenomenon will vary by type of product – for example, many basic
supermarket products are bought by consumers who follow simple habitual loyalty and are
less likely to switch as a result.
(v) Weak Launch or Poorly Executed Launch

Most new products require a reasonable degree of promotional support to build brand
awareness and to access distribution channels and retailers. With a limited launch budget
or a poorly executed launch, then the success of a new product is less likely.

(vi) Adverse Media Attention

Occasionally a new product may attract adverse media attention, usually related to
deficiencies in the product design, price level, or early use problems experienced by
consumers. If this occurs, in today’s Internet connected world it becomes difficult to achieve
new product success.

(vii) Aggressive Competitor Actions

Virtually all new products are designed to take market share away from established
competitors. Therefore, some form of competitor reaction should be expected. In some
cases competitors will increase their level of promotion, reduced prices, leverage retail
relationships to discourage their partners from supporting a new product from a competitor,
or even launch a similar product themselves.

All of these initiatives are designed to protect their market share and try to have the new
product to be as unsuccessful as possible.

(viii) Poor Pricing or Cost Structure

New products may suffer from a poor pricing and cost structure. Sometimes companies will
design products with many features in an attempt to bring something new to the market. As
a result, these products are often more costly to produce, but the firm expects the
marketplace to have a willingness to pay more for a better product. This may or may not be
the case and this product strategy may be quite successful, or be perceived as poor value
in the market.

In line with this concern, an expensive development process, along with an expensive
launch, may necessitate the need to charge a higher price – which again may or may not be
accepted by the marketplace.

(ix) Weak Supporting Brand Equity

As we know, new products launched under a strong brand have a greater likelihood of
success. This is because the brand has existing customer following and loyalty. These
consumers are more likely to trial the new products produced by a brand that they trust and
like. Obviously the reverse will apply – weak brands do not have the same degree of
customer loyalty or brand awareness, and are therefore less likely to generate strong sales
due to their brand support.
(x) Small Target Market

In today’s marketing world, market segments are fragmenting and a number of companies
now pursue niche markets. While niche markets provide a suitable and possibly attractive
market if there is no or little competition, they have the danger of being relatively small.
Clearly a small target market will generate less sales volume and is less financially viable as
a consequence.

(xi) No Clear Market Need or Perceived Product Benefits

For new-to-the-world products, they have the extra concern of whether their
benefits/features are actually meeting a market need. By their very nature, this classification
of new products (brand-new inventions) are something new to the marketplace and provide
a different solution to an established need and sometimes a solution to need it does not yet
exist in the minds of the consumer.

Therefore, if the company misreads this situation, then their level of sales is likely to be
disappointing. This is relatively common with backyard inventors who think that their new
invention is the next big thing.

(xii) Poor Internal Marketing

Service companies in particular rely on internal staff – such as retail staff and call center
staff and various other customer contact personnel. Usually they are the sales or fulfillment
part of the overall launch and marketing process of the new product. Surprisingly, without
an internal marketing program to convince the staff members of the benefits of the new
product for their customers, many of them will be reluctant to sell, or help switch customers
to, the new product.

(xiii) Existing Product Cannibalization

A risk associated with a product line extension is that it may simply cannibalize an existing
product. So in essence, while the new product may be successful, because it could take
significant sales away from an established product the overall new product could be
deemed a failure by management. This is because the company has invested time and
money into bringing new product to market, yet no additional profitability has been delivered
to the bottom line.

However, of course, there are companies who believe in the importance of cannibalizing
their own products – primarily as a competitive defensive measure – an example here is
3M.

(xiv) Weak Sales for Size of Company

When we discuss a product failure, it needs to be considered in conjunction with the overall
size of company. For example, take a large company like Coca-Cola. If they were to bring a
new product to market, some sort of beverage, and that only generated $1 million per year
profit (which is good money for the average company) a company the size of Coca-Cola
would deem this new product a failure and would probably look to discontinue it.

(xv) Insufficient Time for Success

Because new product success relies upon consumers being willing to switch and trial new
products and then become a repeat and loyal purchaser, there are several steps phases
involved in the customer’s journey. This process obviously takes time. Some companies are
willing to wait and invest in a new product, whereas others seek and expect almost instant
success in the marketplace.
 Adoption Process
Adoption process is a series of stages by which a consumer might adopt a NEW product
or service. Whether it be Services or Products, in today’s competitive world, a consumer is
faced with a lot of choices. How does he make a decision to ADOPT a new product is the
Adoption process.

There are numerous stages of adoption which a consumer goes through. These stages may
happen before or even after the actual adoption.

Philip Kotler considers five steps in consumer adoption process, such as awareness,
interest, evaluation, trial, and adoption. On the other hand, William Stanton considers six
steps, such as awareness stage, interest and information stage, evaluation stage, trial
stage, adoption stage, and post-adoption stage. We will follow six steps.

1. Awareness Stage

Individual consumer becomes aware of the innovation. He is exposed to innovation but

knows very little regarding the innovation. He has only limited information about it. He is
aware of either by discussion with friends, relatives, salesmen, or dealers. He gets idea
about a new product from various means of advertising like newspapers, magazines,
Internet, television, outdoor media, etc. At this stage, he doesn’t give much attention to the
new product.

2. Interest and Information Stage

In this stage, the consumer becomes interested in innovation and tries to collect more
information. He collects information from advertising media, salesmen, dealers, current
users, or directly from company. He tries to know about qualities, features, functions, risk,
producers, brand, colour, shape, price, incentives, availability, services, and other relevant
aspects. Simply, he collects as much information as he can.

3. Evaluation Stage

Now, accumulated information is used to evaluate the innovation. The consumer considers
all the significant aspects to judge the worth of innovation. He compares different aspects of
innovation like qualities, features, performance, price, after-sales services, etc., with the
existing products to arrive at the decision whether the innovation should be tried out.

4. Trial Stage

Consumer is ready to try or test the new product. He practically examines it. He tries out the
innovation in a small scale to get self-experience. He can buy the product, or can use free
samples. This is an important stage as it determines whether to buy it.
5. Adoption Stage

If trial produces satisfactory results, finally the consumer decides to adopt/buy the
innovation. He decides on quantity, type, model, dealer, payment, and other issues. He
purchases the product and consumes individually or jointly with other members.

6. Post Adoption Behavior Stage

This is the last stage of consumer adoption. If a consumer satisfies with a new product and
related services, he continues buying it frequently, and vice-versa. He becomes a regular
user of innovation and also talks favorable to others. This is a crucial step for a marketer.

In every stage of consumer adoption, a marketer is required to facilitate consumers. He

must take all possible actions to make them try, buy, and repeat buy the innovation. Be
clear that every type of consumer (innovators, early adopters, early majority, late majority,
or laggards) follows all the stages of adoption process, but takes different amount of time to
adopt the innovation.

Diffusion of Innovation
 The diffusion of innovation is the process by which new products are adopted (or not) by
their intended audiences. It allows designers and marketers to examine why it is that some
inferior products are successful when some superior products are not.

The idea of diffusion is not new; in fact it was originally examined by Gabriel Tarde, a
French sociologist, in the 19th century. However, it wasn’t until the 1920s and 1930s that
the phenomenon began to be investigated in depth by researchers.

The Process for Diffusion of Innovation

Rogers’ draws on Ryan and Gross’s work to deliver a 5 stage process for the diffusion of
innovation.
1. Knowledge

The first step in the diffusion of innovation is knowledge. This is the point at which the
would-be adopter is first exposed to the innovation itself. They do not have enough
information to make a decision to purchase on and have not yet been sufficiently inspired to
find out more.

At this stage marketers will be looking to increase awareness of the product and provide
enough education that the prospective adopter moves to the 2nd stage.

As it was once said (by whom we’re not sure); “If the user can’t find it, it doesn’t exist.”

2. Persuasion

Persuasion is the point at which the prospective adopter is open to the idea of purchase.
They are actively seeking information which will inform their eventual decision.

This is the point at which marketers will be seeking to convey the benefits of the product in
detail. There will be a conscious effort to sell the product to someone at this stage of the
diffusion of innovation.

3. Decision

Eventually the would-be adopter must make a decision. They will weigh up the pros and
cons of adoption and either accept the innovation or reject it.

It is worth noting that this is the most opaque part of the process. Rogers cites this as the
most difficult phase on which to acquire intelligence. This is, at least in part, due to the fact
 that people do not make rational decisions in many instances. They make a decision based
on their underlying perceptions and feelings and following the decision they attempt to
rationalize that decision. Thus, obtaining an understanding of the decision making process
is challenging – the reasons given following a decision are not likely to be representative of
the actual reasons that a decision was made.

4. Implementation

Once a decision to adopt a product has been made the product will, in most cases, be used
by the purchaser. This stage is when the adopter makes a decision as to whether or not the
product is actually useful to them. They may also seek out further information to either
support the use of the product or to better understand the product in context.

This phase is interesting because it suggests that designers and marketers alike need to
consider the ownership process in detail. How can a user obtain useful information in the
post-sale environment? The quality of the implementation experience is going to be
determined, to a lesser or greater extent, by the ease of access to information and the
quality of that information.

5. Confirmation

This is the point at which the user evaluates their decision and decides whether they will
keep using the product or abandon use of the product. This phase can only be ended by
abandonment of a product otherwise it is continual. (For example, you may buy a new car
today – you are highly likely to keep using the car for a number of years – eventually,
however, you will probably sell the car and buy a new one).

This phase will normally involve a personal examination of the product and also a social one
(the user will seek confirmation from their peers, colleagues, friends, etc.)

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Product Life Cycle (PLC)

The Product Life Cycle contains mainly four distinct stages. For the four stages
introduction, growth, maturity and decline, we can identify specific product life cycle
strategies. These are based on the characteristics of each PLC stage. Which product life
cycle strategies should be applied in each stage is crucial to know in order to manage the
PLC properly.
Product-Life-Cycle-Stages

1. Introduction stage 

The introduction stage is the stage in which a new product is first distributed and made
available for purchase, after having been developed in the product development stage.
Therefore, the introduction stage starts when the product is first launched. But introduction
can take a lot of time, and sales growth tends to be rather slow. Nowadays successful
products such as frozen foods and HDTVs lingered for many years before entering a stage
of more rapid growth.

Furthermore, profits in the introduction stage are negative or low due to the low sales on the
one hand and high-distribution and promotion expenses on the other hand. Obviously,
much money is needed to attract distributors and build their stocks. Also, promotion
spending is quite high to inform consumers of the new product and get them to try it.

In the introduction stage, the focus is on selling to those buyers who are the most ready to
buy (innovators).
Concerning the product life cycle strategies we can identify the proper launch strategy: the
company must choose a launch strategy that is consistent with the intended product
positioning. Without doubt, this initial strategy can be considered to be the first step in a
grander marketing plan for the product’s entire life cycle.

The main objective should be to create product awareness and trial.

To be more precise, since the market is normally not ready for product improvements or
refinements at this stage, the company produces basic versions of the product. Cost-plus
pricing should be used to recover the costs incurred. Selective distribution in the beginning
helps to focus efforts on the most important distributors. Advertising should aim at building
product awareness among innovators and early adopters. To entice trial, heavy sales
promotion is necessary. Following these product life cycle strategies for the first PLC stage,
the company and the new product are ready for the next stages.

2. Growth stage 

The growth stage is the stage in which the product’s sales start climbing quickly. The
reason is that early adopters will continue to buy, and later buyers will start following their
lead, in particular if they hear favourable word of mouth. This rise in sales also attracts more
competitors that enter the market. Since these will introduce new product features,
competition is fierce and the market will expand. As a consequence of the increase in
competitors, there is an increase in the number of distribution outlets and sales are
augmented due to the fact that resellers build inventories. Since promotion costs are now
spread over a larger volume and because of the decrease in unit manufacturing costs,
profits increase during the growth stage.

The main objective in the growth stage is to maximize the market share.

Several product life cycle strategies for the growth stage can be used to sustain rapid
market growth as long as possible. Product quality should be improved and new product
features and models added. The firm can also enter new market segments and new
distribution channels with the product. Prices remain where they are or decrease to
penetrate the market. The company should keep the promotion spending at the same or an
even higher level. Now, there is more than one main goal: educating the market is still
important, but meeting the competition is likewise important. At the same time, some
advertising must be shifted from building product awareness to building product conviction
and purchase.

The growth stage is a good example to demonstrate how product life cycle strategies are
interrelated. In the growth stage, the firm must choose between a high market share and
high current profits. By spending a lot of money on product improvements promotion and
distribution, the firm can reach a dominant position. However, for that it needs to give up
maximum current profits, hoping to make them up in the next stage.
3. Maturity stage 

The maturity stage is the stage in which the product’s sales growth slows down or levels off
after reaching a peak. This will happen at some point, since the market becomes saturated.
Generally, the maturity stage lasts longer than the two preceding stages. Consequently, it
poses strong challenges to marketing management and needs a careful selection of product
life cycle strategies. Most products on the market are, indeed, in the maturity stage.

The slowdown in sales growth is due to many producers with many products to sell.
Likewise, this overcapacity results in greater competition. Since competitors start to mark
down prices, increase their advertising and sales promotions and increase their product
development budgets to find better versions of the product, a drop in profit occurs. Also,
some of the weaker competitors drop out, eventually leaving only well-established
competitors in the industry.

The company’s main objective should be to maximize profit while defending the
market share.

To reach this objective, several product life cycle strategies are available. Although many
products in the maturity stage seem to remain unchanged for long periods, most successful
ones are actually adapted constantly to meet changing consumer needs. The reason is that
the company cannot just ride along with or defend the mature product – a good offence is
the best defense. Therefore, the firm should consider to modify the market, product and
marketing mix. Modifying the market means trying to increase consumption by finding new
users and new market segments for the product. Also, usage among present customers can
be increased. Modifying the product refers to changing characteristics such as quality,
features, style or packaging to attract new users and inspire more usage. And finally,
modifying the marketing mix involves improving sales by changing one or more marketing
mix elements. For instance, prices could be cut to attract new users or competitors’
customers. The firm could also launch a better advertising campaigns or rely on aggressive
sales promotion.

4. Decline stage

Finally, product life cycle strategies for the decline stage must be chosen. The decline stage
is the stage in which the product’s sales decline. This happens to most product forms and
brands at a certain moment. The decline can either be slow, such as in the case of postage
stamps, or rapid, as has been the case with VHS tapes. Sales may plummet to zero, or they
may drop to a low level where they continue for many years.

Reasons for the decline in sales can be of various natures. For instance, technological
advances, shifts in consumer tastes and increased competition can play a key role. As
sales and profits decline, some competitors will withdraw from the market.

Also for the decline stage, careful selection of product life cycle strategies is required. The
reason is that carrying a weak product can be very costly to the firm, not just in profit terms.
There are also many hidden costs. For instance, a weak product may take up too much of
management’s time. It requires advertising and sales-force efforts that could better be used
for other, more profitable products in other stages. Most important may be the fact that
carrying a weak product delays the search for replacements and creates a lopsided product
mix. It also hurts current profits and weakens the company’s foothold on the future.

Therefore, proper product life cycle strategies are critical. The company needs to pay more
attention to its aging products to identify products in the decline stage early. Then, the firm
must take a decision: maintain, harvest or drop the declining product.

The main objective in the decline stage should be to reduce expenditure. General

strategies for the decline stage include cutting prices, choosing a selective distribution by
phasing out unprofitable outlets and reduce advertising as well as sales promotion to the
level needed to retain only the most loyal customers.

If management decides to maintain the product or brand, repositioning or reinvigorating it

may be an option. The purpose behind these options is to move the product back into the
growth stage of the PLC. If management decides to harvest the product, costs need to be
reduced and only the last sales need to be harvested. However, this can only increase the
company’s profits in the short-term. Dropping the product from the product line may involve
selling it to another firm or simply liquidate it at salvage value.

In the following, all characteristics of the four product life cycle stages discussed are listed.
For each, product life cycle strategies with regard to product, price, and distribution,
advertising and sales promotion are identified. Choosing the right product life cycle
strategies is crucial for the company’s success in the long-term.
Brand Management: Meaning
& Introduction
Brand management begins with having a thorough knowledge of the term “brand”. It
includes developing a promise, making that promise and maintaining it. It means defining
the brand, positioning the brand, and delivering the brand. Brand management is nothing
but an art of creating and sustaining the brand. Branding makes customers committed to
your business. A strong brand differentiates your products from the competitors. It gives a
quality image to your business.

Brand management includes managing the tangible and intangible characteristics of

brand. In case of product brands, the tangibles include the product itself, price, packaging,
etc. While in case of service brands, the tangibles include the customers’ experience. The
intangibles include emotional connections with the product / service.

Branding is assembling of various marketing mix medium into a whole so as to give you an
identity. It is nothing but capturing your customers mind with your brand name. It gives an
image of an experienced, huge and reliable business.

It is all about capturing the niche market for your product / service and about creating a
confidence in the current and prospective customers’ minds that you are the unique solution
to their problem.

The aim of branding is to convey brand message vividly, create customer loyalty, persuade
the buyer for the product, and establish an emotional connectivity with the customers.
Branding forms customer perceptions about the product. It should raise customer
expectations about the product. The primary aim of branding is to create differentiation.

Strong brands reduce customers’ perceived monetary, social and safety risks in buying
goods/services. The customers can better imagine the intangible goods with the help of
brand name. Strong brand organizations have a high market share. The brand should be
given good support so that it can sustain itself in long run. It is essential to manage all
brands and build brand equity over a period of time. Here comes importance and
usefulness of brand management. Brand management helps in building a corporate image.
A brand manager has to oversee overall brand performance. A successful brand can only
be created if the brand management system is competent.
 Advantage and Disadvantage
of Branding
Branding is the process of creating a name, design or symbol that identifies and
differentiates a company from its competitors. A good brand reflects the benefits of a
product or service and builds recognition and loyalty in customers. However, branding is an
expensive process and is difficult to undo if the company’s direction changes.

When a company looks to establish itself in the marketplace, it often turns to branding to
help. The concept of branding and identity is to create a look and feel immediately
identifiable and recognizable in the marketplace. Good branding can increase the value of
the product and the company itself. A company’s identity in the marketplace can easily
make or break its profitability as a whole.

Advantage of Branding:

1. Awareness

The harder a company works on its branding and identity, in most cases, the more
awareness it creates. For example, Coca-Cola is known worldwide for its product. A
consumer can see it in a foreign county, with labeling in a foreign language and know it is a
Coca-Cola product. The red color and shape of the bottle is an immediate trigger in many
 minds as to the fact that the drink is a Coca-Cola product. This is branding and identity at its
best.

2. Consistency in the Marketplace

The more often a customer sees your brand in the marketplace, the more often he will
consider it for purchase. If the brand and identity are truly kept consistent, the customer is
more likely to feel that the quality is consistent and to become a loyal follower of the brand.
However, this means that the product must maintain a consistency that reflects the image
as well.

3. Customer Loyalty

Well-executed branding helps create customer loyalty by reinforcing the purchase of

merchandise in the consumer’s mind. For sporting products, a campaign focused on
physical fitness and not on a particular product helps establish the brand as a leader in the
industry for both previous and future customers. When the product is associated with a
lifestyle, it keeps consumers pursuing similar goals coming back.

4. Protection from Competition

Brands offer a certain amount of legal protection from the competition because of trademark
law. A trademark can be any unique word, device, or symbol that distinguishes a company.
Nike’s swoosh and Apple’s apple are both trademarked items. Companies can trademark
their business name as long as they use it when advertising to customers. Registering a
brand as a trademark allows the holder to bring legal action against any competitors that try
to infringe on its branding.

Disadvantage of Branding:

1. It’s Expensive

One major disadvantage of branding is the expense. Designing a brand involves significant
research, naming development, graphic design and brand identity integration, which aren’t
cheap. Business owners may feel pressured to increase the price of their products to
compensate for the increased expense, which could cause customers to switch products.
The increased expense of wages and professional fees to develop a brand may or may not
exceed the financial benefits of branding.

2. It’s Tough to Change

One of the major benefits of a brand is that it creates a strong product association for
customers. However, this can also be a disadvantage in several situations. If a company
wants to change direction with its products or target a new segment of consumers, an
established brand can make it difficult to change the image of the company. If a company
undergoes a public scandal, a strong brand only makes it easier for consumers to associate
 the business with past wrongdoings. While brands and even company names can be
changed, it’s an expensive and time-consuming process.

3. Can Become Commonplace

Many brands strive to be No. 1 in the minds of consumers. For example, in many parts of
the U.S., people request a Coke when they go to a restaurant, not necessarily meaning a
Coca-Cola product, but any soda. While it is the goal of branding to become the standard, it
is not the goal to become the generic term of a line of products.

4. Negative Attributes

If a product or service experiences a negative event, that will become attached to the brand.
For example, a massive recall or unintentionally offensive ad campaign can tarnish a
company’s brand and image, causing the company to need to build a whole new brand and
identity to recapture its place in the market.

5. Pigeonholes

Sometimes establishing a strong brand identity can backfire when a company needs to
pivot in response to changing market conditions. A bakery known for sweet cakes may find
it hard to rebrand as a purveyor of gluten-free goods when its name calls to mind images of
pastries, frosting and sprinkles.

Brand Equity
The Brand Equity refers to the additional value that a consumer attaches with the brand
that is unique from all the other brands available in the market. In other words, Brand Equity
means the awareness, perception, loyalty of a customer towards the brand.

E.g., The additional value a customer is willing to pay for Uncle Chips against any local
chips brand available with the shopkeeper.

Brand Equity is the goodwill that a brand has gained over time.
 Brand Equity can be seen in the way the customer thinks, feels, perceives the product along
with its price and market position and also the way brand commands profit and market
share for the organization as a whole.

Customer Brand Equity can be studied in 3 different ways:

1. The Different Responses of a customer towards the product or service helps in

determining the brand equity. The way customer thinks about the brand and considers it to
be different from the other brands will generate a positive response for that brand and will
contribute to its goodwill.

e.g., Customer, have a positive response towards Mac laptops because of its anti- virus
software.

2. The responses can be generated only if customers have sufficient knowledge about
the brand; thus, Brand Knowledge is essential to determine the brand equity. The Brand
knowledge includes the thoughts, feelings, information, experiences, etc. that establish an
association with the brand.
3. g., Brand Association reflects the knowledge about the product such as woodland is
recognized for its rough and tough styling.
4. The different customer’s response that adds to the brand value depends solely on
the Marketing of a Brand. The strong brand results in substantial revenues for the
organization and better understanding about the product among the customers.

Thus, the marketers basically study the Customer-Based Approach wherein they study the
response of a customer towards the brand that can be reflected in their frequency of
 purchase. It focuses on customer’s perception i.e. what they have read, felt, thought, seen
about the brand and how it has helped them to satisfy their urge of need.

Brand Positioning
Brand positioning refers to “target consumer’s” reason to buy your brand in preference to
others. It is ensures that all brand activity has a common aim; is guided, directed and
delivered by the brand’s benefits/reasons to buy; and it focusses at all points of contact with
the consumer.

Positioning creates a bond between the customer and the business. It’s that friend of the
customer who’ll always stay in their subconscious mind and will make them recall about the
company whenever they hear about the any of its product or a particular feature which
makes it stand out.

Examples of Brand Positioning

 Colgate is positioned as protective.

 Patanjali can be trusted as it is fully organic.
 Woodland is tough and perfect for outdoors.
 Coca-Cola brings happiness.
 Axe deodorants have a sexual appeal.

Characteristics of a Good Brand Positioning Strategy

 Relevant: The positioning strategy you decide should be relevant according to the

customer. If he finds the positioning irrelevant while making the purchase decision, you’re at
loss.
 Clear: Your message should be clear and easy to communicate. E.g. Rich taste and
aroma you won’t forget for a coffee product gives out a clear image and can position your
coffee brand differently from competitors.
 Unique: A strong brand positioning means you have a unique credible and
sustainable position in the customers’ mind. It should be unique or it’s of no use.
 Desirable: The unique feature should be desirable and should be able to become a
factor which the customer evaluate before buying a product.
 Deliverable: The promise should have the ability to be delivered. False promises
lead to negative brand equity.
 Points of difference: The customer should be able to tell the difference between
your and your competitor’s brand.
 Recognizable Feature: The unique feature should be recognizable by the customer.
This includes keeping your positioning simple, and in a language which is understood by the
customer.
 Validated by the Customer: Your positioning strategy isn’t successful until the time
it is validated by the customer. He is the one to decide whether you stand out or not. Hence,
try to be in his shoes while deciding your strategy.
 How to create a strong brand positioning strategy?

Before you decide your brand positioning, ask yourself these three questions.

 What does my customer want?

 Can I promise him to deliver it better and/or differently than my competitors?
 Why will they buy my promise?

What does my customer want?

Not everyone in the market is your customer. You need to divide the market into ‘my
customer’ and ‘not my customer’. This way, it’ll be easier for you to know what exactly is
your customers’ wants are.

The division should be followed by you trying to be in your customers’ shoes. A good
businessman speaks in the voice of the consumer.

Your research should not be based on secondary data. You should go out and look for what
the customer actually wants, make the product fit those wants, and they’ll buy it.

Be Better and/or Different

If it’s not just you who is in the market, you’ve got to find a way to deliver your promise
better and/or differently than your competitors. Make a brand which has a recall, which
comes to the customer’s minds when they hear about the particular product category or the
feature you’re offering. Every time I hear about girls being attracted by a deodorant, I get an
image of Axe deodorants in my mind.

Give them a reason to buy your promise.

 Your promise should be one of the factors they consider while buying the product. Use this
trick

 Decide your product

 List its various characteristics
 Do a research, and
 Divide the characteristics into essential and add-ons.
 Select only those categories, be it essential or add-ons, which customers consider
while making a purchase. (E.g. aesthetics, fragrance, taste, shape, cost, etc.)
 Find out what among these categories can you provide better than the competitors.
 Whatever you decide, don’t lose your focus from the essential characteristics. (E.g.
Taste will always be most important characteristic which a customer consider while buying a
food product)
 Provide your unique feature along with the essential characteristics.

Brand Name Selection

The Brand name selection is fundamentally important because it often captures the key
concept or association of a product in a compact and economical manner. Brand names
can be an effective way of communication because they become attached to the products in
consumers’ minds. It is critically important to be very careful in Brand name selection, as
changing this brand element in future is extremely difficult. Brand name selection for a new
product is certainly a combination of art and science. Companies have four strategic options
in choosing a brand name:-

(i) Company Name

Companies that have built a reputation for product quality and commitment to customer
satisfaction and have become household names sometimes use this strategy. All products
are sold under the company name. This approach is less expensive, as it avoids research
to select an appropriate name. It does not require heavy advertising expenditures to create
brand name awareness. The name takes advantage of a good corporate image. Many
Indian and global companies use this approach. For example, Nirma, Escorts, HMT, Philips,
GE, Mercedes, LG, Samsung, Sony, Canon, Nikon and others use this approach.

(ii) Individual Names

Some firms adopt this policy and each brand has its own individual name. The advantage is
that the company does not tie its reputation to the product. In case the product fails, or its
quality is low, the company’s name or image is believed to be safe. The company can
introduce lower quality products under an individual name without diluting the image of its
higher quality product. For example, HLL introduced a low-priced detergent (Wheel) without
hurting Surf.
The company also uses separate brand names for its range of bathing soaps (Lux, Liril,
Pears, Dove, Moti, etc.). Procter & Gamble also uses this approach for its products (Ariel,
Tide, Head & Shoulders, Pentene, and Vicks). The company searches for new names for its
individual brands and this could mean name research expenses.

(iii) Separate Brand Family Names

Some companies producing many different products adopt this approach to select brand
names. Such companies use different brand names for a category of products. For
example, Denim brand of HLL has several products: Denim Deo, Denim Shaving Cream,
After Shave, Denim Soap, and Denim Talc. The company’s Orchid brand includes several
women’s beauty products. HLL’s Lakmé brand has several personal care products.

Combination of Company Name and Product Name (also called umbrella or endorsement
brand names): Some companies follow this policy, such as Maruti Esteem, Maruti Zen, Fiat
Palio, Ford Ikon, IBM ThinkPad, Acer TravelMate, Apple Powerbook, Hamdard Roohafza,
etc.

(iv) Desirable Qualities of Brand Names

Kim R. Robertson is of the view that brand names selected are simple and easy to
pronounce; familiar and meaningful; and are different, distinctive, and unusual. Kevin Lane
Keller, Susan Heckler, and Michael J. Houston caution that brand name elements that are
highly descriptive of the product category or its attributes and benefits may be potentially
quite restrictive. For example, attempts at extending the Burnol brand so far have failed
because of consumers very strongly associate Burnol with burns.

Sometimes a unique name becomes intimately connected to a product category and may
threaten a company’s exclusive rights to that name. For example, consumers now use
names Aspirin, Xerox, Luna, Scotch Tape, Surf, and Dalda to describe product category.
Xerox means photocopy, Aspirin means acetylsalicylic acid, Luna means any moped,
Scotch Tape means adhesive tape, Surf is synonymous with detergent category, and Dalda
is any vegetable oil. In other words, the brand names have metamorphosed into generic
names that cover entire categories of products.

Apple PowerBook is quite an effective name for a laptop PC. The word combines “book,”
denoting a small product that holds a lot of information and “power.” Right from 1984, Apple
has used the power plank to promote its computers. This power theme is also associated
with the processors it has developed over time: Power processors G3, G4, and G5.
Principles for brand name selection

(i) Distinctive

Brand names need to be clear and different to other brands on the market and be
recognizable as a brand name, rather than a generic word

(ii) Easy to recall

Brand name should be quite simple, recognizable and easy to remember. Making a brand
name too complicated or vague or too long should be avoided.

(iii) Avoid confusion

 Think about how the brand name may be used. For example, “My Credit Union” is a cute
name that has some interesting communication and slogan benefits. However, it probably
has less impact for word-of-mouth benefits, as it creates confusion as to the actual name of
the credit union when used in conversation.

(iv) Translatable

For large companies that operate in multiple markets, how the brand name can be
translated and communicated needs to be considered. Legal protection – brand names
need to be trademarked and registered (varies by country), but some generalized names
probably cannot be registered – such as, “chocolate” candy bar as it is too generic.

Brand Sponsorship
Brand Sponsorship

Brand sponsorship is a marketing strategy in which a brand is supporting an event, activity,

person or organization. Everywhere we go we can witness sponsorship investments: music
festival, football games, beneficial events and so on. Sponsorship allows big, medium and
small brands to partner with other companies as well as event agencies in order to generate
a relationship that aims to economically gratify both the sponsor and the sponsee.

Well-known scenario is when a global brand (let’s think at Coca-Cola) spend a lot of money
to become official sponsor of the World-Cup. What are the benefits coming from this
investment?

 Increase brand awareness/visibility: Whether you are a newborn brand or a well-

established company, sponsoring is an activity that can help you gain awareness or
increase your visibility addressing a broader target.
 Increase your sales/acquire customers: This is the ultimate goal for every
business. Getting to the top of the mind of new or existing customers not only increase
awareness but can also directly drive sales, according to how the sponsorship is coherent
with your marketing plan.
 Gain publicity: Can you imagine a startup that get to be the sponsor of an important
event or sport club? Seems like a natural consequence that media will talk about this.
Furthermore, people will share news on social networks. As a result, you can gain good
exposure – all this for free!
 Differentiate from the competition: If you find yourself in a very competitive and
profit-shrinking market, being the sponsor of a big event or organization can give you the
chance to stand out as a leader in your field
 Increase brand loyalty/premium prices: True especially for sport sponsorship. In
fact, it is statistically proven that, for example, fans of a particular team are more willing to
buy from the sponsor than from its competitors. This leads to brand loyalty, which leads
itself to customers being less sensitive to premium prices
 Increase your CSR reputation/brand image: Finally, sponsoring a charitable event
or a foundation can enhance your brand image as a caring company. As a result you will be
able to witness a profit increase on the long term.

A sponsor can enjoy a wide range of benefits from a carefully selected sponsorship, which
can:-

 Raise brand awareness and create preference

 Create positive PR and raise awareness of the organization as a whole
 Provide attractive content for a range of products and services
 Build brand positioning through associative imagery
 Support a sales promotion campaign
 Create internal emotional commitment to the brand
 Act as corporate hospitality that promotes good relations with clients.

Before sponsoring an activity, the sponsor must feel sure that the event/organization will be
successful; has a proven track record, good prospects and generally be aligned with the
sponsor’s brand and business objectives. Sports sponsorship is the most common and can
range from international to regional and local events.

Brand Portfolio
As businesses introduce or acquire more and more divisions, managing these seemingly
separate entities can become a challenge. By gathering each business unit into a brand
portfolio, business leaders can more easily manage the strategy and operation of the
individual brands from a bird’s eye view.

Brand Portfolio

A brand portfolio is simply the collection of brands under a company’s control. Small
businesses with just one shop may have only a single brand, but large and multinational
corporations may have dozens of distinct brands in their portfolios. In some cases, a
business may present the same product or line under different brands in different markets;
each of these brands is a component of the company’s brand portfolio.

Examples of Brand Portfolio

As of publication, General Motors has 14 brands in its portfolio. These brands include Buick,
Cadillac, Chevrolet and OnStar in the United States. International brands include Baojun,
Holden, Jiefang, Vauxhall and Wuling. GM also sells adapted versions of many of the cars
sold as Chevrolets in the United States under the Opel brand in international markets.

Types of Brand Portfolio

Large brand portfolios consist of up to three types of brands. A sub-brand maintains the
greatest distance from the parent company and may present itself to the public as a
somewhat separate organization. An endorsed brand is presented as an offering of the
parent company rather than as a distinctly different line of products. If an organization
introduces an entirely new brand, it may use some of the parent company’s marketing heft
and recognition to help the new line gain momentum; these introductions are known as new
brands.

Advantage of Brand Portfolio

Brand portfolios allow businesses to compete in many different marketplaces with an array
of product lines. The different brands under which the company presents its products and
services allow the organization to differentiate its products from its other lines. GM, for
example, uses its Cadillac brand to compete in the luxury market, participates in the work
truck arena under the GMC brand and operates under the OnStar brand in the in-car
services marketplace. An active brand portfolio can use energy and momentum from one
brand to energize others that may be slowing. In addition, organizations can help reduce
costs by centralizing strategy, administrative and operational support and even
manufacturing processes, across brands. If one brand fails to perform, the organization can
often sell or discontinue that brand with minimal impact on other aspects of its portfolio.
Portfolio Size

The size of an organization’s brand portfolio can vary significantly from industry to industry
and even from business to business. While there is no ideal number of brands, professional
business consultants at McKinsey & Company recommend keeping brand portfolios as
small as possible to minimize administrative expenses associated with operating multiple
brands.

THE END