Chapter Nine: Product Branding and Packaging Decisions TOOLS FOR INSTRUCTORS • Learning Objectives • Annotated Chapter Outline with Instructor’s Notes/Teaching Tips • Answers to End of Chapter Learning Aids Concept Review Marketing Application Questions Net Savvy Chapter Case Study • Video Activities Learning Objectives 1. Describe the components of a product 2. Identify the types of consumer products 3. Explain the difference between a product mix’s breadth and a product line’s depth 4. Identify the advantages that brands provide firms and consumers 5. Summarize the components of brand equity 6. Describe the types of branding strategies used by firms 7. State how a product’s packaging and label contribute to a firm’s overall strategy Annotated Chapter Outline PowerPoint Slides Instructor’s Notes Chapter 9 will focus on product, branding, and packaging decisions. These questions are the learning objectives guiding the chapter and will be explored in more detail in the following slides. Opening Vignette: Canada Goose Canada Goose has built a strong brand making coats that keep people who work in extreme cold conditions toasty warm. This example illustrates brand image, brand promise, and brand equity. More examples are developed that relate theory to Canada Goose throughout the chapter. Ask students: How has the Canada Goose product line depth changed with the addition of new products? Answer: it has become considerably longer. From only jackets, it now offers snow pants, hats and gloves. LO1: Complexity and Types of Products Products are interrelated and include the problem solving benefits consumers are looking for. Products are made up of 3 components: • Core customer value • Actual product • Associated services (augmented product) Marketers involved with the development, design, and sale of products think of them in an interrelated fashion. At the center is the core customer value, next is the actual product, followed by associated services. Types of Products There are 4 types of consumer product: • Specialty Products/Services • Shopping Products/Services • Convenience Products/Services • Unsought Products/Services Consumer products are products and services used by people for their personal use. Marketers further classify these products by the way they are used and purchased. • Specialty goods/services are those toward which the customer shows a strong preference and for which he or she expends considerable effort to find the best options. • Shopping goods/services include those for which consumers spend time comparing alternatives, such as apparel, fragrances, and appliances. • Convenience goods/services require little or no evaluation effort prior to purchase. • Unsought Products/Services are those that people don’t yet know about (e.g. Polar Pen made of magnets), don’t think about buying, (insurance, pre-planned funerals), or don’t want (e.g. duct-cleaning) The same product can represent different goods categories for different consumers. For example, some consumers consider jewellery a shopping good and therefore visit their local department store or warehouse store (e.g. The Bay or Costco) to find products, whereas others view it as a specialty good that should be purchased from a jewellery store. Few people would consider it a convenience good. Even fewer people would consider jewellery an unsought good. LO3: Product Mix and Product Line Decisions • The Product Mix Is the Complete Set of Products Offered by a Firm. • The Product Category Is an Assortment of Items that Customers View as Reasonable Substitutes. • Stock Keeping Units (SKU) Are the Smallest Units Available for Inventory Control. • Product Lines Are Groups of Associated Items that Consumers Use Together. • Product Mix Breadth Represents the Number of Product Lines a Firm Offers. • Product Line Depth Is the Number of Categories within a Product Line. This chapter uses many brands as examples. Many students may be unfamiliar with the name ConAgra, but they likely know its brands, such a Chef Boyardee, Jiffy Pop and Orville Redenbacher popcorn. All companies need to manage their brand portfolios to meet the needs of current customers. One of ConAgra’s best known and most successful brands is Healthy Choice. With its distinctive green packaging, Healthy Choice products appear throughout supermarkets. Group activity: List as many Healthy Choice products as you can think of. How many product lines do they represent? Healthy choices (http://www.healthychoice.com/products/news.jsp) has four types of meals, soups (bowls and cans), frozen novelties, bread and pasta sauces. Thus, they have five product lines. Students should understand that each item is called a stock keeping unit (SKU) and the category depth is the number of SKUs within a category. In the canned pasta category, ConAgra offers a wide range of products, or SKUs, under its Chef Boyardee brand. Changing product mix breadth 1. Increase breadth by adding new product lines to capture new or evolving markets, increase sales, and compete in new ventures. 2. Decrease breadth by deleting entire product lines to address changing marketing conditions or meet internal strategic priorities. Ask students: Why would a company want to increase its product mix breadth? Why would it want to decrease it? Students should comment that they would increase to capture new or evolving markets and increase sales. Decreasing might be due to changing market conditions or internal strategic priorities. Changing product line depth 1. Increase depth by adding new categories within product lines to address changing consumer preferences or pre-empt competitors to boost sales. 2. Decrease depth by deleting product categories to realign resources. Ask students: What are the pros and cons of offering competing products in the same category? The primary advantage is to increase overall sales and profits. But at the same time, adding competing products can cannibalize sales of current brands. Firms must determine the net effect on sales and the overall impact on competitive products. To meet the needs of different market segments for the same product category, firms often offer competing brands. ConAgra offers three of the most popular popcorn brands, each of which is positioned slightly differently in the marketplace and carries its own unique marketing mix. Changing the number of SKUs To stimulate sales or react to consumer demand, some companies add or delete SKUs. Many stores add SKUs to provide a deeper assortment. They might add, for instance, more colors or sizes in a category. Ask students: What effect does this have on consumer behaviour? On financial performance? What is the effect of reducing the number of SKUs? By providing consumers with a deeper assortment, it is more likely that the store will satisfy their demand, which should result in increased sales. But adding SKUs is expensive. The effect of reducing SKUs is just the opposite. Answer: A; see page 279 Branding Branding provides a way for a firm to differentiate its product offerings from those of its competitors. Brand identification takes many forms. Ask students: How many of you can sing the Oscar Meyer jingle? It is the one of the original 1965 Oscar Meyer ads. Group activity: Compare the positioning of two Chevrolet brands (e.g. Corvette, Aveo, Impala, and Malibu). Why does Chevrolet have so many competing brands in the same category? Each brand is aimed at a different target market. Aveo starts around $10,000 while a Corvette coup starts at $45,000. Group activity: Identify a brand that you recognize primarily by each of these elements. Brand Name: Most brands. Jingles: Be all you can be – Army URLs: www.eBay.com Logos & Symbols: Nike Swoosh Slogans Nike- Just Do It. Characters: Quaker, KFC, McDonalds. LO4: The Value of Branding for Customers and Marketers A. Brands facilitate purchasing because consumer recognition facilitates quick decisions. B. Brands can establish loyalty over time and with continued use. C. Brands minimize competition because of their loyal customers. D. Brands reduce marketing costs; well-known brands can largely sell themselves. E. Brands are assets that firms must protect through trademarks and copyrights. F. Brands influence market value and the firm’s bottom line. Answer: D; see page 282 Branding Overview & Brand Equity Branding Includes Brand Equity, Brand Ownership Strategies and Brand Name Strategies. Brand Equity Consists of Four Concepts: Awareness, Perceived Value, Associations and Loyalty. Assets and liabilities linked to a brand can add to or subtract from the value provided by the product or service. Brand equity is an important concept that can both help and hinder. For example, customers dislike some brands because of the firm’s actions or their negative perceptions. Nike has been the target of many labour activists, which causes some consumers to refuse to purchase or wear Nike products. Mattel’s brand equity was hurt when it recalled over 19 million toys because of lethal magnets and lead paint. Additional slides follow to further elaborate on brand equity, brand ownership strategies and brand naming strategies. LO5: Brand Equity A. Brand awareness measures how many consumers in a market are familiar with the brand and have an opinion about it. Remind students what they have learned about consumer behaviour. When consumers recognize a need, they begin with an internal search, during which they consider any brand they already know. If consumers are not aware of the brand, they simply will not purchase it. B. Perceived value represents the relationship between a product’s or service’s benefits and its cost. Consumers report looking for and purchasing more organic products for a variety of reasons, such as concerns about health, the environment, and safety. Organic products often cost more but are perceived as more valuable by some because they mitigate these concerns. C. Brand associations reflect the mental links consumers make between a brand and its key product attributes, such as its • Logo. • Slogan. • Brand personality, which refers to human characteristics people associate with the brand’s symbolic or self-expressive meaning. Brand associations reflect the mental links that consumers make between a brand & its key product attributes, such as a logo, slogan or famous personality. These brand associations often result from a firm’s advertising & promotion efforts. Firms sometimes develop a personality for the brand – as if it were human. Ask students what brands have personalities – they might mention McDonald’s and Pepsi (young). Consumers develop links between brands and their own identity. Some brands are just “not for them.” Ask students: How many of you proudly wear Abercrombie & Fitch clothing? How many choose never to wear this brand? How do you perceive this brand’s message? Answer: C; see page 287 D. Brand loyalty occurs when a consumer buys the same brand’s product or service repeatedly rather than buying from multiple suppliers. Brand loyalty provides the firm with high value. State Farm has built their brand equity by having loyal customers. Ask students: Once you have chosen an insurance company or a bank, how likely is it that you will switch? How likely is it that you will switch due to an increase in price? Is it important for the firm to spend a lot of money marketing to you, a loyal customer? Do you pay much attention to ads or direct mail pieces from competition? To further illustrate brand loyalty, ask students: would you leave a store if your particular brand were not in stock? When you order a Sprite in a restaurant and the server asks, “Is 7-Up okay?” do you say no? LO6: Branding Strategies Brand Ownership Takes Several Forms. A. Manufacturer brands are owned and managed by the manufacturer; most brands are manufacturer brands. B. Private label or store brands are owned and managed by retailers. C. Generic products are sold without brand names, typically in commodities markets. Unlike Europe, where store brands such as Tesco (U.K. grocery chain) were extremely popular, in the United States, few store brands had achieved such status and were often considered inferior to manufacturer or national brands. In Canada, many store brands are well established, such as Kenmore, Mastercraft and Presidents’ Choice. Private-label brands, also called store brand, are products developed by retailers. Some manufacturers prefer to make only private-label merchandise because the costs of developing and marketing a manufacturer’s brand are prohibitive. President’s Choice is a popular store brand in Canada that has also found acceptance in the U.S. Naming Brands and Product Lines • The corporate brand benefits the individual brands associated with the family name. • Family brands use a combination of the corporate and product brand names. • Individual brands identify each product individually. Branding exists on multiple levels, and firms choose strategically how to brand their products. The names they assign their products reflect this strategic choice. Marriott gives its individual brands unique names, all tied together by the phrase “by Marriott,” like Fairfield Inns by Marriott. Ask students: What is the benefit of this type of naming strategy? Answer C; see page 289 Choosing a Name Four desirable qualities should be considered: 1. The brand name should be descriptive and suggestive of benefits and qualities 2. The brand name should be easy to pronounce, recognize, and remember 3. The brand name should be able to be registered as a trademark and legally protected. 4. The brand name should be easy to translate into other languages. Backwoods Brewery in Vancouver has sold its beer to local restaurants and bars for a decade. Taking note of whacky wine names like Fat Bastard and Cat’s Pee on a Gooseberry Bush, the company recently rebranded its beer as Dead Frog. The goal was to create a fun name in a category that has been very conservative. “Dead Frog”, while irreverent, is memorable and appeals to a younger demographic. Brand Extension An extension uses the same brand name for new products introduced in the same or new markets and can benefit the brand in several ways. 1. The brand name is already well established and possibly known for its high quality. 2. Marketing costs are lower because consumers already know and understand the brand. 3. The resulting synergy between the two products can increase overall sales. The extension may boost sales of the parent brand because new adopters may now try the parent brand. However, potential risks of expansions exist as well. Brand dilution can adversely affect consumer perceptions of the core brand’s perceived attributes. 1. Marketers must carefully evaluate the fit between the product class of the core brand and the extension. 2. Firms should evaluate consumer perceptions of the core brand’s attributes and seek extensions with similar attributes. 3. Firm should refrain from extending the brand name to too many products. 4. Firms should consider whether the brand extension can achieve sufficient distance from the core brand. Extending the equity of a brand to new products makes sense sometimes. But with over 30 (and counting) Oreo extensions created over the years—not including the infamous Oreo Fun Barbie doll licensed to Mattel—you have to wonder just how relevant the exposure is and is the consumer marketplace flat out oversaturated? Group activity: Think further about the Healthy Choice brand. How has ConAgra been able to extend this brand? What other extensions might it consider? A brand is only as good as its last extension. Many firms try to take their brands just one more step, only to find the extension hurts rather than helps the parent brand. For example, McDonald’s agreed to license a McKids line of clothing, but the line was not as successful as it had hoped it would be. Ask students: In terms of this example, what do you think McDonald’s did wrong? Cobranding Markets two or more brands together with the same package or promotion. Cobranding benefits the participating brands by attracting the consumers of one brand to the others. Remind students of the FedEx/Kinko’s example. The synergy between these two brands helped ensure a successful cobranding effort. Brand Licensing involves a contractual arrangement. A. One firm allows another to use its brand name, logo, symbols, and/or characters. B. The user provides the brand owner with a negotiated fee in exchange. Think about the products that feature the Lacoste alligator or the Harley-Davidson logo. NASCAR licensed Canadian Tire to produce a range of products for the automotive aftermarket such as NASCAR batteries and windshield wiper fluid. Ask students: Why can these brands be extended in so many directions? Answer: These brands have a strong mystique and a loyal following, and are therefore likely to buy their brand extensions. Answer: A; see page 293 LO7: Packaging Consumers See the Exterior Packaging A. Packaging provides consumers convenience in terms of storage, use, and consumption. B. Packaging helps consumers identify the brand they prefer. Packaging Contains: A. The UPC label used by retail scanners appears on secondary packaging. B. Consumers can use the package itself to find additional information that may not be available on the exterior package. Although often overlooked as a marketing tool, packaging helps determine the success of a product. In some instances, such as Coca-Cola or Aunt Jemima Maple Syrup, the package has become synonymous with the brand. Even small firms benefit from good packaging and labelling. Quaker Coffee’s packaging conveys its value proposition to the marketplace. Its labels communicate roast qualities and bakery labels state “baked fresh.” Sales increased 400% as a result of the redesigned packaging. Ask students: What packages are so distinct that they help make the brand successful? Possible answers are: some bottled waters such as Perrier, Altoids, and Tiffany’s turquoise box Weston Bakeries and William Neilson are the first consumer products marketers to be awarded the distinction of displaying the ParticipACTION logo and website on their packaging. Weston will use the ParticipACTION symbol across Canada (excluding Quebec) on Wonder+ bread products. Neilson Dairy will feature the symbol on its 1% and 2% four-litre bagged milk products in Ontario. The Case-in-Point example features Shreddies. A great example of a packaging change that did not entail a product change and the subsequent success that resulted. Entrepreneurial Marketing 9.1 Three Farmers Sisters Elysia and Natasha Vanenkurk needed approval from Health Canada before they could launch their cooking oil which is made from camelina, an ancient grain. The oil is rich in Omega 3 and Omega 6 and has a long shelf life. Brand name and packaging were critical to the success of this product. Different sizes and flavours help round out the product line. Ask students to watch CBC’s Dragons’ Den video. Ask them to consider Camelina Oil from the perspective of brand name, and differentiation from other cooking oils. Product Labelling The Purpose of Labels: A. Labels provide information the consumer needs for decision and consumption. B. More than just a sticker, the product label provides a communication tool. Legal Restrictions on Labels. A. Many labelling requirements stem from various laws. B. Federal agencies, industry groups, and consumer watchdogs carefully monitor product labels. Label information is determined by regulations, and labelling rules vary from country to country. Certain terms convey specific meanings, such as “natural,” “organic,” “made in Canada,” and products must meet specific tests before placing such terms on their label. In mid-2014 the government introduced new labelling requirements to show added sugar, not just those that are naturally occurring. Group activity: Look at the label of a snack or drink you may have brought to class. What information does it provide? How does it support the marketing of this item? Ask students to check out the labelling of sugar and added sugar. Barbie has now entered into the world of technology, which includes online media. The latest Video Girl doll has a tiny video in her necklace, an LCD screen on her back, & editing software tucked inside. The new doll can record up to 25 minutes of video that can be downloaded to computers with a pink USB cable. She’s also now a celebrity FourSquare user that keeps in touch via networking websites. But have Mattel’s initiative blurred the lines between play & advertising? However, advocacy groups such as the Coalition for a Commercial-Free Childhood object to the blurring of play & purchasing, especially as the industry reaches into children’s lives with everywhere, anytime digital & mobile formats. There are calls to protect children from unauthorized use of online tracking mechanisms. Ask students: do you feel lines are being crossed here, especially as related to advertising directly to children? How can this be controlled more and should it be? Concept Review 1. Explain the differences between product mix breadth and product line depth. Why is understanding this difference important? Answer: The difference between product mix breadth and depth is the number of product lines versus the number of categories within a product line. It is critical to understand the difference because while they may sound similar the two are very distinct decisions. Adding or removing product lines, or changing product mix breadth, can mean entry into new categories and markets. Adding or removing from product line depth means changing the offerings within an existing line, perhaps to serve a new market with similar products. 2. Explain why branding is important to marketers. What value do customers derive from purchasing and using brand name products? Answer: Branding is important to all marketers because it is a way to add value beyond physical and functional traits and to charge a premium for their products or services. It is a critical tool used to differentiate against competitors. Brands serve many purposes to the consumer as well, including creating a recognisable name or logo to facilitate purchasing or build trust and loyalty. Brands also protect from competition and price competition by establishing a market and certain trademark characteristics. Brands also reduce marketing costs once established, since familiarity reduces the amount of information a marketer needs to communicate. 3. What is brand equity? Describe the strategies marketers could employ to increase the value of their brand equity. Answer: Brand equity is the intangible value of a brand, or the set of assets and liabilities linked to a brand that add or take away from the value provided by the product or service. There are many ways to build equity – and many ways to compromise it – including: a) Brand ownership – passing the brand management down to retailers like with a private label brand or maintaining it at the manufacturer’s level b) Naming brands and product lines - creating new brands where appropriate, and building a family or corporate brand versus creating a new brand name, extending the brand with brand extensions, considering co-branding and brand licensing as ways to extend into new categories. 4. Differentiate between a manufacturer’s brand, generic brand, and store brand. Should retailers carry all three types of brands? Why? Answer: All three are simply different types of brand ownership. A manufacturer’s brand is owned and managed by the manufacturer. Generic brands are products sold without brand names, usually commodity products like salt or sugar, although these can also have manufacturer’s brand names. Store brands, also known as private label brands, are owned and managed by the retailer. It is possible for retailers to carry all three types, but it is not necessary. Obviously the manufacturer’s brands will be sought by consumers and it is important to list these, but only retailers with the ability to manage store brands can carry them. Carrying generic brands is common, but a high end retailer may chose not to list this type of product in order to offer only manufacturer’s brands. Store brands tend to offer companies a greater return than manufacturer’s brands and are usually sold at a discount relative to manufacturer’s brands. 5. Describe the desirable qualities companies should consider when choosing product names. Answer: There are four key desirable qualities: 1) A descriptive, suggestive name – like Sunkist 2) Easy to pronounce – like Tide 3) Able to register it and legally protect it 4) Easy to translate into other languages 6. What are the advantages of using the same brand name and extending it to new products? Answer: There are many advantages to leveraging existing brand names. First, the company can spend less to develop the new brand name. As well, the existing perceptions of the brand will carry over to the new product – which requires thoughtful analysis before launching an extension. Overall communication costs can be reduced because consumers already understand the brand. Also, when brand names are used in a complementary fashion, synergies can arise leading the consumer to buy both products. Lastly, leveraging existing brand names can lead to cross-category trial since consumers already know and trust the existing brand. 7. Explain how brand licensing differs from co-branding. Answer: In a brand licensing situation, the manufacturer retains full ownership of the brand and shares the name under contractual agreement for a negotiated fee or royalty. The firm that provides the right to use its brand (licensor) obtains revenues through royalty payments from the firm that has obtained the right to use the brand (licensee). Co-branding, is marketing two brands together on the same package, usually in an effort to leverage the traits of each other’s brands. 8. What is co-branding? When does it make sense for a company to use a co-branding strategy? Answer: Co-branding is marketing two brands together for the purpose of leveraging the existing positioning of one of the brands. This type of strategy makes sense when a certain brand possesses key, unobservable traits that are desired by another brand. As well, there should be synergy between the two brands to some extent, like similar customer groups, for example. Co-branding is a good way for companies to share risks, leverage resources, gain access to each other’s markets, and to build credibility or establish a market presence quickly. 9. Explain how marketers increase the value of their product offering through packaging. Discuss the ethical issues surrounding product packaging and labelling? How might some of these issues be resolved? Answer: Packaging is one of the most important and tangible aspects of product marketing. It has functional benefits like protecting the product, providing ingredients or directions and making it recognisable. It is also an extremely valuable advertising tool because it is the last chance to influence a consumer’s choice – right in the store where they are making decisions. Innovative packaging alone can influence a consumer’s choice. The colour, design and words used on a package also work to establish the brand and product positioning while also communicating specific product information. There are a number of ethical issues surrounding packaging, specifically with respect to what information must always be declared. Some items are mandated, while others are at the discretion of the manufacturer. Being completely honest and declaring all ingredients may be the right thing to do ethically, but will create a disadvantage competitively if other companies choose not to declare the same information. Some solutions to this problem are increased legislation, voluntary packaging networks that encourage full disclosure on all packaging, and third party organisations like Health Check which help consumers make informed decisions. 10. Explain how labelling could be used as a marketing weapon rather than just providing legally required information. Answer: Labelling as a marketing weapon is likely to happen in areas not currently governed by legislation. Some companies may choose to promote certain key aspects or benefits, where others may not. Even though both products are able to make the same claim, the first company to list it on their packaging will win in the minds of consumers. Further, some companies may take advantage of “grey area” like health claims currently under review – knowing that the government will allow them a grace period to remove it from their package – allowing them to make this claim while their competitors can not. Of course, anything on a package can give a competitive edge – the colours and fonts chosen, the wording, the amount of text, the language used for directions. Marketing Applications 1. Prepared foods at Whole Foods Market, the world’s largest retailer of organic foods, are very profitable. To make them even more profitable, suggest two strategies that would alter the product mix breadth and depth. Instructor’s Notes: This exercise prompts students to explore the difference between product line breadth and product line depth in the guise of giving Whole Foods strategic product recommendations. Example answers: Two possible strategies that would make Whole Foods even more profitable—and still remain in the prepared foods market—would be prepared naturopathic general health aids, called “monthly-health-in-a-box,” which would increase its product mix breadth, and prepared appetizers, dinner items, drinks, and desserts put together for a party, which would improve its product line depth. To enhance profitability in prepared foods at Whole Foods Market, consider these two strategies: 1. Expand Product Mix Breadth: Introduce a broader range of international cuisines and dietary-specific options (e.g., vegan, gluten-free) to attract a wider customer base and cater to diverse preferences. 2. Increase Product Mix Depth: Develop more variations within popular categories (e.g., different flavor profiles or ingredient combinations for salads and hot meals) to encourage repeat purchases and increase customer loyalty. 2. Visit a grocery store and look for Colgate Total toothpaste on the shelves. How many different SKUs (include all sizes and flavour variations) are sold at the store? What are the advantages and disadvantages of having so many different variations? Instructor’s Notes: SKUs represent the smallest units available for inventory control. This exercise shows students how many different variations of one product may be available for sale. Example answer: The answer to this question will vary considerably depending on the city students live in and the size/type of store they visit. Colgate Total* is available in a variety of flavours and forms: 50 ml to 150 ml in size, including Colgate Total Advanced Health, Clean Mint Paste, Whitening Gel, Advanced Fresh Gel, and Fresh Stripe Gel. To determine the number of different SKUs for Colgate Total toothpaste at a grocery store, you would need to visit the store and count all variations of sizes and flavors. Advantages: • Increased Consumer Choice: Allows customers to select products that meet their specific preferences and needs. • Enhanced Market Reach: Appeals to a broader audience by catering to various tastes and requirements. Disadvantages: • Inventory Complexity: More SKUs require more storage space and can complicate inventory management. • Higher Costs: Increased production and stocking costs due to a wider range of products. 3. Suppose you have just been hired by a jewellery manufacturer as a marketing consultant. The manufacturer has been making private-label jewellery for 75 years but is thinking about developing its own brand of jewellery. Discuss the advantages and disadvantages of such a strategy. Instructor’s Notes: Private-label, or store, brands are owned and managed by retailers. Students must consider the positives and negatives of such brands and therefore address such factors as market risk, promotional costs, cannibalization, and the competitive landscape (e.g., how will private-label clients react when they find out their manufacturer is now their competitor?). Example answers: The jewellery manufacturer could reap significant profits from making a product for itself rather than another company and possibly build a strong, lucrative brand that would command status and premium prices. However, it will face higher promotional costs for its new brand, and it runs the risk that the brand will not do well compared with the existing private-label business. Advantages: • Brand Identity: Developing their own brand can create a unique identity and differentiate the manufacturer from competitors. • Higher Profit Margins: Selling under their own brand allows for potentially higher margins compared to private-label products. • Customer Loyalty: Building a strong brand can foster customer loyalty and repeat business. Disadvantages: • Increased Risk: Investing in brand development involves risks and significant marketing costs without guaranteed returns. • Market Competition: Entering the branded market means competing against established brands with strong customer bases. • Resource Allocation: Requires substantial resources for branding, marketing, and establishing a market presence. 4. Identify a specific brand that has developed a high level of brand equity. What specific aspects of that brand establish its brand equity? Instructor’s Notes: In picking a brand that they think has high equity value; students should explore why they believe it has high value and what determines that value. Example answers: IBM has developed a high level of brand equity through its longevity, its global reach, its reputation for innovation and Nobel Prize–winning work, the quality of its products, its sponsorship of sporting and cultural events, and the high level of customer service it provides to its customers. Brand: Apple Aspects Establishing Brand Equity: • Innovation: Consistent delivery of cutting-edge technology and design. • Customer Loyalty: Strong emotional connection and brand allegiance. • Premium Positioning: High-quality products and a reputation for excellence. • Distinctive Identity: Iconic design and a recognizable logo. 5. Are you loyal to any brands? If so, pick one and explain why you believe you are loyal, rather than that you simply like the brand. If not, pick a brand that you like and explain how you would feel and act differently toward the brand if you were loyal to it. Instructor’s Notes: This question challenges students to consider exactly why they may be brand loyal toward one product but not another, which may be because of product characteristics, the students’ experience, or their opinion of the company that provides the product. Therefore, they might mention that they only purchase that brand to the exclusion of all others, they purchase the product frequently, and they often visit the store that sells it. Example answers: I am loyal to Starbucks, in that I generally do not get coffee from any other retailer unless there is absolutely no Starbucks within reasonable walking or driving distance. However, though I prefer Pepsi, I sometimes drink Coke; if I were truly brand loyal, I would only patronize restaurants that served Pepsi. Brand: Apple Loyalty Explanation: • Commitment: I would consistently choose Apple products over competitors due to their seamless integration and superior user experience. • Advocacy: I’d actively recommend Apple to others and participate in brand-related events or promotions. • Emotional Connection: My brand loyalty would stem from a deep satisfaction with Apple’s product quality and innovation, leading to a stronger emotional investment beyond mere preference. 6. Ford Motor Company owns several brands: Ford, Lincoln, Mercury, Mazda, Volvo, Jaguar, Land Rover, and Aston Martin. Within each brand are many models, each of which has a unique identifying name. Wouldn’t it be easier to just identify them all as Fords? Justify your answer. Instructor’s Notes: Why does a company like Ford break its product offerings into different brands? Students might mention such factors as promotional costs, product differentiation, brand image, and target market focus. Example answers: Although it might be easier to identify all makes and models as Fords for the sake of promotions and costs, the company would not be able to differentiate its product offerings as it does. Each brand has its own product characteristics, appeals to different market segments, and evokes different feelings and emotions in consumers. It would be much more difficult for Ford to try to do all of this under the single brand umbrella of Ford. Justification: • Brand Positioning: Different brands cater to distinct market segments and consumer preferences (e.g., luxury vs. mainstream). • Brand Equity: Each brand has its own reputation, history, and value, which would be diluted if all were consolidated under the Ford name. • Market Strategy: Maintaining separate brands allows for targeted marketing and specialized product development to better meet diverse consumer needs. 7. Unlike Ford, BMW has only one brand and gives each car it makes a number instead of a name, for example, the BMW Series 3, Series 5 or Series 7. What are the advantages to BMW of this approach? Instructor’s Notes: This question highlights a very different approach to branding which is linked directly to the company name. Example answers: BMW is a more upscale brand than Ford. The main advantages to BMW’s branding approach include factors such as ease of establishing a brand image, savings on promotional costs, and maintaining target market focus. Advantages of BMW’s Approach: • Simplified Brand Management: Focuses on a single brand, reducing the complexity and cost of managing multiple brands. • Streamlined Positioning: Uses a consistent naming convention to clearly communicate the vehicle's series and market positioning. • Efficient Marketing: Leverages the strong BMW brand identity across all models, enhancing brand recognition and loyalty. 8. Identify a specific company that has recently introduced a new brand extension to the marketplace. Discuss whether you believe the brand extension example you provided will benefit or harm the firm. Instructor’s Notes: By having students identify a recent brand extension, this question forces them to consider the degree to which this extension might help or hurt the firm and thus examine how brand extensions add or subtract value from the base brand. Example answers: In a recent brand extension, Donald Trump released a new men’s cologne, called simply “Trump–The Fragrance.” Extending the Trump brand—which traditionally has been associated with real estate, golf, and casino gambling—to men’s cologne probably will hurt the overall brand, because cologne is so different from the other products and services within the Trump brand, and it is a bit cheesy. After all, it would be hard to argue that Donald Trump knows much about men’s cologne. By releasing the cologne, the value of the other Trump-branded products and services might decrease due to brand dilution. Company: Tesla Brand Extension: Tesla Cybertruck Benefit or Harm: • Benefit: The Cybertruck leverages Tesla’s existing reputation for innovation and electric vehicles, attracting new customers and expanding market reach into the electric truck segment. • Potential Harm: The unconventional design and high expectations may alienate traditional truck buyers and face production or market acceptance challenges. 9. Do you think all food sold in a grocery store should have ingredient and nutrition labels? Consider the perspectives of consumers, the manufacturer, and the store. Instructor’s Notes: To expand students’ understanding of the roles and responsibilities of the different parties, this question challenges them to consider the benefits and costs of labels for each group Example answers: Most food in a grocery store should have an ingredient and nutrition label, with the exception of, say, unpackaged produce. Consumers can make more informed purchase decisions, and the store might improve its customer satisfaction, because its shoppers know that all the information they need appears on every product package. From the perspective of the manufacturers, however, broader labelling might seem intrusive and could make sales of cheaper quality, high fat, and high sugar foods more difficult; thus, rather than seeing it as an opportunity to connect positively with consumers, manufacturers might object to comprehensive labelling. 10. You are hired by a small bakery that wants to distribute its products through supermarkets. The market for the bakery’s products has been steadily growing, so the bakery needs to expand its distribution capabilities to match its production capacity. You set an appointment with the manager of a local grocery chain that is familiar with the bakery’s products and excited about the possibility of selling them in the store. The contract he offers includes a $10,000 fee for stocking the product, which he claims is simply the cost of doing business, noting that bigger bakeries object to adding your product line to the chain’s offerings. The bakery cannot afford this fee. What should you do now? Instructor’s Notes: This scenario asks students to consider the common business practices at play in this particular industry and whether such practices meet their ethical standards. If such stocking fees are common within the retail grocery industry, the ethical factor is fairly low; it is more a matter of contract negotiation than an ethical violation. If students determine that such stocking fees are not common practice and that the grocery chain is attempting to exploit the small bakery, they should address the ethical considerations and decide to what degree they should challenge the grocery manager. Example answers: I would first determine whether such stocking fees are common practice in the grocery industry. If they are common, I would try to negotiate the fee down to a more reasonable level that my bakery could afford. If they are not, I would question whether we want to go into business with a firm that allows such unethical business practices. Perhaps we could broker a better deal with another grocery chain; otherwise, I would look for other ways to market and distribute the bakery’s products. Negotiate with the grocery chain to reduce or waive the $10,000 stocking fee, emphasizing the bakery’s growing market potential and the mutual benefits of the partnership. If the fee cannot be adjusted, explore alternative distribution options or seek financial support from investors or grants to cover the cost. Net Savvy 1. Visit the Proctor & Gamble Web site (www.pg.ca). Identify and briefly describe its different product lines. Now identify one of its product categories, and discuss the product line depth of that particular category. Instructor’s Notes: To help confirm students’ understanding of the difference between product lines, product categories, and product line breadth, this exercise asks them to explore P&G’s product offerings, as represented on its website. Example answers: Proctor & Gamble’s product lines include personal and beauty (e.g., hair care, skin products), house and home (e.g., detergents, fabric softeners, air fresheners), health and wellness (e.g., nutrition, oral care), baby and family (e.g., children’s soaps, shampoos, disposable diapers), and pet nutrition and care (e.g., pet food, pet grooming products). The oral care product category contains significant product line breadth and depth; it includes seven different product lines (Crest, Crest Whitestrips, Oral-B, Glide, Scope, Gleem, and Fixodent). Procter & Gamble Product Lines: 1. Beauty: Includes brands like Olay, Pantene, and SK-II. 2. Grooming: Features products such as Gillette razors and shaving creams. 3. Health Care: Includes products like Crest toothpaste and Vicks medicines. 4. Fabric & Home Care: Offers Tide laundry detergents and Febreze air fresheners. 5. Baby, Feminine & Family Care: Includes Pampers diapers and Always sanitary products. Product Category: Beauty Product Line Depth: • Olay: Multiple variants including Regenerist, Total Effects, and Luminous, each with several specific products like cleansers, moisturizers, and serums. 2. Interbrand Corporation is a leading brand consultancy firm headquartered in New York that conducts research on the monetary value of different brands. Visit the company’s Web site (www.interbrand.com) and access the most recent “Best Global Brands” survey. Identify the top five brands, their brand values, and their countries of origin. Describe changes in the rankings of these firms from the previous year. Identify the brands with the greatest increase and the greatest decrease in terms of percentage change in brand value from the previous year. Instructor’s Notes: Students should realize that the four of the five strongest brands are from the United States and that the ranking has changed little from previous years, though the values of the brands have. Example answers: According to a Millward Brown survey conducted in 2014, the top five global brands are as follows: https://www.millwardbrown.com/brandz/2014/Top100/Docs/2014_BrandZ_Top100_Chart.pdf Ranking Brand Name Brand Value (millions) Country of Origin 1 Google 158.843 United States 2 Apple 147,880 United States 3 IBM 107,541 United States 4 Microsoft 90,185 United States 5 McDonalds 85,706 United States To find the exact values and changes: 1. Visit Interbrand’s website and access the “Best Global Brands” survey. 2. Locate the top five brands and their brand values. 3. Compare the current rankings with the previous year’s data to identify changes and percentage shifts. End-of-Chapter Case Band-Aid® Brand Products Build on the Value of the Brand Questions: 1. Visit the company’s Web site (www.bandaid.com) and identify and describe the different product lines that it markets. How would you describe its product line breadth? Instructor’s Aid: By having students explore another consumer products company’s Web site, this question reinforces their understanding of product lines and product line depth. Example answers: Band-Aid offers cleansing products, antibiotic and anti-itch treatments, protection products, first aid products for larger cuts and scrapes, sports tapes and wraps, foot care products, and first-aid kits as its product lines. Its product line breadth is moderate, because it offers fewer product lines than other consumer product firms might have; there tend to be about three to four product offerings within each of the seven product lines. 1. Standard Bandages: Basic adhesive bandages for everyday use. 2. Waterproof Bandages: Designed to stay on in wet conditions. 3. Antibiotic Bandages: Include antibiotic ointments to prevent infection. 4. Sensitive Skin Bandages: Made for those with sensitive skin. 5. Specialty Bandages: Includes shapes and sizes for specific needs (e.g., cushioned, large). Product Line Breadth: Band-Aid’s product line breadth is broad, covering various needs from basic to specialized bandages, catering to different skin types, conditions, and usage scenarios. 2. Review the different product categories in each of the company’s product lines. Which has the greatest breadth? Which has the least? Instructor’s Aid: Extending the previous question, this exercise continues to test the student’s understanding of product categories, product lines, and product line breadth. Example answers: The product category with the greatest breadth is antibiotic and anti-itch treatments, with six product lines. The product category with the least breadth is cleansing products, with only two product lines represented. Band-Aid Product Categories: 1. Standard Bandages: Various sizes and types (e.g., regular, extra-large). 2. Waterproof Bandages: Multiple sizes and designs (e.g., sport, flexible). 3. Antibiotic Bandages: Different sizes and formats (e.g., strips, pads). 4. Sensitive Skin Bandages: Various sizes and types (e.g., fabric, clear). 5. Specialty Bandages: Unique shapes and functions (e.g., cushioned, decorative). Greatest Breadth: Standard Bandages – Offers a wide range of sizes and types. Least Breadth: Antibiotic Bandages – Generally fewer variations compared to other categories. 3. Look at the new products that the company offers. Identify which are extensions of the Band-Aid® brand name and which are not. Discuss the extent to which the brand extensions might dilute brand equity. Instructor’s Aid: Using the Band-Aid scenario, students can examine which of the company’s new products meets the brand extension criteria and whether they help or hurt the brand, as far as consumer perceptions. Example answers: Of the seven new products shown, six of them are extensions of the Band-Aid brand and prominently display the brand name on the packaging. The seventh new product—Skin Crack Ointment—is not a brand extension, because it provides no visible connection to the parent brand; the Band-Aid name does not even appear on the package. All these brand extensions have low probabilities of brand dilution, because they focus on Band-Aid’s core attributes: first-aid protection and faster healing. To determine which new products are brand extensions and which are not, visit the Band-Aid website and review their latest offerings. Brand Extensions: • New Band-Aid Bandages (e.g., advanced types of standard or specialty bandages) are extensions of the Band-Aid® brand name. Non-Brand Extensions: • New Product Lines (e.g., unrelated medical or wellness products) are not extensions of the Band-Aid® brand name. Potential Brand Dilution: • Extent of Dilution: Extensions that closely align with Band-Aid's core product (bandages) are less likely to dilute brand equity, as they reinforce the brand's core strength. Extensions that diverge significantly from the brand’s core category may confuse consumers and dilute brand equity by straying from its established image. 4. Review the company’s products designed for children. To what extent do these use manufacturer (national) branding? Private-label (store) branding? Licensed branding? Justify your answers. What is the added value that these products offer compared with regular Band-Aid® protection products? Instructor’s Aid: This question tests students’ understanding of the differences among the various types of brands. Example answers: The products that Band-Aid designs for children combine national branding and brand licensing. They represent the national brand because the manufacturer’s brand name, Band-Aid, appears prominently on all of the packaging. They also involve brand licensing because they often use popular children’s cartoon or movie characters to promote the products. Band-Aid does not own these characters, so it must purchase a license from the owners to include them on the product and/or packaging. Products Designed for Children: 1. Manufacturer (National) Branding: Band-Aid® brand offers bandages specifically designed for children with fun designs and characters (e.g., Disney-themed). These products use the Band-Aid® brand name and are marketed under the company’s national branding. 2. Private-Label (Store) Branding: Band-Aid® does not typically offer store-branded versions of their child-specific products. Store brands usually have their own branding and do not feature Band-Aid® branding. 3. Licensed Branding: Band-Aid® often collaborates with licensed characters (e.g., Disney, Marvel) for children's bandages, integrating popular characters and themes into their products. Added Value: • Engagement: Fun designs and popular characters make bandages more appealing to children, encouraging them to use them. • Comfort and Convenience: Child-specific bandages often feature softer materials and easier-to-use designs, enhancing comfort for young users. Video Activities Video: Three Farmers (CBC’s Dragons’ Den) Learning Objectives: LO5, LO6, LO7 Description: This video provides a real world pitch by two entrepreneurial sisters on CBC’s Dragons’ Den. Elysia and Natasha Vanenkurk attracted a deal from Arlene Dickinson for their Camelina Oil. It is rich in Omega 3 and 6, can be used at high temperatures and won’t break down, plus has a long shelf life. The video introduces some of the complexities involved with launching a new product based on an ingredient people are not familiar with. It also highlights the importance of having a strong brand name, with a back story to support it, and good packaging. Key Words: branding, product line, naming brands, corporate brand, packaging, labelling Activity: Bring in a variety of different cooking oils. Discuss the products from the perspective of brand name, package appeal, labelling information. Ask students which product they would choose based simply on the package. Then do a taste test and see if the product they like the best matches the one they chose based on only the package. Solution Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9781259030659, 9781259104312
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