Session 3 Product

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Session 3 Product Brand Strategies

• Tonight Product Development Strategic role,
  processes, contributors to success/failure,
  Stratsim experience, examples
• Tomorrow branding, customer-based brand equity,
  building it,growing it, leveraging it, examples

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Product Strategies

• Supports positioning or value proposition
• Competitive focus
• Product development portfolio management
• Summary

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Agenda Product Strategy

• Product
• Value Drivers
• New Product Development Challenges Issues
• Product Life Cycle
• Product Portfolio
• Examples
• Summary Conclusions

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Growth Avenues

• Existing customers with existing products
• New customers for existing products
• New products or services
• Better delivery systems
• Geographic expansion
• Acquisition or alliances
• New competitive arenas

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Business Planning

• To evaluate new business opportunities and major
  transitions in the product strategy.

New
Markets
Current
Current
New
Products
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Example Duponts Strategy
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Duponts Acquisition/Divestiture to reflect this
Strategy
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Business Segment Sales
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Keys to Sustainable Growth

• Put our science to work
• Go where the growth is
• Drive productivity
• Financial discipline

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Putting Their Science to work
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Go where the growth is globally
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Growth market segments
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Drive productivity
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Drivers of New Product Development
New ProductDevelopment
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Product Definition

• Bundle of Benefits
• Benefits vs. Attributes
• Integration with other Elements

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Product Development Levers
Product Type
Core
Augmented

• Packaging
• Attributes and Features
• Customer-Specified Attributes and Features
• Mass-Customized Product

• Customer Service Programs
• Post-Sales Support
• Customer Care
• Customer Relationship Management
• Loyalty Programs and Privileges
• Availability of Complementary Products
• Upgrades
• Enabling Community
• Additional Functionality
• Fulfillment Capabilities

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New Product Development

• Process Competencies
• Time, Cost, Quality, Relevancy Pressures
• Gating Frameworks
• Customer voice
• Simultaneous vs. Sequential
• Breakthrough Products

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Who does this well? Why?
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Stages in the new-product process
THE NEW-PRODUCT PROCESS
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Product Development Divergent and Convergent
Thinking
1. Brain Storming
2. Idea Screening
NumberofIdeas
ConvergentThinking
DivergentThinking
Start
Finish
Critical EvaluationNarrows the Focus Over Time
Ideas ExpandOver Time
Time
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Product Development Portfolio

• Breakthrough to Extensions
• Balance of Risk, Timing
• Strategy Link Paths to Leadership
• Alliances
• Fusion

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Product Portfolio
Low
High
Degree of Innovation
None
Breakthrough or Discontinuous
Incremental
Existing Products
New Products
Line Extensions
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The Project Map
More Product Change
Less New Core Next Generation
Additions to Derivatives Product
Product Product Family
Enhancements
More
Breakthrough Projects Platform
Projects Derivative Projects
New Core Process
Next Generation Process
Process Change
Single Dept. Upgrade
Incremental Change
Less
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Getting it Perfectly Right VersusGetting it
Almost Right Learning From it
Getting it Perfectly Right Ready
Aim Fire Getting it Almost Right and
Learning Ready Fire Aim
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From Deszca, Munro Noori, Journal of
Operations Management, Vol.17, 1999
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From Deszca, Munro Noori, Journal of
Operations Management, Vol.17, 1999
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Best-In-Class Principles
From Deszca, Munro Noori, Journal of
Operations Management, Vol.17, 1999
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Success of New Product Development Process
Issue 1 Technology Strategy
The Effectiveness Efficiency of the New Product
Development Process Depends on
Issue 2 Organizational Context
Issue 3 Teams
Issue 4 Tools
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Success of New Product Development Process (cont.)
Strategic Imperative
1. Articulate the companys strategic intent
2. Map the
companys RD portfolio
Issue 1 Technology Strategy
3. Use strategic alliances to gain rapid access
to enabling technology 4. Choose and monitor
alliance partners very carefully 5. Include
strategic implications of technology development
in the project selection and screening process 6.
Use a parallel development process 7. Use
executive champions
Issue 2 Organizational Context
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Success of New Product Development Process (cont.)
8. Include a diverse range of functions in
project team 9. Involve customers and suppliers
in the development process 10. Match team
structure to project type 11. Match team leader
attributes to type of team 12. Establish mission,
charter, and contract book for project team
Issue 3 Teams
Issue 2 Tools
13. Use appropriate tools to improve the efficacy
of new product development
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Traditional Gated New Product Development Process
Idea Generation
Screening Ideas
Management Review
Product Design
Management Review
Prototype Development
Management Review
Business Analysis
Management Review
Test Market
Management Review
Commercialization
Management Review
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Designing-in Product Quality
Designing-in Product Quality Customer
Satisfaction vs. Customer Retention

• Not knowing what customers want

Following the Quality Function Deployment
(QFD) methodology is one way in which firms can
capture the voice of the customer.
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QFDs Discrete Phases

• Hamid Noori The McGraw-Hill Companies, Inc.

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QFD (House of Quality)
Roof Matrix
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Product characteristics
3
Importance
2
Customer Requirements
Relationship Matrix
1
4
Customer Perceptions
Technical Assessment and Target Values
6

• Hamid Noori The McGraw-Hill Companies, Inc.

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Design and Process
In the new era of Mass Customization, every
customer is unique (customer unique-value) and
each individual customer is a market (market of
one).
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Major Elements Contributed to the Emergence of MC

• Shorter product life cycles and increasing global
  competition led to a breakdown in mass markets,
  increasing operations strategic focus on
  individual customers.
• Customers themselves started demanding greater
  level of variety and personalization in products
  and services.
• Flexible manufacturing and information
  technologies enabled producers to deliver
  customized products at low cost.

Development
Production
Marketing
Delivery
There is a growing consensus that MC strategies
are only viable in a market context where
personalization is demanded, and in an industrial
context where technology is available.
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Stages of Mass Customization
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Mass Customizing Products and Services

• Provide Point-of-Delivery Customization

Move Final Production Step
Production
Development
Production
Delivery
Marketing
Production
Key Find Inherently Individual Characteristic
Move all of Production
Production
Development
Marketing
Delivery
Key Innovation and Invention

• Hamid Noori The McGraw-Hill Companies, Inc.

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Example Cummins in China

• Low-horsepower engine that could affordably meet
  needs of all customers farmers, hospitals,
  small retailers
• Developed smaller, lower-powered, modularized
  engines that could combine with add-ons called
  gensets that could be customized for different
  segments noise abatement hood for hospitals,
  dust and dirt guards for farmers
• Both customers distributors liked the changes

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Innovation Sweet Spot HBR March 2003

• Start with existing products
• 5 Innovation patterns
• Subtraction or reduction Philips Slimline Q
  series DVD players
• Multiplication double bin trash can that allows
  users to sort garbage
• Division unbundling, modularity, mix and match
• Task Unification bundling of tasks defrosting
  element in a cars windshield radio antenna
• Attribute dependency change eyeglasses that
  change with sunlight
• Voice of your product function follows form
• Combination of patterns
• Complementary to other NDP approaches
• Try it -

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New Products Fail Regularly

• 90 of new product ideas never get off the ground
• The overall failure rate of new products is close
  to 85
• Of those new products that hit the market, close
  to 50 of them fail
• But they are significant drivers of future
  profitability

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Your Examples of Failures/Successes????
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http//www.bestnewproducts.ca/en/winners.php
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New Product Acceptance Factors

• Relative Advantage
• Compatibility
• Complexity
• Trial ability
• Observe ability
• Infrastructure

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Reasons For New Product Failure

• Too Small a Market
• Insignificant Point of Difference
• Poor Product Quality
• No Access to Customers
• Bad Timing
• Poor Execution of Marketing Mix

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Product Life Cycle

• Conceptual Foundation Diffusion of Innovations
• Product Definition Issues
• Number of Cycle Shapes
• Descriptive vs. Predictive
• External Internal Issues
• Shorter Cycles

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Product Lifecycle
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Example RIM Launches the Blackberry

• Targeting the right customers
• Understanding adoption process for new technology
• Value proposition initial , subsequent offers
• Market exposure access
• Key relationships
• Competitive arena
• Technology market evolution

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Technology Market Model
Main Street
Tornado
Paging in 98
Wireless email in 98
Bowling Alley
Chasm
Typical Customer
Innovators
Late Majority
Laggards
Early Adopters
Early Majority
Source Geoffrey Moore, Crossing the Chasm
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Product Plan

• The communication vehicle used to convey the key
  messaging of a new product to the rest of the
  organization
• Customer Needs Analysis
• Total Available Market
• Target Market
• Product Positioning
• Value Proposition
• Features and Benefits
• Competition
• Pricing
• Whole Product
• Channel Strategy
• Financial Targets

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Value Proposition
Identifies centerpoint of target segment

• For target customers
• Who have the following problem
• Our product is a new product category
• That provides breakthrough capability.
• Unlike reference competitor,
• Our product key point of differentiation.

Focuses on segments compelling reason to buy
Sets up product leadership axis
States the product leadership benefit
Reputable product leadership alternative
States the customer intimacy commitment
Source Geoffrey Moore, Crossing the Chasm
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BlackBerry Value Proposition

• For business e-mail users who want to better
  manage the increasing number of messages they
  receive when out of the office, BlackBerry is a
  mobile e-mail solution that provides a real-time
  link to their desktop e-mail for sending,
  reading, and responding to important messages.
  Unlike other mobile e-mail solutions, BlackBerry
  is wearable, secure and always connected.

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Whole Product
Potential Product
Products room for growth
Augmented Product
Maximum chance of purchase
Expected Product
Minimum products/services
Generic Product
Shipped in the box
Increase reliance on partners
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RIM Today

• Unbundle its expertise
• Open its platform, license its software
• Market expansion - segments, geography
• Expand functionality - value proposition
• Partner
• Acquire

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Paradoxical Effects of Technology on Customers
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10 Summary Observations on Technology Marketing

• Managers over estimate rate of market acceptance
• People issues likely to be more of a hurdle than
  technology
• Customers Learning - paradoxes
• Value proposition not technology merits
• Making the business case is critical to adoption
• Technology market dynamics transform business
  models
• Time to market time on market - pace of
  business
• Growth through partnerships versus integration
• Technology - Market - Organizational evolution
• Integration - Financing, strategy, technology,
  people, process

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Management Implications

• Technology competency
• Market sensing ability
• Commercialization not just development
• Deal making managing
• Capital cash generation management
• Speed - decision making, organizational
  flexibility responsiveness
• Evolution- market organization - building
  skills
• Leverage help
• Network structuring management
• Human Capital Management

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Target Costing Product Development IKEAs
Approach

• Step 1 Pick a price
• Step 2 Choose a Manufacturer
• Step 3 Design a product
• Step 4 Ship it
• Step 5 Sell it
• Would this kind of approach work in your
  business?

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Summary

• Product think benefits
• Product related value drivers
• Integrated with other marketing elements
• Evolution product/market/competition/strategy
• Process capabilities
• Customers Perspective
• Commercialization challenges
• Partnerships relationships

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Strategic Brand Management
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What is a Brand?

• Traditional view -
• A brand is a name, term, sign, symbol, or design
  which is intended to identify the goods or
  services of one seller or group of sellers and to
  differentiate them from those of competitors.
• More recent views
• Brand is what is experienced and valued by
  customers in everyday social life.
• Brand is the culture of the product shared
  taken for-granted brand stories, images, and
  associations
• Brand is the mental and emotional file we have
  for a product or service or entity.

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New Branding Challenges

• Brands are important as ever
• Consumer need for simplification
• Consumer need for risk reduction
• Brand management is as difficult as ever
• Savvy consumers
• Increased competition
• Decreased effectiveness of traditional marketing
  tools and emergence of new marketing tools
• Complex brand and product portfolios

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Brand Explosion
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Branding by Retailers Example Walmarts 5 Next
Victims Forbes 11/12/2004

• Consumer Electronics Best Buy 1, Walmart 2
  but recently rolled out private brand ILO.,
  expanded brand relationships with Sony, RCA,
  Panasonic
• Banking trying to get into banking but thwarted
  by regulators, instead it offers check cashing,
  bill payment, money orders boasts 28 Wal-Mart
  Money Centres operated by Sun Trust Banks plus it
  has I-store bank branches with other banks
• Pharmacy currently 4th in pharmacy business,
  rolling out a handful of 24hr pharmacies
• Gasoline 1555 stations on Wal-Mart properties,
  300 of which are operated by Sams Club, rest by
  Murphy
• Fashion bought 1 selling British apparel brand
  George from Asda, licenses Mary-Kate Ashley
  lines from the Olsen twins

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The Concept of Customer-Based Brand Equity

• Customer-based brand equity
• Differential effect
• Customer brand knowledge
• Customer response to brand marketing

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Determinants of Customer-Based Brand Equity

• Customer is aware of and familiar with the brand
• Customer holds some strong, favorable, and unique
  brand associations in memory

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Rationale of Customer-Based Brand Equity Model

• Basic premise Power of a brand resides in the
  minds of customers
• Challenge is to ensure customers have the right
  types of experiences with products services and
  their marketing programs to create the right
  brand knowledge structures
• Thoughts
• Feelings
• Images
• Perceptions
• Attitudes

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Salience Dimensions

• Depth of brand awareness
• Ease of recognition recall
• Strength clarity of category membership
• Breadth of brand awareness
• Purchase consideration
• Consumption consideration

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Performance Dimensions

• Primary characteristics supplementary features
• Product reliability, durability, and
  serviceability
• Service effectiveness, efficiency, and empathy
• Style and design
• Price

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Imagery Dimensions

• User profiles
• Demographic psychographic characteristics
• Actual or aspirational
• Group perceptions -- popularity
• Purchase usage situations
• Type of channel, specific stores, ease of
  purchase
• Time (day, week, month, year, etc.), location,
  and context of usage
• Personality values
• Sincerity, excitement, competence,
  sophistication, ruggedness
• History, heritage, experiences
• Nostalgia
• Memories

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Judgment Dimensions

• Brand quality
• Value
• Satisfaction
• Brand credibility
• Expertise
• Trustworthiness
• Likability
• Brand consideration
• Relevance
• Brand superiority
• Differentiation

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Feelings Dimensions

• Warmth
• Fun
• Excitement
• Security
• Social approval
• Self-respect

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Resonance Dimensions

• Behavioral loyalty
• Frequency and amount of repeat purchases
• Attitudinal attachment
• Love brand (favorite possessions a little
  pleasure)
• Proud of brand
• Sense of community
• Kinship
• Affiliation
• Active engagement
• Seek information
• Join club
• Visit web site, chat rooms

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Lovemarks Love/Respect Axis
Respect Performance, Trust, Reputation
Brands Low Love, High Respect
Lovemarks High Love, High respect
Love Mystery, Sensuality, Intimacy
Products Low Love, Low Respect
Fads High Love, Low Respect
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What makes a brand different?

• Recent study of customers, perceptions of top
  brands in airlines, coffee, beer, fast food,
  hotels, long distance telephone, soup in terms of
  functional, economic, psychological, social,
  cultural factors
• Findings
• Brand type can be more important than category to
  positioning of a brand
• Within category hierarchy in terms of five
  factors rated functional economic most
  desirable but cultural, social, psychological
  most closely related to choice
• Functional economic cost of entry or parity
  factors
• Cultural, social, psychological point of
  difference or differentiators

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Auto Example
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Performance Features Mckinsey Quarterly 2003,
Vol 4
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Example of Retailer
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Building Customer-Based Brand Equity

• Brand knowledge structures depend on . . .
• The initial choices for the brand elements
• The supporting marketing program and the manner
  by which the brand is integrated into it
• Other associations indirectly transferred to the
  brand by linking it to some other entities

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Benefits of Customer-Based Brand Equity

• Enjoy greater brand loyalty, usage, and affinity
• Command larger price premiums
• Receive greater trade cooperation support
• Increase marketing communication effectiveness
• Yield licensing opportunities
• Support brand extensions.

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Brand Power Global Business Week, August 2004
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Brand Power - Canada
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Customer-Based Brand Equityas a Bridge

• Customer-based brand equity represents the added
  value endowed to a product as a result of past
  investments in the marketing of a brand.
• Customer-based brand equity provides direction
  and focus to future marketing activities

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The Key to Branding

• For branding strategies to be successful,
  consumers must be convinced that there are
  meaningful differences among brands in the
  product or service category.
• Consumer must not think that all brands in the
  category are the same.
• PERCEPTION VALUE

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Strategic Brand Management

• Strategic brand management involves the design
  and implementation of marketing programs and
  activities to build, measure, and manage brand
  equity.
• The strategic brand management process is defined
  as involving four main steps
• 1) Identifying and establishing brand
  positioning and values
• 2)  Planning and implementing brand marketing
  programs
• 3)  Measuring and interpreting brand performance
• 4)  Growing and sustaining brand equity

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Task/Assigment

• Pick two brands in the same product category and
  compare their sources of brand equity (brand
  salience, brand performance, brand imagery, brand
  judgements, brand feelings, brand resonance)
• Create a mental map (all the associations linked
  to the brand) for each of your two brands
• Use the following projective technique to create
  an image for each of your brands describe your
  brand in terms of an animal, music, sport, a TV
  show or movie
• What does your assessment suggest for the
  marketers of those two brands

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Summary of Brands

• Customer-based brand equity power resides in
  mind of customers
• Brand drives customer behavior loyalty, WOM
• Additional leverage with trade, other partners,
  future products
• Brand elements marketing mix used to build
  brands
• Collective ownership to the brand CEO, everyone
• Brand drives profitability, shareholder
• Next session Joint one on Pricing