Lecture 8 Product Management and Pursuit of Brands

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Feedback and suggestions for leading discussion and project presentation

 Good research, update, and examples

 Practice, rehearsal, be prepared on time, n execute like a magician (embed video and other external links)

 Start with an element of controversy and (new) surprise

 Simple, clear and style

 Focus on main points, avoid clutter and filling the screen

 Rhythm: intro, expand main body, closure

 Avoid reading, memorize script/notes, keep eye contact n engaging

 Relax n tell your story

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2 Economic development

 Consumer behavior is influenced by economic development  Consumers in highly developed countries tend to demand extra performance attributes in their products  Consumers in less developed countries, value basic features as more important  Middle and upper class consumers are increasingly demanding about product performance (toothpaste)  Again, need to reconcile the standardized/focused vs. adaptation/diversified strategies

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Consumer Demands

 There are cultural differences that affect consumer needs.  China is a developing country (middle income) with several distinctive market segments compared with a developed economy with a majority middle class.  There are heterogeneous needs and wants  As income grows and the gap widens, different need segments have emerged

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3 Integrating R&D, marketing and production

 High failure rate ratio

 Between 33 % and 60% of new products fail to earn adequate profits

 Reasons for failure:

 Limited product demand

 Failure to adequately commercialize product

 Inability to manufacture product cost-effectively

 R&D generally lower among Chinese firms

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Management of Product Lines

 Each company has a product mix

 Evaluation existing products and lines

 Line extension: add new items, downward or upward (For great market share and profitability)

 Line filling: add new items in between

 Line reduction: item reduction, due to proliferation

 Line adjustment (Differentiation, cannibalization)

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4 Example: Coca Cola Product lines

可口可乐 Coca-Cola 醒目冰柠檬茶汽水 Smart Lemon Ice Tea Soda 香草味可口可乐 Coca-Cola Vanilla Flavor 醒目苹果汁汽水 Smart Apple Juice Soda 健怡可口可乐 Diet Coke 醒目香橙汁汽水 Smart Orange Juice Soda 柠檬味健怡可口可乐 Lemon Flavor Diet Coke 雀巢冰爽茶 Nestea Ice Tea 青柠味健怡可口可乐 Lime Flavor Diet Coke 雀巢柠檬绿茶(冰极) Nestea Lemon Green Tea (Iced) 香草味健怡可口可乐 Vanilla Flavor Diet Coke 雀巢咖啡 Nestea Coffee 樱桃味健怡可口可乐 Cherry Flavor Diet Coke 即饮雀巢咖啡 Nestea Ready to Drink Coffee 雪碧 Sprite 酷儿果汁饮料 Qoo Juice Drinkr 雪碧冰薄荷 Sprite Icy Mint 酷儿苹果味 Qoo Apple Flavor 雪碧姜汁汽水 Sprite Ginger Soda 酷儿香橙味 Qoo Orange Flavor 芬达 Fanta 爽白酷儿乳酸味饮料 Qoo Lactic Beverage 雪菲力 1 Chivalry "Xue Fei Li" 活力酷儿运动饮料 Qoo Sports Drink 雪菲力苹果味汽水 Chivalry Apple Flavor Soda 阳光茶饮料 "Yang Guan" Tea 雪菲力橙味汽水 Chivalry Orange Flavor Soda 岚风蜂蜜绿茶 "Lan Feng" Honey Green Tea 雪菲力柠檬汽水 Chivalry Lemon Soda 天與地矿物质水 Tian Yu Di Mineral Water 雪菲力乌梅汽水 Chivalry Plum Soda 飛雪矿物质水 Bonaqua Mineral Water 雪菲力饮用纯净水 Chivalry Purified Drinking Water 冰露纯净水 Ice Dew Purified Water 美汁源 Minute Maid 水森活纯净水 "Shui Sen Huo" Sensation Purified Water 美汁源果粒橙 Minute Maid Orange Juice with Pulp 茶研工坊 "Cha Yan Gong Fang" 醒目果味碳酸饮料 Smart (Xingmu) Fruit Flavor Carbonated 保锐得运动饮料 "Bao Rui De" Sports Drink Beverage 津美乐苹果汽水 2 JinMeiLe Apple Soda 醒目苹果汽水 Smart Apple Soda 津美乐菠萝汽水 JinMeiLe Pineapple Soda 醒目西瓜汽水 Smart Watermelon Soda 津美乐橙汽水 JinMeiLe Orange Soda 醒目水蜜桃汽水 Smart Peach Soda 津美乐清柠檬汽水 JinMeiLe Apple Soda 醒目葡萄汽水 Smart Grape Soda 津美乐荔枝汽水 JinMeiLe Lychee Soda 醒目桃汽水 Smart Peach Soda 玉泉汽水 3 Schweppes Brand Soda 醒目椰子汽水 Smart Coconut Soda 醒目提子汽水 Smart Grape Soda 醒目香草冰淇淋汽水 Smart Vanilla Ice Cream Soda

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Swire Pacific Beverages

 Swire Guangdong Coca-Cola produces and sells Coca-Cola, Coke Light, Lemon Coke Light, Sprite, Fanta, Smart, Tian Yu Di mineralised water, Sensation purified water and Qoo juice and also distributes Minute Maid, Nestea and Modern Tea Workshop beverages.

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5 Product Management

 Decision about the nature of product:

 positioning and unique selling proposition (USP)

 Brand Management

 Product packaging

 Services

 Quality assurance and warranty

 Safety

 Learn from local firms

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Boundaries of Product Management Quality

Target Segments?

Price

Of course, there are many ways of doing the perceptual mapping and positioning.

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6 Preparation before launching

 Market research

 Consumer research

 Market segments

 Target market(s)

 Positioning (right, under, or over-)

 Value position or unique selling proposition (USP)

 IMC (integrated marketing campaign)

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Perceptual Mapping

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Gap Analysis

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P&G Case

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9 KFC Case: Local adaptation

 Mandatory

 legal requirements

 infrastructure

 physical requirements

 “Discretionary”

 local tastes:

 fit into cultural environment

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Fashion Case: Extension

 Brand name effect enlarge

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10 3C Case: Renewal

 Moore’s Law

 Consumer demand

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Common Routes of Local Brands

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11 The Brand (fame) Orientation

 Brand by ad bidding

 During Chinese New Year

 CCTV

 Celebrity effect Li Ning, Yaoming

 News sensation

 Hard to tell advertisements from news

 Ethical concerns, relationship with the media

 Deceptive advertising

 Enthusiasm in brand ranking

 National and local rankings

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Brand Recognition with Visual Orientation

 According to local ad agencies, it is important to design a beautiful and meaningful Logo first when planning for a brand recognition system.

 Brand recognition with vision orientation has a certain discriminative communication effect.

 Too many brands lack unique brand identity with many copycats

 Some Chinese brands also use foreign names

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12 Building up Corporate (company) Brand

 Two extremes: every product uses different brand (P&G); all products use the brand of the corporation (Lenovo), an umbrella corporate brand with many product bands.

 Chinese firms prefer corporation brand strategy for the following reasons: limited fund, cultural differentiation, platform of trust, and difference in demand and competition environment.

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Entrepreneur-driven Brand Value

 Entrepreneurs contribute a lot to the brand value. Jack Ma

 Entrepreneurs are like stars and heros! Jack Ma

 Entrepreneurs put their values and characteristics into the corporate brand. Entrepreneurs guide the direction of brand development and determine the brand’s future.

 The speaks and talks of the entrepreneurs become the lively advertisement of the brand.

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International Brands’ Strategies in China

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14 Market Entrance by Joint Venture

 Joint venture is a common module to enter Chinese market by joint venture for international corporations.

 When entering western countries, corporations often use their own investment.

 With the familiarity of Chinese market, many corporations will no longer choose joint venture.

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Shanghai Volkswagon

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15 Government and Public Relation Marketing

 Political power and public relations are very important for marketing.

 International corporations are concerned about government and social public relations because they can both obtain support from government and local people

 Social public relation activities of international corporations: education support, sports sponsor, cultural communication promotion, disaster rescue, and support for western development.

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City Centric Marketing Strategy

 Compared with local brand, the international brand mainly focus on the city markets, where brand awareness is higher.

 Rural markets are complicated and dominated by local brands.

 City consumers have more purchase power and can accept foreign brands more easily

 City consumption behavior can help promote similar consumption behavior in rural markets.

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18 Growth Strategies Product Existing New Market Existing Market penetration Product Ford Motor Development 3M

New Market Development Diversification Haier GE

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Physical Product vs. Communication Adaptations

Communication Communication adaptations not adaptations needed needed (extension) Product Global Marketing Communication adaptations not (Tech or industrial Adaptation needed products) (fast food; chewing (extension) gum) Product Product Adaptation Localization adaptations (Gasoline; laundry (Greeting cards) needed detergent)

Domestic Compass-equipped prayer rug; hand equivalent does powered washing machine not exist (product invention)

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19 Localization Strategies

 Localization is the need for strategy and also a result of the specific Chinese environment.

 Some foreign companies have either developed or acquired local brands, such as Coca Cola.

 Because of the marketing competition, international corporations adopt the localization strategies, including perspectives of product research and development, manufacturing, brand, promotion, distribution channel, purchasing, human resource and capital operation.

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Diversification vs. Focused Strategy

 HBR article

 Leading discussion on Mengniu to learn from a local/multinational company on how to grow, define, differentiate and defend its products and brands

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