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CHAPTER
7
Developing A Product/Brand Strategy:
- Setting Objectives
- Choosing a Marketing Strategy
McGraw-Hill/Irwin
© 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Quick Review
•
Ch.2: Boundary of your business domain
•
Chs. 3-5: Analysis of Major Stakeholders
•
Ch. 6: Your prediction about future
 Potential and Forecasting
•
Ch. 7: Strategy (to achieve your objectives)
 Target (Competitor & Customer)
 Positioning (Value Proposition)
McGraw-Hill/Irwin
© 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Key Topics of Ch. 7
•
Strategy as an Action Plan
•
Elements of a Product Strategy**
•
Making Sense of a “Strategy Jungle”
•
Research In Progress: Kim and Lim
McGraw-Hill/Irwin
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Action Plan
•
Where are we heading to? 
•
How will we get there?* 
•
What will we do? 
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A Successful Strategy:
•
Helps achieve coordination among functional
areas of the organization.
•
Defines how resources are to be allocated.
•
Leads to a superior market position.
McGraw-Hill/Irwin
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Elements of a Product Strategy**
1.
2.
3.
4.
5.
6.
7.
Statement of the objective(s) the product should attain*
Selection [Consideration] of strategic alternative(s)
Selection of customer targets
Choice of competitor targets
Statement of the core strategy*
Description of supporting marketing mix.
Description of supporting functional programs
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Hierarchy of Objectives
Company mission/vision
Level 0
Corporate objectives
Level I
Corporate strategies
Divisional objectives
Level II
Divisional strategies
Level III
Product/brand
objectives
Brand strategies
Program objectives
Level IV
Tactics
McGraw-Hill/Irwin
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1. Setting Objectives
1. Characteristics of Good Objectives
1. Quantified standards
2. Challenging
3. Have Milestones
2. Two Major Decisions
1. Which Objective to Pursue?
2. How High it should be?
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2. Consideration of Strategic Alternatives
1. Corporate Objectives
2. Two Major Paths
1. Increasing Sales/Market Share*
1. Market Development Strategy
2. Market Penetration Strategy
2. Increasing Profitability
1. Decreasing Inputs
2. Increasing Outputs
* 2X2 matrix on growth strategy
McGraw-Hill/Irwin
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Strategic Alternatives
Long-term
profits
Efficiency,
short-run
profits
Growth in
sales or
market share
Market
development
Market
penetration
Decrease
inputs
Increase
outputs
New segments
Existing
customers
Reduce
costs
Increase
price
Convert
nonusers
Competitors’
customers
Improve
asset
utilization
Improve
sales mix
New product
development
McGraw-Hill/Irwin
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Criteria for Evaluating Strategic Alternatives



Size/growth of the segment
Opportunities for obtaining competitive
advantage  Know Yourself
Resources available to penetrate the segment
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© 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
3. Targeting and Positioning

Choice of Customer Targets: Single or multiple*
 Choice
of Competitor Targets
 Statement
of the Core Strategy =Value
Proposition*
 Economic
(cost/price) Advantage
 Functional Advantage
 Psychological Advantage
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Ex) Target Segments for Handspring
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3. Targeting and Positioning (cont’d)

Five Areas of Differentiation
 Quality*
 Convenience and Service
 Status and Image
 Branding*
 Distribution Channels
 Combination of the Above
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Joint Space for Colas
Cola
Segment
3
Diet •
Pepsi
•
Diet
Rite •
Diet
•
Tab
•
RC
Cola
•
Pepsi
•
•
Segment
2
•
•
Nondiet
Segment
Dr
1
Peppe
r
•
Coke
•
7-Up
Fresca
Noncola
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Positioning Decision Steps
1. Identifying alternative positioning themes
2. Screening alternatives according to whether they
are
 meaningful to and believable by customers
 feasible given the firm and product resources
 competitively sensible
 helpful for meeting the product objective
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Positioning Decision Steps (Contd.)
3. Selecting the position that best satisfies these
criteria
4. Implementing programs consistent with the
product position selected
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Total Product Concept
Potential
product
Generic
product
Expected
product
Augmented
product
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Managing Brand Equity
Reduced marketing
costs
Trade leverage
4. Brand
Brand loyalty
loyalty
Attracting new
customers
• Create awareness
• Reassurance
Time to respond to
competitive threats
Anchor to which
other associations
can be attached
1. Brand
Brand loyalty
awareness
Familiarity-liking
Provides value to
customer by
enhancing
customer’s:
• Interpretation/
processing of
information
• Confidence in the
purchase decision
• Use satisfaction
Signal of substance/
commitment
Brand to be
considered
Brand
Brandequity
loyalty
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Brand Equity (cont’d).
Reason-to-buy
Brand
Brandequity
loyalty
Differentiate/position
3. Perceived
Brand loyalty
quality
Price
Channel member
interest
Extensions
Provides value to
firm by
enhancing:
• Efficiency and
effectiveness of
marketing programs
• Brand loyalty
• Prices/margins
Help process/
retrieve information
2. Brand
Brand loyalty
associations
Reason-to-buy
Create positive
attitude/feelings
• Brand extensions
• Trade leverage
• Competitive
advantage
Extensions
Other
proprietary
Brand loyalty
brand assets
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Competitive
advantage
© 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
3. Targeting and Positioning (cont’d)
 Values
Being Sought by Customers (by Rackham)
 Transactional
Sales: Intrinsic Value
 Consultative Sales: Extrinsic Value
 Enterprise Sales: Strategic Value
 Relationship
Life Cycle and Strategy
 Customer
Acquisition
 Customer Retention
 Customer Expansion
 Customer Deletion*
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Making Sense of A “Strategy Jungle”

Strategy at different levels
 Corporate
or Business Level: Porter’s Generic Strategy
 Cost
Leadership: Fixed Cost and Variable Cost
 Differentiation: Supply side and Demand side
 Focus: Segmentation and Targeting
 Functional
Level Strategies:
 Relationship Life Cycle-based Strategy
 Product
Life Cycle-based Strategy:*
 First
mover advantage vs. Second mover advantage
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Strategy Over the Life Cycle
Ex) Pharmaceutical industry (patent expiration in 20 years)
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4. Supporting Marketing Mix & Programs
 Product
and Brand Program: Product feature &
brand meaning
 Pricing Program: price points
 Marketing Channels Program: Level, intensity,
and ownership/function
 Communication Program: ex) Advertising and
Sales Promotion (Incentives)
McGraw-Hill/Irwin
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Multiple Effects of Consumer Promotions on Car Sales
by Steve Kim and J. Lim
Consumer promotions
Firm performance
- Advertising
Car Sales Change
- Immediate
-Total
H1 & H2
- Incentives
H3 & H4
Product
Quality
Product variable
McGraw-Hill/Irwin
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Effects of Advertising and Incentives on Car Sales
McGraw-Hill/Irwin
Advertising
Effect
Incentive
Effect
t-test
Immediate
effect
.013
.108
**
Fluctuation
Until
stabilization
.002
-.059
**
Total Effect
.014
.049
**
© 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Effects of Incentives Under Different Quality
McGraw-Hill/Irwin
Incentive
Effect for
Low quality
Incentive
Effect for
High quality
Immediate
effect
.102
.116
Fluctuation
Until
stabilization
-.069
-.046
Total Effect
.034
.07
T-test
**
© 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Effects of Advertising Under Different Quality
McGraw-Hill/Irwin
Advertising
Effect for
Low quality
Advertising
Effect for
High quality
T-test
Immediate
effect
.028
-.008
**
Fluctuation
Until
stabilization
.003
.001
Total Effect
.031
-.007
**
© 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Illustration: Handspring’s Product Strategy
Objective:
To capture 15 percent of the PDA market by the end of year 2
Customer Targets:
Price-conscious professionals
Nonbusiness professionals
Nonprofessionals
Competitive Targets:
Palm
Sharp
Core Strategy:
Simplicity/convenience
Low price
Expandability (via expansion slot)
McGraw-Hill/Irwin
© 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.