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BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 9A
Brand Management and the Firm
Selling the Project - 1
The Marketing Plan
ALAN L. WHITEBREAD
INTEGRATING NEW PRODUCTS
• Numerous issues depending on the magnitude
of the new product introduction.
– Brand new product family
• Apple I-phone
– Major new product line extension to a product family
• HP Color Laserjet to HP Printer Family
– Standard product line extensions
• Color Laserjet products with more or less performance
– Options
• Laptop computer case color, …
– Accessories
• Paper, toner, …
POSITIONING
Creating the most favorable product position in
the mind of the prospect or customer.
Positioning helps you …
1.
2.
3.
4.
spot gaps in the marketplace,
see if you are launching into a crowded marketplace,
identify your closest competitors,
appreciate the most important criteria customers' use
when positioning different brands in their mind, and
5. establish competitive advantage.
POSITIONING CONSIDERATIONS
• When you begin to evaluate positioning
alternatives, you must be satisfied with the
answers to many key questions.
– Is it credible?
– Can it capitalize on a competitor’s situation?
• SWOT analysis; competitive offering; competitive positioning;
…
–
–
–
–
Is the positioning both specific and distinctive?
Is the positioning sustainable?
Is the positioning difficult to imitate?
Does the positioning leave room for alternatives in
various situations?
– Does the positioning provide room for significant
growth?
SELECT THE RIGHT COMPETITIVE
ADVANTAGES FOR EFFECTIVE POSITIONING
Important
Profitable
Affordable
Preemptive
Distinctive
Superior
Communicable
POSITIONING and IMC:
A Strategy Example
Target: Moms with kids 8-17 who purchase sports drinks at supermarkets.
Current Beliefs
All sport drinks
are the same
Current Actions
Buy whichever
sport drink is on
sale
Message
Gatorade is
the only
sports drink
that is
backed by
years of
research
Desired Belief
Gatorade is better
than other sports
drinks
Desired Actions
Buy Gatorade
even when other
brands are on
sale
POSITIONING DIMENSION
CANDIDATES
Quality
Application[s]
Occasion[s]
Lifestyle /
image
Attributes
Competition
Price
Selection of the metric and its scale of measurement
[preferably subjective] is a very difficult process.
POSITIONING: PERCEPTUAL
MAPPING
Fashion Coverage
Gap
More
Copy
More
Artwork
C
A
BGap
Club Coverage
Channels
?
POSITIONING STRATEGIES
Against Competition
CU
Reposition
a Competitor
C
C
U
Very little differentiation
Very difficult
Probably low gross margins
Establish your position and move
theirs
POSITIONING STRATEGIES
Find a Position
C
C C
Create a Position
U
C
C
C C
C
U
Gap
Strong differentiation with obvious
customer benefits is required.
Ideal positioning if you can clearly
identify a gap.
May achieve higher gross margins
Establish your position and strongly
defend it from future attacks.
May be a significant opportunity in
revenue and profit.
REPOSITION YOUR BRAND
Competition
-Intercompany
-Interbrand
-Intermodel
Cannibalization
Feb., 2009
GM reducing brands
from 8 to 5 and models
from 48 to 36.
Chrysler to discontinue
at least 7 models, but
plans 24 introductions in
the next 48 months.
Class: position Buick, Chevrolet, Oldsmobile, and Pontiac in words.
BRAND MANAGE MENT AT GM:
2001 and beyond
CHEVROLET
value-priced entry level
SATURN
one-price, customer-oriented service
PONTIAC
sporty, performance-oriented for young people
OLDSMOBILE
medium-priced cars
BUICK
premium and “near-luxury” cars
CADILLAC
top-of-the-line standard of luxury
sporty sophistication and elegance
POSITIONING STRATEGIES
Broaden the Base
C U
C C
C
Some differentiation with some
benefits
Another competitive product in a
competitive marketplace
MICROSOFT BRANDS IN 2003
MICROSOFT
Commercial
Windows
Server
System
Microsoft
Business
Solutions
Microsoft
Visual
Consumer
Microsoft
Office
MSN
XBOX
GETTING THE MARKETING MIX
RIGHT
• Product We will assume you have the existing products/services
correct.
• Place You must have appropriate channels of distribution to access the
market .
• Promotion You must know the needs and wants of your customers
and have cleanly defined target market segments to maximize the
effectiveness of your IMC.
• Value [price] You must clearly establish superior customer value
relative to the anticipated price point[s].
BUILDING THE VALUE EQUATION
DIFFERENTIATION
CORPORATE
BENEFITS
VALUE
EQUATION
BRAND
ASSET
VALUE
COMPETITIVE
POSITION
THE BRAND VALUE CHAIN
CREATING ADDITIONAL BRAND VALUE
VALUE STAGES
Marketing
Program
Investment
Customer
Mindset
Market
Performance
Shareholder
Value
Market[s]
Investor
Sentiment
Growth
Risk/Reward
Contribution
MULTIPLIER / ENHANCER
PRICE AND VALUE
• Price is the numerical amount charged for a
product or service.
• Value is
– FUTURE
•
– PAST
•
PRICE AND VALUE
•
Value can be understood by asking three key
questions.
1.
2.
3.
•
Who is the customer?
What benefits do they value?
Relatively speaking, how much are those benefits worth
to them?
If the value proposition is valid, price is not a
problem to a qualified prospect
—because the perceived value exceeds the
price.
VALUE AS PICTURED BY THE
CONSUMER
VALUE
PRODUCT +
List price
Less: Discounts
Quantity
Seasonal
Cash / coupon
Promotion
Less: Allowances
Trade-in
Service
Quality
Brand / Warranty
Repair
Packaging
Credit / Financing
Delivery / Availability
Incentives
=
VALUE AS PICTURED BY THE
RESELLER
VALUE
List price
Less: Volume discounts
Quantity
Seasonal
Cash / coupon
Special
Less: Allowances
Trade-in
PRODUCT +
=
Product
Service
Quality
Brand / Warranty
Repair / Maintenance
Delivery / Availability
Inventory
Promotional activity
VALUE AND THE PRODUCT
CONCEPT
1-Product Value
“Technical value derived from
providing a source of supply”
2-Service Value
“Provided by the services that
Surround the product”
3-“Wow” Value
“Enhanced service, to make
your customer successful
rather than just satisfied”
“Value Chains Versus Supply Chains, Andrew Feller, Dan Shunk, and Tom Callarman
SOURCES OF VALUE*
VALUE IS PERCEPTION – PERCEPTION IS VALUE
•
•
•
•
•
•
•
•
Differentiation*
Positioning*
Experience
Brand / Image from IMC
Perceived quality
Service[s] or service levels*
Proof [from collateral material / use]
USP*
AREAS OF DIFFERENTIATION
PERCEPTION
Product
Form – Features
Performance – Durability
Reliability
Service
Reparability
Image
People
Style – Design - Quality
Most B2B
Often higher margin retailers
UNIQUE SELLING PROPOSITION [USP]
• THREE TESTS
– SPECIFIC
– MEASUREABLE
– BENEFICIAL
USP
“Hot delicious pizza delivered in 30 minutes or less,
or its yours free.” – Dominos Pizza
WHICH WORDS ARE …
SPECIFIC?
MEASUREABLE?
BENEFICIAL?
CRITERIA FOR BRAND ELEMENTS
1.
2.
3.
4.
5.
6.
Memorability
Meaningfulness
Likability
Transferability
Adaptability
Protectability
BRAND NAME SELECTION
Lack Poor
Foreign
Language
Meanings
Distinctive
[Compounds,
Arbitrary,
Fanciful]
Suggestive
Descriptive
[Suggest
Product
Qualities/Benefits]
[Suggest
Product
Benefits]
PLUS …Timeless
Versatile
Easy to:
Pronounce
Recognize
Remember
Positive
BRAND HIERARCHY
•
•
•
•
Brand family
Individual brand
Product lines
Individual product
TYPES OF BRANDS
GENERIC
Pharmaceuticals, Vegetables
CORPORATE / FAMILY
Nike, IBM, GE, RCA
INDIVIDUAL / PRODUCT
COMBINATION
Huggies, P&G soaps, Crest
HP Deskjet, DuPont Stainmaster
CO-BRANDING
PRIVATE LABEL
Post Oreo O’s cereal, Disney SUV
Kenmore, Craftsman, Die-Hard
BRAND LICENSE
Disney
BRAND ISSUES
Perceived Quality
& Value
Consistency
Attributes
Advantages
of
Brand Names
Defense Against
Competition
Brand
Equity
Credibility
Identification
Loyalty
Awareness
BRAND DECISIONS
Brand
Selection
Decision
BrandSponsor
Decision
•Manufacturer
brand
•Brand
•No brand
•Distributor
(private)
brand
•Licensed
brand
BrandName
Decision
•Individual
brands
•Blanket
family
name
•Separate
family
names
•Companyindividual
names
BrandBrandStrategy Repositioning
Decision
Decision
•Line
extension
•Brand
extension
•Multibrands
•New
brands
•Cobrands
Should all products be branded?
•Repositioning
•No
repositioning
BRAND
Brand Insistence
Devoted
to Brand
Values the Brand
(brand as friend)
Brand Preference
Satisfied & Switching Cost
Satisfied Customer
(no reason for the customer to change)
No Brand Loyalty
(customer will change)
Brand
Awareness
BRAND NAME LEVELS
• Combine parent and acquired companies names
– Parent heavy
– Equally weighted
– Parent leads but is minor
• Acquired firm with a verbal link to the parent
• Acquired firm with a passive print link to the
parent
WHAT SHOULD I BRAND?
• Company
• Division
• Product line [family]
• Product
USPTO
http://www.uspto.gov
• U.S. Patent and Trademark Office
– Advice and filings
• Copyrights
• Trademarks and servicemarks
– TESS online search capability
• Patents
– Patent search capability
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 9B
Brand Management and the Firm
Selling the Project - 1
New Product Forecasting /
Using IMC to Drive Customer Value
ALAN L. WHITEBREAD
FORECASTING OBJECTIVES
• MARKET POTENTIAL
•
• MARKET FORECAST
•
FORECASTING TECHNIQUES
• Judgmental Methods [existing or new products]
– Jury of executive opinion
– Sales force composite
• Quantitative [existing products]
– Time Series Analysis
• Autoregression, Box-Jenkins Analysis
– Causal / Regression Modeling
– Neural Networks
• Customer / Market Research
– Pre-market testing
PROJECTION ESTIMATES
High
Medium
Low
1
2
3
4
5
6
7
8
Weeks
Continual reforecasting on a regular basis.
USING IMC TO DRIVE CUSTOMER
VALUE
• A planned, comprehensive, integrated
approach is required to maximize
customer value
Prospect or
Customer
Current Brand
Knowledge
IMC
• A strong IMC program will
–
– Deliver messages that allow consumers to
accurately form desired perceptions
– Allow consumers to create their own sense of
value of the product/service
– Assist in building the brand over an extended
period of time
• Evolve to brand preference or brand insistence
IMC – COMMUNICATION VEHICLES
MEDIA
ADVERTISING
CONSUMER
PROMOTIONS
POINT
OF
PURCHASE
COLLATERAL
EVENTS
PUBLIC
RELATIONS
PACKAGING
& LABELING
DIRECT
MARKETING
SALES
AIDS
INTERNET
ADVERTISING
PLACE
ADVERTISING
TRADE
PROMOTIONS
THE COMMUNICATION PROCESS
FEEDBACK
Sender
Encoding
Feedback
Message
via Media
Decoding
Response
Receiver
Customer
INTEGRATION WITH THE SALES
ORGANIZATIONS
• Work with top sales managers to refine the
program.
• Determine the sales support needs.
• Schedule major new product launch
meetings with all the sales organizations.
SALES SUPPORT MATERIALS
• Sales training materials
• Sales support materials
–
–
• Customer support materials
– Literature
– Specifications
–
–…
CREATING SUCCESSFUL SALES
TRAINING AND SALES MATERIALS
• Sales training materials
– Quickly and easily convey key information
• Product fit and strategy
• Target market[s] and keys to success
• Product FAB’s
• Sales support materials
• Customer support materials
–
–
–
–
Follow AIDA
Simple, easy to read and understand
Drawings and pictures [if necessary]
Maximize white space for non-technical pieces
QUICK CHECKLIST
Be sure …
• Product need is real
• Product fits the corporate strategy
• Product can be made and sold profitably
• Product meets the corporate goals
• There is a simple plan of key events
shows no major issues
• Implementation is well planned and
execution should go smoothly
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 10A
Brand Management and the Firm
Brands: Supply Chain Management, Channel Management, and Value
Chain Management
ALAN L. WHITEBREAD
TODAY’S MANAGEMENT SETTING
•
•
•
•
•
Large variety of products
Rapid change / product life cycle stages
Demand forecasting difficulties
Critical lead times / commitments
Increasing storage and transportation
costs
SUPPLY CHAINS VS. VALUE CHAINS:
AN HISTORICAL PERSPECTIVE
SUPPLY CHAIN
LOGISTICS
The connected set of all
value-added business
entities and flows that
perform or support the
logistics function
required for production.
All discrete and
Interrelated activities
[regardless of ownership]
that seek to enhance
firm performance
Focus on upstream
supplier and producer
processes, efficiency,
and waste reduction.
VALUE CREATION
in every single event,
process, and/or system
from raw materials
through
customer satisfaction.
Focus was on downstream
value creation for the
Customer.
VALUE CHAIN
SUPPLY CHAIN EXAMPLE
Detergent
manufacturer
Grocery chain
or third party
DC
Plastic
Producer
Packaging
Producer
Chemical
manufacturer
Paper
Manufacturer
Customer wants
detergent and goes
to their local
supermarket
Supermarket
Chemical
manufacturer
Timber
Industry
INTERNAL SUPPLY CHAIN
RESEARCH AND
DEVELOPMENT
OPERATIONS
LOGISTICS
C-LEVEL
FINANCE AND
ACCOUNTING
SUPPLY CHAIN
MANAGEMENT
INFORMATION
TECHNOLOGY
HUMAN
RESOURCES
MARKETING
SUPPLY CHAINS ARE
INTERDEPENDENT
MARKET
Consumers:
Customers
Prospects
Suspects
SUPPLIERS
CUSTOMERS
CUSTOMERS’
CUSTOMERS
SUPPLIERS’
SUPPLIERS
SUPPLY CHAINS
• MAXIMIZE VALUE AT EVERY OPPORTUNITY FOR
ALL YOUR STAKEHOLDERS [PUBLICS].
EMPLOYEES
Value exists in
-products
SUPPLIERS
SHAREHOLDERS
-services
CUSTOMERS
-exceeding expectations
-unexpected benefits
INTERESTED
PARTIES
WHO ELSE?
SUPPLY CHAIN MANAGEMENT
[SCM]
A network of facilities and distribution options that
perform the functions of:
– Procurement
• buyer, purchasing, materials management, …
– Transformation of materials into intermediate and
finished products
– Storage and management of inventories
– Distribution of finished products to customers at all
levels
–
–
A SUPPLY CHAIN
• FLOWS AND PROCESSES
– FLOWS
•
– PROCESS INTEGRATION
• Suppliers
– Upstream or Backward Integration
• Focal firm
– Internal Integration
• Customers
– Downstream or Forward Integration
• Complete
– End-to-End Integration
THE SUPPLY CHAIN AT WORK
Toyota builds more than 600,000 cars per year in Europe utilizing ~200 1ST
TIER suppliers with more than 400 factories. The number of suppliers grows
exponentially as you go to the 2ND and 3RD TIER suppliers.
STEEL
UPSTREAM
DIRECT
FORD, GM
DEALERS
RENTAL
COMPANY
SUPPLIER
SUPPLIER
CHRYSLER
AGENCIES
3RD
TIER
2ND
TIER
1ST
TIER
OEM
Manage all other tiers.
STEEL
FASTENERS
RADIATORS
Raw materials, semi-finished, and component products
VEHICLES
CONSUMERS
BUSINESS
CONSUMERS
FLEETS
SPECIAL
VEHICLES
SUPPLY CHAIN CYCLE VIEWPOINT
Supplier cycle
SUPPLIERS
Manufacturing cycle
MANUFACTURER
Replenishment cycle
RESELLERS
Customer order cycle
CUSTOMERS
SUPPLY CHAIN INVENTORY GAINS
150 days of inventory
SUPPLIER
30 days
MANUFACTURER
RESELLER
30 days raw materials
30 days finished products
30 days wholesale
30 days retail
80 days of inventory
SUPPLIER
MANUFACTURER
RESELLER
15 days
15 days raw materials
20 days finished products
20 days wholesale
10 days retail
The 70 day reduction in inventory makes cash available for
many other uses – programs, investment, more NPD, …
SCM COMPONENTS
Facility Location
L
Transportation
Customer Service
O
Purchasing
Order Processing
G
Packaging
Demand forecasting
I
Standards
Production
Scheduling
S
Warehousing
T
Return Goods
Handling
Facility Management
Material Handling
Inventory & Control
I
C
S
Salvage and scrap
disposal
SOURCING DECISION FACTORS
•
Capability and quality of vendor
•
•
•
Extensive corporate access
LOGISTICS
Right Goods - Right Place - Right
Time - Right Cost – Right
Configuration – Right Sequence
SCM ISSUES
• SUPPLIER SELECTION
– Contract or partnership
– Setting requirements
–
– Continuous improvement
–
• SUPPLIER CERTIFICATION
–
SCM ISSUES
• SUPPLIER LOGISTICS
– Orders
– Scheduling and revising schedules
–
–
– Pickup and Delivery
SCM ISSUES
• SUPPLIER INVOLVEMENT
– Design
•
•
•
•
•
•
Standardization
Customization
Modularization
Performance testing
Change management strategies
Flexibility
SCM ISSUES
• SUPPLIER INVOLVEMENT
– Vendor managed inventories
•
– The natural inflation of orders as each firm in the supply
chain evaluates its situation based on current inventory,
safety stock level, internal and supplier lead times.
Which is further affected by less than instantaneous
information flows.
• Changing customer demand
CYCLE TIME
INVENTORY PER TIME PERIOD
1600
1400
1200
1000
800
600
400
200
0
Unscheduled
production
downtime
Poor delivery
performance
Excess lead
times:
production
decides to
increase
inventory
Poor quality of
raw materials
1
1
2
3
4
5
6
Simple
min-max
system
2
7
8
9
10
11
12
Cycle frequency, time [duration], and magnitude
[stockout, minimum, maximum, average, safety stock]
DEMAND PULLS ALL PRODUCT!
B2C
B2B
Suppliers
Manufacturers
Warehouses
or Distribution
Centers
Resellers
B2B or B2C
Consumers
DEMAND AND MAKE TO ORDER PRODUCTION
SCHEDULE
1000
800
Level loaded
600
400
200
0
1
Distributors
2
3
Wholesalers
4
Retailers
5
6
Produced
MARGINAL PRODUCTION / INVENTORY
COST
15.00
Set-up cost
10.00
Production cost
Holding cost
5.00
Total cost
0.00
100
500 1000 2500 5000
UNITS IN INVENTORY
SCM ISSUES
• SUPPLIER INVOLVEMENT
– Vendor managed inventories
• Changing customer demand
• Complex product offering
•
• New versus existing products
SCM ISSUES
• SUPPLIER INVOLVEMENT
– Vendor managed inventories - continued
• Component management
•
• Just-in-time [JIT]
– Frequent, small and consistent deliveries
– Co-location or in customer plant location
–
DIRECT SHIPMENTS
SUPPLIER A
FULL
SUPPLIER D
EMPTY
SUPPLIER B
SUPPLIER C
PLANT
SUPPLIER E
SUPPLIER F
MILK RUN SHIPMENTS
SUPPLIER D
EMPTY
PARTIALLY
FULL
PLANT
SUPPLIER E
[Level loaded]
PARTIALLY
FULL
FULL
SUPPLIER F
SCM ISSUES
• SUPPLIER INVOLVEMENT
– Flexible Business Relationships
• Purchasing agreements / contracts
•
• Single sources
•
• Alliances
SCM ISSUES
• SUPPLIER INVOLVEMENT
– Systems coordination and development
•
•
•
•
•
Integration
Coordination of efforts
Evaluation and feedback
System variation over time
Quality drivers
SUPPLY CHAIN QUALITY DRIVERS
• QUALITY OF
– PROCESS
• coordinated information and material flows
– INFORMATION
• sharing of clean [uninflated] data
– RELATIONSHIPS
• development of upstream and downstream collaborative
commercial relationships
– TECHNIQUES
• continuous improvement systems throughout to drive
competitive advantage
SCM ISSUES
• SUPPLIER INVOLVEMENT
– Infrastructure compatibility
– Packaging [at all stages]
•
•
• Customer
SCM ISSUES
• SUPPLIER INVOLVEMENT
– Target costing approach
• Component
• Product
• Administrative efficiencies
•
The Supply Chain
Organization of discrete yet interrelated activities that enable firm performance
Firm Infrastructure
(Financing, planning, investor relations)
Human Resource Management
(Recruiting, training, compensation system)
Support
Activities
Technology Development
(Product design, testing, process design, market research, material research)
M
A
Procurement
(Raw materials, advertising space, health services)
Primary
Activities
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
and Sales
(Data collection,
material storage,
customer access)
(Component
molding, branch
operations,
underwriting)
(Order processing,
warehousing, report
preparations)
(Sales, proposal
writing,
advertising,
trade shows)
Competitive Advantage, Michael E. Porter
R
G
After-Sale
Service
(Installation,
customer support,
repair)
I
N
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 10B
Brand Management and the Firm
Brands: Supply Chain Management, Channel Management, and Value
Chain Management:
Maximizing Channel Leverage and Participation
ALAN L. WHITEBREAD
TYPES OF CHANNELS
International Vertical Marketing Systems [VMS]
Corporate
Subsidiary
Or JV
More
Contractual
Resellers
Licensees [Franchisees]
Administered
-OpenNo agreement
Less
DIRECT DISTRIBUTION
Pros
• Close to customers
• Active market development
• Greater control over
strategies
• More uniform
implementation of policies
• Increased market
knowledge
Cons
• Difficult to manage if not
familiar with new market
• Time consuming
• Expensive
• Costly to maintain without
volume
INDIRECT DISTRIBUTION
Pros
•
•
•
•
Simple
Inexpensive
Small start-up costs
Intermediaries usually
represent several clients
Cons
• Lose marketing
control in target
market
• Depend on
performance of
intermediary
• Possible reseller
conflict of interest
• Bargaining power of
intermediary
SEGMENTATION AND TARGETING
• Requires maximum similarity within each group
and differences between groups
• Knowing which segments to avoid is just as
important as knowing which to target
• Internal factors and existing channels
•
•
• What value-added services are demanded?
CHANNEL POSITIONING
• Designing the channel to meet the market
segment's demands
• What is optimal channel performance?
• Select the best type of distribution channel
based on its characteristics
REASONS FOR ESTABLISHING NEW
CHANNELS
•
• Changes in target markets
•
• Successful channels usually take years to
build.
REASONS FOR REFINING EXISTING
CHANNELS
• Changes in target markets
• Changes in channel performance
• Changes in the nature of competition
IMPLEMENTATION
•
•
•
•
•
•
•
Channel experience
Size
Financial status
Identifying and minimizing conflicts
Channel coordination
MARKET SEGMENTS AND VERTICAL
CHANNELS
Manufacturer
General line
distributors
ESD
distributors
Grainger, McMaster-Carr
25
Medical equip.
distributors
Electrostatic Discharge Product Market Segments
Unsophisticated
customers
Sophisticated
customers –
large facilities
Sophistical
medical equip.
customers
THE ECONOMY AND NAICS
Manufacturing
31-33
Services
Agriculture
11
Wholesale
42
Information
51
Mining
21
Retail
44-45
Finance
52
Public
Administration
92
Professional
Services
54
Management
Companies
55
Utilities
22
Real Estate
53
Arts / Enter.
61
Construction
23
Health
62
Accommodation
72
Other Services
81
Transportation
48-49
Administration
Waste Mgt.
56
Educational
71
B2B CHANNEL SELECTION
Wholesale http://www.census.gov/epcd/ec97sic/E97SUSF.HTM
TOP 10 GENERAL LINE DISTRIBUTORS 2007
REVENUE
[$billions]
Employees
Headquarters
1. Ferguson Enterprises
6.00
15,800
Newport News, VA
2. W.W. Grainger
5.00
15,500
Lake Forest, IL
3. Hughes Supply
4.42
8,900
Orlando, FL
4. Motion Industries
2.52
5,000
Orlando, FL
5. Airgas
2.40
10,000
Radnor, PA
6. Applied Industrial Technologies
1.61
4,323
Cleveland, OH
7. Hagemeyer NA Holdings
1.50
4,900
Charleston, SC [Netherlands]
8. Fastenal Company
1.24
7,946
Winona, MN
9. Wilson Industries
1.18
2,059
Houston, TX
10. McJunkin Corporation
1.10
1,400
Charleston, WV
B2B CHANNEL SELECTION
Wholesale http://www.census.gov/epcd/ec97sic/E97SUSF.HTM
TOP 10 ELECTRICAL DISTRIBUTORS 2007
REVENUE
[$billions]
Employees
Headquarters
Paris, France
1. Rexel, Inc.
8.20
21
2. Sonepar
7.00
19,700
Berwyn, PA
3. Graybar Electric Company
4.00
7,190
Clayton, MO
4. WEXCO Distribution
3.70
5,350
Pittsburgh, PA
5. Anixter, Inc.
3.28
5,600
Glenview, IL
6. Hughes Supply, Inc.
4.42
8,900
Orlando, FL
7. Hagemeyer NA Holdings
2.60
4,900
Charleston, SC [Netherlands]
8. GE Supply
2.00
?
9. W.W. Grainger
5.00
15,500
Lake Forest, IL
?
5,000
Westlake Village, CA
10. Consolidated Electrical Dist.
Shelton, CT
MEXICO BEARING INDUSTRY - 2000
Domestic Mfgs.
Foreign Mfgs. + subs.
Wholesalers (also
major importers)
$1.00
$1.25
Distributors
(11,000)
V. Large End-Users
(auto assembly, …)
53% of consumption
<(20-30% MU)
brands
$1.56
Retailers
(20,000)
(20-30% MU)
$1.95
Major End-Users
(few in number)
Sm. & Med. End-Users
(???)
Copyright A. Whitebread 3/1/98, updated 12/1/00
COMPLEX DISTRIBUTION
CHANNELS IN JAPAN
1
2
Automobile makers
affiliated parts
makers
Automobile
makers
Dealers
3
Independent
parts makers
1
Wholesalers
Cooperative
sales firms
Sub-dealers
4
Repair parts
makers
Special agents
2
1
2
2nd-level
wholesalers
3
3
4
Retailers
Large users
Automobiles
repair shops
5
End users
Gasoline
stations
5
6
COMPETITIVE ADVANTAGE
THROUGH CHANNEL DESIGN
•
•
•
•
Simplify and shorten channels
Build strong long-term relationships
Strong interactive programs
Listen to the channel members
ROLES OF CHANNEL
INTERMEDIARIES
Entity
Role
Broker
Bring buyers and
sellers together
No
No
Manufacturer’s
representative
Represents several
manufacturers
goods
No
No
Sales agent
Negotiates on the
producer’s behalf
No
No
Manufacturer
Products finished
goods or
components for sale
Yes
Yes
OEM
Manufacturers and
assembles products
into a final unit
Yes
Yes
Distributor or
Wholesaler
Provides goods to
other resellers
Yes
Yes
Dealer or Retailer
Carries goods for
purchase by
consumers
Yes
Yes
CHANNEL ROLES AND EXPECTATIONS
MANUFACTURER “M” Expects
of RESELLER “R”
PRODUCT
RESELLER “R” Expects of
MANUFACTURER “M”

Inventory for _____________

Large inventory—__________ out
of stock

Market price ______________

Volume _____________

Field ______________

Expert assistance when
___________
PROMOTION
•
Training of _____________
•
Collateral such as _____________
PROFITABILITY
•
_________________________
•
____________________
PRICE
PLACE
CHANNEL CONTROL
• The ability to manage the efforts of channel
members
•
TERMS OF SALE EXAMPLE
ACCOUNT TYPE
ITEMS TO THE RIGHT
ARE AVAILABLE
TO YOU IN
THEIR
CATEGORY
PAYMENT TERMS



DELIVERY TERMS
SPECIAL TERMS
Net n days
Prompt pay
discount
There is a
separate price
schedule for
each
distribution level





FOB [Ex works]
Time
Special charges
Shipping fees
Drop ship





PROMOTION &
INCENTIVES
Inventory
adjustment
Minimum order
size
None



Co-op advertising
Sales promotions
None
Truckload
minimum order
2 Inventory
Adjustments per
year

5% Co-op
Advertising
10 pallets
minimum order
1 Inventory
Adjustment per
year

5% Co-op
Advertising
Master Distributor /
Regional Distributor


Net 45 days
2 % 10 days


FOB M.D.
warehouse
Drop ship large
orders in
territory
Distributor


Net 30 days
1% 10 days

FOB Mfg. DC
Retailer

Net 45 days

FOB Mfg. DC

1 pallet
minimum

5% Co-op
Advertising
Dealer

Net 30 days

FOB Mfg. DC

1 pallet
minimum

5% Co-op
Advertising
Consumer

Cash with order

Shipping and
Handling – cash
with order

None

None


CHANNEL PROGRAMS AND
INCENTIVES
• Sales contests
• Training programs
• Marketing programs
• Sales Incentives
CHANNEL COORDINATION
• Channels should tie to target markets
• Channel conflict should be minimized
•
MANAGING RELATIONSHIPS
• Supplier Relationships
• Customer Relationships
•
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 11A
Brand Management and the Firm
Brands: Maximizing Value
ALAN L. WHITEBREAD
PRICE
CONCEPTUAL FRAMEWORK
Value-based vs. cost-based pricing
Price as viewed by the consumer
Price as viewed by the reseller
FACTORS AND OBJECTIVES
Factors
Objectives
Cost
STRATEGIES – TACTICS - LAWS
Price – Quality Strategies
Competition – New Product – Product Mix Pricing
Tactics – Adjustments – Issues - Laws
BASIC PRICE PHILOSOPHIES
VALUE-BASED VS.
MARKET
[SEGMENT]
CUSTOMERS
VALUE
PRODUCT
PLACE
PROMOTION
COST &
PROFIT
PRICE
PRICE
COST &
PROFIT
PRODUCT
PLACE
PROMOTION
VALUE
MARKET
[SEGMENT]
CUSTOMERS
BUILDING THE VALUE EQUATION
DIFFERENTIATION
CUSTOMER
BENEFITS
VALUE
PROPOSITION
COMPETITIVE
POSITION
CORPORATE
BRAND
ASSET
VALUE
PRICE AND VALUE
• Price is
• Value is
• If the value proposition is valid, price is not a
problem to a qualified prospect because the
perceived value exceeds the price.
CREATING CUSTOMER VALUE
Benefits
Quality
Innovation
Cost
Delivery
Flexibility
SOURCES OF VALUE
VALUE IS PERCEPTION – PERCEPTION IS VALUE
•
•
•
•
•
Product and/or Service
Experience
Brand / Image from IMC
Perceived quality
Proof
–
–
SOURCES OF VALUE
VALUE IS PERCEPTION – PERCEPTION IS VALUE
• The sales force is trained to use
–
–
–
– FAB*’s
• People do not buy products; they buy benefits!
FABS
• Features are anything that draw attention
to you product.
– Brand name, dimensions, ergonomics, esthetics, materials, patented,
performance, service level, trademark [logo], …
• Advantages provide the consumer
information about what the feature does.
– Brand name = less risk, dimensions = smaller size, larger print, ergonomics =
comfortable use, esthetics = modern, sleek design, …
• Benefits provide value by answering a key
question. What’s in it for me?
– Brand name = dependability, long life, dimensions = fits my size needs, …
FEATURES, ADVANTAGES,
BENEFITS [FABS] [Pens exercise]
FEATURE
ADVANTAGE
BENEFIT
Specific attributes
Describes what it
does
Value
Color
Ingredients
Packaging
Explanation
VALUE PROPOSITION ANALYSIS*
VALUE
PROPOSITION
ALL BENEFITS
FAVORABLE
POD’s
RESONATING
FOCUS
Consists of:
All benefits from a
market offering
Of your offering
relative to the next
best choice
1 or 2 POD’s that
deliver the greatest
value
Answers the customer
question:
Why should our firm
purchase your
offering?
Why should our firm
purchase your offering
instead of your
competitor’s?
What is most
worthwhile for our firm
to keep in mind about
your offering?
Requires:
Knowledge of own
market offering
Knowledge of own
market offering and
next best choice
How own market
offering delivers
superior value
compared with the
next best choice
Has the potential
pitfall:
Benefit assertion
[no real value to that
customer]
Value presumption
[assume value]
Requires customer
value research
“Customer Value Propositions in Business Markets”, James C. Anderson, James
A. Narus, and Wouter van Rossum, [Harvard Business Review, March, 2006], p.
VALUE AS PICTURED BY THE
CONSUMER
PRODUCT
BENEFITS +
NET PRICE
List price
Less: discounts
Quantity
Seasonal
Cash / coupon
Promotion
Less: Allowances
Trade-in value
<
Service
Quality
Brand / warranty
Repair
Packaging
Credit / financing
Delivery / availability
Incentives
VALUE AS PICTURED BY THE
RESELLER
NET PRICE
List price
Less: Volume discounts
Quantity
Seasonal
Cash / coupon
Special
Less: Allowances
Trade-in value
PRODUCT
BENEFITS +
<
Product
Service
Quality
Brand
Availability
Inventory
Promotional activity
WHAT AFFECTS PRICE?
Internal Factors
Marketing
Objectives
Marketing-Mix
Strategy
Cost Factors
Organizational
Considerations
External Factors
MARKETING OBJECTIVES
INFLUENCE ON PRICE DECISIONS
Survival
Low Prices to Cover Variable Costs and
Some Fixed Costs to Stay in Business
Current Profit Acceptance Level
Maximum Current Profit, Cash Flow or ROI,
Volume level
Market Share Leadership
Price to Become
the Market Share Leader
Product Quality Leadership
High Prices to Cover Higher
Performance Quality and R & D
MARKETING MIX AND PRICE
Product Design
Non-Price
Factors
[Profiles]
Distribution
Promotion
COST FACTORS AND PRICE
Fixed Costs
[(Overhead)
Costs that do not
vary with sales or
production levels.
Variable Costs
Costs that do vary
directly with the
level of production.
Executive Salaries, Rent
Total Costs
Sum of the Fixed and Variable Costs for a Given
Level of Production
WHAT AFFECTS PRICE?
Internal Factors
External Factors
Market and
Demand
Competitors’ Costs,
Prices, and Offers,
Substitute products
Other External Factors
Economic Conditions
Reseller Needs
Government Actions
Social Concerns