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PPRODUCT AND BRAND STRATEGIES

Tomasz M. Miśkiewicz, PhD

Chair of Market and Marketing

Warsaw School of Economics

Warsaw, 2014

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

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

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).

Ph. Kotler, G. Armstrong, Principles of Marketing, Prentice Hall, New Jersey 2001, pp. 291.

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

. All consumer products have different characteristics in terms of

consumer buying behaviour, price, distribution and promotion (see Table 1).

Ph. Kotler, G. Armstrong, op. cit.

Installation

Augmented product

Packaging

Actual product

Brand

name

Features

Core product

Quality

level

Design

Warranty

Core

benefit

service

Delivery

and

credit

After-

sale

service

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

J.P. Peter, J.H. Donnelly Jr., Marketing Management. Knowledge and Skills, IRWIN, 1995, pp.. 97.



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

Very 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

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

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

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.

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



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.

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

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.

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.

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

cti

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.

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

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),

Ph. Kotler, G. Armstrong, op. cit., pp. 269.



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

- 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).

Ibidem, pp. 273.

Figure 3 Perception map of the model product

Positioning strategy

The company may realize one of the following strategies



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.

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

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

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

of nove

lty o

f a pr

om t

fac

ture

r's

tive

New products

manufactured at lower

costs

Products of changed

market position

Improvements

Additional products

within the existing

product range

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,



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



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.

Ph. Kotler, Kotler on Marketing, The Free Press, New York, pp. 43-44.

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.

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

of no

y of

oduc

t fr

om t

manuf

tur

er'

rspe

cti

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

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



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

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

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%)



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.

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.

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

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

penetrate market or

beat

competitors

Distribution

Build selective

distribution

Build intensive

distribution

Build

intensive

distribution

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

entice trial

Reduce to take

advantage

heavy consumer

demand

Increase

encourage brand

switching

Reduce

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).

Table 8 Ansoff’s Matrix

Products

Current

New

Mar

Market Penetration

Product Development

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.

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.

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.

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.

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



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

Market Penetration

Product Extension

Product Development

Expa

nde

Market Expansion

Limited

Diversification

Partial Diversification

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).

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).

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

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.)

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

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

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



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)

J.N. Kapferer, op. cit., pp. 67.

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



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).

Ibidem

Table 16 Distributor's brand categories

Source of brand superiority

Price

Functionality / quality

uppor

the store

twork

None

Brands of first available

price

Private (own) brands

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.

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



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

. 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

Ibidem, pp. 77-79.

Ibidem.

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

. 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).

Ibidem, pp. 97.

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

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.

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

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



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).

Ibidem, pp. 171.

Ibidem.

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

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

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

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).

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

Core

proposition

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

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.

An emblem is used to symbolise brand identity through a visual figure other than the brand

name. It has many function such as



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.

Ibidem, pp. 194.

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

Why must this brand exist?

What would customers be missing if the brand did not exist?

Vision.

What is the brand’s vision of the product category?

Ambition.

What does the brand want to change in people’s lives?

What are our values?

What will the brand never compromise on?

Know-how.

What is the brand’s specific know-how? Its unique capabilities?

Territory.

Where can the brand legitimately provide its benefits, in which product categories?

Typical products or actions.

Which products and actions best embody, best exemplify the brand’s values and

vision?

Style and language.

What are the brand’s stylistic idiosyncrasies? Its semiotic invariants?

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

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

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.

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

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

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



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

Ibidem, pp. 211.

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



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),

Ibidem.



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

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.

Ibidem, pp. 237.

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

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).

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

HIGH

BRAND STATURE

(KNOWLEDGE & ESTEEM)

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

UNREALIZED

POTENTIAL

LEADERSHIP

UNFOCUSED OR NEW

ERODING

LOW

HIGH

BRAND STATURE

(KNOWLEDGE & ESTEEM)

)

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



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;

Ibidem, pp. 248-249.



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.

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)

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



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:

J. Kall, R. Kłeczek, A. Sagan, op. cit., pp. 177.

Ibidem, pp. 179.



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



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.

Ibidem.

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?

- 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

- 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

- 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).

Ibidem, pp. 351-352.

Ibidem.

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

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

Sub-

brand

Sub-

brand

Ferrero

L'Oreal Paris

Brand or corporate

Sub-

brand

Mitsubishi, Samsung

P&G

Nivea, Sony

(Hidden corporate)

Maker's mark

Endorsing brand

Source brand

Product

Brand or corporate

Product brands

Umbrella brand

Masterbrand

Product

Brand or corporate

Brand A

Brand B

Brand C

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

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

……

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

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.

C…

Brand

Products or

services

Specific

communications

by product or

service

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

- 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

Name

Yes

Positioning Yes

Yes

Product

Yes

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

Ibidem, pp. 683.

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

- 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,

Ibidem, pp. 463.

- 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



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

Ibidem, pp. 488.

of ways in which such salient points of the brand identity can be protected against becoming

lost in process of brand globalisation



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



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,

Ibidem, pp. 488-489.

Ibidem, pp. 490.



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

(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



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



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,

Ibidem, pp. 495.

Ibidem, pp. 487.



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.

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