New Product Development & Branding A I N I E Z E A N A W A N G J U A L POLITEKNIK KOTA KINABALU 1ST EDITION
A comprehensive note of NEW PRODUCT DEVELOPMENT AND BRANDING for Polytechnic students
Published by: POLITEKNIK KOTA KINABALU NO 4, JALAN POLITEKNIK, KKIP BARAT KOTA KINABALU INDUTRISL PARK 88460 KOTA KINABALU, SABAH TEL: 088-401800 FAKS: 088-499960 Website: https://polikk.mypolycc.edu.my/ © Politeknik Kota Kinabalu 1 st EDITION All rights reserved. No part of this publication may be reproduced or transmitted in any forms or by any means electronic or mechanical including photocopy, recording or any information storage and retrieval system without permission from Politeknik Kota Kinabalu.
DEDICATION Gratitude and special thanks goes exclusively close family and friends. Not forgetting all colleagues and students who has been a very good inspiration for me to finally come out with this arrangement. Ainiezean Awang Jual
PREFACE Products and brands are very interesting ideas to study. They revolve around us and we, human, cannot live without these two anymore. We buy different products every day, some are essential, some are desire. With a product, comes the brand. Brand is primarily introduced to facilitate identification of products, but nowadays a brand plays very critical role to guarantee a product’s success. This is as a result of changing consumer’s buying behaviour which more likely to purchase a brand rather than a product. Thus, marketers or producers need to have extensive and thorough knowledge of how and what type of product should be produced to meet consumer’s needs and wants and how can we use brand to add value and build strong value proposition. This book is being properly arranged for Malaysian Polytechnic students according to the Malaysia Polytechnic current syllabus. This subject mainly discusses on categories of new products and what are the strategies we can do to maintain relevant in the market. This can be known by studying the branding strategies also discussed in this book. To facilitate an easy understanding, all chapters are being arranged briefly yet comprehensive and each chapter in this book is completed with a review questions to underpin student’s comprehension. I hope students will enjoy reading this book!
iv CONTENTS DEDICATION PREFACE CONTENTS CHAPTER 1 NEW PRODUCT DEVELOPMENT 1 Describe categories of new products 2 Define new product 2 Explain the categories of new products 4 Explain the new-product development organization structure 7 Describe the new-product development organization structure 7 Identify new product development process 7 Explain new product development process 7 Identify the product hierarchy 10 Explain the product hierarchy 10 Revision questions 13 CHAPTER 2 PRODUCT LIFE CYCLE 14 Explain product life cycle (PLC) 15 Describe the stages of PLC 15 Identify marketing strategies through product life cycle 16 Describe strategies through product life cycle-introduction stage 16 Explain strategies through growth stage 18 Explain strategies through maturity stage 18 Explain strategies through decline stage 19 Revision questions 20 CHAPTER 3 PRODUCT DECISIONS 21 Identify product-mix decisions 22 Define product-mix decisions 22 Identify the dimensions of the product-mix 22
v Describe product-line decisions 24 Examine product-line length 24 Explain product line modernization 27 Discuss line featuring and line pruning Explain line featuring 28 Explain line pruning 28 Revision questions 29 CHAPTER 4 BRANDS AND BRAND MANAGEMENT 30 Explain brand 31 Define brand and brand equity 31 Relate brands and product 31 Identify visual brand language 31 Identify the benefits of branding 34 Describe the benefits of branding to consumer 34 Describe the benefits of branding to the firm 34 Describe the brand attributes 35 Describe the brand attributes 35 Revision questions 37 CHAPTER 5 THE BRAND ELEMENTS 38 Describe brand awareness 39 Define brand awareness 39 Explain types of brand awareness 39 Describe brand image 40 Define brand image 40 Identify types of brand image associations 41 Describe brand identity 43 Define brand identity 43 Explain the concept of brand identity 43 Brand identity vs brand image 43 Describe brand personality 44
vi Define brand personality 44 Explain importance of brand personality 45 Describe brand positioning 46 Define brand positioning 46 Explain the concept of brand positioning 46 Review questions 47 CHAPTER 6 PACKAGING AND LABELLING 48 Describe packaging 49 Define packaging 49 Explain types of packaging 49 Identify the functions of packaging 50 Identify the packaging designs 51 Describe labelling 53 Define labelling 53 Identify the types of labelling 53 Revision questions 55 CHAPTER 7 BRAND DECISIONS 56 Identify brand sponsor decision 57 Justify brand sponsor decision 57 Selecting brand names decision 59 Identify the brand name decision 59 Recognize brand strategy decision 61 Explain brand strategy decision 61 Review questions 63 References 64
1 CHAPTER 1 NEW PRODUCT DEVELOPMENT LEARNING OBJECTIVES In this chapter you will learn the concept of new products, classification of new products, process of new product development and product hierarchy. Describe categories of new products Define new product Explain the categories of new products Explain the new-product development organization structure Describe the new-product development organization structure Identify new product development process Explain new product development process Identify the product hierarchy Explain the product hierarchy
2 Describe categories of new products Define new product All products eventually decline, so a firm MUST be good at developing new products to replace aging ones. Companies that excel at developing and managing new products reap big rewards. Every product seems to go through a life cycle: It’s born, goes through several phases, and eventually dies as newer products come along that create new or greater value for customers. Improving & updating product lines is crucial for the success of an organization. Failure for an organization to change could result in a decline in sales & with competitors racing ahead. The process of new product development (NPD) is crucial within an organization. NPD is the development of original products, product improvements, product modifications & new brands through a firm’s R&D effort. Yusniza Kamarulzaman & Nor Khalidah Abu Kotler, et al. Google
3 What is product? Product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. What is “new” product? New products are goods and services that differ significantly in their characteristics or intended uses from products previously produced by the firm. New product does not really need to involve technology, most new products are far simpler. For instance, low fat milk, less sugar soy bean or new flavour of soft drinks are an example of a simple innovation that act as a new product to their producer. New products can be tangible products or services. Hundreds of thousands of people make their living producing and marketing new products. Many managers realize that radical innovation is critical to future growth and even the survival of the firm. Different flavours of Yeo’s soybean indicating simple production of new product Importance of new product a) To create competitive advantage. Create product differentiation to be able to increase profit margin. b) To challenge competitors’ products. c) To replace declining products. d) Enhance the firm’s image in the market. Consumers are attracted to things that are new. Firms that continually strive to introduce new products will likely be at the forefront of attention and have their names continuously in the media. e) Changing consumers’ needs and wants. Firms should respond to these changes, otherwise consumers will switch to competitor’s products that satisfy their "needs and wants". f) Environmental changes.
4 Explain the categories of new products New-to-the-world product This category also known as really new products. It is a new invented product that creates a whole new market. For example, P&G Febreze, Internet and Post-it Notes. Post-it® CATEGORIES OF NEW PRODUCT New to the world product New to the firm product Product line extension Product modification Repositioning Cost reduction Post-it sticky note is one of the examples of a successful New Product in the market. It was first invented by Arthur Fry in 1974 with Dr. Spencer Silver as a founder of the reusable adhesive. Post-it note was then released to the national market in 1980. It became the second largest volume supply item in the office supply industry. In 2003, the company came out with "Post-it Brand Super Sticky Notes", with stronger glue that adheres better to vertical and nonsmooth surfaces.
5 New-to-the firm product New to the firm products are also known as new product lines. It is a new product that allows a company to enter into an established market for the first time. The products are not new to the world but are new to the firm. McDonald’s porridge, Politeknik Malaysia bachelor’s degree program and Acer mobile phone are some examples of new to the firm products. Mamee Monster Biskidz is Mamee Double – Decker’s newly launched fortified biscuits designed especially for children. It is enriched with vitamins, calcium and DHA. Carousell Product line extension Product line extension is an addition to existing product line. It is a new product that supplements a company’s established product lines. These are flanker brands, designed to flash out the product line as offered to the firm’s current market. It can be new packaging sizes, new flavours, etc. Nestlé MAGGI® Maggi strives to lead as the full-line company has extended its products in every corner of their production!
6 Product modification Product modification is the improvements and revisions to existing product. Current products made better. Top row (L-R): 2008 first-gen facelift, 2011 second-gen Standard. Bottom row (L-R): 2011 second-gen Extreme, 2015 second-gen facelift Advance. Paul Tan/paultan.org Repositioning Repositioning type of new product are products that are retargeted for a new use or application. It also includes products retargeted to new users or new target markets. For instance, Coca-Cola repositions its brand as a family time accompaniment - their key message emphasized is “Open Happiness”. Coca – Cola retargeted its product from a “leisure-cinema drinks” to a “family-time accompaniment drinks”. Youtube Cost reduction When there is new product that simply replace existing products in the line, providing the customer similar performance but at a lower cost, that product can be considered as a cost reduction type of new product.
7 Explain new-product development organization structure Describe the new-product development organization structure Product Managers Product managers providing the sales team with the necessary technical expertise to enable them to sell the product. New Product Managers Discover a product that is valuable, usable and feasible”. New Product Committees Not permanent, widely used by marketers, flexible committee. New Product Departments Formal department, permanent, strong capital support, have more vision. New Product Venture Team Small & independent department, members are expect in their respective fields, work in fulltime basis. New Product Task Force Temporary, manage a specific & complex task, after job is done the task force dissolve. Identify new product development process Explain new product development process What is new product development? New product development is the development of original products, product improvements, product modifications, and new brands through the firm’s own product development efforts. There are eight stages involved in this process; 1. Idea Generation Idea generation is the systematic search for new-product ideas (brainstorming). Sources of ideas: Internal idea sources – R&D department and employees (i.e. marketing & sales staffs, engineering technicians).
8 External idea sources - Distributors, suppliers, intermediaries, competitors, customers, scientists, etc. Crowdsourcing - inviting broad communities of people like customers, employees, independent scientists & researches, and even the public at large – into the newproduct innovation process. Crowdsourcing can produce a flood of innovative ideas. 2. Idea Screening Idea screening is an idea reducing stage. This process screens new-product ideas to spot good ideas & drop poor ones as soon as possible is very crucial. Company wants to go ahead only with those product ideas that will turn into profitable products. Some companies require their executives to come up with a formal write-up of new product ideas. The write-up should at least contain product/ service description, target market, competitors and customers value proposition. DROP & GO error. Businesses need to perfect their product screening process in order to avoid making either of the following errors: A "Drop Error" occurs when a business decides to abandon a product idea that, in hindsight, may have been successful if developed. Too many drop errors indicate a conservative approach to product screening. A "Go Error" occurs when a business fails to identify a poor product idea that has already moved into the development and commercialization stages. Too many go errors indicate a young, ambitious yet inexperienced approach to product screening. 3. Concept Development & Concept Testing An attractive idea must be developed into a “Product Concept”. Product Concept is a detailed version of the new-product idea stated in meaningful consumer terms. The company needs to develop the new product idea into a product concept, and find out how attractive each concept is to customers. So, the company needs to do “Concept Development & Concept Testing”. Concept Development example Development of a new Electric Car Concept 1: An affordably priced midsize car designed as a second family car to be used around town for running errands & visiting friends. Concept 2: A mid-prices sporty compact appealing to young singles & couples. Concept 3: A “green” car appealing to environmentally conscious people who want practical, non-polluting transportation.
9 It’s a marketer’s job to develop concepts for the new product & find out which concept appears to be the most attractive to customers (concept testing). Concept Testing is testing a new-product concept with a group of target consumers to find out if the concepts have strong consumer appeal. Example: Concept 3 is developed with more details. An efficient, fun-to-drive, battery-powered compact car that seats four. This 100% electric wonder provides practical an reliable transportation with no pollution. It goes 300 miles on a single charge & costs penny per mile to operate. Before a firm proceeds with an actual product, firm will test new product concept with customers, to assess the quality of the concept. Customers will be exposed with the concept and then they will be asked with several questions regarding the concept. Customer’s ability to answer the questions will determine the quality of the concept – whether the concept should be developed to the next stage or not. Perodua 4. Marketing Strategy Development When a product concept has been determined, the next step is marketing strategy development. Marketing Strategy Development is designing an initial marketing strategy for a new product based on the product concept. Marketing strategy statement consists of THREE parts; ❖ Target market, value proposition, sales & profit goals? ❖ Price, distribution & marketing budget? ❖ Long – run sales target and marketing mix?
10 5. Business Analysis Once the company has decided on its product concept & marketing strategy, it will need business analysis report. Business Analysis is a review of sales, costs & profit projections for a new product to find out whether these factors satisfy the company’s objectives. If everything meets the company’s objectives, the product can move to the product development stage. 6. Product Development Product development stage is developing product concept into physical product to ensure that the product idea can be turned into a workable market offering. Here, R&D and engineering & other related departments develops product concept into a physical product. The initial product is known as “Prototype”. Prototype has to be attractive, safe & appear valuable to consumers. 7. Test Marketing Product and its proposed marketing program are tested in realistic market setting. Test marketing gives the marketer experience with marketing a product before going to great expense of full introduction. But, not all firms will launch a test marketing. If the firm is confident with the product, they will skip this step. 8. Commercialization Commercialization is the stage of introducing new product into the market. It is a “National Launch” of a product. A company launching a new product must first decide on introduction timing. For example, if the economy is down at the moment, the company may wait until the economy gets better to launch the new product. However, if the competitors are ready to introduce their competing products, the company might want to push the new product sooner. Next, company must decide where to launch the new product. Company must decide whether to launch in a single location, region, or global. Identify product hierarchy Explain the product hierarchy Product hierarchy stretches from basic needs to particular items that satisfy those needs. We can identify seven (7) items in product hierarchy:
11 Need family Need family is the core need that underlies the existence of a product family. This class provide the basic reason why a product exists. Product family All the product classes that can satisfy a core need with reasonable effectiveness. Product class Product class is a group of products with similar functional coherence. It is also known as product category. Product class and Product family are very similar in nature and can also be treated as synonyms. Product line Product line is a group of product within a product class that are closely related because they perform a similar function. Products under this class usually sold to the same customer groups, marketed through the same outlets or channels, or fall within given price ranges. Product type A group of items within a product line that share one of several possible forms of the product. Within the Product line there are various product types. For example, if we talk of Toyota Vios 1.5J, then there is Toyota Vios 1.5G and Toyota Vios 1.5 TRD SPORTIVO. So Vios 1.5 becomes a product type and the other models like Vios 1.5J or 1.5G or 1.5 Sportivo become product units (item). Brand A name, term, sign, symbol or design or a combination of these, that identifies the product or services of one seller or group of sellers and differentiates them from those of competitors. Item Item is a distinct unit within a brand or product line distinguishable by distinct features like size, price, appearance, or some other attributes. It is a product variant.
12 CAR (Toyota) -1 NEED FAMILY Transportation (need for travelling) PRODUCT FAMILY Automobile PRODUCT CLASS Gasoline (petrol) powered PRODUCT LINE Sedan car (MPV, SUV/ crossovers, compact) PRODUCT TYPE Auto-transition Manual transition BRAND Toyota Vios Toyota Corolla ITEM Toyota VIOS 1.5 SPORTS EDITION (AT) Toyota VIOS 1.5 TRD SPORTIVO (AT) Toyota VIOS 1.5G (AT) Toyota VIOS 1.5J (MT) Toyota COROLLA ALTIS 2.0V Table 1.1 Example of Product Hierarchy Table 1.2 Example of Product Hierarchy CAR (Toyota) -2 NEED FAMILY Transportation (need for travelling) PRODUCT FAMILY Passenger vehicle PRODUCT CLASS Car, SUV & 4WD, MPV, VAN PRODUCT LINE Car PRODUCT TYPE Toyota VIOS Toyota COROLLA ALTIS Toyota CAMRY BRAND Toyota Vios 7. ITEM Toyota VIOS 1.5 SPORTS EDITION (AT) Toyota VIOS 1.5 TRD SPORTIVO (AT) Toyota VIOS 1.5G (AT) Toyota VIOS 1.5J (MT) Toyota COROLLA ALTIS 2.0V
13 REVISION QUESTIONS 1. Define product and new product. 2. Identify five categories of new products. 3. Differentiate “New Product Department” and “New Product Venture Team”. 4. Explain the eight new product development processes. 5. Explain four types of product hierarchy by giving appropriate examples. 6. New products must begin with ideas. Explain four resources for a firm to generate ideas in creating new product. 7. Explain any four organization structures of a new product development.
14 CHAPTER 2 PRODUCT LIFE CYCLE LEARNING OBJECTIVES In this chapter you will learn on concept of the product life cycle (PLC), stages of the PLC, PLC characteristics and objectives and marketing strategies through product life cycle. Explain product life cycle (PLC) Describe the stages of PLC Identify marketing strategies through product life cycle Describe strategies through product life cycle-introduction stage Explain strategies through growth stage Explain strategies through maturity stage Explain strategies through decline stage
15 Explain product life cycle (PLC) Describe the stages of PLC Figure 2.1 Kotler and Armstrong, 2014 What is PLC? PLC is the course of a product’s sales and profits over its lifetime. Stages of PLC Introduction The PLC stage in which a new product is first distributed and made available for purchase. Introduction is a period of slow sales growth as the product is new to the market. Growth The PLC stage in which a product’s sales start climbing quickly. Growth is a period of rapid market acceptance and increasing profits. Maturity The PLC stage in which a product’s sales growth begins to slows down or levels off. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Decline Decline is the period when sales fall off and profits drop.
16 Figure 2.2 PLC characteristics summary After launching the new product, management wants that product to enjoy a long and happy life. Although it doesn’t expect that product to sell forever, the company wants to earn a decent profit to cover all the effort and risk that went into launching it. All products has its own life cycle – long or short. Life cycle can be used to conceptualize different general approaches to developing core strategies and tactics. Identify marketing strategies through product life cycle Describe strategies through product life cycle-introduction stage Promotional activities (increase brand / product awareness) Massive promotional activities usually needed during introduction stage to create consumer awareness. The main aim is to build high awareness of the product. •Promotional activities (increase brand / product awareness) •Rapid or Slow Skimming •Rapid or Slow Penetration strategy INTRODUCTION STAGE •Sustain rapid market growth •Product improvement •Price modification •Market expansion •Advertisement; shift product awareness ads to product preference ads. GROWTH STAGE •Market modification •Product modification •Marketing mix modification MATURITY STAGE DECLINE STAGE •Identify weak product - Continue R&D to strengthen product • Decrease investment on R&D - Drop decision.
17 Rapid or Slow Skimming i. Rapid skimming strategy - New products are launched at high price with high promotional activities. - High price helps the firms to recover high profit and enables early breakeven. - High promotional activities help for high customer awareness and quick adoption of the new product. - Usually used for; ➢ Products with very high brand value but facing high competition. ➢ Consumers are willing pay higher price due to higher brand value. ii. Slow skimming strategy - New products are launched at high price but low promotion. - High price helps the firms to recover high profit and enables early breakeven. - Low promotion helps to keep the marketing expenses low. - Usually used for; ➢ Limited and specific market segment, i.e. upper-end market. ➢ Consumers are aware of the brand. ➢ Consumers are willing pay higher price due to higher brand value. ➢ Less competition due to superior quality and brand value. Rapid or Slow Penetration strategy i. Rapid penetration strategy - New product launched at a low price but with high promotion. - Low price and high promotion is ideal to achieve fast market penetration and large market share within a short period of time. - When using this strategy, company will depend on its sales volume to earn profit. - Usually used when; ➢ Market is large. ➢ Consumers are unaware of the product / brand. ➢ Customers are price sensitive. ➢ High product competition / product has many substitution. ii. Slow penetration strategy - New product is launched at a low price with low promotion. - Low price increase sales and encourages acceptance among the perspective buyers who are very much price sensitive. - Low promotion reduces marketing cost. - Lower promotional costs also help to keep the price lower and increases profitability. - Usually used when; ➢ Market is large.
18 ➢ Consumers are highly aware of the brand so less promotion is needed. ➢ Market is price sensitive. ➢ Market is minimally sensitive to promotions. Explain strategies through growth stage Sustain rapid market growth - Responsive to customer’s feedback. E.g. Conduct market survey. - Offer better warranty and after – sales service to boost sales. Product improvement - Add new features, improves product quality and looks based on customer’s feedback during market survey. Price modification - Add new models or versions with different prices suitable to customer’s needs and wants to increase customer acceptance. - I.e. Low price may attract price-sensitive customers. Market expansion - Enter new markets in new geographic locations. - Increase distribution coverage and enter new distribution channels to reach each and every corner of markets. Advertisement - Shift product awareness ads to product preference ads. Explain strategies through maturity stage Market modification i. Sales volume can be increased by expanding the number of brand users. - Converting non users which are yet to use the brand or product. - Entering new market segments or geographic locations to expand the market. - Get competitor’s customer by attracting them to own our product. ii. Sales volume can be increased by increasing usage rate. - Get the customers to use the products more frequently. - More usage per occasion. - Discover / suggest new product usage. - Convince customers to use the product in different ways.
19 Product modification Sales can also be increased by doing product modifications in many different ways such as; i. Improvement in quality - Quality improvement tries to increase the final performance of a particular product in terms of durability and reliability. ii. Improvement in features - Features improvement aims at improving usability, versatility and safety. iii. Improvement in style and looks. - Style and looks can be given a fresher look through up-to-date designs. Marketing mix modification Sales can also be increased by stimulating or improve the other marketing mix components. i. Product - Modified the product to attract existing customers. ii. Place - Find new places to market the products. iii. Promotion - Try new promotion tools to market the products. iv. Price - Price decrease to attract price sensitive consumers to try our product. - Price increase to indicate superior quality and to attract upper end market. Explain strategies through decline stage Identify weak product - Defend market and product. - Increase firms invest to dominate market and strengthen competitive position. - Maintain investment in innovations and R&D. Decrease investment on R&D - Drop unprofitable products – drop decision. - Harvesting or divesting the products.
20 REVISION QUESTIONS 1. In order to succeed, it is absolutely essential to constantly improve products to increase the value offered to customers. Based on the statement, describe the three strategies in product modification by providing appropriate examples. 2. Illustrate the graph of product life cycle completely. 3. Discover five marketing strategies in growth stage of product life cycle. 4. Describe how a company’s marketing mix strategies are implemented in the introduction stage of product life cycle. 5. Briefly describe characteristics in each stage of the product life cycle.
21 CHAPTER 3 PRODUCT DECISIONS LEARNING OBJECTIVES Now that we know what is product, its time to understand specific decisions that companies must make when designing and marketing products & services – Product Decisions. In this chapter you will learn about product-mix decisions, the dimensions of the product-mix (width, length, depth and consistency) and product line decisions. Identify product-mix decisions Define product-mix decisions Identify the dimensions of the product-mix Describe product-line decisions Examine product-line length Explain product line modernization Discuss line featuring and line pruning Explain line featuring Explain line pruning
22 Identify product-mix decisions Define product-mix decisions Product Mix is also known as “Product Portfolio”. Briefly, product mix is the sum of all products and variants offered by an organization. In full, product mix can be defined as “The set of all product lines and items that a particular seller offers to sale”. Mamee—Double Decker product mix MAMEE-Double Decker (M) Identify the dimensions of the product-mix A company’s product mix has four (4) important dimensions; PRODUCT MIX DIMENSIONS Width Length Depth Consistency
23 Product mix width Product mix width refers to the total number of product lines the company offers to consumers. For example, P&G product mix width ranges from beauty, personal, and baby products to home care products. Product mix length Product mix length refers to the total number of items a company carries within its product lines. For P&G, it has many product brands under its beauty, hair & personal care line. Product mix depth Product mix depth refers to the number of versions / variants offered for each product in the line. P&G has a very deep product mix. Under beauty and hair products – Olay itself has so many different product versions such as moisturizer, cleanser, day cream, etc. Product consistency Product mix consistency refers to how closely related the various product lines in terms of end use, production requirements, distribution channels, target market, industry served or some other way. If company’s product lines usage, production & marketing are related, then product mix is consistent, else it is unrelated. Mamee Double-Decker product lines are fairly consistent, as they produce consumer products & go through the same distribution channels (F&B products channels). P&G product lines are also fairly consistent as they perform similar functions for buyers and go through the same distribution channels (Personal care products). On the other hand, Samsung Group as a company has many product subsidiaries which are completely independent of each other. Thus, Samsung product lines are inconsistent. Samsung product lines (subsidiary) include - consumer electronics, electronics components, telecommunications, chemical, automotive and so forth.
24 Samsung’s diverse products (Wikipedia) Having less consistency among product lines helps to build company’s reputation as a full line company On the other hand, high consistency helps a company to build strong reputation in single field. Consistency ensures the company’s name becomes synonymous with the products. For instance, Apple is synonymous with its computers, smartphones & gadgets. Coca cola is synonymous with soft drinks. This helps brand recognition with particular products! Describe product-line decisions Examine product-line length Definition of product line Product line refers to a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. Items under the same Product Lines usually satisfy the same class of needs. For example, beverages product line satisfies the same need, to quench thirst. While instant noodles product line satiates hunger. Definition of product line length Product line length refers to number of items in the product line. The line is too short if the company can increase profits by adding items. Thus, the company should add more items to its product line to get more sales and profits. The line is too long if the company can increase profits by dropping items. Thus, the company should delete some items in the existing line to avoid loss. Product lines may determine a company’s ability to earn profits from its sales volumes.
25 Thus, manager has to analyse product lines regularly to monitor their performance on sales & profits. A company can expand its product line by practicing “product line strategies” below; Product line filling Product line stretching Product line modernization Product line featuring Product line pruning Product line filling Product line filling involves adding more items within the present range of the line. Adding different version to existing product range, i.e. Mamee noodles adding vegetarian flavour to existing range. Reasons for product line filling: ❖ Reaching for extra profits. ❖ Satisfying customers and dealers. ❖ Using excess capacity. ❖ To be the leading full-line company. ❖ Plugging holes to keep out of competitors. ❖ Gain competitive advantage. However, a company should not overdo its product line filling. An overdone may cause products cannibalization and customer confusion. Company must make sure that new items are noticeably different from existing products. Product line stretching Product line stretching occurs when a company lengthens its product lines beyond its current range. Company can stretch its line downward, upward or both ways. i. Product line downward stretching Companies located at the upper end of the market can stretch their lines downward. Why a company choose to stretch downward? ❖ A company may stretch downward to plug a market hole – serve as a full line manufacturer. ❖ Respond to a competitor’s attack on the upper end. ❖ Stagnating or declining upper market. ❖ Target a new lower end segment by adding low-end products.
26 Company has 3 choices in naming its “down-market” products; ❖ Same name (same brand name) ❖ Sub-brand name (e.g. Maruti Suzuki, MASwings) ❖ Different name (Shiseido → Za-Cosmetics & Majolica Majorca) HONDA prices ranging from high to moderate © 2018 Honda Malaysia Sdn. Bhd. ii. Product line upward stretching Companies located at the lower end of the market can stretch their lines upward. Why a company choose to stretch downward? ❖ To add prestige to their current products. ❖ Attracted by a faster growth rate or higher margins. ❖ Plug market holes - To position themselves as full-line manufacturers. © Lexus 2018 Lexus is the luxury vehicle division of Japanese automaker Toyota Motor Corporation. First introduced in 1989 in the USA, Lexus is now sold globally and has become Japan's largest-selling make of premium cars. Price range from RM 280 985 for its Compact Sedan to RM1.3m for its Hybrid Luxury Sedan.
27 iii. Product line both ways stretching Companies in the middle range of the market may decide to stretch their lines in both directions. Stretch by filling the whole line. Company decides to stretch both ways to serve both higher and lower end market. A good example for this is Marriott. Marriott International, Inc. is a leading hospitality company with more than 3,900 properties, 18 brands, and associates at their headquarters, managed and franchised properties around the world. Founded by J. Willard and Alice Marriott and guided by Marriott family leadership for more than 80 years, the company is headquartered in Bethesda, Maryland, USA, and reported revenues of nearly $13 billion in fiscal year 2013. Marriott Hotel Kuala Lumpur Malaysia Along with regular Marriott hotels, it added eight (8) new branded hotel lines to serve both the upper and lower ends of the market. For example; Renaissance Hotels & Resorts aims to attract and please top executives, Fairfield Inn by Marriott for vacationers and business travellers on a tight travel budget and Courtyard by Marriott for salespeople and other road warriors. So, a company can lengthen its product line in 2 ways, and they are “product line filling” & “product line stretching”. Explain product line modernization Product line modernization Product modernization is a strategy in which items in a product line are modified to suit modern styling and tastes and re-launched. Proton Saga modernization is a good example. autoworld.com.my
28 Wikipedia, 2018 Product line featuring Product featuring is the selection of one / few items in the line to feature (to be considered as Traffic Builders/ Flagship products). Managers might feature low end promotional models to serve as traffic builders. At other times, managers will feature a high end item to lend prestige to the product line. For instance, lowest priced version of car is advertised to bring consumer to the showroom to lure them to make purchase. (Proton) Product line pruning Product pruning is the act of reducing the depth of a product line by deleting less profitable offerings in a particular product category. When company is experiencing production capacity shortages, it should concentrate more on producing profitable products and discontinue depressed products.
29 REVISION QUESTIONS 1. A company may use dimensions of the product mix to develop the new product in order to extend their business. Identify four of the dimensions by giving suitable examples. 2. Explain two differences of line featuring and line pruning. 3. List reasons for line filling strategy. 4. A company can lengthen its product line downward, upward or both ways. With appropriate example, explain how your company can stretch downward.
30 CHAPTER 4 BRANDS AND BRAND MANAGEMENT LEARNING OBJECTIVES Now that you know how to produce a product, branding knowledge is very important to a successful product. So, in this chapter, you will learn about brand and brand equity, brands and products relationship, visual of brand language, benefits of branding and brand attributes. Explain brand Define brand and brand equity Relate brands and product Identify visual brand language Identify the benefits of branding Describe the benefits of branding to consumer Describe the benefits of branding to the firm Describe the brand attributes Describe the brand attributes
31 Explain brand Define brand and brand equity Definition of brand Brand is s name, term, sign, symbol, design or a combination of these that identifies the products or services of one seller or group of sellers and differentiates them from those competitors. Definition of brand equity Brand equity is the commercial value that derives from consumer perception of the brand name of a particular product or service, rather than from the product or service itself. Brand equity refers to the value of the brand or how much does is worth to consumers. It’s a measure of the brand’s ability to capture consumer preference and loyalty. A brand has positive brand equity when consumers react more favourably to it than other brands. A brand with strong brand equity is a very valuable asset. High brand equity provides a company with many competitive advantages. Relate brands and product Brands are more than just names & symbols. Brands represent consumer’s perceptions & feelings about a product & its performance – everything that the product or the service means to consumers. Brand exists in consumers’ head! Identify visual brand language What is visual brand language? Visual brand language is the unique “mix" of design elements – such as shape, colour, sound and shapes, which directly and subliminally communicate a company's values and personality through compelling imagery and design style. Successful Visual Brand Language creates a memorable experience for the consumer, encouraging repeat business and boosting the company's economic health. Brand language helps people to remember your product. There are ten visual brand languages that are commonly used by businesses; Name Name can be a word that identifies not only a product but also its manufacturer or producer. For example, Apple, IBM, Mercedes, Shell, Sony and Toyota.
32 Logotype Only the letters of the name make up to the logo. The only true logos are the ones that contain nothing but stylized letters. Coca-Cola and Sony are examples of company which are using logotype as their brand sign Google Logo mark Logomark is an identifying mark or symbol that doesn’t contain the business name. Think of the Nike ‘tick’, Shell, Mercedes or Adidas for examples. It is a picture representing a product or an organization. Both logotypes & logomarks are symbols or graphic marks commonly used by commercial enterprises, organizations and even individuals to aid and promote instant public recognition Tagline or catchphrase A “tagline” is not “slogan”. A tagline is a distillation of your corporate values and identity. A slogan is something that’s there to help you with branding. Taglines tend to be about the company. Slogan tends to be more about products, the marketplace, the consumer and a need met. Sony with the company tagline and iPad Air with its slogan. Wikipedia Shapes A shape is the form of an object or its external boundary, outline, or external surface as opposed to other properties such as colour, texture or material composition. A shape sends a unique message, and it’s crucial that your choices go hand-in-hand with your corporate values. For example, the unique shape of the Coca Cola bottle and the shape of Volkswagen Beetle.
33 The shape of Coca-Cola bottle helps the brand stand out among hundreds of other beverage’s brand Wikiwand. Circles, ovals and ellipses are typically associated with a positive emotional message. These round shapes signify unity, and by extension, community, friendship, love, and relationships. Squares and triangles with their straight edges are associated with strength, professionalism, and efficiency because of their precise nature. These rigid shapes imply practical stability and balance. Disney’s oval shape is very relevant to tackle the little ones attention, also their family! © Disney Colours Colour is an important element of brand identity. The iconic yellow of IKEA logo & the iconic red of Coca-Cola serve to support the brand. Colour offers an instantaneous method for conveying meaning and message without words. Many of the most recognizable brands in the world rely on colour as a key factor in their instant recognition. Google image Sounds / Jingles The strategic use of sound and music to build brands—is used to trigger emotional responses that help consumers identify with the brand and build loyalty.
34 Scents Scent marketing is also known as “aroma marketing”. It uses scent to build brand or company recognition. This is also used to influence customer purchase decision. Tastes Taste is associating a brand with specific tastes remembered by consumers. For instance, what makes you think of KFC fried chicken? Can you differentiate its tastes with other fried chicken? Movements Movement helps to build rapport with your community. Most popular way to build “brand movement” nowadays is via social network such as Facebook, Twitter, Instagram and so on. McDonald’s is famous for their “Ronald McDonald Gift of Smile” children’s charity for cleft lip or palate. (RMHC)® Malaysia Identify the benefits of branding Describe the benefits of branding to consumer ❖ Help consumers to identify products / services. ❖ Provide clues on quality of products / services. Buyers who always buy the same brand know that they will get the same features, benefits & quality each time they buy. ❖ Buyer may derive a psychological reward from owning the brand, i.e. owning a Rolex or Mercedes gives the owner a prestigious image. Describe the benefits of branding to the firm ❖ Provide legal protection for unique product features that otherwise might be copied by competitors. ❖ Helps to segment market. ❖ Enables sellers to attract loyal customers.
35 ❖ Helps organization to differentiate itself from its competitors. ❖ Enable seller to charge higher price for a higher profit margin. ❖ Strong brand helps build corporate image, makes it easier to gain acceptance from distributors and customers. Describe the brand attributes Describe the brand attributes There are nine most common brand attributes. Relevancy Brand name suggests something about the product’s attributes. Example, ColorStay Lipstick – suggest long – wear lip colour. Appealing Likable brand attributes such as fun and interesting and rich visual and verbal imagery. Google image Uniqueness Uniqueness is being different. Using different brand attributes than competitors. What makes the brand stands out. Our local example is YOYO – unique.
36 YOYO was established in 2000 and quickly rose to popularity due to its flavourful drinks, made from the best ingredients and skilful techniques. Our innovative spirit led to us tries our hand at bread, pastries and cookies in 2010. By 2015, we diversified our menu to include a cake and gift set to provide more delicacies for our valued customers. In YOYO, we insist on strict compliance with our food safety and hygiene standards to provide quality and premium offerings for our customers. Copyright ©2015 YOYO CAFE Photo from Trip Advisor. Consistency Meaningful brand attributes. The brand should be descriptive in which it suggests something about product’s quality or benefits for example Duracel and Pos Laju. It also should be persuasive such as Etiqa Insurance where “etiqa” is a Malay word means ability to do or act in the right way. Credible Using esteemed, respected or highly regarded brand attributes. For example, using logomark that suggests the credibility of the brand or company – FAMA 1Malaysia’s Best or Trusted Brand logomark. Inspirational A good brand should be able to inspire people by using influential brand names. For example, Fresh & White toothpaste, Smart Reader Kids kindergarten tries to convince people through their inspiring brand names. Proper positioning Make sure your brand is memorable, easily recognized, recalled & pronounce. iPhone, iPod, iPad are all Apple products which always starts their product’s brand name with an “i”. This gives a good positioning for their brands. Sustainable Flexible & adaptable brand logo which can be given new look over time is important for a brand to stay relevant in the market for a longer time. For example Shell logo mark evolution throughout the years. International One more important thing to remember while building a brand is transferable. Make sure the brand can be accepted across geographical boundaries & cultures. We must make sure our brand name does not have bad meaning in other language.
37 REVISION QUESTIONS 1. Explain items in brand attributes with suitable examples. 2. Define following terms of visual brand language; a. Tagline b. Graphic c. Shape d. Colour e. Sound 3. Define visual brand language. 4. Define brand and brand equity. 5. Explain three benefits of branding to customers. 6. Explain three benefits of branding to sellers.
38 CHAPTER 5 THE BRAND ELEMENTS LEARNING OBJECTIVES In this chapter you will learn about Brand Awareness, Brand Image, Brand Identity, Brand Personality and Brand Positioning. Describe brand awareness Define brand awareness Explain types of brand awareness Describe brand image Define brand image Identify types of brand image associations Describe brand identity Define brand identity Explain the concept of brand identity Brand identity vs brand image Describe brand personality Define brand personality Explain importance of brand personality Describe brand positioning Define brand positioning Explain the concept of brand positioning
39 Describe brand awareness Define brand awareness Brand awareness is the extent to which a brand is recognized by potential customers, and correctly associated it with a particular product. Brand awareness is the primary goal of advertising in the early months or years of a product's introduction phase. The Nike corporation has done an excellent job in brand awareness by making their "swoosh" one of the most instantly recognizable logos on the planet. © 2018 The Express Tribune. Explain types of brand awareness Top of mind awareness (immediate brand recall) Top of mind awareness happens when you can immediately recall a brand upon being mentioned of it. Top of mind awareness occurs when a brand pops into a consumer’s mind when asked to name brands in a product category. This means that on mentioning the product category, the first brand that customer recalls from his mind is the brand. For example, when someone ask you to mention a fast-food brand, your answer is McDonald’s, thus, this represents top of mind awareness! BRAND AWARENESS Consumer’s ability to associate a brand with a product category Consumer’s ability to associate a brand with an image
40 Aided awareness Aided awareness happens when consumer can recall a brand when aided with a list of products or company names. Aided awareness occurs when consumers see or read a list of brands, and express familiarity with a particular brand only after they hear or see the list. This means that on mentioning the product category, the customers recognize your brand from the lists of brands shown. For example, when people give you a fast food restaurants list such as McDonald’s, KFC and so on, you are able to add Burger King or Domino’s Pizza to the latter, so this represents aided awareness! Describe brand image Define brand image Brand image is the current view of the customers about a brand. Brand image is the idea of the brand that people develop in their minds. In example of a Maserati car – it has the image of a luxury and indulgence which makes it one of the most expensive car in the world, and that is merely because of the image of the brand. Maserati is an Italian premium car manufacturer specializing in ultra-luxury vehicles. With the tagline “Luxury”, Maserati models place an emphasis on luxury and sporty design, and Maserati prices begin above $100,000. Auto Nation Maserati of Stevens Creek Brand image is a unique associations of a brand within consumer’s mind. It signifies what the brand presently stands for. It is a set of beliefs held about a specific brand. In short, it is nothing but the consumers’ perception about a “brand”. Consumers nowadays buy not only a product, but also the image associations of the product, such as power, wealth, sophistication, and most importantly identification and association with other users of the brand. In a consumer led world, people tend to define themselves and their "persona" by their possessions. Good brand images are instantly evoked, positive & unique among competitive brands.Brand image can be reinforced by brand communications such as packaging, advertising, promotion, customer service, word-of-mouth and other aspects of the brand experience.
41 Brand image reinforced using packaging Rabiatul Kuih Cincin/Facebook Shutterstock image Identify types of brand image associations Brand attribute associations Brand attribute associations is associating a brand with a product’s attribute. For instance, Toyota is associated with reliability, The Body Shop is known as vegan products and Politeknik is associated with technical institution. Packaging can also be the attribute associated with a brand in which people often recall a brand when they see the packaging. Brand attributes are the functional and mental connections with the brand that the customers have. Brand association is attributes of brand which comes into consumer’s mind when the brand is talked about. Celebrity, feeling an emotion and such. Attached is a sample image of what represents Brand Association for McDonald’s. Pooja Goyal/ Quora Brand benefit associations Brand benefit associations is associating a brand with a product’s benefit. Benefits are the rationale for the purchase decision – what consumers think the product can do for them.
42 For instance, Volvo is associated with safety, Apple products is associated with security and 99 Speedmart is associated with cheaper price. There are three types of benefits that can be used as an association to a brand image. ❖ Functional benefits - what do you do better (than others) ❖ Emotional benefits - how do you make me feel better (than others) ❖ Rational benefits/support - why do I believe you (more than others) No fatal crashes in Volvo XC90 since 2002 release Volvo’s commitment to having zero occupant fatalities in its cars by the year 2020 appears to be well on track, after new data showed that its XC90 SUV had not suffered a single fatal accident in the UK since it was first released in 2002. The XC90, now in its second generation, has regularly been touted as a super-safe car – both generations achieved five stars in their respective Euro NCAP crash tests, and the most recent was named the organisation’s safest car of 2017. That secondgeneration car offers class-leading active safety features, including standard-fit autonomous emergency braking (AEB), large animal detection, and blind-spot monitoring. But it’s not just the active safety that contributes to safety, says Matthew Avery, research director at Thatcham. “All second-generation Volvo XC90s have had AEB as standard, so they’ve all had collision avoidance systems out of the factory. But before that, none of them had the collision avoidance systems we’re talking about,” said Avery. “At Volvo Cars, we always put people and safety first. Our vision is that nobody should be killed or seriously injured in a new Volvo car from 2020.” “So most of the delivery of safety of that vehicle, the fact that no-one’s been killed in it, is because of the good structure. It’s about reprogramming the energy in the collision, about good restraints, good seatbelts, pre-tensioners and load limiters. It’s also good airbags. “The real delivery is not the collision avoidance systems, it’s because it’s got really good passive safety.” The Volvo holds up to scrutiny. In Euro NCAP’s 2003 crash test, the car was noted to have an ‘immensely strong body’ that provides ‘safe, all-round protection for its passengers’. The report goes on to say that the body performed ‘exceptionally well’ in front impact tests, while side impact tests were ‘among the lowest seen by Euro NCAP’ at the time of testing. Press Association © Aberdeen Journals Ltd 2018