Chapter 5

Product and Service Strategy

and Brand Management
In this chapter, you will
learn about…
1. The Offering Portfolio
The Offering Concept
The Offering Mix
2. Modifying the Offering Mix
Additions to the Offering Mix
New-Offering Development Process
Life-Cycle Concept
Modifying, Harvesting, and
Eliminating Offerings
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In this chapter, you will
learn about…
3. Positioning Offerings
Positioning Strategies
Repositioning
Making the Positioning Strategy
Decision
4. Brand Equity and Brand Management
Creating and Valuing Brand Equity
Branding Decisions
Brand Growth Strategies
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Importance of the Offering

The ultimate profitability of an

organization depends on its

product or service offering(s) and

the strength of its brand(s).

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Basic Offering-Related
Decisions

Modifying the Offering Mix

Positioning Offerings

Branding Offerings

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The Offering Concept

What is an “offering”? It consists of:

Tangible product or service

Related services (e.g.,
delivery and setup)
Brand name(s)
Warranties or guarantees
Packaging
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 The Offering Mix
(Portfolio)

The totality of a company’s offerings is

known as its product or service offering
mix or portfolio

Consists of distinct offering lines

(product line width)

Each line consists of individual

offers or items (product line depth)

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 The Offering Portfolio

Bundling – enhancing the offering mix

by providing two or more product or
service items as a “package deal”

McDonald’s “value meal”

Travelocity’s vacation packages

IBM hardware, software, and

maintenance contracts
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Modifying the Offering Mix
Major Decisions

Should the offering mix be modified?

If yes, what should be

added, modified, harvested,
or eliminated?

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Modifying the Offering Mix
Additions to the Offering Mix

How consistent is the new offering with

existing offerings?

Does the organization have the

resources to adequately introduce and
sustain the offerings?

Is there a viable market niche for the

offering?

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Modifying the Offering Mix
Additions to the Offering Mix

How consistent is the new

offering with existing offerings?

Cannibalization (Kodak
cameras)
Fit with sales and distribution
strategies (Metropolitan Life
Insurance)
Consistency with target markets
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Modifying the Offering Mix
Additions to the Offering Mix

Does the organization have the

resources to adequately introduce
and sustain the offerings?

Financial strength – outlays for

research, development, and
marketing (Gillette)
Market Growth (Miller Lite)
Competitive response (RC Cola)
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Modifying the Offering Mix
Additions to the Offering Mix

Is there a viable market niche

for the offering?

Is there a relative advantage

over existing competitive
offerings?
Does a distinct buyer group
exist that is not being satisfied
with current offerings?
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Modifying the Offering Mix
New-Offering Development Process

1. Idea generation/idea screening

employees, buyers, competitors

2. Business analysis
forecasting sales, costs, profitability

3. Market testing
laboratory or field market tests

4. Commercialization
full-scale introduction of offering to
market
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 New-Offering
Development Process
Idea Generation & Screening
1. Does the offering have a relative
advantage?
2. Is the offering compatible with buyers’
use or consumption behavior?
3. Is the offering simple enough for buyers to
understand and use?
4. Can the offering be tested on a limited
basis prior to actual purchase?
5. Are there immediate benefits from the
offering, once it is used or consumed?
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 New-Offering
Development Process
Business Analysis

Sales Forecasts
Profitability Analysis
– Investment requirements
– Breakeven analysis
– Payback period
– Return on investment (ROI)

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 New-Offering
Development Process
Test Marketing

Generate benchmark data for assessing

sales volume
Relative effectiveness of alternative
marketing programs can be examined
Incidence of offering trial by potential
buyers, repeat-purchasing behavior, and
quantities purchased
Results in a competitive response

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Modifying the Offering Mix
Life-Cycle Concept

A life cycle plots sales of an offering or a

product class over a period of time.

There are FOUR main stages:

1. Introduction
2. Growth
3. Maturity (Saturation)
4. Decline

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Modifying the Offering Mix
Life-Cycle Concept

Sales

Sales

Profits

Introduction Growth Maturity Decline

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Modifying the Offering Mix
Life-Cycle Concept

The sales curve can be viewed as

being the result of offering trial and
repeat-purchasing behavior.

Sales volume = (number of triers x average

purchase amount x price) + (number of
repeaters x average purchase amount x price)

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Modifying the Offering Mix
Modification

Trading up
Trading up
Improvingthe
Improving theproduct
productand
andincreasing
increasingthe
theprice
price

Trading down
Trading down
Reducingthe
Reducing thenumber
number of
of features
featuresor
orquality
quality
andreducing
and reducingthe
theprice
price

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Modifying the Offering Mix
Harvesting

Harvesting should be considered when:

1. The market for the offering is stable

2. The offering is not producing good
profits
3. Market share is becoming difficult to
maintain
4. The offering provides other benefits
to the organization
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Modifying the Offering Mix
Elimination

Elimination is appropriate when the answer to

the following questions is “very little” or “none”:

1. What is the future sales potential of

the offering?

2. How much is the offering contributing

to the overall profitability of the
offering mix?

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Modifying the Offering Mix
Elimination

3. How much is the offering

contributing to the sales of other
offerings in the mix?
4. How much could be gained by
modifying the offering?
5. What would be the effect on
channel members and buyers?

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 Positioning Offerings

The act
The act of
of designing
designing an
an organization’s
organization’s
offering and
offering and image
image so
so that
that itit occupies
occupies aa
distinct and
distinct and valued
valued place
place inin the
the target
target
customer’s mind
customer’s mind relative
relative to
to competitive
competitive
offerings.
offerings.

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 Positioning Offerings
Positioning Strategies

1. By attribute or benefit
2. By price and quality
3. By use or application
4. By user
5. By product or service class
6. Against competition

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 Example of Positioning by
Attributes
Market Segments
Toothpaste
Attributes Teens, Young
Children Family Adults
Adults
Flavor 
Color 
Whiteness of teeth 
Fresh breath 
Decay prevention 
Price 
Plaque prevention 
Stain prevention 

Ultra Brite, Colgate, Topol,

Principal Brands Aim, Stripe
McCleans Crest Rembrandt
Positioning Offerings
Repositioning

Necessarywhen
Necessary whenthetheinitial
initial positioning
positioning
isno
is no longer
longer competitively
competitivelysustainable
sustainable
or profitable,
or profitable,ororwhen
when better
better positioning
positioning
opportunitiesarise
opportunities arise

St. Joseph’s aspirin for babies to “Low

Strength Aspirin” for adults
Carnival Cruise Lines vacation
alternative for older people to a “Fun
Ship” for younger adults and families
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 Positioning Offerings

Making the Positioning Strategy Decision

1. What position do we want to own?

2. What competitors must be
outperformed if we are to establish
the position?
3. Do we have the marketing resources
to occupy and hold the position?

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 Brand Equity &
Brand Management
Brand Name
Brand Name
Anyword,
Any word,“device”
“device”(design,
(design,sound,
sound,shape,
shape,
or color),
or color),oror combination
combinationofofthese
these
usedto
used toidentify
identifyan
anoffering
offering
andset
and setitit apart
apartfrom
fromcompeting
competingofferings.
offerings.

Brand Equity
Brand Equity
Theadded
The addedvalue
value aabrand
brand name
namebestows
bestowsononaa
productor
product orservice
service beyond
beyondthe
the functional
functional
benefitsprovided.
benefits provided.
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Brand Equity & Brand Management
Creating and Valuing Brand Equity

Develop positive brand awareness and name-

product association (Gatorade, Kleenex)

Establish a brand’s meaning in the minds of

consumers (Nike)

Elicit the proper consumer responses to a

brand’s identity and meaning (Michelin)

Create a consumer-brand resonance (Harley-

Davidson, Apple, eBay)
 Customer-Based Brand Equity
Pyramid
Relationships:
Intense, active
What about you
loyalty
and me? Consumer
Brand
Resonance
Positive,
Response: What
accessible
about you? Consumer Consumer reactions
Judgments Feelings

Strong, favorable,
Meaning: What
Brand and unique brand
are you? Brand Imagery
Performance association

Identity: Who are Deep, broad

Brand Salience
you? brand awareness
 Brand Equity and
Brand Management
Branding Decisions

Assign one
Assign one brand
brand name
name allall of
of the
the
organization’s offerings
organization’s offerings (GE,
(GE, Sony)
Sony)
OR
OR
Assign one
Assign one brand
brand name
name toto each
each lineline of
of
offerings (Sears,
offerings (Sears, Craftsman
Craftsman Tools)
Tools)
OR
OR
Assign individual
Assign individual names
names to to each
each
offering (P&G,
offering (P&G, Unilever)
Unilever)

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 Brand Equity &
Brand Management
Branding Decisions
Using a single brand name…
Advantage
Easier to introduce new offerings when
the brand name is familiar to buyers
Disadvantage
Can have a negative effect on existing
offerings if a new offering fails

Sub-branding…
…combining a family brand with a new brand

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 Brand Equity &
Brand Management
Branding Decisions

Decide whether or not to supply an

intermediary with its own brand name.

What are the costs/revenues?

Is there excess capacity?
If we don’t manufacture the brand, will
a competitor produce it?

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Brand Equity & Brand Mgmt
Brand Growth Strategies

New Existing
products products

New New
NewBrand
Brand Fighting/Flanker
Fighting/Flanker
Brand Strategy
Strategy Brand
BrandStrategy
Strategy

Existing Brand
BrandExtension
Extension Line
LineExtension
Extension
Brand Strategy
Strategy Strategy
Strategy

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Brand Equity & Brand Mgmt
Line Extension Strategy

Addingofferings
Adding offeringswith
withthe
thesame
samebrand
brandin
inaa
product class
product classthat
that an
anorganization
organizationcurrently
currently
serves…
serves…

Respondto
Respond tocustomers’
customers’desire
desirefor
forvariety
variety
Eliminategaps
Eliminate gapsin
inthe
theproduct
product line
line
Lowersadvertising
Lowers advertisingand
andpromotion
promotioncosts
costs

Consider possibilities
Consider possibilitiesof
of product
productcannibalism
cannibalismand
and
proliferationof
proliferation of offerings
offerings(Coke
(Cokeand
andVanilla
VanillaCoke)
Coke)
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Brand Equity & Brand Mgmt
Brand Extension Strategy

The practice of using a current brand name

to enter a completely different product class

Reduced risk due to brand equity

Success depends on perceptual fit with
the original product class
e.g., Yamaha makes motorcycles, sound
equipment, computer peripherals, and
musical instruments

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Brand Equity & Brand Mgmt
Brand Extension Strategy: Co-branding

Co-branding
Co-branding
Pairing two
Pairing two brand
brand names
names of of two
two
manufacturers on
manufacturers on aa single
single product
product
e.g.,General
e.g., GeneralMills
Millsand
andHershey
HersheyFoods’
Foods’
Reese’sPeanut
Reese’s PeanutButter
Butter Puffs
Puffs

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Brand Equity & Brand Mgmt
New Brand Strategy

Involves the development of a new brand

and often a new offering for a product
class that has not been previously
served by the organization.

Most challenging strategy

Most costly
e.g., Lexus by Toyota

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Brand Equity & Brand Mgmt
Flanker/Fighting Brand Strategy

FlankerBrand
Flanker BrandStrategy
Strategy
Involvesadding
Involves addingaanew
newbrand
brandon
onthe
thehigh
highor
or
lowend
low endofofaaproduct
productline
linebased
basedon
onaaprice-
price-
qualitycontinuum
quality continuum (Marriott
(MarriottHotels).
Hotels).

FightingBrand
Fighting BrandStrategy
Strategy
Involvesadding
Involves addingaanew
newbrand
brandwhose
whosesolesole
purposeisisto
purpose toconfront
confront competitive
competitivebrands
brands in
inaa
productclass
product classbeing
beingserved
servedbybyan anorganization.
organization.
(Frito-Lay’sSantitas
(Frito-Lay’s Santitasused
usedtotofight
fight regional
regional
tortillachip
tortilla chipbrands).
brands).
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