Extend Profits, Not Product Lines Essays - Brand Management

Extend Profits, Not Product Lines Extend Profits, Not Product Lines Market Segmentation To compete successfully in today's volatile and competitive business markets, mass marketing is no longer a viable option for most companies. Marketers must attack niche markets that exhibit unique needs and wants. Market segmentation is the process of partitioning markets into groups of potential customers with similar needs or characteristics who are likely to display similar purchase behavior. Market segmentation is the foundation on which all other marketing actions can be based. It requires a major commitment by management to customer-oriented planning, research, implementation, and control. The overall objective of using a market segmentation strategy is to improve your company's competitive position and better serve the needs of your customers. Some specific objectives may include increased sales, improves market share, and enhanced image. The authors, John A. Quelch and David Kenny do confess the lure of product line extensions. Line extensions come closer to meeting the needs of smaller and smaller market groups. Such products allow for something different. They sanction pricing breadth, aiming higher prices at select markets, with superior quality. They aid in fixing the excess capacity many firms are experiencing today. They offer short-term (short-lived) gain at low cost, catering to the desires of today's managers. They help to assure sufficient shelf space. Product line extensions also help to meet retailer's demands, providing packaging that will suit their particular marketing needs. Product Optimization Today, more than ever, the ability to develop and launch new products successfully and quickly is the key to business success. What makes a new product a success? What can be done to improve the odds of winning at new products in your company? A highly regarded success factor is product superiority. Premium products that deliver real and unique benefits to users are far more successful that me too products. It is impossible to pursue every market opportunity so you must make strategic choices based on customer needs, competitive opportunities, corporate objectives, and your firm's financial, technical, and marketing resources. Product Positioning You may accomplish an effective position by searching out unique marketing advantages, seeking new market segments that competitors are not, or developing new approaches to old problems. Your position must be based on real (e.g., lower cost, superior quality) or intangible (e.g., company reputation) competitive advantage. Product positioning is an important strategy for achieving differential advantage. Positioning reflects the place a product occupies in a market or segment. A successful position has characteristics that are both differentiating and important to consumers. Every product has some sort of position-whether intended or not. Positions are based upon consumer perceptions, which may or may not reflect reality. A position is effectively built by communicating a consistent message to consumers about the product and where it fits into the market-through advertising, brand name, and packaging. Positioning is inextricably linked with market segmentation. You can't define a good position until you have divided the market into unique segments and selected your target segments. Brand Equity and Image Assessment The most important assets of any business are intangible-including its base of loyal customers, brands, symbols, and slogans-and the brand's underlying image, personality, identity, attitudes, familiarity, associations, and name awareness. These assets-along with patents, trademarks, and channel relationships-comprise brand equity, and are a primary source of competitive advantage and future earnings. The brand is a distinguishing name and/or symbol (logo, trademark, or package design) intended to identify the origin of the goods or services-and to differentiate those goods or services from those of competitors. A brand signals to the customer the source of the product-and protects both the customer and producer from competitors who would attempt to provide products that appear to be identical. By developing strong and consistent images, well-regarded brands generate hidden assets-or brand equity-that give them distinct advantages. Brand equity is a form of wealth that is closely related to what accountants call goodwill. A brand is a promise made to its customers and shareholders. Promises that are kept yield loyal customers and produce steady streams of profits. Brand equity is initially built by laying a foundation of brand awareness-eventually forming positive brand images-and is ultimately maximized by high levels of brand loyalty. Brand image is everything. It is the sum of all tangible and intangible traits-the ideas, beliefs, values, prejudices, interests, features,