Lecture8. Product Management and Pursuit of Brands

第10 章 品牌追求轨迹

Economic development

• Consumer behavior is influenced by economic development – Consumers in highly developed countries tend to demand extra performance attributes in their products • Price not a factor due to high income level – Consumers in less developed countries, value basic features as more important • Price remains a factor due to lower income level –Cars: no air-conditioning, power steering, power windows, radios and DVD players . • Product quality and reliability are more important

1 Consumer Demands and Product attributes • There are cultural differences that affect consumer needs. – Differ in social structure, language, religion and education – Impact of tradition and local customs: alcohol – Although some tastes and preferences becoming cosmopolitan • China is a developing country (middle income) with several distinctive market segments compared with a developed economy with a majority middle class. • Thus, there are heterogeneous needs and wants – Different products and features: basic features to multi-functions – Targeted marketing with a unique product or a wide mix • As income grows and the gap widens, different need segments have emerged: – Working/salary class: basic features and good price/value – Upper class: quality, brand, and luxury items – Mass marketing with a uniform product is no longer effective. – Creating needs for product variety and upgrades

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, but some domestic firms have better understanding of local customers: Lenovo vs. IBM, Taobao vs. eBay, – More MNCs have set up R&D centers in China

2 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

Product Line Management: Extension and Trimming • Extension – Upward extension to develop more upscale and luxury products – for Midea – Downward extension to include more economic (and bare- bone) models – Filling the gaps to meet the unfulfilled needs (dryers) • Trimming – Product and brand proliferation dilute resources and lead to ballooning costs and thin profit margins – Terminate the slow-moving items.

3 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

Boundaries of Product Management y t i l a u Q

Target Segments?

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

4 Product Management

• Decision about the nature of product: – positioning and unique selling proposition (USP) • Brand Management • Product packaging • Quality assurance and warranty • Safety • Product introduction: understanding customer needs, washing machine (size of Whirlpool machines), pick- up truck (GMC) • Learn from local firms

Developing and Communicating a Positioning Strategy through the PLC: implications for foreign products that are new to China • Market research • Market segments • Target market(s) • Positioning • Value position • IMC

5 Perceptual Mapping

6 Gap Analysis

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

New Market Development Diversification Haier GE

7 Product Adaptations • Mandatory – legal requirements – infrastructure – physical requirements • “Discretionary” – local tastes: KFC – fit into cultural environment – E.g., GMC pickup trucks in China – Iced water in Refrigerators: • Cold drinks in NA • Cold/hot water • Clean water in China

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8 Physical Product vs. Communication Adaptations

Brand Management

• What do brands do for consumers? – Awareness, consideration, and choice (sets). – Decision aid and shortcut (heuristic) – Image and social-emotional appeals – Signals of quality -- willing to pay for a higher price (premium)!!! • For marketers: – Reduce price sensitivity – Cultivate customer loyalty • Global brands dominate the market – Greater awareness, top choice, premium price, blamed for less in case of product failure • Building brand image and equity is essential and an on-going project involving all levels.

9 History of Brand Development 品牌发展历程及动力

• Initiation period of brand consciousness. 品牌意识启蒙期 – Few brands with clear positioning, with uniform product designs, few features and little variety or differentiation: Yili, Changhong • Brand creation period. 进入自创品牌期 – Introduction of new brands: MengNiu, Wahaha – Promotion of brand and quality guided by the government • Brand competition period. 进入品牌竞争期 – Rapid growth of new brands and products – Brand proliferation and hypercompetition • Brand globalization period. 进入品牌国际化期 – With government support, Chinese brands are going global. – Haier, TCL, Huawei

China’s Top Brands

• 1 Haier Home appliances 2 CIMC Freight containers 3 Tsingtao Beer 4 Tong Ren Tang Traditional medicines 5 Yanjing Beer 6 Pearl River Pianos 7 Legend/Lenovo PCs 8 Ancai TV tubes 9 Shanghai Zhenhua Container cranes and port machinery 10 Erdos Cashmere 11 Wanxiang Qianchao Automotive parts 12 NCPC Pharmaceuticals 13 FAW Cars 14 Broad Air- conditioning 15 COSCO Shipping

10 Shifting of Brand Focus 品牌关注焦点转移

• Factors of brand equity: brand prominence, brand image, brand positioning, customer satisfaction, and brand loyalty. 品 牌资产的个别要素 – Chinese customers are not known for very loyalty – Perhaps due to lack of brand knowledge – More price sensitive – A challenge for marketers to educate consumers • Brand extension and brand core value. 品牌延伸与品牌核心 价值 – Haier – white appliances – pharmaceuticals? • Brand generalization. 品牌化的泛化 – From toothpaste to schools • Brand equity valuation 品牌资产评估

11 The Brand Transmission of Fame Orientation 知名知名知名 度导向的品牌传播

• Brand bidding “标王”创牌 – During Chinese New Year • Celebrity effect 明星造牌 Li Ning, Yaoming • News sensation, 新闻炒作 – Hard to tell advertisements from news – Ethical concerns, relationship with the media, and tuo 拖? – Deceptive advertising • Enthusiasm in brand ranking – National and local rankings 热衷排行榜

Brand Recognition with Visual Orientation 视觉导向 的品牌识别

• According to local ad agencies, it is important to design a beautiful and meaningful Logo first when planning for a brand recognition system. 本土 广告公司认为，规划一个品牌的识别系统，首先要思考如何设计一个 简练美观且寓意深刻的 LOGO 。 • Brand recognition with vision orientation has a certain discriminative communication effect. 视觉导向的品牌识别能起到一定的差异化沟通效 果 • Too many brands lack unique brand identity with many copycats! • Some Chinese brands also use foreign names ( 去中国化） . • With the entering of international brand, development of local excellent brand, and the increasing in number of competitors, it is more difficult to build a brand image only from the visual perspective. 随着国际品牌的涌入， 本土优秀品牌的崛起，竞争对手的增加，只从视觉上来企求品牌新形 象的树立变得越来越难

12 Building up Corporate (company) Brand • According to brand theory, the brand strategy has 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. 品牌理论认为，品牌化战略有两个 极端：每个产品或产品线使用不同的品牌；所有产品都使用 公司品牌 • But in China, they have the P&G brand! • Chinese firms prefer corporation brand strategy for the following reasons: limited fund, cultural differentiation, platform of trust, and difference in demand and competition environment. 与美国 品牌相比，中国的品牌似乎更喜欢公司品牌战略，主要有以 下原因：有限的财力；文化差异；信任的平台；需求和竞争 环境的差异 – Sometimes one cannot associate corporate brand with products – what are they trying to sell? – Another pitfall: bad publicity affect all products with the same brands

Entrepreneur-driven Brand Value 企业家驱动的品牌价值

• Entrepreneurs contribute a lot to the brand value. • 企业家的贡献对品牌价值起到了极大的作用 Haeir, MengNiu, etc.., Entrepreneurs are like stars and heros! • Entrepreneurs put their values and characteristics into the corporate brand. 企业家把自己的价值观和个性融入到公司 品牌中 • Entrepreneurs guide the direction of brand development and determine the brand ’s future. 企业家牢牢把控品牌发展的方 向，决定品牌的命运 • The speaks and talks of the entrepreneurs become the lively advertisement of the brand. 企业家演讲和言论成为对自己品 牌最生动的宣传

13 Market Entrance by Joint Venture 合资方式的市场进入

• Joint venture is a common module to enter Chinese market by joint venture for international corporations. 跨国公司在中国 的品牌发展战略，一个较为普遍的模式是以合资形式进入 – Thus, joint venture brands are very popular; Ronshida (Maytag) • When entering western countries, corporations often use their own investment. 进入欧美国家时，通常采用独资的方式 • With the familiarity of Chinese market, many corporations will no longer choose joint venture. 随着对中国市场的熟悉，许 多合资企业选起了独资浪潮 • Joint venture brand: foreign brand, local brand, or hybrid brand? Shanghai-Volkswagon, – The appeals of foreign brands: quality, advanced, modern – The advantages of domestic brands: friendly, close, and good value

Government and Public Relation Marketing 政治营 销和公关营销

• Politics power and public relation are very important for marketing. 政治权力和公共关系对于营销很重要 • International corporations concern about government and social public relation because they can both obtain supports from government and local people 跨国公司重视政府和社会 公关，一方面可以获得政策倾斜，另一方面可以赢得当地 人好感 . • Social public relation activities of international corporations: education support, sports sponsor, cultural communication promotion, disaster rescue, and support for western development. 跨国公司的社会公关活动：支持教育事业； 赞助体育事业；促进中外文化交流；为赈灾救济作贡献； 支援西部开发

14 City Centric Marketing Strategy 城市市场的重点战 略略略

• Compared with local brand, the international brand mainly focus on the city markets, where brand awareness is higher. 与 本土品牌相比，国际品牌普遍以城市市场为根据地并定位 于市场高端 • Rural markets are complicated and dominated by local brands. 农村市场跨度大，情况复杂 • City consumers have more purchase power and can accept foreign brands more easily. 城市消费者购买能力高，容易接 收新进洋品牌； • City consumption behavior can help promote similar consumption behavior in rural markets. 城市消费行为可以带 动农村消费行为。

Global or Local Brands? • An effective brand is one that has both a clear "global" identity and delivered locally to create meaningful experiences for consumers in their own language, culture, and context. • The global marketing highway is littered with examples of bad brand localization, with results ranging from the humorous to the culturally offensive (Chevy Nova). The cost of these cross- cultural faux-pas can be measured in lost dollars, damaged customer relations and slower time to market. • Position, and communicate your company's brand for an effective and meaningful local experience in China through gap analysis and value analysis. • Identify your core brand attributes and build a roadmap to deliver them effectively to your target market with cultural sensitivity, linguistic accuracy, and meaningfulness. • The Glocal strategy – global appeals but also meaningful in local culture and language – Generali 中意 , IBM G1

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G1 Geng, 10/23/2008 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

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.

16 Localization Strategies 全方位的本土化战略

• Localization is the need for strategy and also a result of the specific Chinese environment. 本土化原因：营销本土化是 战略占领需要；中国独特的环境所致 • 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. 为了应对激 烈的市场竞争，跨国公司纷纷采用本土化策略：产品研发， 产品制造，品牌，促销，分销渠道，采购，人力资源以及 资本运作。

The Mainstream of Wholly-Owned Subsidiaries • Wholly-Owned Subsidiaries became common in the late 1990. The popularity of self owned enterprises not only means the independence of operation and management of international corporations, but also indicates that, international corporations begin to consider themselves as local corporations . • With more and more competition, international corporations start to increase the investment and set a higher entrance barrier. • M&A of brands – Coca Cola wants to buy out Huiyuan Juice. • Brand extension to other categories increasing popular – according to JWT CEO – as consumers trust the big brands, to minimize risks and uncertainty – http://learn.ouhk.edu.hk/~etpmsp/broadcast2002/windows/ten_mistakes .wvx

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