1
Copyright 2014 by Tomasz M. Miśkiewicz. All rights reserved. This publication
is protected by Copyright and permission should be obtained from the author
prior to any prohibited reproduction, storage in a retrieval system, or
transmission in any form or by any means, electronic, mechanical,
photocopying, recording, or likewise. For information regarding permission(s),
write to: tomasz.miskiewicz@sgh.waw.pl.
PPRODUCT AND BRAND STRATEGIES
Tomasz M. Miśkiewicz, PhD
Chair of Market and Marketing
Warsaw School of Economics
Warsaw, 2014
2
Contents
1. Definition of product. Levels of product. Product classification. Individual product
decisions
2. Methods of product/brand situation analysis
3. Positioning
4. New-product development strategy
5. Product life-cycle strategies
6. Product-Market Strategies
7. Definition and functions of brand. Brand as a company competitive advantage.
Brand-product relationships
8. Brand diversity
9. Brand identity and positioning
10. Launching the brand
11. Brand life cycle. Formulation of brand strategy
12. Creating the product portfolio and brand portfolio. Brand extension strategies
13. Brand architecture
14. Brand/product strategies in international marketing
Bibliography
3
1. Definition of product. Levels of product. Product classification. Individual product
decisions.
Definition of product
A product is anything that can be offered to a market for attention, acquisition, use, or
consumption and that might satisfy a want or need. Products include more than just tangible
goods. Broadly defined, products include physical objects, services, events, persons, places,
organizations, ideas, or mixes of these entities.
Services are a form of product that consist of activities, benefits, or satisfactions offered for
sale that are essentially intangible and do not result in the ownership of anything. A
company’s offer to the marketplace often includes both tangible goods and services. Each
component can be a minor or a major part of the total offer. At one extreme, the offer may
consist of a pure tangible good, at the other extreme are pure services, for which the offer
consists primarily of a service. Between these two extremes, however, many goods and
services combinations are possible
1
.
Levels of product
A product or service may be viewed from two distinct perspectives. The seller views it as a
tangible offer with colour, features, style, a brand name, packaging, and size, easily
recognized by the buyers. To the prospective buyer, however, these physical or chemical
attributes may not be important. The buyer may view the same product or service not only in
terms of its physical attributes but based more on benefits he gets from it. Because of this, in
developing a product, the product planner needs to think about the product on three levels:
core product, actual product, and augmented product (see Figure 1).
1
Ph. Kotler, G. Armstrong, Principles of Marketing, Prentice Hall, New Jersey 2001, pp. 291.
4
Figure 1 Three levels of product
Source: Ph. Kotler, G. Armstrong, Principles of Marketing, Prentice Hall, New Jersey 2001,
pp. 294.
The core product refers to the use, benefit or problem-solving service that the consumer is
really buying when purchasing the product, i.e. the need that is being fulfilled. The actual
product is the tangible product or intangible service that serves as the medium for receiving
core product benefits. The augmented product consists of the measures taken to help the
consumer put the actual product to sustained use, including installation, delivery and credit,
warranties, and after-sales service.
Product classification
Products and services fall into two broad classes based on the types of consumers that use
them - consumer products and industrial products. Broadly defined, products also include
other marketable entities such as experiences, organization, persons, place, and ideas.
Consumer products are those bought by final consumer for personal consumption. There are
four types of consumer goods: convenience products, shopping products, specialty products,
and unsought products
2
. All consumer products have different characteristics in terms of
consumer buying behaviour, price, distribution and promotion (see Table 1).
2
Ph. Kotler, G. Armstrong, op. cit.
Installation
Augmented product
Packaging
Actual product
Brand
name
Features
Core product
Quality
level
Design
Warranty
Core
benefit
or
service
Delivery
and
credit
After-
sale
service
5
Table 1 Marketing consideration for consumer products
Marketing
considerations
Type of Consumer Product
Convenience
Shopping
Specialty
Unsought
Customer
buying
behavior
Frequent
purchase, little
planning, little
comparison or
shopping effort,
low customer
involvement
Less frequent
purchase, much
planning and
shopping effort,
comparison of
brands on price,
quality, style
Strong brand
preference and
loyalty, special
purchase effort,
little comparison
of brands, low
price sensitivity
Little product
awareness,
knowledge (or,
if aware, little or
even negative
interest)
Price
Low price
Higher price
High price
Varies
Distribution
Widespread
distribution,
convenient
locations
Selective
distribution in
fewer outlets
Exclusive
distribution in
only one or a
few outlets per
market area
Varies
Promotion
Mass promotion
by the producer
Advertising and
personal selling
by both
producer and
resellers
More carefully
targeted
promotion by
both producer
and resellers
Aggressive
advertising and
personal selling
by producer and
resellers
Examples
Toothpaste,
magazines,
laundry
detergent
Major
appliances,
televisions,
furniture,
clothing
Luxury goods,
such as Rolex
watches or fine
crystal
Life insurance,
Red Cross blood
donations
Source: Ph. Kotler, G. Armstrong, op. cit.
Industrial products are those purchased by enterprises for the purpose of producing other
goods targeted at running the business. This category includes the following
3
:
3
J.P. Peter, J.H. Donnelly Jr., Marketing Management. Knowledge and Skills, IRWIN, 1995, pp.. 97.
6
raw materials and semi-finished goods,
major and minor equipment, such as basic machinery, tools, and other processing
facilities,
parts or components, which become an integral element of some other finished good,
supplies or items used to operate the business that do not become part of the final product.
Each industrial product can be characterized by: price, length of life, quantities purchased,
frequency of purchase, standardization of competitive products, quantity of supply (see Table
2), and marketing considerations (see Table 3).
Table 2 Classes of Industrial Products – Some Characteristics
Characteristics
Type of Product
Raw
Materials
Fabricating
Parts and
Materials
Installations
Accessory
Equipment
Operating
Supplies
Unit price
Very low
Low
Very high
Medium
Low
Length of life
Very short
Depends on
final product
Very long
Long
Short
Quantities
purchased
Large
Large
Very small
Small
Small
Frequency of
purchase
Frequent
delivery;
long-term
purchase
contract
Infrequent
purchase,
but frequent
delivery
Very
infrequent
Medium
frequency
Frequent
Standardization
of competitive
products
Very much;
grading is
important
Very much
Very little;
custom-
made
Little
Much
Quantity of
supply
Limited;
supply can
by increased
Usually no
problem
No problem
Usually no
problem
Usually no
problem
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slowly or
not at all
Example
Iron ore
Engine blocs Blas
furnaces
Storage
racks
Paper clips
Source:
J.P. Peter, J.H. Donnelly Jr., op. cit. pp. 99.
Table 3 Classes of Industrial Products – Marketing Considerations
Characteristics
Type of Product
Raw
Materials
Fabricating
Parts and
Materials
Installations
Accessory
Equipment
Operating
Supplies
Nature of
channel
Short; no
middlemen
Short;
middlemen for
small buyers
Short; no
middlemen
Middlemen
used
Middlemen
used
Negotiation
period
Hard to
generalize
Medium
Long
Medium
Short
Price
competition
Important
Important
Not
important
Not main
factor
Important
Pre-sale/After-
sales-service
Not
important
Important
Very
important
Important
Very little
Promotional
activity
Very little
Moderate
Sales people
very
important
Important
Not too
important
Brand
preference
None
Generally low
High
High
Low
Buying
contracts in
advance
Important;
long-term
contracts
used
Important;
long-term
contracts used
Not usually
used
Not usually
used
Not
usually
used
Example
Iron ore
Engine blocs
Blas
furnaces
Storage racks
Paper clips
Source:
J.P. Peter, J.H. Donnelly Jr., op. cit., pp. 99.
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Individual product decisions
Consumers tend to see products as complex bundles of benefits that fulfil their needs. These
benefits come from all elements of the product, especially from product attributes,
branding, packaging, labelling, and product support services.
Product attributes are perceived by features, quality, style and design. All these attributes
can constitute added value for consumers. Product features are physical characteristics of a
product which include qualities or variables such as shapes, size colour weight, speed,
durability and maintainability. A product can be offered as the starting point – a stripped-
down model without any extras or as a higher-level model with more added features. Product
quality is the ability of a product to perform its functions. It includes the product’s overall
durability, reliability, precision, ease of operation and repair and as well as valued attributes.
Product style and design are important source of added value for consumer. The style
describes the appearance of a product and can attract attention of a potential consumer. The
design is a larger concept than style and should contribute to product’s usefulness as well as
to its look. Good style and design can not only give the consumers added value but also
improve product performance, cut production costs and give the product a strong competitive
advantage.
Brand is a name, term, sign, symbol, design or a combination of these and it identifies the
maker or seller of a product or service. Branding helps buyers identify products and informs
them about the quality of products. It is also added value for the seller who gains via the brand
name legal protection of products’ unique features that could be possibly copied by
competitors.
Packaging involves designing and producing the container or wrapper for a product.
Traditionally, the primary functions of the package were to contain and protect the product
during loading and transporting. Nowadays, packaging can perform the following functions:
protective function - packaging protects the content
storage function - packaging is a storing tool
loading and transporting function - packaging is also used for the convenience of handling
the objects packed
sales and promotional function - attractive packaging has been used to lure potential
buyers’ attention and to have a positive impact upon their purchasing decision
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informative function - packaging is also an important medium for imparting information
that is often printed on packaging; most of the custom packaging products made by
packaging manufacturers are targeted at providing the consumer with details about the
contents and use of the particular product
Labels may range from simple tags attached to products to complex graphics that are part of
the package. The label identifies the product or brand and might also describe another things
about the product such as: who made it, where it was made, when it was made, its contents,
how it is to be used, how to use it safely, what is the unit price, what is it’s expected shelf life
or what nutritional values the product has. The label might also promote the product through
its attractive graphics.
Product support services are services that augment the actual product. This kind of services
can be a significant part of the added value offered to consumers and at the same time the way
to gain competitive advantage.
2. Methods of product/brand situation analysis
Portfolio analysis is a systematic way to analyse the products and services that make up a
company's business portfolio. Most firms are involved in more than one business with a range
or portfolio of products each of which may be at a different stage in its life cycle. Each
business is one of the company’s strategic business units (SBUs) and consists of a portfolio of
products or services. The company will want to put strong resources into its more profitable
business and phase down or drop its weaker ones. Portfolio analysis helps decide which of
products and services should be emphasized and which should be phased out, based on
objective criteria. Portfolio analysis consists of subjecting each of the company’s products
and services through a progression of finer screens.
Portfolio analysis offers the following advantages:
it encourages management to evaluate each of the organization's businesses individually
and to set objectives and allocate resources for each,
it stimulates the use of externally oriented data to supplement management's intuitive
judgment,
it raises the issue of cash flow availability for use in expansion and growth.
10
Portfolio analysis does, however, have some limitations:
it is not easy to define product/market segments,
it provides an illusion of scientific rigor when some subjective judgments are involved.
Considering both its advantages and disadvantages, portfolio analysis should be regarded as a
disciplined and organized way of thinking about asset allocation.
Most standard portfolio-analysis methods evaluate SBU’s on two important dimensions – the
attractiveness of the SBU’s market or industry and the strength of the SBU’s position in that
market or industry. The best-known portfolio-planning methods were developed by the
Boston Consulting Group (The BCG growth-share matrix) and General Electric (General
Electric’s strategic business-planning grid).
BCG Matrix
Using the Boston Consulting Group approach, a company classifies all its SBU’s using two
dimensions – market growth rate and relative market share (see table 4). Market growth rate is
calculated as a difference between individual sales this year minus individual sales last year
divided by individual sales last year and provides a measure of market attractiveness. Relative
market share is calculated as a relation between business unit sales this year and leading rival
sales this year and serves as a measure of company strength in the market.
Table 4 The BCG growth-share matrix
Mar
ke
t grow
th r
ate
High
Star
Question mark
Low
Cash cow
Dog
High
Low
Relative market share
Source: Ph. Kotler, G. Armstrong, op. cit., pp. 54.
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By dividing the growth-share matrix as indicated, four types of SBU’s can be distinguished:
Stars, Cash cows, Question marks, and Dogs.
Stars (high growth rate, high relative market share) are leaders in business. They require
heavy investment to maintain its large market share. It leads to large amount of cash
consumption and cash generation. Company should attempt to hold the market share,
otherwise the star might become a Cash cow.
Cash cows (low growth rate, high relative market share) are foundation of the company and
often the stars of yesterday. They generate more cash than required by investing as little cash
as possible. They are located in an industry that is mature, not growing or declining. Using the
profits from Cash cow the company can support other SBUs that need investment.
Dogs (low growth rate, low relative market share) are the cash traps. SBUs recognized as
Dogs are situated at a declining stage. Dogs do not have potential to bring in much cash. They
may generate enough cash to maintain themselves but not promise to be large source of
business. Its number should be minimized in the company.
Question marks (high growth rate, low relative market share) have potential to become star
and eventually cash cow but can also become a dog. They require a lot of cash to hold their
share and become Stars.
General Electric’s strategic business-planning grid
General Electric’s strategic business-planning grid maps the external industry vs. the internal
firm's forces using multiple factors to determine grid placement. It is a systematic perception
measurement used to determine the attractiveness of the industry and the business strengths of
the firm. The grid can be used to identify the strategic development of the product and
evaluation of market share.
The value of this tool lies in its power to allow an organization to analyse potential new
products' or existing products' relationships to business opportunities, environmental threats
and the firm's strengths and weaknesses. The tool provides an annualized evaluation of the
effectiveness and performance of long-term strategic planning.
12
This tool uses a matrix with two dimensions – one representing industry attractiveness and
one representing company strength in the industry (see Figure 2).
Figure 2 General Electric’s strategic business-planning grid
Business strength
Strong
Average
Week
Industr
y a
tt
ra
cti
ve
n
ess
High
Medium
Low
Source: Ph. Kotler, G. Armstrong, op. cit., pp. 55
Industry attractiveness is an index made up of market size, market growth rate, industry profit
margin, amount of competitors, seasonality and cyclicity of demand, and industry cost
structure. Each of these factors rated and combined in an index of industry attractiveness. The
business strength index includes factors such as the company’s relative market share, price
competitiveness, product quality, customer and market knowledge, sales effectiveness, and
geographic advantages. Using rating for industry attractiveness described as high, medium
and low, and for business strength as strong, average and weak the grid can be divided into
three zones. The green cells contain SBUs in which the company should invest and grow. The
yellow cells contain SBUs that are medium in overall attractiveness. The company should
maintain its level or investment in these SBUs. The orange cells contain SBUs that are low in
overall attractiveness. The company should give serious thought to harvesting or divesting
these SBUs.
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3. Positioning
Product position
Consumers are overloaded with information about products and services. They cannot re-
evaluate products every time they make a purchase decision. To simplify the buying process,
consumers organize products into categories – they “position” products, services, and
companies in their minds. A product’s position is the way the products is defined by
consumers on important attributes – the place the product occupies in consumers’ minds
relative to competing products. A product’s position is the complex of perceptions,
impressions, and feelings that consumers have for the product compared with competing
products
4
.
The positioning process consists of three steps:
identifying a set of criteria which can used by consumers to evaluate an offer in a defined
category of goods or services,
evaluating the position of own product and product of competitors using identified criteria
(with the use of consumer perception maps),
choosing of the position for own product.
While identifying the criteria used by consumers when evaluating products from the category
analysed, the most important thing is to understand the needs of consumers. They can refer to
product attributes (product features, quality, design), price of the product, product support
services, the way how product is consumed etc. Thanks to criteria identification it’s easy to
understand the most important differences between products. If the product has significant
advantages regarding criteria of choice they can be used for differentiation of the product
(positioning). Criteria of choice, pointed by consumers, are only part of criteria used for
positioning of the product:
offer characteristics (features, components, price, packaging, quality, ease of handling and
repairing, personalization grade, availability) or its advantages (prestige, leisure time,
security),
additional services (after-sales-service, delivery, installation, warranty, financing
facilities),
4
Ph. Kotler, G. Armstrong, op. cit., pp. 269.
14
users’ characteristics (sex, age group, subculture),
producer’s image (market position, tradition, innovation, country of origin, brand heritage,
distribution channel),
staff characteristics (competences, reliability, kindness).
Nevertheless, solid positions cannot be built on empty promises. Promised value should be
delivered and give consumers more value than competitors’ offers. Therefore, during the
positioning process not only subjective consumer perception should be taken into
consideration but also objective evaluation of own and competitors’ products.
When using criteria of positioning the company should decide how many differences to
promote and which ones. Many marketers tend to think that companies should aggressively
promote only one benefit to the target market, however, other marketers claim that more than
one (two or more) distinctive factors can be promoted. Criterion or criteria chosen should
represent the following features
5
:
- important: the difference delivers a highly valued benefit to target buyers,
- distinctive: competitors do not offer the difference, or the company can offer it in a more
distinctive way,
- superior: the difference is superior to other ways that customers might obtain the same
benefit,
- communicable: the difference is communicable and visible to buyers,
- pre-emptive: competitors cannot easily copy the difference,
- affordable: buyers can afford to pay for the difference,
- profitable: the company can introduce the difference profitably.
The positioning of the product can be presented on a following perception map (see Figure 3).
5
Ibidem, pp. 273.
15
Figure 3 Perception map of the model product
Positioning strategy
The company may realize one of the following strategies
6
:
single segment placement,
multi-segment placement,
imitative placement,
anticipatory placement,
adaptive placement,
defensive placement.
Single segment placement strategy is connected with product development and with the
process of preparing marketing mix program adapted to target market preferences,
encompassing only one segment. This classic approach in marketing is advantageous
particularly when the individual segment chosen is big enough.
6
L. Garbarski, I. Rutkowski, W. Wrzosek, Marketing. Punkt zwrotny nowoczesnej firmy, Polskie Wydawnictwo
Ekonomiczne, Warszawa 2008, pp. 197-199.
Product 3
Product 1
Product 2
Product 5
Product 4
High Quality
Low Quality
High Price
Low Price
16
Multi-segment placement strategy takes place when an enterprise is seeking to source
customers from various segments. Such strategy, advantageous in terms of economies of scale
and relatively lover investment expenditures and effort, should be employed when individual
segments are small and when the positioned product is in an early life cycle stage. Should the
above mentioned conditions not be fulfilled, the single segment placement strategy proves to
be less effective..
Imitative placement strategy consists in launching new product into the market and
positioning it in such a way that it imitates a competitive brand which enjoys consumers’
interest. This strategy is aimed at taking over some proportion of competitive products’
customers. Confronting the competitors in such a way bears risk, hence, the company which is
using this strategy, should have a competitive edge over other companies, i.e. easier access to
distribution channels, better sales staff, etc.
Anticipatory placement strategy refers to the future and is connected with a situation when
a company is positioning a new products taking into account the development and changing
of target market needs. It means that companies do not refer to customers’ needs which are
already established and at the same companies don’t expect a quick acceptance of the new
product (brand).
Adaptive placement strategy is used when the company is changing its position on the
market due to the evolution of target market needs. The subsequent changes introduced in the
process of positioning are also referred to as: repositioning (secondary product positioning)
Defensive placement strategy is based on rolling out a new brand into the market, akin to
own brand which proved to be successful, and creating a similarly strong position for it. Such
situation leads to the effect of „cannibalization” but it is fully justified. The brand which
proved to be successful, is exposed to competitors’ actions aimed at imitating it, which can be
risky. Positioning a new product similarly to an old one diminishes the presence of the initial
brand but, on the other hand, it also substantially weakens or neutralizes competitors actions
.
17
4. New-product development strategy
The substance of a new product development strategy consists in intended actions taken by
the manufacturer which are aimed at offering new products on the market supposed to
effectively stimulate demand and ensure the execution of development goals of an enterprise.
A firm can obtain new products in two ways. One is through acquisition – by buying a whole
company, a patent, or a licence to produce someone else’s product. The other is through new-
product development in the company’s own research and development department.
The degree of novelty of a product may be assessed from the perspective of both the
manufacturer and customer (see table 5).
Table 5 Degree of novelty of a product introduced to a market
Degree of novelty of a product from the customer's perspective
Low
High
De
gr
ee
of nove
lty o
f a pr
od
u
ct
fr
om t
h
e
m
an
u
fac
ture
r's
p
er
sp
ec
tive
L
ow
New products
manufactured at lower
costs
Products of changed
market position
Improvements
Improvements
Additional products
within the existing
product range
Hi
gh
New product ranges
Worldwide novelties
New-product development process consists into 8 stages:
idea generation,
idea screening,
concept development and testing,
marketing strategy development,
business analysis,
product development,
test marketing,
18
commercialization.
Idea generation is the systematic search for new-product ideas. It includes internal sources,
customers, competitors, distributors and suppliers. Some companies have developed
successful intrapreneurial programs that encourage employees to thing up and develop new-
product ideas. Many new-product ideas come also from watching and listening to customers.
The firm can analyse customer questions and complaints to find ideas how to solve better
consumer problems. Competitors are also good source of new-product ideas. Companies
watch and buy competing new products, take them apart to see how they work, analyse their
sales, and decide whether they should bring out a new product of their own. Distributors are
close to the market and can pass along information about consumers problems and new-
products possibilities. Suppliers can tell the company about new concepts, techniques, and
materials that can be used to develop new products.
The search for new-product ideas should be systematic. Top management can install an idea
management system that directs the flow of new ideas to a central point where they can be
collected, reviewed, and evaluated. In setting up such a system, the company can do any or all
the following
7
:
appoint a respected senior person to be the company’s idea manager,
create a multidisciplinary idea management committee consisting of people from
R&D, engineering, purchasing, operations, finance, and sales and marketing to meet
regularly and evaluate proposed new-product and service ideas,
set up a toll-free number for anyone who wants to send a new idea to the idea
manager,
encourage all company stakeholders – employees, suppliers, distributors, dealers – to
send their ideas to the idea manager,
set up formal recognition programs to reward those who contribute the best new ideas.
The purpose of idea generation is to create a large number of idea. The purpose of the
succeeding stages is to reduce that number. Idea screening is the first idea-reducing stage. On
this stage manager or committee evaluates the new-product ideas against a set of general
criteria.
7
Ph. Kotler, Kotler on Marketing, The Free Press, New York, pp. 43-44.
19
The purpose of concept development and testing is to change new-product idea into product
concept. Product concept is a detailed version of the new-product idea stated in meaningful
consumer terms. For some concept test, a word of picture description might be sufficient.
However, a more concrete and physical presentation of the concept will increase the
reliability of the concept test. After being exposed to the concept, consumers may be asked to
react to it. Reactions of consumers can help the company decide which concept has the
strongest appeal.
The purpose of market strategy development is designing an initial marketing strategy for
introducing the new-product to the market. The market strategy statement consist of three
parts. The first part describes the target market; the planned product positioning; and the sales,
market share, and profit goals for the first few years. The second part of the marketing
strategy statement outlines the product’s planned price, distribution, and marketing budget for
the first year. The third part of the marketing strategy statement describes the planned long
run sales, profit goals, and marketing mix strategy.
Business analysis stage involves a review of the sales, costs, and profit projections for a new
product to find out whether they satisfy the company’s objections for a new product to find
out whether they satisfy the company’s objectives. If they do, the product can move to the
product development stage.
The purpose of product development stage is to develop the product concept into a physical
product. During this stage R&D department develop and test physical versions of the product
concept and look for version, which satisfy consumers and is budget effective.
Test marketing is a stage, when the product and marketing program are tested in more
realistic market settings. The amount of test marketing depends on the type of product. When
the cost of developing and commercialisation the product are low, or when management is
already confident about the new product, the company may do little or no test marketing. Test
marketing gives management the information needed to make a final decision about launching
the new product.
The purpose of commercialisation is to introduce a new product into the market. On this stage
management decides when (which month, or season), where (local, national or international
market) and how (how quickly and which way to expand) to launch new product.
20
In reference to the degree of novelty of products introduced to the market from the customer's
perspective, one may differentiate four strategies of a new product (see Table 6).
Table 6. Types of new product strategies followed by Polish enterprises
Degree of novelty of a product from the customer's perspective
Low
High
De
gr
ee
of no
ve
lt
y of
a
pr
oduc
t fr
om t
he
manuf
ac
tur
er'
s
pe
rspe
cti
ve
Low
Strategy of technological
modification of a manufactured
product
Strategy of a new product
High
Strategy of upgrade of a
manufactured product
Strategy of competitors'
product imitation
Source: M. Haffer, Determinants of a new product strategy of Polish industrial enterprises,
UMK, Toruń 1998, pp. 193.
The nature of upgrade of a manufactured product lies in its adjustment to changing
preferences and requirements of customers. From the customer's perspective, this strategy is
characterized by low degree of novelty and a slight change in the field of new benefits. For a
the manufacturer, however, it becomes a change to extend the life cycle of the offered product
without having to introduce radical changes in its functional features and manner in which the
needs are satisfied.
The strategy of technological modification of a manufactured product is followed by
manufacturers in the light of changes of applicable law requirements and/or quality
requirements the product has to meet. This may result also from the manufacturer's endeavor
to reduce manufacturing costs by changes of the technology or materials used for production
or by design changes. The outcome is, from the customer's perspective, a technically new
product which, however, provides them with little significant new benefits.
The strategy of competitors' product imitation consists in adaptation of a technology
known to a given manufacturer to manufacture and/or commercialize a new product that is
similar to products offered by other enterprises and boasting certain success on other markets.
A significant factor encouraging manufacturers to adopt this strategy is the relatively short
time required for its implementation and high success chance thanks to the observation of
21
competitors' experiences and market behavior of customers. High degree of novelty of a
product from the perspective of a customer may result from the lack of similar products
within a given market or lack of clear superiority of such product as compared to the products
existing on the market earlier.
Strategy of a new product assumes the necessity to create an innovation allowing for taking
up the position of a market leader. Most often this involves the application of new techniques
and/or technologies, while the introduction of a product onto the market requires new
marketing activities that differ from those of competitors. Introduction of a new product onto
the market creates a chance for the customers who may obtain entirely new functionalities
allowing to satisfy new needs or to satisfy existing needs in a new manner.
As part of the strategy of a new product, depending on the priority of market introduction and
degree of innovativeness of a new product, one may differentiate between two variants of this
strategy: innovation leadership strategy and imitation strategy.
The innovation leadership strategy leads to obtaining benefits from earlier introduction of a
product onto the market (dominant share in the market, possibility to generate higher profits)
and achieving a leader's position on such market. A company may thus set out technical and
quality standards on a given market as well as it may establish a higher price level. Its
position may be additionally subject to legal protection (e.g. patents and concessions). This
strategy, however, requires considerable resources and skills enabling the enterprise to
maintain such position for period of time that is long enough for compensation of investment
spending for the development of such new product and its market introduction.
The imitation strategy may be adopted as a reaction to the actions of the market leader. It may
take a number of forms, including the following:
creative imitation strategy which allows for the use of the leader's experience and their
translation into improvement of technical solutions and/or marketing actions of the latter
quick imitation strategy in which the strong market position may be achieved by method
of rapid adaptation of competing products, e.g. by purchase of a license and know-how
and quick copying of other solutions
elastic specialization strategy assumes the modification of characteristics and features of
products offered earlier by the market leader in order to adjust such products to the needs
of specific market segments
22
strategy of imitation on request consists in the introduction of innovation at the order of
other enterprises based on the design or prototype provided by them
late imitation strategy consists in the introduction of gradual, minor improvements
supported by other actions which differentiate the products, however with a considerable
delay with respect to the market leader
Introduction of new products involves a number of risks related to the enterprise environment.
These can include the following:
risk of lack or too slow product acceptance by potential customers
risk of revenge actions being taken by competitors aimed at mitigation of effects of
introduction of a new product to a given market
risk related to entering into new cooperative relationships with suppliers
risk related to creation of distribution channels for a new product
The risk or lack or too slow product acceptance by potential customers results from the lack
of experience of customers with a given product. The market pioneer is forced to take the risk
and costs of shaping the customers' preferences (overcoming technical, economic and
psychological obstacles). In extreme cases, the manufacturer may be compelled to abandon
further actions and withdraw such product from the market. However, if the manufacturer
becomes successful, the newly introduced product may become a market standard. The risk of
followers is smaller, since they may learn and draw conclusions from the pioneer's successes
and negative experiences and adjust their actions accordingly.
The risk of revenge actions being taken by competitors aimed at mitigation of effects of
introduction of a new product to a given market relates to a possibility in which market
competitors may attempt to introduce imitations of a given innovative product to the market.
This risk can be reduced by seeking legal protection and creating barriers in access to
materials, technology, distribution channels or other resources.
The risk related to entering into new cooperative relationships with suppliers results from the
lack of relevant suppliers and/or contracts for deliveries of essential materials or components
of specific quality and in required quantity.
The risk related to creation of distribution channels for a new product is connected with the
necessity to convince the intermediaries to novelties and taking the effort to educate them
23
about such novelty. As in case of customers, the manufacturer may be forced to shape new
needs and overcome existing barriers.
Apart from the risk generated by the enterprise's environment, introduction of a new product
to the market is related also to the risk originating within the manufacturer's organization. It is
connected both with the resources essential for securing the production and commercialization
process of a new products, as well as with the existing portfolio of given manufacturer's
products.
5. Product life-cycle strategies
Each product has a life cycle, although the exact shape and length is not known in advance.
Typical product life cycle comprises five distinct stages, including the product development
stage: product development stage, introduction, growth, maturity, decline (see Figure 4).
Figure 4 Sales and profits over the product life cycle from inception to demise
Source: Ph. Kotler, G. Armstrong, op. cit., pp. 354.
Sales
Profits
Time
Growth
Maturity
Decline
Product
develop-
ment
stage
Sales and
profits
Losses-
investment
Introduction
24
Product development stage begins when the company finds and develops a new-product idea.
During product development, sales are zero and the company’s investment cost rises.
Introduction stage starts when the new product is first distributed and made available for
purchase. Introduction takes time, and sales growth can be slow. Profits are negative or low
compared to subsequent stages. Considerable amount of money is needed to attract and
inform the distributors and consumers and ultimately make them try the new product. The
company and, potentially, some of its competitors manufacture basic version of the product
and offer it buyers who are the readiest to buy. This group of consumers is called innovators,
because they are the first to be ready to try a new product in its product area (see adopter
categorization on the basis of relative time of adoption of innovations in Figure 5). The next
group of consumer which starts buying the product at the introduction stage are early
adopters.
Figure 5 Adopter categorization on the basis of relative time of adoption of innovation
Source: Ph. Kotler, G. Armstrong, op. cit., pp. 201.
For a market pioneer, the introduction stage constitutes a chance to build market leadership,
but a new marketing strategy may be needed when the pioneer moves through later stages of
the life cycle.
The basic problems at the introduction stage refer to:
Time of adoption of innovations
Innovators
(2,5%)
Early
adopters
(13,5%)
Early
majority
(34%)
Late
majority
(34%)
Laggards
(16%)
25
specification of key product features which will become crucial for achieving the success
on the market
determination of price policy allowing to maintain or extend market share
selection of distribution channels which are adequate to the placement and manner of
purchasing by the consumers and potential consumers
overcoming of potential consumers' reluctance resulting from earlier habits and lack of
awareness of the new product
creation of a need to use the new product, provided that no such need has been defined yet
leading the consumers to try the product out
The growth stage begins with a visible boost in sales of a given product. This means that the
market has embraced the new product. The early adopters will normally continue to buy,
whereas the later buyers will start doing the same which is often due to positive opinion on
the product (word of mouth). However, as the opportunities to make profit become apparent
to market competitors, new companies may choose to enter the market. The market expansion
will be driven by their efforts, such as offering new product features. With the increasing
number of competitors, also the number of sales outlets grows, promoting the rise of
intermediate parties selling the product (resellers). At this stage, no or just minor price drops
should be expected. Advertising and promotion expenses incurred by a company is on the
same or slightly higher level as at the introduction stage. While the knowledge about the
product spreads, market education remains important, but the situation becomes complicated
by rising competition. Growth stage is when the profits increase because the promotion costs
are divided among greater production figures. At this stage, also the unit manufacturing costs
can be considerably lower. In order to maintain market growth for as long as possible, several
methods are available for the company. These include product quality improvement and
addition of further functions and/or product variants. Another method is to expand to new
market segments or distribution channels. Instead of only educating the market about the
product, the advertising efforts from now on also include building product conviction and
encouraging more purchase, thus leading to further price decrease
At the growth stage the company has to find a compromise between high market share and
high current profit. Product enhancement, advertising and distribution require spending (lower
current profit), but allow to win a major position on the market which the company hopes will
bring more profit in the stage which follows.
26
Basic problems in the growth stage refer to:
determination of current buyer's profile
identification of possibilities to extend the buyer's base by entry into new market segments
or finding new product applications
determination of impact of the market competitors and identification of their strategy
verification of the distribution channels in terms of increasing the buyer reach
definition of the price policy enabling the increase of market share
In the maturity stage sales growth slows down or levels off. It’s normally longer stage than
growth stage, and it poses strong challenge for marketers. The slowdown in sales growth
results, that companies start marking prices, increasing their marketing budgets. Drop in profit
results that some of the weaker competitor start dropping out. Some of the companies modify
the product, market and/or marketing mix. Modifying the product means changes in
characteristics of the product as features, quality, design or style. The goal of this activity is to
attract new consumers and/or inspire more usage. Modifying the market means that company
tries to increase sales of the current product, attracting new users and market segments.
Modifying the marketing mix means change one or more marketing mix elements. It can cut
prices or change communication channels or launch a better advertising or promotional
campaign.
Basic problems in the maturity stage refer to:
determination of buyer groups which make most frequent purchases and which buy the
largest quantities
determination whether product modifications are possible and how much would they cost
determination if by promotional activities, price policy and/or changes in the distribution
one may sustain sales so as to extend product life cycle on the market whilst maintaining
satisfactory market share
Decline stage is a last stage in life cycle of the product. On this stage product’s sales decline.
Sales decline for many reasons, including technological advances, shifts in consumer tastes,
and increased competition. Because of declining of the sales some companies withdraw from
the market. Those remaining cut marketing budget and reduce their prices further. Company
may decide to harvest the product, reducing various costs or drop the product from the line,
selling it for example to another company or liquidate.
27
Basic problems in the decline stage refer to:
determination of how rapid the product market decline will be
determination whether and, if so, then how the company can slow this process down
determination of costs required to slow down the decline in sales figures of a product
identification of possibilities of introducing a new, more attractive form of an existing
product and determination of a manner to build a link between the new and existing
product
Table 7 summarizes the key characteristics of each stage of the product life-cycle.
Table 7 Summary of product life-cycle characteristics, objectives, and strategies
Characteristics
Introduction
Growth
Maturity
Decline
Sales
Low sales
Rapidly
rising
sales
Peak sales
Declining sales
Costs
High cost per
customer
Average cost per
customer
Low cost per
customer
Low cost per
customer
Profits
Negative
Rising profits
High profits
Declining
profits
Customers
Inoovators
Early adopters
Middle majority Laggers
Competitors
Few
Growing
number
Stable
number
beginning
to
decline
Declining
number
Marketing Objectives
Create product
awareness
and
trial
Maximize
market share
Maximize profit
while defending
market share
Reduce
expenditure and
milk the brand
Strategies
Product
Offer a basic
product
Offer
product
extensions,
service,
warranty
Diversity brand
and models
Phase out weak
items
Price
Use cost-plus
Price
to Price to match Cut price
28
penetrate market or
beat
competitors
Distribution
Build selective
distribution
Build intensive
distribution
Build
more
intensive
distribution
Go
selective:
phase
out
unprofitable
outlets
Advertising
Build
product
awareness
among
early
adopters
and
dealers
Build awareness
and interest in
the mass market
Stress
brand
difference
and
benefits
Reduce to level
needed to retain
hard-core loyals
Promotion
Use heavy sales
promotion
to
entice trial
Reduce to take
advantage
of
heavy consumer
demand
Increase
to
encourage brand
switching
Reduce
to
minimal level
Source: Ph., Kotler, Marketing Management: Analysis, Planning, Implementation, and
Control, Prentice Hall 1999, New Jersay, pp. 316.
6. Product-Market Strategies
Product-market strategies basically consist in conscious and intended selection of actions
related to the offered products and markets served which are aimed at stimulating the demand
for the company's products.
The Product/Market Grid of Ansoff is used to determine business growth opportunities. The
Product/Market Grid has two dimensions: products and markets (see Table 8).
29
Table 8 Ansoff’s Matrix
Products
Current
New
Mar
ke
ts
C
ur
re
nt
Market Penetration
Product Development
Ne
w
Market Development
Diversification
Ansoff's matrix provides four different growth strategies:
- Market Penetration - the firm seeks to achieve growth with existing products in their
current market segments, aiming to increase its market share
- Market Development - the firm seeks growth by targeting its existing products to new
market segments
- Product Development - the firms develops new products targeted to its existing market
segments
- Diversification - the firm grows by diversifying into new businesses by developing new
products for new markets
The market penetration strategy assumes sales growth intensification by the growth of
consumption by current consumers, attracting new consumers and taking over competitors’
consumers. The market penetration strategy is the least risky since it leverages many of the
firm's existing resources and capabilities. In a growing market, simply maintaining market
share will result in growth, and there may exist opportunities to increase market share if
competitors reach capacity limits. However, market penetration has limits, and once the
market approaches saturation another strategy must be pursued if the firm is to continue to
grow. The characteristics of the market penetration strategy are summarized in Table 9.
30
Table 9. Characteristics of the market penetration strategy
Strategy analysis
criteria
Characteristics of the market penetration strategy
Dominant premises
for application
- insignificant changes in customer preferences
- lack of possibilities to introduce changes to offered products
Resources and skills
needed for strategy
application
skills in the scope of carrying out marketing activities
financial resources for marketing activities
Impact on costs
increase in costs related to distribution, promotional activities and
price policy
reduction of unit costs of product manufacturing
Expected effects
sales growth
maintenance or growth of the market share
Risk
Competitors' reactions may reduce impact of marketing activities
standstill in new product development
Market development strategy includes the pursuit of additional market segments or
geographical regions. The company may change the way of positioning of the product and/or
suggest new ways to use the current product. The development of new markets for the product
may be a good strategy if the firm's core competencies are more to the specific product rather
than to its experience with a specific market segment. Because the firm is expanding into a
new market, the market development strategy typically bears more risk than the market
penetration strategy. The characteristics of the market development strategy are summarized
in Table 10.
31
Table 10. Characteristics of the market development strategy
Strategy analysis criteria
Characteristics of the market development strategy
Dominant premises for application
- significant changes in customer preferences
- competitors' activity in the scope of new products
Resources and skills needed for
strategy application
knowledge on customer preferences and their
changes
possibility to implement changes in the
manufacturing process
production system flexibility
Impact on costs
costs of market research
costs of changes in production process and materials
Expected effects
maintained or growing market share
improvement of the product and company image
Risk
counteractions taken by competitors
uncertainty about customers' acceptance of the
product changes
The product development strategy may be appropriate if the firm's strengths are related to its
specific customers rather than to the specific product itself. In this situation, it can leverage its
strengths by developing a new product targeted to its existing customers. It can be achieved
by improvement of the company's current product or launch of new products. Similar to the
case of new market development strategy, new product development involves more risk than
a simple attempt to boost market share. The characteristics of the product development
strategy are summarized in Table 11.
32
Table 11. Characteristics of the product development strategy
Strategy analysis criteria
Characteristics of the product development strategy
Dominant premises for application
- identified new customer needs
- innovative potential of a company
Resources and skills needed for
strategy application
resources and skills in the scope of innovation
technical knowledge
production capacity
considerable financial resources
Impact on costs
high costs of development and launch of a new
product
long-term reduction of fixed costs
Expected effects
market share increase
extension of the company's impact on the market
thanks to a new product
increase in total company sales volume
possibility to improve company's image perceived
by customers and counterparties
Risk
insufficient knowledge of customer preferences
uncertainty about acceptance of novelties
difficulties in forecasting demand and production
By following the diversification strategy the company introduces new products into new
markets. Diversification is the most risky of the four growth strategies since it requires both
product and market development and may reach beyond the scope of the company's core
competencies. In fact, this quadrant of the matrix has been referred to by some as the "suicide
cell". However, diversification may be a reasonable choice if the high risk can be
compensated by the chance of a high rate of return. Other advantages of diversification
include the potential to gain a foothold in an attractive industry and the reduction of overall
business portfolio risk. The characteristics of the diversification strategy are summarized in
Table 12.
33
Table 12. Characteristics of the diversification strategy
Strategy analysis criteria
Characteristics of the diversification strategy
Dominant premises for application
- identified new customer needs
- innovative potential of a company
Resources and skills needed for
strategy application
resources and skills in the scope of innovation
technical knowledge
production capacity
considerable financial resources
Impact on costs
high costs of development and launch of a new
product
long-term reduction of fixed costs
Expected effects
market share increase
extension of the company's impact on the market
thanks to a new product
increase in total company sales volume
possibility to improve company's image perceived
by customers and counterparties
Risk
insufficient knowledge of customer preferences
uncertainty about acceptance of novelties
difficulties in forecasting demand and production
Diversification can be executed in three ways:
horizontal diversification – it occurs when the company acquires or develops new
products that could appeal to its current consumer groups even though suchnew products
may by technologically unrelated to the existing product lines
vertical diversification – the company moves into the business of its suppliers or into the
business of its agent
34
concentric diversification – results in new product lines that have technological and/or
marketing synergies with existing product lines, even though the products may appeal to a
new customer group
The market-product strategies can be differentiated in a more advanced manner by application
of the 9-box grid (see Table 13).
Table 13. The 9-Box Grid
Products
Current
Modified
New
Mar
ke
ts
C
ur
re
nt
Market Penetration
Product Extension
Product Development
Expa
nde
d
Market Expansion
Limited
Diversification
Partial Diversification
Ne
w
Market Development
Partial
Diversification
Diversification
The 9-box grid allows for differentiation between expanding the market by new segments
(market expansion) and geographical expansion to new markets (market development) and
between introduction of a new product into new market segments (partial diversification)
from geographical expansion with a new product (diversification). Additionally, product
modifications are analyzed separately from the product innovations, both if they refer to the
current market (product extension and product development), new market segments (limited
diversification and partial diversification), as well as geographically new markets (partial
diversification and diversification).
35
7. Definition and functions of brand. Brand as a company competitive advantage.
Brand-product relationships
From the financial and accounting perspective, brands are intangible assets, posted eventually
in the balance sheet as one of several types of intangible assets (a category that also includes
patents, databases and the like).
From the legal perspective, a brand is a sign or set of signs certifying the origin of a product
or service and differentiating it from the competitors. A key point in this legal definition is
that trademarks have a “birthday” – the date they are registered. As of that day they become a
property which needs to be defended against infringements and counterfeiting. Although the
legal approach is most useful for defending the company business against copies of its
products, it should not become the core element of brand management, because it takes time
to create brand, and it’s difficult to recognize when a brand is created.
From the brand management perspective, a brand is a name that influences customers,
becoming a purchase criterion. The power of a brand to influence buyers relies on
representations and relationships. A representation is a system of mental associations which
cover the following aspects: brand territory (perceived competence, typical products or
services, specific know-how), quality level (low, middle, premium, luxury), its qualities with
those which differentiate it from the competing brands, brand personality and imagery.
Beyond mental system associations, the power of a name is also due to specific nature or the
emotional relationships it develops.
A brand may be also perceived as living system comprising three poles: products or services,
name and concept (see Figure 6).
36
Figure 6. The brand system
Source: J.N. Kapferer, The New Strategic Brand Management, Kogan Page, London 2008, pp.
12.
Consumer and financial approaches related to brands are connected with the use of three
terms - brand assets, brand strength, brand value (see Figure 7).
Brand concept
(value proposition)
tangible and intangible
Brand name and symbols
semiotic invariants
Product or service
experience
37
Figure 7. From awareness to financial value
Source: J.N. Kapferer, op. cit., s. 14.
Brand assets are the sources of influence of the brand. Brand strength is captured by
behavioral competitive indicators at a specific point in time as a result of brand assets within a
specific market and competitive environment. Brand value is the ability of brands to deliver
profits. Summarized brand value is the profit potential of the brand assets, mediated by brand
market strength.
There are four main indicators of brand assets:
aided brand awareness – measures whether the brand has a minimal resonance
spontaneous (unaided) brand awareness – a measure of saliency of share of mind when
cued by the product
evoked set (consideration set) – measures if the brand belong to the shortlist of two or
three brands one would surely consider buying
question if the brand has been already consumed or not
Since the eighties, goodwill is treated in accounting and finance as the difference between the
price paid and the book value of the company. This difference is brought about by the
Brand assets
Brand strength
Brand value
Brand awareness
Market share
Market leadership
Market penetration
Perceived brand personality
Share of requirements
Perceived brand values
Growth rate
Reflected customer imagery
Loyalty rate
Brand preference or attachment
Price premium
Patents and rights
Percentage of products the
trade cannot delist
Net discounted cashflow
attributable to the brand after
paying the cost of capital
invested to produce and run the
business and the cost of
marketing
Brand reputation (attributes,
benefits, competence, know-
how etc.)
38
psychological goodwill of consumers, distributors and all the parties involved in the sales
channels. Accounting goodwill is the monetary value of the psychological goodwill that the
brand has created over time through communication investment and consistent focus on
product satisfaction, both of which help build the reputation of the name. Most valuable
global brands are presented in Table 14.
Table 14 Brand financial valuation 2011
39
Source: Brand Z,
http://www.millwardbrown.com/BrandZ/BrandZ_Top50_Chinese_Brands.aspx.
In general, brands create value for the consumer, but they do not always play a role in the
buying decision process of consumers. There are product categories (for example sugar and
paper), in which buyers do not look at the brand when they are making their choice. For the
rest of categories of products brands deliver some added value.
40
There are eight basic functions of the brand for a consumer (see Table 15).
Table 15. The functions of the brand for the consumer
Function
Consumer benefit
Identification
To be clearly seen, to quickly identify the sought-after products, to
structure the shelf perception
Practicality
To allow savings of time and energy through identical repurchasing
and loyalty
Guarantee
To be sure of finding the same quality no matter where or when you
buy the product or service
Optimisation
To be sure of buying the best product in its category, the best
performer for a particular purpose
Badge
To have confirmation of your self-image or the image that you
present to others
Continuity
Satisfaction created by a relationship or familiarity and intimacy with
the brand that you have been consuming for years
Hedonistic
Enchantment linked to the attractiveness of the brand, to its logo, to
its communication and its experiential rewards
Ethical
Satisfaction linked to the responsible behaviour of the brand in its
relationship with society (ecology, employment, citizenship,
advertising which doesn’t shock)
Source: J.N. Kapferer, op. cit., s. 22.
The first two functions facilitate choice and help manage consumer's time. The next three
functions reduce the perceived risk. The perceived risk is greater if the unit price is higher or
the repercussions of a bad choice are potentially more severe. The brand’s function is to
overcome this anxiety. The last three functions have a more pleasurable side to them. The
usefulness of these functions depends on the product category.
At the same time brands create value for the company. For companies, brand also act as risk-
reduction factor. Strong brands benefit from a high degree of consumer loyalty, which gives
stability of future sales. The reputation of the brand justifies a premium price and allows to
increase profit margin. Strong brands build also an entry barrier to potential competitors. A
41
well-known brand can be extended to a number of markets, without heavy spending for
promotion as would be the case of another brand.
Products and brands are mutually interrelated. On the one hand there is no brand without a
great product, on the other hand, there is ample evidence that market leaders are not the best
products available on their market, because being the best product in a given category means
to compete in the premium tier which is rarely a large segment. Often the market leaders are
those who deliver the best performance or best quality/price ratio. Historically most
significant brands are born out of a product or service innovation which outperformed their
competitors. A superior product is the determining factor of the launch campaign.
Psychologists have also identified the halo effect as a major source of value created by a
brand: the fact that knowing the name of the brand does influence consumer’s perception of
the product advantages beyond what one can see the product offers, not to speak of invisible
advantages. Furthermore, there are pure intangible associations attached to the brand which
stem from the brand’s values, vision, philosophy, its typical buyer, its brand personality and
so on. These associations are the source of emotional ties which go beyond product
satisfaction (see Figure 8).
Figure 8. The product and the brand
Source: J.N. Kapferer, op. cit., pp. 41.
Brand aspiration
Product satisfaction
Expectations
Halo
effect
Product's visible and
differentiating characteristiscs
Brand's intangible
values and imagery
Branded product
42
8. Brand diversity
Distributors’ brands
Traditionally the brands used to be created by companies and branded products had easier
access to distribution channels. Over time, also the distributors noticed a chance to benefit
from the advantages a brand stows on the product owner and started to introduce products
under own brand (so-called store brand, own brand, private label).
Distributors’ brands are on the rise everywhere, and now dominate the market in a variety of
mass consumption categories. Distributors’ brands are now part of the competitive
environment in almost all sectors of the economy. Distributors are well schooled in
distributors’ brands. They
8
:
allocate the majority of their shelf space to their own brands, thus eliminating all weaker
brands
have segmented their portfolio of distributors’ brand in order to meet the different
expectations of their clients without forcing them to identify with the shop name
structure their range in order to cover not only different price levels, from the cheapest to
the highest price on the entire shelf, but also the emerging needs known as “trends”
The distributor brand is often becoming the only true competitor to the producer’s brand when
it is not the shelf leader in sales volume. Brand managers' perceived key competitors are not
other producers' brands but the distributors' much cheaper products, with an increasingly
comparable quality level. Thus, in a supermarket the consumers are offered the producers'
brands the distributors' brands and the lowest-price products much more cheaper. This further
heightens the urgency to act and position the major producer’s brand firmly and squarely on
the pillar of differentiation: innovation and quality on one hand, and emotional added value on
the other.
Distributors now manage their brand portfolios as part of an overall concept for the category
and for the store. They have to choose their brand mix for each category segment, and make a
decision with regard to the type of brand to offer: whether it would be the producer’s or
distributor’s brand? The latter may offer either ranges of economical products, a value-for-
money range (often with the distributor’s own name on them) or own brands (private labels)
8
J.N. Kapferer, op. cit., pp. 67.
43
providing more flexibility in terms of positioning. The decision of a distributor to introduce a
product under own brand depends on the relationship between the consumers and the store
and the value added to a product by such brand (recognized for each category of product). A
store typically will not impose its name directly when
9
:
its insufficient reputation is a handicap for product sales
the badge function of the consumption does not fit the presence of a generalist distributor
the level of added value of the product is too low and could reflect negatively on the store
From a managerial point of view, distributors’ brands are, broadly speaking, brands like any
other. They have all necessary features of a brand but, in addition, they have to respond to two
different constraints simultaneously. They have to find their place in the distributor’s brand
mix, in which they currently represent a key component of identity, differentiation and loyalty
generation. And they generally use price as a driving force behind their own marketing mix
even when, exceptionally rather than generally, they are positioned in the premium segment.
For this reason, the management supervising such brands have considerably less autonomy
than a typical producer’s brand.
While the function of producers’ brands is to drive progress through innovation, change,
fashion and design, a business model of a distributor’s brand assumes light marketing – in
order to reduce the costs linked to the dozens of product heads – and the fact that it follows
quickly in the wake of what is already working, namely the innovations of successful
manufacturers, by copying them to within a few details. In fact, the product specifications of
subcontractors tasked with manufacturing a distributor’s brand product are up to 80 per cent
defined by the characteristics of the successful product that they are supposed to follow.
One may differentiate 5 categories of distributors' brands (see Table 16).
9
Ibidem
44
Table 16 Distributor's brand categories
Source of brand superiority
Price
Functionality / quality
S
uppor
t
of
fe
re
d
by
the store
ne
twork
None
Brands of first available
price
Private (own) brands
S
trong
Flagship brands
Network (store) brands,
double brands
Source: J. Kall, R. Kłeczek, A. Sagan, Zarządzanie marką, Oficyna Ekonomiczna, Kraków
2006, pp. 288.
The banner brands' superiority stems from their lower prices. Increasing their attractiveness in
the buyers' perception takes place by reference to the reputation of a retail network and, thus,
to the buyers' loyalty. Simple, practical, ordinary and one-color packaging of banner brands
convey only the product name and its basic characteristics. Such aesthetic approach is in line
with price positioning.
The premier prix brands are also distinguished by their low price but are not supported by the
retail outlet network. In assumption, their goal is to compete with discount food stores, not
hypermarkets. The premier prix brands are supposed to ensure buyers can purchase a product
in a given retail network at a lower possible price. The name and graphic mark of such brands
do not correspond to the identification elements of the retail network.
The network brands and double brands are characterized by usability and, at the same time,
they are provided support from the retailer. The names of double brands include, apart from
the brand name, an additional sub-brand name which indicates very good quality of offered
products. Network brands and double brands are of a quality high enough that it is not a
compromise for the retailer to place its identification mark on them. Similar visual
identification of a brand and of the entire network ensure mutual synergy in the process of
building brand's capital which can be important in the process of network expansion to new
markets, whether geographical or product-related.
45
Private brands also known as own brands represent a level of quality that is comparable to
manufacturers' brands. They are characterized by identification features different from those
used by a retail network and typically their product range is narrower - they are often used for
a single product or a product line which satisfy one specific need. Each private brand is
independent of other retailers' trade brands, thus resembling primarily a traditional
manufacturer's brand.
There are three stages in the business growth of distributors’ brands
10
:
oblative
imitative
identity
The oblative stage results from the refusal of sale by the major industrialists or is strengthened
through identifying gaps in the ranges of the major producers (in the segments where certain
articles should be offered to the consumer, but where the major brands have no such offer).
In the imitative stage the distributor examines its competitors’ own brand ranges, and sets
about imitating them. The purpose of this stage is the deliberate intent to take market share
from the big brands by allocating more space to distributor’s own brand, a similar copy, and
to increase the average price of the big brands in order to attract clients to the distributor’s
brand. The real aim of this approach is to cause confusion, profiting from the average
attention span of the shopper in the aisle. Through lack of attention, the consumer may take
the distributor’s brand instead of the major brand product
11
. The unconscious recognition
factors in the aisle are listed below in decreasing order of importance:
colour,
packaging shape,
key designs,
name, typography and so on.
This is exactly what distributors’ brand products copy.
The third stage is the identity stage, where the distributor’s brand is used to capture market
share from competitors. In the identity stage a distributor’s brand holds key positioning
10
Ibidem, pp. 77-79.
11
Ibidem.
46
importance, since its content and products express the values of the distributor. In this stage
the distributor’s brand offers one or more components of added value, based on the
ingredients, packaging, traceability, concept and so on. In this stage the price is no longer the
main sales-driving factor.
The success of distributor’s depends, among other aspects, on the following:
size of a potential market
high profit margin within the sector concerned
advertising expenditure
ability to achieve quality
consumers’ price sensitivity
the rate of innovation in the sector
Luxury brands
Luxury brands are the polar opposite of low cost brands – producers may fix prices as high as
they want. Historically the objective of luxury brands was to create the unbridgeable distance
between the consumer buying the product of a luxury brand and an ordinary person.
Nowadays, luxury is a much more relative term and depends on the individual person’s
situation, experience, needs, and approach.
There are two different business models for brands
12
. The first includes brands with a history
behind them, while the second covers brands that, lacking such a history of their own, have
invented a story for themselves. The first brand and business model may be represented by the
luxury pyramid (see Figure 9).
12
Ibidem, pp. 97.
47
Figure 9 The pyramid brand and business model in the luxury market
Source: J.N. Kapferer, op. cit., pp. 98.
At the top of the pyramid, there is the “griffe” - the creator’s signature engraved on a one-of-
its-kind piece of work. The second level includes, expensive luxury brands of products
manufactured in small quantities within a workshop. The third level involves high-quality
mass production. At this level of industrialisation, the brand’s recognition produces an aura of
intangible added values for top-tier and highest-quality products which, however, gradually
tend to look resemble other products on the market. In this model, management of luxury
brands consists in studying and adjusting to interactions between the first three levels of the
pyramid. The success of griffes relies hugely on their support from financial groups that are
capable of providing necessary resources for the first level, and on their licencing to industrial
players who are able to create, launch and offer products at the third level worldwide. Actual
profit accrues at the third level and, in fact, only this level can be truly conducive to make the
huge investments on the first level pay off. Nonetheless, these investments are essential to
evoke certain aura around the brand.
The second brand and business model can be characterised by its flat, circular model
resembling a constellation. At its centre lies a perfect brand, whereas all manifestations of the
brand (its extensions, licences and so on) are located outside, at a relatively similar distance
from the central perfect brand. Consequently, these extensions are treated with similar
Relations
Attributes
The
griffe
Money
Aura
The
luxury brand
The upper-range brand
The brand
Pure creation, unique work, materialised perfection
Small series, workshop, handmade work, very fine
craftsmanship
Series, factory, highest quality in the category
Mass series, cost pressure, the spiral of quality
48
attention, as each of them conveys its own individual variation of the perfect brand to its
specific target market.
Service brands
One aspect of service brands that contrasts with product brands is that service is intangible.
Structurally, service brands are handicapped in that they cannot be easily illustrated. That is
why service brands use slogans. Through a slogan, the brand defines its behavioural
guidelines, and these guidelines give the consumer the right to be dissatisfied if they are
transgressed. These attributes must be fully internalised by the people who offer and deliver
the service. The fact that humans are intrinsically and unavoidably variable is definitely a
challenge for the brand approach in service industries. This is why brand alignment has
become so important if the whole organisation is to live the brand. Brand alignment is the
process by which organisations think of themselves as brands. The brand experience in the
service sector is totally driven by what happens at points of contact where the company staff
liaises with customers.
Geographic Locations’ brands
Geographic locations, like products and services, also can be branded. In this case, the brand
name is relatively fixed by the actual name of the location. The power of branding is in
making people aware of the location and then linking desirable associations. Cities, states,
regions, and countries are actively promoted through communication tools. The goal of these
types of campaigns is to create awareness and a favourable image of a location that will entice
temporary visits or permanent moves from individuals and businesses alike (Keller, page 30).
A location brand competes with other places. It must be seen, perceived to be different,
credible and attractive. The location brand must have a positioning based on this identity –
perceived values, history, competence and so on. The difficulty for the location brands is of
internal nature. A location does not have the same levers of power and authority that enable a
company to transform itself from the inside out in order to bring itself into line with the values
promoted in its communication.
49
9. Brand identity and positioning
A brand is not just the name of a product. It is the vision that drives the creation of products
and services under that name. That vision, the key belief of a brand and its core values is
called the identity. It drives vibrant brands able to create advocates, a real cult and loyalty.
Modern conception defines two essential aspects of brand management: “brand identity”
which specifies the faces of brands’ uniqueness and value, and “brand positioning”, i.e. the
main difference creating preference for its products on a specific market and at a specific
time. Brand positioning specifies the approach applied to the products of given brand to attack
a market in order to expand their market share at the expense of competing brands
13
.
Brand identity refers to stable, defining characteristics of a subject or person that makes their
individual character - i.e. that they differ from given brands and are similar to others. Brand
identity will be clearly defined once the following questions are answered
14
:
What is the brand’s particular vision and aim?
What makes it different?
What need does the brand fulfil?
What is its permanent nature?
What are its value or values?
What is its field of competence? Or legitimacy?
What are the signs which make the brand recognisable?
Brand identity is connected with brand image which is the way how recipients (consumers,
competitors and other groups of people) perceive a brand. The brand image is an integrated
outcome made by the general public of all various brand messages, brand name, visual
symbols, products, places, people and marketing communication. The public decodes a
message, extracts meaning and interprets signs. Brand identity is one of the factors creating
brand image, but it is restricted to the message sender’s side (i.e. to the on the brand owner’s
side). It include brand’s meaning, aim and self-image (see Figure 10).
13
Ibidem, pp. 171.
14
Ibidem.
50
Figure 10 Identity and image
Source: J.N. Kapferer, op. cit., pp. 174.
Brand identity is also interrelated with brand positioning. The notion of positioning is based
on the assumption that all decisions made by consumers are based on comparison. To position
a brand simply means to emphasise its discriminating characteristics differentiating it from its
competitors and, at the same time, appealing to the customers. Positioning is a process
consisting of two stages. Firstly, an indication is made what group of competitors the brand
should be associated and compared with and, secondly, a question is answered regarding the
brand’s essential differentiating characteristics and reason of presence on the market as
compared to other products and brands of that group.
However, the process of positioning focuses more on a given product than on the brand itself
and does not necessarily reveal the brand’s rich associations nor reflect all of its potential.
Likewise, positioning does not address the manner, form and values behind the
communication. The notion of identity allows to express the brand’s character and values as
well as it is used to prepare communication in a consistent manner, form and appealing to
specific values. At the same time, the brand identity creates certain rigid framework for
ensuring that a given brand is proposed and perceived in a coherent manner.
Receiver
- products
- people
- places
- mimicry
- communication
- opportunism
- idealism
Competition and
noise
Brand image
Signals
transmitted
Brand identity
Sender
Messages
Other sources of
inspiration
51
There is a number of concepts for brand positioning. One of the most famous models is the
Brand Key, promoted by European Institute for Brand Management (see Figure 11).
Figure 11 Brand Key
Source: European Institute for Brand Management, www.eurib.org.
The Brand Key, a model used in a range of various organisations, comes in different shapes
and sizes, and has different names (such as Brand Box), thus making its origin not entirely
clear. The model names eight stages that can lead to differentiating and relevant brand
positioning: competitive environment, target, consumer insight, benefits, values and
personality, reasons to believe, discriminator, brand essence. The Brand Key is all about
taking stock of all relevant information for these eight subjects, by putting some succinct
52
points to paper for each. The Brand Key model operates with an the assumption that a brand
manager takes the following eight steps in a brand positioning process (EUROIB):
a) Competitive environment: the first step on the road to clear positioning involves mapping
the competition situation. This means analysis of the brands/products that a consumer
would consider when making his/her purchase decision. These can include direct
competitors, but also less obvious competitors that, for example, cater for generic needs of
satisfying actual demand. At this stage, the brand manager will not only have to identify
competing brands, but also consider how these brands position themselves in the market,
and which associations customers/consumers have with these brands. A very handy tool
for the analysis of competing brands is the Porter’s Five Forces Model.
b) Target: this step consists in identifying the (desired) target group, not only in terms of
demographics, but also in terms of attitudes and values. This, in principle, means
answering the question why the brand in question makes the best choice for a certain
person and/or in a certain situation.
c) Consumer insight: for a brand to be successful in a market, it will have to tie in with a
relevant consumer insight. A consumer insight concerns a latent purchase motive in the
target group with relation to the product. A consumer insight does not merely answer the
question why consumers buy a certain product, but rather lays bare the latent needs
driving consumers to buy a certain product. This is not only about finding out why
consumers buy a certain product, but also about finding out why they would not buy it.
d) Benefits: whereas steps 1 to 3 are focused outwards (competition, target group and
consumer insights), step 4 is the first of a series of more inward-looking steps with a focus
on the brand itself. This stage involves identifying the benefits offered by the brand. These
benefits can be both of a functional nature (for example emphasizing the presence of
certain ingredients in a margarine brand), and of a psycho-social nature (by margarine
appealing to the value of motherly care).
e) Values & personality: the central question in this phase is what values a brand has to
appeal to (what does the brand stand for, and what does it believe in?). Brands appealing
to values are supposed to fit in the consumer's beliefs. This does not only mean better
brand recognition, but also a greater degree of appreciation by the consumer. Well-known
value systems are Mitchell’s VALS typology, and Rokeach’s RVS typology. When
designating values, two aspects come into it: values should not be communicated directly,
but should in the end still resound in the advertising message, and values generally do not
53
make reference to the points on which a brand differentiates itself. Where the latter is
concerned, it should be noted that the difference between brands mainly lies in the
question how values are converted into practical consequences. Values can also be
personified; describing the brand in terms of personal(ity) characteristics or traits. A way
of doing that in marketing communication is using celebrities with such characteristics in
advertising.
f) Reason to believe: at this stage of the process, the crucial goal is to formulate arguments
based on which the target group will believe the brand is the best option for them. This
preference can mostly be captured in sentences such as: “I buy brand X because…”. These
arguments can be used in advertising, but actual consumer contacts can also be set up in
such a way that they prove to consumers that the brand actually stands for what it claims
to stand for.
g) Discriminator: in this penultimate step, the brand manager will have to concisely state
what the actual difference is between the brand in question and other brands. This
difference is typically expressed in sentences such as: “Only brand X has…”.
h) The brand essence: this is a summary of stages 4 to 7. The idea here is to catch the brand’s
essence in one or two words.
The advantage of the Brand Key is that it profiles virtually every single relevant step in a
positioning process; but the downside is that it overemphasizes the outside-in approach,
making the model less suitable for brands where the inside-out approach is relevant (such as
in the case of service providers). The outside-in emphasis particularly comes to the fore in the
fact that values and personality features rather late on in the model. When positioning a brand
that strongly depends on an inside-out movement, values and personality tend to be a fact that
serves as the basic principle of positioning: it is therefore rather tricky to apply this model for
service providers. A restated version of the brand key model is the diagram named Brand Box
which does indeed identify the same phases as the Brand Key (see Figure 12).
54
Figure 12 Brand Box
Source: European Institute for Brand Management, www.eurib.org.
The brand identity can be also characterised by six faces shown in the brand identity prism
(see Figure 13).
Values & personality
Argumentation
Benefits
Discriminator
Competitive environment
Target
Target group insights
Int
er
na
l
E
xt
er
na
l
Core
proposition
55
Figure 13 Brand identity prism
Source: J.N. Kapferer, op. cit., pp. 183.
First face denotes physical features and qualities – brand’s physical appearance. It combines a
their obvious, objective features or those of emerging character. It serves as the brand’s
backbone, but is also a factor creating tangible added value. The physical aspect can be
established by answering questions such as: What is it specifically? What it is for? What does
it look like? Numerous brands experience problems in scope of the physical face as the
functional aspects of their product present little added value, whereas the consumers expect
even a purely image-based brand to offer tangible benefits.
Second face is the personality. Personality of a brand is the manner in which it communicates
about products or services offered under this brand, i.e. it reveals what kind of person it would
be if it were a person. The simplest way to create an on-the-spot brand's personality is to
engage a spokesperson or a figurehead, no matter real or symbolic.
Third face of the brand identity is the culture. Culture of a brand relates the set of values
driving the brand’s inspiration. It is the source of the brand force to create aspirations. The
cultural facet encompasses the basic rules according to which a brand is manifested in its
outward signs (looks of a products and communication). This mandatory aspect belongs to the
56
core of the brand idea. Each brand should create its unique culture which provides a field
from which every product derives. Brand culture is of an essential role in brand
differentiation. It indicates the set of ethical rules which, translated into and expressed as
values, are embodied in the products and services of the brand.
Fourth face of the brand identity is the relationship. Brands are frequently involved in
transactions and various exchanges between people. The aspect of relationship is most
important for the service brands, as the service is, by definition, a relationship.
Fifth face denotes consumer reflection. A well-managed brand always creates a reflection or
an image of the customer or user at which the brand is targeted. The ideas of consumer
reflection and target group, though distinct, often get mixed up. The target group means
simply the brand’s potential buyers or users. Reflecting a customer does not rely on
describing the target buyer, but reflecting the buyer according to its own aspirations which are
satisfied by using and/or purchasing a brands.
The last face of the brand is the self-image. Self-image is the target’s own internal reflection.
By our attitude towards certain brands, we experience develop a certain type of aspirations,
i.e. a relationship with ourselves.
The brand identity prism shows that these facets, while focusing on various aspects, are all
mutually linked and make and well-structured model. Physical characteristics, relationship
and reflection are the social facets and are targeted outward, i.e. provide the brand with its
outward expression. All these faces are visible faces. On the other hand, the personality,
brand's culture and self-image are seen as elements of the brand itself, within its intangible
nature.
All brands are represented by their symbols – brand name, visual symbols and logotypes.
The brand name can be a very rewarding source of brand identity. Already the brand’s name
can reveal many of the of the brand’s intended associations. This surely is the case for brand
names which purposefully and from the very beginning, are chosen to convey inform about
certain objective or subjective features of the brand, yet it also corresponds to other brand
names which have can delimit the brand’s legitimate territory.
57
An emblem is used to symbolise brand identity through a visual figure other than the brand
name. It has many function such as
15
:
To help identify and recognise the brand. Emblems must identify something before they
signify anything.
To guarantee the brand.
To give the brand durability – since emblems are permanent signs – thereby enabling the
company to capitalise on it.
To help differentiate and personalize: an emblem transfers its personality to the brand. In
doing so, it enhances brand value. But it also facilitates the identification process in which
consumers are involved.
10. Launching the brand
Launching a brand and launching a product are two different things. Most renown brands,
ample with meaning and values, were launched as the ordinary names of innovative products
or services which were different and better from those of competitors. These names were
chosen without any prior study, analysis or forecasts. Only after the brand name has been
selected in more or less random way, advertising was engaged to present the advantages of
the new product as well as the benefits that the buyers could expect from it. After certain time,
new, especially successful products tend to become copied by competitors. Then they become
replaced by new products offering higher quality and/or functionality which often benefit
from existing product name that has already earned some recognition. After this happens,
advertising will be only of supporting importance, but the real product selling force will be
the brand itself. Over time, the brand will receive more autonomy and may divert from its
original meaning by developing its own way of communication, of how it speaks to the public
and what actions it takes.
A launch, in order to be successful, requires that the new brand is treated as a full brand, right
form the very start – not just a product name presented in a TV advertisement. Considerate
launch of a new brand requires taking actions long before the product name earns its
reputation as a brand symbol, with broader and deeper meaning than earlier.
15
Ibidem, pp. 194.
58
The brand launch is a long-term project. Creating a brand implies first drafting the brand’s
programme, which underlies the brand identity and positioning. The brand programme can be
presented in a programmatic format (see Table 17).
Table 17 The programme underlying a brand
1.
Why must this brand exist?
What would customers be missing if the brand did not exist?
2.
Vision.
What is the brand’s vision of the product category?
3.
Ambition.
What does the brand want to change in people’s lives?
4.
What are our values?
What will the brand never compromise on?
5.
Know-how.
What is the brand’s specific know-how? Its unique capabilities?
6.
Territory.
Where can the brand legitimately provide its benefits, in which product categories?
7.
Typical products or actions.
Which products and actions best embody, best exemplify the brand’s values and
vision?
8.
Style and language.
What are the brand’s stylistic idiosyncrasies? Its semiotic invariants?
9.
Reflection.
Who are we addressing? What image do we want to render of the clients
themselves?
Source: J.N. Kapferer, op. cit., pp. 205.
This programme is a useful step in a brand creation process. This process is different for
brands which are the same as company names and for brands which are no direct reference to
the companies’ names. In the first case, there must be a relationship between brand identity
and corporate identity. In the second case, there is relative higher degree of freedom – the
59
brand’s identity can be created from scratch. When company and brand names coincide it is
necessary to transfer the company identity onto brand identity (see Figure 14).
Figure 14. Transfer of company identity to brand identity when company and brand names
coincide.
Source: J.N. Kapferer, op. cit., pp. 206.
There are the values stemming from the corporate identity which feed the brand and give it
the company’s outlook on the world and the impetus to transform the product category. This
values imparts meaning to the brand. Over time this relationship between brand and company
is switched around.
Next step for launching new brand is the process of brand positioning. It consists of five
phases: understanding, exploration, testing, strategic evaluation and selection, and
implementing or activating the brand
16
.
The understanding phase is about identifying all potential added values for the brand, based
on its identity, roots, heritage, prototypes and its current image. This potential added values
for the brand are determined as a result of an analysis of customers and competitors.
The exploration phase is about suggesting scenarios for the brand. Using four questions –
against whom? why? for when? for whom? – it’s possible to identify alternative scenarios.
16
Ibidem, pp. 207-209.
Brand identity
Values
Founder's values and
ethics
Company focus and
culture
Corporate identity
Physique
Personality
Reflection
Self-concept
Relationship
Culture
60
The test phase is the time when scenarios are either refined or eliminated. It requires
consumer studies to evaluate the credibility and emotive resonance of each scenario. At this
stage, the ideas and formulations are tested, not whole campaigns.
The strategic evaluation takes the form of a comparison of scenarios based on criteria,
followed by the economic evaluation of potential sales and profits.
The fifth phase is the implementation and activation. It consists in defining the brand’s
marketing strategy, functional objectives and campaign plan. Activation is the phase during
which strategy becomes behaviour and tangible actions.
The next stage in a brand launch, following positioning, is to choose the flagship product. The
purpose of this stage is to choose one product or service, which will be presented in the first
advertising campaign. This product or service should be the one that best represents the
brand’s intentions. Such product should the one which truly epitomises the brand’s identity,
ideally if this identity is visible.
When the position on the market and flagship product are chosen, the next stage is to create
communication for the launch of the new brand. It starts with a decision if this
communication should concentrate on the product or its brand. Whenever a brand is created,
there are two alternative strategies: to communicate the brand’s meaning either directly, or by
focusing on a particular product. The choice depends on the company’s ability to select one
product which will fully convey the brand’s meaning.
The next decision is to choose a name for a strong brand. Any name can make a strong brand
as long as consistent effort is made over time to give meaning to this name and to give the
brand a meaning of its own. Regardless of that fact, there are some basic selection rules
helping to choose right name for a brand.
The name must anticipate all potential challenges from the very start. The brand name must
be chosen with a view to the brand’s future and destiny, not in reaction to the specific market
and product situation at the time of its birth.
The brand name shouldn’t describe products. The product’s characteristics and qualities will
be presented to the target audience by the advertisements and other marketing activities. The
brand name should distinguish products. The name must serve to add extra meaning and to
61
convey the spirit of the brand. It should reveal or suggest a difference between a specific
brand and its competitors. It can help to protect product from copies.
Any brand must be given the potential to become international in case it should want to
become so one day. A brand must ensure that the name is easy to pronounce, that is has no
adverse connotations and that it can be registered without problems.
The next decision concerns brand language and territory of communication. The
communication should be created for the whole world, but at the same time certain freedom
should be allowed for local, place-specific communication. Inconsistent use of language in the
communication will typically lead to repeating the same groups of words or pictures over and
over again, so that the whole brand message eventually becomes clogged. Each specific
campaign should convey the personality, culture and values of the sender and help to win
customers' heart. They can be summarized in form of the quid, which specify the following
17
:
dominant features of style,
the audio-visual characteristics such as a gesture, a close-up of a customer’s face, a jingle,
the graphic layout or narrative structure codes, and the brand’s colour codes,
the principles determining if and how the brand – and its signature, if it has one – can be
used in some circumstances.
Using this “central code”, different subsidiaries of the company can adapt the theme of their
messages to local market and product requirements.
The last decision when launching a new brand is to create communication for it. It consists in
the choice of communication channels and tools, and creation of messages for each channel.
The communication that builds a brand may reach the recipients by various ways and with
various tools. The company can choose between reaching the target group through the media,
locations and/or other people.
The quickest way to deliver an information on a new brand to a large group of buyers is to
advertise in the media. Although the effects of advertising are generally considered difficult to
measure, for newly-marketed brands the rise in interest and demand for the new brand caused
by advertising can be quickly identified. Advertising is also a relatively expensive method to
17
Ibidem, pp. 211.
62
reach your target group. This results from the fact that its potential is hardly used to its full.
This can be prevented in a number of ways:
increase in the advertisement exposure in the media by application of more creative
communication forms,
better adjustment of the media plan to the target group,
ensuring product distribution in places in which the target group's demand for the product
will be raised.
Advertisement of a new brand should be supported by communication in places in which the
contact between the desired target group and the new brand is likely to take place. This
particularly refers to sales outlets and, for more advanced and/or more expensive products,
also trade fairs. The communication tools used to convince the target group to try the new
brand out are promotions and direct sales.
Another method to support brands is to engage in sponsoring. Adequate selection of events,
persons or groups (artists, athletes or other celebrities) allows to support the personality and
values which are to be associated with the brand.
A particularly important communication tool which may hugely support a brand launch is the
use of informal communication. Opinion leaders or persons from the target group passing
information on the new brand are the most reliable source of information and
recommendation. The opinion leaders can be persons deemed experts in their respective fields
(related to a given product or its consumption), persons who have charisma and who want to
distinguish themselves from the group. Opinion leaders can be recruited to become so-called
brand ambassadors. Such persons are also included in the buyers' group which has the closest
relationship with a given brand, i.e. they are included in the last of the following segments of
the public with respect to the relationship with a given brand
18
:
those consumers who dislike the brand, even hate it. It is really not part of their world,
those who are not consumers because they consider the brand is underperforming on a
sought attribute,
those who simply are not consumers, without a specific reason (simply the brand has
nothing salient to their eyes to induce trial),
those who would like to buy but cannot (no availability, no accessibility, price problem),
18
Ibidem.
63
those who buy from time to time, switching between brands,
those who buy more often,
those buyers who are involved, engaged with the brand, its ambassadors.
11. Brand life cycle. Formulation of brand strategy
The life of each product proceeds in some stages, which can be characterized using product
life cycle concept. Although products are mortal and governed by a more or less long life
cycle which can be delayed but not avoided, brands can escape the effects of time. Many great
and well-known brands have disappeared, others are struggling. Time is a convenient
indicator of the changes that affect society as well as markets, subjecting the brand to the risk
of obsolescence on a double front – technological and cultural. With the time, technological
advances become more widely available and new cheaper entrants arrive that destabilise the
balance od added value of established brands, forcing them into a never-ending cycle of
constant improvement. As time goes by, current clients grow older and a new generation
emerges which has to be won over from scratch all over again. Finally, time also wears down
the signs, the words, the symbols and the advertising campaigns of brands
19
.
A brand is based on a product or service, which has own life cycle. If the brand is attached to
a single product, or even a single version of product, it is subject to the product life cycle. But
many brands start from one product, and then continue to grow from multiple products. These
brands keep on surfing new products and their intrinsic growth. Brands, which are not
growing any more can stimulate their growth through regular innovations, geographical
expansions, and/or brand extensions.
With their massive presence in distribution and daily presence on the table or in commercials,
brands have become familiar, friendly and close, a source of empathy, even of loyalty and
attachment. To maintain the strength of brands, it is vital to nourish the two pillars which
make the relationship with the brand: one cognitive, the other emotional. Innovation serves
precisely this purpose. It enables the brand to differentiate itself objectively and to draw once
again the market’s attention. With time, it is noticeable that perceived differences erode faster
than the emotional relationship.
19
Ibidem, pp. 237.
64
The brand strategy can be created within the time by the usage of Brand Asset Valuator
(BAV) – the tool created and developed by Young & Rubicam. The methodology of this tool
based on four brand measures of consumers perception – differentiation, relevance, esteem
and knowledge.
Differentiation measures the strength of the brand's meaning. Consumer choice, brand essence
and potential margin are all driven by Differentiation. Relevance measures the personal
appropriateness of a brand to consumers and is strongly tied to household penetration.
Relevance alone is not the key to brand success. Rather, Relevance together with
Differentiation form Brand Strength , an important indicator of future performance and
potential. Relevant Differentiation is the major challenge for all brands and a leading indicator
of brand health. The combination of Esteem and Knowledge form Brand Stature , a more
traditional measure that BrandAsset® Valuator has determined to be a lagging indicator of
brand health.
The starting point for all brands is differentiation. It defines the brand and distinguishes it
from all others. Differentiation is how brands are born. As a brand matures, BrandAsset®
Valuator finds that Differentiation often declines. It doesn't have to happen. Even after
reaching maturity, with good management, a brand can perpetuate its Differentiation. A low
level of Differentiation is a clear warning that a brand is fading.
Differentiation is only the first step in building a brand. The next step is Relevance. If a brand
isn't relevant, or personally appropriate to consumers, it isn't going to attract and keep them -
certainly not in any great numbers. BrandAsset® Valuator shows that there is a distinct
correlation between Relevance and market penetration. Relevance drives franchise size.
The relationship between a brand's Relevance and Differentiation represents brand strength,
which is a strong indicator of future performance. Relevant Differentiation - remaining both
relevant and differentiated - is the central challenge of every brand. It is critical for all brands
and all over the world.
BrandAsset® Valuator's third primary measure (or pillar) is Esteem - the extent to which
consumers like a brand and hold it in high regard. In the progression of building a brand, it
follows Differentiation and Relevance. It's the consumer's response to a marketer's brand
building activity. Esteem is itself driven by two factors: perceptions of quality and popularity,
and the proportions of these factors differ by country and culture. BrandAsset® Valuator
65
tracks the ways in which brands gain Esteem, which helps us consider how to manage
consumer perceptions. Through BrandAsset® Valuator, we can identify opportunities for
leveraging a brand's Esteem.
If a brand has established its Relevant Differentiation and consumers come to hold it in high
Esteem, brand Knowledge is the outcome and represents the successful culmination of
building a brand. Knowledge means being aware of the brand and understanding what the
brand or service stands for. Knowledge is not a consequence of media weight alone. Spending
money against a weak idea will not buy Knowledge. It has to be achieved.
As Brand Strength was found in the relationship between Relevance and Differentiation,
Brand Stature is discovered in the combination of Esteem and Knowledge. Brand Stature
indicates brand status and scope - the consumers' response to a brand. As such, it reflects
current brand performance and is a strong strategic indicator. For example, Esteem rises
before Knowledge for a growing brand. If rankings show the opposite relationship, a problem
may have been identified.
By plotting all four measures - Differentiation, Relevance, Esteem and Knowledge -
BrandAsset® Valuator serves as an exceptional diagnostic tool for building and managing
brands. BrandAsset® Valuator's Power Grid, a graphical depiction of the relationship between
brand strength and brand stature widely associated with Young & Rubicam's BrandAsset®
Valuator shows the strengths and weaknesses of a brand. It identifies the strategic direction to
maximize brand strength and helps clarify the role of elements in the marketing mix (see
Figure 15).
66
Figure 15 BrandAsset® Valuator
On the vertical axis, we there is plot each brand's strength - its level of Relevant
Differentiation. Along the horizontal axis, there is plot each brand's current stature - its
Esteem and Knowledge levels. Brands begin life in the lower left corner, where they first
establish their Differentiation, their reason for being. Most of the movement here is upward.
The process of growth starts with Differentiation, then Relevance, while the brand is not yet
held in Esteem or widely known.
Enough Strength boosts the brand into the upper left quadrant. This quadrant represents the
potential for a brand. Strength is still building and the challenge here is to translate this
Strength into Stature for the brand. Brands can stay in the upper left quadrant, establishing
themselves as successful niche players. Or, from this position, a brand can launch its attack.
From a marketer's standpoint, it's also an area of yet unrealized potential. Current brand
leaders need to recognize the brands in this quadrant as their emerging competition. The upper
right area is populated by the brand leaders. The strongest brands are here, those with
megabrand potential and, in many cases, the megabrands themselves. A key finding of
BrandAsset® is revealed in the Power Grid. Both older and relatively younger brands are
found in this upper right quadrant. The implication is tremendous - brands can hold a position
of power, virtually forever, if managed properly.
BRAND STREANGTH
(RELEVANCE & DIFFERENTIATION)
UNREALIZED
POTENTIAL
LEADERSHIP
HIGH
NEW
LOW
LOW
HIGH
BRAND STATURE
(KNOWLEDGE & ESTEEM)
67
Finally, the bottom right quadrant is the trouble spot for brands, an indicator of eroding
potential. These brands have failed to maintain their Relevant Differentiation - their core
Strength. If unattended long enough, their Stature will begin to fall and the franchise decline.
Without proper management, brands in the bottom right quadrant could slide into the lower
left quadrant signalling that these brands have become unfocused. Consumers hold few
perceptions of them, finding them less Differentiated or Relevant. Esteem is falling and is
frequently at a lower level than Knowledge. Unless steps are taken to stimulate and
reinvigorate, these brands will lose Esteem
and could eventually fade from consumers'
consciousness.
The Power Grid defines a cycle of brand development (see Figure 16).
Figure 16 The Power Grid
Brands begin life in the lower left corner, where they first establish their Differentiation, their
reason for being. As the brand develops Differentiation and starts to build Relevance, it rises
into the Unrealized Potential area. Brands here can stay in this area, establishing themselves
as successful niche players, or they can build on their Strength to develop into strong mass
brands. As brands develop Stature on their base of Strength, they move into the Leadership
area of the Power Grid. The strongest brands are here - those with megabrand potential and, in
H
IG
H
UNREALIZED
POTENTIAL
LEADERSHIP
L
O
W
UNFOCUSED OR NEW
ERODING
LOW
HIGH
BRAND STATURE
(KNOWLEDGE & ESTEEM)
(R
E
L
E
V
A
N
C
E
&
D
IF
F
E
R
E
N
T
IA
T
A
IO
N
)
B
R
A
N
D
S
T
R
E
N
G
T
H
68
many cases, the megabrands themselves. Successful brands that then fail to maintain their
Relevant Differentiation- their core Strength, can decline into the Eroding Potential area.
These are brands exhibiting warning signs. Brands can decline even further, eroding Stature
as well as Strength, becoming Unfocused, and ultimately fading from consumer's
consciousness.
The brand strategy should include some of following activities:
investment in communication
price management
creation entry barriers
defending against brand counterfeiting
Communication is the brand’s weapon. It alone can unveil what is invisible, reveal the basic
differences hidden by the packaging which often looks the same among competitors. It alone
can sustain the attachment to the brand, by promoting intangible values, even if this loyalty is
eroded by many in-store promotions. Advertising is also a source of barrier to entry for
competitors.
Even if product and advertising do increase added value, loyalty at all costs does not exist.
Customers can be both sensitive to the brand but disloyal to it, estimating that the price of the
brand goes beyond the price span that they are willing to pay for the product category.
Moreover the part of the benefits linked to the product are sometimes not valued by
customers’ eyes. Because of that, the brand has to stay within the core of the market if it
wants to continue.
The offer should be created in the way, which can make impossible for competitors to enter
on the market. The main sources of entry barriers can be
20
:
Controlling the cost of the factors of production is the most important, which leads to a
long-lasting competitive advantage;
Mastering technology and quality can be a key success factor for companies. It enables
them to constantly innovate and to remain the reference of the market in terms of quality;
20
Ibidem, pp. 248-249.
69
Domination through the fame and image (brand awareness) as a result of focusing of
company all their communications on the name itself and applying a brand extension logic
beyond the initial segment;
Quickly using up all the aspects of a promising concept through range extension;
Putting a name on a product in itself yields a uniqueness of offer and an added value that
competitors will lack;
Controlling the relationship with opinion leaders;
Controlling distribution and imposing own brand on the shelf;
Defending exclusive image against counterfeit products, models or signs.
Products, ideas, concepts can all be the subject of imitation. The competitive advantage based
on innovation is short-term only. Intellectual property must be defended and extended. There
are two types of attack – counterfeiting and imitation. Counterfeiting is the identical, trait-for-
trait imitation of the brand and its identifying components. There is no need to provide
evidence of customer confusion. It simply needs to be identified, and legal action taken. In a
number of countries where counterfeiting is not only tolerated, but even accepted the long-
term work is necessary. This work consists legal actions and educational actions.
12. Creating the product portfolio and brand portfolio. Brand extension strategies
All products marketed under a given brand are considered a brand portfolio. The purpose of
creating the brand portfolio and its management is to improve brand power (measured with
the criterion or brand awareness and/or image) and to increase the brand portfolio's capacity
of generating profits in long term.
New products marketed under the same brand are easier and cheaper to manufacture than
launching an entirely new brand. This is due to the use of the already built brand awareness
and image to support a new product launch, without having to build these qualities from
scratch. In case of introducing new products under the same brand, the brand itself becomes a
hierarchical structure and includes a number of products targeted at various market segments.
70
Introduction of new products under an existing brand is referred to as brand extension (if the
new product is given the name of an existing brand) or sub-brand creation (if the name of the
new product refers to the name of an existing brand)
21
.
A brand which provides support for a new product becomes a parent brand and, if such
support encompasses many products introduced under the existing brand, it is referred to as a
family brand. Brand extension can be divided into two classes:
intra-category extension (product line extension),
inter-category extension.
The intra-category extension means introduction of a new product to a segment already served
by a given brand. Typically this will constitute a modification in terms of the manner of
product use or adjusting it to a new user group. Inter-category extension relates to a situation
in which the existing brand supports a product introduced to another product category.
Brand extension poses a risk of decreasing brand value as a result of change and/or dispersion
of its image. At the same time, a new product marketed under a given brand should not only
benefit from the brand one-sided, but it should support it, improving its power and image.
Successful brand extension can generate a number of benefits for the brand owner,
including
22
:
Transfer of associations and evaluations related to a strong brand onto a new product and
related reduction of the perceived risk of trying out and using a new product;
Avoidance of costs of new brand development - elements such as name, logo, packaging
and slogan (catchphrase);
Parent brand image improvement by intensification of desired connotations or by adding
entirely new, major associations which apply to all products of a given parent brand;
Brand refreshment which means improvement in parent brand awareness and image;
Possibility to appeal to a new group of customers.
Brand extension also involves a number of risk if the extension receives negative opinion
from the buyers. Such situation may be the case if:
21
J. Kall, R. Kłeczek, A. Sagan, op. cit., pp. 177.
22
Ibidem, pp. 179.
71
The buyers perceive the extension of the original brand's product category and the product
category in which the brand extension is carried out as dissimilar or mismatched (e.g. they
perceive them as non-substitutive, non-complementary categories or think that their
production are not based on similar resources or that the extension is relatively easy to
generate);
Product varieties have been introduced which are addressed to lower price segments,
whereby the brand's product portfolio was related to higher price segments and added
prestige to the buyer's perceived self-image;
Brand extension can be accompanied by associations which can be seen as incoherent or
contradicting the parent brand image.
Because certain financial and image-related relationships exists between the parent brand and
brand extension, the decision on brand extension should only be taken after the procedure
described below has been executed
23
:
determination of the existing image of the parent brand;
determination of possible extension directions;
evaluation of the potential of possible extensions;
development of a manner in which a new product will be launched;
brand extension evaluation.
Determination of the existing image of the parent brands consists in the identification of
central associations related to the brand and determination of their power. These associations
are the basis of the image transfer into the desired extension direction.
Determination of possible extension directions is carried out by method of product category
structure analysis, segment attractiveness analysis, brand hierarchy, portfolio analysis,
controlling and positioning rules. These directions should be determined with consideration of
possibilities of taking advantage of brand's key associations for specific products for which
the extension will be carried out.
Evaluation of the potential for possible extensions should include sensitivity analysis of the
planned extension in two directions, i.e. transfer of the image from the parent brand to the
extended product and from the extended product back to the parent brand.
23
Ibidem.
72
Introduction of a new product being an extension of an existing brand to the market requires
adequate advertising, distribution and promotional support. It is particularly important to
announce the new product to the public which will take account of mutual positioning of the
parent brand and the new product, thus reducing product cannibalization within the
framework of a given brand.
The evaluation of brand extension includes the verification of sales figures in the new
customer segment and change of the sales within the entire product portfolio offered under a
given parent brand.
Not every brand can be extended and not each brand is suitable for this purpose. Before
launching a brand extension, it is very important to consider several factors affecting the
success of such decision (see Table 18).
Table 18 Extension strategic evaluation gird
Extension 1
Extension 2
Is it a growing market?
Are its success factors close to our strengths?
Are the brand assets transferable?
Are the brand assets still assets in this market?
Will it impact positively the brand equity?
How entrenched are competitors?
How fast can they copy?
Does the product have a clear differentiation?
Is it a motivating difference?
Can the company produce it?
Can it produce at a normal cost?
Will distribution accept it?
Is it consistent with brand or company identity?
Does it capitalise on the brand or company’s present
customers?
Is it consistent with the brand or company’s positioning?
Does it capitalise on the company’s expertise in:
- production?
73
- advertising?
- logistics?
- sales force?
- retail location?
- pricing/promotion?
Does it meet the company’s profitability objectives?
Can the company sustain competition (does it have the
financial resources needed to compete)?
Source: J.N. Kapferer, op. cit., pp. 341.
13. Brand architecture
Brand architecture is a coherent response given to the following three questions
24
:
- How many brand levels should be used? A single level, or two? In others words, should
brands be created to designate the activities or the professions or the products themselves?
- What reference point exists between these brand levels? This initiates the question of the
respective roles of the brands: where is the value located, who endorses whom, and so on?
- What visibility should the corporate brand have? And what role?
There are six main brand architectures
25
:
- the product-brand strategy and its variants, the line and range brands,
- the flexible umbrella strategy,
- the masterbrand strategy,
- the maker’s mark strategy,
- the endorsing brand strategy; the source brand strategy.
These strategies may be structured using two axes – according to whether the value sought by
the brand relates more to power and stature, or personalisation, differentiation and identity
(see Figure 17).
24
Ibidem, pp. 351-352.
25
Ibidem.
74
Figure 17 Positioning alternative branding strategies
Source: J.N. Kapferer, op. cit., pp. 352.
At one hand, the strategy known as the corporate masterbrand is characterised by a single and
unique brand level, often the corporate name, and that of the company itself. On the other
hand, there is the product-brand strategy, in which the company is not identified at all.
Architectures with two or more brands levels constitute a compromise between the power
requirements that push for a single dominant name and the personalisation requirements that
push for segmented daughter brands, each having a separate and unique identity.
These architectures may be also classified according to the degree of limitation that they
impose downstream, at the business, product and market levels. Based on this criterion, it is
possible to differentiate between two basic alternatives – house of brands and branded house.
BRAND FUNCTION:
INDICATOR OF ORIGIN
SOURCE EFFECT
REASSURANCE
BRAND FUNCTION:
PRODUCT
DIFFERENTIATION
PERSONALISATION
Corporate
masterbrand
Endorsing brand
Range brand
Line brand
Source brand
Umbrella brand
Maker's mark
Corporate
endorsing brand
Corporate
source brand
Generic brand
Product brand
75
House of brands relates to a situation of extreme freedom of management for the brands,
subsidiaries, activities and division. The branded house expresses the willingness to give
coherence to the whole under the auspices of a brand with pivotal values that find
embodiment at the market and product level. This path brings together the masterbrand and
also dominant brand strategies, giving a strongly normative structure to the daughter brands
on the second level.
All strategies may be classified by the number of brand levels and according to the degree of
freedom allowed downstream, at market level, for decisions on product and service
positioning (see Figure 18).
Figure 18 The six main brand architectures
Source: J.N. Kapferer, op. cit., pp. 354.
corporate
Brand A
High degree of freedom
(house of brands)
High degree of coherence
(branded house)
One
branding
level
Two
branding
levels
Brand A
Brand B
Corp
Corp
Sub-
brand
B
Sub-
brand
C
Ferrero
3M
L'Oreal Paris
Brand or corporate
Sub-
brand
A
Mitsubishi, Samsung
P&G
Nivea, Sony
(Hidden corporate)
Maker's mark
Endorsing brand
Source brand
Product
Product
Product
Brand or corporate
Product brands
Umbrella brand
Masterbrand
Product
Product
Product
Brand or corporate
Brand A
Brand B
Brand C
76
The product-brand strategy involves the alottment of a particular name to one, and only one,
product or product line as well as one exclusive positioning (see Figure 19). The merit of this
strategy is that company may focus on one market, choose appropriate positioning and
compete to win the whole market. Company can adapt its offer for each particular segment
with different needs and expectations of the consumers and promote one brand summarising
all added values. Product-brand strategy allows firms to take risk in new markets. Since each
brand is independent of the others and company name, the failure of one of them has no risk
of adverse influence on the others and company name. This strategy may be also used in
distribution, where limited number of brands from one manufacturer is preferred. If acompany
offers independent and strong brands in many product categories, there is much higher chance
to put all of them at the shelf space.
Figure 19 The product-brand strategy
Source: J.N. Kapferer, op. cit., pp. 356.
The line brand strategy regards the case, where the line of the products is rolled out as a
complete ensemble, with many complementary products linked by a single central concept.
The line brand strategy offers various advantages:
- it enhances the selling power of the brand and creates a strong brand image,
- it eases the distribution for each line extension,
- it diminishes roll-out costs.
Company X
Brand A
Brand B
Brand N
Product A
Product B
… etc …
Product N
Positioning A
Positioning B
Positioning N
77
The drawbacks of the line strategy lie in the tendency to forget that a line has limits. One
should only include product innovations that are responsive to the existing ones.
Range brands bestow a single brand name and promote through a single promise a range of
products belonging to the same area of competence. In range brand architecture, products
protect their common name. These brands combine all their products through a unique
principle, a brand concept (see Figure 20).
Figure 20 Range brand formation
Source: J.N. Kapferer, op. cit., pp. 360.
A big merit of this strategy is that range brand can concentrate its communication on a brand
name, which can be then shared with by other products. This communication is based on
unique brand concept and promotes only the most representative product from the group. New
products can be easily distributed with low cost of the launch.
The maker’s mark strategy is characterised by a discreet corporate logo, giving superiority to
the commercial brand.
Endorsing brand gives its approval to a wide variety of products grouped under products
brands, line brands or range brands (see Figure 21).
Brand
Product concept
PRODUCTS
A
B
C
D
……
N
78
Figure 21 Endorsing brand strategy
Source: J.N. Kapferer, op. cit., pp. 363.
This strategy is one of the least expensive ways of giving substance to a company name and
allowing it to gain a minimal brand status. The endorsing brand becomes responsible for the
guarantee that is substantial for all brands.
Umbrella brand strategy is characterised by a single brand level: the products are not given a
daughter brand. The umbrella brand covers several products categories (see Figure 22).
Promise A
Promise B
Promise C
Promise N
Product or
range A
Product or
range B
Product or
range C
Product or
range N
Brand A
Brand B
Brand C
Brand N
Endorsing brand
79
Figure 22 Umbrella brand strategy
Source: J.N. Kapferer, op. cit., pp. 364.
Flexible umbrella architecture gives the subsidiaries a high degree of freedom, which can
motivate them. On the communication level, the accent is put on the specific qualities and
advantages of the products. The brand may be perceived as a source of quality products, but it
can also be deemed cold and distant.
Specific type of the umbrella brand is masterbrand. Masterbrand gives not just a name, but a
frame of reference behind which everything should align, in order eventually to become the
representation of it, the living spokesperson. Here the brand is the surrounding framework.
When choosing the brand strategy several factors should be taken into consideration:
- corporate strategy,
- business model,
- culture,
- added-value lever of the product,
- resources,
- brand vision.
A
B
C…
N
A
B
C
N
Brand
Products or
services
Specific
communications
by product or
service
80
14. Brand/product strategies in international marketing
A big number of well-entrenched and known global brands have generated much of their sales
and profits from nondomestic markets. The success of these brands have provided
encouragement and drive to many enterprises to market their brands internationally. The
growing interest in global presence arouses also from the following factors
26
:
- perception of slow growth and increased competition in domestic markets,
- belief in reinforced overseas growth and profit opportunities,
- desire to diminish cost via economies of scale,
- need to diversify risk,
- recognition of global mobility of customers.
There are strong compelling economic premises to globalise products or platforms. But the
meaning of globalisation of products can be different. There are eight alternative patterns of
globalisation (see Table 19).
Table 19 From global to local: eight alternative patterns of globalisation
Type
1
2
3
4
5
6
7
8
Name
Yes
Yes
Yes
Yes
No
No
No
No
Positioning Yes
No
Yes
No
Yes
No
Yes
No
Product
Yes
Yes
No
No
Yes
Yes
No
No
Examples
Coke
Chanel
Amex
Sony
Mars
Martell
Nescafe
Garnier
Persil
Ariel/
Tride
Vauxhall
Opel
Volks-
wagen
(Group)
Benckiser
Cycl-
europe
(Group)
Pure
local
Source: J.N. Kapferer, op. cit., pp. 459.
Type 1 is a fully global model. Type 2 recognises the need for alternative positioning strategy.
Type 3 acknowledges the need for important product adaptations. Type 4 is the effect of
brand split between companies. Type 5 appears when the company cannot use the same name
for legal reasons everywhere. Type 6 results when almost identical products are sold under
26
Ibidem, pp. 683.
81
two world brands with different price positioning. Type 7 represents the business model when
there are strong differences in expectations on local markets. Type 8 is the fully local model.
A number of potential benefits have been put forth regarding the development of a global
marketing program. In the competitive race, economies of scale provide a strategic leverage in
that they contribute to competitive pricing. The local company, even if it is positioned in a
niche, has no other way of overcoming the price barrier than to extend its outlets while
innovating. Geographical expansion is then a basic step in the race for survival.
There are some types of enterprises which need a global name for their brands. The single
brand is inevitable whenever the clients themselves are already operating worldwide. It is also
necessary to keep a single brand when the brand itself refers to the signature or “griffe” of its
individual creator – for example in the luxury trade.
The global approach envisions countries and their roles in a widened competitive field. The
objectives s of marketing in each country are no longer determined by the local subsidiary but
are decided upon according to the global competitive system. Hence, whereas traditionally
each subsidiary planned its activities based on their own resources and the domestic market,
within a global strategy the following is the case
27
:
- Certain countries have the role of developing a marketing mix for a new product, testing
its qualities and potential in their domestic markets before extending it to other countries.
This, therefore, represents a test, not of the best marketing mix on single national markets
but of a global marketing mix prior to extension. As a result, nowadays, it is insufficient to
keep an eye on the competition in one country alone – every country should be watched
closely;
- Certain countries are assigned to develop know-how on a particular brand or a type of
product brand so that they can become a precursor and coordinator for others.
Opposite to the global approach, many multinationals follow a multi-local philosophy,
preferring to follow specific regional trends in each country’s market.
There are a number of reasons for creating a global brand:
- economies of scale in production and distribution,
- synergies between countries,
27
Ibidem, pp. 463.
82
- the speed at which innovations created worldwide can be brought onto the market,
- lower marketing costs,
- power and scope,
- consistency in brand image,
- ability to leverage good ideas quickly and efficiently,
- uniformity of marketing practices,
- international image.
Key stages distinguished in the process of globalisation of a brand are as follows
28
:
defining brand identity;
selection of applicable regions and countries,
access to the markets,
selection of the brand architecture,
selection of products suitable for the target markets,
developing global campaigns.
The brand must have an identity that will be used as a vector for its global marketing and that
includes both tangible and intangible aspects. First step for a company is to define the
characteristics of the brand’s identity. This step is of essential importance to ensure coherent
brand image, all the more so because entering real global markets poses a challenge of
centrifugal tendencies for a brand, i.e. that in different places it may be understood and
perceived differently. In order to restrict this movement, one has to create a clear and concise
system of outgoing character. Another challenge in the brand globalization is to deliver a
message in an intended way, so instead of risky question of understanding and translations,
global campaigns are typically based on universal words that are values themselves, creating a
consensus, such as high quality, client focused, dynamic and competent. However an
excessively consensual brand will be regarded as weakness in brand identity, because to fit
within the framework of global market and specificity means compromise. Since the notion of
brands is based on differentiation, successful brands must be characteristic and non-
conforming to prevailing market trends.
Each brand should be based on a consumer insight. In their campaigns, global brands tend to
respond to universal needs. They also need to have characteristic points. There exist a number
28
Ibidem, pp. 488.
83
of ways in which such salient points of the brand identity can be protected against becoming
lost in process of brand globalisation
29
:
by presenting the faces of the brand identity in comparison to specific qualities, saying
what the brand is and what it is not,
by providing a combination of words and images (brand concept board),
by reinforcing the facets through training initiatives and creating local brand relays
(keepers of the flame),
by refraining from delegating strategic implementation (such as advertising and the
websites) to the local level.
At this stage, it is important to differentiate between exported brands and true global brands.
If a brand is exported, it normally acquires the added values related to its perception on the
international market and it also takes advantage of the spill over effect resulting from such
international perception. Globalising a brand means to think up a brand with global, universal
identity from the beginning.
Before the company chooses its target regions and countries for global expansion of a brand,
it primarily has to become the leader in its native market. Upon the selection of regions and
countries a strategic analysis should be performed to evaluate the potentials of respective
countries and the obstructions hindering the access to their markets. Such analysis should
include
30
:
the size of the current market,
factors indicating actual growth and/or the potential of this market, and its segmentation –
social and cultural development and the increase of purchasing power,
consumer insights on their outlooks on quick development,
the character of any competition and its potential to counteract – does the given brand
have resources and potential for strong differentiation or an added value?
the presence of a rudimentary brand equity in the country or region (by tourism or
international media which broadcast brand images into homes throughout the world),
the presence of appropriate distribution channels with potential to promote the brand
concept,
29
Ibidem, pp. 488-489.
30
Ibidem, pp. 490.
84
the existence of a media network,
the existence of adequate business counterparts at the local level,
lack of obstructions preventing the access to the market – customs, formal and informal
laws,
the potential for registering or purchasing a brand name (verification if the brand is not
already restricted locally).
Establishing a brand is a process that takes a period of time, and there is nothing more
important than brand’s first activities in a market, since these determine the long-term
representation of a brand. The basis of this representation it the prepared prototype.
Nowadays many brands comprise two levels of branding – the parent brand and the daughter
brand. A typical brand arrangement is the source brand which comprises two levels. The
brand can be launched globally through its daughter brands which cover a selection of
products. The key to making these parent brands global is to establish a strong daughter
brand.
There are two major strategies for accessing national markets – by creating a new category or
segmenting an existing category.
Creating a new category is based on a launch of a daughter brand becoming the originator of a
new category. It sources benefits associated resulting the advantage of an initiator, negligible
or no competition at all as well as easier business with distributors who always happily
welcome creative innovations and added value rather than a simple switch over from one
brand to another. A downside of this is higher marketing expenditure.
To segment en existing category means to launch a differentiated product basing the values
represented by a brand, but in a category boasting large sales volume.
Adaptation of the brand structure can be achieved by either or a combination of these
solutions – horizontal crunch and/or the vertical crunch. The horizontal crunch consists in
reduction of perceived range of similarly positioned brands and to reposition them below
other brands. The vertical crunch, in turn, serves an opposite goal – the vertical brand
structure comprising three levels of branding which are reduced to two for increased
efficiency and practicality. This type of crunch is further divided into the so-called top-down
crunch and the bottom-up crunch. The top-down crunch describes a situation in which an
endorsing (parent) brand becomes the driving force driver and relegates the depending
85
(daughter) brand to a mere describing role . In the bottom-up crunch case, the number of
levels is reduced by suppression of middle on and by elevation of the bottom brand
Managing the growth of a business and building a brand's position means non-stop adaptation
of the marketing, including ranges of products, to the ever-changing market, however this
takes place within the framework of a pre-defined and consistent strategy.
However, not every brand wants and benefits from global communication. Some choose to
allow their subsidiary companies and branches a high degree of freedom in their local
businesses. For numerous companies operating at a global scale, it is a natural course of
action to centralize their global initiatives around internationally understood values and
company dialogue. In such case, all characteristics such as the name, logo and packaging will
tend to be identical for all products, but the advertising strategies are managed locally. Still, it
is very important to start by creating a brand identity platform, which, although initially
serves no apparent purpose, but later it is presented consistently around the world.
Before starting on creation of brand globalisation campaigns, it is crucial to identify the
factors which unite the brand, which is what it intends to globalise
31
:
the spirit of the brand, aspects parameters of brand identity,
the brand’s visual identity,
the product on which the strategy is based (prototype),
the execution codes of the brand's campaign.
The above have to be identified before progressing to an identical copy strategy, a common
creative concept or even a global campaign.
In order to launch a globalized advertising campaign, it is advisable to
32
:
start the globalisation campaign at the regional level. For instance, first launch in Asia and
include the United States and Europe thereafter, or vice versa,
establish common brand identities and share these aspects (the spirit) of the brand to
create a feeling of affinity between brands,
31
Ibidem, pp. 495.
32
Ibidem, pp. 487.
86
establish universal guidelines in order to carry out the advertising, which either can be
limited to only using common symbols by which the brand can be recognized or,
alternatively you can go much further in order to project the brand personality,
if necessary, admit that the angle of approach not necessarily has to be identical for
different markets (positioning in comparison to competitors, the unique and sales-inducing
competitive advantage), depending on regions and/or continents,
never forget that although a single advertisement is surely economically justified to
achieve this goal, the objective of branding is not to money saving but to boosting your
business. Operating at the international level is costly as it involves building an
international structure, organisation of many meetings, and so on,
it is good to be more prescriptive with towards common strategic products than local
products of tactical importance.
87
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