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BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 11B
Brand Management and the Firm
Brands: Pricing Strategies, Tactics, and Laws
ALAN L. WHITEBREAD
THE PRICE-SETTING PROCESS*
•
• Estimated demand and its price elasticity
• Examine the cost-volume relationship
• Examine competitive prices and strategies for
comparable and functionally similar products
• Set the price schedule
PRICE STRATEGIES
-COMPETITION BASEDGOING – RATE
Based on what competitors
are charging
EQUAL TO
PRODUCT LEADER
ALCOA, metals
SOLE SOURCE
PRICE STRATEGIES
-NEW PRODUCT*MARKET PENETRATION
Initial low price for volume
Wal-Mart
MARKET SKIMMING
Initial high price followed
by price decreases -
STAIRSTEP
Planned reductions
Computers
PRICE STRATEGIES
-PRODUCT MIXPRODUCT LINE*
Steps between items in line
Consumer electronics
BY-PRODUCT
Plastic lumber
OPTIONAL PRODUCT*
PRODUCT BUNDLE*
Auto accessories
Season tickets
CAPTIVE PRODUCT*
PRICE ADJUSTMENT STRATEGIES
• Adjusting
Prices for a
Psychological Effect
Psychological Pricing
•
Price as a Quality Indicator
•
Reference Prices
[buyer’s perspective Clothing]
•
•
Odd & Even
•
•
Price Lining*
Prestige Pricing
•
PSYCHOLOGICAL PRICING
Price lining
Price
$395
Prestige pricing
Price
per
per
unit
unit
$349
Units sold
Units sold
Demand is inelastic over range: appliances
Labor; Chia Pet
PRICE ADJUSTMENT STRATEGIES
• Adjusting
Prices for a
Psychological Effect
Promotional Pricing
•
•
Loss leader [milk]
Temporary reductions
•
Coupons*
PRICE ADJUSTMENT STRATEGIES
Geographical Pricing*
• Adjusting
Prices to Account
for the Geographical Location
of Customers
•
Zones (UPS)
•
FOB
PRICE ADJUSTMENT STRATEGIES
[PRICE FLEXING]
Discount & Allowance
Reducing Prices to Reward
Customer Responses such as
Paying Early or Promoting
the Product.
Segmented*
Adjusting Prices to Allow
for Differences in Customers,
Products, and Locations.
Cash Discount
Customer
Quantity Discount
Product-Form
Functional Discount
Location*
Seasonal Discount
Time* Fed Ex
Trade-In Allowance
Channels* Stanley
Promotional Allowance
PRICE STRATEGIES
-PRICE ADJUSTMENTUNIT PRICING
-By size, ounce
Detergents
COST-PLUS PRICING
• PROVIDES A SET MARKUP OR MARGIN
–
–
–
–
–
–
–
Must understand cost structure in depth
Seller perceives price fairness
Seller perceives less price competition
Unrelated to market conditions
No customer orientation
$
No confidence in acceptance rate
Dangerous volume assumptions
QUANTITY
Cost in Dollars (millions)
BREAK-EVEN ANALYSIS
Total Revenue
Target Profit
($2 million)
12
10
8
6
4
2
Variable Cost
Fixed Cost
200
400
600
800
Sales Volume in Units (thousands)
1,000
Total Cost
COMPETITIVE RESPONSE
Has Competitor Cut
Price?
No
Hold Current Price;
Continue to Monitor
Competitor’s Price.
Yes
Will Lower Price
Negatively Affect Our
Market Share & Profits?
No
Reduce Price
Yes
No
Can/ Should Effective
Action be Taken?
Yes
Raise Perceived
Quality
Improve Quality
& Increase Price
Launch Low-Price
“Fighting Brand”
PRICING CHALLENGES
• Economic Value-Added [EVA]
– After-tax operating profit – capital*cost of capital
– Positive number indicates you are increasing shareholder
value
•
•
•
•
Pricing innovative products
Pricing in rapidly growing markets
Pricing in mature markets
Appealing to all four customer price/value
segments
CONSUMER PRICE/VALUE
SEGMENTS
High
Price Sensitive
Segment
Pain
Value-Seeking
Segment
Of
Expen
diture
Convenience-Seeking
Segment
Loyal
Segment
Low
Low
High
Value of differentiation
THE LEGAL SIDE OF PRICING
Price Fixing
-restraint of trade
(Sherman Act 1890)
Price Discrimination
-Exclusives; Tying
(Clayton Act 1914)
-resellers
(Robinson-Patman Act (1936)
ROBINSON-PATMAN ACT [1936]
• Case law and code law
• Predatory Pricing […per se…]
•
–
• Section 2(a) Price Discrimination [p. 21]
– Dealing with purchasing
– Different prices to different customers
• difficult, potentially illegal
– Different prices for different quantities
•
– Different prices for different customer classes
• airlines, seniors, …
THE LEGAL SIDE OF PRICING
Price Fixing
-restraint of trade
(Sherman Act 1890)
Price Discrimination
-exclusive; tying
(Clayton Act 1914)
-resellers
(Robinson-Patman Act (1936)
Deceptive Practices
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 12
Brand Management and the Firm
Brands: Integrated Marketing Communications
ALAN L. WHITEBREAD
INTEGRATED MARKETING
COMMUNICATIONS [IMC]*
The concept under which the company has careful
integration and coordination of all communication
channels to deliver a clear, consistent, and
compelling message about the organization and /
or its products.
IMC – COMMUNICATION VEHICLES*
MEDIA
ADVERTISING
COLLATERAL
PUBLIC
RELATIONS
PACKAGING
& LABELING
DIRECT
MARKETING
INTERNET
ADVERTISING
PLACE
ADVERTISING
IMC [B2B] – GETTING THROUGH
THE NOISE!
TRADE
PROMOTIONS
MEDIA
ADVERTISING
COLLATERAL
PUBLIC
RELATIONS
PACKAGING
& LABELING
DIRECT
MARKETING
INTERNET
ADVERTISING
PLACE
ADVERTISING
DEVELOPING THE PROMOTION MIX
• PUSH STRATEGY
– Through channels to consumers
Manufacturer
Reseller(s)
Advertising & promotion
Consumers
DEVELOPING THE PROMOTION MIX
• PULL STRATEGY
– To consumers and back through channels
Manufacturer
Reseller(s)
Advertising & promotion
Consumers
SETTING THE PROMOTION MIX
ADVERTISING
Any paid form
of non-personal advertising
by a paid sponsor
PROMOTION
Short-term incentives
to stimulate sales
PUBLIC RELATIONS
Relating to various publics
by utilizing favorable messages
SETTING THE PROMOTION MIX
ADVERTISING
-Extensive reach
-Expressive
-Impersonal
PROMOTION
-Incentives to buy
-Short-lived
PUBLIC RELATIONS
-Believable
-Effective
-Economical
SETTING THE IMC BUDGET
AFFORDABLE
METHOD
PERCENT-OFSALES METHOD
Total cost basis
Revenue basis
COMPETITIVEPARITY METHOD
OBJECTIVE-&TASK METHOD
Meet competition
Planned & measured
SETTING ADVERTISING OBJECTIVES
-An objective for every target market-
Informative Advertising*
New products
Major product changes
“Coldwater Tide”
Persuasive Advertising
“Buy brand X”
Comparison Advertising
Reminder Advertising
Compares Brand A to B
Keeps Consumers Thinking
About a Product
Features & benefits
ADVERTISING’S 5 M’S
Message*
Money*
Message generation
Factors to
consider:
Message evaluation
and selection
Mission
Stage in PLC
Sales
goals
Market share
and consumer
base
Advertising
objectives
Competition
and clutter
Advertising
frequency
Product
substitutability
Message execution
Social-responsibility
review
Measurement
Communication
impact
Media*
Reach, frequency,
impact
Major media types
Specific media
vehicles
Media timing
Geographical
media allocation
Sales
impact
DEVELOPING EFFECTIVE
COMMUNICATIONS
Identify target audience[s]
Set communication objectives
Designing the message[s]*
•
•
Content
Emotional, moral, rational
•
Structure
Conclusions, argument type and order
•
•
•
•
Format
Layout, words, sound, language
•
Source
Congruity, expertise, trustworthiness
•
MESSAGE EXECUTION STYLES*
[Advertising appeals]
USP
Testimonial
Evidence
Slice of Life
Scientific
Evidence
Lifestyle
Technical
Expertise
Fantasy
Personality
Symbol
Mood or Image
(Humor, sex, fear)
Musical
(Song or theme)
DEVELOPING EFFECTIVE
COMMUNICATIONS
Identify target audience[s]
Set communication objectives
Designing the message[s]
Choosing the media*
MEDIA COVERAGE - GOOD
D
B
A
C
MEDIA COVERAGE - BAD
D
A
B
C
ADVERTISING CATEGORIES*
National (global) brand advertising
Retail (local) advertising
Directory advertising
Business-to-business advertising
Institutional advertising
Direct response advertising
Public service advertising
SELECTING ADVERTISING MEDIA
1. Decide on Reach, Frequency, and Impact
Step 2. Choosing Among Major Media Types
Media Habits of Target Consumers / Segments
Nature of the Product
Type of Message
Cost
Step 3. Selecting Specific Media Vehicles
Specific Media Within a Given Type, i.e. TV’s ER.
Must Balance Media Cost Against Media Factors:
Audience Quality & Attention, Editorial Quality
Step 4. Deciding on Media Timing
Scheduling of Advertising Over the Course of a Year
Pattern of Ads: Continuity or Pulsing
Media Schedule
COLLATERAL MATERIALS
• Consumer
–
– Auto brochures
– Catalogs
–…
• The B2B world is totally different*
– http://www.geplastics.com/gep/en/Home/Home/home.html then to
•
•
Literature and tools
Solution Area: Products & Services – Industry Applications
– http://www2.dupont.com/DuPont_Home/en_US/index.html then to
•
Plastics – Fluoropolymers – Teflon PFA
AD AGENCY
Creative Services
Develops Campaign’s
Strategy for Client
Dreams Up and Produces
the Ads / Materials
Media Planning
Determines Effective
Communication Vehicles /
Media Schedule
Collect and Analyze Information to
Help Develop a Strategy
DEVELOPING EFFECTIVE
COMMUNICATIONS
Identify target audience[s]
Set communication objectives
Designing the message[s]
Choosing the media
Collecting feedback
CONSUMER PROMOTION
Consumer-Promotion
Objectives
Consumer-Promotion
Tools
Increase Short-Term Sales
Samples
Build Long-Term Market
Share
Coupons
Retailers to Carry New Items
Sales Force Support for
Current or New Products
Consumer Relationship
Building
Cash Refunds
Advertising
Specialties
Patronage
Awards
Price Packs
Premiums
Point-of-Purchase
Displays
TRADE PROMOTION
Retailers and Wholesalers
Trade-Promotion
Objectives
Trade-Promotion
Tools
Persuade Retailers or
Wholesalers to Carry a Brand
Price-Offs
Premiums
Give a Brand Shelf Space
Allowances
Displays
Promote a Brand in
Advertising
Buy-Back
Guarantees
Discounts
“Push” a Brand to Consumers
Free Goods
Contests
Specialty
Advertising
Items
TRADE PROMOTION
Industrial Customers
Business-Promotion
Objectives
Generate Business Leads
Stimulate Purchases
Reward Customers
Motivate Salespeople
Business-Promotion
Tools
Advertising
Allowances
Initial Stock
Buy-Back
Displays
Discounts or
Free Goods
Specialty
Advertising
Programs
PUBLIC RELATIONS OBJECTIVES
Introducing New Products to
Manufacturers
Introducing New Products to
Consumers
Influencing Government
Legislation
Enhancing the Image of a City,
Region, or Country
Calling Attention to a Firm’s
Involvement with the Community
PUBLIC RELATIONS TOOLS
Strong PR Firm
Press releases / stories
(Firm and it products)
Public Affairs
(Community relations)
Development & Miscellaneous
DEVELOPING A COMPREHENSIVE
IMC PLAN
• Complete list of items, timing, and budget
for all audiences
– Literature schedule
– Media schedule
– Coverage ratios
– Introduction and training
– Trade shows
– All other items
IMC CHALLENGES
•
•
•
•
•
•
FLOW
TIMING
ACCURACY
COORDINATION
CONTROL
MEASUREMENT
E-COMMERCE OBJECTIVES
• Complement and synergize with all other
programs
• Clear and concise direction
• Consistent approach and image
• Extremely user-friendly
INTEGRATING E-COMMERCE
STRATEGY AND ACTIVITY
• In-depth examination of all of the 4-P’s
– Be especially sensitive to issues with
• Channels
• Prices
• Promotions
• Eliminate or minimize conflicts
• Overall integrated approach to the various
market segments
WEB SITE*
• Extremely user friendly
– Navigation, graphics, white space
– Logically organized
– Easy to read [quicky]
•
•
•
•
Valuable and timely information
Interactive
Security, tracking, automation
Very fast response time
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 13
Brand Management and the Firm
Selling the Project -2
The Business Plan
ALAN L. WHITEBREAD
BUSINESS PLAN CONTENTS
• Executive Overview
• Marketing Opportunity
– USP, FABs
• Product Development
– Cost, time, risk analysis, other issues
• Go to Market Strategy
–
• Detailed Financial Analysis
PRODUCT DEVELOPMENT
• Summary of issues
•
• Remaining items
SUCCESS MEASURES
• CUSTOMER /
PRODUCT
ACCEPTANCE
–
–
–
–
–
Acceptance rate
Revenue forecast
Unit volume
Market share
Quality guidelines
• FINANCIAL
PERFORMANCE
–
–
–
–
–
Product cost
Margins
Break-even point
Time to break-even
Profitability
• IRR, ROI, NPV, …
MARKETING
• Customer Analysis
– the need, the value, anticipated response
•
•
•
•
•
•
Competitive Analysis
Company Analysis
Market segments and target markets
The Marketing Mix
Summary of benefits
ROLL-OUT PLAN
• Detailed introduction to the market
– Possibly in stages
– Gantt chart[s]
• Department agreement
• Remaining special concerns
THE MARKETING BUDGET
Gantt Chart
CAMPAIGN TIMELINE: SMALLER COMPANY
Week Number
RESEARCH
Customer/Prospect Research
CAMPAIGN CREATION & MANAGEMENT
Brainstorming
Creation
Presentation to Top Execs
Meeting and Assignments
Ongoing Weekly Status Meetings
ADVERTISING: PRINT
Create Media Plan (Print and Online)
Buy Print Media
Design
Photography and/or illustration
Production
Copywriting and Review
Final Negatives, Insertion Orders
Ship Negatives and Orders to Publications
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
LAUNCH
FINANCIAL ANALYSIS
• Comprehensive set of financials
– Statements
• Line item detail
• Possible stage evaluation and review
–
– Human resources
– Project analysis
•
BUDGETING
• Top-down or bottom-up approach
–
– Expected revenues and sources
–
– Estimated average standard costs
– Marketing expenses
• Line item detail by area
• Implementation
• Timing issues and other schedules
– Projected pre-tax income
PROFIT MEASUREMENTS
• Operating profit is defined as the amount
of money pre-tax, a company makes from
its ongoing business.
• Pre-tax profit is the sum of operating
profits plus or minus gains and losses from
other activities.
– Investments, interest expense, royalties, and
other financing activities
Profit and Loss Statement
Cost Category
Sales
Cost of Goods
Gross Profit
G&A
Operating Profit
Non-operating cost
(interest expense)
Profit before tax
Taxes [50%]
Profit after tax
(000’s)
$20,000
(12,500)
7,500
(2,500)
5,000
(1,250)
3,750
(1,875)
$1,875
37.5% GM
18.75%
CASH FLOW
• Cash flows into a company when it receives
payment for sales or on receivables, borrows
money, sells stock, issues bonds, collects
royalties, interest, or some other items.
• Cash flows out of a company when it acquires
plant and equipment, purchases materials,
produces goods, markets goods, repays
investors, or repays debt, or spends money on
anything.
• The finance area is concerned with both the total
amount of these flows and their timing.
Income Statement and Cash Flows
• While the income statement shows a pretax profit of $160,000, the
statement of cash flows shows that we would not have enough cash
to finance operations if it had to be justified on a fully-loaded cost
basis.
• Managing cash flows and pre-tax profit are critical for long term
survival.
FINANCIAL DECISION TOOLS
•
•
•
•
•
Present Value [PV]
Discounted Cash Flow [DCF]
Future Value [FV]
Net Present Value [NPV]
Economic Value-Added [EVA]
PRESENT VALUE [PV]
• The value of a fixed amount n time periods expressed in
today’s currency.
• Assume you are making $100,000 [$S] per year. Your
employer offers you a five-year contract [n=5] that will
increase your annual salary to $150,000 per year in the
fifth year. Assuming a 9% [r] inflation rate, will this be
worth more or less than you are currently making?
– The formula is PV = S * [1/[1+r]n]
– Build a spreadsheet and calculate the answer.
– Did you find that the $150,000 in year five was worth only
$97,489.71 in today’s money?
DISCOUNTED CASH FLOW [DCF]
• This is the process of valuation by finding
the present value [PV] of some amount of
cash flows at some time in the future.
FUTURE VALUE [FV]
• The value of a fixed amount n time periods in the
future.
• Assume you start your career making $35,000
per year [S]. Also assume you never change
jobs but keep up with the average rate of
inflation [r = 4%] for your entire 42-year career
[n=42]. What would you be making when you
retired.
– The formula is FV = S * [1+rn]
– Build a spreadsheet and calculate the answer.
– Did you get $181,747.40?
Net Present Value
• Time-Value-of-Money Concept
– $1 today is worth more than $1 in the future
• Discounts future cash flows in terms of
present value to determine the net value
added to the company by a project.
• Considers:
– Forecasts of revenues and costs
– Expected life cycle or products and
technology
– Industry Trends
Net Present Value
NPV = PV of future cash inflows – PV of future cash outflows – initial cost
• The greater the NPV, the better the investment
• Negative NPVs represent projects that do not
breakeven
ECONOMIC VALUE-ADDED [EVA]
• EVA shows you how much money the company makes
from operations after taxes, less the cost of capital for
the money tied up to make the product.
• EVA provides a longer-term perspective on whether a
project is generating or destroying value.
• EVA provides a more in-depth understanding of a
decision than Net Present Value because it also includes
the timing of cash flows and the cost of capital tied up in
accounts receivable, inventory, and related assets.
EVA = Operating Profit – Taxes – [Total Capital
Employed * Company’s Cost of Capital]
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 14
Brand Management and the Firm
International Intellectual Property:
Protecting Your Brands and Creations
ALAN L. WHITEBREAD
INTELLECTUAL PROPERTY
• The U.S. leads the world in technology—it
is something everyone wants.
• IP
• IP
WORLD TRADE ORGANIZATION [WTO]
http://www.wto.org/english/thewto_e/thewto_e.htm
• ORIGINALLY GATT [1948 – tariffs]
• CURRENTLY INVOLVED IN
– INTELLECTUAL PROPERTY
–
– SUBSIDIES
•
– SAFEGUARDS
•
WORLD TRADE ORGANIZATION [WTO]
http://www.wto.org/english/thewto_e/thewto_e.htm
– INFRASTRUCTURE
• CHINA:
– ACCOUNTING [chose British System 2007]
–
– DISPUTE RESOLUTION
– http://www.wto.org/english/tratop_e/region_e/region_e.htm is
map of risk assessment.
a
INTELLECTUAL PROPERTY &
THE MARKETING MIX
• PRODUCT DECISIONS
– May be dependent upon patents for
• Designs
• Production processes, …
– The brand is often more important than the
product itself.
• PROMOTION DECISIONS
– Slogans, songs, or visual communications
that become part of the product image need
to be protected.
INTELLECTUAL PROPERTY
• DISTRIBUTION DECISIONS
– Ownership, use, and rights
– Who is allowed to do what?
– What approval[s] are needed?
• PRICING DECISIONS
– Driven by competition and the market
• IP protection may reduce competition for a limited time.
– Price can be used as a weapon to gain share or open
up new market segments. Be careful, this can be
dangerous.
ELEMENTS OF INTELLECTUAL
PROPERTY
• COPYRIGHT
• TRADEMARK
• SERVICE MARK
• PATENT
•
•
ELEMENTS OF INTELLECTUAL
PROPERTY
• COPYRIGHT [ © ]
– a guarantee of control of an original work
– for the original way the idea is expressed
– you have no more than six months to claim
copyright protection.
– any type of
• artistic, dramatic, digital, literary or musical work
ELEMENTS OF INTELLECTUAL
PROPERTY IPO http://www.wipo.org/about-ip/en/trademarks.html
• TRADEMARK [ TM ® ]
– a guarantee of control of a work of some item
used to uniquely identify the product [or
service in some countries]
– it could be a
• word, logo, package design, slogan, or other
identifying mark
DOMAIN NAMES
• Internet addresses [domain names] are
bought and sold – sometimes for large
amounts of money.
• If a domain name infringes on a registered
trademark, the domain name will be
suspended immediately if challenged by
the trademark owner.
ELEMENTS OF INTELLECTUAL
PROPERTY
• SERVICE MARK [ SM ® ]
– some item used to uniquely identify a service
[available only in some countries]
– it could be a
• word, logo, package design, slogan, or other
identifying mark
TRADEMARKS & SERVICE MARKS
• Available in approximately 200 of 270 political entities.
• There are different filing methods and requirements.
• The safe route is
–
– U.S. CASSIS System for searching marks
– See the USPTO website for detailed information.
• The level of protection varies by country and trademark
treaty signatories.
TRADEMARK TREATIES
• THE PARIS CONVENTION
– extends national resident treatment of US
citizens in member nations for patents,
trademarks, and service marks.
–
– The mark must be registered in each country.
– You must file for the mark within six months of
the U.S. filing date.
TRADEMARK TREATIES
• THE MADRID AGREEMENT
– provides a central filing procedure through the
World Intellectual Property Organization
[WIPO].
– A central application will be filed and the
designated countries will process the
application based on local trademark rules.
– This requires two filing fees—one for the
home country and one for the central filing.
The U.S. is not a member. U.S. companies
can file as a member if they use a subsidiary
in a member country.
TRADEMARK SYSTEMS
• COMMON LAW
– is where trademark rights are acquired
through use.
– A trademark can not be preregistered.
– The first user has the rights to the protection.
TRADEMARK SYSTEMS
• FIRST TO FILE OR STRICT
REGISTRATION
–
– The rights are awarded only by registration
application.
– Whoever files first gets the mark protected
even though it may never have been used.
– Within this group is the “Famous Mark
Exception” which, in some countries,
protection can be provided based upon
international reputation.
TRADEMARKS & SERVICE MARKS
• Available in approximately 200 of 270 political
entities.
• A Service Mark [SM] is not permitted in many
countries.
• Using a registered trade mark symbol [®] is a
felony in a few countries.
• The EUROPEAN COMMUNITY TRADE MARK
ACT [
] for 15 nations has one filing.
TRADEMARK ISSUES
• Dilution
– occurs when a mark loses its significance in the
market. This was first addressed legislatively in the
United States in 1995 and is an issue in countries
around the world.
• Kleenex tissues, Scotch Tape, Xerox[ing], Aspirin, …
• Losing your mark
– In most countries, the lack of use of the mark over a
consecutive three to five year period can make your
mark invalid and someone else could claim it.
TRADEMARK PROTECTION
• EXHAUSTION
or “first sale” determines when the trademark owner may
or may not have rights
-This varies by country
-Interstate or intrastate in the U.S.
• UNIVERSALITY [or trade identity]
states a trademark is not only an identification of the
source of a product but remains as a part of the product.
• TERRITORIALITY
states a trademark holder has the right to control the
distribution of the trademarked product.
ELEMENTS OF INTELLECTUAL
PROPERTY
• PATENT
– A guarantee of a set of rights to control the
use of an invention
– Protects the original idea and the way it is
implemented [in some countries]
– Generally 14-20 years protection based on
country and type of patent
–
Primary Requirements for a Patent
• The new invention must be:
– Novel
• not known or used in the country [sometimes
anywhere in the world] and
• not published [or sometimes discussed] anywhere
–
– Non-obvious
• cannot be an obvious way to do something, e.g., a
simple extension of a principle
– Useful
•
• See Wacky Patents and similar sites for many examples.
ELEMENTS OF U.S. INTELLECTUAL
PROPERTY
• UTILITY PATENT [20 YEARS]
– Covers processes, machines, manufacture or composition of
matter, plus new and useful improvements
– protects the way an article is used and works
• DESIGN PATENT [14 YEARS]
– Covers the appearance or ornamental design of an article
– protects the way an article looks
• PLANT PATENT [20 YEARS]
– discovered and asexually reproduced a distinct and new variety
of plant, other than a tuber propagated plant or a plant found in
an uncultivated state
MAKING SURE THE PATENT HAS VALUE
• DESIGN PATENT
– Design patents are frequently of little or no value
because they are so limited in what they protect.
– They should be written as broadly [i.e., cover as many
extensions] as possible [similar to a utility patent] and
still have a very good chance of being granted, and
be defendable.
• UTILITY PATENT
– These should be written as broadly [i.e., cover as
many extensions] as possible and still have a very
good chance of being granted, and be defendable.
MAKING SURE THE PATENT HAS VALUE
• Employ a specialized patent law firm or a
large law firm with full-time specialized
patent attorneys.
• File for as much protection as possible
domestically and internationally. Follow
the international patent application
sequence.
CHALLENGING A PATENT
• There are two ways to invalidate some or
all of a patent that has been granted.
–
–
• The two most common ways to invalidate
a patent are to [1] clearly show there was
prior art or [2] prove the examination was
faulty.
PATENT COOPERATION TREATY
See http://www.wipo.int/pct/en/texts/articles/atoc.htm for complete text.
• PCT is a procedure for filing patent applications
internationally. One filing results in a single
search which is accompanied by a written
opinion. You can also get a preliminary
examination. An full examination required by
national law must to done to receive a patent in
each application country.
• No “international patent” exists.
• Find a map of PCT countries on the web.
• Find a list of PCT member nations on the web.
ELEMENTS OF INTELLECTUAL
PROPERTY
• TRADE SECRETS
– Process(es)
•
– Controls
– Documentation
– Security
– Awareness
–
KNOWLEDGE MANAGEMENT
• A newly emerging business field of all
aspects of knowledge within a firm.
– Information
– Combined with experience
– Context of use
– Interpretation
– And its place in the context of the firm
KNOWLEDGE MANAGEMENT
• Intellectual property
• Knowledge within the firm
– Processes [manufacturing, …]
– Systems [order entry, …]
– Methods [product testing, …]
– Market knowledge
• Customer / prospect lists
• Databases
ELEMENTS OF INTELLECTUAL
PROPERTY
• NEW HORIZONS [the U.S. is leading the
way in most categories]
– Software
– Sounds
• Examples?
– Colors
• Examples?
– Scents
• Examples?
BRAND MANAGEMENT AND
NEW PRODUCT DEVELOPMENT
SECTION 15
Brand Management and the Firm
Sales: Ethics, Organizations and Integrating Sales Activities
ALAN L. WHITEBREAD
SALES RESPONSIBILITIES
•
– Feedback about client developments
– Feedback about your company
– Feedback about competitors
•
– Implement the marketing plan
– Communicate your company policies and/or positions
– Not an agent
•
SALES RESPONSIBILITIES:
INFORMATION DISSEMINATION
• TO CUSTOMERS AND PROSPECTS
– STANDARD COMMUNICATION
– NEW PRODUCTS AND PROGRAMS
• TO THE COMPANY
– CUSTOMER AND PROSPECT REACTIONS
– COMPETITIVE INFORMATION
• SIGNIFICANT EVENTS
SALES RESPONSIBILITIES:
CUSTOMER & PROSPECT CARE
• BUILDING A RELATIONSHIP
– TRUST
–
• DELIVERING AS ADVERTISED
– INFORMATION
– FOLLOW-UP AND FOLLOW-THROUGH
–
UNDERSTANDING THE SALES FIT IN
THE MARKETING ORGANIZATION
•
•
•
•
•
•
•
•
Markets and market segments
Target market segments
Channels of distribution
Types of sales organizations
Sales approaches to be used
Understanding the sales cycle
Understanding sales support
Sales trends
TYPES OF SALES ORGANIZATIONS*
FIELD
DIRECT
MARKETING
DIRECT SALES
TELESALES
NATIONAL
ACCOUNTS
DIRECT MAIL
RESELLER
PARTNERSHIPS
CATALOG
MANUF. REP’S
OEM
INTERNET
FRANCHISES
GOVERNMENT
LICENSEES
HOUSE
JOINT
VENTURES
Small organizations need to focus on
multiplicative sales efforts!
Copyright A. Whitebread, 2001-2008.
STRATEGIC
ALLIANCES
MAJOR SALES APPROACHES
• TRADITIONAL
– Product oriented—profit through sales volume
•
– Problem-solving—profit through problem solving
•
– Understand their business—profit through strategic
relationships, customer loyalty and satisfaction
• TEAM
– Integrate organizations—profit through sales volume
MANAGING THE PROSPECT FUNNEL AND
THE SALES CYCLE
MARKETING
DEPARTMENT
LEADS VS. COLD
CALLS
PROSPECT
EFFECTIVENESS
A
APPROACH & QUALIFY
NEEDS &
I
PRESENT
VALUE
DEMONSTRATE
FAB
REAL, FALSE,
STALLS
HANDLE OBJECTIONS
HOT PROSPECT
TRIAL & ACTUAL
CLOSE
COGNITIVE DISSONANCE
SALES TRAINING
Copyright A. Whitebread, 2001-2008.
QUALIFIED !
CLOSE
D
CUSTOMER !
A
FOLLOW-UP
SALES SUPPORT
SALES TRENDS
• TEAM SELLING TO LARGE ACCOUNTS
• TECHNOLOGY AND THE NUMBER OF SALES
PERSONNEL
– DIRECT SALES
– MANUFACTURER’S REPRESENTATIVES
– INTEGRATION OF ALTERNATIVE SALES ENTITIES
• INSIDE / OUTSIDE SALES FORCE MIX
• SALES FORCE AUTOMATION [SFA]
SALES MANAGEMENT ISSUES
1.
2.
3.
4.
5.
6.
7.
8.
Organization, strategy, and structure
Implementation and orchestration
Recruiting and selecting
Training and developing
Compensation
Direct, supervise, and motivate individuals
Evaluation
Retention
SALES MANAGEMENT
• 1-ORGANIZATION STRATEGY
AND STRUCTURE
• CHANNELS OF DISTRIBUTION STRONGLY
INFLUENCE DECISIONS
– Customer / market orientation
•
• SALES FORCE SUPPORT REQUIREMENTS
– Marketing resources, collateral, customer services, …
• SALES FORCE STRUCTURE AND SIZE
– TERRITORY, PRODUCT, CUSTOMER, COMPLEX
TYPES OF SALES FORCES
FIELD
DIRECT
MARKETING
DIRECT SALES
TELESALES
NATIONAL
ACCOUNTS
DIRECT MAIL
RESELLER
PARTNERSHIPS
CATALOG
MANUF. REP’S
OEM
INTERNET
FRANCHISES
ALTERNATIVE
GOVERNMENT
LICENSEES
HOUSE
JOINT
VENTURES
Copyright A. Whitebread, 2001-2008.
SALES FORCE ORGANIZATION
ISSUES
SALES
TYPE
CONTROL
FIELD
SMALL
GROWING /
DECLINING
COST
LEARNING
CURVE
?
?
?
?
?
DIRECT
MKTG.
ALTERNATIVE
EFFECTIVENESS
PRIMARILY
SMALL
ACCOUNTS
?
?
?
?
GEOGRAPHIC STRUCTURE
VP Marketing
Product Manager
Group A
Product Manager
Group B
Eastern Region
Sales Manager
Western Region
Sales Manager
Advantages of this structure include
1.
2.
Disadvantages to this structure
include
simple
1.
low cost of sales and administration
3.
direct customer interaction
Marketing
Communications
Manager
2.
no specialization
controlling how the sales force spends its
time
3.
selling all the products
PRODUCT STRUCTURE
VP Marketing
Product Manager
Group A
Product Manager
Group B
Advantages of this structure include
1.
2.
driven by product purchases
specialized sales force knowledge for
specialized products
3.
helps forecasting and production
scheduling
Sales Manager
Product Group A
Sales Manager
Product Group B
Marketing
Communications
Manager
Disadvantages to this structure
include
1.
duplication of sales effort selling two
very different product groups
2.
3.
higher administrative costs
problem with accounts wanting to buy
both product groups
FUNCTIONAL STRUCTURE
CEO
Marketing and
Sales
Operations
List three advantages to this
structure below.
1.
2.
3.
Finance and
Accounting
Information
Technology
Human Resources
List three advantages to this
structure below.
1.
2.
3.
MARKET / CUSTOMER STRUCTURE
VP Marketing
Product Manager
Group A
Product Manager
Group B
National Sales
Manager
Major Accounts
Manager
Marketing
Communications
Manager
National Accounts
OEM Accounts
Federal
Government
Advantages of this structure include
1.
driven by type of customer and is close
to the customer
2.
sales management controls field sales
and how they spend their time
3.
improved feedback throughout the
organization
Disadvantages to this structure
include
1.
2.
3.
higher selling and administrative costs
multiple sales forces compete for product
management’s time
account assignment to the appropriate
sales organization is critical to the
success of this approach
COMPLEX STRUCTURE
VP Marketing
Product
Management
Group
National Sales
Manager
Direct Sales
Managers
Reseller Sales
Managers
Direct Marketing
Manager
Telesales
Manager
Advantages of this structure
include
1.
2.
3.
driven by type of customer and is close
to the customer
multiple levels of sales skills based on
the customer type
very difficult for competitive analysis
Internet Sales
Manager
National
Accounts
Issues of this structure
include
1.
classification and reclassification of
accounts
2.
3.
Marketing
Communications
Manager
OEM Accounts
Federal
Government
Disadvantages of this
structure include
1.
2.
price strategies
consistent program implementation
Major Accounts
Manager
3.
requires a lot of coordination
Information is widely spread over the
organization and hard to consolidate
very heavy work load on marketing
communications
COMPLEX STRUCTURE
VP Marketing
Product
Management
Group
National Sales
Manager
Direct Sales
Managers
Reseller Sales
Managers
Direct Marketing
Manager
Telesales
Manager
Internet Sales
Manager
National
Accounts
Major Accounts
Manager
Marketing
Communications
Manager
OEM Accounts
Federal
Government
THIS BECOMES EVEN MORE COMPLEX WITH
-MANUFACTURER’S REPRESENTATIVES
-CUSTOMER SERVICES
-TECHNICAL SALES SUPPORT
-
WHERE SHOULD CUSTOMER SERVICES SHOULD REPORT? WHY?
INTERNATIONAL STRUCTURE - 1
CEO or
VP Marketing
North
America
Central and
South America
List three advantages to this
structure below.
1.
2.
3.
Europe, Africa,
and the
Middle East
Asia and the
Pacific
Export
List three disadvantages to
this structure below.
1.
2.
3.
INTERNATIONAL STRUCTURE - 2
VP Marketing
Product
Management
Group
National Sales
Manager
Direct Marketing
Manager
Major Accounts
Manager
Marketing
Communications
Manager
Customer
Services
Technical Sales
Support
This is a typical U.S. marketing structure for a large organization. At
this size it could look like an international structure at the higher level.
This provides you detail of some of the organizational issues larger
firms face every day.
THE SALES ORGANIZATIONS
• 2-IMPLEMENTATION / ORCHESTRATION
–
– COMMON GOALS
– SIMILAR STRATEGIES AND TACTICS
– TEAMWORK
SALES MANAGEMENT
• 3-RECRUITING AND SELECTING
• SEARCH AND SEARCH COSTS
– % AVERAGE TURNOVER
– HOW?—WHERE?—WHO CAN HELP?
–
• SELECTION PROCESS
– TEST FOR SALES APTITUDE AND / OR FIT?
» PERSONALITY
» PERSEVERANCE
–
–
SALES MANAGEMENT
• 3-RECRUITING AND SELECTING-continued
• SEEK THOSE WITH GOOD SKILLS
–
– AS PROMISED AND ON TIME
– CRITIQUE CALLS
–
– PROFESSIONAL COURTESY
•
SALES MANAGEMENT
• 4-TRAINING & DEVELOPING
• BASIC SALES SKILLS
– PSS OR EQUIVALENT
– PRESENTATIONS
–
• WHY SALES TRAINING?
– STRONGER CUSTOMER RELATIONS
– IMPROVED MORALE
– INCREASED PRODUCTIVITY
SALES MANAGEMENT
• 4-TRAINING & DEVELOPING-continued
• KNOW YOUR CUSTOMERS
• TIME MANAGEMENT
• TERRITORY MANAGEMENT
– TYPES OF ACCOUNTS
TYPES OF ACCOUNTS
ACCOUNT POSITION
STRONG
P
HIGH
O
WEAK
BASE + GROWTH
GROWTH
MAXIMIZE EFFORTS
T
E
NEED CLOSE EVALUATION
N
THE DIRECT MARKETING ISSUE
T
I
WHAT FUTURE ?
A
L
LOW
Copyright A. Whitebread, 2001-2008.
PROBLEM !
SPEND AS LITTLE TIME AS POSSIBLE
SALES MANAGEMENT
• 4-TRAINING & DEVELOPING-continued
• EXCELLENT PRODUCT & PROGRAM
KNOWLEDGE
•
• BE PRODUCTIVE AND EFFICIENT
TIME MANAGEMENT
30%
25%
20%
Sales
Manager
15%
10%
5%
0%
Selling Phone Service Admin
Travel
SALES MANAGEMENT
• 5-COMPENSATION
• OBJECTIVES
• IS THE SALESPERSON IN CONTROL?
• EQUITABLE
–
SALES MANAGEMENT
• 5-COMPENSATION-continued
• WHAT IS THE JUSTIFICATION FOR
–
–
–
–
–
–
BASE SALARY
COMMISSIONS
BONUS
EXPENSES LEVELS
AUTOMOBILE OR ALLOWANCE
THE COMPENSATION MIX TO MEET CORPORATE
OBJECTIVES
SALES MANAGEMENT
• 5-COMPENSATION-continued
• TYPES OF PLANS
– SALARY & TRAVEL PAID
» ELECTRONICS
– SALARY & BONUS OR COMMISSION & TRAVEL
» COMMON
– STRAIGHT COMMISSION & TRAVEL
» COST MINIMIZATION
– STRAIGHT COMMISSION
» CORRUGATED, AVON
– PLAN DESIGN ISSUES
SALES MANAGEMENT
• 5-COMPENSATION-continued
– PLAN DESIGN ISSUES
» Time period
month, YTD, cumulative YTD …
» Territory size
»
»
SALES MANAGEMENT
• 5-COMPENSATION-continued
• COST OF SALES ISSUES
• CALCULATING THE COST OF SALES
–
–
–
–
How many prospects?
Average number of calls made per day.
Average cost of a B-B sales call--$300+
Average cost of a telesales call--$25 est.
• UNDERSTANDING THE SALES CYCLE
– Length
– Key events
–
COST OF SALES CALCULATIONS
• Method 1-Territory Coverage / Workload Approach
# prospects * avg. calls to close
(avg. calls / day) * 240 * 0.6
• Method 2-Profitability Approach
avg. cost / call * avg. calls to close
avg. GP margin
• Method 3-Available Budget Approach
budget / avg. cost of a salesperson
DOES NOT INCLUDE THE HIT RATIO.
Copyright A. Whitebread, 2001-2008.
SALES MANAGEMENT
• 6-DIRECT, SUPERVISE, & MOTIVATE
INDIVIDUALS
– PLANNING AND IMPLEMENTING
– FORECASTING
• TERRITORY POTENTIAL
• SALES
– TRACKING & ACCOUNTABILITY
SALES MANAGEMENT
• 6-DIRECT, SUPERVISE, & MOTIVATE
INDIVIDUALS
– BUDGETING AND EXPENSE CONTROL
– MOTIVATING AND COACHING
• TWO DRIVING FORCES
–
–
» HONORS, AWARDS
» SALES INCENTIVE PROGRAMS [Trips, gifts]
» SALES MEETINGS
SALES MANAGEMENT
• 7-EVALUATION
• THE ROLE OF QUOTAS
– OBJECTIVES
– DESIRED RESULTS
– DETERMINING A FAIR QUOTA
–
SALES MANAGEMENT
• 7-EVALUATION-continued
• PROGRESS TO PLAN / QUOTA
– GREAT YEAR
– BAD YEAR – AGAIN!
– GREAT YEAR – BAD YEAR
–
• TIMLINESS
– SALES REPORTS & CALL PLANS
– TERRITORY INFORMATION
– MEETING ADMINISTRATIVE REQUIREMENTS
SALES MANAGEMENT
• 7-EVALUATION-continued
• ATTITUDE
• LEADERSHIP POTENTIAL
• CAREER PLANNING
– ADVANCE THROUGH SALES
– ADVANCE THROUGH MARKETING
– DEVELOP LEADERS AND PREVENT TURNOVER
SALES MANAGEMENT
• 8-RETENTION
TURNOVER COSTS
–
–
–
–
–
INTERIM TERRITORY COVERAGE
RECRUITING
INTERVIEWING & HIRING
ACCOUNT INTRODUCTIONS
PERSONAL & MOVING EXPENSES
GETTING THE SALES ORGANIZATION
READY FOR THE LAUNCH
• Support materials
• Samples
• Sales training
– Sales calls
– Demonstrations
• Pre-launch sales