Product and Brand Management

Question 1

Ansoff Matrix

Answer 1

Market Penetration - existing products and market
Product Development - new product, existing market
Market Development - existing products, new markets
Diversification - new products and markets

Question 2

Stages of New Product Development Model

Answer 2

Idea generation
Idea screening
Concept testing
Business analysis
Product development
Test marketing
Commercialisation 
Monitor and Evaluation

Question 3

Product testing purpose

Answer 3

• Understanding demand
• Helping capital investment, HR, supply chain, marketing/sales and budgeting decisions - better information makes these decisions more profitable.
• Don’t do volume forecasting for any new products that are not concept tested as well

Question 4

Data Collection methods

Answer 4

Classic text marketing

Simulation test

Question 5

Classic text marketing

Answer 5

• Select a small town demographically similar to entire population
• Launch the new product on a small scale
• Observe trial rate (actual sales behaviour)
• Project sales to entire population

Question 6

Simulation test

Answer 6

• Create concept boards (explaining new product in detail)
• Use concept boards as stimulus in simple experiment/survey
• Adjust statistically for biases
• Calculate projected sales to population

Question 7

Trial Rate

Answer 7

Volume projection is based on actual trial rate observed in a test market. IS the number of triers directly observed in a test market

Question 8

Trial volumes

Answer 8

Trial rates often estimated on basis of surveys of potential customers and their intentions to buy/trial etc. Because all respondents do not follow through their intentions, firms make adjustments to the % in the top two boxes in developing realistic sales projection.

Question 9

Sales projection include adjustments of?

Answer 9

• Lack of awareness about the product within a target market
• Estimated availability/ distribution of product
• Lack of awareness and distribution reduces trial rate

Question 10

Repeat volumes

Answer 10

Estimate fraction of people who try a product and then repeat the purchase decision. Metric = Repeat Rate. In reality, initial repeat rates are often lower than subsequent repeat rates

• Trial - First time buyers
• 50% of First time buyers make a Second time purchase (first repeat buyers)
• 80% of Second time buyers make a third time purchase (second repeat buyers

Question 11

Volume projection metrics challenges

Answer 11

• Don’t confuse trial rate in a test market (actual behavior) and concept test/survey (self-report) setting. Adjustments to self-reported trial does not apply to trials in test markets (where it is observed behaviour)
• Assumptions concerning awareness have uncertainty involved. i.e, what sort of awareness does the product need
• Some products generate strong results in the trial stage but fail to maintain ongoing sales.
• Customers may be acquired, lost, reacquired and lost again
• Trial repeat model suited to projecting sales over first few periods

Question 12

We care about growth because

Answer 12

• Engine of free-market economies
• Stockholder expectation
• How to manage existing products: track product life cycle and deduce strategic implications

Question 13

PLC: Introduction

Answer 13

Sales are slow to build, little competition, appeals to innovators

Question 14

PLC: Growth

Answer 14

Rapid sales growth, very profitable, competitors slow to react

Question 15

PLC: Turbulence

Answer 15

Sales rising, fierce competition, weaker competitors drop out

Question 16

PLC: Maturity

Answer 16

growth slows/stalls, competition stabilises, strategy diversification (fixed strategic positions)

Question 17

PLC: Decline

Answer 17

sales drop, substitutes enter, marketing support cut

Question 18

Year on Year growth purpose

Answer 18

To assess how the company (units/brands/ territories) is performing over time in terms of revenue/profits/volume/% AND what has the company achieved this year, compared to last year.
Uses the prior year as a base for expressing % change from one year to the next.

Question 19

Year on Year Growth measurement challenges

Answer 19

• Changes over time in the BASE from which growth is measured. Changes in # of stores, people, sales etc. Utilisation of “same store” measure address this issue.
• Compounding of growth over multiple periods. If company achieves 30% growth in year 1, but its results remain unchanged in year 2 and 3, that would not mean the company has had 10% growth in each 3 years. (CAGR) address this issue.

Question 20

Same Stores Growth

Answer 20

• “Same-store sales” (or “comparable store sales”) has been a key indicator of a retailer’s health
• Analysis of results from stores that have been in operation for a while and ignoring the stores which has not been in operation DURING the concerned period of time. Ensures comparability.
• Same stores growth calculations excludes stores that were not open in the beginning of the period of consideration

Question 21

CAGR Purpose

Answer 21

• The question arises how average growth over multiple years can be adequately represented to discount the effect of compounding, a mathematical artifact resulting from the increasing base year to year.
• By compounding, managers adjust growth figures to account for the iterative effect of improvement

Question 22

CAGR meaning

Answer 22

• CAGR is a “smoothed” year-on-year growth rate over multiple years better representing “average” growth
• CAGR is a constant year-on-year growth rate

Question 23

Cannibalisation

Answer 23

A market phenomenon in which sales of one product are achieved at the expense of some of a firms others products. Main purpose to assess the reduction in sales of old products as a result of introducing new products e.g. IPhone cannibalized the iPod.

Question 24

Cannibalisation is a familiar business dynamic & dilemma

Answer 24

• Strong brands/ companies may want to introduce line extensions, new products to better serve certain segments – danger is that they cannibalize the existing products’ sales
• If they don’t introduce product(s), competitors may jump in and capture sales and market share.

Question 25

Cannibalisation considerations

Answer 25

- In general, the more similar the new product is to the old, the higher the danger of cannibalisation - You always have to calculate contribution margins as well as sales - Firms considering introducing new products should estimate the potential cannibalization beforehand to provide an idea of how the product line’s contribution as a whole will change.

Question 26

Cannibalisation rate problems

Answer 26

- The difficulty of determining what proportion of sales are lost directly because of the new product’s introduction, uses a lot of assumptions. - Contribution analysis is a useful way to make decisions about new product introductions – but the time horizon has to be taken into account: will initial contribution decreases be made up later (e.g., the original business was on a downswing even before the new product was introduced)

Question 27

Brand Equity is?

Answer 27

- About what the brand is worth to a customer. It is the value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent (Generic soda vs Coke) - Brand equity is strategically crucial, but famously difficult to quantify

Question 28

Brand Equity purpose

Answer 28

- Measure the intangible value brands represent for firms and consumers - Business’ long-term objective is sustainable competitive advantage, the marketing function’s long-term objective is strong brands (which secure present and future consumer demand) - Brands are marketing assets even if they are not necessarily accounted for as such in financial accounting

Question 29

Brand Equity can be measured through

Answer 29

Quantitative (profit margins, market share, price premium charged, sales volume Qualitative (prestige, associations, evaluating brand image)

Question 30

Construction types for Brand Equity

Answer 30

1. The premium that consumers would pay above the generic (source: consumer research) 2. Trait-based models (examples: Aaker, Y&R) (source: consumer research) 3. Models that have a financial valuation component (Interbrand, MB BrandZ) (source: consumer research and financial data)

Question 31

Aaker Model

Answer 31

Loyalty, quality, associations, awareness and market behaviour to consider.

Question 32

Y&R Brand Asset Valuator

Answer 32

based on 4 criteria and in comparison to different brand. Tool and global database of consumer perception of brands.

Question 33

Energised Differentiation

Answer 33

The brand's point of difference. Relates to margins and cultural currency. Brand strength.

Question 34

Relevance

Answer 34

How appropriate the brand is to you. Relates to consideration and trial. Brand strength.

Question 35

Esteem

Answer 35

How you regard the brand. Relates to perceptions of quality and loyalty. Brand stature.

Question 36

Knowledge

Answer 36

An intimate understanding of the brand. Relates to awareness and consumer experience. Brand stature.

Question 37

BAV's Brand lifecycle power grid

Answer 37

Brands tend to move clockwise around the power grid in an evolutionary lifecycle starting at the lower left quadrant. They begin by building energised differentiation and relevance, to become interesting niche brands. Then a select few build esteem and knowledge to become leadership brands. But if their difference and momentum begins to fade, they slip to mass market, commodity and finally to erosion.

Question 38

Financial models of brand equity

Answer 38

Interbrand and Brand Z. used to define the value of the brand in financial terms

Question 39

Financial model on business-unit strategy

Answer 39

- Informs marketing decisions and campaigns, know which areas to improve on - Aids resource allocation, avoid wasted resources by allocating more resources to the brand’s weak areas - Co-branding analysis

Question 40

Financial model on corporate strategy

Answer 40

- Mergers or acquisitions – help find targets/buyers | - Joint ventures: allocate profit sharing and shareholding

Question 41

Brand Valuation components

Answer 41

Financial performance of branded products/ services Role of brand in purchase decision Brands competitive strength

Question 42

Brand Valuation sources

Answer 42

``` Desk research Expert panel Thomson Reuters and company annual reports Consumers goods data Social media signals ```

Question 43

Brand Equity problems

Answer 43

- Each brand consultancy has their own method - Syndicated services do disservice to unique brand characteristics - How to organise brand strength/brand traits is infinitely variable - Some brand evaluation results do not seem to make intuitive sense