VIEWS: 35 PAGES: 40 CATEGORY: Market Research POSTED ON: 11/2/2012
The focus of this first part of the subject is on the job of the product manager. There may not be a person with that exact title in every marketing organisation-while many such jobs exist, the people who fill them could be called brand managers, market managers, or the like. We intend the generic title product manager to apply to different kinds of organisational structures and different kinds of companies, whether they provide consumer goods, industrial products, or services.
THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ INTRODUCTION TO PRODUCT AND BRAND MANAGEMENT AND INNOVATION Managing the Product 2 Marketing Decision Making 2 The Four Functions 2 Marketing 3 The Product Manager's Position 4 Scope of Responsibility. 5 Authority 6 What sort of person makes a good Product Manager? 7 1. ANALYSIS AND RESEARCH 9 2. PRODUCT PLANNING 10 3. ADVERTISING 10 4. PROMOTION AND MERCHANDISING 10 5. ANALYSIS, FORECASTING AND PROFIT PLANNING 11 Product and Brand Management Organisation 13 Marketing Organisation 14 Product-Focused Organisations 16 Market-Focused Organisations 18 Functionally Focused Organisations 18 Changes Affecting Product Management 20 Impact of Change on Organisational Structure 23 WHAT IS A BRAND? 24 Early Branding 24 Modern Branding 24 The Development of Branding 25 Successful Branding 26 The Importance of Brands 27 Maintaining Brand Values 28 The Brand Life-Cycle 28 Brand Extension 31 Creative Branding 32 THE SIGNIFICANCE OF BRANDING 33 New Brand Development 33 Maintaining Brand Equities 33 The Benefits of Brands 34 International Brands 34 Brand Values 34 HOW TO BRAND NEW PRODUCTS 35 Developing a Point of Difference 35 Identifying New Brand Opportunities 36 Reasons for Brand Failure 36 Branding by Retailers 36 Brand Search 37 Testing the Concept 37 BRANDING SERVICES 38 Particular Problems of Services Branding 38 The Need for Branded Services 39 WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 1 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ Types of Service Brands 39 The Essentials of Service Branding 40 KEY TERMS INDEX 40 Managing the Product The Role of the Product Manager The focus of this first part of the subject is on the job of the product manager. There may not be a person with that exact title in every marketing organisation-while many such jobs exist, the people who fill them could be called brand managers, market managers, or the like. We intend the generic title product manager to apply to different kinds of organisational structures and different kinds of companies, whether they provide consumer goods, industrial products, or services. The perspective is of a manager in a company whose primary responsibility is a product or a closely related product line. Broadly speaking, the product manager has two responsibilities. first, the product manager is responsible for the planning activities related to the product or product line. 1 Thus, the product manager's job involves analysing the market, including customers, competitors, and the external environment, and turning this information into marketing objectives and strategies for the product. Second, a key function of the product manager is getting the organisation to support the marketing programs recommended in the plan. This may involve co-ordinating with other areas of the firm, such as research and development for product-line extensions, manufacturing, marketing research, and finance. It also involves internal marketing of the product to obtain the assistance and support of more senior managers in the firm. Figure 1 gives some perspective on a product manager's interactions within and outside the firm. Marketing Decision Making The Four Functions In the broadest sense, there are only four functions in any company or organisation: Finance Marketing Production Producing the product (including services) Personnel The right people properly motivated and trained, in the right place, at the right time. No matter what the title of the head of each function, such as Finance Director, Marketing Manager, 1 When we use the term product throughout the subject, we are referring to all kinds of products, including services. Product is simpler to use than product/service. While there are well-documented differences between marketing manufactured goods and services, the structure we present in this subject is meant to be a template that can be used for all products. WEB: www.marketing.org.au E-MAIL: email@example.com 2 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ Factories Controller, Administration Manager, each is on a par with the other in terms of importance within a company. Each must plan, put those plans into execution, and ensure, through detailed control, that they work in practice. Each requires information from the other to carry out these operations effectively. Marketing Since Marketing, perhaps more than any of the other three functions, is vitally concerned with the outside world and its effects upon the company's total marketing operation, such as government action, social change, new techniques, international market trends and changes, as well as the more immediately relevant market intelligence, there should be a greater flow of information emanating from Marketing than from any other function. This internal relationship is an extremely delicate one. Marketing plans will only be actioned effectively if others carry them out with commitment. Whenever Marketing is newly incorporated into an existing structure, entrenched positions and understandable jealousies will inevitably make life difficult for the Product Manager. This subject is intended to give the reader background and knowledge essential to be a successful product manager. What, then, are the differences between a focus on the product manager and a more general marketing management perspective? One key difference is that marketing managers in charge of a division or strategic business unit have more concerns about managing "portfolios" of products and about the long-term strategic direction of their business groups. Because product managers in our sense are in charge of a single product or closely related product line, they are not concerned on a day-to-day basis about the health of the general business area in which they operate. The narrow product or brand focus at the expense of the product category as a whole has given rise to a new position at many packaged goods companies, the category manager. A second key contrast is that the nature of decision making is quite different. Divisional marketing managers typically make strategic decisions about which products to add or drop and manage to meet an overall divisional financial objective. While product managers are intimately involved with developing marketing objectives and strategies for their products, their key decisions are tactical and revolve around the marketing mix: how much to spend on advertising, how to react to a competitor's coupon promotion, which channels of distribution are appropriate, and similar questions. FIGURE 1 A product managers potential interactions WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 3 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ SOURCE: Philip Kotler, Marketing Management: Analysis, Planning, Implementation, & Control, 7th ed. 1991, p. 693. Prentice Hall, Englewood Cliffs, New Jersey. Finally, product managers and marketing managers face different time horizons. Product managers focus on meeting annual (or other short-term) targets. This does not imply that they are myopic; however, they face substantial pressure to attain short-run market share, volume, or profit targets. Marketing managers are also concerned with short-run targets, but they more often take a longer perspective of where the business is going. Thus, this subject focuses on the product manager's tasks of marketing planning, developing product strategy, and implementing that strategy through various marketing tools. The intended audience includes those individuals who manage individual products. The Product Manager's Position So where does this place the Product Manager, and is that a sensible title for him or her anyway? There are many influencing factors which can help to determine his/her role in differing situations. 1. Is the Product Manager responsible for a group of products, or is he responsible for an individual brand. Obviously in the latter case 'Brand Manager' would be a better title. WEB: www.marketing.org.au E-MAIL: email@example.com 4 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ 2. Does the market breakdown make it sensible to have Market Managers or Market Development Managers? 3. Can the total market sensibly be broken down into recognisable sectors. 4. What does the company policy require? A single paramount company name such as Cadburys; individual brand names, or a bit of both, such as Johnson & Johnson for baby products and Band-Aid for first aid dressings? 5. How does the concentration of buying power into fewer and fewer hands affect overall marketing? Is there an increasing need for a marketing backup for Key Accounts sales executives. 6. Can there be justification for separate marketing service people to back Product Managers, with statistical data. 7. Is the total turnover for any one brand or product category so vast that the sheer size requires it to be broken down into manageable portions. 8. Should the Product Manager have product development responsibilities or should he be left to look after his/her own existing products lest they be neglected? 9. How technical is the product or market? 10. To what extent is export a separate function? 11. Has the company newly embraced marketing, and to what extent is formal marketing planning practised? 12. Is one restricted to a finite distribution chain but with hundreds of products? 13. How large is the company overall? Is it vast requiring a large number of responsible marketing executives? 14. How competitive is the market? Is it highly competitive, like video, or is it very specialist, such as water purification? 15. What are the relevant profit centres within the company? Each Product or Brand Manager must have a budget and access to detailed costings, and be a profit centre. 16. To what extent is top management able and willing to delegate decision making? All these considerations inevitably lead to a plethora of structures, each of which can be perfectly sensible for individual companies. There is a constant need to review responsibilities in light of the ever-changing patterns of markets and the speed at which product development and innovation occurs. An ever-present organisational danger in such a fluid situation is the overlapping of responsibilities. Scope of Responsibility. Much of the preceding descriptions of the product manager's job and the types of marketing WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 5 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ organisational structures that impact on the role of product managers was general. As is always the case, there are exceptions to the rules. Even within a specific organisation type, the product manager's job varies between industries and between products. Authority Product Management is a middle management position and therefore must report to higher authority as well as be responsible for others. But whilst this is so, the Product Manager must act as responsibly as if he alone were responsible for his/her product. It is the reason why Product Managers are called Managers. They must manage people and events for the benefit of the whole company, not simply for one product or product group, even though all their endeavours revolve around one product group. As previously noted, there is no typical job description or even job title for a PM. In general, PMs co- ordinate sales, manufacturing (if applicable), and research and development (R&D). But the extent to which a PM focuses on one area or another varies depending on the time of year, the industry segments, and the stage of the product life cycle. Interestingly, the PM's position can be characterised as having broad responsibility and limited authority! The Product Manager, (sometimes called the Brand Manager) should ideally be a judicious blend of the theorist and the practitioner, and certainly very much an all-rounder. The Product Manager under the system is ideally placed to estimate for top management the optimum balance between sales growth and profit growth for his/her own particular product. He/she studies the market and the product, he/she forecasts the sales and recommends the price, which together make up the product's revenue; he/she plans and coordinates the advertising and sales promotional programmes which make up the bulk of the product's expenditure. In short, he/she can be made responsible to his/her superiors for the overall health and profitability of his/her product over a sustained period of time. In the execution of this responsibility there is no aspect of the product's activity which is not his/her concern. Any criticism which management may reasonably level at the product-if the product or the advertising are not good enough, if sales are below forecast, or expenses above budget, if problems are not being tackled systematically, or opportunities exploited-in any of these circumstances, and many others, management will in the first instance hold the product manager accountable. The PM has a diverse role. Responsibilities, emphasis on marketing mix variables, and skills utilised differ across products even within individual companies. The two most important industry variables separating responsibilities are the stage in the product life cycle and the degree of technological innovation. Effective marketing requires information support and people skills. Most PM’s admit that they do not have enough time and resources to be sufficiently thorough in their analyses. They feel that more sophisticated analysis tools would give them more confidence in recommending proposals to upper management, especially with respect to pricing. In addition, the PMs' role as co-ordinator often brings them into situations in which they have no direct authority over the staff involved. Good personal relations are therefore crucial for a PM to secure co-operation from the staff. WEB: www.marketing.org.au E-MAIL: email@example.com 6 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ Not surprisingly, product marketing can be a political job. Politicking is a headache in both large and small companies. On the one hand, enterprising people at all levels often manage to bypass bureaucratic layers to find champions among higher management levels to back a project. On the other hand, fear of politics can limit plan and program options for product managers. This problem is most obvious in high-tech companies where many projects compete for management attention and budgetary resources. Finally, the role and image of marketing differs across industries. In consumer product companies, marketing is the traditional "hub of the wheel." PMs in this segment follow the traditional marketing model most closely-writing a marketing plan and planning and implementing the four Ps (price, promotion, place, and product). In high-tech companies, the PM is an important intermediary between engineering and customers. PMs play the dual role of translating customer needs into technology requirements and smoothing out the rough edges of a raw product from R&D. In service industry segments, the PM is chiefly concerned with distribution and channel management. For services, distribution is an integral part of the product itself. What sort of person makes a good Product Manager? - Someone able to size up a situation quickly, realistically; - who can sense the possible effects of external actions on his own plans; - who has that all-important 'feel' of the market place; - who can see the various courses of action in the circumstances, can gather all the options and take positive action to exploit the situation; - who has the presence and commands the respect of his/her colleagues for obtaining commitment to his/her measures; - who is logical, numerate, clear, and mature in thought as well as incisive and decisive in action; - someone not easily panicked, who is a good thinker and a good practitioner; - knowledgeable to the point of being an expert on his or her products: to an extent, a Jack of all trades but a master of marketing: - who can systematically and single mindedly attack and attain the objectives set, with overall control and a grasp of detail; - who, with all his/her logicality, can exercise an entrepreneurial flair when the occasion demands; - who can communicate with and sell to top management, as well as to his or her colleagues, associates, equals and peers. Companies which adopt the Product Manager system gain three clear benefits from so doing: (a) A unity and consistency in the development of the individuals WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 7 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ In a large multi-product organisation, the day-to-day contact between the line management of the different departments, production, research, sales, finance, etc.-is necessarily limited and intermittent. Responsibilities are heavy, the degree of specialisation is intensive. As any administrative theorist will point out, the greater the specialisation the more there is a problem of co-ordination. Historically, this co-ordination was provided by the chief executive of the company, who had a clear vision of what he/she wanted to do, and did it, right or wrong. As the producing units have grown larger and more complex, so have the purely administrative demands on the boss, pulling him/her further and further back from the day-to-day commercial processes and reducing his/her entrepreneurial contribution. If there was only one course of action to be taken at any one time, the task of management would be easy. In fact, top management has to allocate the company's many resources (not the least of which- is its own most precious time) with great skill and precision. If there is a given piece of time or money-and it is a cliche to say they are the same thing-there will immediately be a dozen different ways of using it. Lower down the line, the factory makes the company's products, the sales force sells them all, and so on. However, left to themselves none of these departments will be utterly impartial. One product will present a higher labour overhead, or longer shut-down time, than another. One product will be easier to sell or easier to display than another. One will be more than another. The only way to be certain that each product or brand has an even break, and that no worth-while project gets overlooked in the crowd, is to employ the age-old principle of the devil's advocate. It seems a good idea to follow course A. Very well then, before we take the decision, let someone put forward the best possible case for course B. The Product Manager is the advocate for his/her product(s). At all times he/she is pressing for the maximum single-minded drive behind that one product, regarding the company's other products not so much with indifference, as with deep-rooted hostility. Nobody asks the Product Manager to take a cool and impartial view in this situation. If everyone in the organisation, from the Managing Director to the newest recruit under sales training, were to devote his/her entire time and effort to just one product or product line, the Product Manager in question would have only one doubt in his/her mind: was the organisation working long enough hours? The resultant vigorous internal competition between Product Managers ensures that no possible activity, on any of the brands, is passed by for want of enthusiastic backing. Top management can quickly and efficiently review the competing claims and recommendations, and allocate resources in the confident knowledge that the groundwork has been done thoroughly. (c) A pool of trained and experienced executives with a well-developed feeling for general management The leavening of Marketing Managers, trained in the big, highly sophisticated consumer goods companies, has been of considerable value to commerce in this country. It has, nevertheless, contributed to a fairly widespread misunderstanding of the Product Manager system. Valuable as the other benefits are, the biggest single advantage a large company derives from maintaining the system is in the area of management training. The concept of the "management trainee" in industry has been not too successful in the main. It also problems of what to do with the WEB: www.marketing.org.au E-MAIL: email@example.com 8 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ trainees while they are spending time with different departments, and how to prevent them getting bored through having no responsibility other than to observe and learn. The immediately obvious alternative, of putting a trainee into one department and leaving him/her there, has the equally obvious drawback that the end product is a specialist in one function, without the breadth of experience to reassure his/her superiors that he/she has a general management capability. This then, is the system. It is time now to look a little more closely at those of the marketing assignments which are the product manager's personal responsibility under this system. The product manager's role is to develop product plans, see that they are implemented, monitor the results, and take corrective action. This responsibility breaks down into six tasks: - Developing a long-range and competitive strategy for the product - Preparing an annual marketing plan and sales forecast - Working with advertising and merchandising agencies to develop copy, programs, and campaigns - stimulating interest in and support of the product among the sales force and distributors - Gathering continuous intelligence on the product's performance, customer and dealer attitudes, and new problems and opportunities - Initiating product improvements to meet changing market needs These basic functions are common to both consumer - and industrial - product managers. Yet there are some differences in their jobs and emphases. Consumer-product managers typically manage fewer products than industrial-product managers. They spend more time on advertising and sales promotion. They spend more time working with others in the company and various agencies and little time with customers. They are often younger and better educated. Industrial-product managers, by contrast, think more about the technical aspects of their product and possible design improvements. They spend more time with laboratory and engineering personnel. They work more closely with the sales force and key buyers. They pay less attention to advertising, sales promotion, and promotional pricing. They emphasise rational product factors over emotional ones. 1. ANALYSIS AND RESEARCH One of the characteristics which distinguishes the true marketer is that he/she is fact-hungry. He/she has the habit of automatically separating the opinion from the fact and attaching due weight to each accordingly. The jargon phrase "on judgement", used as a prefix to a statement, has become a silent apology for not having the facts. It is not that marketing specialists are good at finding the right answers. It is rather that they ask the right questions. Most of the answers in a consumer-orientated business must come from the WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 9 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ consumer. Market research techniques make it possible to get some of these answers right some of the time. The aim is to identify the prime consumers and measure their preferences, attitudes, and actual behaviour in all matters which can affect the product. 2. PRODUCT PLANNING There is no substitute for a good product, and a good product is a relative rather than an absolute term. A good product in 1995 may have become an adequate product by 1996 and a poor product by 1997 as competitors improve their own products. Nor can the continuous process of product improvement be left to the inspiration of technical researchers. The Product Manager, acting as the advocate for the consumer, must give purpose and direction to product development work. The brand name, the price and, where applicable, the packaging are also vital aspects of this assignment. 3. ADVERTISING This is a major assignment in itself, especially in the field of repeat-purchase products where it may be the life-blood of the business and where it can consume up to half the product manager’s time. Advertising is the main weapon in the product's armoury, and with its aid the product managers can communicate to the consumer, at third hand, some tiny part of the enthusiasm and conviction he/she himself feels about the product. The major decisions include fixing the advertising appropriation, the choice of media, the nature of the sales message itself, and the evaluation when it is an over. All this involves working closely and continuously with the advertising agency. 4. PROMOTION AND MERCHANDISING It is the task of the sales force to obtain and maintain the proper retail and wholesale distribution, trade stocks, and point of displays of the product, as well as (where appropriate) the right degree of dealer enthusiasm. Nevertheless, it is a cold, competitive world, and the product manager dare not disregard these vital areas without a sufficiency of which his/her product and his/her advertising are wasted. The consumer must be given every chance of finding the right product, in the right place, at the right time. In the words of one authority: "the basic fundamental of all merchandising (is) that it makes it easier for the buyer to buy”. The Product Manager will try and keep his/her particular product from the burning in three ways: (a) By amassing all the information he/she can about the relative standing of his/her own and competitive products in the retail store. Quantitative data can be bought or collated from the company's own figures. Qualitative data the product manager gets on his/her own flat feet, out in the field. (b) By assessing the desirable and achievable levels of distribution, stocks, and display, and planning special promotional schemes. These are designed to motivate the company's salesmen and the retail trade to achieve the targets set, and also to motivate the consumer to try or re-try the product. WEB: www.marketing.org.au E-MAIL: email@example.com 10 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ (c) By controlling the development of all physical material used by the sales force in the store- selling aids for the salesmen, display material for the store and (where relevant) promotional pieces for the consumer-anything from leaflets to those infamous plastic daffodils. 5. ANALYSIS, FORECASTING AND PROFIT PLANNING It is the numbers in the end that keep the score. What will be the sales, the earnings, the expenditure, and the resultant profit? The product manager is in the best position to make accurate extrapolations of trends, to establish market objectives, and to draw up plans to achieve the objectives. Once the execution of the plan has begun, it is the product manager who must compare achievement with target and recommend appropriate adjustments in the light of the new situation. So far this catalogue of the product managers main assignments gives a good clue to the specialist departments with which he/she has to work. The sales department, the product research technicians, the advertising agency and the market research department or agency -these are the people who take up most of his/her time. Additionally, of course, he/she spends a lot of time with his/her own superiors in the often chastening pursuance of "quality control" (in relation to his/her own performance as well as to that of others). Finally, his/her range of working contacts will extend to individuals as widely differing as the company lawyer, the company or agency public relations man, his/her own opposite number on the export side, and his/her product's immediate customers-retailers and wholesalers. With so many tasks to achieve, most of them continuous and many of them incapable of precise measurement, it can be very difficult indeed for the Product Manager to have any clear and reliable picture of how well he/she is doing the job. His/her superiors will undoubtedly do their best to remedy the deficit. In fact, the principal criteria by which the product manager’s achievement will be judged are, in order of importance: (a) The profitability per unit of sale. (b) The product's share of consumer purchases (whether measured in units or dollars). (c) The product's total sales volume (again, whether units or dollars). The sequence of these criteria is significant. One of the less fortunate tendencies sparked off by the marketing concept is the idea that profit is not really all that important. It is never put as baldly as that. "You have got to spend money to make money", said the early missionaries. "Invest in marketing the way you invest in plant." However valid this may be from the point of view of overall company philosophy, when it comes right down to the management of a single company brand, each chief marketing executive has to ask himself which of his/her product people qualifies for the next rung up the ladder: Objective criteria like product share, sales, and profits are not the only yardsticks for measuring the Product Manager's success. Fate or the Marketing Director can deal a bad hand. A product manager who can keep cool in the face of adversity, and do a good job with a poor brand, can and frequently WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 11 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ does attract more favourable notice than the dunce who sits on top of a successful goldmine and contributes nothing to its success. In pursuance of his/her twin goals of growth and profitability, the Product Manager's job breaks down into a planning element and a coordinating element. Responsibility without power, is the unhappy lot of the Product Manager, since the actual execution of the tasks he/she plans is almost invariably in the hands of a separate specialist unit over which he/she has no direct authority. This means that the Product Manager can only perform as well as he/she can persuade others to perform on behalf of his/her brand the product and production technicians, the sales force, the advertising agency, and all the other departments which have a contributory function to perform. This in turn means that the top flight product manager should possess a remarkable combination of attributes, in terms of: (a) his/her knowledge and skills as a marketing craftsman; (b) his/her general/personal management ability. As far as his/her marketing expertise is concerned, this is largely a matter of training. When potential Product Managers are recruited by a manufacturing company, it is this ability to analyse and to predicate logically from the analysis which is used to separate the possible candidates from the non-starters. Intelligence and logic aside, the quality which distinguishes the able from the merely bright in product management, as in all other spheres, is the capacity and the will to work really hard, and preferably fast, over a sustained period of time. Perhaps the truism has a special importance in product management, since in few other fields is a relatively youthful executive brought into such regular contact with top management. The Product Manager is properly called upon to represent the interests of his/her product at top level meetings of all sorts, not always excepting board meetings, and the justification for his/her presence must be that he/she has devoted more study and effort to that product than anyone else in the company. When up against his/her seniors, he/she will always find it difficult to carry his/her point. If he/she has not done his/her homework scrupulously, and cannot command respect . for his/her knowledge, he/she will certainly command none for his/her experience. Diplomacy, too, is more than usually a virtue in product management, especially in the early stages, before the young product manager has won his/her spurs. The Sales Manager, with 30 years' service, or the battle-seasoned Account Supervisor at the advertising agency, do not take kindly to so called "bright young people" telling them how to do their jobs. Nor does it help that the veterans have a shrewd suspicion, based on past experience, that the young whipper-snapper will within 2 years go shooting up through the organisation like a rocket. This initial suspicion from the experienced specialists takes a variety of forms, some more insidious than others. When the youthful Assistant Product Manager takes a rough of a poster down to the Sales Manager (to obtain the necessary sales department approval) and that worthy silently picks it up by one comer and drops it in the waste-paper basket, there is no serious problem. Each knows precisely where he/she stands. It frequently happens, however, that there is no overt rejection process. The specialist manager in question, with a cautious eye on the future, is friendly and even ingratiating. Unfortunately, the WEB: www.marketing.org.au E-MAIL: email@example.com 12 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ advertising agency is especially open to the temptation to serve up a judicious mixture of flattery and lavish lunches to the point where the unwary product manager becomes somewhat inflated with a sense of his/her own importance. Apart from making him/her a less lovely person to know, this can impair his/her performance and his/her future growth by blunting the sensibilities which should be amongst his/her most important assets. Intelligence, logic, diligence, diplomacy, and sensitivity. Two other qualities are required, perhaps above all the others. The first is tenacity-part self-confidence, part courage, and part sheer bloody-mindedness. The kind of tenacity which causes a man to stay with a task when he/she is bored with it, or stick to his/her guns when he/she has not understood the counter-arguments, even in the face of hostile and influential public opinion. This is also the kind of tenacity which will get him/her into trouble every now and then-no one wants a salesperson who has never got thrown out of a shop for trying too hard. The second quality-and heads are bared in product management circles at the mention of the word-is objectiveness, or (in the larger dictionaries only) objectivity. To be objective is a consuming passion with the good Product Manager The vital importance of being objective is, of course, closely related to the passion for facts already mentioned. In combination, the two allied characteristics can be maddening, but with them goes an instant readiness to back down, without embarrassment or hesitation, in the face of superior logic or new facts. This is a quality to be prized in any commercial operation. Product and Brand Management Organisation Companies producing a variety of products and/or brands often establish a product or brand management organisation. The product management organisation does not replace the functional management organisation but serves as another layer of management. The product management organisation is headed by a products manager, who supervises several product group managers, who supervise product managers in charge of specific products (See Figure 1) A product management organisation makes sense if the products are quite different and/or if the sheer number of products is beyond the capacity of a functional marketing organisation to handle. Product Management first appeared in the Procter & Gamble Company in 1927. A new company soap, Camay, was not doing well, and one of the young executives, Neil H. McElroy (later president of P&G), was assigned to give his exclusive attention to developing and promoting this product. He did it successfully, and the company soon added other product managers. Since then many firms, especially in the food, soap, toiletries, and chemical industries, have established product management organisations. General Foods, for example, uses a product management organisation in its Post Division. There are separate product group managers in charge of cereals, pet food, and beverages. Within the cereal product group, there are separate product managers for nutritional cereals, children's presweetened cereals, family cereals, and miscellaneous cereals. In turn, the nutritional-cereal product manager supervises brand managers. WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 13 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ Marketing Organisation The product management organisation introduces several advantages. First, the product manager develops a cost-effective marketing mix for the product. Second, the product manager can react more quickly to problems in the marketplace than a committee of specialists can. Third, smaller brands are less neglected because they have a product advocate. Fourth, product management is an excellent training ground for young executives, for it involves them in almost every area of company operations. But a price is paid for these advantages. First, product management creates some conflict and frustration. Typically, product managers are not given enough authority to carry out their responsibilities effectively. They have to rely on persuasion to get the cooperation of advertising, sales, manufacturing, and other departments. They are told they are "mini managers" but are often treated as low-level coordinators. They are burdened with a great amount of "housekeeping" paperwork. They often have to go over the heads of others to get something done. Figure 2 Product Management Organisation Marketing Director Marketing Advertising Products Marketing Sales administration sales promotion manager research Manager manager manager manager Product group managers Product managers Second, product managers become experts in their product but rarely become experts in any functions. This is unfortunate when the product depends on a specific type of expertise, such as advertising. Third, the product management system often turns out to be costlier than anticipated. Originally, one person is appointed to manage each major product. Soon product managers are appointed to manage even minor products. Each product manager, usually overworked, pleads for and gets an associate brand manager. Later, both overworked, they persuade management to give them an assistant brand manager. WEB: www.marketing.org.au E-MAIL: email@example.com 14 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ With all these personnel, payroll costs climb. In the meantime, the company continues to increase its functional specialists in copy, packaging, media, sales promotion, market surveys, statistical analysis, and so on. The company becomes saddled with a costly structure of product management people and functional specialists. Fourth, product managers tend to manage their brand for a short time. Either product managers move up in a few years to another brand or product, or they transfer to another company, or they leave product management altogether. Their short-term involvement with the product leads to short- term marketing planning and plays havoc with building up the product's long-term strengths. The functions of marketing management, can be broken down into fixed tasks and variable tasks, in the manner of costs. The fixed tasks are those which remain constant for all intents and purposes, whether the company in question markets one product or twenty. These include sales policy, the recruitment, training and administration of the sales force, its motivation, its performance and the measurement of its effectiveness, contact with the wholesale and retail trades, order processing, credit control and cash collection, deliveries and after-sales service. The variable tasks are those which have to be carried out entirely separately for each product, and are thus duplicated as many times as the company has products. These comprise market analysis, consumer research, product planning (including pricing and packaging), sales promotion and merchandising planning, advertising and public relations, sales forecasting, and profit planning. Daunting as the two lists of tasks may seem, in a small company they can be carried out with varying degrees of success by a tiny management team, or even, in appropriate circumstances, by a single individual. Obviously, the larger the scale of the operation, in terms of numbers of salesmen or of products marketed, the more complex the management structure required. The growth of any marketing organisation will be by the normal blend of delegation and specialisation; that is to say, the structure will extend both vertically and horizontally Although we briefly described the tasks of the "typical" product manager, they actually, of course, vary quite widely from organisation to organisation. Usually, the kinds of tasks with which product managers become involved are highly related to how marketing is organised. Three organisational structures for marketing have been identified: organising by product, by market, and by function.' FIGURE 3 Product-focused structure WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 15 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ SOURCE: Donald R Lehmann and Russell S. Winer; PRODUCT MANAGEMENT. Richard D. Irwin 1994. Product-Focused Organisations Figure 3 provides a general view of this form of marketing organisation. This is the classic "product management" structure that was developed by Procter & Gamble in the 1930s. It is most likely to be found in packaged goods industries, but it also exists in other industries. It is commonly used where different products use the same channels of distribution. In this structure, the product manager acts like a "mini-CEO," taking responsibility for the overall health of the product. Over time, a well-defined hierarchy within the product management system has developed with key roles assigned to assistant and associate product managers. Often, these jobs are entry-level jobs for individuals who want careers in product management. The tasks of these elements of the hierarchy are typically the following.' The assistant product manager’s job includes market and share forecasting, budgeting, co- ordinating with production, executing national promotions, and packaging. In general, the product assistant's tasks involve becoming more familiar with the category within which the product is competing. Associate product managers have more freedom to develop brand extensions, and sometimes even manage a small product line. The product manager, of course, has the ultimate responsibility for the product.. This structure is not limited to packaged goods companies. The product management system has several advantages. The locus of responsibility is clear because the person responsible for the success of the product is the product manager and no one else. Because of this clear locus of responsibility, it is also clear to whom the organisation can turn for information about the product. Product managers' training and experience is invaluable; they develop the ability to work with other areas of the organisation, and the persuasion and communication skills necessary to be an advocate for the product. In fact, companies organised by product management are often breeding grounds for senior executives of other companies, which highly value the training WEB: www.marketing.org.au E-MAIL: email@example.com 16 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ received. FIGURE 3 General Foods Corporation Division organisational chart SOURCE: Donald R Lehmann and Russell S. Winer; PRODUCT MANAGEMENT. Richard D. Irwin 1994 FIGURE 5 Marketing organisation: Medical equipment company SOURCE: Donald R Lehmann and Russell S. Winer; PRODUCT MANAGEMENT. Richard D. Irwin 1994 WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 17 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ The product management system also has its weaknesses. The extreme focus on one product can sometimes lead to an inability to step back and ask more fundamental questions about customer needs. It can also be a very centralised structure in which the product manager is somewhat removed from "where the action is" in the field. One of the changes in marketing organisation that will be discussed later is an attempt to flatten the organisation and decentralise product management, particularly when there are significant differences in regional tastes for a product. In addition, some people complain that product managers are too myopic in their quest for quarterly or even shorter changes in sales and market share. One of the results of this perspective has been the dramatic increase in the use of short-term marketing tools, such as sales promotions, for consumer packaged goods. A final risk in a product-focused organisation, particularly for industrial products, is that it could result in several salespeople from the same company who represent different products calling on the same customer. This problem is most likely to occur when the sales force is organised by product specialties and is not necessarily a general characteristic of product management organisations. Despite these weaknesses and many criticisms of traditional product management, it continues to flourish in consumer and industrial products companies. Market-Focused Organisations This structure defines marketing authority by market segment. Segments could be defined by industry, channel, regions of the country or the world, or customer size. The market focused structure is clearly useful when there are significant differences in buyer behaviour between the market segments that lead to differences in the marketing strategies and tactics used to appeal to them. The big advantage of this market-based structure is clearly its focus on the customer. In this structure, managers can consider changes in customer tastes that may, in fact, result in eliminating some of the products currently being marketed. It is particularly useful when the product being marketed is a system that bundles a number of products made by the company. A product management structure offers insufficient motivation to spend time on a system sale, which may involve little revenue for a particular product. The market-based structure makes the job of getting the product managers to pull together easier. These managers often have better knowledge about the company's line of products than do the product managers in a product-focused company. A drawback to this structure, however, is the potential conflict with the product management structure that may lie beneath it. Additionally, some of the mini CEO training and experience of traditional product managers is lost. Functionally Focused Organisations As opposed to the product-focused and market-focused organisations previously described, functionally focused organisations align themselves by marketing functions such as advertising and sales promotion. Most marketing organisations have some aspect of this structure; it is common, for example, for sales and marketing research to be separate functions. However, in functionally focused structures, no single person is responsible for the day-to-day health of a product. Marketing strategies are fully designed and implemented through the co-ordinated activities of the functional areas. WEB: www.marketing.org.au E-MAIL: email@example.com 18 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ This highlights one of the drawbacks of the functionally oriented structure: Who is responsible for the product? Someone must take day-to-day responsibility for each product or service marketed by the organisation. Conflicts between product marketing strategies can only be resolved by spending substantial time in meetings. The management training aspect of this structure also focuses on functional rather than broad general management education. However, there are some advantages in this kind of structure. It is administratively simple: The groups are designed to be parallel to normal marketing activities. Functional training is better-for example, skills in developing sales promotions will be better developed because that is a person's sole responsibility. Five steps have been suggested to make the product management system work better. - Clearly delineate the limits of the product manager's role and responsibility for the product. (They are essentially proposers, not deciders.) - Build a strategy development and review process to provide an agreed-to- framework for the product manager's operations. (Too many companies allow product managers to get away with shallow marketing plans featuring a lot of statis- tics but little strategic rationale.) - Take into account areas of potential conflict between product managers and functional specialists when defining their respective roles. (Clarify which decisions are to be made by the product manager, which by the expert, and which will be shared.) - Set up a formal process that forces to the top all conflict-of-interest situations between product management and functional line management. (Both parties should put the issues in writing and forward them to general management for set- tlement.) - Establish a system for measuring results that is consistent with the product manager's responsibilities. (If product managers are accountable for profit, they should be given more control over the factors that affect their profitability.) A second alternative is to switch from a product-manager to a product-team approach. In fact, there are three types of product-team structures in product management. - Vertical product team This consists of a product manager, associate product manager, and product assistant. The product manager is the leader and primarily deals with other executives to gain their cooperation. The associate product manager assists in these tasks and also does some paperwork. The product assistant does most of the paperwork and runs errands. WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 19 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ - Triangular product team This consists of a product manager and two specialised product assistants, one who takes care of (say) marketing research and the other, marketing communications. This design is used at the Illinois Central Railroad, where various three-person teams manage different commodities. Also, the Hallmark Company uses a "marketing team" consisting of a market manager (the leader), a marketing manager, and a distribution manager. - Horizontal product team. This consists of a product manager and several specialists from marketing and other functions. Thus the 3M Company divided its commercial tape division into nine business-planning teams, each consisting of a team leader and representatives from sales, marketing, laboratory, engineering, accounting, and marketing research. Instead of a product manager's bearing the entire responsibility for product planning, he or she shares it with representatives from key parts of the company. Their input is critical in the marketing-planning process, and furthermore each team member can bring influence to bear in his or her own department. The ultimate step after a horizontal product team is organised is to form a product division around the product. A third alternative is to eliminate product-manager positions for minor products and assign two or more products to each remaining product manager. This is feasible especially where two or more products appeal to a similar set of needs. Thus a cosmetics company does not need separate product managers, because cosmetics serve one major need - beauty - whereas a toiletries company needs different managers for headache remedies, toothpaste, soap, and shampoo, because these products differ in their use and appeal. Changes Affecting Product Management It is often said that the only constant is change. Product managers face many challenges in adapting to the changes in the marketing environment that have been affecting and are going to continue to impact decision making in the 1990s. Some of the key changes are: 1. Changing demographics. Several major changes in the demographic composition of Australia include the aging of the population, growth of minority populations due to increased immigration, and increasing dual-career households. These changes and others have significant impact on product management concerns, from the kinds of products that will be successful to the appropriate channels of distribution and communications programs necessary to reach customers. 2. The data explosion. As the product managers noted, effective marketing today requires sophisticated information management. For consumer packaged goods companies, this means better and more timely information on market shares, sales, and distribution due to the proliferation of scanners in supermarkets. Almost all products sold through the retail system are more effectively tracked by both the retailer and the manufacturer due to increased use of information technology. The use of laptop computers and fax machines means quicker transmission of competitor information and sales call reports from the field. Data-base marketing-launching marketing programs from computerised customer lists is becoming a key approach for the 1990s. 3. Product life cycles are becoming shorter. A key phenomenon in technology-based industries and many others is that product life cycles are shortening. 2 The time it takes a product category to reach maturity has been reduced by increased rates of 2 William Qualls, Richard Olshavsky, and Ronald Michaels, "Shortening of the PLC-An Empirical Test," Journal of Marketing 45 (Fall 1981), pp. 76-80. WEB: www.marketing.org.au E-MAIL: email@example.com 20 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ innovation among increased numbers of competitors. This puts pressure on product managers to constantly seek ways to extend their products' life cycles by repositioning, changing features, looking for new uses, or developing other ways of extending the period in which profits can be generated. Because shortening product life cycles implies that profit life cycles are also becoming shorter, it is more important than ever to be right when the product is first brought to market. This increases the importance of market research and the interaction of new-product development teams and marketing. 4. Growing bargaining power of the distribution channels and growing importance of sales promotion. The major distributors of consumer packaged goods - supermarket chains and mass merchandisers - are becoming more powerful and are demanding better terms from consumer packaged goods companies in exchange for scarce shelf space. These distributors are primarily interested in generating more store traffic, and they are pressing manufacturers for more trade deals. The heat is being felt by the manufacturers' sales forces, who tell the product managers that they cannot get shelf space without more trade deals. The result is that the product manager shifts more money into sales promotion and has less funds to build his or her brand franchise. Furthermore, the distributors are demanding more multi brand and multi category promotion deals from each manufacturer. The distributors want customised multi brand deals that would enable them to distinguish their offers from competitors' offers. These deals have to be worked out at higher levels of management than the brand level. But the brand managers have to be taxed to support these deals, sometimes by giving up about 25 percent of their budget. The ptroduct manager is being left with less control over his or her sales promotion funds. As sales promotion becomes more important, the manufacturers realise that they are not organised to handle it efficiently. Originally sales promotion was handled individually by each brand manager. Some companies later appointed a sales promotion specialist to help product managers choose good premium and couponing schemes for consumer sales promotion. Meanwhile the company's sales force is heavily pressing for more trade promotion money. The question becomes, How much should be spent on sales promotion out of the total budget and how should this money be split between trade and consumer promotion? Unfortunately, the decisions are being made politically rather than rationally. 5. Declining cost-effectiveness of mass advertising. Product managers are finding that they have less money to spend on advertising, the one tool they know best. Furthermore, mass advertising - particularly network television - is becoming less cost effective. There are fewer people watching network television, and many of them are not interested in many products that are advertised. The money can be spent more effectively by studying category and brand interest levels market-by-market. But brand managers do not know the individual markets that well. Companies are increasingly developing local area marketing plans through other people rather than the brand managers. 6. Declining level of customer brand loyalty. Consumers have been exposed to so much dealing recently that a growing number are deal-prone rather than brand-prone. The consumers' evoked set of acceptable brands is increasing. As more consumers switch their brands each week depending on the deals, brand shares become more volatile. A brand's weekly or monthly market share means less and becomes less useful in deciding how much money to allocate to each brand. Higher levels of management have to decide how much in funds each brand should get based on more long-run criteria. WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 21 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ 7. Increased parity between manufacturers and sellers. Prior to the last five years, manufacturers held the upper hand in dealing with retailers due to asymmetry in information: Manufacturers had a better idea of what was selling than retailers because of better data collection methods. Today, improvements in information technology and partnerships between manufacturers and sellers in developing measurement systems have given both parties equal access to sales performance. As a result, the balance of power in distribution channels is clearly shifting from the manufacturer to the retailer. This has created more manufacturer awareness, even among manufacturers with powerful brand names, that retailers must be treated well and that it is as important to be close to them as it is to the end customer. 8. Increased spending on sales promotion versus advertising. This is mainly characteristic of consumer products. The higher rates of spending on sales promotion, particularly on trade promotion, coupled with downward pressure on prices have lowered profit margins dramatically. This has had the unfortunate effect of making product management even more short-term oriented as the battle for market share has become more intense. 9. Pricing and value. These two terms are often confused. Companies are more interested in pricing their products at a level commensurate with customer value, that is, the economic value customers place on the product. However, during the recessionary period of the early 1990s, pricing at customer value was impossible. As a result, value pricing came to mean offering greater value to the customer than is justified by the price. Product managers, therefore, seek ways to offer increased value in products while reducing prices, producing "bargains." 10. Increased importance of customer service. Many marketing writers feel that customer service will be the competitive battleground of the 1990s because parity has been achieved between the features of most competitors' offerings. Thus, customer service can be seen as a dimension of the product where a sustainable competitive advantage can be achieved. However, most companies have a long way to go to deliver levels of service that would differentiate themselves (in a favourable way!) from competitors. 11. New ways of reaching customers. Companies are seeking and using more cost-effective ways of communicating with customers and measuring the effects of the dollars spent. The decrease in advertising billing levels partially reflects this phenomenon. Increases in the use of direct marketing, telemarketing, cable TV, and, in the near future, interactive TV, will make the product manager's job of selecting alternative modes of communication more complex. 12. Increased global competition. Unquestionably, product managers have to be equipped to deal with world-wide competition-not only by having appropriate organisational structures as discussed earlier in the chapter, but also by obtaining experience and knowledge about how business is conducted in a variety of cultural contexts. These developments are forcing companies to rethink how they should develop and manage their products and brands. There are two competing solutions: 1. Changing the job description and the role of the Product Manager. One avenue of thought is that the product manager should spend less time creating the promotion plans and become more involved in product improvement and production. Normally the product manager has little time to think about creating flankers and brand extensions, and this has forced companies to appoint new-product specialists within brand or category groups to WEB: www.marketing.org.au E-MAIL: email@example.com 22 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ do this work. And the product manager does not become very involved in knowing the production and logistics steps and how to find cost improvements. Therefore it might be argued that product managers should have their responsibilities shifted more to product improvement and production/distribution efficiency concerns. 2. Eliminating the Product Management system. Another avenue of thought is that a company should organise teams around major product categories such as snacks, dog foods, and cereals. Each team would be headed by a category manager and would consist of a marketing researcher, an advertising specialist, a sales promotion specialist, and a sales management specialist. This would reduce the number of middle managers and result in a leaner marketing organisation. If product managers are eliminated, their counterparts in advertising agencies - namely, account executives - might also be eliminated. Many consumer packaged goods companies are pressing advertising agencies to lower their costs, especially considering the reduced effectiveness of mass advertising. These companies normally prepare their own brand marketing plans and simply want a good creative plan and media plan from their advertising agency. They wonder why they have to work through account executives and their assistants. Some companies are telling their advertising agencies they are going to pay less or else switch agencies, thus forcing these agencies to reconsider their own organising patterns and the role of the account executives. Impact of Change on Organisational Structure Some of the changes mentioned above have been reflected in shifts in the way marketing is (or will be) organised at many companies. One major change in packaged goods has been the establishment of a category manager." One of the drawbacks of the traditional product management structure is that the product focus leads to promotions run from the perspective of the product alone. When a Product Manager runs a promotion, the retailer may not benefit because the increase in sales for one product takes sales from another, leaving the retailer in the same position. Due to retailers' increased power as described earlier, some companies that use product management have instituted the category manager to provide an overall perspective of, for example, how a promotion for one brand of detergent will affect the whole category. Product managers for products in a category report to the category manager, who has long-term strategic responsibilities. Companies that have adopted such an organisational structure include Procter & Gamble. Coca Cola Foods defines its categories by trademarks, and has a trademark manager who oversees marketing all brands with that trademark. Not all companies have been enamoured of the extra layer of management. A second change is the addition of account teams to deal with a company's largest customers. These are sometimes referred to as "trade marketing" or "trade management" groups. Because of the increased power of large buyers such as Coles Myer and the big supermarket chains, packaged goods manufacturers see as much need to sell themselves as to sell individual product lines. A third change is a reaction to differing tastes in different parts of the country, As previously noted in discussing changes in the marketing environment, one reason for different tastes is the growth of ethnic minorities. Manufacturers of food products and food service organisations, such as McDonald's, have been particularly interested in flatter marketing organisations that give more power to regional marketing management to adapt products to local tastes. WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 23 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ In reaction to the more rapid product life cycles, some companies are attempting to bring marketing more closely into the new-product development process. Japanese companies use this approach routinely-termed a rugby approach," it advocates simultaneous marketing and research and development working through a team approach, rather than the conventional sequential new product development process featuring a hand-off from R&D to marketing. This is commonly happening not only in high-tech companies such as Hewlett-Packard, but also in companies like Procter & Gamble that established a position called product supply manager. Because of all the changes in both the marketing and economic environments, many organisations are struggling to find an appropriate organisational form of marketing. Other companies are looking for an organisational form that better integrates all communications within the firm, including advertising, promotion, public relations, and other forms of marketing communications. WHAT IS A BRAND? Early Branding It was not until the latter half of the nineteenth century that modern branding concepts first started to be used. This phenomenon occurred simultaneously in Western Europe and in the United States and was brought about by the growth of the railways. Until the development of the railways, long distance communication and distribution by land was so expensive and difficult that much production and distribution took place on only a local basis. The first Trade Mark Bill in the United Kingdom was drafted in 1862 and become law in 1875. Many brand names still powerful and in extensive use today first saw the light of day around a hundred years ago. Coca-Cola was launched in Atlanta, Georgia in 1886. American Express travellers cheques, Quaker Oats, Heinz baked beans, and Ivory soap were all leading brands in the 1880s and 1890s. Modern Branding Modern branding, however, really dates from after the Second World War. The Economist observed that six times more wealth has been created in the world since the end of the Second World War than in the entire period of recorded history up to the war. Our generation has seen, therefore, a massive explosion in wealth and prosperity, and consumers in developed countries have disposable incomes at a level undreamed of only a few generations earlier. The explosion of choice facing the consumer has resulted in more and more investment being placed in brand and product development by manufacturers in order to capture the attention and loyalty of the consumer. Manufacturers have, for example, increasingly developed brands which are carefully targeted at specific, often very narrow consumer sectors, although, as we have noted, producers of branded products are often inexorably attracted to the branded products of their competitors and imitate as much as innovate when developing new products. WEB: www.marketing.org.au E-MAIL: email@example.com 24 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ A brand is the product of a particular supplier which is differentiated by its name and presentation. Thus any manufacturer can produce a cola drink but only the Coca Cola company can produce Coke. There seems little doubt that hundreds, even thousands of suppliers around the world could produce a high quality cola syrup and put in place the bottling systems and distribution infrastructure required to bring a cola drink to market. No doubt Coca-Cola, a world leader in cola drinks, has its own special product formulation as well as particular organisational and managerial skills. Nonetheless, the major differentiating feature possessed by Coca-Cola, and the only feature which a determined and well resourced competitor would be unable convincingly to replicate, is the brand itself. A brand then is a complex thing. Not only is it the actual product, but it is also the unique property of a specific owner and has been developed over time so as to embrace a set of values and attributes (both tangible and intangible) which meaningfully and appropriately differentiate products which are otherwise very similar. The term "Gestalt" has been used to help explain the complex nature of brands. It means literally "form" or "shape" and the concept behind the Gestalt is that nothing is simply the sum of its individual parts. Thus any attempt to analyse the whole by breaking it down into its molecular components is certain to fail. In psychology the term has been adopted to explain the process of perception: of how we understand and give form to the messages that we receive through our senses. Psychologists have suggested that much of learning - of absorbing, ordering and understanding data - consists of forming Gestalt's, of creating patterns of understanding such that fragmentary data can be formed into a fuller, richer whole. It has also been suggested that even the most simple Gestalt's which we respond to and which we rely upon in making sense of complex reality, need to be established over an extended period of time. A brand, then, acts as a Gestalt in that it is a concept which is more than the sum of its parts and which takes a long time to establish in the minds of consumers. Of course, in order to embrace a complex set of beliefs and values and internalise them as a Gestalt the recipient (or consumer) needs to recognise that what is on offer is appropriate and attractive. In other words, the Gestalt needs to be credible, coherent and attractive, supported and developed over time and not subject to rapid fluctuations in message, quality, positioning or overall "mood". The consumer, therefore, is prepared - given exposure to and confidence in the brand - to impart to the brand an authority and unity, a cohesion, which functions as a Gestalt prompting recognition, confidence and easy familiarity. Not all brands, of course, gain such authority and stature in the minds of consumers. They may have no particular features which set them apart from similar brands; or quality or positioning may vary so much that the consumer lacks confidence in the brand or fails to comprehend what the brand stands for. Alternatively, of course, the personality of the brand may be simply unattractive or unconvincing. To be successful, brands must be appealing and be maintained in good shape by their owners so as to continue to satisfy the consumer's needs. A brand is therefore a "pact" between the owner and the consumer: it allows the consumer to shop with confidence in an increasingly complex world, and it provides the owner with higher volumes, often higher margins and greater certainty as to future demand. The Development of Branding WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 25 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ Branding is not a new phenomenon. Indeed, it has been with us since earliest times as producers have always wanted to identify uniquely the fruits of their labours, and customers have never been slow to appreciate that they prefer one producer's products to those of another. In the last one hundred years, however, the use of branding has developed considerably. 1. Legal systems have recognised that brands and other forms of intellectual property are property in a very real sense. Over 160 countries have trade mark laws which allow owners of brands to claim title in their brand names and logos through trade mark registration. Owners of brands, therefore, can enjoy title to a property which is every bit as strong as the title they enjoy to more tangible forms of property such as plant and freehold estate. 2. The concept of branding has successfully been extended from goods to services; indeed, in countries such as the United States and those of Western Europe the rate of growth in branded services now outstrips that in branded goods. Legal systems now recognise this and make specific provision for the registration of service trade marks. 3. As consumer choice has grown, as marketplaces have become more crowded, and as new products have been aimed at increasingly tightly targeted sectors, intangible factors have come to play an increasingly important role in brand selection. Of course quality or, in the case of service brands, the delivery of a superior quality service, is essential to brand success, and no successful brand can exist without satisfying the needs of consumers. Nonetheless, additional intangible elements are often critical in persuading the consumer to choose between alternative branded products or services, all of which are broadly capable of satisfying his or her requirements. Modern branding is therefore concerned increasingly with the intangible elements of a brand, with assembling and maintaining in a brand a mix of attributes, both tangible and intangible, which are relevant and appealing, and which meaningfully and appropriately distinguish one brand from another. Successful Branding The key elements in a brand are the product itself, its pricing, distribution, packaging, brand name, promotion and its overall look and presentation. It is far more than just a product - it is the particular, differentiated product of one supplier. Creating a successful brand entails blending all these various elements together in a unique way - the product or service has to be of high quality and appropriate to consumer needs, the brand name must be appealing and in tune with the consumer's perception of the product, the packaging, promotion, pricing and all other elements must similarly meet the tests of appropriateness, appeal and differentiation. The last factor, differentiation, is of critical importance in today's crowded markets. It is not inconceivable that any one of a dozen manufacturers of confectionery and chocolate products could, with a certain difficulty and expense, produce a passable imitation of a Kit- Kat chocolate bar. They would probably have to invest in special equipment and, not enjoying Rowntree's economies of scale, they would probably also have to sacrifice margin in order to meet Rowntree's price. Nonetheless, the Kit-Kat product is not protected by patents or by any unique technology and it seems almost certain that competitors could quite closely match the Kit-Kat product in terms of the product itself, its price and so forth. Rowntree's rights are, of course, protected through its trade mark and device mark registrations and at common law, and the company could also rely on more generalised legal protection for its intellectual property rights through "passing off" or, in certain jurisdictions, WEB: www.marketing.org.au E-MAIL: email@example.com 26 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ unfair competitions laws. Nonetheless, successful competition in the branded goods sector does not consist of developing close facsimiles of existing products, though no brand owner who opens up a new product sector can expect to remain free from competition for long. Even Kellogg's Corn Flakes, a formidably powerful brand, faces competition from other Kellogg's brands as well as from other breakfast cereal producers. There is an obvious need for manufacturers to compete effectively in key market sectors. When a competitor gains market share through the establishment of a new and successful product competitors must try to respond in a way which is credible and appealing to the consumer. Normally, however, this process should stop short of launching a new product which is a more-or-less undifferentiated pastiche of the original competitive product as such products are usually recognised by consumers for what they are and have little appeal unless, for example, they sell at a substantially lower price. In practice, in "mainstream" consumer products sectors such as beers, toiletries and foods, it is rare to achieve such massive product breakthroughs as to be able substantially to differentiate the brand in terms of performance ("wonder products" such as the first nylon stockings, stainless steel razor blades or even "green" products occur only occasionally). Further, today's goods are produced so efficiently and well that it is difficult to achieve substantial advantages in quality or pricing. The way, therefore, in which the brand can often be most effectively differentiated is not through the product itself but through its packaging, name, presentation or market positioning. For example, a new brand can be presented in an entirely fresh and contemporary fashion so that, by implication, the old brand appears dull and dated. Innovative, differentiated brands do not, however, need to be bizarre or eccentric. The degree of differentiation, of shift of emphasis, may well need only be slight. Moreover, such differentiated brands can do more than merely offer the consumer some transient new appeal and persuade him or her to switch, perhaps only temporarily. Differentiated brands can serve to outmode and wrong-foot existing brands. This process has been called "competitive de positioning"; in effect, the owner of the new brand attempts to portray his brand in a fresh and exciting way so that, by contrast, the original competitive brand or brands appear dull and outdated. The Importance of Brands Brands are important to brand owners at two quite different levels. Firstly, they serve as a focus for consumer loyalties and therefore develop as assets which ensure future demand and hence future cash flows. They thus introduce stability into businesses, help guard against competitive encroachment, and allow investment and planning to take place with increased confidence. The brand also serves to "capture" the promotional investment which has been placed behind it. It has been argued that enormously valuable world brands such as Marlboro, Pepsi and Kellogg's are still benefiting massively from the large investments in brand- building which their owners placed behind them in the 1950s and 1960s when advertising media, in contrast with today, were cheap and had none of today's clutter. Thus the benefits of this past media expenditure still accrue to the brand decades later. The second key feature of brands is their strategic importance. The way in which brands work for their WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 27 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ owners has been described as a process whereby the manufacturer can "reach over the shoulder of the retailer direct to the consumer". If manufacturers did not possess brands they would not have the ability to talk directly to consumers and would therefore be merely commodity suppliers to the middle man, the retailer. Brands provide the brand owner with the opportunity to maintain a measure of balance in the relationship with the retailer. The brand allows its owner to prevent his or her products becoming simply commodities bought by intermediaries according to the market forces operating at a particular time. Besides their importance to brand owners, brands also have very real value to consumers. A brand is a pact between the brand owner and the consumer, and branding, therefore, is by no means a cynical activity imposed on the unsuspecting consumer against his or her will. Brands allow consumers to shop with confidence in an increasingly complex world. The brand offers the consumer a guarantee of quality, value and product satisfaction. As long as the brand keeps its part of the bargain the consumer will continue to support it. Conversely, should the consumer not like the brand, or should it fail to deliver what the consumer requires, or should another brand appear which better suits the consumer's needs, the brand identity allows the consumer to avoid the brand and purchase an alternative. Maintaining Brand Values Consumers are not fools and have freedom to buy whatever brands they want. It almost goes without saying that brand owners must keep their brands in good repair and must be assiduous as to quality, distribution, pricing and brand support, for if the brand does not keep its side of the bargain, there is no reason why the consumer should continue to support it. Brands, therefore, cannot shield brand owners from their own neglect of their brands or from inappropriate pricing, promotional policies, distribution policies or range extensions. Consider the case of a consumer wishing to buy colour film. The consumer may well have a distinct preference for the Kodak brand but if it is over-priced or unavailable, they will probably quite readily settle for another brand instead. Much of the marketing and distribution function in a company is directed at ensuring that the company's brands are not handicapped by such factors and that they are available at an appropriate price, are properly presented, adequately advertised and supported, and have the full range of varieties and alternatives which the consumer might require. Given such "equality" the function of the brand is, at point-of-sale, to tip the consumer decision in favour of the company's brand. Even though consumers have the ability to purchase whatever products or brands they wish, in practice they are remarkably loyal to familiar brands and desert them only reluctantly. The stability of brands over an extended period is also quite remarkable. Many of today's most famous ones such as Coca-Cola, Kodak and Shell have been with us for a hundred years or more, and a high proportion of the leading brands advertised in the magazines of the 1920s and 1930s are well-known to us today. The Brand Life-Cycle Although the theory of a brand life cycle carries little weight, that is not to say that a product cannot have a life cycle. It most certainly can and, if unchecked, may take the brand down with it. The brand owner must always be aware of the sustainability of the brand's competitive advantage and of the relationship of the functional (product) and symbolic (intangible, image) elements of the brand's WEB: www.marketing.org.au E-MAIL: email@example.com 28 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ make-up to the requirements of the marketplace. The strategy that a brand owner chooses to adopt must depend upon the stage of development of a brand in a market. This can typically include the following: 1. A proprietary period in which the brand which was first into a market can be seen to be unique and to own the market. 2. A competitive stage in which competitors begin to catch up with the functional aspects of the brand and new ways need to be found to sustain the product advantage. 3. An image phase in which any unique product and functional advantages have been eroded and symbolic values have much greater importance in differentiating the brand from its competition. It is essential, therefore, for brand owners to be prepared constantly to monitor the functional and symbolic values of their brands in the context of the changing environment in which they operate and, where necessary and appropriate, to adapt them to meet the new requirements of the market or the threat of a competitor. Different markets demand different strategies for brands to survive and succeed. A simple matrix (figure 1) can be constructed to demonstrate the relative roles of functional and symbolic aspects of a brand. WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 29 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ Fig. 1: Matrix showing the relationship between the roles of a brand's functional and symbolic aspects High Functionality B A Low High D C Low Symbolism 1. In quadrant A can be found brands with high functionality and high symbolism, e.g. Rolex, Mercedes, Hasselblad. 2. In quadrant B are brands with high functionality but low symbolism, e.g. Post-it, Hoover, Konica. 3. In C are brands with low functionality but high symbolism, e.g. Gucci, Dunhill, Tiffany. 4. In D are brands with low functionality and low symbolism, . Figure 2 shows how some well-known car brands might be placed on such a matrix. This example demonstrates the range of possible positionings and perceptions: the "rational" high practicality, relatively low image of Land Rover; the "irrational" high image, relatively low utility of Alfa-Romeo; the high functionality and image of Mercedes and, towards the opposite corner, Skoda and Lada, brands which are considered by many to be neither functional nor rich in positive, intangible brand values but which sell mainly on price. WEB: www.marketing.org.au E-MAIL: email@example.com 30 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ Fig. 2: Some well-known car manufacturers applied to the matrix of Figure 1 High ___________________________________________ Land Rover BMW Mercedes Funct- Volvo Porsche ionality Rolls-Royce Rover Low _____________________________________ High Skoda Alfa-Romeo Lada ___________________________________________ Low Symbolism The important fact demonstrated by this matrix is the ability of brands to move along one or both axes. Fifteen years ago Japanese car brands would probably have been found in the bottom left-hand corner, but by adapting their product offering to make new technology available to consumers they have pulled themselves much higher on the function scale and are now in the process of climbing up the image scale. This is the same route taken by BMW before them and which, it is intended, Rover will follow. Brand Extension Developing and launching new brands is normally extremely expensive and highly risky. One strategy which has been developed to reduce the costs and risks of new product introduction, to use more efficiently the equity which has been built up in existing brands and, at the same time, keep existing WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 31 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ brands relevant and meaningful to the consumer, is brand extension. The Dunlop brand, for example, started its life as a brand of bicycle tyre but was, over time, extended to cover tyres for road vehicles as well as a wide range of automotive, industrial, consumer and sporting products. The Kodak brand has been extended from its original positioning to embrace an enormous range of photographic products. Dunhill, originally a brand of cigarettes, has been extended to cover a wide range of luxury products for both men and women. Brand extension is clearly an entirely feasible marketing strategy. The problem for brand owners is to ensure that the brand is extended in an appropriate fashion such that the brand equity is enhanced rather than diluted. A critical factor is the development of an approach to brand extension which recognises the unique attribute of the brand and extends the brand in a fashion which is sensitive to the character of the brand and plausible to the consumer. Perrier, for example, is clearly an extremely powerful brand of mineral water, and the brand possesses unique attributes of "purity" and refreshment coupled with style and sophistication. No doubt Perrier has all the technical, financial and distribution capabilities to produce a cola or an alcohol-free beer under the Perrier brand name and it could be argued that products of this sort fulfil the key attributes of refreshment and quality which are inherent in the Perrier brand. In practice, however, a Perrier brand cola or alcohol-free beer may well be considered totally inappropriate by consumers and it may be that, should the owners of the Perrier brand wish to extend it, it could be used much more readily on personal care products, magazines, fragrances, clothing, bicycles or holiday resorts than on products which in many respects are adjacent to the brand's core area of activity. Creative Branding Much of current new-brand development seems to consist of presenting consumers with barely differentiated facsimiles of the brands they already know and appreciate. Poor consumer research must bear part of the blame as such research pushes the brand owner in the direction of the "bland brand" because consumers, in research situations, relate any new brand proposition to what is already familiar to them. They thus tend to score most highly those brand features which are closest to the brands that they already know. Much of successful branding, however, is concerned with getting there first, with anticipating and shaping consumer needs and desires. Indeed, there is evidence to suggest that pioneering brands are substantially more profitable than late entrants to a marketplace as it is much easier to seize and retain the attention and loyalty of consumers when there are no established competitors in the sector. Successful creative branding consists, therefore, of thinking ahead of consumers, of anticipating their needs and wants. Consumers do not maintain schedules of new products or brands they would like to see on the market; they are generally satisfied with the brands which are currently available to them. The task of the developer of new brands is to anticipate consumers' future needs and to present the consumers with new and attractive brands which they can embrace and make a part of their purchasing repertoire but which the consumers would never have anticipated a need for in advance of the product becoming available. WEB: www.marketing.org.au E-MAIL: email@example.com 32 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ THE SIGNIFICANCE OF BRANDING Branding has been used from the earliest times to distinguish the products of one producer from those of another. A potter, for example, would put a cross or a thumbprint on his product to distinguish it from the products of others, and the satisfied customer would seek out the products of that potter again while the dissatisfied customer would be able to recognise the unsatisfactory product by its brand and avoid it. No doubt, too, the branded products of one potter would come to command a premium over those products, branded or otherwise, of other potters. If one potter's products were considered particularly satisfactory or aesthetically desirable, or were sought as status symbols despite being very similar to another potter's products, then the branded products would come to be more valued than others and command particular loyalties and respect. New Brand Development For whatever reasons, the vast majority of new products do not succeed in the marketplace. They are sufficiently differentiated, of the wrong quality, wrongly priced, inadequately supported, inadequately distributed or in some other way not appealing to the consumer. It is estimated that up to nineteen out of every twenty new brands fail and quite frequently the reasons for failure cannot be precisely determined. Given such a high failure rate for new brands, it is clear that those brands which are successful, which are appealing to the consumer, which are stable and which have survived for an extended period must be regarded as particularly important and valuable assets. In a sense their value lies not just in their ability to generate future income but also in the fact that to reproduce them nineteen failures would have to be risked in order to achieve one success. Their value, therefore, is in the cost of all the failures as well as in the specific returns brought to the owner by the brand's success. It is normally impossible to persuade the major retail groups, who control a large proportion of national distribution in areas such as food and drink, to stock a new product unless they are guaranteed that the brand will receive extensive and costly promotional support. The producer of a new brand must be prepared, therefore, to invest heavily in the new brand even though the chances of success are small. Maintaining Brand Equities Although brands, once established, can be exceptionally robust they do not survive without constant support and attention. A high proportion of the company's income has also been devoted each year to maintaining the brand's interest and value to the consumer. WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 33 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ The Benefits of Brands The brand represents, to the consumer, a credible guarantee of quality and satisfaction at a recognised price. The use of such brands, therefore, provides the consumer with a kind of route map through what would otherwise be a bewildering range of alternatives. Conversely, though, brands can also provide the consumer with the ability to avoid a product if it has proved unsuitable in the past. For this reason brand owners must be sure to maintain quality, value and consistency in their brands. Brands also offer a range of very real benefits to manufacturers. Firstly, they provide an opportunity for the producer to talk directly to consumers and to influence their likes and preferences. Through advertising and promotion, brands can be endowed with qualities and attributes that make them appealing, and once consumers seek out and specify a branded product retailers are virtually bound to stock it. International Brands Most of today's powerful international brands were not developed as world brands; they were developed originally to serve particular national markets and first found a distinct positioning and appeal in those markets. Once established, they were then extended internationally. This process of brand globalisation has been greatly facilitated in recent years by better communications, greater travel and wider use of certain languages, especially English. With the growth of satellite TV and other communication "overlaps", it is clear that this phenomenon will continue to grow in importance as the world gets smaller. Global brands afford their owners economies and efficiencies such as those originally offered by national brands in the nineteenth century after the growth of the railways. They also offer international branded goods businesses a means of maintaining a coherence and unity in their international activities. Brand Values Much merger and acquisition activity in the late 1980s has been concerned with capturing powerful international brands. The power and importance of brands has now been clearly recognised not just be owners but also by investors and predators. The cost of developing new brands, the risks of new product development and the rarity of strong international brands all contribute to this interest. More importantly, however, the robustness of leading brands and the guarantees they provide of stability and of future cash flows ensure that brands are now regarded as serious and valuable assets akin in many respects to income- producing property assets. The value of brand assets, however, ultimately depends on the unique pact between brand owners and the consumer. The brand owner must recognise and honour this pact and maintain the appeals and values of the brand; the consumer will continue to support the brand only as long as it meets its side of the bargain or until a more appealing brand comes along. WEB: www.marketing.org.au E-MAIL: email@example.com 34 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ HOW TO BRAND NEW PRODUCTS New brands are extremely expensive to develop and launch. Several years of continued spending on the brand are needed before its success or failure can be ascertained. And in any case most brands fail. Clearly, new product development is not for the faint hearted. Indeed, in recent years some observers have predicted the total demise of all new product development, arguing that it is a mug's game, that far and away enough brands already exist, and that no sane company would consider any form of brand development other than brand extension. How, then, should new brands be developed and successfully launched? It should first be emphasised that the number of truly new brands developed and launched by companies is really quite small. Just look at the new products section of any of the major marketing magazines; you will find that most of the so-called new products or new brands are in fact new flavours or new product variants, old brands in new packaging formats, relaunched products or existing products launched into new markets. Only a tiny minority will be truly new brands. New brand development is, therefore a somewhat unusual and rare activity - most people in marketing will be involved in new brand development no more than a handful of times in their working careers. The first lesson in new brand development is to recognise that it is a risky and costly business, that you know very little about it, that your colleagues probably know little more than you do. The next and probably most important lesson is to ensure that your new brand has a point of difference. Consumers almost certainly have no real interest whatsoever in your new brand of paint or in your new savings plan; most probably they are more-or-less satisfied with their current brand so it is essential that you establish a meaningful point of difference which sets your brand apart from those already on the market, stimulates interest and encourages trial. Equally importantly, however, your new, differentiated brand must be attractive and credible. In establishing a point of difference you by no means need to develop a brand which is eccentric or outrageous. Rather, you have to develop a point of difference which is recognisable by consumers, desirable, credible and which can be properly communicated. Developing a Point of Difference Recognisable points of difference are those which manifest themselves to consumers. It is no good, therefore, basing a new brand of cola on an improved product formulation which sends the R&D department into ecstasies but which in blind taste testing the consumer cannot tell from the existing product. Desirable points of difference are those that they need or want. Consumers want improved performance, better value, greater convenience, new and improved services and neat solutions to obvious problems (e.g. fluoride toothpastes to fight tooth decay, new types of fabric softeners which are easy to use, spray starches, etc.). Of all the desirable points of difference which you can build into your new product the most critical is "quality". The PIMS (profit impact of market strategy) program was initiated in the United States in 1972 by the Strategic Planning Institute to try to determine how key dimensions of strategy affect profitability and growth. It has since collected data from some 450 WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 35 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ corporations. One of the findings was that, "in the long run, the most important single factor affecting a business unit's performance is the quality of its products and services relative to those of competitors." Credible points of difference are those which not only seem desirable and credible to consumers but which are actually delivered to the consumer once the product is tried. Properly communicated points of difference are those where the brand name, packaging and, ultimately, the product and its promotion all combine to present, justify and reinforce a proposition which is differentiated, credible and appealing. Identifying New Brand Opportunities How does one identify such paragons, the new brand with an appropriate and clearly identified point of difference? One thing which is certain is that they do not emerge by some "eureka" process. Nor do they emerge by scanning the marketing or trade press and hoping for inspiration. Indeed, new brand development based on such a process is doomed to failure as many others will have read precisely the same material as you and will have arrived at the same new brand idea as you at precisely the same time. A survey conducted in 1982 by consultants Booz Allen & Hamilton suggested that successful new brands are developed through an intimate knowledge of markets and market trends, and a clear, objective, no-nonsense understanding of internal company resources and capabilities. Indeed, according to Booz Allen, the essence of a successful strategy is that it must "link the new product process to company objectives and provide a focus for idea/concept generation." Reasons for Brand Failure Many new brands fail for readily understandable reasons: the product did not work, or a major competitor cut prices so vigorously that it was not worthwhile for retailers to give the new brand a trial, or the packaging was poor. Frequently, however, it is not possible confidently to identify the reason for failure: the brand appeared to be well contrived, properly priced, well packaged and it achieved national distribution. In such circumstances the most common reason for failure is quite simply that the brand had no point of difference; it was merely a good facsimile of existing brands with which the consumer was already happy, and it could offer the consumer no good reason to switch. Branding by Retailers One of the paradoxes of new brand and product development over the last ten years in fast-moving consumer goods sectors such as food and drink is that many of the most original and successful initiatives have been taken not by manufacturers but by retailers. This development will assume increasing importance with the concentration of retail power in a smaller number of retail groups. Retailers normally eschew the more tedious and laborious process followed in the new brand development area. Typically, a buyer in one of the major retailers will identify a potential new product WEB: www.marketing.org.au E-MAIL: email@example.com 36 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ or brand from one of many sources: customer demands, suggestions from other members of staff, proposals from suppliers, even dissatisfaction with existing branded products. Manufacturers often argue that the retailer is somehow in a "privileged" position and that such "fast- focus" new brand development is impossible for the manufacturer. While there is a measure of truth in this, in fact the retailer is simply following the well-informed, pragmatic, no-nonsense approach which manufacturers would do well also to follow. It seems clear, in many instances, that retailers know and understand their markets and market sectors and the needs and motivations of their customers rather better than do manufacturers. In fact, manufacturers are often quite divorced from the real needs and motivations of the consumer; the data they receive provide information but not insights. Manufacturers, then, are advised to take a much more pragmatic, no-nonsense approach to new brand development that is often the case at present. Frequently, inexperience in the new product development area coupled with a keen realisation that the process is risky and expensive leads to a gross over-complication of the process and an intense focus on examining minutiae at the expense of understanding the whole. Where then, is a fast-focus approach appropriate and where is it not? Brand Search One area where no compromise should be made is in the area of understanding the market and the needs of the consumer. This, however, goes way beyond merely analysing and understanding market statistics. An analyst working in the tyre industry, for example, may well be able to describe in detail the market and industry trends, and may, therefore, be able to tell you that, in his or her opinion, your concept for a new brand of low profile 10" crossply tyre is quite stupid. It is unlikely, however, that his or her detailed knowledge of the market will provide any clear specification as to what exactly you should be doing. Moreover, any gaps in the market that have been discerned by the analyst should be approached with extreme caution as it is likely that analysts in competing companies have simultaneously spotted the same gap. Sources of new brand ideas are many and wide-ranging. One source, though, which seems curiously little used is the simple process of seeing what other people are doing in similar markets around the world. Of course, very many products popular in overseas markets will not comfortably make the transition into other markets. Dr. Pepper, for example, a highly successful soft drink in America for which consumers acquire a taste at a young age, has been unsuccessful overseas. This failure has been attributed in large measure to its idiosyncratic taste which seems not to appeal unless you are weaned to it. The British product Marmite and the Australian Vegemite are enormously appealing in their home markets but are often considered little short of disgusting in export markets. In spite of such products which are unlikely to make the transition into other markets, opportunities for product transfer abound. Testing the Concept Whatever the origination process used, once a new brand concept has been developed very real WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 37 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ opportunities exist for "fast focus" in the research and concept testing area. Much market research, both qualitative and quantitative, is mindless, inappropriate and, at times, misleading. Simple, unelaborate qualitative research can often provide valuable information and considerable "comfort" as to acceptability and preferences. The research must, however, be conducted among the real target users - often heavy users of competitive products - and not just among a general selection of target consumers. The final part of the process is to try the new brand concept on consumers in a real-life situation - as retailers have shown so well, this is the acid test. Manufacturers frequently spend so much time developing, testing, refining, retesting, reformulating and so on that the new brand concept ceases to bear any relation to reality. It is somewhat like designing a car by focusing in great detail on all the individual components without stepping back from time to time to reappraise the car's overall look and functionality. The process of new brand development advocated here is essentially a simple process: one of mere trading. Come up with something that the consumer wants, offer it to them; if they buy it and like it then the product is a success; if not it is a failure, and time for the would- be entrepreneur to replan and rethink. Although a pragmatic, fast-focus, no-nonsense approach to new brand development is recommended, there is at least one area where it is inappropriate but where in practice corners are cut all the time, even when expense and effort is lavished on every other aspect of the new brand development process. It is the area of name development. The brand name is the product's one component which is unlikely ever to change and which is at the heart of its personality. It is also the feature of the brand in which the brand owner can establish clear legal title. Furthermore, if there is any intention that, once successful, the brand will be marketed internationally then it is essential to establish a strong, appropriate and internationally protectable brand name at the outset. If the brand owner should neglect to do so it is virtually certain that the new brand name will prove either unsuitable or unavailable in key international markets when the brand owner decides to market the brand abroad. The brand owner will be forced, therefore, to adopt a series of local brand names for the same product and will soon have on his hands not an international brand but a medley of local, similar brands each with its own brand name, packaging, positioning, advertising and separate brand personality. BRANDING SERVICES Mars is one of the world's most successful companies in the areas of brand development and brand management. Its brands are powerful, international, appealing to customers, of high quality and they also offer exceptional value for money. Mars manages its brands with great skill and this is manifest in the areas of new brand development, product manufacture, distribution, and even at point-of-sale. Particular Problems of Services Branding Contrast Mars with how a financial services company such as Prudential might go about branding its services. Firstly, its brands are intangible; though they can, and frequently do, carry their own brand names they cannot be distinguished by taste, feel, colour or appearance. WEB: www.marketing.org.au E-MAIL: email@example.com 38 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ Whereas most people would recognise a tangible fiction, for example "a crisp chocolate wafer with added sardines", recognising an intangible fiction is much more difficult: another indication of the difficulties involved in giving form, substance and identity to concepts as opposed to things. The problems are compounded by the fact that service products are normally in a constant state of change, especially those in the financial sphere: new legislation is constantly being introduced, interest rates change, competitors reinterpret the rules to develop new, more attractive products and so forth. Therefore, whereas Mars can be more-or-less confident that any successful new brand it launches will be largely unchanged in twenty or even fifty years time, Prudential may be forced to make substantial changes to its brands at the time of each new budget and perhaps even more frequently. All service brands share this problem of intangibility, of the need by the brand owner to give form, shape, substance and personality to something which is intangible and whose characteristics may appear bafflingly complex to the consumer. Certain service brands, however, have additional problems: quality control. Whereas Mars can control the quality of its branded products, the best laid plans of Hertz or Hilton can be thwarted by a snarling receptionist, a badly prepared car, or a hotel room which has not been properly cleaned. The Need for Branded Services Paradoxically, even though it is far more difficult to build and sustain brands in the services sector than in the product sector, the need for branded services is particularly acute and the opportunities for new brand development are enormous. One of the key functions of a brand, as discussed earlier, is to reassure consumers as to quality and origin and, at the same time, to provide them with a simple route map through what may otherwise be a bewildering choice. Thus brands help the consumer to shop confidently and unerringly. The service sector is a particularly difficult one for the consumer to shop: the range of choice is very wide, the services and service products are often complex and each tends to meld into the next because consumers frequently do not perceive underlying structures and so cannot discern the boundaries between alternatives. The market for savings provides a good example. Consumers have an enormous range of savings options ranging from government bonds, through building societies, banks, the stock market, investment in tangible assets to the option of leaving their savings under the mattress and not investing them at all. It is clear that many consumers do not have any well- developed overview of the savings market whatsoever and often make important savings decisions based on hunch, anecdote, established family savings habits, advice from workmates and so on. Types of Service Brands Service brands fall into two main categories: 1. Branded intangible service products such as financial products. 2. Branded services provided on a person-to-person basis such as food services and retail services. WEB: www.marketing.org.au E-MAIL: firstname.lastname@example.org 39 THE MARKETING ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ______________ In practice, both forms of service brands are quite different. The former is altogether intangible but does not actually consist of the provision of a person-to-person service. The second type of service brand is what most people would regard as a "true" service brand, and is the one that presents particular problems of quality control. The Essentials of Service Branding Given that branding in the services sector is especially difficult, that consumers seek, nonetheless, the reassurance provided by brands, and that major opportunities are opening up due to the increased importance of services in our economy and the non-availability of brands in certain market sectors, how does one go about branding services? The most important factor, as far as the consumer is concerned, is to keep the brand proposition simple. The very intangibility of services makes it essential that the supplier of services puts across the brand proposition in an entirely straightforward and uncomplicated fashion. The purpose of branding is essentially to simplify the complex: not to make a complex world even more bewildering. Another important principle of services branding is that strict quality control is essential at all stages in the process, especially for "retail" services. This is a particularly difficult problem and considerable emphasis needs to be placed on staff selection, training, motivation and on close day-to-day control. KEY TERMS INDEX "Gestalt.................................................... 24 image phase............................................. 28 Authority .................................................... 6 intangible elements................................... 25 barely differentiated facsimiles ................... 31 international brands .................................. 33 Brand extension........................................ 30 market research ....................................... 36 brand extensions ...................................... 22 Marketing................................................... 3 brand life cycle ......................................... 28 marketing and distribution ......................... 27 brand management................................... 37 mini managers.......................................... 14 'Brand Manager .......................................... 4 new-brand development............................ 31 branded services..................................25, 38 personality of the brand ............................ 25 Branding .................................................. 25 PIMS........................................................ 34 commodity suppliers ................................. 27 process of perception ................................ 24 competitive stage...................................... 28 product management organisation ............. 13 consumer promotion ................................. 20 Product Manager ........................................ 4 couponing ................................................ 20 Product Manager. ....................................... 3 customised multi brand deals ..................... 20 proprietary period ..................................... 28 device mark.............................................. 26 sales promotion ........................................ 20 Differentiated brands................................. 26 trade mark laws........................................ 25 differentiating feature................................ 24 trade promotion........................................ 20 differentiation ........................................... 26 Triangular product team ............................ 19 distributors............................................... 20 unfair competitions laws ............................ 26 financial services....................................... 37 unique property ........................................ 24 flankers.................................................... 22 Vertical product team 19 four functions ............................................. 2 functional and symbolic values ................... 28 functional management organisation .......... 13 Horizontal product team ............................ 19 WEB: www.marketing.org.au E-MAIL: email@example.com 40
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