CHAPTER 7 Branding and Positioning 2014 Cengage Learning

Introduction n One of the most important product decisions that marketers must relates to branding. n. A brand is a combination of name, symbol, term, or design that identifies a specific product. n Brands have two parts: 1. Brand name—the part of a brand that can be spoken, including words, letters, and numbers. 2. Brand mark—symbols, figures, or a design that cannot be spoken. 2 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

n To be truly effective, a brand should succinctly capture the total offering in a way that answers a question in the customer’s mind. n Brands may have many different attributes that make up the way customers think about them. [Exhibit 7. 1] 3 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Good Brands Answer Questions for Customers n Where can I find information quickly? n Where can I get a quick meal and make my kids happy? n Where can I buy everything I need, all at decent prices? n Where can I get the best deal on car insurance? n How do I find a value-priced hotel in midtown Manhattan? 5 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategic Issues in Branding n Most firms consider their corporate brands to be equally as important as individual product-related brands. In fact, productrelated brands and corporate brands are clearly intertwined. -Corporate branding activities are typically aimed at a variety of stakeholders, including customers, shareholders, advocacy groups, government regulators, and the public at large. -Corporate branding and reputation are critical to effective product-related branding and positioning as they create trust between the firm and its stakeholders. -Negative coverage of a company's problems can have quick, dramatic, and long-lasting effects on its brand reputation. 6 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Basic Branding Decisions n Advantages of Branding -Product Identification -Comparison Shopping -Shopping Efficiency -Risk Reduction -Product Acceptance -Enhanced Self-Image -Enhanced Product Loyalty 7 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

8 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or

Strategic Issues in Branding Strategy 9 © 2014 Cengage Learning. All Rights Reserved. May

Basic Branding Decisions 1 -Manufacturer vs. Private-Label Brands n n n Private-label brands are owned by the merchants that sell them (Gap, Craftsman, Sam’s Choice) Private-label brands are more profitable for the retailer Manufacturer brands have built-in demand 2 -Individual vs. Family Branding n Individual branding – when a firm gives each of its product offerings a different brand name n Family branding – when a firm uses the same name or part of the brand name on every product 10 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

1 -Manufacturer versus Private-Label Brands [Exhibit 7. 3] a)Private-label brands, or store brands, are owned by the merchants that sell them. They are typically more profitable for the merchant than manufacturer brands. - Private-label brands are more profitable for the retailer. b)Manufacturer brands are important in driving customer traffic. They also give customers confidence that they are buying a widely known brand from a respected company. -Manufacturer brands have built-in demand. 11 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Manufacturer (Name) Brands versus Private-Label Brands (Exhibit 7. 3) 12 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2 -Individual versus Family Branding a)A firm uses individual branding when it gives each of its product offerings a different brand name. b)Family branding occurs when a firm uses the same name or part of the brand name on every product. 13 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategic Brand Alliances n Cobranding is the use of two or more brands on one product to leverage the image and reputation of multiple brands to create distinctive products with distinctive differentiation. n Brand licensing involves a contractual agreement where a company permits an organization to use its brand on non-competing products in exchange for a licensing fee. 14 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

n Brand Loyalty Brand Value v -Brand loyalty is a positive attitude toward a brand that causes customers to have a consistent preference for that brand over all other competing brands in a product category. v -Brand recognition occurs when a customer knows about the brand is considering it as one of several alternatives in the evoked set. v -Brand preference is a stronger degree of brand loyalty where a customer prefers one brand to competitive brands and will usually purchase this brand if it is available. v -Brand insistence occurs when customers will go out of their way to find the brand will accept no substitute. v -Overall, brand loyalty is declining because of increasing commoditization and the overuse of sales promotion activities. 15 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Brand equity n Brand equity is the value of the brand to the firm, or the marketing and financial value associated with a brand's position in the marketplace. n Brand equity is hard to measure; however, it represents a key asset for any firm. [Exhibit 7. 4] n Firms will go to great lengths to protect their brand assets. 16 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The World’s Twenty-Five Most Valuable Brands (Exhibit 7. 4) 17 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Packaging and Labeling n Packaging and labeling strategy go hand-in-hand with branding as both are involved with developing a product, its benefits, its differentiation, and its image. n Packaging serves a number of important functions, including protection, storage, convenience, product modification, repositioning, and cobranding. n Product labels not only aid in product identification and promotion; but they also contain a great deal of information to help customers make proper product selections. n Product labeling is an important legal issue as several federal laws and regulations specify the information that must be included on a product's packaging. 18 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Differentiation and Positioning n Differentiation involves creating differences in the firm's product offering that set it apart from competing offerings. Differentiation typically has its basis in distinct product features, additional services, or other characteristics. n Positioning refers to creating a mental image of the product offering and its differentiating features in the minds of the target market. This mental image can be based on real or perceived differences among competing offerings. 19 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Hypothetical Perceptual Map of the Automotive Market (Exhibit 7. 5) 20 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Hypothetical Strategy Canvas for the Book Retailing Market (Exhibit 7. 6) 21 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

n In differentiating and positioning the product offering, the principle task for the firm is to develop and maintain a relative position for the product. n The process of creating a favorable relative position involves several steps: 1. Identify the characteristics, needs, wants, preferences, and benefits desired by the target market. 2. Examine the differentiating characteristics and relative position of all current and potential competitors in the market. 22 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

3. Compare the position of your product offering with the positions of the competition for each key need, want, preference, or benefit desired by the target market. 4. Identify a unique position that focuses on customer benefits that the competition does not currently offer. 5. Develop a marketing program to leverage the firm’s position and persuade customers that the firm’s product offering will best meet their needs. 6. Continually reassess the target market, the firm’s position, and the position of competing offerings to ensure that the marketing program stays on track and also to identify emerging positioning opportunities 23 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

§ -Relative Position Addressed using a tool called Perceptual mapping. § Perceptual mapping represents customer perceptions and preferences spatially by means of a visual display. § Perceptual maps illustrate two basic issues: 1 - They indicate products/brands that are similar in terms of relative mental position. 2 - Perceptual maps illustrate voids in the current mindscape for a product category. 24 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Using Product Descriptors as a Basis for Differentiation (Exhibit 7. 7) 25 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Differentiation Strategies n Customer perceptions of a brand are of utmost importance in differentiation because differences among competing brands can be based on real or psychological qualities. n The most important basis for differentiation is the brand. n Important v -Product descriptors. v -Customer v- bases for differentiation include: support services. Image. 26 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

1)Product Descriptors [Exhibit 7. 7] a)Product Features—factual descriptors of the product and its characteristics. b)Advantages—performance characteristics that communicate how the features make the product behave, hopefully in a fashion that is distinctive and appealing to customers. c)Benefits—the positive outcomes or need satisfaction that customers acquire from purchased products. 27 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2)Customer Support Services a)Providing good customer support services—both before and after the sale—may be the only way to differentiate the firm's products and move them away from a price-driven commodity status. b)Support services include anything the firm can provide in addition to the main product that adds value to that product for the customer. 28 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

3 - Image n The image of product or organization is the overall impression, positive or negative that customer have of it. n This impression includes: -What the organization has done in the past. -What it presently offers. -Projections about what it will do in the future. ØA good image is not only one of the best means of product differentiation, it is also a major sustainable competitive advantage. 29 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Positioning Strategies 1 -Strengthen the Current Position n Constantly monitor customer perceptions, needs, and wants n Raise the bar of customer expectations 2 -Repositioning n Often requires a fundamental change in one or more marketing program elements 30 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

1 -Strengthen the Current Position n The key to strengthening a product's current position is to monitor constantly what target customers want and the extent to which customers perceive the product as satisfying those wants. n Strengthening a current position is all about continually raising the bar of customer expectations and being perceived by customers as the only firm capable of reaching this new height. 31 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2 -Repositioning n Repositioning may involve a fundamental change in any of the marketing mix elements, or perhaps even all of them. n Some of the most memorable marketing programs involve attempts to move to new positions. 32 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Managing Brands over Time n The product life cycle is a useful tool for addressing brand product strategy over time. n Limitations of the product life cycle n Most new products never get past development Most successful products never die Life cycles really refer to industries, not products or brands n The length of each stage depends on the actions of other firms n n n The product life cycle forces managers to consider the future of their industry and their brand. 33 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Stages of the Product Life Cycle (Exhibit 7. 8) 34 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategic Considerations During the Product Life Cycle (Exhibit 7. 9) 35 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

1 -Development Stage n No sales revenue during this stage n The development stage usually begins with a concept, which has several components: n n An understanding of desired uses and benefits A description of the product The potential for creating a complete product line An analysis of the feasibility of the product concept n Customer needs should be discerned before developing marketing strategy n Test marketing is conducted in this stage. 36 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2 - Introduction Stage n The introduction stage begins when development is complete and ends when sales indicate that target customers widely accept the product. n Marketing strategy goals common to the introduction stage include: a)attracting customers b)inducing customers to try and buy the product c)engaging in customer education activities d)strengthening or expanding channel and supply chain relationships e)building availability and visibility through trade promotion f)setting pricing objectives that balance the firm's need to recoup investment with the competitive realities of the marketplace © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 37

3 -Growth Stage n The length of the growth stage varies according to the nature of the product and competitive reactions. n The firm has two main priorities during the growth stage: a)establish a strong, defensible market position, and b)achieve financial objectives that repay investment and earn enough profit to justify a long-term commitment to the product. n During the growth stage, the overall strategy shifts from acquisition to retention, from stimulating product trial to generating repeat purchases and building brand loyalty. n Another major challenge during the growth stage is the increasing number of competitors entering the market. 38 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

n Marketing Strategy Goals During the Growth Stage: • Leverage the product’s perceived differential advantages • Establish a clear brand identity • Create unique positioning • Maintain control over product quality • Maximize availability of the product • Maintain or enhance the product’s profitability to partners • Find the ideal balance between price and demand • Keep an eye focused on the competition 39 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

4 -Maturity Stage n At the end of the growth stage, the strategic window of opportunity will all but close for the market and it will enter the maturity stage. n In the typical life cycle, we expect maturity to be the longest stage. n. A firm has four general goals during the maturity stage: a)generate cash flow b)hold market share c)steal market share d)increase share of customer © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 40

n. A firm has at least four general options for strategy selection throughout the maturity stage: a)develop a new product image b)find attract new users to the product c)discover new applications and uses for the product d)apply new technology to the product **Stealing customers away from the competition involves creating incentives for noncustomers to try the firm's product. 41 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

5 -Decline stage n. A product's sales plateau will not last forever, and eventually a persistent decline in revenue begins. n. A firm has two basic options during the decline stage: a)attempt to postpone the decline b)accept the inevitability of decline 42 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

n Firms that accept the inevitability of decline can either harvest profits or take steps to divest the product. a)Harvesting—a gradual reduction in marketing expenditures and the use of a less resource-intensive marketing mix. b)Divesting—withdraw all marketing support from the product and continue to sell the product until it sustains losses, or arrange for the product to be acquired by another firm. 43 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

n Important strategic considerations during the decline stage: a)Market Segment Potential—The firm might have loyal customer segments that will continue to buy the product. b)The Market Position of the Product—A product in a leading market position with a solid image may continue to be profitable. c)The Firm's Price and Cost Structure—If the firm is a low cost producer and can maintain its selling price, the product can remain viable in a declining market. d)The Rate of Market Deterioration—The faster the rate of market deterioration, the sooner the firm should divest the product. 44 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.