MMPM – 003

Product and Brand Management

Indira Gandhi National Open University

School of Management Studies

BLOCK 1
Introduction to Product Management 3
BLOCK 2
New Product Development and
Implementation 69
BLOCK 3
Brand Management 135
BLOCK 4
Managing Brand Equity 209
COURSE DESIGN AND PREPARATION TEAM
Prof. K Ravi Sankar Prof. Sharad Sarin
Director, XLRI. Jamshedpur
School of Management Studies,
Mr. S. Ramachandran
IGNOU, New Delhi
General Manager Marketing
Prof. Ruppal W Sharma Dabur India Ltd.
Head- Delhi Centre New Delhi
S.P. Jain Institute of Management & Research
Dr. (Mrs.) Sushila Rao
New Delhi
Director
Prof. U.M. Amin Consulting and Research Enterprise
Ex-Director, Hyderabad
Jamia Millia Islamia,
Mr. Vinod Dhawan
New Delhi
Vice-President
Prof. Dhruva Chak Hindustan Cocoa Products Ltd.
BIMTECH
Ms. Snageeta Aggarwal
Greater Noida
Visiting Faculty
Prof. Madhulika Kaushik AIMA
Ex- Director IGNOU New Delhi
New Delhi
Prof. M. Chaturvedi
Dr. Arvind Kumar XLRI
NIT-Rourkela Jamshedpur
Odisha
Prof. Mohan Aggarwal
Dr. Preeti Tak XLRI, Jamshedpur
IIFT
Prof. J.D. Singh
New Delhi
IMI, New Delhi
Dr. N.C.B. Nath (Chairman)
Mr. Surabh Khosla
Foundation to Aid Industrial Recovery
Managing Director
New Delhi
Tulika Advertising Agency
Prof. Rakesh Khurana New Delhi
Founder Director
Mr. D.K. Bose
School of Management Studies
Media Director
IGNOU, New Delhi
Hindustran Thompson Associates
Prof. M. Janakiraman New Delhi
Indian Institute of Management
Pavan Chaudhary
Lucknow
Vygon India Pvt. Ltd.
J.K. Sharma Gurgaon, Haryana
Jagsonpal Pharmaceuticals Ltd.
T.V. Vijay Kumar
New Delhi
Course Coordinator & Course Editor
School of Management Studies,
IGNOU New Delhi

Acknowledgement: Relevant parts of this course have been adapted and updated from the
course MS 63: Product Management. MS 63 course was prepared by the experts (names mentioned
above in Italics) and their profile is as it was in that material.

MATERIAL PRODUCTION
Mr. Tilak Raj
Assistant Registrar
MPDD, IGNOU, New Delhi

July, 2022
© Indira Gandhi National Open University, 2022
ISBN:
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any
other means, without permission in writing from the Indira Gandhi National Open University.
Further Information on the Indira Gandhi National Open University course may be obtained from
the University’s office at Maidan Garhi, New Delhi – 110068
Printed and published on behalf of the Indira Gandhi National Open University, New Delhi, by
the Registrar, MPDD, IGNOU.
Printed at : M/s Educational Stores, S-5 Bulandshahar Road Industrial Area, Site-1, Ghaziabad
(UP)-201009
 MMPM – 003
Product and Brand Management

Indira Gandhi National Open University

School of Management Studies

Block

1 INTRODUCTION TO PRODUCT
MANAGEMENT
UNIT 1
Basic Concepts of Product and Product Planning 5
UNIT 2
Product Life Cycle (PLC) 23
UNIT 3
Product Line Decisions 37
UNIT 4
Product Portfolio 50
BLOCK 1 INTRODUCTION TO PRODUCT
MANAGEMENT
Products form a tangible expression of all that an enterprise has to offer. It is
one’s experience with the products of an enterprise that largely influences a
consumer evaluation of business endeavour and affects his future patronage.
Product management therefore becomes central and core to the marketing
management function in the firm.
Block 1 form the introductory block of this course on product and brand
management and consists of 4 units.
The first unit familiarizes you with the term product and its related concepts
and the product planning activities in an organization.
In the second unit you will be introduced to the concept of Product Life
Cycle (PLC) its characteristics, objectives and strategies which helps you
understand the role of PLC in product management decision making.
The third unit gives you a fairly good idea to understand and appreciate the
concept and logic behind product lines, the reasons for the proliferation of
product lines and their merits and limitations.
The last unit focuses on the strategic importance of managing products
continuously with a vision, in response to the ever changing needs and
wants of the end users and prevailing market forces. Precisely, this unit
focuses on the firm’s product portfolio its models for decision making.
UNIT 1 PRODUCT MANAGEMENT
BASIC CONCEPTS

Objectives
After reading this unit you should be able to:
●● discuss on the meaning and scope of product management
●● define a product offering
●● explain the types of products ,their nature, classification, differentiation
and product
●● and brand relationships.
●● appreciate the origin and scope of product management and product
planning tasks
●● understand the role and responsibilities of a product manager
●● comprehend the conceptual issues.
Structure
1.1 Introduction
1.2 Product Management - Meaning and Scope
1.3 Product Management: An Overview
1.4 What is a Product?
1.5 Product Classification, Differentiation
1.6 Product and Brand Relationships, Product and Brand Systems
1.7 Product Planning.
1.8 Role and Responsibilities of a Product Manager
1.9  Summary
1.10 Self - Assessment Questions
1.11  Further Readings

1.1 INTRODUCTION
Product is core to any business enterprise and forms the most tangible
expression offered by the firm in response to consumer needs and wants.
Issues pertaining to `product’, therefore, become key determinants of
successful business strategy.
In this unit you will be introduced to the meaning, scope and major areas of
responsibilities of the product management function within the organisation.
The unit also familiarizes you with what a product is all about, mentioning
the related conceptual issues related to Product / Product Management.

1.2 PRODUCT MANAGEMENT – ITS MEANING

AND SCOPE
Among the 4 Ps of Marketing mix elements which you are familiar with
the first P i.e. “Product” is the main carrier of consumer value. Product
constitutes the core of the offer made by the firm. It may be a car, an air
ticket or an app. You cannot imagine any role or relevance of the other three
5
Introduction to Product elements of the marketing mix i.e. price, place and promotion in isolation
Management from the product. They are also important carriers of consumer value and
their complementarity and compatibility with the product is essential in
designing the firm’s business strategy and making the product a success in
the market place.
How a firm conceives and creates this product and successfully markets it
to the customer is the theme of Product Management. Product Management
is the holistic job of Product Managers which includes planning, forecasting
and marketing of products and services
Every professionally managed progressive and pro-active manufacturing
and marketing firm which responds to market needs resorts to a Product
Planning exercise in relation to its customers, relevant markets, competition
and other prevailing market forces.
The task of Product Planning derives from the Marketing Plan which is a
functional sub-set of the overall Corporate Plan. In product planning are
included product strategies relating to product line -length and breadth and
line stretching, both upwards and downwards.
The scope of Product Management also considers conceptual issues like the
Product Life Cycle, New Product Development related issues to Pricing,
Promotion and Distribution and the Product Portfolio.

1.3 PRODUCT MANAGEMENT – AN OVERVIEW

In simple terms, Product Management means managing various product
lines/ products and the overall product mix of the company. Product
Management is also known by the term Product Policy.
The major/main tasks in Product Management include the following:
●● Appraisal of each product line and each product/brand in the line
●● Decisions on packaging
●● Product differentiation and positioning
●● Managing brands and developing brand equity
●● Innovations and new product development
●● Managing product quality
●● Managing the Product Life Cycle of products/ brands

1.4 WHAT IS A PRODUCT?

The term “Product” in marketing means any offer that a company brings
out for sale. It could be beauty soap, a laptop, a holiday package, or even
a wallet service by an e- payment provider. “Product” is a common term
to denote the company’s offer to the market. It is by offering something to
the consumer that the firm begins its marketing task. The job of marketing
is to make the product and the customer meet and result in a continuing
relationship.
A Product may be a physical good, service or an idea, or any combination
of the three, offering a bundle of satisfactions. Pepsi selling Lay’s chips is
selling a product, advertising agency JWT provides services to organizations
by preparing advertising campaigns ,and Vandana Luthra sells ideas to lose
weight as well as skin -care products.
Taking the idea further, the physical entity is only one component of the
6
product personality. The various features and functions built around it – the Basic Concepts of Product and
brand name, the package and labelling, the quality associated with it, the Product Planning
guarantees, the price label, the manufacturer’s name and prestige-all go into
the personality of the product.
According to Theodore Levitt-“Products are almost and always a
combination of the tangible and the intangible. For example an automobile
is not simply a machine for movement visibly or measurably differentiated
by design, size, colour, options, horse-power, or kilometre per litre. It is
also a complex symbol denoting status, taste, rank, achievement, aspiration,
and (these days) being “smart”—that is, buying fuel economy rather than
display. But the customer buys even more than these attributes.
Besides, the enormous efforts of the auto manufacturers to cut the time
between placement and delivery of an order and to select, train, supervise,
and motivate their dealerships suggest that these too are integral parts of
the products people buy and are, therefore, ways by which products may be
differentiated to the potential buyer.
Thus a product is a complex cluster of value satisfactions. The generic thing
is not itself the product; it is merely, as in poker, table stakes—the minimum
that is necessary at the outset to give its producer a chance to play the game.
It is the playing that gets the results, and, in business, this means getting
and keeping customers. Customers attach value to a product in proportion
to its perceived ability to help solve their problems or meet their needs.
In the words of a specialist in industrial marketing has expressed it, “The
“‘product” is the total package of benefits the customer receives when he
or she buys.”
When Apple sells an I Phone, or Chanel sells a perfume, are they selling a
rectangular box or bottled perfumed water? Is that for what consumers pay
fancy prices willingly? The question is clearly rhetorical, and the obvious
answer is an emphatic no. Instead, what these companies are really selling
is the satisfaction, use or benefit the consumer wants.
A product essentially means the need-satisfying offering of a firm. The idea
of “Product’ as potential customer satisfaction or benefits is very important.
Many business managers get wrapped up in the technical details involved
in producing a product. But that is not how customers view the product.
Most customers think about product in terms of the total satisfaction it
provides. That satisfaction may require a complete product offering that
is really a combination of excellent service, a physical good with the right
features, useful instructions, a convenient package, a trustworthy warranty
or familiar name that has positive memories for the customer.
According to Philp Kotler “At the heart of great brand is a great product.
To achieve market leadership, firms must offer products and services of
superior quality that provide unsurpassed customer value”

1.5 PRODUCT CHARACTERISTICS AND

CLASSIFICATION
Various components of a Product can be conveniently classified as follows:
●● The Core product
●● The Associated features
●● The Brand name
●● The logo
●● The package and label
7
Introduction to Product The Core Product
Management
The core or basic constituent of the product is the first component. By taking
the example of Mysore Sandal soap. The fragrance of sandal oil, the oval
shape, the sandal colour, the brand name, the price, the place of manufacture,
the positioning as luxury soap everything has gone into the making of
the product personality. But the core component is the soap, the generic
constituent, as in the case of any other bath soap the other components are
superimposed on this basic constituent to develop the total personality of
Mysore Sandal Soap. The first lesson in Product Management is that the
basic product constituent has to be good for the total product personality to
be effective.
The Associated features
To continue with the above example of Mysore Sandal Soap the associated
features are its fragrance, the oval shape, the sandal colour and the like
which contribute to the total personality of the product. Most attempts of
marketers to enhance the product personality are centred on the associated
features. Even when two products share the same plank in respect of the
core constituent and function, differences in associated features are the
basis for differentiation. While in the case of consumer durables, product
design is the big value addition from smart phones to toys. Apple has built
up its entire business on its unique competence at design.
Product features vs. Product benefits
Product features are only the beginning; it is the benefits that they yield
which are of relevance to the consumer.
Brand name
We live in the age of brands. In fact, the brand name is a major selling
tool. The intensive brand promotion exercises conducted by brands have
made consumers extremely brand conscious. Today, we do not ask for
toothpaste or a cell phone or a cupboard or a perfume - we ask for a Colgate
or a One Plus or Godrej or a Christian Dior. People trust brands and pay
disproportionate price (in relation to the cost of manufacturing the product)
for acquiring the brand of their choice. It would not be out of place to say
that the marketer adorns or beautify the product with the brand.
The Logo
The logo or the brand mark /symbol, too is an integral part of the product.
It supports the brand effectively. Symbols and pictures serve the purpose of
product / brand identification and recall. The logo’s importance is enhanced
in rural markets where less learned customers may form a large chunk and
the written matter on the packaging is of no use to them so they recognize
the product by the picture in the logo. Brands such as Nirma and Dettol
(below) are recognized in rural areas by the visuals incorporating the logos.
The Nirma girl
The Dettol Sword

8
The Package Basic Concepts of Product and
Product Planning
The Package is so important that some marketers have even given it the
status of the 5th P or fifth element of marketing mix. The package serves
three essential roles:
1. It protects the product
2. It provides information about the product
3. It adds to its aesthetics and sales appeal.
From being merely a protective cover, packaging has evolved into a major
game changer and a great value- addition. The material of the package,
the colour, its shape and size, its finish, its labelling, the possibilities of
its re-use often come together to enhance the sales appeal of the product.
For example you may have noticed that Nescafe, offer its coffee powder in
innovative containers which later they can be used as show piece and can be
proudly be show cased in the drawing room. The power of good packaging
in prompting on the spot purchases cannot be over estimated. Packaging
has, thus, emerged as an immensely powerful tool in the consumer goods
industry.
The Label
The label is part and parcel of the products package. A label provides written
information about the product. Labelling helps the buyer to comprehend
the nature of the product, its distinctive features, its composition, its
performance and so on. There are grade labels and descriptive labels. In
grade labelling, product classifications are based on standards of quality.
Products are classified in A, B, C or 1, 2, 3 categories based on quality.
But for branded products, mostly descriptive labelling is used, furnishing
detailed information about product attributes and quality. For several
products, statutory labelling requirements are laid down and marketers are
required to follow the mandates laid down as in case of pharmaceutical
industry and health and well products industries as well.

1.6 Product Levels

In planning the product offering, the marketer needs to address the five
product levels in the figure below. Each level adds more customer value,
and the five constitute the customer value hierarchy.
The Customer Value Hierarchy involves the following five product levels
which are explained below:
1. Core Benefit
The fundamental level in a product is the core benefit: the service or benefit
the consumer is really buying. A hotel guest is buying rest and sleep. The
purchaser of a drill is buying holes. Marketers must see themselves as
benefit providers. While customers view themselves as benefit seekers.
2. Basic Product
At the second level, the marketer must turn the core benefit into a basic
product- a version of the product containing only those attributes or
characteristics absolutely necessary for it to function. Thus the basic
product for a hotel would include “a bed, bathroom, towels, desk, cupboard
and closet.” While a basic product for personal hygiene is a bathing soap
irrespective whether branded or unbranded.
3. Expected Product
At the third level, the task of every marketer is to prepare an expected
product - a set of attributes or characteristics that buyers normally expect
9
Introduction to Product and agree to when they purchase this product i.e. a clean bed, fresh towels,
Management working lamps and a relative degree of quiet. In developing countries such
as India and Brazil, competition takes place mostly at the expected product
level. In order to curb competition marketer should nurture and focus at this
juncture/stage the customer –value hierarchy accordingly.
4. Augmented Product
Constitute the fourth level; the marketer prepares the product through
Inclusion of additional features, benefits, attributes or related services that
serve to differentiate the product from its competitors. (Brand positioning
and competition come in at this level in developed countries)

5. Potential Product
At the fifth level stands the potential product.ie all the augmentations
and transformations a product might undergo in the future. Here is where
companies search for newer ways to satisfy the customer and to differentiate
their offerings from the competition. Product innovation comes in at this
level for a marketer.

Kotler’s 5 Product Levels

Differentiation arises, and competition increasingly occurs, on the basis
of product augmentation. Each augmentation adds cost and augmented
benefits soon become expected benefits and points-of -parity in the category.
If today’s hotel guests expect large screen HD TVs, wireless internet access,
and a fully equipped fitness centre, the competition must provide even more
features to differentiate themselves.
As some companies raise the price of their augmented products, others offer
a simplified product for less. Thus you have the Taj Mahal hotel at one end
of the spectrum and Ginger hotels at the other.
Activity 1
Imagine you are the Product Manager for a company specializing in air
conditioners. Go through all levels of the Customer- Value hierarchy
in building up the Potential product for your company. With the space
earmarked below show diagrammatically all 5 levels leading up to your
potential product.
Space for Diagram for Activity 1

10
 Basic Concepts of Product and
1.5 PRODUCT CLASSIFICATION AND Product Planning
DIFFERENTIATION
Marketers classify products on the basis of durability, tangibility and use (
consumer or industrial). Each has an appropriate marketing mix strategy.
1. Durability and Tangibility: Products fall into three groups
according to durability and tangibility:
i. Non durable goods are tangible goods normally consumed in one
or a few uses, such as soaps and shampoo. Because these goods
are purchased frequently, the appropriate strategy is to make
them available in many locations, charge only a small markup,
and advertise heavily to induce trial and build preference.
ii. Durable goods are tangible goods, such as refrigerators, machine
tools, and clothing, that normally survive many uses. They
normally require more personal selling and service, command a
higher margin, and require more seller guarantees.
iii. Services are intangible, inseparable, variable, and perishable
products that normally require more quality control, supplier
credibility, and adaptability. Examples include haircuts, legal
advice and appliance repairs.
2. Classification of Consumer Goods:
i. Convenience goods are purchased frequently, immediately, and
with minimal effort. Examples include soft drinks,soaps and
newspapers.
Staples are convenience goods consumers purchase on a regular
basis.Thus,a consumer might regualarly buy milk, bread, atta
etc.
Impulse goods are goods purchased without any planning or
search effort such as Cadbury’s chocolate or a magazine at an
airport.
Emergency goods are goods purchased when the need is urgent,
as an umbrella in the case of unexpected rain. Manufacturers of
such goods place them where consumers are likely to experience
an urge or a compelling need to purchase.
ii. Shopping goods are those that the consumer characteristically
compares on such bases as suitability, quality, price, and style.
Examples include furniture, clothing and major appliances.
iii. Homogeneous shopping goods are similar in quality but different
enough in price to justify shopping comparisions.Examples
would include automobile tyres or a television system.
iv. Heterogeneous shopping goods differ in product features and
services that may be more important than price. Sellers of such
goods carry a wide assortment to appeal to different tastes and
requirements and train their sales people to inform and advise
customers appropriately. Examples would be major appliances,
clothing, furniture, and high-tech equipment.
v. Specialty goods have unique characteristics or brand
identification for which enough buyers are willing to make a
special purchasing effort. Example would include cars, men’s
suits, and perfumes. Specialty goods don’t require comparisons.
11
Introduction to Product Buyers only go to dealers with the desired products. The seller
Management only needs to let the prospective customers know where to find
them.
vi. Unsought goods are those the consumer does not know about or
normally think of buying. Unsought goods require advertising
and personal-selling support such as life insurance, smoke
detectors, encyclopaedias.
3. Industrial-Goods Classification:
vii. Materials and parts are goods that enter the manufacturer’s
product completely.
1. Raw materials, in turn, fall into two major groups: farm
products and natural products.
2. Manufactured materials and parts fall into two categories:
component materials and component parts.
viii. Capital items are long-lasting goods that facilitate developing
or managing the finished product.
1. They fall into two groups: installations and equipment.
2. Installations consist of buildings and heavy equipment.
3. Equipment includes portable factory equipment and tools
and office equipment.
ix. Supplies and business services are short-term goods and services
that facilitate developing or managing the finished product.
1. Supplies are of two kinds: maintenance and repair items
and operating supplies.
Business services include maintenance and repair services
Activity 2
Name two convenience goods, two shopping goods that you have used in the
recent past. Write below the purpose of your using them and the frequency
of your usage of each of these products.
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Why Differentiation?
To be branded, products must be differentiated.
 Differentiated products can create significant competitive advantage.
 Means for differentiation include form, features, performance quality,
conformance quality, durability, reliability, repairability and style.
 Design has become an increasingly important differentiator.
Product Differentiation: Need and Scope
Product differentiation can be done through several means:
●● Form: the size, shape, or physical structure of a product.
12
●● Features: a company can identify and select appropriate new features Basic Concepts of Product and
by surveying recent buyers and then calculating customer value Product Planning
versus company cost for each potential feature and should avoid
feature fatigue.
●● Performance Quality: Performance level is the level at which the
product’s primary characteristics operate: low, average, high, or
superior.
●● Conformance Quality: the degree to which all produced units are
identical and meet promised specifications.
●● Durability: a measure of the product’s expected operating life under
natural or stressful conditions is a valued attribute for vehicles, kitchen
appliances, and other durable goods.
●● Reliability: a measure of the probability that a product will not
malfunction or fail within a specified time period, and high reliability
can garner a price premium.
●● Repairability: ease of fixing a product when it malfunctions or fails.
●● Style: the product’s look and feel to the buyer, which creates
distinctiveness that, is hard to copy.
●● Customization: customized products and marketing allow firms to
be highly relevant and differentiated by finding out exactly what a
person wants—and doesn’t want—and delivering on that.
Services Differentiation:
When the physical product cannot be easily differentiated, the key to
competitive success may lie in providing value added services and
improving their quality. The main service differentiators are ordering ease,
delivery, installation, customer training, customer consulting, maintenance
and repair, and ease of returns.
a. Ordering Ease: describes how easy it is for the customer to place an
order with the company.
b. Delivery: refers to how well the product or service is brought to the
customer, including speed, accuracy, and care throughout the process.
c. Installation: refers to the work done to make a product operational in
its planned location.
d. Customer training: helps the customer’s employees use the vendor’s
equipment properly and efficiently.
e. Customer consulting: includes data, information systems, and advice
services the seller offers to buyers.
f. Maintenance and Repair: critical in business-to-business settings
g. Returns: Avoiding inconvenience, embarrassment , or difficulty in
using or handling ; bad for providers when returned merchandise is
not in re-sellable condition, or lacks proper proof of purchase, or is
returned to the wrong store
a. Controllable returns result from problems or errors made by the seller
or customer and can mostly be eliminated with improved handling or
storage, better packaging, and improved transportation and forward
logistics by the seller or its supply chain partners.
13
Introduction to Product b. Uncontrollable returns result from the need for customers to actually
Management see, try, or experience products in person to determine suitability and
can’t be eliminated by the company in the short run.
c. Basic strategy is to eliminate the root causes of controllable returns,
while developing processes for handling uncontrollable returns.
Product Design: Importance and issues
As competition intensifies design, the totality of features that affect the way
the product looks, feels, and functions, offers a potent way to differentiate
and position a company’s products and services.
 Design Leaders: Use the emotional power of design and the importance
to consumers of look and feel as well as function. Hence, design is
exerting a stronger influence in categories where it once played a
small role. E.g. Jaguar bathroom fittings.
 Power of Design: In a visually oriented culture, transmitting brand
meaning and positioning through design is critical.
 Approaches to Design: a well-designed product is easy to manufacture
and distribute. To the customer, it is pleasant to look at and easy to
open, install, use, repair, and dispose of. The designer must take all
these goals into account.
I. Luxury Products face some unique issues
A. Distinguishing Luxury Brands
i. High priced are often about social status and who a
customer was—or perhaps aspired to be.
ii. Luxury for many has become more about style and
substance, combining personal pleasure and self-
expression
iii. Common denominators of luxury brands are quality and
uniqueness
iv. Winning formula for many is craftsmanship, heritage,
authenticity, and history, and is often critical to justifying
a sometimes extravagant price.
B. Growing Luxury Brands: luxury brands that successfully
extended their brands vertically across a range of price
points are usually the most immune to economic downturns
i. Clear differentiation must exist between these brands,
minimizing the potential for consumer confusion and
brand cannibalization.
ii. Each also must live up to the core promise of the parent
brand, reducing chances of hurting the parent’s image.
iii. Horizontal extensions into new categories can also be
tricky for luxury brands.
iv. Much of the growth in luxury brands in recent years has
been geographical.
C. Marketing Luxury Brands: Do’s and Don’ts
a. Globalization, new technologies, financial crises, shifting
consumer cultures, and other forces require luxury brand
marketers to be skillful and adept at their brand stewardship to
succeed.
b. Luxury brand marketers have been issued the following
guidelines:
14
 i. Maintain a premium image for luxury brands; Basic Concepts of Product and
control the image. Product Planning
ii. Create many intangible brand associations and an
aspirational image.
iii. Align all aspects of the marketing program for
luxury brands to ensure high-quality products
and services and pleasurable purchase and
consumption experiences.
iv. Besides brand names, other brand elements—
logos, symbols, packaging, signage—can be
important drivers of brand equity for luxury
products.
v. Secondary associations from linked personalities,
events, countries, and other entities can boost
luxury-brand equity as well.
vi. Luxury brands must carefully control distribution
via a selective channel strategy.
vii. Luxury brands must employ a premium pricing
strategy, with strong quality cues and few discounts
and markdowns.
viii. Brand architecture for luxury brands must be
managed carefully.
ix. Competition for luxury brands must be defined
broadly because it often comes from other
categories.
x. Luxury brands must legally protect all trademarks
and aggressively combat counterfeits.
c. Trend for luxury brands is to wrap personal experiences around
the products.
d. Some luxury marketers have struggled to find the appropriate
online selling and communication strategies for their brand
e. Success depends on getting the right balance of classic and
contemporary imagery and continuity and change in marketing
programs and activities
Examples of highly successful brands are Ralph Lauren, Calvin
Klein, Giorgio Armani and Gucci.
II. Environmental Issues: many firms are considering ways to reduce
the negative environmental consequences of conducting business,
and some are changing the manufacture of their products or the
ingredients that go into them.
III. Product and Brand Relationships: each product can be related to
other products to ensure that a firm is offering and marketing the
optimal set of products.

1.6 PRODUCT AND BRAND RELATIONSHIPS

Each product can be related to other products to ensure that the firm is
offering and marketing the optimal set of products. Often synergies among
them can be found and these can lead to substantial savings in terms of costs
and effort for the firm.
The Product Hierarchy
A. The Product Hierarchy: Includes six Levels namely
15
Introduction to Product a. Need family: The core need that underlies the existence of a product
Management family. e.g. Security
b. Product family: All the product classes that can satisfy a core need
with reasonable effectiveness. E.g. savings and income
c. Product class: Group of products within the product family recognized
as having a certain functional coherence, also known as a product
category. e.g. Financial instruments.
d. Product line: group of products within a product class that are closely
related because they perform a similar function, are sold to the same
customer groups, are marketed through the same outlets or channels,
or fall within given price ranges. A product line may consist of
different brands, a single family brand, or an individual brand that
has been line extended for E.g. Life Insurance.
e. Product type: A group of items within a product line that share one
of several possible forms of the product for E.g. Term Life Insurance
f. Item (also called stock-keeping unit or product variant): A distinct
unit within a brand or product line distinguishable by size, price,
appearance, or some other attribute E.g. Tata AIA Term plan with
Return of Premium.

The Product Hierarchy

6. Item

5. Product
type
4. Product
line
3. Product
class

2. Product
family
1. Need
family

Product Systems & Mixes

u Product syst em

u Product mix/ assort ment

u Width
u Length
u Depth
u Consistency

Product Systems and Mixes

16
A company’s product mix has a certain width, length, depth, and consistency. Basic Concepts of Product and
Product Planning
 The width of a product mix refers to how many different product
lines the company carries.
 The length of a product mix refers to the total number of items in the
mix.
 The depth of a product mix refers to how many variants are offered
of each product in the line.
 The consistency of the product mix describes how closely related the
various product lines are in end use, production requirements, distribution
channels, or some other way

Product Mix

A product mix is the total assortment of products

Product Mix
and services marketed by a firm.

A product line is a group of individual products

that are closely related in some way. Depth of
Product Line product line is number of items under each product
/ brand in the line, in terms of variants, shades,
models, pack sizes

An individual product is any brand or variant of a

Individual Product
brand in a product line.
— Thus a product mix is a combination of product lines, which are
combinations of individual products.

Product Mix Characteristics

— Any product mix can be defined in terms of width, length, and

consistency.
The number of product lines in the product mix.
Product Mix
Width
The more product lines, the wider the product
mix.

Product Mix Product mix length refers to the number of

Length products in the product mix.

Product mix consistency refers to the

Product Mix
Consistency
relatedness of the different product lines in a
product mix.

Examples:
Product mix: - Philips India’s Product mix consists of the following
product lines, namely music systems and video systems, television, lighting
systems and medical electronics catering to different markets across various
segments.
Depth of product mix:-Halo shampoo from Colgate-Palmolive comes in
three formulations and three sizes and hence has a product mix depth of
nine. Similarly Rasna soft drink concentrate from Pioma Industries has
seven flavours which form the depth of the product mix.
Consistency of a product:-Philips’s product lines are consistent in the
sense that they are all electronic products.
These product mix dimensions provide the handles for defining the
company’s product strategy. The company can increase its business in four
ways:
17
Introduction to Product ●● It can add new product lines, thus widening its product mix. In this
Management way, its new lines build on the company’s reputation in its other lines.
●● The company can lengthen its existing product lines to become a
more full-line company.
●● Or it can add more product variants to each product and thus deepen
its product mix.
●● Finally, the company can pursue more product line consistency—or
less—depending on whether it wants to have a strong reputation in a
single field or in several fields

Product Mix Characteristics

Kodak’s Product Mix

Line Stretching
As the name suggests, line stretching decisions pertain to adding or dropping
items from the line, as and when it is profitable to do so. Line stretching
could be upwards, downwards or both ways.
Downward stretch is apt when the company finds its offerings are at a high
price end of the market and then stretch their line downwards. For example,
Daewoo Motor’s, small car “Matiz” of the 90’s was originally introduced
as a premium high end car with one single variant catering to the top end
or the elite segment. Subsequently, the feedback from market and research
findings made them offer variants to tap the low end market segment as well.
This decision made the company turnaround through a quantum increase in
sales and an expansion in customer base.
On the other hand, upward stretch is possible when the company enters the
upper end of the market through a line extension. The reason could desire a
higher growth rate, increased market share, tapping new market segments,
better margins etc. A good example would be that of Lifebuoy soap, which
was initially positioned as a hygienic soap focussing on the semi urban and
rural mass markets. Currently, Lifebuoy has positioned itself as a premium
liquid hand wash, catering to the higher strata of the society.
Reasons for Line Filling: When a firm adds more items within the existing
product range results in lengthening the line. Following are the reasons for
line filling.
●● aiming for incremental profit
●● optimal utilisation of excess and under - utilised capacities
18
●● an attempt to offer a full line of the product Basic Concepts of Product and
Product Planning
●● In response to dealer complaints about lost sales because of missing
items in the line.
The addition of double toned milk is an example of line filling. Mother Dairy
has added this item to its existing range of full cream, and single toned milk,
thereby catering to health conscious milk consumers. All the categories of
milk mentioned above are easily identifiable by their packaging color.
Activity 3
Select any two examples of line filling in the consumer durables industry.
Were the products successful? Give reasons for their success or failure.
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1.7 Product Planning

1. Development of a strategic product planning system is one of the most
critical elements of a company’s product management function. In
designing such plans, the management requires adequate information
on the current and anticipated performance of its existing products.
This information can again be broadly classified into two dimensions:
a. the perceptual dimension consisting of the consumers perception
about the product per se, as well as in relation to the products
of the competitors and
b. the ‘objective’ dimension consisting of actual raw information
about actual and anticipated performance on relevant criteria
such as sales, profits and market share.
The information on both the dimensions needs to be seen as a whole to
develop a proper product planning system. However, most approaches use
the information obtained in isolation, making the picture incomplete. The
traditional approaches to Product Planning left much to be desired.
While there are many approaches that companies follow, an integrated
approach to product planning has been suggested by Yoram Wind and
Henry J. Clayclamp in a paper presented in the Journal of Marketing in
1976. Which is of practical relevance to the marketer are the possibilities
they outline at the end of their paper.
 Do not change the product or its marketing strategy;
 Do not change the product but do change its marketing strategy. This
may involve a change in the type and level of advertising, distribution
and pricing strategies associated with a given positioning and given
product attributes.
 Change the product. This may involve product modifications either
within the parameters of the product’s current market positioning or
19
Introduction to Product within a new positioning. In either case, a change in the associated
Management marketing strategy is required.
 Discontinue the product or the product line. This strategy may
involve an interim product or product line “run out” strategy, gradual
chopping of the product line, or the immediate phasing out of the
product or the complete line.
 Introduce new products into the line or add new product lines.
Which among these to follow would be the outcome of a detailed exercise
in Product Planning?

1.8 The Origin of the concept and Role

and Responsibilities of a Product
Manager
Product Management is the holistic job of Product Managers including
planning, forecasting and marketing of products and services. The Product
Management concept is widely acknowledged to have been commenced in
the year 1931 in Proctor & Gamble. Back then, a manager at P&G named
Neil McElroy wrote what is now referred to as the “McElroy Memo”.
P&G was famous for their culture of writing memos on important topics.
McElroy was the manager responsible for Camay soap a lesser brand to the
company’s leading Ivory soap brand.Camay was not selling well and he
decided that a dedicated “brand man” (and supporting team) was needed to
ensure that sales of the brand were being maximized.
The need as expressed in his memo was to:
• Understand the regions and volumes of product being shipped.
• For regions where sales are good or growing, understand why and try
to apply those principles to other similar regions
• Where sales are light, investigate the situation to understand the
problems. Devise a plan to address the problems and work with internal
parties to ensure the plan is successful.
• Take charge for all messaging and advertising copy for the brands
• Oversee advertising and marketing expenditures for the brands
• Try new things, particularly with packaging of the brands
• Work with local sales managers to understand their perspective on
what is and isn’t working in their region.
In essence, the “brand man” is responsible for the business success of the
brand (product or product family).The role of “brand man” or “brand team”
was very successful at P&G and was emulated throughout the consumer
packaged goods industry. And, after almost hundred years, Brand
Management is well - defined and is a pure marketing and business function
within Consumer Packaged Goods (CPG) companies.
Product Management employs a matrix organizational structure in which
a product manager is charged with the success of a product or product
line, but has no direct authority over the individuals producing and selling
the product. Much of the work of a Product Manager is through various
20
departments and cross - functional teams, almost as if the Product Manager Basic Concepts of Product and
were operating a business within a business Product Planning

Product Manager’s reporting in a Typical Matrix Structure

Product Managers, as an organizational form, has moved into a variety of

B 2 B firms, as well as service organizations such as financial institutions
and hospitals. Most large banks have Product Managers for credit cards,
deposit services, trust operations, and commercial cash management
services. Product Management is most successful for companies with
several products having similar manufacturing but different marketing
requirements, particularly when the same product cuts across several
divisions or customer groups. Top Management must be committed to the
Product Management organization and provide the structure and tools to
make it work and the right people must be selected for the job.

Research
Customers Development

Marketing Sales
Product
Management

Support Board

Finance Logal

Product Manager’s Interface

The Product Manager can, thus, be thought of CEO for the Product and
responsible for marketing planning, developing product strategy and
implementing that strategy through various marketing tools.

1.9 SUMMARY
The Unit takes through and discusses the scope and meaning of Product
Management and its ultimate aim of developing, marketing and sustaining
new products successfully in the face of competitive rivalry. We have
also touched what a product is, its characteristics and classifications, the
customer - value hierarchy, means of differentiation, the product hierarchy,
products and brand systems, product mix concepts, product and brand
relationships, line stretching and filling and the role and responsibilities of
a Product Manager as CEO for his brand.
21
Introduction to Product
Management 1.10 SELF- ASSESSMENT QUESTIONS
1. Some marketers believe product performance is the main reason for a
product to be successful. Other marketers believe look, feel and other
design elements are what really make the difference. What do you
feel? Take a position on Product performance vs Product aesthetics.
(Consider perfumes, paints, Apple I -phones).
2. Imagine you are the Product Manager for a new 5 star hotel. Go
through all levels of the Customer- Value hierarchy in building up the
potential product for your hotel. What services would you include in
the potential product to differentiate yourself from the competition?
3. How important is the packaging for you when you visit the
supermarket? What common problems do you face when searching
for a product?
As a Consultant to a luxury soap company what elements / copy
would you suggest for them to include in the soap cover?
4. What are the Pros and Cons for Product Management to exist as a
separate functional area not falling under the purview of the marketing
function?
Based on your analysis what would be your choice and why?

1.11 Referencing/Further Readings

Ramaswamy & Namakumari, Marketing Management 6e (2018): Indian
Context: Global Perspective, Sage /Texts.
Philip Kotler & Kevin Lane Keller, Marketing Management 15 (2016),
Pearson.
Donald R. Lehmann, Russell S. Winer, Product Management, McGraw-Hill
International Edition.

22
UNIT 2 PRODUCT LIFE CYCLE (PLC)
Objectives
After reading this unit you should be able to:
●● discuss the concept of the product life cycle
●● explain the stages in the product life cycle
●● operationalise the PLC concept
●● understand the product life cycle, its characteristics ,objectives and
strategies
●● describe the role of PLC in product management decision making
●● understand the diffusion of innovation theory and its relevance.
Structure
2.1 Introduction and Theoretical Background
2.2 Product Life cycles Implications of Product life cycle
2.3 Product Life Cycle (PLC) an aid to Product Planning
2.4 Operationalising the Product Life Cycle
2.5 Product Life Cycle as a Guideline for Marketing Strategy
2.6 Product Life Cycle as a Guideline for framing Market Share Strategy
2.7 Summary of PLC Objectives, Characteristics and Strategies
2.8 Evidence and Critique for the Life Cycle Concept
2.9 The Diffusion of Innovation Theory – A Parallel theory
2.10 Summary
2.11 Self Assessment Questions
2.12 References/Further Readings

2.1 INTRODUCTION AND THEORETICAL

BACKGROUND
Take a little time away from your busy schedule and look around and you
will find for yourself that everything in the market place is presumed to be
going through several phases or stages in their life cycle from introduction
until its decline. When a product or a brand is launched, it grows, attains
maturity, and starts declining to be phased out or may be for a re launch. A
Product is basically a need satisfier. In reality there may be several products
satisfying the need of a customer. For example, the need for a document and
producing multiple documents was existent since human civilization started
communication. As civilization matured, the need for documentation has
also grown. This change in the level of need is captured by the demand
life cycle. For every need cycle there is a sequence of phases starting with
emergence, accelerating growth, decelerating growth, maturity, and decline.
(The four stages of a product life cycle)
Historically speaking a product is an embodiment of technology, and the
technology, in fact, satisfies the need. Let’s look at the need for a document
was first satisfied by a mud tablet and progressed through palm leaves, copper
leaves, paper and has now reached the electronic pages stage. Succeeding
technologies normally satisfy the need better than their predecessors. Once
you consider the need for multiple copies of the same information, modern
23
Introduction to Product technology would suggest use of carbon papers, cyclostyling, photocopying,
Management printing and more convenient and efficient forms of duplication.
The introduction and decline phases of products are common themes in
our everyday lives. The cassette tapes have replaced the vinyl records, and
currently CDs, digital mini discs, VHS and DVDs tapes have been largely
replaced by MP3 digital files. These innovations a result of technology
development and technology adoption show that products, markets and
competition change over time. Revolutionary products create new product
markets. Correspondingly, competitors are developing and copying new
ideas and products making existing products out of date more quickly than
ever. Think of Nokia and Blackberry and consider how quickly these brands
faded in the market. Products, like consumers, go through their respective
life cycles.
Roger Everett’s Diffusion of innovations theory explains the process of new
product adoption over period of time. Both the Product Life Cycle (PLC)
and the Diffusion curve are concerned with the changes in the adoption
of products over time, the cumulative diffusion curve and PLC curve
exhibit considerable similarity. However, there is a difference in terms
of the parameters used. PLC depicts absolute sales over time while the
diffusion curve relates cumulative percentage of potential consumers over
time. Diffusion theory presents a five-stage adoption process, starting from,
innovators, early adopters, early majority, late majority, and laggards.
Monopolistic Competition theory explains the variations in the number of
firms at different stages of the PLC. Monopolistic competition involves
many firms competing against each other, but selling products that are
distinctive in some way. Examples include stores that sell different styles of
clothing; restaurants or grocery stores that sell different kinds of food; and
even products like golf balls or beer that may be at least somewhat similar
but differ in public perception because of advertising and brand names.
In the initial stage, the number of firms in the business will be lower, many
players would not enter the market due to the risk involved in the new
product. Once the product acceptance is realized more firms would enter
the market, this leads to the growth in the market. During the maturity stage,
the number of firms entering and number of firms leaving the market would
be more or less equal. On the decline, only those firms, which choose to
specialize, would stay in the market and others would leave the market.

2.2 Implication of Product Life Cycle

A company’s positioning and differentiation strategy must change as its
product, market and competitors change over the product life cycle. A
product life cycle implies the following:
●● Products have a limited life
●● Product sales pass through distinct stages, each posing different
challenges, opportunities, and problems to the seller
●● Profits rise and fall at different stages of the product life cycle
●● Products require different marketing, financial, manufacturing,
purchasing, and human resource strategies in each life-cycle
stage<section id=”ch11lev2sec7”><title id=”ch11lev2sec7.title”>
Concept of Product Life Cycle</title>
Most product life cycles are portrayed as bell-shaped curves, typically
divided into four stages: introduction, growth, maturity, and decline

24
●● Introduction: A period of slow sales growth as the product is introduced Product Life Cycle (PLC)
in the market. Profits are non existent because of the heavy expenses
of product introduction
●● Growth: A period of rapid market acceptance and substantial profit
improvement
●● Maturity: A slowdown in sales growth because the product has
achieved acceptance by most potential buyers. Profits stabilize or
decline because of increased competition
• Decline: Sales show a downward drift and profits erode
The figure below shows a growth slump maturity pattern, characteristic of
small kitchen appliances like bread makers and toaster ovens. Sales grow
rapidly when the product is first introduced and then fall to a “petrified”
level sustained by late adopters buying the product for the first time and
early adopters replacing it.

Source: Philip Kotler Marketing Management 15e

The re- cycle pattern in the figure below describes the usual pattern for new
drugs.
The pharmaceutical company aggressively promotes its new drug,
producing the first cycle. Later, sales start declining and another promotion
push produces a second cycle, usually of smaller magnitude and duration.

Source: Philip Kotler Marketing Management 15e

Style, fashion and fad cycles
A style is a basic and distinctive mode of expression appearing in a field of
human endeavour and can last for generations and go in and out of vogue.
Thus clothing can be formal, casual or sporty and art realistic, surrealistic
or abstract.

25
Introduction to Product ●● A fashion is a currently accepted or popular style in a given field.
Management Fashions pass through four stages: distinctiveness, emulation, mass
fashion, and decline. The length of a fashion cycle is hard to predict.
What is currently popular can shift rapidly. Certain colour or style of
clothing -baggy jeans, mini -skirts or four inch wide ties may be in
fashion on season and outdated the next. Marketing managers who
work with fashions have to make really fast fashion changes .For
Example, Zara, a fashion retailer headquartered in Spain, takes only
about two weeks to go from a new fashion concept to having items on
the racks of its stores. One view is that fashions present a compromise
and consumers start looking for the missing attributes. For example,
if automobiles become smaller and less comfortable, consumers start
wanting larger cars. Another view is that if too many consumers adopt
the fashion others are discouraged. An alternative view to both the
preceding is that the length of a fashion cycle depends on whether the
fashion meets a genuine need, is consistent with other trends, satisfies
societal norms and values and keeps within technological limits as it
develops.
●● Fads are fashions that come quickly into public view, are adopted with
great zeal, peak early, and decline very fast. Their acceptance cycle
is short and they tend to attract only a limited following searching
for excitement or wanting to distinguish themselves from others.
Examples are fads like the hula hoop, the Rubik’s cube, or bell –
bottom trousers which came and went.
Fads decline because they don’t normally satisfy a strong need. The
marketing winners are those recognize fads early a leverage them into
products with staying power like Crocs did.

Source: Phillip Kotler Marketing Management 15e

As discussed, a product or brand goes through several phases from birth
until its death. Firstly a product is launched; it grows, attains maturity,
then starts declining and, finally, is ironed out. Accordingly, the product
life cycle is explained by the following stages; (i) Introductory stage; (ii)
Growth stage; (iii) Maturity stage and (iv) Decline stage.
Stages in the Product Life Cycle:
1. Introductory Stage
The introductory stage of a product are believed to be relatively slow,
even after its technical problems have been ironed out, due to a number
of marketing forces and consumer behaviour factors. The major marketing
obstacle to rapid introduction of a product is often distribution. Retail outlets

26
are often reluctant to introduce new products, and may prefer to wait until Product Life Cycle (PLC)
a track record has been established before including them. in their stock.
Consumer acceptance of new products tends to be relatively slow. The
newer the product, the greater the marketing effort required to create
the demand for it. The length of the introductory period depends on the
product’s complexity, its degree of newness, its fit into consumer needs, the
presence of competitive innovations of one form or another, and the nature,
magnitude and effectiveness of the introductory marketing effort.
At this stage it is usually assumed that there are no competitors, the market
structure is defined as ‘Virtual Monopoly’. But there are very few really
radical innovations with no existing substitutes. Most new products and
services face considerable competition from existing products, and also
experience severe competitive pressure from other new products.
There are many cases where two firms introduce similar products almost
at the same time, which is possible if the two companies are working on
similar technological developments. On noticing the success of the test
market conducted by one company, others may follow suit with similar
products. If two or more firms introduce products at about the same time,
the result is likely to be a shorter introductory period. The length of the
introductory period is a crucial aspect of the PLC. From the managerial
point of view, the shorter this stages the better.
The consumers who buy the product in the introductory stage itself are called
innovators, and those who buy later are called late adopters or laggards. This
may sometimes be misleading, for example in the case of a buyer who hears
about a product for the first time two years after its introduction, buying it
at once.
2. Growth Stage
The growth stage begins when demand for the new product starts increasing
rapidly. If innovators are satisfied with the trial, they move to repeat purchase.
They then influence others by word-of-mouth, which is often considered
the most effective mode of communication. The product availability and
visibility in distribution and in use (e.g., new cars on the road) tend to bring
new triers into the market. At this stage, the entry of competitors increases
the total demand for the product through their advertising and promotional
efforts.
3. Maturity Stage
The maturity or saturation stage occurs when distribution has reached its
planned or unplanned peak and the percentage of total population that is
ever going to buy the product has been reached. Volume (reflecting the
number of customers, quantity purchased, and frequency of purchase) is
stable. At this stage it becomes difficult to maintain effective distribution,
and price competition is quite common.
4. Decline Stage
Changes in competitive activities, consumer preferences, product
technology and other environmental forces tend to lead to the decline of
most mature products. If decline is for a product and not brand, producers
may withdraw from that product category. The typical reason for a product
decline is the entry of new products and decreased consumer interest in the
specific product. One of the few options left for keeping a brand alive is
price reduction and other drastic means that depress the profit margin and
lead to product withdrawal .Product decline occurs when most customers
no longer buy the product and only a few loyal customers remain. The
latter continue buying the product in spite of no advertising or promotional
campaign. The company may decide to follow a `milking or harvesting
27
Introduction to Product strategy’ i.e., retain the product with meagre marketing support as long as
Management it generates some sales. But this requires maintaining distribution of the
product, which becomes less profitable.
Activity 1
1. Trace the PLC of Blackberry cell phones. What were the reasons for
their decline?
2. What could they have done to extend the life cycle?
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2.3 PRODUCT LIFE CYLE (PLC) – AN AID TO

PRODUCT PLANNING
The Product Life Cycle concept, as a tool of product planning, has had its
share of criticism as well as support. Let us look at some empirical evidence
in this context.
The S Shaped logistic curve has been widely accepted as a representation
of the life cycle of a product, having four visible stages; a long phase
(introduction), an exponential phase (growth), a stationary phase (maturity
and saturation) and a decline phase.
The empirical support for the S shaped product life cycle is not universal
and the evidence regarding its validity is, therefore, not conclusive. This
general pattern was found to exist in certain product classes. Puzzle and
Cook in their study of 192 consumer products in 1969 found that 52 per
cent of the products followed the general pattern of the product life cycle.
A number of studies on industrial products also showed that a fairly large
percentage of them approximate to the PLC representation.
Sales of `mature’ products however, did not necessarily follow the predicted
pattern. Three variations in the maturity phase were observed -- the expected
stable maturity, a growth maturity due to changes in the market variables,
and an innovative maturity due to some innovations introduced in the
product. Similarly for the decline stage, it has been shown that the stage is
not inevitable for products like milk, bread etc.
It must however, be clearly understood that products do not follow a natural
and inevitable cycle of birth, growth and death as organisms do. The
product life cycle that they follow is, to a large extent the result, and not
the cause, of marketing strategies. The sales and profit graphs do respond
to marketing inputs and a sales decline does not necessarily mean that the
product has entered an irreversible decline phase. As the life cycle stages
do not have predictable duration and inevitable sequence, the product
life cycle concept can at best be used as a general guideline for planning
future action. It has to be supplemented by a deep and thorough study of
the market and competitive conditions characterising a product, in order to
28
serve as a productive or planning tool. The usefulness of the PLC concept Product Life Cycle (PLC)
varies in different decision situations. As a planning tool, it emphasises the
type of main marketing challenges a product is likely to face in the different
phases, and suggests major alternative strategies that may be followed at
each stage. As a tool for control, the PLC concept enables comparison of
product performance against similar products in the past.

2.4 OPERATIONALISING THE PRODUCT LIFE

CYCLE
In order to utilize the product life cycle effectively it is necessary to
understand how one can unambiguously determine the position of a product
in the context of its life cycle. Putting the PLC concept into operation would
require the following decisions to be taken:
a) Deciding upon the unit of analysis.
As the actual shape of the product life cycle curve may differ for product
form, product class, or an individual product and a brand, it is important
to decide which particular unit of analysis is being considered. The PLC
analysis can be undertaken for each of these units, both at the firm and the
industry level. The importance of explicitly defining a unit of analysis will
become apparent to you when you consider an example of whether all TV
sets should be considered or the focus should be on either black and white
or Colour sets, or portable versus non-portable ones - it is apparent that no
set rules can be prescribed at to the correct unit of analysis. Based on their
needs and intention of how to use the PLC, Management should define and
select the relevant unit of analysis.
b) Definition of relevant market
Normally, the PLC approach assumes a single homogenous market,
which is further segmented by the difference in adoption behaviour of the
consumers i.e. the early adopters, late adopters and, finally, the laggards.
Generally, PLC studies focus on the product sales at the total market level.
However, it is sometimes useful to consider the PLC by type of market (for
example international versus domestic market), distribution pattern (direct
versus retail distribution) or market segment (organisational buyers versus
individual buyers).
c) Identification of the Product stage in the PLC
In order to use the PLC concept one would need to answer two related
questions (a) how to determine the stage of a product in the life cycle (b)
how to determine when the product moves from one stage to another. Since
the shape of the PLC curve varies widely for products, as does the duration
of the different stages, it is not possible to assess the stage of a product in
the life cycle and its transition to another stage, merely by observing the
historical sales graph of the product.
Let us consider the operational approach suggested by Polli and Cook as
represented in the figure below:

29
Introduction to Product
Management

The approach is based on the measurement of the percentage change in

real sales from one year to the next. These changes are plotted as a normal
distribution. Change in real sales from year to year is then measured.
Products having a percentage change less than -.5 are classified as being
in the decline stage, those having percentage change greater than .5 were
classified as being in the growth stage while those in the range of +.5 were
classified as being in the maturity stage, which was further divided into
decaying maturity and stable maturity.
As far as the duration of a stage in the PLC of a product and the exact
point in time of the transition of a product from one stage to another, no
generalised conclusions can be drawn since the duration of each PLC stage
depends on a large number of variables like product characteristics, market
acceptance and competitive action.
Defining the Unit of Measurement
Though most analyses of PLC are based on actual sales it is important to
determine:
1. Whether to use unit sales or rupee sales as unit of measurement?
2. Should actual sales figures or adjusted sales figures be used?
3. Should real or projected prices be used as units of measurement?
4. Should sales be allowed to function as the sole yardstick or should
other criteria like profit and market share used to estimate PLC curve?
Determining the time unit
Annual data generally forms the basis of PLC analysis. As the life periods
of products are shortening ,and as some classes of products are prone to
wide seasonal fluctuations, it may sometimes be considered desirable to use
quarterly or monthly data to develop PLC graphs. Depending upon its needs
and the product characteristics, management must decide in advance what
should be the unit of time chosen.

2.5 Product Life Cycle -- As a Tool To

Plan Market Share Strategies
Determining the market share strategy of a product is also one of the key
factors in product development. When a product manager is faced with
a number of products which are doing well presently he has to come to
a decision regarding the long term market share target for each of the
products. Given the market share to be obtained, the other elements of the
marketing mix can then be decided upon. How do we go about making
decisions regarding the market share objectives? What criteria do we use?
30
A framework to evaluate a product’s position vis-a-vis its long term growth Product Life Cycle (PLC)
prospects has been developed by Bernard Catry and Michel Chevalier. The
proposed framework is given below:
Framework Suggested: The first market criterion used is the stage of
the product life cycle in which the currently product is. This gives a good
indication of the trend in demand as well as competitive patterns. The three
phases of a product life cycle used here are introduction, maturity and
decline.
The second criterion consists of placing the firm into one of three categories
on the basis of its market share. A firm can therefore be placed in (i) small
market share (ii) average position (ii) dominant position.
On the basis of these two criteria the firm can choose whether to (i) increase
its position (ii) maintain its position at the same level; (iii) reduce its market
share.
Table 1 given below indicates the different alternative positions that exist
over time in a product group. Each cell corresponds to a different investment
or a different expected gain. The term investment in this case means that a
firm deciding to increase its position at the introductory stage must make
production and marketing investments that will enable it to increase both its
brand awareness in its market coverage and its production facilities. On the
other hand, a firm which has to maintain its position in a slow growth market
may not require as much investment. In the table, the amount of investment
necessary is suggested by the number of pluses and minuses following the
letter I, while the amount of expected cash return is indicated by pluses and
minus following the letter E. An overall value can thus be obtained for each
cell by computing the arithmetic sum of cash investments and expected
cash returns in the short run. This forms a basis for comparison to arrive at
a decision on the appropriate strategy.
Table I : Market share Diagnosis
Product Life Cycle : Market Share Position of the Firm
Strategic Alternatives Introduction Maturity Decline
Small Average Dominant Small Average Dominant Small Average Dominant
Increased I ++ I ++ I +++ I ++ I +++ I ++++ I+ I ++ I ++
Investment E +++ 1
E ++ (1)
E ++ (1)
E+ (1)
E+ (2)
E+ (3)
E–– (3)
E––– (5)
E–––
–(6)
Marketing I I+ I ++ I I I I+ I I––
Position E0 E+0 E++0 E0 E+++3 E++++4 E +2 E+1 E++3
Disinvestment I I– I– I– I– – – I– – – – I– I– – – I– – –
E0 E1 E0 E +2 E+++6 E++++4 E1 E++4 E++5

The action implications arising out of this table can be summarised as under:
1. In the introduction stage of the product life cycle the best short term
strategy for a weak brand is to invest in market share. On the other
hand, for the dominant firm the best strategy would be to harvest.
2. Firms with a small market position are advised not to invest for more
market share at a very late phase of development of the market.

2.6 Product Life Cycle as a Guideline

for Marketing Strategy
In considering the possible relationship between marketing strategy and
the product’s life cycle, one should see whether companies should adopt
their marketing efforts according to the product life cycle or whether the
firm’s marketing strategy can change the course of the product life cycle.
But, unfortunately, most studies of the determinants of product sales are
not concerned directly with the product’s PLC. Knowledge of the product’s
31
Introduction to Product stage in its life cycle gives useful but only partial input for the design of the
Management product’s marketing strategy.
Recommendations have frequently been made concerning the type and level
of advertising, pricing, distribution, and other product/marketing activities
required at each of the product life cycle stages. Some of the more common
recommendations are discussed below, but should be viewed as hypotheses,
and not facts or normative prescriptions.
Advertising:
In the introductory stage, advertising informs customers about the existence,
advantages, and uses of new products. During the growth stage -advertising
stresses the merits of the products in comparison to competing product. In
the maturity phase, advertising attempts to create impressions of product
differentiation. It appeals to pride and non-economic utilities. Massive
advertising campaigns attempt to attract attention. Finally, in the decline
stage, the percentage of sales going into advertising decreases.
Product Changes:
Product changes to be made at each stage of the product life cycle are as
follows:
Introduction: new product; Growth: product modification; Maturity:
product modification and differentiation; Saturation: product modification,
differentiation and diversification; and Decline: product diversification.
While at the maturity stage new versions are introduced, at the decline
stages, stripped down versions are introduced.
Pricing:
Price is usually believed to be high at the introductory period and to decline
with the product life cycle stages, as it becomes an increasingly important
competitive weapon, especially at the later stages of growth, maturity and
decline. Although price-cutting is quite common in many industries as the
product matures (e.g.: Reduction in prices of cell phones, calculators and
digital watches over time), many managers prefer to engage in non-price
competition. Price cutting in the saturation stage, although common, is far
less important than changes in the product, promotion, and distribution
policies. In determining the product’s price strategy, not only the introductory
price should be considered, but also what the next move might be, given
alternative competitive actions. A relatively low introductory price should
not be ruled out automatically but should be fully examined.
Distribution:
Initial distribution is slow since distribution channels are still being set up
to reach its full coverage at the growth stage when retail outlets are seeking
the product. At the maturity stage, retail outlets are the first to suffer from
changes in consumer purchase patterns; hence manufacturers may start
losing outlets. At the same time, efforts are made by manufacturers to
establish new methods of distribution e.g. e-commerce and new outlets
The above attempts to prescribe a marketing strategy and guide the allocation
of marketing resources over the stages of a product’s life cycle assumes that
at any one stage of the PLC the firm has only a single reasonable marketing
strategy it can flow. This is misleading as it constrains management’s
creativity in generating new marketing strategies and ignores differences
among products, markets and firms. In the real world there is seldom only
definitive strategy
Activity 2
Pick up any two products- one each from consumer goods and consumer
durables of your choice. Identify the stage of PLC that they are in. As the
32
Product Manager propose a suitable marketing strategy for products? Product Life Cycle (PLC)
Product A........................................................................................................
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Product B........................................................................................................
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2.7 PLC: CHARACTERISTICS, OBJECTIVES

AND STRATEGIES

Source : Phillip Kotler Marketing Management 15e

2.8 EVIDENCE AND CRITIQUE FOR THE LIFE

CYCLE CONCEPT
A) Evidence for the Product Life-Cycle Concept
New consumer durables show a distinct take -off, after which sales increase
by roughly 45 percent a year, but they also show a distinct slowdown, when
sales decline by roughly 15 percent a year. Slowdown occurs at 34 percent
penetration on average, well before most households own a new product.
The growth stage lasts a little more than eight years and does not seem to
shorten over time. Informational cascades exist, meaning people are more
likely to adopt over time if others already have, instead of making careful
product evaluations. One implication is that product categories with large
sales increases at take -off tend to have larger sales declines at slowdown.

33
Introduction to Product B) Critique of the Product Life-Cycle Concept
Management
PLC theory has its share of critics who claim life-cycle patterns are too
variable in shape and duration to be generalized and marketers can seldom
tell what stage their product is in. As a tool for control, the PLC concept
enables comparison of product performance against similar products in the
past. It has got a limited utility as a forecasting tool as sales histories of
products differ widely and the life cycle stages exhibit varying duration.
Further, market evolution takes pace and companies affected by new needs,
competitors, technology, channels, and other developments, change product
and brand positioning to keep pace. Also like products, markets evolve
through four stages: emergence, growth, maturity, and decline, making
forecasting uncertain.

2.9 The Diffusion of Innovation Theory

This is a theory which runs concurrently with the Product life Cycle theory
and should be considered complementary in framing of marketing strategy.
Diffusion of Innovation Theory, developed by E.M. Rogers in 1962, is
one of the oldest social science theories. It originated in communication to
explain how, over time, an idea or product gains momentum and diffuses
(or spreads) through a specific population or social system. The end result
of this diffusion is that people, as part of a social system, adopt a new
idea, behaviour, or product. Adoption means that a person does something
differently than what they had done previously (i.e., purchase or use a new
product, acquire and perform a new behaviour, etc.). The key to adoption
is that the person must perceive the idea, behaviour, or product as new or
innovative. It is through this that diffusion is possible.
Researchers have found that people who adopt an innovation early have
different characteristics than people who adopt an innovation later. When
promoting an innovation to a target population, it is important to understand
the characteristics of the target population that will help or hinder adoption
of the innovation. There are five established adopter categories, and while
the majority of the general population tends to fall in the middle categories,
it is still necessary to understand the characteristics of the target population.
When promoting an innovation, there are different strategies used to appeal
to the different adopter categories.
1. Innovators: These are people who want to be the first to try the
innovation. They are venturesome and interested in new ideas. These
people are very willing to take risks, and are often the first to develop
new ideas. Very little, if anything, needs to be done to appeal to this
population.
2. Early Adopters: These are people who represent opinion leaders.
They enjoy leadership roles, and embrace change opportunities. They
are already aware of the need to change and so are very comfortable
adopting new ideas. Strategies to appeal to this population include
how-to manuals and information sheets on implementation. They do
not need information to convince them to change.
3. Early Majority: These people are rarely leaders, but they do adopt
new ideas before the average person. That said, they typically need
to see evidence that the innovation works before they are willing to
adopt it. Strategies to appeal to this population include success stories
and evidence of the innovation’s effectiveness.

4. Late Majority: These people are sceptical of change, and will only
adopt an innovation after it has been tried by the majority. Strategies
34
 to appeal to this population include information on how many other Product Life Cycle (PLC)
people have tried the innovation and have adopted it successfully.
5. Laggards: These people are bound by tradition and very conservative.
They are very sceptical of change and are the hardest group to bring
on board. Strategies to appeal to this population include statistics,
fear appeals, and pressure from people in the other adopter groups.

Everett Roger’s Diffusion of Innovation Curve

The stages, by which a person adopts an innovation, and whereby diffusion
is accomplished, include awareness of the need for an innovation, decision
to adopt (or reject) the innovation, initial use of the innovation to test it,
and continued use of the innovation. There are five main factors that
influence adoption of an innovation, and each of these factors is at play to
a different extent in the five adopter categories.
1. Relative Advantage: The degree to which an innovation is seen as
better than the idea, program, or product it replaces.
2. Compatibility: How consistent the innovation is with the values,
experiences, and needs of the potential adopters.
3. Complexity: How difficult the innovation is to understand and/or use.
4. Trialability: The extent to which the innovation can be tested or
experimented with before a commitment to adopt is made.
5. Observability: The extent to which the innovation provides tangible
results.
The relevance of this theory would lie in achieving a degree of fair accuracy
in forecasting sales and setting sales targets at different stages of the PLC

2.10 SUMMARY
This unit describes the Product life cycle which is one of the enduring
and widely publicized frameworks in marketing literature. Both, theory of
innovations and diffusion, as well as theory of monopolistic competition
complement and endorse this framework. In this model it is conceptualized
that product goes through four distinct phases, namely introduction, growth,
maturity, and decline. There are controversies about the causality of product
life cycle; hence, it is important to take adequate precaution while applying
the PLC concept for decision making. PLC can be of diverse shapes, such
as the classical bell shaped curve, scalloped, style and so on. The PLC can
also be viewed from different levels of product, like core product, product
35
Introduction to Product category, brand and so on. The shape may change depending on the markets
Management served. In marketing literature several prescriptions have been proposed for
using PLC for marketing strategy formulation. However, it is important to
consider the decision context, product in question, market conditions and
other factors before using PLC for strategy formulation.

2.11 SELF – ASSESSMENT QUESTIONS

1. Cell phones are a part of our everyday lives. At what stage of the PLC
do you think they are? What will marketers have to do to sustain them
in future? Or will they die out and be replaced by newer technologies?
Think futuristically.
2. Coco Cola and Pepsi have been in a mature stage of the Product Life
Cycle for many years. What are these soft drink marketers doing to
prevent their decline?
3. Can brands live forever if marketed well or must be they have a finite
life? Your views? Trace the history of 3 long - lived brands and find
out the reasons for their long term survival.

2.12 REFERENCING/FURTHER READINGS

Ramaswamy & Namakumari, Marketing Management 6e ( 2018) : Indian
Context: Global Perspective, Sage /Texts
Philip Kotler & Kevin Lane Keller, Marketing Management 15 e ( 2016),
Pearson
Robert Dolan, Product Policy- HBR,( April 20, 2015)
Wind Y J, Product Policy. Concepts, Methods, and Strategy, (1982).
Addison-Wesley Pub Co. Reading

36
UNIT 3 PRODUCT LINE DECISIONS
Objectives
After reading this unit you should be able to:
●● explain the concept and logic behind product lines
●● discuss reasons for the proliferation of product lines
●● enumerate the merits and demerits of product line extensions
●● describe the main factors influencing the decision process in relation
to product lines
●● analyse the changes in product lines of different companies.
Structure
3.1 Introduction
3.2 Product Line Analysis
3.3 Product Line Extension
3.4 The Disadvantages of Line Extension
3.5 Factors Influencing Product Line Decisions
3.6 Category Factors Influencing Product Line Decisions
3.7 Summary
3.8 Self Assessment Questions
3.9 References/Further Readings

3.1 INTRODUCTION
Across the globe, Products have proliferated at an unprecedented rate in
every category of consumer goods and services. There have been widespread
line extensions in all types of consumer goods and services. This puts the
focus of marketing executives on the product line’s length and breadth, the
consumers it is catering to, and the future direction to pursue.
A Product line is a group of products which are closely related because
they satisfy a class of need or are used together, sold to the same consumer
group, marketed through the same types of outlets, fall within similar price
ranges, and is considered a unit because of marketing, technical or end-
use considerations. In other words, a broad group of products meant for
essentially similar uses and which possess reasonably similar physical
characteristics constitute a product line. Taking HUL as an example, bath
soaps constitute one product line containing Dove, Liril, Pears, Rexona,
Lifebuoy and Hamam. Fabric wash is another product line containing Surf,
Rin, Wheel, Sunlight, Ala, 501. Barbie’s product line contains baby clothes,
nursery equipment, vaporizers and toiletries.

3.2 Product Line Analysis: - An

InTRODUTION
In offering a product line, companies normally develop a basic platform
and modules that can be added to meet different customer requirements
and lower production costs. Car manufacturers build cars around a basic
platform. Home builders show a model home to which buyers can add
37
Introduction to Product additional features. Product line managers need to know the sales and
Management profits of each item in their line to determine which items to build, maintain,
harvest, or divest, and they need to understand each product line’s market
profile and image.
Sales and Profits: Every company’s product portfolio contains products with
different margins. For instance, supermarkets make almost no margin on
bread and milk, reasonable margins on canned and frozen foods and better
margins on flowers, ethnic food lines and freshly baked goods. Companies
should recognize that different items will allow for different margins and
respond differently to changes in level of advertising.
Market Profile and Image: The product line manager must review how the
line is positioned against competitors’ lines.
A product map shows which competitors’ items are competing against the
company’s items. The map also reveals possible locations for new items.
Another benefit of product mapping is that it identifies market segments.
Product line analysis provides information for two key decision areas:
product line length and product mix pricing.
Product Line length
Company objectives influence product length. One objective is to create a
product line by up selling. Thus Maruti would like to move customers from
Maruti 800 to Zen to Baleno. A different objective is to create a product
line that facilitates cross selling. Hewlett Packard sells printers as well as
computers. Still another objective is to create a product line that protects
against economic ups and downs. Videocon offers white goods such as
refrigerators, washing machines, televisions, microwave ovens, and air
conditioners under different brand names to cater to the entry level, mid
level, and premium segments. This can also help the company when the
economy moves up and down. Companies seeking high market shares and
growth will generally carry longer product lines. Companies that emphasize
high profitability will carry shorter lines consisting of carefully chosen
items.
Product lines tend to lengthen over time. Excess manufacturing capacity puts
pressure on the product line manager to develop new items. The sales force
and distributors also pressure the company to keep a more complete product
line to satisfy customers who like a one -stop shop for all their needs. But
as item are added costs rise for design and engineering, inventory carrying,
manufacturing changeover, order processing transportation, and new item
promotions. Eventually, top management may stop development because
of insufficient funds or manufacturing capacity. A pattern of product line
growth, followed by massive pruning may repeat itself many times.
Line stretching involves the question of whether a particular line should be
extended downwards, upward, or both ways. Line filling raises the question
of whether additional items should be added within the present range of the
line. Line filling should not lead to cannibalization of the existing products.
Line modernization raises the question of whether the line needs a new look
and whether the new look should be installed piecemeal or all at once. Line
featuring raises the query of the items to feature in promoting the line and
which item has to be put in the forefront of promotion to attract customers
to that particular category. Line pruning raises the question of detecting and
removing weaker product items from the line. It is aimed at getting rid of
the dead wood and making the product line more efficient. Deepening is
done by adding more items under a given product / brand by way of more
variants, models, shades and packs sizes. By enhancing the line depth, more
choice is made available to consumers.

38
Line stretching takes place when a company lengthens its product line Product Line Decisions
beyond its current range, whether down-market, up-market, or both ways.
The aim is to enter a new price slot and a new market segment, which is not
covered by the existing offers in the line. This can be done in two ways -by
line stretching and line filling
Down-Market Stretch: Every company’s product line covers a certain part
of the total possible range.
A company positioned in the middle market may want to introduce a lower-
priced line for any of the three reasons:
●● The company may notice strong growth opportunities such as mass
retailers like Walmart, Big Bazaar to attract a growing number of
shoppers who want value -priced goods.
●● The company may wish to foil lower-end competitors who might
otherwise try to move up-market.
●● The company may find the middle market stagnating or declining.
Examples of successful down – market stretch:
●● Surf (now Rs 65/KG), was priced @ Rs 40 per kg for a long time. HUL
introduced Sunlight @ Rs 26/Kg and Wheel @ Rs 10/kg primarily to
combat the threat posed by Nirma.
●● Parker Pen company which historically operated in the high price slot
of the pen market as a prestige product, offering low price pens for
the mass market.
Marketers face a number of naming choices in deciding to move a brand
down-market
●● Use the parent brand name on all its offerings.
●● Introduce lower-priced offerings using a sub-brand name such as
Gillette Vector, the lower- priced version of men’s shaving razors.
●● Introduce the lower-priced offerings under a different name such as
Britannia’s Tiger biscuits (expensive to implement wich means brand
equity will have to be built from scratch, but the equity of the parent
brand name is protected)
The risks associated with down-market stretching
●● Not pricing low enough
●● Cannibalizing sales
●● Consumers not understanding how different offerings are
compartmentalized or the differences between them.
Up-Market Stretch: Companies may wish to enter the high end of the
market to achieve more growth, realize higher margins, or simply position
themselves as full-line manufacturers.
●● Some companies have created surprising upscale segments such as
Starbucks in coffee, Haagen Daaz in ice – cream and Evian in bottled
water.
●● Some companies have created new names such as Toyota’s Lexus,
Nisan’s Infiniti and Honda’s Acura to counter expected customer
resistance.

39
Introduction to Product ●● till other companies have used their own names in moving up market
Management such as General Electric using the GE Profile brand for its large
appliances in the upscale market.
Examples of successful up – market stretch:
Earlier, in the stereo music player market, Philips was synonymous with
low priced stereo systems in the Rs 1000 – Rs 2000 range. It launched the
Powerhouse range: Rs 6000 Rs 9000. (Catering to the middle segment).
Subsequently, it has launched the Power play Range with pricing between
Rs Rs.15000 – Rs.25000 (Premium segment) contributing to 30 % of the
company’s audio sales and succeeded in becoming established as a major
player in the upper segment by the time new entrants like Sony arrived
Some brands have used modifiers to signal a quality improvement such as
Ultra dry Pampers and Extra strength Tylenol.
Two-Way Stretch: companies serving the middle market might stretch
their line in both
directions.
Examples of successful Two -Way stretch:
●● Haier: Entered with a Refrigerator in the middle range (Rs 20000
–25000). Later, it introduced lower end 170 L models starting from
Rs.8990 and high end models 688 L @ Rs.97,900 and above.
●● LG also opted for two ways stretching after commencing its launches
somewhere in the mid range. In the refrigerator line it went to the
lower end with models like LG Economy Direct Cool (55 l) at Rs
6000 and also to the top end with models like LG Premium (816 l) at
Rs 1, 55,000 respectively.
●● Samsung, too, resorted to two way stretching and finally carried a full
line, ranging from the low- priced Direct Cool (170 l) at Rs 9000 to
Samsung (570 l) at Rs 78.500.
Line Filling: In line filling, the firm introduces more items to the line to
strengthen the gaps in its current range of offers. The intention is that it
should be seen by consumers as a “full line” company, and consumers do
not go to competitors for particular variants /models. If overdone, it can
result in cannibalization and confusion.
Example of successful Line Filling:
●● Good Knight Mosquito repellents which have been successful .The
brand have been offered in different product forms and variants
depending upon consumer requirements.
●● Daimler India launched a medium duty truck in the sub 9 tonne
category. The company had a gap in this segment. With this addition,
it became a full line truck company with products ranging from 6
tonnes to 49 tonnes.
Line Modernization Featuring and Pruning: Product lines regularly
need to be modernized.
●● A piecemeal approach allows the company to see how customers and
dealers take to the new style and is less draining on the company’s
cash flow.
●● The downside is it that lets competitors see its changes and they start
redesigning their own lines.
40
●● Sometimes a company finds one end of its line selling well and the Product Line Decisions
other end selling poorly.
●● Using sales and cost analysis, product line managers must periodically
review the line for deadwood that depresses profits.
●● Multi-brand companies all over the world try to optimize their brand
portfolios.
In rapidly changing markets modernization is continuous. Companies
plan improvements to encourage consumers to migrate to higher valued,
higher priced products. Microprocessor companies such as Intel and AMD
continually introduce more advanced versions of their products.
In the Indian market there are more than five thousand models with leader
Titan watches offering as many as 1500 of these. Titan makes 350 - 400 new
launches annually. In mobile phones, the top 10 companies launch nearly
400 models in a single year. The same is the practice in products ranging
from high priced durables like cars and low – priced daily consumption
items like soaps.
Pruning
Managing too long a product line with too many forms can cause problems.
For optimising the profits of a product line, it must be manageable in the first
place. An analysis of the sales trends of all items in the portfolio needs to
be done regularly. The ones that are uneconomic, or cannibalise the others,
need to be weeded out.
In 1999, after realizing more than 90 % of its profits came from just 400
brands, Unilever did a massive weeding programme to get the most value
from its brand portfolio by eliminating three quarters of its 1600 distinct
brands by 2003.
A multi -brand company P& G, in its “back to basics” strategy concentrated
on brands over $ 1 billion in revenue such as Tide, Crest, Pampers and
Pringles.
While Titan introduces 350 -400 models each year, in different segments
,ranging from kids watches in the Rs 300 range to jewellery watches costing
lakhs of rupees, each year it also withdraws an equal number of models, so
that the line remains modern, manageable and profitable.
Deepening the Product Lines
Variants are added to the main brand to satisfy the consumer’s need for
variety. They also help push visibility of the brand at the store level. Colours,
fragrances, tastes, flavours, are all used to introduce variants and increase
their appeal. Lux bath soap was available initially only in the colour white.
Now it is available in different colours /flavours/bases/, and each in different
size.
Activity 1
Ascertain the product lines of the top 3 detergent (e.g. HUL, P&G and
Nirma) manufacturers in India. Suggest which products they should drop
from their product lines and why?
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41
Introduction to Product ........................................................................................................................
Management ........................................................................................................................
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3.3 BASIS FOR PRODUCT LINE EXTENSION

The following seven important factors make companies pursue line
extensions as a significant element of their marketing strategies.
Customer Segmentation
Line extension is perceived by managers as a low-cost, low-risk way to meet
the needs of various customer segments, and by using more sophisticated
and lower-cost market research and direct-marketing techniques; they can
identify and target finer segments more effectively than ever before. In
addition, the depth of audience-profile information for television, radio,
and print media has improved; managers can now translate complex
segmentation schemes into efficient advertising plans.
Consumer Desires
There is widespread volatility in consumer behaviour and brand loyalty has
taken more or less a back seat in many different categories of consumer
goods and services. More consumers than ever are switching brands and
trying products they have never used before. Line extensions try to satisfy
the desire for “something different” by providing a wide variety of goods
under a single brand umbrella. Such extensions, companies hope, would
fulfil customers’ desires while keeping them loyal to the brand franchise.
Moreover, according to studies conducted by the Point-of-Purchase
Advertising Institute, USA, consumers now make around two-thirds of
their purchase decisions about grocery and health and beauty products on
impulse while they are in the store. Line extensions, if stocked by the retailer,
can help a brand increase its share of shelf space, thus attracting consumer
attention. When marketers coordinate the packaging and labelling across all
items in a brand line, they can achieve an attention-getting billboard effect
on the store shelf or display stand, and, thus, leverage the brand’s equity.
Pricing Breadth
Managers have found a novel way of increasing profitability through line
extension. Managers often tout the superior quality of extensions and set
higher prices for these offerings than for core items. In markets subject
to slow volume growth, marketers can then increase unit profitability by
trading current customers up to these “premium” products. In this way, even
cannibalized sales are profitable at least in the short run.
In a similar spirit, some line extensions are priced lower than the lead
product. For example, American Express offers the Optima card for a
lower annual fee than its standard card, and Marriott introduced the hotel
chain Courtyard to provide a lower-priced alternative to its standard hotels.
Extensions give marketers the opportunity to offer a broader range of price
point’s in order to capture a wide audience.
Excess Capacity
Line extension helps in utilizing the excess capacity of the production
facilities of the firm. Many manufacturing operations add faster production
lines to improve efficiency and quality. The same organizations, however,
do not necessarily retire existing production lines. The resulting excess
capacity encourages the introduction of line extensions that require only
minor adaptations to current products.
42
Short-Term Gain Product Line Decisions
Besides sales promotions, line extensions represent the most effective and
least imaginative way to increase sales quickly and inexpensively. The
development time and costs of line extensions are far more predictable than
they are for new brands, and less cross-functional integration is required.
In fact, few brand managers are willing to invest the time or assume the
career risk to introduce new brands to market. Line extensions offer quick
rewards with minimal risk. Senior executives often set objectives for the
percentages of future sales to come from products recently introduced.
At the same time, under pressure from stock exchanges for quarterly
earnings increases, they do not invest enough in the long- term research
and development needed to create genuinely new products. Such actions
necessarily encourage line extensions.
Competitive Intensity
Mindful of the link between market share and profitability, managers often
see extensions as a short-term competitive device that increases a brand’s
control over limited retail shelf space and its overall demand for the category.
Close-up and Colgate toothpastes brands both are available in more than
15 types and package sizes, have increased their market shares in the last
decade at the expense of smaller brands that have not been able to keep pace
with their new offerings.
Trade Pressure
The proliferation of different retail channels for consumer products, from
club stores to hypermarkets, pressures manufacturers to offer broad and
varied product lines. While retailers object to the proliferation of marginally
differentiated and “me-too” line extensions, trade accounts themselves
contribute to stock-keeping unit (SKU) proliferation by demanding either
special package sizes to fit their particular marketing strategies (for example,
bulk packages or multipacks for low-price club stores) or customized,
derivative models that impede comparison shopping by consumers.

3.4 The disadvantages of Line

extensions
Given this backdrop, it’s easy to visualise why so many managers have been
swept into line-extension mania. But, as more managers are discovering, the
problems and risks associated with extension proliferation are formidable.
Weaker Line Logic
Manager often extend a line without removing any existing items. As
a result, the line may expand, to the point of over segmentation, and the
strategic role of each item becomes muddled. Salespeople should be able to
explain the commercial logic for each item. If they cannot, retailers turn to
their own data the information collected by checkout scanners to help them
decide which items to stock. Invariably, fewer retailers stock an entire line.
As a result, manufacturers lose control of the presentation of their lines at
the point of sale, and the chance that a consumer’s preferred size or flavour
will be out of stock, increases.
A disorganized product line can also confuse consumers, motivating those
less interested in the category to seek out a simple, all-purpose product,
such as All Temperature Cheer in the Laundry detergent category.
Lower Brand Loyalty
Some marketers mistakenly believe that loyalty is an attitude instead of
understanding that loyalty is the behaviour of purchasing the same product
43
Introduction to Product repeatedly. In the past 50 years, many of the oldest and strongest brands
Management have had two and three generations of customers buying and using products
in the same way. When a company extends its line, it risks disrupting the
patterns and habits that underlie brand loyalty and re-opening the entire
purchase decision.
Although line extensions can help a single brand satisfy a consumer’s diverse
needs, they can also motivate customers to seek variety and, hence, indirectly
encourage brand switching. In the short run, line extensions may increase
the market share of the overall brand franchise. But if cannibalization and a
shift in marketing support decrease, the share held by the lead product and
the long-term health of the brand will be weakened. This is particularly true
when line extensions diffuse rather than reinforce a brand’s image in the
eyes of long-standing consumers, without attracting new customers.
Underexploited Idea
By bringing important new products to market as line extensions, many
companies leave money on the table. Some product ideas are big enough
to warrant a new brand. The line extensions serve the career goals of a
manager of an existing brand better than a new brand does, but long-term
profits are often sacrificed in favour of short- term risk management.
Stagnant Category Demand
Line extensions rarely expand total category demand. People do not eat
or drink more, wash their hair more, or brush their teeth more frequently,
simply because they have more products to choose from. In fact, a review of
several product categories shows no positive correlation between category
growth and line extensions. If anything, there is an inverse correlation as
marketers try in vain to reinvigorate declining categories and protect their
shelf space through insignificant line extensions.
Poorer Trade Relations
Retailers cannot provide more shelf space to a category simply because
there are more products within it. They have responded to the flood
by rationing their shelf space, stocking slow-moving items only when
promoted by their manufacturers, and charging manufacturers slotting fees
to obtain shelf space for new items and failure fees for items that do not
meet target sales within two or three months. As a manufacturer’s credibility
has declined, retailers have allocated more shelf space to their own private
label products. Competition among manufacturers for the limited slots still
available escalates overall promotion expenditures and shifts margins to the
increasingly powerful retailers.
More Competitor Opportunities
Share gains from line extensions are typically short-lived. New products
can be matched quickly by competitors. What’s more, line-extension
proliferation reduced the retailer’s average turnover rate and profit per SKU
(Stock Keeping Unit) this can expose market leaders to brands that do not
attempt to match all the leaders’ line extensions but instead offer product
lines concentrated on the most popular line extensions. As a result, on a
per - SKU basis, lesser known brands, as compared to market leaders, can
deliver a higher direct product profit to the retailer than brands with -larger
shares and more SKUs.
Activity 2
Take two leading Washing Machine manufacturers (e.g. Siemens and IFB)
in India and analyse the changes in their product line over the last five years
and its effect on the total market share of each company.
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44
....................................................................................................................... Product Line Decisions
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3.5 FACTORS INFLUENCING PRODUCT LINE

DECISIONS
An in-depth analysis of a product’s potential to achieve a desired level
of return on the company’s investment is an essential component of the
marketing planning process. An analysis of this type not only assesses
financial opportunities but also provides ideas about how to compete better
given structural characteristics of the category.
The various factors influencing the product line decisions of a corporation
are:
Category Size
Category size is an important piece of data about any market. It is clearly
an important determinant of the likelihood that a product will generate
revenues to support a given investment. In general, larger markets are better
than smaller ones. Besides having more market potential, large categories
usually offer more opportunities for segmentation than small ones. Large
markets, however, tend to draw competitors with considerable resources,
thus making them unattractive for small firms.
Market Growth
Market growth is a key market factor advocated by various planning
models. Not only is current growth important, but growth projections over
the horizon of the plan are also critical. Fast-growing categories are almost
universally desired due to their abilities to support high margins and sustain
profits in future years. However, like large categories, fast-growing ones
also attract competitors.
Product Life Cycle
Category size and category growth are often portrayed simultaneously in
the form of the product life cycle. Usually presumed to be S shaped, this
curve breaks down product sales into four segments: introduction, growth,
maturity, and decline. The introduction and growth phase are the early
phases of the life cycle when sales are growing rapidly, maturity represents
a levelling off in sales, and the decline phase represents the end of the life
cycle.

45
Introduction to Product In the introductory phase, both the growth rate and the size of the market
Management are low, thus making it unattractive for most prospective participants, who
would rather wait on the side-lines for a period of time. When market
growth and sales start to take off, the market becomes more attractive. In
the maturity phase, the assessment is unclear; while the growth rate is low,
the market size could be at its peak. Finally, the decline phase usually is so
unattractive that most competitors flee the category.
Sales Cyclicity
Many categories experience substantial inter year variation in demand.
Highly capital-intensive business such as automobiles, steel and machine
tools, are often tied to general business conditions and, therefore, suffer
through peaks and valleys of sales.
Seasonality
Seasonality - intra -year cycles in sales is generally not viewed positively.
Seasonal business tends to generate price wars because there may be few
other opportunities to make substantial sales. However, most products are
seasonal to some extent. Some, of course, are exclusively seasonal.
Profits
While profits vary across products or brands in a category, large inter
-industry differences also exist.
These differences in profitability across industries are actually based on a
variety of underlying factors. Differences can be due to factors of production
(e.g., labour versus capital intensity, raw materials), manufacturing
technology, and competitive rivalry. Product categories that are chronically
low in profitability are less attractive than those that offer higher returns.
A second aspect of profitability is that it varies over time. Variance in
profitability is often used as a measure of industry risk. Product managers
must make a risk-return trade-off, evaluating the expected returns against
the variability in those returns.

3.6 CATEGORY FACTORS INFLUENCING

PRODUCT LINE DECISIONS
Although the aggregate factors just described are important indicators of the
attractiveness of a product category, they do not provide information about
underlying structural factors in assessing the structure of industries: such as
46
●● The threat of new entrants. Product Line Decisions

●● The bargaining power of buyers

●● The bargaining power of suppliers.
●● The amount of intra -category rivalry.
●● The threat of substitute products or services.
Threat of New Entrants
If the threat of new entrants into the product category is high, the
attractiveness of the category is diminished. Except for the early stages
of market development, when new entrants can help a market to expand,
new entrants bring additional capacity and resources that usually heighten
the competitiveness of the market and diminish profit margins. Even at
early stages of market growth, the enthusiasm with which new entrants are
greeted is tempered by who the competitors are .The strength of barriers
to entry erected by the existing competition impact the likelihood of new
competitors entering the market. Some of the potential barriers to entry are -
●● Economies of Scale
●● Product Differentiation
●● Capital Requirements
●● Switching Costs
●● Distribution
Bargaining Power of Buyers
Buyers are people or institutions that receive finished goods or services
from the organizations in the category being analysed. Buyers can be
distributor’s manufacturers, original equipment manufacturers (OEMs), or
end - customers.
High buyer bargaining power is negatively related to industry attractiveness.
In such circumstances, buyers can force down prices and play competitors
off against one another for benefits such as service. Some conditions that
occur when buyer bargaining power is high include the following:
●● When the product bought is a large percentage of the buyer’s costs.
●● When the product bought is undifferentiated.
●● When the buyers earn low profits.
●● When the buyer threatens to backward integrate.
●● When the buyer has full information.
●● When substitutes exist for the seller’s product or service.
Again, the product manager’s concern is to decrease the buying power. This
can be accomplished, by increasing product differentiation (e.g., making
services such as technical assistance or manufacturing-related consulting
built into switching costs).
Bargaining Power of Suppliers
Suppliers are any institutions that supply the category of concern with
factors of production such as labour, capital raw materials, and machinery.
High supplier’s power is clearly not an attractive situation because it allows
suppliers to dictate price and other terms, such as delivery dates, to the
buying category. Some conditions that prevail when supplier bargaining
power is high are:
47
Introduction to Product ●● When suppliers are highly concentrated, that is, dominated by a few
Management firms.
●● When there is no substitute for the product supplied.
●● When the supplier has differentiated its product or built in switching
costs.
●● When supply is limited.
Current Category Rivalry
Product categories characterized by intense competition among the major
participants are not as attractive as those in which the rivalry is more sedate.
A high degree of rivalry can result in escalated marketing expenditures, price
wars, employee raids, and related activities. Such actions can exceed what is
considered `normal’ market competition and can result in decreased welfare
for both consumers and competition. Some of the major characteristics of
categories exhibiting intensive rivalries are:
●● Many competitors
●● Slow growth
●● High fixed costs
●● Lack of product differentiation
●● Personal rivalries
●● Pressure from substitutes
Categories making products or delivering services for which there are
a large number of substitutes are less attractive than those that deliver a
relatively proprietary product, one that uniquely fills a customer need or
solves a problem. Since almost all categories suffer from the availability
of substitutes, this may not, be a determinant of an unattractive product
category. However, some of the highest rates of return are earned in
categories in which the range of substitutes is small.
Category Capacity
Constant overcapacity is not a positive sign for long-term profitability. When
a category is operating at capacity, its costs stay low and its bargaining
power with buyers is normally high. Thus, a key indicator of the health of
a category is whether there is a consistent tendency toward operating at or
under capacity.

Impact of Category Factors

on Attractiveness

Activity 3
If you are a European fashion clothes manufacturer aiming at the Indian
market, what are the conditions that will influence your product line
decisions? Outline all the factors and decide upon the length of your product
line.
48
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3.7 SUMMARY
As discussed there are multiple external and internal factors affecting
the product line decisions to be made by the Product Manager? Product
Line decisions are ultimately a function of the company’s short term and
long term objectives and the external and internal factors prevailing in the
environment and within the company. This is the only basis for reaching at
a product line decision aimed at improving the overall profitability of the
firm.

3.8 Self Assessment Questions

1. Undertake a study to find out the changes in LG’s different product
lines (ACs and Refrigerators) in the last decade i.e. 2010 and study
the impact on their market shares. Were their strategies successful?
Why or why not?
2. HUL has a large number of product lines. Is it right to have so many or
would it be too much of a strain on its resources in future to maintain
them?

3.9 References/ Further Readings

Ramaswamy & Namakumari, Marketing Management 6e ( 2018) : Indian
Context: Global Perspective, Sage /Texts.
Robert Dolan, Product Policy- HBR,( April 20, 2015).
Subhash C Jain, Marketing Strategy, Planning Implementation and Control
(2011),
Cengage Learning.

49
 Unit 4 Product Portfolio
Objectives
After reading this unit you should be able to:
●● explain the concept of product portfolio analysis
●● describe the various types of product portfolio models
●● discuss the usage of portfolio models for decision making.
Structure
4.1 Introduction
4.2 The Portfolio Concept
4.3 The Logic of Portfolio Approach
4.4 Types of Display Matrices
4.5 The BCG Growth-Share Matrix
4.6 GE’s Strategic Business Planning Grid
4.7 Shell’s Directional Policy Matrix
4.8 PIMS Model
4.9 Arthur D Little Co. Matrix Model
4.10  Hofer’s Market Evolution
4.11 Utility of Display Matrices
4.12 Summary
4.13 Self Assessment Questions
4.14 References/Further Readings

4.1 Introduction
Product portfolio analysis is an increasingly popular framework for strategic
planning within multi-product corporations. Unless the entire product
portfolio is considered explicitly for decision making, sub optimal decisions
are quite likely. In product portfolio analysis, all the products of the company
are evaluated on important dimensions like, profitability, growth potential
and associated risk involved in investment etc. Such an evaluation facilitates
and provides valuable inputs for deciding on investment on product market
strategies like, addition of products, modification of existing products, and
deletion of low performing products.

4.2 Portfolio Concept

The basis of the portfolio concept lies in management of financial resources
wherein the optimal portfolio of stocks are decided based on the trade off
between the expected returns and associated risk of the stock.
Peter Drucker has suggested a six-fold product classification-for effective
resource allocation. His classification tends to have two product groups
with positive contributions one with a marginal contribution and three with
negative contributions. A description of these groups follows:
1. Tomorrow’s breadwinners
2. Today’s breadwinners
50
3. Products with potential to contribute if attended to yesterday’s Product Portfolio
breadwinners
4. Yesterday’s breadwinners
5. “Also ran”
6. Failures
In this typology, resource allocation is based on the ranking. Tomorrow’s
breadwinners and today’s breadwinners are provided with necessary
resources. While yesterday’s bread winners “Also ran” and Failures are
deprived of resources and sometimes allowed to die. The products falling
at rank three are provided with resources depending on their expected
potential.
In this procedure, product contribution margin is used as the sole decision
making indicator. Subsequently, more sophisticated portfolio models have
been developed incorporating several criteria like, market share, market
growth, profitability, expected return, risk etc.
The advantage of product portfolio analysis is that it offers a structured
set of dimensions to evaluate the current products comprehensively. The
dimensions may vary among different portfolio models proposed in the
marketing literature. There are two kinds of portfolio models the first
suggests normative dimensions as in the case of the share/growth matrix
proposed by the Boston Consulting Group, popularly known as the BCG
matrix comprising relative market share and industry growth rates as the
two dimensions.
The primary tasks involved in portfolio analysis are to classify the products
on the dimensions of the matrix and to develop strategies to move the
products on the matrix towards a target or ideal matrix. The target matrix
may include potential segments, products etc. This extended portfolio
would reflect the objectives of the management, and the desired direction
of growth. This would help in devising guidelines for resource allocation.
For constructing the product portfolio matrix, three critical decisions have
to be considered as mentioned below:
●● trend of the business considered for analysis,
●● defining the served markets
●● time frame for analysis.
Level of Business Unit
Product portfolios could be analysed at different levels starting from
Corporate, Strategic Business Units, product lines and so on, so forth.
Served Market
Product portfolios could be constructed for every segment as well as across
served market segments. The served market refers to the market segments of
the total market within which a firm actively competes. Quite often portfolio
analysis is carried out not only with respect to the served market, but for
higher level product markets as well. They are, in fact, complementary to
each other. When the portfolio is restricted to the served market, the focus is
on the consumer point of view, such as positioning and consumer perception
about the complete assortment provided to the market. At a higher level
portfolio analysis the focus is more on performance of each product in the
served market.
Time Frame for Analysis
The first dilemma the decision maker encounters is whether to use historical
data or to incorporate the period for which decisions are being taken.
51
Introduction to Product However, mostly historical data is used for the analysis with an assumption
Management that historical trends of growth are going to continue in the decision period,
too. In the contexts where this assumption does not hold good, forecasts
have to be made for the decision period and incorporated in the portfolio
model.

4.3 THE LOGIC UNDERLYING THE

PORTFOLIO APPROACH
The portfolio models analysis is based on the following philosophy:
1) The opportunities for the product/market differ.
2) Products inherit different competitive strengths and exploiting
opportunities.
3) In resource allocation decision for products, the major considerations
are opportunity for product growth and profitability.
4) Corporate objectives would be decided based on the cumulative
opportunities for all the products and competitive strength of these
products.
5) Based on the corporate and individual product objectives, resources
would be allocated. However, it is not a straightforward process; it
involves several interactions based on much involved analysis of
sources and uses of resource

4.4 TYPES OF DISPLAY MATRICES

The purpose of portfolio analysis is to optimally allocate resources for the
best total return, with focus on the corporate strategies. Many different
approaches involving different matrices have evolved over the years; with
the common objective of successful diversification. We discuss below these
matrices:
1. Boston Consulting Group’s Growth-Share Matrix
This is a two-by-two product portfolio analysis using Market Growth Rate
and Relative Market Share. It identifies its segments as Dogs, Cows, Stars
and Question Marks (also called Wild Cat or Problem Children). These
different businesses are categorized in terms of cash flow. Each segment
is then populated by bubbles whose size is proportional to the size of the
business activity, expressed in terms of sales, assets or some other measure.
2. McKinsey Matrix
This matrix is generally associated with General Electric and Shell Companies.
It is a three-by-three matrix, which divides Industry Attractiveness and
Business Strength, into low, medium, and high segments each. The parameters
are compound variables of different factors, to be either subjectively judged
or objectively computed based on weighted judgements.
3. Strategic Planning Institute’s Matrix
Strategic Planning Institute’s program on Profit Impact of Market Strategy
(PIMS) compares the company’s profitability with the average profitability
of the associated industry. DIMS matrix is based on business average
profitability (PAR ROI), an industry characteristic determined by a cross-
sectional, multi- dimensional regression study of the profitability to different
businesses. This method avoids the judgmental weights of the previous
approach, but some criticize this approach because of its heterogeneous
population of dissimilar businesses.
52
4. Arthur D. Little Company’s Matrix Product Portfolio
This matrix uses Life Cycle Stages (Embryonic, Growth, Mature and
Decline) with Business Strength (Weak, Tenable, Favourable, Strong and
Dominant). The grid segments are then classified into Build, Hold, Harvest
and Unacceptable ROI
5. Hofer’s Product / Market Evolution Matrix
In this matrix, products are plotted in terms of their product /market evolution
and their competitive position.
Besides the above, there are other matrices associated with different
consultants who have developed them to suit their specific needs for market
differentiation. Some of the above mentioned matrices are described in
detail below, starting with the pioneering BCG matrix.

4.5 THE BCG GROWTH-SHARE MATRIX

BCG Portfolio Analysis is based on the premise that majority of the
companies carry out multiple business / products / activities in a number
of different product-market segments. Together these different businesses
form the Business Portfolio, which can be characterized by two parameters:
1. Company’s relative market share of the business, representing
competitive position of the firm, and
2. The overall growth rate of the business.
The BCG model proposes that for each business activity within the corporate
portfolio a separate strategy must be developed depending on its location
in a two-by- two matrix of high and low segments on each of the above
mentioned axes. These parameters are discussed in detail below.
Relative market share is based on the assumption that the relative
competitive position of the company would determine the rate at which
the business generates cash. An organisation with a higher relative share of
the market compared to its competitors will have higher profit margins and
therefore higher cash flows. (This point of view can be debated upon since
a high market share, per se, may or may not be linked to high profitability
or growth in future). Relative Market Share is defined as the market share of
the relevant business divided by the market share of its largest competitor.
Thus, if Company X has 10 per cent, Company Y has 20 per cent, and
Company Z has 60 per cent share of the market, then X’s Relative Market
Share is 1/6, Y’s Relative market Share is 1/3, and Z’s Relative Market
Share is 60/20 = 3. Company Z has Company Y as its leading competitor,
whereas Companies X and Y have Company Z as their leading competitor.
The selection of the Rate of Growth of the associated industry is based on
the understanding that an industrial segment with high growth rate would
facilitate expansion of the operations of the participating company. It will
also be relatively easier for the company to increase its market share, and
have profitable investment opportunities. A high growth rate business
provides opportunities to plough back earned cash into the business and
further enhance the return on investment. The fast growing business,
however, demands more cash to finance its growth. If an industrial sector is
not growing, it would be more difficult for the participating company to have
profitable investments in that sector. In a slow growth business, increase in
the market share of a company would generally come from corresponding
reduction in the competitor’s market share.
The BCG matrix classifies the business activities along the vertical axis
according to the `Business Growth Rate’ (mean growth of the market for
the product), and the `Relative Market Share’ along the horizontal axis. The
53
Introduction to Product two axes are divided into Low and High sectors; so that the BCG matrix is
Management divided into four quadrants (refer to Figure 6.1). Businesses falling into each
of these quadrants are classified with broadly different strategic categories,
as explained below:

Cash Cows: The business with low growth rate and high market share are
classified in this quadrant. High market share leads to higher generation of
cash and profits. The low rate of growth of the business implies that the cash
demand for the business would be low. Thus Cash Cows normally generate
large cash surpluses. Cows can be `milked’ for cash to help to provide cash
required for running other diverse operations of the company. Cash Cows
provide the financial base for the company. These businesses have superior
market position and invariably low costs. But, in terms of their future
potential, one must keep in mind that these are mature businesses with low
growth rate.
Dogs: If the business growth rate is low and the company’s relative market
share is also low, the product is classified as Dog. The low market share
normally also means poor profits. As the growth rate is also low, attempts
to increase market share would demand prohibitive investments. Thus, the
cash required maintaining a competitive position often exceeds the cash
generated, and there is a net negative cash flow. Under such circumstances,
the strategic solution is to either liquidate, or, if possible, harvest or divest
the dog business.
Question Marks: Like dogs, Question Marks are products with low market
share, but the product has a high growth rate. Because of their high growth,
the cash requirement is high, but due to their low market share, the cash
generated is also low. As the business growth rate is high, one strategic
option is to invest more to gain market share, pushing from low share to high.
The question mark business then moves to a Star (discussed later) quadrant,
and subsequently has the potential to become a cash cow, when the business
growth rate reduces to a lower level. Another strategic option when the
company cannot improve its low competitive position (represented by low
market share) is to divest the question mark business. These products are
called Question Marks because they raise the question as to whether more
money should be invested in them to improve their relative market share
and profitability, or they should be divested and dropped from the portfolio.
Stars: Products, which have high growth rate and high market share, are
called Stars. Such businesses generate as well as use large amounts of
cash. The stars generate high profits and represent the best investment
opportunities for growth. The best strategy regarding stars is to make
the necessary investments and consolidate the company’s high relative
competitive position.
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BCG Matrix-Building Procedure Product Portfolio
The Boston Consulting Group suggests the following step-by-step procedure
to develop the business portfolio matrix and identify the appropriate
strategies for different products.
●● Classify various activities of the company into different business
segments or Strategic Business Units (SBUs).
●● For each business segment, determine the growth rate of the market.
This is later plotted on a linear scale.
●● Compile the assets employed for each business segment and determine
the relative size of the business within the company.
●● Estimate the relative market shares for the different business segments.
This is generally plotted on a logarithmic scale.
●● Plot the position of each business on a matrix of business growth rate
and relative market share. A bubble represents the size of the business;
a circle with a diameter corresponding to say the assets employed in
that business.
For precise plotting, it has been recommended that the radius of a bubble
corresponding to a business/product may be defined as:
r = square root of (P * R2)
Where, R = radius of the large circle representing total company sales, and
P = sales of a product as percentage (expressed in decimal) of the total
sales.
Arbitrary lines divide the four quadrants. In most of the cases 10 per cent
volume growth is the typical dividing line between high and low growth
businesses, and a relative market share of 1.5 X may separate Stars from
the Question Marks in high- growth industries. On the other hand, the
recommended relative market share dividing Cows and Dogs is IX for low
growth industries. It is, however, added that these dividing lines are merely
approximate guidelines and may be changed if desired.
BCG Matrix-Strategic Implications
Most companies will have different segments scattered across the four
quadrants of the BCG matrix, corresponding to Cash Cow, Dog, Question
mark and Star businesses.
The general strategy of a company with diverse portfolio is:
I. To maintain its competitive position in the Cash Cows, but avoid
over-investing.
II. The surplus cash generated by Cash Cows should be invested first in
the Star businesses, if they are not self-sufficient, to maintain their
relative competitive position.
III. Any surplus cash left with the company may be used for selected
Question Mark businesses to gain market share for them.
IV. Those businesses with low market share, and which cannot be
adequately funded may be considered for divestment.
V. The Dogs are generally considered as the weak segments of the
company with limited or no new investments allocated to them.
The BCG Growth-share matrix links the industry growth characteristic with
the company’s competitive strength (market share), and develops a visual
display of the company’s market involvement, thereby indirectly indicating
current resource deployment. (The sale to asset ratio is generally stable over
55
Introduction to Product time across industries). The underlying logic is that investment is required
Management for growth while maintaining or building market share. But, while doing
so, a strong competitive business in an industry with low growth rate will
provide surplus cash for development elsewhere in the Corporation. Thus,
growth uses cash, whereas market competitive strength is a potential source
of cash.
In a sense, the BCG matrix can be regarded as a pictorial representation
of the sources and uses of funds statement. Market Share is considered
valuable because it is a source of profits. Profits are the fruit of accumulated
experience, giving rise to a cost advantage. The model assumes that high
market growth of star businesses wills subsequently slowdown, permitting
the market leader to take cash out of the Cow business. Some of the
underlying assumptions may not always hold true for some products. For
instance, electronic appliances and the so-called fashion goods have very
short life cycles, whereas staples like bread have very extended life cycles.
These businesses may, therefore, not follow the typical behaviour pattern
assumed by the BCG growth-share matrix.
Conditions for Having a Balanced Portfolio
An organisation would want to have a balanced portfolio:
●● cash cows of sufficient size and/or number that can support other
products in the portfolio
●● stars of sufficient size and/or number which will provide sufficient
cash generation when the current cash cows can no longer do so
●● problem children that have reasonable prospects of becoming
future stars
●● no dogs or, if there are any, there would need to be good reasons for
retaining them.
Limitations of the BCG Matrix
The Growth-share BCG Matrix has certain limitations and weak points that
must be kept in mind while using portfolio analysis for developing strategic
alternatives. These are as discussed below:
1. Predicting Profitability from Growth and Market Share
BCG analysis assumes that profits depend on growth and market share. The
attractiveness of an industry may be different from its simple growth rate,
and the firm’s competitive position may not be reflected in its market share.
Some other sophisticated approaches have been evolved to overcome such
limitations.
There have been specific research studies, which illustrate that the well-
managed Dog businesses can also become good cash generators. These
organisations relying on high-quality goods, with medium pricing and
judicious expenditure on R&D and marketing, can still provide impressive
return on investment of above 20 per cent.
2. Problems in Determining Market Share
There is a heavy dependence on the market share of a business as an
indicator of its competitive strength. The calculation of market share is
strongly influenced by the way the business activity and the total market are
defined. For instance, the market for helicopters may encompass all types
of helicopters, or only heavy helicopters or only heavy military helicopters.
Furthermore, from a geographical point of view the market may be defined
on a worldwide, national or even regional basis. In case of complex and
interdependent industries, it may also be quite difficult to determine the
market share based on the sales turnover of the final product only.

56
3. Effect of Experience Ignored Product Portfolio
In the BCG approach, businesses in each of the different quadrants
are viewed independently for strategic purposes. Thus, Dogs are to be
liquidated or divested. But, within the framework of the overall corporation,
useful experiences and skills can be acquired by operating low-profit Dog
businesses, which may help in lowering the costs of Star or Cash Cow
businesses. This may contribute to higher corporate profits.
4. Disregard for the Human Aspect
The BCG analysis, while considering different businesses does not take into
consideration the human aspects of running an organization. Cash generated
within a business unit may come to be symbolically associated with the
power of the concerned manager. Consequently, the manager running a
Cash Cow business may be reluctant to part with the surplus cash generated
by his unit. Similarly, the workers of a Dog business which were decided to
be divested may react strongly against changes in the ownership. They may
deem the divestiture as a threat to their livelihood or security. Thus, BCG
analysis could throw up strategic options, which may or may not be easy to
implement.
5. Modifications in BCG Approach
It was in 1981 that the Boston Consulting Group realised the limitations of
equating market share with the competitive strength of the company. They
have admitted that the calculation of market share is strongly influenced by
the way business activity and the total market domain is defined. A broadly
defined market will give lower market share, whereas a narrow market
definition will result in higher- market share resulting in the company as the
leader. It was, therefore, recommended that products should be regrouped
according to the manufacturing process to highlight the economies of scale
manufacturing, instead of stressing the market leadership.
On the other hand, BCG still maintains that for branded goods it is important
to be the market leader so that the advantages of economies of scale and price
leadership can be fully utilised. But they also concede that such advantages
may still be achieved even if the company is not the largest producer in
the industry. Some other versions of portfolio analysis have, however,
developed much beyond these minor modifications of BCG analysis.
Activity 1
Draw the BCG matrix for Gujerat Milk Marketing Federation (GCMMF)
in the space below. Discuss what you need to do to optimise profits for the
next 5 years. Draw up your Marketing plan describing the 4Ps for your Stars
and Question Marks. Would you like to maintain the dogs or do you see a
future for them. Explain and justify.
Space for Diagram

57
Introduction to Product
Management 4.6 General Electric (or McKinsey)
matrix
This matrix uses market attractiveness as not merely the growth rate of
sales of the product, but a compound variable dependent on different factors
influencing the future profitability of the business sector. These different
factors are either subjectively judged or objectively computed on the basis
of certain weights, to arrive at the Market Attractiveness Index. The Index is
thus based on a thorough environmental assessment influencing the sectoral
profitability.
The Market Attractiveness/SBU Strength Matrix: As can be seen in the
diagram below, the matrix has four dimensions on two axes.
●● Industry attractiveness:-which includes the size, growth, diversity,
profitability and competitive structure of the industry, as well as
relevant political, economic, social and technological factors.
●● Business or competitive strengths:-another composite dimension
including size, growth, share, position, profitability, image, strengths
and weaknesses.
●● Size of industry:-products or services (strategic business units) are
entered onto the policy matrix as circles, with size proportional to
turnover size of circle.
●● Share of industry:- represented by a segment of the circle.

High

Long-term
industry Medium
attractiveness

Low

Strong Average Weak

Business strength/competitive position

Each axis should be defined in terms that are meaningful to that company.
Some examples are given below.
Competitive Strengths Industry Attractiveness
• Relative market share  Market size, growth, diversity
• Distribution/brand strengths  Inflation recovery
• Technology strengths  Technology protection
• Innovation/management  Socio/political risks
• Profit margins relative to  Economies of scale
competitors  Seasonality
• Ability to compete on price and  Cyclicality
quality  Barriers to entry and exit
• Knowledge of customer and
market
• Calibre of management
58
Strategic choices Product Portfolio
This matrix can also be used to develop and clarify strategic choices:
a. depending on where a unit is positioned in the matrix, its broad
strategic mandate will be to invest/build, hold or harvest
b. arrows can be attached to the circles showing the direction in which
the strategist wants the product to move
c. the direction of movement can often be changed by management
action for example; competitive strength could be increased if
resources were directed at technological innovation.
The implied strategies may be as shown in the chart below:
Business strength/Competitive position

Strong Average Weak

Long-term • Enhance • Hold leadership • Maintain
industry leadership position leadership
attractiveness • Diversify • Leverage in more
High product/market strengths into attractive
segment more attractive segments
• Re-invest most segments • Harvest work
aggressively • Use economies segments
in technology, of scale to • Shrink
capacity and outspend production
marketing competition line
Long-term • Avoid ‘me too’ • Increase level • Harvest
industry strategy segmentation by pricing
attractiveness • Segment market to differentiate up, selling
Medium carefully strategies shares and
• Differentiate between growth cutting costs
product, service and harvest aggressively
or business • Avoid through line
approach perpetrating pruning
• Concentrate on high shared
re-investment overheads
Long-term • Apply high • Harvest by • Divest or
industry degree of sale to larger liquidate
attractiveness segment focus company in
Low • Seek advantage, market
e.g. proprietary
technology
Strengths and Weaknesses of SBU Strength Matrix
There are strengths and weaknesses of this approach.
●● The use of multiple criteria provides sounder judgement.
●● The criteria used can be tailored to business level or business type and
the matrix is relevant to many business situations.
●● However, the analysis is not totally quantitative and judgements need
to be made.
●● To be effective the matrix needs sophisticated users.

59
Introduction to Product
Management 4.7 SHELL’S DIRECTIONAL POLICY MATRIX
The Directional Policy Matrix (DPM) initially worked out by the Shell
group is a framework which can be used to classify and categorise an
organisation’s business activities in terms of its strengths, capabilities or
market position, and the way it perceives markets to be attractive. The basic
structure of a DPM is illustrated in the diagram below:

The purpose of the matrix is to diagnose an organisation’s strategic

options in relation to those two composite dimensions; business strengths
and market attractiveness. The DPM, therefore, enables organisations to
conduct an analysis of their portfolio of products or areas of operation. The
analysis is performed, first, according to the potential each product area or
business has to achieve the organisation’s objectives and second, according
to the organisation’s ability to take advantage of the range of opportunities
it faces. The matrix requires its users to identify a number of factors which
will act as indicators of the attractiveness of a market or opportunity to
them and, similarly, a number of factors which will act as indicators of
organisational strengths. These factors will obviously vary from one product
or business area to another, since what will be attractive to one activity may
not be attractive in another area of operation, or, at least, may not be equally
attractive. Similarly, a strength or capability in one area may not exist or be
strength in another.
In comparison with other portfolio analysis tools, such as the Boston Matrix,
the DPM is a more sophisticated mechanism. Like its forerunner, the Boston
Matrix, it can be used to derive quantitative comparisons between areas of
activities, but, in addition, is able to take into account a much wider range of
decisional influences. In fact, the DPM was originally conceived by General
Electric and developed by McKinsey (management consultants), and later
Shell, as a means of overcoming some of the limitations the Boston Matrix
was perceived to have. It is usually drawn as a 3 x 3 box matrix, rather than
the more standard 2 x 2 format, in order to encompass the range of strategic
options it covers. In the end, the number of lines drawn is irrelevant. What
is more important is defining the substance of the matrix and its axes, and
adopting an orderly methodology for its application
Strategic Business Unit (SBU):
Since the purpose of performing a DPM analysis is to provide a basis for
determining policy and allocating resources for the alternative products or
business within an organisation, it is important to consider the organisational
level at which the analysis should be conducted. This is normally taken as
being that of the ‘strategic business unit’ (SBU).
60
The most common definition of a SBU is that it will: Product Portfolio

●● Have common segments and competitors for most of its products.

●● Operate in external markets.
●● Be identifiable as a discrete and separate unit.
●● Be managed by people who will have control over most of the areas
critical to success
Thus, the process of defining an SBU can be applied all the way down
to product or departmental level. It is, therefore, possible to use the DPM
for any unit that has within it a number of different variables that can be
usefully plotted using a two-dimensional matrix. There must obviously be
two or more markets or segments between which managers wish to choose,
and these can be either existing or potential markets. It is usually felt that
there should be at least three and a maximum of ten areas for analysis if
using the DPM is to be of value.
Rather than simply include market growth and share, the DPM considers a
range of factors including the following.
Business Sector Prospects
●● Market: demographic factors, growth, seasonality, maturity.
●● Competition: number and size of competitors, price competition,
barriers to entry, substitutes.
●● Technology: sophistication, rate of change, lead time, patents.
●● Economic: leverage, capital intensity, margins.
●● Government: subsidies/grants, purchases, protection, regulation,
taxation.
●● Geography: location, markets, communications, environment.
●● Social: pressure groups, trade unions, availability of labour.
Competitive Capabilities
●● Market: share, growth, product maturity, product quality, product
mix, marketing ability, price strategy, customer loyalty.
●● Technological: skills, patent protection, R&D, manufacturing
technology.
●● Production: costs, capacity utilisation, inventory control, maintenance,
extent of vertical integration.
●● Personnel: employee quality, top management quality, industrial
relations, trade union strength, training, labour costs.
●● Financial: resources, capital structure, margins, tax position, financial
control, investment intensity
Possible DPM Strategic Choices
The cell labels shown in the diagram above represent possible strategic
choices or types of resource deployments most appropriate for the firm,
given its score on each of the two axes. More specifically these cell labels
have the following implications.
●● Withdrawal: - probably already losing money; net cash flow negative
over time. Losses may be minimised by divesting or even liquidation.

61
Introduction to Product ●● Phased withdrawal: - probably not generating sufficient cash to
Management justify continuation; assets can be redeployed.
●● Cash generation: - equivalent to a ‘cash cow’ in the BCG grid. This
cell would be occupied by a firm or product in later stages of the life
cycle that does not warrant heavy investment, but can be ‘milked’ of
cash due to its strong competitive position.

●● Proceed with care: - similar to a ‘problem child’; firms falling in this

sector may require some investment support but heavy investment
would be extremely risky.
●● Growth: - a firm, product or SBU in these sectors would call for
investment support to allow growth with the market. It should generate
sufficient cash on its own.
●● Double or quit: - units in this sector should become ‘high fliers’ in the
not-too-distant future. Consequently those in the upper right corner
of this cell should be singled out for full support. Others should be
abandoned.
●● Try harder: - external financing may be justified to push a unit in this
sector to a leadership position. However, such a move will require
judicious application of funds.
●● Leader: - the strategy for this segment is to protect this position by
external investment (funds beyond those generated by the unit itself -
occasionally); earnings should be quite strong and a major focus may
be maintaining sufficient capacity to capitalise on strong demand.
Strategic Movements
In addition to considering the position on the directional policy matrix in
static terms, changes over time need also to be considered.
●● Ideally, products in the cash-generating sectors should be able to
finance expenditure on products in the attractive business/weak
position sectors, so as to move them to the attractive business/strong
position sectors.
●● Later these products move down to become cash generators themselves
and the cycle is completed.

4.8 PROFIT IMPACT OF MARKETING

STRATEGY (PIMS MODEL)
A program for the Profit Impact of Market Strategy (PIMS) was started
at General Electric, and was later used by the Strategic Planning Institute.
The PIMS program analyses data provided by member companies to
discover `general laws, which determine the business strategy in different
competitive environments producing different profit results’. Unlike the
earlier approaches using judgement for multi dimensional factors, the SPI
uses multidimensional cross-sectional regression studies of the profitability,
of more than 2,000 businesses. It then develops an industry characteristic,
business average profitability, and compares it with the performance in the
concerned company.

62
This model uses statistical relationship estimated from past experience, in Product Portfolio
place of the judgmental weights assigned for the importance of different
factors behind Market Attractiveness and Competitive Position in previous
approaches. This scientific objective approach has been criticised saying
that the analysis of relationships is based on a heterogeneous population,
i.e., different types of business, taken at different time periods. Profitability
is closely linked with market share. A 10% improvement in profitability is
linked with 5% improvement in Return on Investment (ROI). This has since
been rationalised by a number of arguments, such as `the Experience Curve
Effect’, which implies reduction in average cost with increase in accumulated
production. The larger company can use better quality management, and
thus can exercise greater market power.

4.9 ARTHUR D. LITTLE COMPANY’S MATRIX

Arthur D. Little Company’s matrix links the stages of the product life cycle
with the business strength. On the vertical axis, the businesses are classified
with respect to their business strength: Weak, Tenable, Favourable, Strong,
or Dominant: Along the horizontal axis four stages in the life cycle,
Embryonic, Growth, Mature and Decline are marked.
Arthur D Little Company’s Matrix

In the Embryonic and Growth stages the businesses are recommended

for Build strategy, except when the business strength is weak. For Mature
stage businesses with dominant to favourable strength, HOLD Strategy
is recommended. Harvest strategy is proposed for businesses in Decline
stage, with Strong or Dominant position. For weaker businesses in Mature/
Decline stage unacceptable ROI is marked.
The Advantages and Disadvantages of the ADL matrix
Unlike other models of product portfolio analysis, the ADL matrix is based
on an enhanced applicability because it fits to all situations of competition
encountered in a marketplace. Also the ADL matrix can be applied to the
fragmented industries, holding a small competitive advantage but with a large
number of ways of obtaining it (provides multiple ways of differentiation).
As such, we can say that the ADL matrix has a high degree of adaptability
to situations of a qualitative nature. A first disadvantage is that the matrix
63
Introduction to Product does not take into account a number of phenomena that can generate long-
Management term involution in the products life cycle of a company. Another weakness
is related to the high level of difficulty in terms of objective evaluation
of the ADL model variables. This is often the case for the competitive
position indicator. In other words, the difficulty lies in the fact that some
factors are qualitative in nature and there is a high risk of bias in their use.
In conclusion, we can say that the ADL matrix provides clearer results as
a company is more diversified and enables synchronization on decisions
relating to competition.

4.10 HOFER’S PRODUCT/MARKET

EVOLUTION MATRIX
Charles Hofer has proposed a three-by-three matrix where products are
plotted in terms of their product/market evolution and the competitive
position. Relative sizes of Industries are shown by circles wherein the
market of the company is shaded.

Accthis model a firm’s business is positioned in a 15-cell matrix based on

two major variables viz., stage of production-market development and the
competitive position. Charles W. Hoffer has suggested a further refinement
of GE/ Mckinsey portfolio matrix by identifying companies, particularly
new businesses, that are about to accelerate their growth. This matrix is
also called ‘life-cycle portfolio matrix. An illustrative graph representing
Hofer’s matrix is given in figure above provides potential strategies for
different units placed in the matrix.
Hofer’s matrix reflects the stage of development of the product or market.
Business units are placed on a grid showing their stage of product-market
evolution and their competitive position. Circles represent the industry and
the pie wedges represent the market share of the business unit. Hofer’s
evolution matrix is useful to develop strategies that are appropriate at
different stages of the product life cycle. In Hofer’s matrix, the vertical
axis represents the stages of product-market evolution and horizontal axis
represents the SBU’s competitive position. In this matrix, three stages
of competitive position of SBU (viz., strong, average and week) are
shown on horizontal axis. The vertical axis shows the industry’s state in
the evolutionary life cycle, starting with initial development and passing
through the growth, competitive shake-out, maturity, saturation, and decline
stages.
64
1) SBU A with average competitive position and in development stage Product Portfolio
holds out prospects for future development deserves expansion and
desired financial resources to be allotted to exploit the opportunities.
2) SBU B with strong competitive position and in growth stage requires
to adopt growth strategies to make it a future winner.
3) SBU C with weak competitive position which is in growth stage of the
industry should give lot of attention and requires a careful formulation
of marketing strategies to make it more competitive in the industry.
4) SBU D with moderately strong position is in the shake-out stage
can be probable with close attention and careful marketing strategy
formulation. This may also requires adoption of growth strategies.
5) SBU E with average competitive position and in maturity stage of the
industry needs to adopt stability strategies.
6) SBU F with moderately strong competitive position and is in the
maturity stage of the industry life cycle, needs the stability, harvest
and retrenchment strategies need to be adopted. No further funds to
be invested in this SBU. The market strategies require to hold the
market position without fall.
7) SBU G with moderately weak competitive position and is in the
decline state of the industry life cycle need to be divested immediately
to arrest any cash loss since it is in a position of losing. Revival of this
SBU is not suggested. The Hofer’s product-market evolution matrix
displays business portfolio of an international firm with relative
greater degree of accuracy and completeness.
The Hofer’s Matrix considered the following Variables:
1. Variable # (a) Market and Consumer Behaviour Variables Like:
i. Buyer needs v. Market size
ii. Purchase frequency vi. Elasticity of demand
iii. Buyer concentration vii. Buyer loyalty
iv. Market segmentation viii. Seasonality and cyclicality
2. Variable # (b) Industry Structure Variables Like:
i Uniqueness of the product vii. Transportation and distribution
costs
ii. Rate of technological change in viii. Price/cost structure
product design
iii. Type of product ix. Experience curve
iv. Number of equal products x. Degree of integration
v. Barriers to entry xi. Economy of scale etc.
vi. Degree of product
differentiation
3. Variable # (c) Competitor Variables Like:
i. Degree of specialization within iii. Degree of seller concentration
the industry
ii. Degree of capacity utilization iv. Aggressiveness of competition
4. Variable # (d) Supplier Variables Like:
i. Degree of supplier ii. Major changes in availability of
concentration raw materials

65
Introduction to Product
5. Variable # (e) Broader Environment Variables:
Management
i. Interest rates iv. Growth of population
ii. Money supply v. Age distribution of population
iii. GNP trend vi. Life cycle changes
6. Variable # (f) Organizations Variables Like:
i. Quality of products iv. Value added
ii. Market share v. Degree of customer
concentration etc.
iii. Marketing intensity
Hofer developed descriptive propositions for each stage of product life
cycle.
For example- in the maturity stage of the product life cycle, Hofer
identified the following major determinants of business strategy:
(a) Nature of buyer needs
(b) Degree of product differentiation
(c) Rate of technological change in the process design
(d) Ratio of market segmentation
(e) Ratio of distribution costs to manufacturing
(f) Value added
(g) Frequency with which the product is purchased
Hofer, thereafter formulated normative contingency hypothesis using the
above major determinants.
An example for the maturity stage is when:
(a) Degree of product differentiation is low.
(b) The rate of buyer needs is primarily economic.
(c) Rate of technological change in process design is high.
(d) Purchase frequency is high.
(e) Buyer concentration is high.
(f) Degree of capacity utilization is low.
Then the business firms should:
1. Allocate most of their R&D funds to improvements in process
design rather than to new product development.
2. Allocate most of their plant and equipment expenditures to new
equipment purchases.
3. Seek to integrate forward or backward in order to increase the value
they added to the product.
4. Attempt to improve their production scheduling and inventory
control procedures in order to increase their capacity utilization.
5. Attempt to segment the market.
6. Attempt to reduce their raw material unit costs by standardizing their
product design and using interchangeable components throughout
their product line in order to qualify for volume discount.

66
 Product Portfolio
4.11 UTILITY OF DISPLAY MATRICES
It is important to note that whereas the specific names of axes differ from
matrix to matrix, they are based on quite similar principles. In one form
or another, most portfolio approaches try to correlate industry growth or
profitability with market share, either as a direct single variable or as an
index based on multiple variables. Further, these matrices are meant to
facilitate a graphic display of the diversity of an organization rather than to
provide a precise analytical tool. The matrices help to raise critical questions
about improper deployment of funds and gross mismatches in businesses,
and not so much to give precise answers as to where and how the next unit
of money should be used.
Experience shows that portfolio analysis is not applicable where market
share is not so critical, or the capital cannot be easily withdrawn. Similarly
extra care is required in utilising portfolio analysis if value added is low or
cost can be lowered without experience, or technology is transferred rapidly
by suppliers. Seasonality of and cyclic businesses, IPR restrictions and `low
economies of scale also complicate the strategic outcomes from portfolio
analysis.
To conclude, the models discussed here must be used to stimulate managers
to think about their businesses in an integrated manner.
Activity 2
Visit a local branch office of any diversified group company and gather
information about its product portfolio .Give below your analysis on how
well the company has organized its portfolio to serve market needs.
........................................................................................................................
........................................................................................................................
........................................................................................................................
.......................................................................................................................
.......................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
........................................................................................................................
4.12 SUMMARY
Portfolio Analysis is a very important task for a Product Manager. It provides
a framework for analysing the mutual compatibility of diverse operations
of an organisation. The portfolios of operations need to be balanced with
respect to net cash flows, state of development, and the risks associated with
each business activity. After discussing the need for balancing the portfolio
with respect to these aspects, different types of display matrices have been
introduced in this unit.
The Boston Consulting Group’s Growth-Share Matrix, being the pioneering
model, was first taken up for detailed discussion. A methodology for building
up the BCG Matrix was proposed. The strategic implications, balancing
of portfolios, and variations with time were covered next. Some of the
limitations of the BCG Matrix with respect to determination of profitability,
market share and lack of consideration for the experience curve synergy and
67
Introduction to Product human aspects associated with strategic actions were discussed along with
Management some of the modifications proposed by the Boston Consulting Group.
Features of other display matrices, such as General Electric’s Strategic
Business Planning Grid, Shell’s Directional Policy Matrix, Strategic
Planning Institute’s Matrix (PIMS Model) and matrices based on product
life-cycle or market evolution were explained in the context of their
departure from the BCG Matrix. The overall utility of the Product Portfolio
was also explained.
4.13 SELF- ASSESSMENT QUESTIONS
1. What basic considerations have to be kept in mind while balancing
portfolios?
2. Explain the methodology of constructing the BCG Matrix.
3. Discuss the limitations of the BCG Matrix.
4. How does the GE Planning Grid differ from the BCG Matrix?
5. Explain Shell’s Directional Policy Matrix.
6. Explain the uses of: a) PIMS Model b) Arthur D. Little Company’s
Matrix c) Hofer’s Product Market Evolution Matrix.
4.14 REFERENCES/FURTHER READINGS
Ramaswamy & Namakumari, Marketing Management 6e ( 2018) : Indian
Context: Global Perspective, Sage /Texts.
Philip Kotler & Kevin Lane Keller, Marketing Management 15 e ( 2016),
Pearson.
Robert Dolan, Product Policy- HBR, April 20, (2015.
(https://kfknowledgebank.kaplan.co.uk/business-strategy/strategic-choice/
bcg-growth-share-matrix).

68
 MMPM – 003
Product and Brand Management

Indira Gandhi National Open University

School of Management Studies

Block

2
NEW PRODUCT DEVELOPMENT AND
IMPLEMENTATION
UNIT 5
Organizing for New Product Development 71
UNIT 6
Generation, Screening and Development of New
Product Ideas 82
UNIT 7
Concept Development Testing and Physical
Development of the Product 101
UNIT 8
New Product Launch 118

69
 BLOCK 2 NEW PRODUCT DEVELOPMENT
AND IMPLEMENTATION
Ideas come in all directions, but the ability to screen and gauge the most
appropriate and viable ideas and developing them into technically and
commercially feasible product is the essence of this block.
The first unit explains how the responsibility is assigned within a firm for
undertaking development of new products. It discusses the organizational
actions, and decisions that are taken to facilitate new product development.
The second unit of this block takes you through the concept generation
methods, evaluation of these concepts and concept testing to foresee the
feasibility for Implementation.
The third unit is the extension of the first unit wherein the concept will
be converted into physical form and includes a wide range of activities
commending from planning stage of physical development to testing of the
product for acceptance and subsequent implementation.
The last unit on product launch is the most vital and crucial. All the issues
pertaining to the marketing mix, the marketing plan of the new product
offering are vividly addressed for a successful full scale launch of the new
product.

70
UNIT 5 ORGANIZING FOR NEW
PRODUCT DEVELOPMENT
Objectives
After going through this unit you should be able to:
●● explain how responsibility is assigned for undertaking development
of new products
●● discuss the organizational actions, commitments and decisions are
taken to facilitate
●● new product development
●● how organizations justify the setting up of new product development
units
●● suggest alternative organizational patterns for new product
development.
Structure
5.1 Introduction
5.2 Setting Responsibility for New Product Development
5.3 Structural Units for New Product Development
5.4 Function of the New Product Development Units
5.5 Summary
5.6 Self-Assessment Questions
5.7 References/ Further Readings

5.1 INTRODUCTION
Most of the new products are new in limited ways. New colors are
introduced, new ingredients are added, and capacity increased by says 25%
are not major innovations. Yet, these slightly or somewhat new products
account for may result in significant increase in revenues and profits. They
are often the responsibility of a product, brand, or a category manager.
The development of new products occurs in stages. At each stage the product
is evaluated to determine whether it will make sense to proceed to the next
stage. While this approach works well for slightly new products, it is too
simplistic and difficult to apply for really new in class products.
Planning and coordinating new product development activities involve
almost every functional area in an organization. It requires that new product
development effort is properly coordinated, it is essential that a well thought
out organizational structures are designed around the day-to-day activities
needed to be performed to ensure smooth operations and these are carried
out effectively and successfully. Managers in each functional area such as
marketing, R&D, operations, and finance, therefore concentrate on meeting
laid down objectives and solving current problems.
Despite the fact that the future is uncertain, yet current day to day problems
easily take away focus from the future. But the long-range survival of the
firm requires that new products be developed.
The Booz, Allen, and Hamilton study of new product introductions suggests
that the organizations which encounter the major success in new product
introductions are the ones that have given the great emphasis on organizing
for developing those products.”
71
New Product Development and Setting up an organizational form for new product development involves
Implementation the following related issues:
I. Who will be responsible for new product development?
II. What are the tasks to be accomplished?
III. How are the tasks to be performed?
In other words, organizing for new product development implies establishing
responsibility for carrying out new product development, and, also creating
special structure(s) to handle such an activity -- along with the functions to
be performed by new product development units.

5.2 SETTING RESPONSIBILITY FOR NEW

PRODUCT DEVELOPMENT
Responsibility for developing new product can be set at the corporate level,
the divisional level, or the operational level. Let us discuss these levels
accordingly.
New Product Development at the Corporate Level
Involvement of the top management in new product development depends
upon the importance that has been assigned to new products in the overall
organizational strategy. Corporate level new product department is feasible
and appropriate when the objective is’ to develop new markets or products
that are not in the firm’s existing lines of business and when the outputs of
various divisions have similar technologies and markets. The nature of a
company’s business (and its future business) conditions the top management
support. A company that is operating in a sector characterized by slow
change has innovation playing only a minor role in its performance and
therefore, delegates new product development to lower level executives. On
the other hand, a firm operating in a fast changing environment, for example,
pharmaceutical, electronics and chemicals etc depends on innovation
to achieve competitive advantage and has involvement of higher-level
executives to undertake new product development.
Operating divisions normally get into development into unfamiliar fields as
they fall outside main line of business. Divisions seldom allocate resources
to venture into sunrise areas unless the task is taken up at the corporate
level.
Figure 1 is one possible way to depict an organization assigned with
responsibility for new product development considered at the corporate
level.

There are both advantages and disadvantages of having new product

development responsibility taken up at the corporate level.
Advantages
 Greater effectiveness and control of innovative activities - centralized
research units are usually larger than the scattered; decentralized units
72
 attached to divisional operations, and the larger size permits hiring Organizing for New Product
of more specialized, technical staff well equipped to handle a wider Development
array of problems.
 Insulation from the daily pressures and crisis atmosphere -
reporting directly to the CEO, the new product unit has a direct
line of communication to top management. Its proximity to the top
management keeps it protected from the daily routines and possibly
accompanying crises that affect the operating personnel.
Disadvantages
 No response to the urgencies of the market place - its isolation from
the day-to-day work pressure of operations makes the corporate level
new product unit unresponsive to the immediate needs of the market.
A request for all possible haste can easily be shrugged off as frantic
behavior of nervous salesmen.
 Organizational and spatial separation - the comparative isolation of
the corporate level new product unit from operational divisions makes
it necessary to integrate differentiated structures.
New Product Development at the Divisional Level
Divisional level responsibility for new product development is most likely
when operating units have highly differentiated product lines.
Compared to the centralized approach, the divisional level effort makes
new product development more aligned with the exigencies of business. An
organization with new product-development responsibility at the divisional
level is depicted in Figure 2.

As in Figure 1, here also the new product unit is conceived of as a staff

function and normally reports to the divisional head. This arrangement
is deemed most appropriate when new product development is likely to
involve relatively large budgets with prolonged periods of development.
A new product development unit at the divisional level in many ways
encounters the problems as at the corporate level.
Advantages
 The new product development effort is set apart from the day-to-day
activities of operations; yet its connections with the changes with
respect to current business may be quite intense.
 The job is only an arm’s length away from top management which
aids the integrative process and gives direction to the division.

73
New Product Development and Disadvantages
Implementation
 Separated from the operating level, the new product unit might be
looked upon as comprising of elitist dreamers; which is likely to cause
friction between the developmental and functional levels.
 Another difficulty possible is the contention that new product
development is only a part of the firm’s total product management
and new products account for only a portion of the firm’s products
and markets; putting question mark as to why elevate new product
development to a position of pre-eminence
New Product Development at the Operating Level
Responsibility for new product development anywhere, below the
divisional level becomes associated with operational activity. A division
usually contains many departments capable of managing the development
of new products. Therefore, the assigning of responsibility, for new product
development actually is the task of choosing one of the departments for
developing new products. Thus, the assigning the responsibility for new
product development tends to be dependent upon the existing organizational
structure.
The new product development at operating level is largely dependent upon
how a division produces and distributes its existing products as these are the
basic tasks of a division and new products must adjust to them. Therefore,
there are two options:
1. assign responsibility for new product development to one of the
functional departments, say, marketing, or
2. assign it to product manager.
This is quite different from giving responsibility to a unit at the corporate or
divisional level for they don’t have basic functions that can accommodate
new product development and new structures have to be created; whereas,
at the operating level, the changes occur only in the way an operational unit
functions.
Activity 1
Assume an FMCG firm having two product lines having four products each.
What alternatives are available to the firm in terms of locating the new
product responsibility?
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New Product Development in Functional Department
The functional type of organization is the oldest and yet by far the most
common. In the majority of cases, the assigning of responsibility for new
product development is between marketing and research and development,
with marketing being the most popular choice - as in Figure 3.

74
 Organizing for New Product
Development

The biggest advantage in assigning new product development responsibility

to marketing is that the marketing personnel are in a position to track trends
in sales, prices, competitive actions, distribution, and services which are
all very important in bringing a new product to commercialization. It is the
marketplace that determines the success or failure of a new product.
The choice of marketing department has other advantages also, for a new
product development program depends heavily on establishing long-term
relationships with distributors and agents, especially when a new product
is meant for markets not serviced by the company’s regular distribution
channels.
New product development in high technology arena is also greatly
influenced by the components of a marketing program. Highly complex or
custom-built equipment frequently require extensive servicing; installation,
maintenance, and repair. This is true for most of the B2B products.
However, the greatest danger of putting marketing in charge of new product
development is its short-term outlook, since its primary concern is current
sales and generating large sales volume to achieve maximum market share.
The ongoing daily activities may influence the new product activity
adversely. Since any new product usually starts out with low sales figures,
a trade-off of current with future sales may tend to be perceived as a losing
proposition.
Marketing personnel may face challenge when confronted with new products
involving scientific concepts and complex technology. They may be unable
to cope with and direct technological development and integrate advanced
scientific thinking. If unable to keep up with the latest developments in
research and technical design, even their response to customers may be
delayed. This is why many industrial marketers recruit marketing personnel
and sales force having engineering and technical background.
On the other hand, it is opined that placing responsibility for new product
development with any department other than marketing - even in R&D -
deprives the new development program a market-orientation. Personnel
other than marketing lack market sense and sensitivity to the needs of
customers. Unless purchasing behaviors of customers are analyzed and fully
understood, the very basis for new product development may be faulty.
Activity 2
Study two progressive companies, one an FMCG and other a B2B goods
manufacturer known to have a history of adding new products to their
product line. Examine few of their earlier ventures. What has been the
location of new product responsibility? What has been the division of
activities/responsibility between marketing and R&D department? What
75
New Product Development and according to you are the reasons for the respective location of the new
Implementation product responsibility?
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New Product Development Responsibility of Product Manager
This type of arrangement is usually made when a rapid proliferation of
products creates a burden too heavy for the chief marketing executive and
other marketing personnel.
Responsibility is assigned to brand manager directly, e.g., in ITC, in case of
its traditional product cigarettes and other new product categories introduced
by the company such as apparels, confectionary and lately personal care..
It represents a case of extreme decentralization. One such organizational
form for a consumer goods division is shown in Figure 4. This type of
organization structure is called ‘product management system’.

In many instances new product development other than modification/

extensions of existing lines may initiate elsewhere within the organization
but, later on are assigned to the product manager.

76
The product manager in a consumer goods company tends to handle fewer Organizing for New Product
products compared to his industrial counterpart. Companies with multiple Development
brands have separate product manager for each brand, called brand manager.
The product managers may also be responsible for a product category or a
group of products rather than only a brand. For example, in case of Amul,
there are product managers each for milk, ice cream, and other categories.
With a slight variation in the position - designations in Cadbury India Ltd.,
have vice-president (foods - biscuits and ice creams, and vice-president
(confectionery - chocolates with a marketing manager under hire.
The biggest advantage of one manager for each brand is that a new product
is assigned to one manager who devotes his/her full time in planning and
coordinating the new offering. He/She would work to obtain a satisfactory
outcome, for his/her success depends upon the brand’s performance.
At the same time, the multiplicity of brands and lines may force companies
to hire young, inexperienced persons as product managers and, who are
unwilling to take risks. The product manager’s job may involve only
gathering information, communicating plans for approval, and monitoring
performance.
In consumer goods, a product manager’s greatest concerns are distribution
and promotion for they constitute the means of moving goods. While in case
of the product manager for industrial goods is unable to ignore technical
and design features. He has to consult with engineers and technicians just
as frequently as with marketing people. That is to say, in new product
development, the product manager (industrial goods) is more likely to be in
an intermediary position between technical and marketing divisions, and,
thus, can be more effective in integrating diverse functions. This integrative
role is far more necessary in industrial than in consumer goods.
A matrix form of organization is another alternative for assigning
responsibility for new product development. This form is the result of adding
marketing managers to the product management system. The marketing
manager is concerned with all products moving into the market over which
his responsibility extends market; such as industrial goods’, consumer
goods” or a geographic area. The product manager looks after the product
distributed and promoted in all markets. Such a matrix is shown in Figure 5.
PRODUCT MANAGER MARKETING MANAGER
Market1 Market2 Market3

Product A

Product B
Product C

Figure 5
New products can be developed and introduced by either the product
manager or marketing manager. The matrix form is most effective when
specific products or groups of products can be targeted to different markets.
Consequently, each product manager, in effect, divides responsibility with
each marketing manager ‘in a product-market segment.
The matrix form of organization lends itself to checks and balances. The
system involves duplication of effort, conflicts of interest, problems in
communication, and other general difficulties of managing.

77
New Product Development and
Implementation 5.3 STRUCTURAL UNITS FOR NEW PRODUCT
DEVELOPMENT
In small companies, new product development is often handled by the
existing units. There is not much change in the day-to-day functions except
that the company may have more personnel and more products, but large
firms regard new product development as an on-going activity and organize
specific measures to carry it out.
To set up the organization for new product development, the large companies
either rely upon the existing functional units or create entirely new structures.
The most common organizational units established especially for new
product development, are `new product departments’, `new product
committees’, `ad hoc committees’, `venture teams’, and `task forces’.
These five formations can be differentiated on the bases of status-permanent
or temporary - division, or operations.
Putting the five forms by permanency status and the responsibility level, we
can have eleven possible structural units.
Only new product department and new product committees are permanent
in status. Also, the new product departments can be at all the three
responsibility levels namely corporate, division and operations. But, the
new product committees are generally only at the corporate and division
levels.
From among the temporary structural units, the ad hoc committees are
possible at all the three responsibility levels; the `task forces’ at the division
and operationslevels; and the `venture teams’ only at the corporate level.
Figure 6 depicts all the relevant possible new product development units.

Status Structural Unit Responsibility Level

Corporate
Permanent New Product Department Division
Operations
Corporate
New Product Committee Division
Corporate
Ad hoc Committee Division
Operations
Temporary Task Force Division
Operations
Venture Team Corporate
Figure 6

Each of these unit configurations is unique and can be identified by its

characteristic features.
New Product Department
This is a unit can either at the corporate, divisional or operational level.
At the corporate level, this unit is positioned to serve all the divisions
within the company and reports to top management. It is often the largest,
single unit in the company dealing with new product development. It has
permanent, full-time staff, consisting of both technical and non-technical
personnel. Firms that need a vital role of technology in their new product
development efforts may attach a experimental laboratory to this unit.
At the divisional level, the unit initiates and coordinates new product
development for a division’s product lines. It may be a centralized unit
reporting to a divisional manager (in case when the unit itself is of a division
78
stature), or a new products unit may be attached to each division. This unit Organizing for New Product
is usually staffed with permanent, full- time managers who may fall back Development
upon the services provided by functional areas.
At the operational level, the new product department reports to the head of
a specific product group. It is usually a one-person department - a manager
who usually works alone. Such a unit is most desirable when a quick
response to the needs of individual product lines is required. It is closer to
operations and the new product manager depends upon the functional units
of the division to carry out all projects.
New Product Committee
It is usually at either the corporate or divisional level. Therefore, it has
a permanent status. It comprises of members from different parts of the
organization who do not work full-time on new product development
activity. Still, the committee has continuity and, at times, has responsibilities
similar to those of a new product department, but its role is advisory.
Ad hoc Committee
Such units are set up to pursue specific tasks. They may exist at every level
- corporate, divisional and operations. They are composed of specialists
needed to manage certain aspects of new product development activity, such
as brainstorming (to generate new product ideas), screening, coordinating
test marketing, etc. The committee operates on a part-time basis. After
completion of the task, it is dismantled. Thus, it is only temporary in status,
and lacks continuity.
Task Force
A task force is established to perform both integrative and coordinating
functions. This is a special unit of specialists which works directly with
the functional areas. It exists only till the life span of a project. Thus, this
unit is also temporary in status. It is usually formed at the divisional or the
operational level.
Venture Team
This structural unit, usually established at the corporate level, is a small
interdisciplinary group which works full-time on a specific mission. It
usually handles projects different from that of current product lines. When
ventures are completed, they are a part of the operations either as new
divisions or as parts of the existing ones. The venture team is a temporary
arrangement, discontinued on conclusion of venture or failure of a project.

5.4 FUNCTION OF THE NEW PRODUCT

DEVELOPMENT UNITS
Essentially, when different types of structural units participate and share
responsibility in new product development, each may look after a separate
function.But, in practice, all types take part in the developmental sequence
with varying extent of involvement. For example, the following table shows
that the new product department has a high involvement in the screening
of new product ideas compared to a task force or venture team. While as in
commercialization of new product, the involvement of a venture team is as
much as that of a new product department.

79
 New Product New Product Department Committee,
Development Stage New Product/Adhoc Task Venture Team
Corporate Divisional Operational
Force
Screening H H, H M L L
Scheduling/ H H M L M M
Budgeting
Product M M L L L M
Moog
Test Marketing. N1 14 NM L L L
Commercialization M M M L L M

H: 80% or more involvement, M: 50% to 70% involvement, L: Less

than50% involvement
Activity 3
List out the various units you are familiar with or units which are close to
you. Study the responsibility for new product development has been set in
them corporate, divisional, or operational levels. Then complete the forming
matrix.
Industrial Unit New Product Development at
Corporate Division Operations

A) Now, Complete the following sentences?

a) In case of industrial products, new product development
responsibility is set at the level.
b) In case of consumer non-durables, new product development
responsibility is set at we level.
c) In case of consumer durables, new product development
responsibility is set at the level.
d) In case of services, new product development responsibility is
set at the…………………….level.

80
Activity 4 Organizing for New Product
Development
Develop a table - as given in above on the industrial units studied in, activity
3(A).
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5.5 SUMMARY
New products rarely get the attention they deserve without explicit
organizational arrangement and proper planning though product ideas may
occur spontaneously and anywhere, within and outside the organization, their
conversion into successful products needs a champion and organizational
support.
The location of responsibility for new product development may vary from
organization to organization both in terms of levels and units. This unit
discusses the advantages and disadvantages of the different organizational
arrangements for new product development and also explains the concept
of product development units as an alternative to traditional organizational
arrangements.

5.6 SELF-ASSESSMENT QUESTIONS

1) What are the factors that determine the decision to offer new products
by the marketer?
2) Do small firms that manufacture one or two products need to be
concerned about developing and managing new products? Why or
why not?
3) When is it more appropriate to assign a marketing manager than an R&D
manager for new product development?
4) How do skills needed to manage a new product differ from those used
to manage an existing mature product?

5.7 REFERENCES/FURTHER READINGS

1. Cardozo, R, Product Policy: Cases and Concepts, Reading, Mass:
Addition Westey.
2. Yoga J. Wind, “Product Policy” Concepts, Methods, and Strategy.
3. New Products Management for the millenium, (NY: Booz, Allen, and
Hamilton, Inc.,1982)
4. Product Management, Lehmann Donald R, Winer Russel S., Tata
NcGraw Hill.
Online Resources:
1. Organizing innovation and new product developmenthttps://www.
youtube.com/watch?v=uCVetZE3GlM
2. Product Development explained https://www.youtube.com/
watch?v=2TEGqqUuaYA
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 Unit 6 Generation, Screening
and Development of new
Product Ideas
Objectives
After reading this unit you should be able to:
●● discuss the various techniques used for generation of new ideas
●● describe the sources of new product ideas
●● evolve and evaluate criteria for screening of new product ideas
●● explain the different methods of screening new product ideas
●● explain the development of a new product idea into a product concept.
Structure
6.1 Introduction
6.2 Innovation and the New Product Development Process
6.3 Generation of New Product Ideas
6.4 Sources of New Product Ideas
6.5 Methods of Generating New Product Ideas
6.6 Screening of New Product Ideas
6.7 Criteria for Screening New Product Ideas
6.8 Development of New Product Ideas
6.9 Summary
6.10 Self-Assessment Questions
6.11 Reference/ Further Readings

6.1 INTRODUCTION
New product development shapes a company’s future. Improved or
replacement products can maintain or increase market share; new in class
products can transform industries and companies. But the low success
rate of new products and services points to the many challenges faced by
companies.
Marketers are playing a key role in the development of new products by
identifying and evaluating new product ideas and working with R&D and
other areas in every stage of development. A product that one uses today
was just an idea some time ago. Product idea may be developed based on
creative insight. It is the creative idea that gets translated to the new product
opportunity eventually. Sometimes, creative thinking and a crude prototype
may influence new product development.

6.2 INNOVATION AND THE NEW PRODUCT

DEVELOPMENT PROCESS
Sometimes, innovations are by accident or serendipity, such as the
vulcanization of the rubber process -- discovered when a rubbery mixture
was spilled on a hot stove: The world’s first and, perhaps, the only floating
soap, Ivory, was just made when a mechanical mixer was left on overnight
and whipped up raw soap materials into a lightweight cleanser. Necessity,
82
it seems, was the mother of invention for the ice cream seller who ran out Generation, Screening and
of paper cups and rolled pancakes into serving cones - the first ice cream Development of New Product
cones. Ideas
However, these days, when innovations call for sizable financial investments
and other resources for support and commercialization, most innovations
come from serious research and development efforts undertaken with the
support of formal organizations.
Therefore, in conclusion, there is no one answer to a question such as” How
are new product ideas generated?” The new product development process
can be rather quick, the result of a sudden flash of insight. But, in case
of the development of highly technical products, say space satellite, the
process can take years. Still, in some cases, the development process can
take long not so much because of technical complexities but because of
market resistance to the new product. Customer acceptance can be found
lacking even when the new product has an advantage that will eventually
succeed, for example, instant coffee breakfast cereal and microwave oven.
The standard new product development process model comprises the
following stages:
1. Idea generation
2. Idea screening
3. Concept development and testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Market testing and
8. Commercialization
This unit primarily deals with the first three stages, i.e., Generation,
Screening, and Development of New Product Ideas.
Activity I
Study the new product development function of two organizations that you
are familiar with; one from FMCG sector and another from B2Bsector.
Analyze whether the new product development process was initiated.
a) in response to a consumer need.
b) in response to a new scientific/technological discovery.
c) to utilize excess resources for each of the above cases.
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83
New Product Development and
Implementation 6.3 GENERATION OF NEW PRODUCT IDEAS
Product Ideas
There are a number of idea generation techniques at the marketer’s disposal.
Each technique has its advantage and disadvantages, but no technique is
superior to others. Although all firms should strive for an orderly, market-
directed approach, they are constrained by individual situations. Companies
should adopt those idea-generation techniques which are most compatible
with their corporate goals and the circumstances. Corporate product
objectives, financial status, personnel and plans for future growth may all
affect this decision.
A manufacturer of canned soup might need some product modifications to
deepen the product line. To find ideas the firm might use morphological
analysis to see new taste combinations, or possibly benefit-structure analysis
to discover unmet needs. Conversely, a manufacturer of aircraft, needing a
new type of altimeter, might find his best answer in synectics.
Large, firms with market research departments might find rigorous benefit-
structure analysis a viable alternative, and maximize their investment using
it. Smaller, poorer firms may have to make do with less elaborate research
and more individual creativity; perhaps through brainstorming or transfer
analysis.
The individual psychologies of the firm’s executives are also a contributing
factor. Are executives imaginative? Can they work together with a minimum
of interpersonal conflict? Not all firms possess the kind of personnel who
can use brainstorming or synectics effectively. Hence, the utility of rather
mechanical techniques like morphological analysis.
Finally, one should note that some of these techniques might be used
simultaneously for effectiveness. We can see how conjoint analysis
complements benefit-structure analysis. Is it that the psychological freedom
of brainstorming enhances a technique like attribute listing, the firm which
defines its product in similarly broad terms? Conjoint analysis might be of
use in converting a vague product idea into a product concept acceptable to
the market. Clearly, a creative approach is needed for the creative process.
Activity 2
Why are the following products emerging now and how far do you think
they are likely to go
a) Electric cars (EV)
b) Social Media consulting
c) Organic wellness products
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 Generation, Screening and
6.4 SOURCES OF NEW PRODUCT IDEAS Development of New Product
Ideas
The research for ideas is not random. The corporation itself can serve as a
guide for exploration. The organizational plan can be used to seek directions
in the most likely and desirable areas in which to look for new product
ideas. That is to say, to begin with, there are host of possible new product
idea sources within the company, such as company sales people, scientists
(employed in R&D), top management, etc.
As such, all employees of a company are potential sources of new product
ideas. But some are more productive than others. For example, marketing,
sales, and technical research personnel are generally the main originators of
new product ideas.
Sources for new product ideas exist outside the company also. These external
sources are numerous, such as customers, competitors, channel members,
but the firms differ greatly as to where they concentrate their efforts for
outside assistance and the extent to which external ideas are sought after
and used.
Table 6.1 summarizes the major sources of ideas both inside and outside
the company.
Table 6.1

Inside Company Sources Outside Company Sources

Sales personnel Customers

Marketing personnel Competitors’ products
Research and Development Global products
Top management Consultants
Operations department Advertising agencies
Purchase department Researchers/Inventors
Customer service division Distribution channels
Employee feedback system Publics-unexpressed ideas

6.5 METHODS OF GENERATING NEW

PRODUCT IDEAS
New product ideas can be generated both directly and indirectly. Both
approaches can be undertaken simultaneously and can vary from highly
structured, loosely structured to unstructured procedures.
Direct methods rely heavily upon the creativity of individuals as well
as groups and the consumer survey data for the techniques, e.g., Forced
Relationships, Transfer Analysis, Brainstorming, Motivation Research,
Market-gap Analysis, Multi- dimensional Scaling, etc.
Indirect methods refer to the `synthetic’ methods, methods that are used for
other purposes but, with little ingenuity, they can be employed just as well
in exploration. For example, Quadrant Analysis and Magnitude Estimation
have been used in product testing. Consumer Engineering integrates the
processes and results of exploratory consumer studies, such as Focus Group
Interviews (which throw up clues to consumer needs and problems; and
their solutions) and technological forecasting techniques, such as Delphi.
Table 6.2 summarizes both the direct and indirect methods of generating
new product ideas
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New Product Development and Table 6.2
Implementation
Direct Methods Indirect
Individual Techniques Group Methods
Morphological Consumer Techniques
Analysis Surveys
Attribute Listing Conjoint Analysis Brainstorming Consumer
Heuristic Ideation- Multi-dimensional Focus Group Engineering
Technique Scaling Interviews Estimation
Forced Market-gap Analysis Synectics Quadrant
Relationships Analysis
Transfer Analysis Motivation Research
Problem Detection
Problem Inventory
User Solution
Analysis
Methods of generating new product ideas are numerous; but, as suggested
by Father Mascarenhas, only some of these are suited to Indian conditions.
They are:
●● Attribute Analysis
●● Heuristic Ideation Technique
●● Benefit-structure Analysis
●● Brainstorming
●● Focus Group Interviews
We now discuss each of these methods below:
Attribute Analysis
By breaking down existing products into combinations of specific parts,
benefits, or attributes, Attribute Listing (or Analysis) seeks to modify one or
more of these to improve the whole product.
A common screwdriver, for example, can be broken down into the following:
●● a round, steel shank
●● a handle, manually operated
●● wedged end to engage the slot in a screw
●● torque provided by twisting action
A group/individual can be asked to propose attribute modifications to
improve product appeal and/or performance. The round shank can be made
hexagonal or slotted so that the hand has a better and firm grip or a wrench
could be applied to get the increased torque; electric power could replace
manual power; and so on.
Thus, in case of a company planning to bring out toothpaste, it may want
to know a package of optimum level and combination of various attributes
and benefits, such as:
●● whitening of teeth
●● breath freshening

86
●● decay prevention Generation, Screening and
Development of New Product
●● taste Ideas
●● price
If each of these attribute-benefits has 3 levels - High to Low - then there are
as many as 243 combinations possible to choose from among.
One study suggested that useful ideas can he generated by posing following
questions to an object and its attributes:
●● put to other uses?
●● adapt?
●● magnify?
●● reduce?
●● substitute?
●● rearrange?
●● reverse?
●● combine?
Although Attribute Analysis may not result in major breakthroughs, it can
undoubtedly aid in “re-marketing” - “new” and. “improved” products - and
possibly in product differentiation.
Activity 3
On the basis of the section above, use attribute analysis to design the
attributes of
a) A Multi featured smartphone for upwardly mobile Professionals.
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Heuristic Ideation Technique (HIT)
In Attribute Analysis, alternative combinations may be numerous which
may make the analysis very difficult. Therefore, the number of alternatives
to be considered must be reduced.
There are some statistical methods, such as Method of Fractional Factorial
Designs’ which may help in this regard. But this cannot be accomplished
without eliminating some very good ideas. One suggestion has been
heuristics - rules of thumb developed from the past experience.
In Heuristic Ideation - one of the more publicized morphological techniques
- each dimension becomes an axis of a two-way grid. Variations of the
dimension are placed at intervals along that dimension’s axis. For example,
in the case of a household cleaning agent, “product ingredients” is one of
87
New Product Development and the many dimensions (such as package, cleaning instrument, objects to be
Implementation cleaned, texture, etc.). The possible variations of this dimension are alcohol,
ammonia, pine oil, scenting agent, deodorizing agent, disinfectant, etc.
Table 6.3 shows how these variations are cross classified - in a matrix form
- with the variations of another dimension, package.
Table 6.3
Ingredient Product Package
Aerosol Bag Bottle Box Can Jar Tube
Alcohol 1 2 3 4 5 6 7
Ammonia 8 9 10 11 12 13 14
Pine Oil 15 16 17 18 19 20 21
Scenting Agent 22 23 24 25 26 27 28
Deodorizing 29 30 31 32 33 34 35
Agent
Disinfectant 36 37 38 39 40 41 42
If there are six dimensions of a household cleaner being considered, then,
in-all, there will be thirteen such, two-way cross classifications, each cell
of which is a new product idea source. Certain cells can be eliminated as
`technically non-feasible’; e.g., in Table 6.3, alcohol and pine oil in tube
and bag - cells 2, 7, 16, and 21. Similarly, some cells can .be eliminated as
`commercially non-feasible’; e.g., cell 5.
After this feasibility screening, the remaining ideas can be checked for
their ‘novelty’. This will eliminate certain cells. Experts, believe that the
`feasibility’ and `novelty tests can help eliminate almost 70 to 90% of the
cells.
The remaining cells can further be checked for `market potential’ and
`manufacturing competence’ of the firm. The required competence can also
be developed if the idea is really new and potentially very rich.
A `cost-benefit analysis’ will, finally, show the feasibility of the remaining
new product ideas.
To generate a composite new product idea through the interactive
combination of cross-classification cells, let us consider all the dimensions
of the earlier stated home cleaner again.
According to Alford and Mason, the following six dimensions can be
identified, in case of a household cleansing agent:
• Type of cleaning instrument (1)
• Product ingredients (2)
• Objects to be cleaned (3)
• Package (4)
• Substances to be removed (5)
• Product texture (6)
Thus, a vacuum cleaner (1), such as “Euro clean”, can be used to clean
carpets (3) from dust (5) and, at the same time, may spray (4) into the carpet
(3). a disinfectant and a cleaning shampoo (2) in a gaseous form (6) so that
the carpet (3) is not only clean but also germ free (5). A similar apparatus
(1), maybe designed to clean drapes and curtains and wall hangings (2).
Another variation, the Morphological Box, extends this technique of
morphological analysis, HIT, to more than two dimensions. The more
dimensions one adds, the greater is the number of ideas generated.
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Activity 4 Generation, Screening and
Development of New Product
Use HIT for designing food packages for Business Class passengers for an Ideas
Airline India.
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Benefit-Structure Analysis
Another approach, similar to Attribute Listing, is Benefit-Structure Analysis
proposed by Myers. This analysis begins with 25 to 50 in-depth individual or
group interviews wherein the respondents are asked to recall all `occasions’
when a product class was used. The following questions are further asked
for the desired results:
●● What was the actual operation?
●● For example, if the product is a household cleansing agent, then
the `occasion’ is general cleaning but, the `actual operation’ can be
kitchen floor cleaning.
●● What products were used in this operation?
●● for example, alcohol, ammonia, pine oil, or a disinfectant. If possible,
the brand should also be mentioned, such as Colin, etc.
●● What were the benefits sought from this operation?
●● for example, removal of stains, disinfection, shine, or simple cleaning.
●● What were the attributes of the product(s) used
●● for example, strong pleasant/foul smell, quick drying, economical,
abrasive, antiseptic, non-staining, contains deodorant, self-polishing,
etc.
●● What were the cleaning instruments used?
●● for example, broom, brush, mop, sponge, or vacuum cleaner.
●● When was the work done?
for example, morning, afternoon, evening, or night. Also required are the,
duration of work’, and `persons worked with’.
Results obtained from this initial analysis can be used for a wider survey of
housekeepers in the cities/metros. The generated data can be arranged in a
multidivisional matrix, such as:
Operations x Product attributes desired x Product attributes received x
Benefits desired x Benefits received x Brands used x Occasions x Other
ambient characteristics x various supporting data.
Now, some more analyses are to be performed sequentially.
First, study the `Product-by-Use’ matrix-`product types’ as rows and
`operations’ as columns. This matrix will show what products are used for
what all cleaning operations, which may help the marketer, see how the
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New Product Development and current products are being used and what are their substitutes/complements;
Implementation and how some of the products are being converted from single-use to multi-
use (or the other way round). Best of all, this matrix will give the relative
frequency of various cleaning operations/tasks. Ifquantity/amount used’ is
also asked, a `volumetric analysis’ can also be made.
All this of information comprises new product ideas. Look for the gaps for
which (cleaning) operation has no or a few products/brands available.
This matrix, in other words, gives one form of `market structure’ and
what we look for are `market gaps’. Therefore, this study is also known as
`Market-gap Analysis’
The second study to be made is for each `benefit’ across each `brand’
and eachoccasion’ - ‘Benefit-Deficiency Matrix’ - for some benefits may
be desired but not received, or received but not desired. This matrix may
provide average deficiency for each brand. Study the frequency with
which benefits are not received across each brand in the market. Analyze
which brands have failed to provide the desired benefits the most and why.
Study the brands which have delivered-the desired benefits the most. Also,
consider possible additional usages/applications for the existing products.
All this can help conceive new products that deliver the exact combinations
of benefits desired for a single operation/task, as well as for a group of
related operations/ tasks.
Finally, constructing an `Occasion-by-Operation-by-Ambient characteristic
Matrix’ may reveal demographic and sociographic patterns of product uses
which may be required for positioning the product in the market segment
correctly. It can help in isolating those respondents who desire a particular
benefit or a cluster of benefits.
Activity 5
Study the new products that have been launched in the market in the last six
months. For what type of products do you think benefit structure analysis
can be used most effectively Apply it to any one of them.
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Brainstorming
Brainstorming is a rather popular creative technique with a long track-
record. It was first developed by Alex F. Osborn in 1938, and gained
acceptance by the business world in the 1950s. Brainstorming aids in idea
generation by encouraging the creativity latent in many of us. It originated as
a management technique for groups charged with problem solving. Osborn
feels that creativity is fostered in an informal meeting where participants are
free to express any and all ideas they concoct.
Criticism is ruled out until the end of the meeting as this inhibits people
from contributing ideas that might prove useful or at least stimulating to
others. In this way, the participants should produce a greater number of
ideas than if they worked along. Actually, brainstorming sessions are held
when a company needs a lot many ideas.
The usual group consists of six to ten people. It is advised to avoid too many
experts in the group as they may tend to look at a problem in a rigid way.
The sessions should preferably be held in the morning and should last about
an hour. The problem should be specific.
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Briefly, the technique is executed as follows: Generation, Screening and
Development of New Product
The chairperson of the brainstorming notifies the participants that the meeting Ideas
is to be held -states the problem to be discussed, and gives them several days
for preparation. Individuals are generally chosen for their creative talents
and ability to work cooperatively and openly. In this regard, it is sometimes
better to avoid using supervisors or too many specialists: these people could
disrupt and/or dominate a session thus stemming creativity.
The discussion should take place in relaxing surrounding to help the
participants loosen up. The chairperson addresses the problem at hand, and
subtly keeps the ensuing discussion on the topic. To ensure creativity, the
following “ground rules” are suggested:
1. Do not permit evaluation of ideas: Osborn feels that criticism at this
stage only makes the participants more defensive and restrains their
thinking.
2. Encourage participants to think `far out’: It is much easier to tame
down wild ideas than to beef up insipid ones. The central purpose of
brainstorming is to tap all of the participants’ thoughts and experiences,
`far out’ ones not excluded.
3. Put emphasis on creating a large quantity of, ideas: A large quantity
of’ ideas should eventually produce a greater number of better quality
thoughts. Also, the emphasis on quality damps tendency to evaluation.
4. Encourage participants to modify or build upon the ideas of
others: Such hybrids are often superior to their predecessors as
different perspectives are focused on a common solution.
Osborn has suggested the following questions to further probe the
brainstorming group for generating real-value new product ideas:
1. Can you list some existing attributes of this product class?
2. Can you suggest new attributes? New uses? New ways?
3. Can these attributes be adapted? Does the past offer a parallel?
4. Can these attributes be modified with respect to `meaning’, `colour’,
`motion’, `sound’, `odour’, `forms’, `shape’, etc.?
5. Can these attributes be magnified? What to add? Greater frequency?
Stronger? Higher? Longer? Thicker? More durable? More value?
Better quality? Duplicate? Multiply? Exaggerate?
6. Can these attributes be reduced? What to delete? Smaller? Condensed?
Lower? Lighter? Cheaper? Tone down? Miniature version, actually.
7. Can these attributes be substituted? Other ingredients? Other
processes? Other markets?
8. Can these attributes be rearranged? Interchanged? Other patterns?
Other layouts? Other sequences? Other schedules?
9. Can these attributes be reversed? Upside down? Backwards?
Opposites?
10. Can these attributes be combined°? - A different blend’? Another
alloy? A new assortment? Different combine appeals? Combine
objectives? Combine units? Combine uses?
In effect, it comes out to be an application of Attribute Listing approach in
Brainstorming.
This procedure is continued until the group is drained of ideas. Some writers
emphasize the value of pressing on for a few minutes when this point is
reached, as fatigue is seen as a catalyst in releasing ideas. Some believe
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New Product Development and that when minds are drained of ideas, a synthesis of these thoughts can take
Implementation place.
The brainstorming technique has much to recommend it in generating
new product ideas. It offers the potential of producing a great number of
ideas in a relatively short time and at a very modest cost. However, not all
companies enjoy success with brainstorming. Often failure results simply
from the inability to correctly adhere to the ground rules of the technique.
Dissatisfied executives have complained of participants not preparing
for brainstorming sessions. Others cite problems with using members of
different organizational rank in the same sessions. These failures cannot be
blamed upon the technique itself.
Detractors of brainstorming feel the technique itself is invalid. Principally,
many doubt the “synergistic benefits” attributed to these group sessions. For
example, “You can’t put three individuals with 100 IQs together and expect
to get the product of two persons with 150 IQs’*
The essence of brainstorming is the attempt to produce ideas in quantity via
the freedom of expression which comes with the deferment of judgement.
Thus defined, “brainstorming” is an individual as well as group technique.
In view of this, how should one handle brainstorming? Can the talents of a
group be properly harnessed by this technique?
To salvage this potentially valuable tool from human foibles, several
variations have been created. Once such variation is the “Buzz Group” created
by Dr. J. Donald Phillips. Phillips theorised that aggressive individuals will
tend to dominate group sessions and thus cause their colleagues to hold
back. To prevent this from inhibiting the expression of ideas, he subdivided
the group into clusters of six and allowed each group only six minutes to
come up with an idea. This subdivision isolated the “bullies” somewhat,
and the introduction of time pressure caused the “timid” to be more vocal.
As with group brainstorming, the reaction to the Buzz Group is mixed.
Critics point out those six minutes is often not enough time for effective
ideation.
Activity 6
Conduct Brainstorming exercises to generate ideas regarding:
a) An approach to popularize use of public transport system.
b) Benchmark for maintaining quality.
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Focus Groups
The conducting of focus group interviews is very much like that of
brainstorming. It is unstructured, to some extent, and it relies on the
spontaneous interaction of the group. But the members of the group are
consumers (rather than employees of the firm) and, usually, are decided on
by a market research agency. That is to say, focus group interviews can be
thought of as brainstorming with consumers/potential consumers.

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As the name of the technique conveys, this type of group discussion Generation, Screening and
focuses on some definite marketing/product aspect, such as a product’s, Development of New Product
characteristics, a brand name, and an advertising theme. The pivotal theme Ideas
is necessary to keep the discussion revolving around the important questions
or the issues. This also helps in cutting down the irrelevant and idle talk.
About eight to twelve potential and interested consumers can be invited to
form a focus group. The group moderator’s role is to lead the participants
through an open and in-depth discussion on the subject area(s) in question
in a non-directive and non judgmental manner.
This technique is widely used by advertising agencies for guidance in
creating effective advertisements. It is often employed in the testing stages
of new product development - both in concept and product testing - also.
But, when focus groups are used to generate new product ideas, they present
some basic conceptual difficulties. Mainly for, firstly, consumers can hardly
be expected to invent products -- the need(s) may be latent and it may
be difficult to conceive products which do not actually exist. If a typical
consumer were asked about his entertainment needs in the early forties,
he might not have an idea of picture screen, with sound right, there in his
bed room, i.e., a TV or if, in the early sixties, consumers were surveyed
about their needs in handling numbers, who would have suggested a hand
calculator? In other words, at best, focus group interviews can be used
effectively for the existing products and their problems.
These groups should also be protected from lack of representation and
the poor quality of response. At times, samples are mainly composed of
housewives easily available and outgoing with lot of time and inclination
to participate in such an activity. The worse, if they are articulate too. They
may try to impress the panel with their smartness and tend to act like experts.
Thus, the results may be exploratory in nature and may not be generalized
for the entire population.
Another difficulty possible is related to interpretations. Even though
recorded - audio/ video - when analyzing a discussion, there may he as
many interpretations as interpreters.
However, these points may not be valid when it comes to generating new
product ideas, because the focus group interviews for generating new
product ideas are not to be utilized in an evaluative manner.

6.6 SCREENING OF NEW PRODUCT IDEAS

Screening is essentially an elimination technique. If the purpose of idea
generation is to have a large number of ideas, the purpose of screening is to
reduce this number to profitably viable few.
Actual screening procedures vary from company to company and range
from simple, yes -. no checklists to elaborated scaling. In large companies,
the screening process is usually a multistage procedure.
Screening of new product ideas is essential for costs and risk of developing
new products run very high. Each project needs to be evaluated before
funds are committed to its development. Once a product reaches the market
place, what is done cannot be easily undone. It stands or falls on its merits.
Back-tracking can be fatally costly for stakes get progressively higher as the
new product approaches commercialization. Therefore, smart companies
concentrate on appraisals very early in the life of a new product idea.
The rationale for what is basically a rejection technique stems from the fact
that very few ideas end up as successful products; may be just 1% or 2%.
But, as the experts believe, typical screening operation may yield about
25% productive concepts to work on for screening can check that good
ideas are not discarded.
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New Product Development and
Implementation 6.7 CRITERIA FOR SCREENNG NEW PRODUCT
IDEAS
Screening criteria are established as evaluative standards in new product
development. They make arbitrary decisions less likely. They provide a
unity of purpose. They provide a perspective for new product planners.
Screening criteria usually concern themselves with three factors - markets.
products, and-finances. More frequently used market-criteria are market
size, share; market growth; market positioning; distribution features; etc.
The `product-criteria’ are newness; technical feasibility; organizational’
support; servicing requirements; legal considerations; etc. The `financial-
criteria’ are profitability; return on investment; cash flow; etc.
Because-some considerations are of more significance than others, many
firms have more than one set of screening criteria. The following sets of
“Must have” and “Would like” criteria have been suggested for the planner
of new products’:
“Must have” criteria
●● Fill a perceived need with a sufficiently defined group of heavy users
for the product.
●● Have unique product characteristics that offer distinctive benefits to
the user.
●● Have sufficient trading profit contribution, e.g., 20% to 50%, in case
of grocery products.
• Be saleable in large, expanding territories.
“Would like” criteria
●● Be compatible with and able to carry the company’s brand naive.
●● Provide the basis for a continuing business, e.g., a minimum life span
of three to five years, in case of grocery products.
●● Lend itself to mass media advertising.
The existence of a double standard - “must have” and “would like” criteria-
suggests that screening be done in stages. It makes sense. Only if an idea
passes the first test of makes compulsories would it progress to the next
level of evaluative checks. Ideas that pass the preliminary stage are then
appraised further for estimating their relative values, so that the best of the
lot can be selected.
Whether a firm will adopt a multistage approach depends upon the number
of ideas flowing from exploration to evaluation. A few ideas can easily be
screened at a single session. But, for a continuous stream of ideas, a more
elaborate procedure is required. Consequently, many small and medium-
size firms do not have a multistage screening method, for resources are
limited, new product ideas are not actively pursued, and formal organizing
for managing the new product development function does not exist. On the
other hand, screening in steps is quite common in large companies.
Ideas can also be screened one-by-one or in batches. Processing several
ideas together, in one operation may offer certain economies. But, if this
is not a significant consideration, the individualistic approach should be
preferred to screening ideas in groups.
Preliminary Screening
Preliminary screening is the first, rather rough, attempt to judge the value
94
of a new product idea. Some basic criteria are required for preliminary Generation, Screening and
screening. For example, in case of consumer goods, company, the following Development of New Product
statements can serve as primary criteria to screen new product ideas: Ideas

●● The item should be in a field of activity in which the corporation is

engaged.
●● If the idea involves companion product to others already being
manufactured, it should be made from materials to which the
corporation is accustomed.
●● The item should be capable of being produced on the type and kind of
equipment that the corporation normally operates.
●● The item should be easily handled by the corporation’s existing sales
force through the established distribution pattern.
●● The potential market for the product should be at least Rs……
●● The market over the next five years should be expected to grow at a
faster rate than GNP
• Return on investment, after taxes, must reach a minimum level of ....
For majority of such check statements, a yes or a no answer should be
forthcoming without spending much time to reach the point in question.
Technical questions can be referred to the appropriate departments.
Product Profile Ratings - Ranked Data
This technique basically calls for the ideas to be evaluated in terms of a
number of key characteristics. One type of such a rating system is the simple
ordinal measure wherein each characteristic is scored on a five-point scale.
For example, each idea can be rated on ten different criteria from Very Good
(A) to Very Poor (E), as shown below:
Criterion/ Very Good Good Average Poor Very Poor
Characteristic (A) (B) (C) (D) (E)
1. .................... x
2. .................... x
3. .................... x
4. .................... x
x
5. ....................
x
6. ....................
x
7. ....................
x
8. .................... x
9. .................... x
10. ....................
These ratings are shown below:

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New Product Development and This chart shows a (new) product profile in graphic form, Such profiles
Implementation can be developed from all new product ideas and their comparisons can be
made easily.
Product Profiles - Summated Data
This method of screening new product ideas is very much like that of ranked
data but there are some modifications:
●● The ratings are in terms of numerical values. Scores by different
people are averaged.
●● Each criterion is given a weight in accordance with its supposed
importance to the success of a new product.
●● Scores and weights are multiplied and their products added to
obtain a single overall rating for an idea. This total score facilitates
comparisons of different ideas.
The overall rating is described as follows:

Where,
R is overall rating,
Wi is weight of the ith criterion
Si is score of the idea on the ith criterion, n is number of ideas used
in screening.
To illustrate this method, we can use the data used in the previous method.
Each criterion is to be given a weight and numbers 1 to 5 will replace letters
A to E. The total of all weights should come to 1.00 and, thus, the maximum
score of any idea possible is 5.0 (Very Good). For a ready acceptance, the
summated rating of an idea should be 4.00 and above. An idea rated between
3.5 and 4 is placed between acceptance and rejection. But, exact cut-off
point is a judgmental decision arrived at by experience.
The results of using this method are shown below:
The basic reason why this method should be preferred to the previous
method of rating product profiles is the advantage summated data have over
the ranked data. In Product Profile Ratings, a Product profile with mostly A
ratings can be rather easily distinguished from one with mainly B or C. But,
when the patterns of ratings are not quite as distinct or when they take on
irregular shapes; sorting of best ideas from a large lot can become difficult.
That is why methods using mathematical manipulations are believed to give
better picture of the product profiles.
Criterion/ Weight Very Good Average Poor Very Total
Characteristic Good (4) (3) (2) Poor
(5) (1)
1. .................... 0.15 x 0.45
2. .................... 0.13 x 0.52
3. .................... 0.12 x 0.60
4. .................... 0.11 x 0.55
5. .................... 0.10 x 0.30
6. .................... 0.10 x 0.10
7. .................... 0.09 x 9.36
8. .................... 0.09 x 0.36

9. .................... 0.08 x 0.24

10. .................... 0.03 x 0.15

1.00 3.63
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Finally, in screening the ideas, as Philip Kotler says, a company must avoid, Generation, Screening and
two types of error - a DROP error and a GO error. Development of New Product
Ideas
A DROP error occurs when the company dismisses an otherwise good idea
for the easiest thing to do is to put down others’ ideas, If a company makes
too many DROP errors, its standards are too conservative.
A GO error occurs when the company permits a poor idea to move into the
stages of product development and commercialization. As a result, three
types of failure can ensure. An, `absolute product failure’ (sales don’t cover
even variable costs), a `partial product failure’ (sales cover all the variable
costs and even some of the fixed costs), and relative product failure’ (yields
a profit that is less than the company’s normal or target rate of return).
The purpose of screening should be to stop and drop poor ideas as early as
possible. Otherwise, if the ideas reach later stages and get converted into
ready to launch products, management may feel that after investing so much
in the development of the product it is worth trying it in the market. But that
may be fatal. What happens when you let good money chase bad money?

6.8 DEVELOPMENT OF NEW PRODUCT IDEAS

For further progress in the process of new product development, screened
ideas need to be converted into product concepts, “A product concept is an
elaborated version of the idea expressed in meaningful consumer terms”,
states Philip Kotler!
We can see the method of idea development with the: help of the following
example:
A large food processor, say Cadbury India, gets the idea of producing a
powder to add to milk to increase its nutritional level and taste. This is
only an idea. Consumers, however, do not buy product ideas. Therefore,
this product idea needs to be converted into a product concept. And, any-
product idea can be converted into several product concepts.
There is a need to ask some questions. First, “Who is to use this product?”
(The powder can be aimed at infants, children,’ teenagers, young or middle-
aged adults, or senior citizens). Second, “What primary benefit should be
built into this product?” (Taste, nutrition, refreshment, energy?). Third,
“What is the primary occasion for this drink?” (Breakfast, brunch, lunch,
evening, dinner, late night?).
From these questions, the following concepts emerge
●● A tasty midday snack drinks for children.
●● An instant breakfast drink for adults.
●● A health supplement for elderly people at night.
For testing each of these concepts, elaborated version of each concept can
be presented to sample consumers. For example, the elaborated version of
product concept (b) above can be like the following:
A powdered product that is added to milk to make an instant breakfast that
gives the person all the nutrition needed along with good taste and high
convenience, the product will be offered in three flavors - chocolate, vanilla,
and strawberry - and will come in individual packs - six in a box - at Rs.
120 a box.
Then, the consumers can be asked some questions like:2
- Are the benefits clear to you?
- Are the rewards believable’?

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New Product Development and - Do you see this product as problem solving/need filling?
Implementation
- Are there other products that meet the same need?
- How do you rate it on satisfaction when compared to them?
- Is the price justified?
- Would you buy the product?
Respondents’ answers to these questions can lead to the concept’s
`communicability’ and `believability’, the `need level’, the `gap level’
(between the new product and the existing products), `perceived value’,
and the `purchase intention’ (definitely, probably, probably not, definitely
not). A summary of these answers can tell if the concept has a strong and
broad enough appeal. The concept looks good, the information also tells the
planner what products this new product would replace, what consumers are
the best targets, and so on;
Activity 7
Suppose you are hired as a consultant by a new Indian Corporate to help
them with the generation of new ideas for a range of breakfast cereal (ahead
of the existing range)
1) Which idea generation techniques) you will use and why?
2) Generate new ideas.
3) How will you screen the ideas generated?
4) Develop the screened ideas into product concepts.
5) Testing these concepts, arrive at the final/best new product idea.
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6.9 SUMMARY
The unit discusses the generation, screening and development of new
product ideas, as the first stages in the development process of new products.
With the improvement in research and technology and the premium of
innovativeness in modern management, the marketer has at his disposal, an
average of idea generation techniques, each with its merits and demerits.
The unit discusses a number of these techniques while idea generation
techniques aim at multiplication of ideas for new product development;
screening is basically an elimination technique to reduce the number of new
product ideas to a viable few. The unit discusses the criteria for screening as
well as the screening methods. The development of the idea into a product
concept has also been discussed.

6.10 SELF -ASSESSMENT QUESTIONS

1) What are the sources of new product/service ideas utilized in your
organization, any other organization that you are familiar with?
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 Evaluate them with respect to their potential as good sources of ideas. Generation, Screening and
Development of New Product
2) Compare and contrast the techniques of idea generation studied by Ideas
you in this unit.
Which method would you prefer for?
i) a consumer product
ii) a service
3) How would you use Benefit Structure Analyses to generate new
Product ideas for?
a. Edible oil
b. Mosquito Repellent
c. Deodorants
4) What are the safeguards to ensure the effective use of brainstorming
as a technique? What are the limitations of this technique’?
5) Describe the important criteria used to screen new product ideas?
6) How would you use product profile ratings to a new product idea’?
Explain with the help of an example’?
7) What are the steps involved in new product launch? Discuss with the
help of a suitable example’?
8) How would you select the right target market for your new product?
Discuss the criteria for selection of a viable segment
9) Describe the development of the components of product strategy for
a new product.

6.11 FURTHER READINGS/ REFERENCES

Burns, T and Stalker G., The Management of Innovations (London:
Tavistock Publications.
Kaushal, O.P. (ed.), Product Management (Bombay: Lalvani Publishing
House.
Mascarenhas, S.J., O.A.J., New Product Development : Its Marketing
Research & Management (Calcutta: Oxford & IBH Publishing Co. (P) Ltd.
Midgley, D.F., Innovation and New Product Marketing (London : Groom
Helm, 1977). New Products Management (NY : Booz, Allen & Hamilton
1982)’ Osborn, A.F., Applied Imagination, 3rd ed. (NY. Scribner’s, 1963).
Parries, S.J. and Harding, H.F. (eds.) Source Book for Creative Thinking
(NY: Scribner’s.
Pessemier, E.A., Product Management: Strategy and Organization (NY:
John Wiley & Sons.
Rothberg, R.R., Corporate. Strategy and Product Innovation (NY The Free
Press).
Sachs, W.S. and Benson, G., Product Planning and Management (Oklahoma:
PennWell Publishing Company.
Urban, G.L. and Hauser, J.R., Design and Marketing of New Products (NJ
: Prentice- Hall, Inc.
Lehmann Donald R, Winner Russel S, ‘Product Management, 4th edition
Tata McGraw Hill
Arnold. John E., “Useful Creative Techniques”, in Source Book forCreative
Thinking. eds. S.J. Parnes and H.F. Harding.

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New Product Development and B.J. Winer, Statistical Principles in Experimental Design, (NY: McGraw
Implementation Hill).
Alford, C.L. and Mason, J.B. “Generating New Product Ideas”, Journal
ofAdvertising Research, vol. 15, No. 6, (December 1975), pp. 27-35.
Myers. James H., “Benefit-Structure Analysis: A New Tool for Product
Planning”, Journal of Marketing, Vol. 40, No.4, (October 1976) pp. 23-32.
McGuirc, E.P., Evaluaitng New Product Proposals. (NY : The Conference
Board, 1973), p. 27. Sachs, W.S. and George Benson, Product Planning and
Management (Oklahoma: Penn Well Publishing Company), p. 231.
Kotler, Philip, Kavin Keller, Marketing Management: New Delhi:. Prentice-
Hall of India Private Limited, 13th edition.
Online Resources:
1. Idea Generation: How new products ideas are generated:
https://www.youtube.com/watch?v=U4Q8qlw-puk
2. Idea Screening: https://www.youtube.com/watch?v=bXHr4AGDvQw
3. Concept Development and Testing:
https://www.youtube.com/watch?v=vWJGHOnVCzI

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Unit 7 Concept Development
Testing and Physical
Development of the
Product
Objectives
After reading this unit you should be able to:
●● define a product
●● understand the reasons behind introduction of new products to the
market
●● synthesize new product development process
●● develop a new product
●● analyze the importance of each of the seven stages of new product
development
●● evaluate and plan for challenges arising during new product
development process.
Structure
7.1 Introduction
7.1.1 What does a Product mean?
7.1.2 Need for introduction of new products
7.1.3 Protection of new product ideas
7.2 New Product Development
7.2.1 Idea Generation
7.2.2 Idea screening
7.2.3 Concept Development and Testing
7.2.4 Development of Marketing Strategy
7.2.5 Business Analysis
7.2.6 Product Development
7.2.7 Market Testing
7.2.8 Commercialization
7.3 Business plan: A tool to fetch financial assistance for new product
development program
7.4 Summary
7.5 Self Assessment Questions
7.6 References/Further Readings

7.1 INTRODUCTION
As customers we all buy products and services for consumption and adoption
and thereby derive satisfaction. But when a new product or service is offered
in the market and if it fascinates you then you tend become curious to know
about its features, cost and other related details. Finally, you end by buying
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New Product Development and the product and use it and was thoroughly satisfied and contented with its
Implementation performance. In this scenario as a customer have you ever given a thought
how the marketer had conceived the idea of this new product the answer
could be no in affirmative. Precisely this unit will take you through the
entire process of how a new idea is being converted into a physical entity
(product) keeping in mind the customer needs and wants at every stage of a
new product development process, Thus as a layman you will be appreciate
the need of a new product; its relevance to the customer, to the firm, to the
society at large, to the nation and to the world; and the challenges that firms
do face in developing a new product. The unit also focuses the new product
development process and explains in detail all the stages that are unversed
in the launch of a new product.
7.1.1 What does a Product mean?
A product is a pack of utilities offered to its prospective buyers at a certain
price to satisfy their specific need(s) and want(s). A product has got five
levels – core, generic, expected, augmented, and potential (see Figure 1).
Core level is at centre of a product and it mainly refers to the benefit or
service it provides to its customers. For example – the core level of an
automobile product is to provide transportation services. Next to the core
level is the Generic level which refers to the basic product. In an automobile,
a basic product can be an automobile without any power steering, air
bags or air conditioner etc. In expected level, we refer to all the features
a customer generally expect to have in the product. Expected level in an
automobile includes power steering, air bags, and air conditioner etc. In
an augmented level, we refer to all the features customers do not expect to
have but the firm provides along with the product. In automobile purchase,
if the customer gets an unexpected offer of a discount of INR 50,000 or
first five years insurance free, it will be real delight for the customer. Lastly,
potential level refers to all the up-gradations the product may go through in
the future years.
It is learnt that marketers differentiate their offering at augmented level
though whatever is at augmented level become the expected level of
customers with passage of time. To deal with, marketers either increase the
prices of their augmented models or they may offer less featured models at
discounted prices.

Figure1. Product levels

(Source: Adapted from Levitt, T. (1980). marketing success through
differentiation-of anything, Harvard Business Review, 83-91. and Kotler,
P. and Keller, K. L. (2018). Marketing Management, 15th Edition, India:
Pearson India Education Services Pvt. Ltd.)

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7.1.2 Need of introduction of new products Concept Development Testing
and Physical Development of
“Necessity is the mother of invention” the Product
---- Anonymous
There are five orientations a firm can choose from – production, product,
selling, marketing and holistic marketing. A production oriented firm
focuses on low cost, efficient production, and mass distribution, while a
product oriented firm relies on providing the best quality, and advanced
features in their offerings. A firm that follows selling orientation believes
that people do not buy until and unless they are told and convinced, whereas
the marketing oriented firms believes that customers’ a firm cannot survive
without fulfilling customers’ needs and wants. A firm following holistic
marketing, an extension of marketing orientation, believes on the notion
that everything matters.
“The aim of marketing is to know and understand the customer so well the
product or service fits him and sells itself.”
– Drucker (1974)
As discussed above, there are five orientations marketers can choose from.
Though, whichever of these five orientations a firm follows, a firm needs to
have a good product to survive in the market. A lot of firms are realizing this
and taking steps in launching new products. Argument regarding launches
of new products is detailed here as follows-
1. Change in customer needs and wants – Markets these days are
appearing very dynamic. There is a continuous change in purchase
preferences of consumer and it is mainly because of consumer
awareness, increments in surplus income, and consumerism. As a
result, there is constant pressure on the marketers to provide innovative
products to the customers. This again is resulting in continuous
increase in product modifications and new product launches.
2. Stiff competition – The level of competition among the marketers
to increase their market share is high. For example – Xiaomi and
Samsung are competing with one other to be the market leader in
India. The strategy of Samsung to beat Xiomi is through launches of
new models at regular intervals.
3. Technological advancements – Because of continuous developments
in technology, better production approaches are revealed. Firms these
days are also spending a lot of money for technological up-gradation.
To justify these spending and match the technological advancements,
new products are being developed all around the world.
4. Globalization – Because of digitization of business, it is now possible
for customers to order the latest products and services from any part of
the world. Marketers are also very fast on imitating the product ideas
well in advance. This is how in a short period, ideas are spreading all
across the world, which again gives rise to new product launches with
some modifications.
5. Reputation – Some firms want to earn a name of being the most
innovative firm. Their zeal to do well in this direction is earning them
a number of new product launches. For example – Space X of Elon
musk is an innovation wherein most of new research is still going
on. Therefore, one can expect more number of services, like Space
tourism, from them in the future.
6. Minimization of Risk – Most of the firm are desperate to minimize
their risk and their way of doing it is through diversification. This
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New Product Development and again is resulting in launching of new and advanced products. For
Implementation example – Adani Group is looking forward to enter in to automobile
sector and has even obtained a trademark “Adani” registered in
their name. Therefore, sometimes from now, we may hear and see
automobiles being launched from them in the near future.
7.1.3 Protection of new product ideas
As the innovative firms and individuals are inventing new product offerings,
it becomes very important for the innovators to protect their ideas from
getting imitated. One can protect his/her inventions through –
(i) Registration of trademarks if it is related to sign, design, symbol,
sound, name etc.
(ii) Filing for copyrights if it is related to images, music, literature work
etc.
(iii) Filing of patent if it is related to a new product or process.

7.2 New Product Development

Before discussing new product development, let us first understand what
does a new product actually mean. By a new product, we actually mean-
- Creation of a new product or
- a modified product or
- an existing product of one market is introduced to a new market.
Having the new product defined, we shall now discuss the process of new
product development. There are eight stages in a new product development
process. As we have already discussed the first two stages of idea generation
and idea screening in the last unit, here we shall discuss in detail the
remaining stages only.
7.2.1 Idea Generation
The process of new product development starts with idea generation.
Though the idea for new product can come from many sources, some of the
main sources of new product ideas are -
- Interaction with the employees,
- Analysis of competitors’ products,
- Customers’ feedbacks, suggestion and complaints,
- Interaction with suppliers and distribution partners
With the aforementioned sources, the firm has to consider the following
techniques to generate ideas –
●● Brainstorming – It is the process of generating a number of ideas
concerning a specific issue/topic. At this stage, no criticism should be
allowed, even raising eyebrows, making facial expressions that reflect
skepticism and doubts should also be prohibited. Here leapfrogging
and freewheeling should be encouraged. Thrust should be on quantity
of ideas as quality should be dealt later on. Too much paper work at
the very initial stage should always be avoided.
●● Focus groups – Herein a group of 10-12 stakeholders discuss on the
concerned topic for 1 to 3 hours. It is recorded and moderated by an
expert moderator.
●● Depth Interviews – A 30-60 minutes interview of a stakeholder/
customer/user by a skilled interviewer is carried to get insight about
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 the solution(s) they seek in a product. Concept Development Testing
and Physical Development of
●● Library and internet research – Employees of a firm concerned with the Product
product development carry out literature review to find out a new
product concept with which customers can be satiated.
●● Projective techniques – There are a number of techniques like role
playing, word association, sentence completion, cartoon picture, and
third person technique wherein customers are asked to participate and
responses from them from these participations are used to get insight
of the psyches.
7.2.2 Idea screening
Once the ideas are generated they are screened to filter out the not so
promising ideas. The filtered out ideas are not discarded away but they are
kept safe and secure in database for future product developments.

7.2.3 Concept Development and Testing

ATAR Model
ATAR model is employed to forecast sales volume and profit potential of a
new product by an entrepreneur or a firm is going to develop.
A – Aware (how many potential buyers are aware about the product?)
T – Trial (how many potential buyers are trying the product?)
A – Available (how many potential buyers are finding the product
available in the store?)
R – Rebuy/Repeat Purchase (how many are repurchasing the product?)

Figure 2: ATAR Model

Let us suppose that an entrepreneur thinks of manufacturing toothpaste.
However, toothpaste is comprised of number of ingredients and various
combinations of ingredients will also be possible. In such a scenario,
ATAR model can be worked out to check the profitability of each of the
combinations. By doing so, the most feasible options can be then worked out.
Table 1 gives insights on the applicability of ATAR variables in evaluation
of the feasibility of a product concept, specifically a herbal toothpaste with
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New Product Development and good taste. Herein, the firm is able to reach breakeven point after 3 years.
Implementation The firm will also analyse other concepts and then it will choose the most
promising one(s) among them. If the firm’s sole objective is to increase its
bottom line in a shortest possible time frame, the firm will obviously go
with a concept whose breakeven point or payback period is the least.
Table 1. Analysis of a concept through ATAR variables
Product – Toothpaste
Year 0 Year 1 Year 2 Year 3 Year 4
(Herbal & Tasty)
Market Size (units that
4,00,000 420000 441000 463050
can be sold)
Growth Rate (Annual) 5%
ATAR
Awareness 10% 15% 20% 25%
Trial 10% 10% 5% 5%
Availability 20% 20% 25% 25%
Repeat 20% 25% 25% 30%
Customers’ Analysis
New repeat customers 160 315 276 434
Total ‘Repeat’ buyers 160 475 751 1185
Price & Volume Analysis
Average quantity
purchased per year 22 22 22 22
Unit Price (after
discounts) 8 8 8 8
Cost (per unit) 3 3 3 3
Margin (per unit) 5 5 5 5
Total sales 3520 10450 16513.75 26064.16
Total Revenue 28160 83600 132110 208513.3
Gross Margin 17600 52250 82568.75 130320.8
Initial Investments
(Capital 90000
Spending on Promotion 40000 30000 20000 10000
Profit (After Expenses) -90000 -22400 22250 62568.75 120320.8
Cumulative Profit
Contribution -90000 -112400 -90150 -27581.3 92739.53
Source: Author’s own assumptions
Concept Development
As explained in ATAR model, assume that the entrepreneur finally thinks
of manufacturing toothpaste which is herbal and tastes good. Though, it is
a good idea, it can be further divided in to a number of concepts, as buyers
do not buy merely ideas they actually buy concepts. These concepts are as
follows -
I. Concept 1. Toothpaste for urban children to cultivate a habit of tooth
brushing as they dislike toothpaste because of their bad tastes.
II. Concept 2. Toothpaste for all those who do not use toothpaste because
of their bad tastes.
III. Concept 3. Toothpaste for villagers who use chew sticks as they find
toothpastes are neither available nor they are herbal.
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Once done with the defining of concepts, one can identify the categories Concept Development Testing
of the products each of these three ideas are going to compete with. For and Physical Development of
example Concept 1 is going to compete with all the toothpaste brands that the Product
are present in children’s toothpaste category , Concept 2 is going to compete
with all the herbal toothpaste brands, and Concept 3 is to compete with
freely available chew sticks.

Figure 3. Product Category Structure of Oral Care

(Source: Author’s own propositions)

Let us assume that among these three concepts, concept 2 appears to be

the most promising at the moment. In that case, the next step is to plan
the product-positioning map, a map portraying the positions of different
products in oral care category.
Expensive
*floss
*toothpowder *non-herbal toothpastes
Not Easily Easily
Available *chew sticks *mouthwash Available

Inexpensive
Figure 4. Product-positioning Map (Product-positioning Oral Care)
(Source: Author’s own propositions)
Once we are done with product-positioning map, next is brand-positioning
map, a map portraying of perceptions of customers regarding all other brand
in that category. As we can see that there are only two existent brands that
are appealing to segment 1 and 4. In this case we can launch two brands
catering to segment 2 and 3. The brand we are going to launch in segment
3 should be a premium brand while the brand we are going to launch in
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New Product Development and segment 2 should be discounted brand. By doing so, we can have a larger
Implementation pie of these segments.

High price per gram

*Brand C

*Segment 4 *Segment 3
Bad taste *Brand A The Best
*Brand B taste
*Segment 1 *Segment 2
Low price per gram

Figure 5. Brand-positioning Map (Herbal and Tasty toothpastes)

(Source: Author’s own propositions)

Concept Testing
Concept testing is the stage where we present the product, mostly in physical
or symbolic form, to a few target consumers to get their feedback. Normally
the feedback is received on following points –
(i) Need satisfaction – are the customers finding that the product will be
able to satisfy their needs?
(ii) Perception regarding value received – do the customers perceive that
they will receive substantial value through this product?
(iii) Purchase intention – Are the customer willing to purchase the product?
(iv) Believability in the product – do the customers believe that any
product like this can exist in the market?
(v) Purchase occasions – when the customers will be happy to purchase
the product?
(vi) Purchase frequency – what will be the purchase frequency of the
product?
To find the purchase preferences of the customers regarding the variables
like packing colour, product colour, pack size, and price, a firm can use
techniques like conjoint analysis.
i) Pack size (50 grams, 100 grams, 200 grams)
ii) Pack color ( Red, White, Blue)
iii) Price (INR 50, INR 90, INR 175)
iv) Product colour (Green, Red, White, Blue)
By collecting the ranking of customers on these 108 (= 3 x 3 x 3 x 4)
different combinations, one can then use regression to find utility being
drawn from each of these 13 (=3+3+3+4) points. Then one can easily find
which top three or four combinations of pack size, pack colour, price and
product colour one can go with.
Activity 1

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1. Select any product category of your choice and develop at least 3 Concept Development Testing
concepts that you think will be feasible in the present context.. and Physical Development of
the Product
………………………………………………………………………
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2. Carry out product-positioning and brand-positioning map for the most
feasible concept proposed under the Activity 1.
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7.2.4 Development of Marketing Strategy
Once the firm is done with successful concept test, it can then go for the
development of marketing strategy. The marketing strategy will be framed
on the basis of three parts –
i) Market credentials and brand positioning: Market credentials
specifically means, the target markets, the existing marketers , the
level of competition exists, the aspirations of target customers, and
the size of market potential. For example – in our herbal and tasty
product concept, we have to find how many people can be the potential
customers, how much they are already spending on tooth care, how
much will be the potential if we multiply their population size with
their respective spending, what expectations people have, what need
they think are not getting fulfilled etc. After knowing all these we
have to develop our branding and brand positioning strategy. We need
to pick brand elements (symbol, logo, term, sound, sign) in such a
way that anyone looking at these brand elements can assume that it is
related to something herbal and tasty. In doing so, we have to register
these trademarks with the concerned department and then design our
commercials to convey that we are herbal and tasty toothpaste. Before
airing the commercial on any of the mass media tv or radio, we should
show it to a few target customers to get their feedback on it. If any
suggestion is received, we have to integrate them.
ii) Financials and Distribution: In financial aspect, we have to take
care of two things - price at which we have to offer the product, and
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New Product Development and marketing budget for the successful marketing of the new product. In
Implementation distribution aspect, on the other side, we have to plan about pack size,
box sizes, retailers, jobbers and distributors and their commissions
respectively.
iii) Marketing Mix – At this juncture we have to plan for product
(quality), price (skimming or penetration strategy, differential pricing
etc.), distribution, promotion (packing, media planning, channel
selection, procurement of marketing services etc.).
7.2.5 Business Analysis
Once the firm develops marketing strategy, it can go for business analysis
wherein the firm prepares cost, sales and profit projections to see whether
the product commensurate with the objectives of the firm. If it seems so, the
product will go to product development stage.
Estimation of Sales over the Product Life Cycle (PLC) - In estimation of
sales of the product during its PLC the firm should look at various aspects
like – number of target customers, purchase frequency, purchase quantity,
price of the product, sales promotion, commissions to channel partners.
Estimation of cost and Profit - Herein the firm projects a 5 year or a 10 year
plan wherein all the sources of inflows and outflows are included. It gives
the firm a complete picture of what that has to do to achieve the financial
objectives of the firm in the context of present product.
Activity 2
1. Carryout business analysis for the concept selected for the Activity 2.
………………………………………………………………………
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……………………………………….....…………………………….
7.2.6 Product Development
Quality function deployment is the technique which most of the firms use
in product development. In this technique, customers are asked about their
preferences (what) and then these preferences are transformed in to technical
specifications (how), the characteristics a firm can control. Following this,
pair wise correlations among all the technical specification are established. If
two are highly correlated ++ sign is allocated, if two are correlated the + sign
is allocated, if two are not related then 0 is allocated, if two are negatively
correlated then – is allocated, and if the two are highly negatively correlated
then -- sign is allocated. These correlations assist the firm in taking care of
customer preferences in a better way. Following this, customers are asked
to rate each of their preference from 1 to 10. Then mean of all these scores
110
are calculated and these are called relative importance. Next the customer Concept Development Testing
preferences (what) are correlated with technical specifications (how) and and Physical Development of
the Product
if they are found to be highly, moderately, and weakly correlated then the
numbers allocated to these correlations are 9, 3 and 1 respectively. If they
are not all found to have a correlation with one another, 0 is allocated. Next
to it, relative importance score are multiplied with corresponding correlation
scores of what and how. These multiplications are added for each of the
specifications. These multiplications and additions are performed for each
of the technical specification. Next to it, all the scores are added to calculate
the grand total. Next to it, we divide each of technical specification score
by grand total and in doing so we get relative importance weight-ages. By
looking at these score we can find which aspect is of more importance to
the customer and which of these is of lesser importance to the customer. In
our example, we can see that aspect of SSD is of the utmost importance to
the customer. We can then work out different combinations to customers to
satisfy their needs and wants.
Example – Let us understand this with the help of an example wherein a
firm is looking forward to develop a laptop for the market. It approaches
customers and finds that there are 6 aspects that customers are looking
while purchasing laptop i.e. quick when switched on, does not heat up,
easy to use, good battery capacity, durable and portable. The firm then asks
the customers to rate these 6 aspects on a scale of 1 to 10. After receiving
this data, the firm allocate technical specifications with which these 6
aspects can be controlled with, these specifications are – processor, RAM
size, screen size, material, weight, and SSD. Then these specifications are
correlated pair wise and signs of ++, +, 0, _, and --, are allocated as per
the aforementioned explanations. Following this, correlations between each
of the 6 aspects processor is established and a score of 9, 3, 1 and 0 is
allocated as discussed above. The allocation of correlation numbers are also
allocated in the case of RAM size, screen size, material, weight, and SSD
as well. Next to it, the relative importance scores are multiplied with their
corresponding correlation scores. Like in the case of processor 10, 9, 7, 9,
7, and 6 are multiplied with 9, 3, 9, 9, 0, and 0 respectively to get a sum of
261. These calculations are also performed in the case of RAM size, screen
size, material, weight, and SSD also to get the sums of 261, 144, 261, 152,
and 282. All of them are added to get 1361 (261+261+144+261+152+282).
Next to it, we divide 261, 261, 144, 261, 152 and 282 by 1361 to get relative
importance weight age of processor, RAM size, screen size, material, weight,
and SSD. In doing so, the relative importance weight ages of processor,
RAM size, screen size, material, weight, and SSD are found as 0.1917,
0.1917, 0.1058, 0.1917, 0.1116 and 0.2072 respectively. Among these, as we
can see, 0.2072 is the highest while 0.1917 is the second highest. It shows
that the most important thing to a customer in a laptop is SSD, and then the
next equally-important things to a customer are a laptop’s processor, ram
size and material it is made up off.
After doing so, the firm can select a few combinations of SSD, Weight,
Material, Screen Size, Ram Size, and Processor and can reach the customers
to get their feedback in this regard. The best 2-3 combination can be then
selected for further considerations.
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New Product Development and
Implementation

Figure 6. An Example of Quality Function deployment

(Source: Author’s own data)
7.2.7 Market Testing
If the firm is into FMCG business then the firm will have the following
options to choose from for market testing:
i) Test Marketing:- Test marketing is also known as standard test
marketing. These are conducted with limited number of prospective
locations (cities/towns/villages etc.) which are generally selected
through probability sampling techniques. The firm does everything
in these locations that it would have otherwise done at national level.
The sales personnel as usual sell products to jobbers, distributors,
commission agents and retailers. Marketing mix plans and strategies
are then devised to be implemented. The performance of the test
market is analyzed through the sales track. Surveys are conducted
with consumers and distributors. In-store activities of customers are
analyzed. Results received from these activities are then analyzed to
be better prepared for national launch.
ii) Simulated Test Marketing :-( STM) STM is designed to overcome
the issues and disadvantages of standard test markets. Simulated tests
are conducted in laboratories wherein a theme is exposed to marketing
mix variables (especially product, place, price, and promotion) to
gauge their purchase related intentions. Simulated test markets are
relatively faster and cheaper than the standard test markets.
iii) Controlled Test Marketing: - Controlled test marketing is mostly
used for introduction of new products in controlled settings. In
controlled test marketing, the concerned firm shortlists certain
retail stores across different geographies and approach them to keep
its product in their stores for some fee. The firm controls the shelf
position, POP (point of purchase) promotions, pricing, and displays
of its product in these stores. Then data is collected from these stores
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 through video cameras and checkout scanners to draw meaningful Concept Development Testing
conclusions regarding the product. Input received from this process is and Physical Development of
the Product
then utilised for the national launch of the concerned product.
iv) Sale-wave:- In this method a few consumers are repetitively offered
the product and is always offered free of cost. Then the firm tries to
seek their willingness to use the product each time it is offered to
them.
On the contrary, in case of industrial product the firm will have the following
options to choose from for market testing.
i) Alpha testing: In this method prior to commercialization of the
product, the product is offered to the employees or test engineers of
the firm to see how they find the product. Then after some time their
feedback is taken to make decision regarding further course of action.
ii) Beta testing: While in this method the product is given to those
customers who actually need it. They are then asked to use the
product for a fixed time period. Once the time is over, their feedback
is recorded and the suggestions (if any) are worked out before the
final launch of the product.
7.2.8 Commercialization
Commercialization is the stage when actual launch of the product takes place.
Most of the time firms are too occupied with new product development that
they hardly get time for preparing a winning commercialization program.
For a firm commercialization program, the firms need to have suitable
arrangements for manufacturing, and long lasting relationships with all
the players of value chain, specially suppliers, transporters, retailers and
distributors. Sometimes, entrepreneurs not have backings of big firms have
to rely on start up funds, angel investors, and crowd funding for their capital
requirement.
Beside funding and arrangement with other parties, the decision pertaining
to when (timing), how (strategy of introduction), and where (location) of
commercialization are also very important to make.
i) When (timing): When a firm is looking to replace their product, they
wait until the stock of old product is sold out. If a firm is launching
new product, then it has three choices to choose from. One of these
three choices is that of first entry wherein the firms commercialize
the product before its competitors do. If the firm does so, it enjoys
the leadership and can possibly dry out distributors, retailers, and
customers for its competitors. Another choice that a firm has is
that of simultaneous entry wherein the firm is commercializing the
product on the day its competitor(s) is commercializing the product.
Advertisements of both the firm may create buzz for the product
getting launched. Last choice is that firm wait for its competitors to
launch the product. In doing so, it will not be required to spend much
on educating the customers. Though, the chances of drying out of
customers and distribution partners by competitors can’t be denied in
that case.

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New Product Development and ii) How (strategy for introduction): Any new product launch attracts
Implementation huge money in terms of expenditure and expenses. In the light of this
firm should plan a realistic budget for its launch activities much in
advance. Further, to ably complete all the activities of distribution, a
firm can also employ the critical path method scheduling technique
for a better handing of transportation issues.
iii) Where (location): Location for commercialization is decided by
the product type, target market and resources that are available for
the launch activities. Generally, small firms launch their products in
one of the promising cities and keep continue on launching in other
cities as well. Large firms, on the other side, nationally launch their
products and then the move to other countries.
Let’s discuss with an example wherein the concern for environment
protection specific to curb carbon emission and with the objectives of mass
electric mobility shift Ola forayed into electric scooters and established
Ola electric 2017. In May 2020, Ola electric acquired Etergo, a Netherland
based electric scooter firm, and expressed its intention of launching electric
scooters in India. In December 2020, an MoU was signed with Tamil Nadu
Government to invest INR 2400 Cr for manufacturing of electric scooters
in Tamil Nadu. In January 2021, it procured 500 acres land in Krishnagiri,
Tamil Nadu for manufacturing the proposed electric scooters. In February
2021, construction work started at the manufacturing plant. On December
15, 2021 the CEO of Ola, tweeted to inform all the prospective buyers
regarding the launch of Ola electric scooters. The potential buyers booked
the Ola electric scooters online and the scooters were delivered to them
at their doorsteps as Ola did not go for traditional dealership model. Just
within 5-6 months of its commercialization, in the month of April 2022,
it became top electric two wheeler firm in India. It snatched top spot from
Hero Electric by selling 12,683 electric scooters in April 2022.
7.3 Business Plan: A tool to seek
financial assistance for New
Product Development
On one hand the government is fostering entrepreneurship in the country
while on the other hand entrepreneur do have startup idea but they do
not have the requisite financial support to make their dreams a reality.
And to seek financial assistance from any financial institution or an angel
investor, they need to submit business plan, a formal written report about
the entrepreneurial idea, expressing the planning and steps to be taken to
carry out the proposed concept. This section explains all the constituent
parts that are there in a business plan.
Constituents of a business plan are explained as follows: –
●● Executive Summary – A summary of the whole report for executives to
enable them to go through to understand the project in a very short time.
●● Vision, Mission and Goal(s): Vision is what one needs to do tomorrow
(in simple words these are the aspirations of the future. For example
vision of Ford is to build a motor car. Mission, on the other hand, is a
long term aims to be achieved by the entrepreneur/firm. For example
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 Mission of TCS is to enhance its competency capital. Goals are time Concept Development Testing
bound achievable targets regarding sale, production etc. For example- and Physical Development of
the Product
To Achieve 24% quality improvements by next financial year
●● Company Overview: Herein the details pertaining to the firm, specially
information regarding its registered office, employee strength, and
management etc. is explained.
●● Product: This section actually explains what the product is, what its
ingredients are, what speciality it has, why it is proposed, what its
USP is, and what kinds of needs it is going to fulfil.
●● The Market: Market includes group of buyers and this section
provides information about the buyers you are going to make the
proposed product for. It explains the profile of the segment(s) you
are targeting, especially its demographics, needs, aspirations, and
disposable income.
●● Marketing plan: A written document which provides a summary of
what the marketer has learnt about the marketplace and indicates how
these plans will be achieved and the marketing objectives to pursue.
The contents include the following which are mentioned below:-
(i) Executive summary – it contains brief of plan, including its goals, and
recommendations.
(ii) Table of contents – It contains the ingredients of the marketing plan.
(iii) Situation analysis – It includes information about the bottom and top
line, market characteristics (size, definition, growth rate), competitors,
and macroeconomic factors.
(iv) Marketing strategy – It explains strategic marketing constituents
(segmentation, targeting, positioning) and tactical marketing
constituents (sales promotions, price hikes, alliances for distribution,
and plan as per the competitiveness of the product in the concerned
product line etc.)
(v) Planning projections – It includes sales forecasting, and analysis
regarding break-even and expenses.
(vi) Implementation controls – It chalk out weekly/monthly goals, budget
in the context of previous sales results, and adjustment(if any) to
deal with situations like price wars, natural calamities (COVID-19),
strikes, and lock outs, etc.
(vii) Competition/competitors – This section chalks out the number of
competitors that are there in the market. This explains the level of
competition, rivalry among the firms (if any).
(viii)Risk - If there is entry or exit barrier it reports it here. Besides this, it
also reports all sort of risk that can be there because of macroeconomic
factors, natural calamities (like COVID -19).
(ix) Employees Management – It reports the strength employees are
going to be there in the proposed manufacturing, marketing, and
distribution of the product. How these employees will be recruited
and how they will be trained. This also talks about their promotion
and compensation in brief.
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New Product Development and (x) Capital Requirements – This section talks about the finances required in
Implementation the actualization of the business idea.
(xi) Conclusion - It summarizes the whole business plan while touching
upon all the facets of import briefly.
Activity 3
1. Chalk out a business plan of a new product development of your
choice.
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7.4 Summary
This unit focuses on the various aspects of new product development process
within a firm. It is divided into three parts; the first part introduces the learner
to the meaning of a product, why we need new products, and how marketer
can protect their ideas of new product developments. In the second part, it
synthesizes the new product development process and explains in detail all
the stages that are to be carried out to launch a new product. Lastly, in the
third part, it gives an overview of business plan to assist the learner in their
entrepreneurial journeys.
7.5 Self -Assessment Questions
1. Why do you think we need new product when old products can also
assist us in our daily life? Discuss
2. a) How do you think the concerns regarding climate change all
over the world are forcing the firms and individuals to come up
with innovative products with which carbon emission can be
reduced?
b) Is there any impact of these in real scenario? If yes, please
explain at least four products that you think are the result of
these compulsions.
3. What do you think are the problems that a small enterprise might
face in journey of development of a new product? Can a educational
institute can assist in this regard? Elaborate with a suitable example.
4. How do you think we can bring more start ups in India to give a boost
to Indian economy? How as a student you can contribute to this?

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 Concept Development Testing
7.6 REFERENCES/FURTHER READINGS and Physical Development of
the Product
Ulrich, K. T. (2003). Product design and development. Tata McGraw-Hill
Education.
Karol, R., & Nelson, B. (2011). New product development for dummies.
John Wiley & Sons.
Kotler, P. and Keller, K. L. (2018). Marketing Management, 15th Edition,
India: Pearson India Education Services Pvt. Ltd.)
Drucker, P. F. (1986). Tasks, responsibilities, practices. New York: Trueman
Tally Books
Kotler, P. and Keller, K. L. (2018). Marketing Management, 15th Edition,
India: Pearson India Education Services Pvt. Ltd.)
Levitt, T. (1980). Marketing success through differentiation-of anything,
Harvard Business Review, 83-91.

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 UNIT 8 NEW PRODUCT LAUNCH

Objectives
After reading this unit you should be able to:
●● understand the meaning of product launch;
●● explain the marketing plan for new product launch;
●● ascertain and select target market; and
●● plan for launch schedules.
Structure
8.1 Introduction
8.2 Types of New Products
8.3 New Product Launch the Marketing Plan
8.4 Defining and Selecting the Target Market
8.5 Product Strategy and Positioning
8.6 Pricing the New Product
8.7 Promotion of the New Product
8.8 Summary
8.9 Self-Assessment Questions
8.10 References/Further Readings

8.1 Introduction
The new product launch poses an interesting and satisfying challenge
to product managers and his team members working in the marketing
department. It actually offers an opportunity to the marketing personnel
to apply their theoretical and practical knowledge in their job and to see
their plans bearing fruits and success. In essence, it is very difficult to take
appropriate decision even after adequate knowledge and information about
marketing techniques, what adds flies in the soup is that even a single hasty
and irrational decision can jeopardize the success of a new product and its
profitability.
Furthermore, the rising competition in almost all businesses, the availability
of global information to the customer with the press of a button through the
internet and the explosion in the media has made the already onerous task
of marketers even more difficult.
One may ask as to how all these developments make the success of new
products difficult? The answer lies in the fact that with the easy access to
all the information channels, the customer has become more aware about
the happenings around him. This makes him more demanding as far as the
value for the money spent by him is concerned. On the other hand he is
also being bombarded with a lot of messages on a day-to-day basis. Thus
making it almost impossible to remember the product unless it offers him
the clear advantage or it meets some unmet need or at least he perceives the
new product as different and unique.
Imagine the plight of a housewife who takes the decision to buy a detergent.
During her spare time, she watches a few interesting programmes on her
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favorite TV channel. During the same time she would have to watch at New Product Launch
least 20 to 30 advertisements which have been interspersed in her favorite
programmes. How many of these can she remember? The chances are quite
negligible. Though the recall of a particular advertisement will depend upon
many factors, what is intended to be emphasised here is that all these aspects
make the life of marketers and product managers more difficult.
The success, in this difficult environment, depends upon the intelligence,
creativity, knowledge, experience and the ability to take risks, of the
concerned product managers and other marketing personnel. It should be
the endeavor of everybody concerned with the new product launch to avoid
pitfalls at every step of the process.
It has been the endeavour to present the requisite information with emphasis
on practicability of the concepts in the section that follows.

8.2 TYPES OF NEW PRODUCTS

Before we dwell into the details of marketing and launch of new products,
it is very important to understand what types of new products one can come
across. This is important because the marketing strategy is also influenced
and it should be influenced with the type of the new product. Various types
of new products are as follows:
New for the Mankind
Products which are the result of new discoveries/inventions constitute new
to the human race. These types of products come about once in the life time
of an individual or even longer. The examples of such products are all the
discoveries when they were actually made. The examples include telephone,
television, aircraft, bicycle and more recently the Mobile Phones.
New for the Country
All products which have been marketed as innovations in other countries
are being marketed in the country of one’s origin for the first time. The
example of such products could be Viagra (the tablets for impotence)
launched by Pfizer abroad is currently available in the Indian Market too.
New for the Industry
Products which are new for a particular industry constitute a new
product to the industry. The examples are the flat television launched in
the T.V. industry, The Euro I and Euro II cars launched by some of the
major automobile companies in India, the laptop computers launched in
the computers industry, cars with automatic gear system launched in the
automobile industry a host of other products keep adding to the list with the
passage of time and advancement in science and technology.
New Product in a Product Category
Products which represent an innovation in an already existing product
category for example, cigarettes represent a product category. The
introduction of the cigarettes specially marketed for female gender
represents the new product in a category. We may remember that the
cigarettes in the brand name of “Ms.” were launched a few years ago. To
cite another example The UB group has launched the light Kingfisher beer
in the product category of beers, similarly diet coke paved its way into the
health conscious segment.

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New Product Development and New Product in the Product Class
Implementation
The new class represents the new types of products in the existing product
category. For example, cigarettes represent a product category; the filtered
cigarettes represent a product class. Similarly, if antibiotics represent a
product category, penicillin represents a product class.
New Product for the Company
A new product which is new to the company itself is considered as a new
product of the company. There is nothing new in terms of an innovation
regarding the product category or the product class or for the country etc.
Here the company launches the same product which is already available
in the market under a new brand name. Thus the brand name is the only
thing that is new. In order to differentiate, the company comes out with
innovative marketing strategies and marketing communication to ensure the
success of such brand. There are many examples of such products in the
pharmaceutical industry. There are many brands of ampicillin or B-complex
vitamins or tonics available in the market. And there is exactly no difference
between the B-complex vitamins marketed by one company over the other.
The examples from other industries include the tyres, soaps etc.
Activity I
Identify any five new products (Brands) of your choice which have been
launched in the recent past.
Try and identify to which product category these products belong to.
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8.3 NEW PRODUCT LAUNCH-THE
MARKETING PLAN
When the test marketing results are positive, the new product is ready to
enter the final battleground - the market. In this part of the unit we shall look
at the factors and steps involved in developing marketing plan for the launch
of a new product. The marketing plan for launch is simply a statement of
the course of action to be followed for the product’s introduction into the
market. It should clearly specify the marketing objectives, strategies and
programmes. Though this section is placed towards the end of the product
development process, it is not to imply that marketing planning for launch
can be left till the end to commence just prior to the launch. Marketing
planning is a continuous activity in the new product development process
and informally may start at the time of idea development itself. Formally,
it should commence as soon as the product development stage begins. Like
all important plans, marketing planning for launch is an iterative process.
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 New Product Launch

Setting objectives for new products: The statement of marketing

objectives for new products represents a decision criterion - a goal that the
team strives to achieve. A statement of clearly defined, measurable, time-
bound objectives is critical, especially if the new product team is large and
diverse. Marketing objectives clearly written down and communicated can
have a synergising effect on the activities of the new product team.
Typical marketing objectives for the new product should contain:
●● Unit or Rupee value sales of the product by the year,
●● Market share by the year, and
●● Product profitability in terms of percentage margins and payback.
In the early stages of the new product development process, the information
at the disposal of the marketer may permit only rough estimates. As more
information starts coming in as a result of market studies and test marketing
feedback, as well internal cost data, the objectives can be refined and made
more realistic.
Situation Analysis: An analysis of the environment, surrounding the new
product is critical to its success and usually is one of the early steps in the
development process. It is here being discussed only as an ingredient of the
marketing plan. The situation analysis in this respect would comprise of the
macro environmental analysis, the market analysis and the internal analysis.

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New Product Development and The macro environmental analysis involves the study of variables that lie
Implementation outside the firm and may have implication on the products market and the
company. Specifically, it would include a study of the economic situation,
the political-legal situation, the demographic and social trends as well as the
technological developments. The analysis gives a useful framework for the
marketing plan to be developed.
The market analysis is essentially undertaken to provide an input in
designing a successful marketing strategy. It should include:
●● Market overview - An assessment of the quantitative and qualitative
aspects of market size and growth.
●● Segment overview - What is the target segment? How are the segments
distinguished, and defined in terms of size and growth trends?
●● Consumer overview- A definition of who are the buyers, the purchase
influencers? What, when and how do these target consumers buy?
Why do they buy? What are their preferences, needs and wants?
●● Competition overview- A definition of the competitors and their relative
strengths and weaknesses segment wise. A critical assessment of their
products and consumer’s perceptions of their products, competitors,
strategies for pricing, advertising, distribution; an assessment of their
marketing position.
Time invested in market analysis usually gives rich dividend at the time of
planning the positioning strategies of the new product.
●● The internal analysis pertains to an assessment of the company’s
resources with reference to the new product. In respect of the
marketing plan one must specifically analyze:
●● The sales force - How do you assess the present sales force in terms
of their capabilities of selling the new product? Would they require
additional training inputs? Do you require a new sales force?
●● Promotional set-up - Do you require significant changes in the
advertising and promotional set-up?
●● Distribution system - How do you evaluate the service and distribution
system with reference to new product? Do you require significant
modification? What needs to be done to assure dealer support to the
new product?
The internal assessment must also consider the strengths and weaknesses
of the other functional areas that have a direct bearing on new product
development. It is essential that an integrated approach presupposes a
critical assessment of manufacturing, research and development, finance
and marketing strengths, and weaknesses.

8.4 DEFINING AND SELECTING THE TARGET

MARKET
Market segmentation, the definition of clusters of consumers within a
market such: that there is relative homogeneity within each group can
utilise several bases. You have already studied these in your basic/core
course in Marketing. Perhaps the most prevalent method of segmentation
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for new products is benefit segmentation. Benefit segmentation recognises New Product Launch
that people seek different benefits from their purchases and have different
motivation to purchase. Using this approach it is possible for the market-to
define the benefits and attributes that must be built into the new product and
communicated to the consumers. In fact, the positioning and communication
strategies are largely defined by the benefit segment selected.
Any segmentation analysis would yield a number of potential segments
and present alternative attribute packages that can be built into the product
to make it more suited to a segment. It is, therefore, important to identify
criteria used to select an appropriate market segment for the new product.
Some commonly used criteria are:
●● Segment attractiveness in terms of market size, growth and future
potential.
●● Ease of access in terms of selling effort distribution channels etc.
●● Degree of fit in terms of the closeness of match between needs and
preferences of each segment and the attributes and possibilities of the
new product.
●● Competitive situation in terms of where the competition is lowest,
weakest or most vulnerable.
●● Relative advantage in terms of the differential advantage that you may
have relating to product features and benefits as well as entry strategy.
Fit and ease of access only suggest adequacy of the segment. In order
to be desirable a segment must offer possibilities of competitive edge.
●● Profitability in terms of offering you to the greatest possibility of
meeting your profit and sales targets.

8.5 PRODUCT STRATEGY AND POSITIONING

Product strategy takes shape side by side with the definition of target markets.
Product strategy in the context of new products would mean finalisation of
the product benefits features and attributes and developing growth strategy.
The Product Benefit distinct from a feature, which forms part of the
physical design of the product, is a character that is of some value to the
consumer. It helps to list your product benefits as they become important
determinants of your positioning. For example, a benefit of a new lawn-
mower may be that it can be easily operated by elderly people. This benefit
may be translated into a product feature in the form of rotor wheels to give
easy maneuverability and relatively lighter weight material used. Feature
and attribute definition in detail may bring you very close to the defining
the product specification but it does help to bring the product profile into a
sharp focus.
Product Positioning: Positioning in the market -place means deciding how
the product will be perceived by potential customers. A product positioning
statement should clearly show the end-use, and the benefit sought to be
delivered.

8.6 PRICING THE NEW PRODUCT

Pricing the New Product is an important and careful decision. It is so because
pricing will directly affect the sales volumes for the new products thereby
generating revenue for the company
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New Product Development and Sales = Number of units sold x Price (in rupees) per unit
Implementation
New products require a strategic approach to pricing because they are
unique. But their uniqueness is temporary and uncertain till the competitors
offer their products on learning that the market acceptance for the new
product is high.
On the contrary by pricing the product rationally and strategically the
company can slow down the entry of competitors with new substitutes. But
arriving at the optimum price for a new product is rather uncertain as there
is no past experience to guide as to how the market will react to a new
product at a given price.
Not withstanding all the uncertainties described above, one should be clear
that a new product should be priced in such a manner that it provides the
company with---
●● Reasonable profits,
●● Reasonable and continued market share, and
●● Reasonable unit wise sales.
Pricing Strategies
For a new product, there are two distinct pricing strategies available to
product manager. These are:
●● Skimming pricing, and
●● Penetration pricing.
Skimming Pricing
Distinctly new and highly priced products which bridges a wide gap
between the benefits offered by existing products This pricing mechanism
is characterised by high expenditure on promotion. This type of high pricing
for a distinct product in the initial stage of its launch and then lowering the
price when the competition enters has proven to be quite successful.
Examples of new products introduced with this type of pricing strategy are:
●● Dove soap
●● Van-Heusen readymade shirts
●● Woodland footwear
●● Cifran tablets
Such a pricing strategy works well when:
1). The unit wise sales of the product are not affected by the price at least
in the early stages or till the time the product’s substitutes flood the
market.
2). The market is large and only those customers who can afford to buy
the product. This ensures a profitable product.
3). The initial high price becomes a source to feel the demand and to
cover the initial high cost of promotion. It is better to initially price
the product high and then to reduce it when the competitors enter the
market than to initially price it low and increase it later.

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4). The objective is to earn initial high profits rather than initial high New Product Launch
market share. The high price in the initial stage of the products life
cycle usually ensures high profits. But on the other hand, high prices
prevent the sales to mass market.
The alternative to high price is to introduce a new product at a low price so
as to enter into the mass market at the initial stages of products life cycle.
This pricing strategy is known as the penetration pricing.
Penetration Pricing
This alternate pricing mechanism suggests to price a new product low so
as to appeal to a wide range of customers and to sell the product in large
quantities with the objective of securing a large market share. This pricing
strategy works well when:
1). The unit wise sales of the product are highly dependent on its price.
2). Sufficient economy of scale has been obtained and the costs of
manufacturing have been brought down considerably.
3). The competitors are expected to enter the market very soon.
4). The buyers who can pay high price do not exist in the market.
Examples of new products adopted penetration pricing strategy are:
●● Nirma washing powder.
●● Peter England shirts.
●● Maruti 800 cars.
It should be noted here that the price of an annually high priced product can
be lowered at any stage of the product. This helps in stretching the product’s
life cycle by adopting the penetration pricing policy at a later stage while
pursuing skimming pricing strategy at the initial stage.
Factors Affecting the New Product’s Price
After having learnt the two pricing strategies for a new product, let us
discuss the factors which influence and should be considered while deciding
the price. These factors are:
Demand for the New Product
The projected demand more importantly the demand at three or four prices
is one of the important factors affecting the price of a new product.
The nature or product would determine in estimating the demand for the new
product. In case the product belongs to an entirely new product category, the
procedure to estimate its demand will be different than for a new product
which is new only for the company and not to the market.
In case of new product which belongs to a new category, the demand can be
estimated by examining the number of customers who are dissatisfied with
other products which, though belong to some other category, meet the same
or related customer need.
In case of a new product which is new just for the company, the demand can
be estimated by expecting a reasonable market share out of the total market
of all the products in that product category.

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New Product Development and Costs
Implementation
Determining and estimating various costs involved with the marketing
of new products is the second most important factor affecting the pricing
decisions.
Apart from estimating the costs of manufacturing, (which includes Direct
Labour costs, Material costs, Costs of Special components required for
manufacturing new product), the estimated sales and promotional expenses
and the investme. nt required for the new product should also be calculated
as precisely as possible. It should be noted that all these costs should be
estimated at various estimated demand projection.
Marketing and Sales Objectives:
Once the indicators of demand and costs are positive then setting objectives
with respect to sales volume, market share, unit wise sales, expected profit
and profitability etc are possible. . The significance of determining all these
variables lies in deciding the price of a new product. If at a given price `x’,
the expected unit wise sale is `y’, the price `x’ will be fixed for the product
by the management only if the profit `z’ and the sales volume are acceptable.
If the management finds that all the measurements are below the acceptable
limits, it may decide to fix the price of the product at a higher level.

8.7 PROMOTION OF THE NEW PRODUCT

While deciding the price of a new product, the quality, quantity and costs of
promotion should be considered.
While deciding the type of promotion, one can either opt for a high promotion
or a low promotion. Both these alternatives can be exercised with skimming
price and penetration price. Thus, one can have four different options of
price-promotion combination. This can be graphically represented as
follows:

In option A, both factors (price as well as promotion) are kept on a high.

This type of a strategy works well for a product where the product has a
mass-market appeal, the targeted customer can pay the demanded price,
the market is relatively unaware of the benefits of the new product and the
competition is expected to enter the market sooner or later. As the product is
new, the company will be expected to spend a lot of money on its promotion
so as to educate the targeted customers about its benefits. The high price, in
such a case, is often the right decision as it provides a means to recover the
high cost of promotion and still earn an appreciable profit.
Option B, on the other hand, suggests another interesting option for an
intelligent marketer. In this case, the price of the product is high but the
expenditure on the promotion is kept on low ebb. Such a price-promotion
mix works well for a product, where the target market is not too large, and
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is aware about the benefits of the product, it can pay the demanded price and New Product Launch
the competition is not expected to enter the market very soon, or not at all.
Such an option provides an opportunity to earn high profits for every unit
sold as the price is high and the company is spending a low amount on the
product’s promotion.
In option C, a marketer decides to price the product on low ebb, while
budgeting high amount on its promotion. Such a strategy is usually adopted
by the marketers who target a quick and high market share. This strategy
is good for a product which enjoys a mass-market, the market consists of a
sufficiently large number of price- conscious customers and the competition
is expected to enter the market.
Option D suggests low price and low promotion as one of the choices
available. This option is good where the market for the product is not too
large and the customers are price conscious.
Distribution Policy
After having considered the influence of costs, demand, objectives and
promotion, let us consider as to how the channels of distribution influence
the pricing of a new product.
In case of high price-high promotion or low price-high promotion strategy
it will be expected that a large number of customers will throng the retails
stores for the product. In such a case the product should be available at a
large number of stores. This will involve high distribution costs. On the
other hand the new product is new only for the company and its substitutes
are available in the market, the distribution stores or retail store owners will
have sufficient push potential. The company can ask the retail stores owners
to exercise their push, by paying them higher margins or discounts. This
will obviously influence the profitability for the company and the price.
Thus, while deciding the price of a new product, an avid marketer will
consider all these factors which influence the decision.
Activity 4
Suggest pricing mechanism for the following new products scheduled for
launch.
a) Premium soap for men.
b) Electric bike.
c) Coconut water in tetra pack.
d) New satellite television service provider
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New Product Development and Promoting a New Product
Implementation
Having decided upon and have implemented various aspects of product
characteristics, and pricing decision, it’s time to take appropriate decisions
to optimize various promotion avenues and its budget.
Promotion is the life-line of a product’s life-cycle. A product manager’s time
is involved in taking promotion decisions of one or the other kind. While
the decisions regarding the product’s attributes/features and pricing are,
more often than not, one time decisions, the promotion decisions involve
the marketers on a day-to-day basis.
Significance of Promotion
Before we dwell into the details of promoting a new product, let us try to
understand the need to promote a new product.
Every marketer big or small wishes that the product should enjoy a long life
generating profits. This objective would be achieved only when the product
sells well. The product will sell only when a sufficiently large number of
customers will buy the product. This is possible when all the potential
customers are AWARE about the product, which further INTERESTS
them creating a DESIRE to own the product and finally they will ACT and
purchase the product. Thus, to achieve the goals of creating and developing
Awareness, Interest, Desire and Action among the targeted customers, we
need to promote our products and to even a greater extent our new products.
And the stages mentioned above (awareness, interest, desire and action) are
the stages of AIDA theory of selling.
Some researchers advocate the superiority of the theory of `Adoption
Process’ over AIDA theory. The stages in the Adoption Process theory are
as follows:
●● Awareness
The targeted customers become just aware of the product but do not have
the detailed information pertaining to its features and benefits.
●● Interest
The consumer becomes interested in the product as she/he receives more
information about the product.
• Evaluation
On the basis of the extra information received, consumer evaluates the
likeness, of satisfying his need and then decides his buying decisions
accordingly.
• Trial
The customer purchases the product just to try and ascertain to what extent
is would satisfy both in terms of the, need and value for money.
• Adoption
The customer studies the satisfaction levels in the trial stage and later buys
the product and uses it regularly in the adoption stage.
Though there are a couple of other but related theories, we should basically
understand that the customer’s needs information at different stages of
either the AIDA theory or the theory of the Adoption Process.
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Promotion strategy helps marketers achieve the goals of making the New Product Launch
customers aware, interested, desirous and buying their product thus creating
sales. And it is this promotion, (the intelligent, cost-effective, and most
importantly, creative use of promotion tools which helps achieve all this).
This explains the significance of promotion.
The promotion Mix
The promotion-mix consists of four components,
●● Advertising,
●● Publicity,
●● Sales Promotion, and
●● Personal Selling.
Depending upon the nature and type of the new product (new to the category,
new to the firm new to the industry) a marketer should exercise a blend
of these components in desired permutations and combinations. All these
components have varied significance for various types of new products.
(Refer to course MMPC-006, Marketing Management), which discusses all
the four components of promotion mix in detail.
Budgeting for Promotion
Enumerate all the promotional activities to be undertaken for the new
product promotion. These activities should be grouped under various
heads of promotion mix i.e. advertising, sales promotion and publicity. The
budgeting for personal selling is usually avoided for a given product, as it
links to the sales force which is common for all the product the budgeting
for personal selling is performed at the corporate level.
Budgeting for advertising, sales promotion and publicity is planned as
follows:
i) Budgeting for Advertising
This is usually planned by establishing a link with the expected unit wise
sales of the product, the advertising medium, its frequency, reach and cost
of advertising etc.
If the marketer wishes to sell 4, 00, 000 units of a new product in a month.
Assuming that one person needs 4 units of the product in a month. Thus it
needs - 1, 00,000 customers in a month. Then
• Total sales units expected = 4,00,000
• Number of customers required = 1,00,000
• If 10 % of customers who are convinced, = 10,00,000
try the product, the number of customers
to be convinced
• If 10 % of customers who see the = 1,00,00,000
advertisement, are convinced, the
number-of customers who should see
the advertisement

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New Product Development and
• If an advertisement has a reach of 10, = 10
Implementation
00,000 customers. then the number of
advertisements to be released
• Cost of one advertisement = Rs.50,000
• Cost of 10 advertisements = Rs. 5,00,000
• Thus the advertising budget of 1 month = Rs, 5,00,000
• The advertising budget for 12 months = Rs.60,00,000
It should however be noted that Rs. 60 lacs will be the cost of just releasing
the advertisement. The cost of producing the advertisement will be separate
and will be added to Rs. 60 lacs to arrive at the total advertising budget.
ii) Budgeting for Sales Promotion
While budgeting for sales promotion various sales promotion activities
should be planned for the complete year. All the sales promotion activities
should be planned on a monthly basis. The cost of each activity should then
be also allocated. The cost of all the individual activities put together gives
as the total budget for sales promotion for a specific period.
Following illustration will help you to understand it more clearly.
Planning the Activities
Month Sales Promotion Activity
April a) Free distribution of samples.
b) Putting up danglers at the retail shops.
c) Putting up posters at the retail shops.
May a) Free scheme of one unit free on purchase of one unit.
b) Demonstration of product’s performance at metro towns and
A class cities.
June a) Distribution of leaflets of the product in newspapers directly
to households.
b) Participation in trade exhibition.

COST IMPLICATIONS OF THE ABOVE ACTIVITIES

S.No Particulars Quantity Rate Amt. (Rs.)
(Rs.)
1. Free distribution of 1,00,000 10 10,00,000
samples
2. Putting up danglers 1,00,000 5 5,00,000
at retail shops
3. Putting up posters at 1,00,000 2 2,00,000
retail shops
4 Free scheme of 4,00,000 20 80,00,000
one unit free on
purchase of one unit

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 New Product Launch
5. Demonstration 500 1000 5,00,000
of product’s
performance at
metro towns and A
class towns
6. Leaflets distribution 5,00,000 1 5,00,000
in newspapers to
households.
7 Participation in 1 2,00,000 2,00,000
trade exhibition
Total Rs. 1,09,00,000
Having planned sales promotion activities for 3 months, the budgeted
expenditure is Rs.1.09 Cr. Similarly, one can plan for all the 12 months.
While budgeting the sales promotion expenses for the activity number 4
, we have budgeted 4,00,000 units as free units since we except the sales
to be 4,00,000 units , one unit free on purchased of 4,00,000 units would
mean that have to give 4,00,000 units as free . We have budgeted Rs. 20/-
per unit as this is the cost of manufacturing of one unit, through the selling
price is Rs. 70/ per unit. Thus the company earns a gross profit of Rs. 50 per
unit .While providing one free unit on purchase of one unit, the cost to the
company is Rs. 20 per unit, thus the budgeting of Rs.20 unit in item No. 4
above.
iii) Budgeting for Publicity
While budgeting for publicity, the marketer can negotiate with an external
agency specializing in publicity.
Usually a contract is established between the company and the agency on
fixed terms and fees. This fee becomes the budget for publicity.
It is responsibility of the external agency to contact various media persons
or to organize press-conferences. The executive from the organisation voice
their views on the new product which are then published in the print-media.
More companies are finding the benefits of publicity and are fast, switching,
large portions of their promotional budgets to publicity component.
Distribution of the New Product
Though, distribution is a specific function within the organisation, yet
this function has a strong interface with the product managers. This is
particularly true in case of new products
In the era of tough competition and with the availability of substitutes of
all the products in abundance, every customer wishes that the products of
his choice should be available at the nearest stores. Unless the product is
unique, the customer will not walk an extra mile to purchase the brand of
his choice. This may not be the case if the customer is a brand loyalist. But
then in this fast paced world can one expect a customer to remain brand
loyal for a long period of time? Furthermore, in case of a new product, one
cannot expect the brand loyalists to emerge from day one. Thus it becomes
very important for the organisation to make the new product available at
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New Product Development and most of the retail stores for that category of products. It is in this context
Implementation the role of product manager assumes significance. Distribution managers by
and large are responsible for the proper distribution of the complete range
of the products of the organisation. Hence in the process of ensuring the
proper distribution of other products they may tend to overlook the proper
distribution of the new product thus inadvertently jeopardising the success
of the new product:. This may also occur because it takes some time for the
personnel of the organisation in getting familiarised with the new product.
This results in the enhanced responsibility of the product manager handling
the new product. The product manager is one who is more interested in
the success of new venture. There by require to be a lot more persuasive
in getting things done for-the new product by other offices concerned who
are indirectly linked with the success of the product and without whose
cooperation it would be a difficult task for any individual to succeed with
his new offering.
The urge to ensure the proper distribution of the new product, the product
manager ought to be prepared with the following:
Plan for Sales Expectations
The product manager is the best informed person in the organisation about
the product. He has the pulse of the market, the competition, the technical
superiority of his product, the marketing strategy for the product etc. He
should share all the relevant information pertaining to new product with all
the sales managers, and with their help, should prepare the sales expectations.
While doing so, He/She should also consider the relevant published data
with regard to sales of such products and also sales of the competitor’s
products and the most appropriate scientific sales forecasting methods.
Having completed the task of defining the sales objectives for the company,
the market should be divided on the basis of territories, regions, states and
zones. The manager should also be aware about the channels of distribution
of the company and on the basis of the sales expectations, should chalk out
the quantities required to be available at each distribution point.
Once the manager has completed this exercise, it needs to be co-ordinated
with production department and inform the requirements for the new
product. These requirements should be informed to the production people
on a monthly basis.
Plan The Launch Schedules
The product manager should plan a detailed launch schedule of the new
product. He should plan conferences for sales personnel and educate and
share all information possible to them with regard to the new product. This
enables the sales force to build up their confidence level in the new product
and helps them to sell the product in due course. It is essential that the
product manager and the technical personnel who are directly involved in
new product should sell the product internally to the sales team boosting
their confidence levels and later expect them to sell to the ultimate end-
users.
While planning the launch schedule, a product manager should also ensure
that the product would be available with the retailers much in advance prior
to the official launch.
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 New Product Launch
Assume the launch date as X
Suppose it takes 7 days for the stock to reach the X -7 days
retailers from the stockists, then it should be available
at stockists
Suppose it takes 15 days for the stock to reach the X -22 days
stockist from the depot, then the product should be
available at the depots
Suppose it takes 15 days for the stock to reach X -37 days
depots from the factory, then the stocks should
be ready at the factory

From the above it is obvious, that the product manager should ensure that
the stocks are available in consumption condition at the factory premise at
least 37 days in advance from the launch date.
CO-ORDINATE WITH THE DISTRIBUTION MANAGER
Once the product manager is ready with the launch plan and the product at
the factory premise, the manager needs to co-ordinate with the distribution
department to ensure that the product reaches the depots as per the planned
date. Subsequently, to co-ordinate with the, respective depot managers and
to ensure that the stocks are further sent to the stockists as per the planned
dates.
INFORM THE SALES PERSONNEL
The product manager should ensure the sales team that the stocks of the new
products are available with the stockists and in turn they should ensure that
the same are available with the retailers before the launch dates.
The most important activity in ensuring the proper distribution is making the
product available at the retailers so that the customer is catered accordingly.
8.8 SUMMARY
Products launch always poses an interesting yet a challenging task to the
marketer. There are different types of new products and it is very important
to understand it because it influences the marketing strategy. The strategy for
a product which is new just for the company should have different elements
than a product which is new for the category.
Though the launch of a new product always carriers a financial risk for the
company in the event of it being a failure, the need for new products are so
overwhelmingly wide that a company has to resort to the process.
Different companies have different personnel or group of personnel who are
bestowed with Product Launch the responsibility of new product launch.
While some companies have the regular product mangers responsible for
the same, some others have new product managers. Some companies even
have new product committees for the job.
The process of the launch of a new product starts with .the idea of the
product itself. There are few techniques which can be relied upon to come
out with good ideas about the product. These include competitors’ analysis,
product audit, product augmentation, marketing research, etc.

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New Product Development and While deciding about the price of a new product one can choose from
Implementation different strategies like skimming price and penetration price. The decision
about a particular pricing strategy is influenced by demand, costs, objectives,
promotion, distribution policy etc.
The decision about promoting the new product is equally significant as this
would enable to communicate with target audience. The promotion mix
(which consists of advertising, publicity, sales promotion, personal selling),
budgeting for promotion (which consists of budgeting for advertising, sales
promotion and publicity) are touched upon.
Lastly co-coordinating with distribution department is considered at the
most crucial responsibility of the product manager. Distribution alone can
decide the success or failure of a new product.
8.9 SELF-ASSESSMENT QUESTIONS
1. What are the steps involved is the launch of a new product in the
market?
2. What factors decide companies to offer new products? Should new
products aim at short term or long term business strategy? Discuss.
3. Assuming you have been assigned the task of launching a new product
(any FMCG). Discuss how you would go about planning you launch
mix.
8.10 REFERENCES/FURTHER READINGS
Burns, T. and Stalker C., The Management of Innovations (London:
Tavistock Publications. 1961).
Kaushal, O.P. (ed.), Product Management (Bombay: Lalvani Publishing
House, 1969).
Mascarenhas, S.J., O.A.J., New Product Development: Its Marketing
Research and
Management (Calcutta: Oxford & IBH Publishing Co. (P) Ltd., 1987).
Midgley, D.F., Innovation and New Product Marketing (London: Croom
Helm, 1977). New Products Management for the 1980s (NY: Booz, Allen
& Hamilton, 1982). Osborn, A.F., Applied Imagination, 3rd ed. (NY:
Scribner’s, 1963).
Parnes, S.J. and Harding, H.F. (eds.), Source Book for Creative Thinking
(NY: Scribner’s, 1962).
Pessemier, E.A., Product Management: Strategy and Organization (NY:
John Wiley & Sons, 1977).
Rothberg, R.R., Corporate Strategy and Product Innovation (NY: The Free
Press,
1976).
Sachs, W.S. and Benson, G., Product Planning and Management Oklahoma:
Penn Well Publishing Company, 1981).
Urban, G.L. and Hauser, J. R., Design and Marketing of New Products (NJ:
Prentice- Hall, Inc., 1980).
134
 MMPM – 003
Product and Brand Management

Indira Gandhi National Open University

School of Management Studies

Block

3
BRAND MANAGEMENT
UNIT 9
Brand Concepts and Evolution 137
UNIT 10
Brand Equity 158
UNIT 11
Brand Building Blocks: Identify, Image and
Positioning 176
UNIT 12
Brand Architecture and Brand Extension 192

135
 BLOCK 3 BRAND MANAGEMENT

Similar to human beings, naming of products and service offerings is core

to product policy decisions. Branding make’s an excellent tool for customer
pull and aid in effective promotion of the product which forms the essence
of this block.
The rationale for branding a product the concept and relevance of branding
and the framework associated with brand name selection is the core of the
first unit.
The second unit discusses the brand equity its components and the
contribution to competitive advantage. Besides the various approaches of
brand equity are explained and eventually the steps involved in developing
strong brands.
In the third unit despite of catchy and impressive brand names of products, a
product may not appeal to the target groups unless they are rightly positioned.
Therefore it is essential for marketers to be thoughtful, foresighted and
professional in their approach and should resort to successful positioning
strategies for product acceptance and adoption.
The last unit of this block introduces to you the brand architecture and
strategy creation. In addition it also focuses on the concept of brand
extensions its need and the various types of brand extensions.

136
UNIT 9 BRANDING CONCEPTS AND
EVOLUTION

Objectives
After reading this .unit you should be able to:
●● provide the, rationale for branding
●● explain the concept and relevance of branding
●● define the importance of brand name as a marketing asset
●● evolve a framework for brand name selection
●● apply inputs on how to build a brand comment on brand image and
its dimensions
●● describe the emerging trends in branding of commodities
Structure
9.1 Introduction
9.2 Branding
9.3 Strategic Relevance of Branding
9.4 Branding Policy Decisions
9.5 Brand Name
9.6 Brand Name Selection Process
9.7 How to Build a Brand?
9.8 Brand Image
9.9 Branding of Commodities
9.10 Summary
9.11 Self-Assessment Questions
9.12 Further Readings

9.1 INTRODUCTION
This unit will introduce to the term “Branding and familiarize you with
the basic concepts related to branding”, its relevance both to the firm and
external environment including marketing stakeholders like consumers,
channel members and communication partners as well as the various
branding decisions that a firm needs to take. The unit will further help you
understand what brands are, all about followed by brand name selection
process. Subsequently, an attempt has been made to share how brands are
built. Brand image, another important dimension of branding has also been
discussed. Eventually, branding of commodities is the fast emerging trend
and its challenges are dealt with.

9.2 BRANDING
Before we really start talking on this subject pause for a moment, to recall
the process that your mind went through before you chose to become a
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Brand Management student of this university vis-a-vis other institutions which offer distance
learning programmes. Obviously the first thing that must have struck you
is the NAME of the programme, thereafter the NAME of the university -
followed by the image that you associated with each of them. Obviously the
image would have been influenced by what you would have seen and heard
about these NAMES. Well, the process of any image creation in the mind
starts with the NAME and comes back and gets attached with reference to
the Name in your mind. Well, the process and success of an image creation
task is what positioning is all about. What are we hinting at? That the
communication, identification, differentiation, distinction and positioning
all start getting identified with the name.
There was a time in USSR, when all the products being produced by different
units did not carry name identification. Consumers were expected to pick up
a product- (produced from any unit) and be happy about it.
Soon experience taught the consumers that the same product purchased
at different points of time, differed in their quality. Sometimes these
differences were so sharp, that consumers decided to go without a product
rather than bear with a substandard product. This suppressed demand and
the economists were forced to recommend the system of `Production
Marks’. Each product, form a different production unit with a different
mark-so that consumers could identify, distinguish one from the other. What
were` production marks’ in true sense? They were` brand names’.
In simple terms a brand is a name, term, design, symbol or any other feature
that distinguishes one seller’s good or service from those of other sellers. A
good brand name can cut down your advertising cost and a non-altrantive
brand name can force you to add more money to your advertising for the
same impact, assuming that all other variables are maintained at same levels
in both situations.
However, the Repurchase Value of a name is an imperative quality, which
every name has to contain. We cannot afford at any cost to ignore this factor.
We cannot get away with raising an expectation in the mind of a prospect or
a consumer, which the product cannot live up to. There can be cases, when
the expectations raised by a brand name are not intended to be satisfied or
met through the physical qualities of the product. The marketer probably
intends to satisfy these through skillful use of advertising. If that be the
case, we need to take this into account, while naming the brand.
What is Branding?
Branding is
 A process
 a tool
 A strategy
 an orientation
Branding as an ongoing process helps establish and build a long term
symbiotic association between the marketers and the consumer in response
to the changing needs and wants by way of product offerings for mutually
beneficial arrangement.

138
Branding is also viewed as an excellent and reliable promotional tool for Brand Concepts and Evolution
creating mass awareness, for projecting and positioning a product in the
minds of target consumers the authentic product attributes and the satisfaction
they would derive by adoption. Despite the availability of equally satisfying
products in the market place the satisfied customer with a specific brand
would not want nor make an attempt to spend additional effort to evaluate
the other alternative choices in the category.
As already mentioned, branding helps in easy identification thus differentiates
and stands out apart from other competitive products in the category and
there by developing a close affinity and linkage with target customer group.
This way Branding comes handy to the marketer as a weapon for clear
distinction of his product more so when the product nature is such that it
would be difficult to distinguish in terms of visible features as in case of
services and other products like cement, fertilizer etc. which are generally
perceived as commodities. This way branding is used strategically for
strategy formulation for the target groups in response to their changing taste
and preferences by way of developing and offering customized products
backed with effective communication and supported by visuals to match
and keep pace with the customer life styles and expectations.
Brand creation and brand building by the marketer’s should be a well
defined and conscious task keeping the consumer on the top of the mind:
Branding always facilitates easy and quick decision making in purchase
process. Branding also attracts customer pull and helps retain customers to
its fold over their rivals offerings for quality and personal satisfaction and
develop loyalties for the same. From the marketers angle strong brands does
help in building strong foundation/premise for the promotion of additional
products.
By now you would definitely agree that branding is much more than just
giving a brand name and signaling the rest of the world that such a product/
service has been stamped with the mark and imprint of an organization.
Table 9.1 below gives an overview of brand functions and consumer benefit
Table 9.1

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Brand Management Activity 1
List any three brands across product categories that your family has been
using for the last five years. Explain how using these brands consistently
have.
Simplified your buying decision process in that product category
Affected your overall perception about other products from the same
company
Made you non receptive to promotional messages from competing brands
How would you explain your buying behavior on the basis of what you have
studied in this unit?
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9.3 STRATEGIC RELEVENCE OF BRANDING

Brands are powerful entities because they blend functional, rationally
assessed performance-based values with emotional values
In a more complete definition, Leslie Chematony (2010) defines a brand
as “a cluster of functional and emotional values that enables a promise to
be made about a unique and welcomed experience. A Brand is much more
than the name, logo or the creation of an image that the producer service has
received an organizational imprint.
Every year Inter brand publishes a list of the most valuable brands about
which you will read more in Unit 10 on Brand Equity. A research study was
conducted by Madden Delhi and Fournier over a four year period and 111
companies on the Interbrand’s awarded list, to investigate whether successful
brand management yields higher shareholder value. The study concluded
that strong brands resulted in much higher returns to shareholders. From the
viewpoint of strategic relevance of branding and brand management this
fact strongly underlines the strategic importance of brands as an asset. As
a brand is a combination of both functional and emotional values you will
find that in a lot of cases, the initial connect with the consumer is developed
on the strength of the functional value- (e.g., the whitest white- Tide, fast
to cook, good to eat-Maggie). Marketers are however very conscious of the
fact that their competitors can quickly decipher the functional advantage
and either replicate it or improve upon it. They therefore invest significantly
in creating an emotional connect with the consumers which is not easy to
replicate and results in the sustained power for the brand.
Brands furnish one of the strongest bases of competitive advantage through
clear differentiation, positioning and powerful brand associations. Brands
to be managed well over time require sustained and strategic investment
140
of research supported investment and managerial attention to convert their Brand Concepts and Evolution
power into a long term sustainable competitive superiority. Companies are
able to build favorable reputations through successful brands over time and
over geographic boundaries, which serve to enhance the confidence and
trust of employees, consumers, dealers and indeed, the investors.
To the consumer’s brands are well regarded entities because they enable the
fulfillment of a value expressive function for them. Consumers buy certain
brands because they allow the consumers to express their own consumption
values that are in consonance with the brand values, enabling consumers to
have the quality of life they wish to achieve.
To the manufacturers brands represent a way of translating the differential
consumer needs into different satisfiers in the same product category such
that you may be able to satisfy all complexions of that need. Unilever for
example offers a Lifebuoy to the cost conscious health oriented consumer
while Lux to the beauty and skin care consumer with inspirational dreams,
thereby allowing marketers opportunities for segmentation as well as market
coverage.
Activity 2
Select Top Indian brands in the category of
 dishwashing liquids/gels
 hair care products
 motorbikes
 banks
In each case analyze the strategic role played by the brand identified by you
in the growth and consumer engagement for the company.
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9.4 BRANDING POLICY DECISIONS

In considering and making branding decisions, the firm has to consider
factors like, target consumer, target markets, their cultural influences on the
market, and the impact of brand on business strategy for example a product
which is culturally alien will find difficulty in getting accepted in the market
like in case of `Ms’ brand of cigarettes targeted at Indian women which
failed in the market place. Besides, the firm has to consider the values,
attitudes and cultural aspects of target consumers.
The brand decisions a firm has to take are-
●● manufacturers name i.e. whether to have its own name on all products, or
●● marketing organization/distributors brand name, or
●● adopt a mix of the two
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Brand Management The firm should also take decisions relating to the following:
a) Family brand name-extending family name to new products like
Onida did to other products like washing machines, music systems
etc.
b) Individual Brand name-a practice which most of the consumer
product firms like P&G adopted for its toiletry and other personal
care products.
Let us now look into each of these brand policy options available for the firm.
Manufacturer Brand Policy
As the name suggest that this policy is based on the. assumption that
the manufacturer has built a reputation in the market, with a strong and
wide distribution network and a sound financial resources to establish a
new product in the market. Customer faith and confidence in the firm is
the-prime factor in the manufacturer deciding to brand the product in his
own name. When the manufacturer markets such product in his own name
nationally, this is called the national brand policy. Classic examples are all
leading national brands of Indian corporate in diverse product categories.
For Example: Hero Motors, Maruti, Raymond, Tata and Reliance etc. Under
this Brand Policy there are two options.
Family Branding
Most of us use different brands for personal consumption and are loyal
towards some of these brands for reasons best known to each of us. Thus
when the name brings in positive associations in the minds of consumers
with respect to quality reliability and assurance of standards in all their
product offerings, family branding works effectively„
Family brand names are generally recommended in view of high cost
associated in creating a new brand and also where recognition of the
corporate name along with positive association is high. Products can be
managed quickly and at low cost under an established brand, because they
can take advantage of the existing trust and knowledge of consumers. Brand
building efforts and marketing costs are therefore lower than with a single
brand strategy. The major disadvantage of family branding is that the failure
of a new proud introduction may impact the existing family brand and create
some dissonance among existing customers. Family branding is also known
as umbrella branding for instance Dove is the mother brand name used for
soap, shampoos, conditioners, Face wash, deodorants and so on.
In order to safeguard the existing brand reputation from the repercussions of
not so successful product introductions, the policy of individual branding is
used by many large corporations.
Individual Branding Policy
You also come across some firms choosing distinct names for each of their
offerings Unilever, Proctor and Gamble and Dabur are some major examples
who have been following this option of giving different names to each of
their products. The advantages of Individual brand name lies in strong
market penetration of the product across various well-defined segments.
The company can try different marketing approaches without impacting
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the parent brand. Different positioning options become available to the Brand Concepts and Evolution
company for accessing the market with each new brand being introduced.
Sometimes they may have multiple brands of a product which compete with
each other. The chief disadvantage lies in the fact that developmental costs
and corporate effort required developing a new brand every time a new
product is being conceptualized and introduced, will be high.
Distributors Brand Policy
This is an alternative to manufacturer brand policy, which comes handy
and are relevant in the absence of firms, strength in marketing and adequate
financial resources to build a strong brand and the competition in tine
industry is high. As are result of the latter, the retail shelf space is at premium.
The distributor or the marketing organisation has strengths in the market,
customers have confidence in it and hence his bargaining power with the
manufacturer is high. In such a situation it may be advisable to market the
product under the distributor brand name.
Groceries and common household goods and commodities where the
distributor’s power over consumer’s choice is high, show prevalence to
the use of distributor brands. Online grocers like Grofers which is now
rebranded as Blinkit) and Big Basket in India, show a lot of spices, pulses,
dishwashing liquids etc under their own brand and often at a lower cost that
competing manufacturer’s brands. As some of these are low involvement
products e.g. Dishwashing liquid, consumers tend to opt for the price
advantage and patronize the distributor’s brand.
The risk associated with this strategy is:
(i) loss of control over the product marketing;
(ii) if the product succeeds, premium may go to the distributor and not to
the manufacturer; and
(iii) distributor may not extend the desired marketing support to the brand.
Mixed Brand Policy
An alternative to the above two options is for the firm to enter into a strategic
alliance with a well known Marketing firm and allow it to market the product
under its name in a well defined geographic area. The manufacturer also
confirms to market the product under his own name nationally.

9.5 BRAND NAME

If you carefully observe that every product in the market place is identifiable
by a specific name given by its maker called the brand name. Thus
identifying and selecting an appropriate brand name is the first and most
crucial step in managing a brand. The decision of branding a new product
is like naming a new-born child. It basically serves to easy identification
of the firms offering. You must have come across that a brand could be
a word, term-sign or symbol that identifies and distinguishes one product
from another for example, it could be:
 a word with meaning not necessarily related to the product it represents
viz., Amrutanjan, Orterm, Cherry Blossom, Sprite, Graviera Suiting’s
etc.
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Brand Management  the name of the manufacturers of the product viz., Bata, HMT, Titan
 a combination of numerical and alphabets,viz.Elle-18,CBZ-150
 a word whose meaning suggests some functions, or quality of the
product for example brand names like Surya (lighting) Sleep wel
(mattresses) Head and Shoulders (shampoo) Clean and Clear ( Face
wash) Fair and Lovely (fairness cream) D-cold (Medicine for cold
&cough) etc. indirectly indicate the use of the product.
A brand name may impact the buyer’s perception about the product. Brand
names are often conceived and used in establishing an overall product
concept. Occasionally, strong brand name becomes the generic name of
the product for instance brands like Surf, Dalda and Tempo used to be
synonymous with detergents vegetable oil and mini trucks respectively
while Xerox, a specific brand became synonymous with the photocopying
usage itself.
A good brand name has a mnemonic quality, something that stays in
the buyers mind and he derives some recognition and status from using
certain brands. You have only to look at iconic brand names like Apple,
Kodak and Jaguar to bring home this point. Branding always plays a major
role in communication. Apart from identifying the marketer producer of
the product branding assures the buyer of some consistency and quality
standards leading creating of brand confidence and repeat purchases. It is
essential and also mandatory for the marketer/ producer to register brand
names under the Indian Trade and merchandise act for protection and to
prevent imitation.

9.6 BRAND NAME SELECTION PROCESS

We will now attempt to share with you a realistic and operational basis for
the art of brand naming. Presented below is an approach for the formulation
of a name for a product and the selection of the most suitable from amongst
the various alternatives at hand. You have seen that a brand name should
be checked for certain qualities. The task of systemizing the choice of a
brand name calls for more than a knowledge of these qualities. What is
required is to develop a systematic base for useful and realistic evaluation
of different suggestions for adaptation. For a rational decision in this regard
a mathematical approach has limited application. Therefore, an audit’ cum
`mathematical’ approach, is suggested below the major steps in this process
are presented here.
Step 1-Preparing checkpoints for the different values to be contained in
the name
The company should first layout the objective it wants to fulfill through the
name that is trying to design. For this purpose lists of checkpoints may be
prepared using the Jackson Martindell’s method. It may be broadly classified
on the basis of certain recognized values.
Associational Value: (a) Pick upon the qualities of the product, the
association of the name to which, are likely to establish the brand; (b) List
the satisfactions that the consumer seeks to achieve through the product.
Caution: the product is meant to serve a target audience of potential
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consumer; thus only that satisfaction should be listed which are desired by Brand Concepts and Evolution
the chosen target audience. The satisfactions should be listed in order of
priorities; (c) Now prepare a combined list of the desirable qualities and
satisfactions and list them in order of priorities, for example:
Qualities and satisfactions to Impact in terms of profit and/or market
which associations of name is to share (% of potential consumers desiring an
be sought attribute)
Attribute A :
Attribute B :
Attribute C :
Attribute D :
Attribute E :
It should be remembered that consumers with a preference for, say, attribute
A can overlap with the consumers desiring attribute B. This means that
the combined market share of attribute A and attribute B will not be the
cumulative of the market shares of both but something less. The attributes
should be listed in a descending manner so that as one goes down the list, the
cumulative market share of the attributes increases. Also, the overlapping
of-the set of consumers of attribute A with that of attribute B should be less
than that of the set of consumers of attribute C with that of attribute B or A.
Memorization value: List the words to which the name can be made to
resemble in rhyme, meaning etc. and which are in Common use by the
target audience of potential consumers.
Descriptional Value: Follow the same procedure as laid down under the
heading associational value. List the product qualities that need to be
described according to consumer preferences. Also, include those qualities
which are preferred by the target audience and are present in the product but
are missing in competitive products. Prepare a list of check points on the
following design:
Descriptions Impact on the profit and/or market share
(% of potential consumers desiring an
attribute)
Attribute A :
Attribute B :
Motivational Value: Follow the same procedure as above and list the
product qualities that would motivate the consumers to make the purchase.
Against each product quality indicate the proportion of potential consumers
that are motivated by it. Also, list the factors which, if developed in the
product, would motivate purchase.
Purchase motivators Impact on the profit and/or market share
(% of potential consumers desiring an
attribute)
Quality X:
Quality Y:

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Brand Management Repurchase value: If the name is checked against the checkpoints prepared
for associational value, memorizational value, descriptional value and
motivation value it will by itself contain the required repurchase value.
Hence no separate list of checkpoints is required. For the same reason the
foregoing procedure will take into account only the first four values.
Step11-Attempting a search for names
The next step is to search for possible names that can be given to the product.
Such names are listed that fulfill the objectives laid down in Step I, i.e. they
contain the required values: A great deal of-creative imagination is required
for this job. Attempt has to be made to ensure that such emphasis is on the
required qualities. At this stage, primary emphasis is on the required values
the name has to contain; the objective evaluation comes later.
Step111-Assigning differential ratings to the names formulated
A proforma of the rating scales for all the four values can now be drawn.

Now a representative sample of the potential consumers is picked up and is

given a series of tests.
Associational value tests: The names formulated in Step II are haphazardly
arranged and listed on one side and the qualities or attributes laid down in
the list of check points for associational value in Step I along with other
product attributes are listed in a random manner on the other side. The
participants are then asked to associate names with attributes.
In this manner the extent of relationship of a name with the attributes of
the associational value can be determined. Ratings are then allotted to
these names on the associational value scale. The judgment is based on the
comparison of the results of the associational test, with the list of checkpoints
prepared in Step I under the head associational value. If the test indicates
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that a name has been exactly associated with the attributes of checkpoints, Brand Concepts and Evolution
it would represent the highest degree of association the name has with these
attributes. This particular name would then be allotted a rating in between
80 and 100. It should be noted that the rating, allotted to different names
have to be relative in nature.
Memorizational value tests: Brand names listed in Step II after being
properly shuffled with such similar names and related names (shuffling is
done to reduce the error that might creep in because of the association of
the names with each other) are listed and then given to the participants for
a specific time. They are asked to read them over, again and again, say 5 to
10 times. Then another list of names containing the names for the product in
the first list shuffled along with other similar names i.e., similar in spelling
and rhyme etc. is given to the participants. They are then asked to locate the
names of the first list. In this way the names can be allotted rating on the
memorizational value scale.
Descriptional value tests: The list of names is given to the participants.
Each participant is then asked to list under each name a few attributes that
she/he thinks the product with that name may contain. The attributes listed
by the participants are then checked against the check points prepared under
the heading Descriptional Value in Step 1. Ratings are then allotted to the
different names on the descriptional value scale in a similar manner as they
are done for associational values.
Motivational value tests: Names formulated in Step11are listed on one side
after shuffling them with a few other names that are not being considered.
Purchase motivators that are listed under checkpoints prepared under the
heading motivational value in Step 1, are shuffled up with non-motivators
and listed on the other side. The participants are then asked to associate
the names with the purchase motivators. There being no restriction on the
number of purchase motivators that may be linked with a name and the
number of times a purchase motivators that may be linked with a name and
the number of times a purchase motivator may be used. After having done
this on the basis of the results obtained and with the help of checkpoints for
motivational value, ratings can be allotted to the names on the motivational
value scale.
Step IV - Quadrivalent analysis for separating undesirable names from
desirable ones and measuring the marketing potency of the different
names
The marketing potency of a name in its most ideal sense depends on all the
four values that have been discussed above. However, in practice you may
need to rely on a few of the above qualities. It is also possible that you just
can’t find a name which can strongly reflect these qualities. If that be the
case, you will have to contend -with a hard choice-giving up something
for something better. If you are compelled to do this, look at your total
marketing programme and find a solution to what you have lost in some
other element of the mix at your command. We can express the marketing
potency by a simple mathematical expression as under:
MP= (An) (Mm) (Dp) (Mt)

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Brand Management MP- marketing potency of a name, An-Associational value, Mm-
Memorization value. Dp-Descriptional value, Mt-Motivational value.
The marketing potency of a name or the extent to which the name helps
in capturing the market is assumed to be a function of multiplicative
relationship among the four variable multiplicative because theoretically
reduction of any of the four variables to zero would sharply bring down the
marketing potency of the name. In these general formulae, you will also
notice that we have assigned equal weights to all the four values.
In practice, the scenario may be totally different. You may not be intending
to describe the product at all through your name in view of the marketing
strategy you have in mind. What do you do in this kind of a situation,
how would you deal with the mathematical expression stated above? You
will need to do some transformation of the expression or assign some
arbitrary value to the descriptional value. We suggest that you assign this
descriptional value a value equivalent to unity. Again it is quite possible that
the associational value of the product is two times more important than the
descriptional value of the product. Again you would need to transform your
expression. You will need to assign weights and we suggest that you assign a
weight of two units to associational value in relation to descriptional value.
At the time of determining the marketing potency the ratings for this value
will have to be divided by two to give it the desired weightage.
The graphic representation shown in Fig 9.1 consists of 3 axis all
perpendicular to each other, two lying in the horizontal scale and one in the
vertical scale. The two variables associational value and memorizational
are represented on the horizontal axis and descriptional value is represented
on the vertical axis. After ratings for a name have been plotted on the
associational and memorizational value axis (scales) its rating on the
descriptional value axis helps in assigning the name a position in the space.
The rating for the motivational value of the name is indicated in parenthesis.
Positions are located for all the names on this three dimensional graph.
Three planes are then made to divide this three dimensional brick resulting
into 8 quadrants. A horizontal plane is drawn so that half the names lie
above the plane and half below the plane. A 2nd plane, which is vertical
and parallel to the associational value axis, is drawn so that half names lie
on one side of the plane and half on the other side. A 3rd plane, vertical but
parallel to the memorizational value axis is drawn in a similar fashion. This
process gives rise to 8 quadrants. The upper right hand quadrant farthest
from the memorization value axis (Quadrant 1) will have those names
which are more desirable than those in other quadrants. Figure 1 shows that
brand names A & B 1 in quadrant I and hence they are more desirable than
those in other quadrants.

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 Figure 9.1 Brand Concepts and Evolution

Fig.9.1 The three dimensional graphic representation shows the extent of

different value each name. It also depicts the elimination of undesirable
names from the desirable ones by inserting three axis at right angles to
each other in the graphic representation. The three planes divide the 3
dimension brick into eight quadrants; quadrant 1 has the desirable brand
names-brand names A&B.
The 4th rating on the motivational value scale should be indicated in
parenthesis. This is indicated in parenthesis because if the name has the
other three desired values it would contain some motivational value too;
however, this is not true of the other values. Names falling in the upper right
hand quadrant farthest from the memorizational value axis can be compared
with each other; their ratings for motivational value too can be compared.
If there are a large number of names lying in quadrant 1, further elimination
of undesirable names can be done. Divide quadrant one into still small
quadrants. This is done by using the same, procedure. This means that
quadrant I is divided by 3 planes to give rise to 8 mini quadrants. The
inception of planes to bring about division of quadrant I is done in a similar
manner as that followed for dividing the whole graph. This would give rise
to another quadrants F which would contain a still smaller number of names.
Thus it would be easy to make choice from among these names.
Controlled experimentation can also help in determining the marketing
potency of the few names that emerge from the above method (say 2 to 3
names) from which the final choice has to be made. Redetermination of the
marketing potency can be done not only by taking into consideration the
results of this controlled experimentation but also by subjecting them to the
tests designed in Step II and checking them up with the help of checkpoints
in Step 1.

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Brand Management Step V-The final choice
We can afford to go a step further. The 2 or 3 names that we have are listed
on separate cards. On each card the total market share generated by each
of the four values is determined. We shall take as example the associational
value. Check the name against the checkpoints listed under associational
value in Step I. List those attributes to which the name has been associated
by the sample of potential consumers at the time they were given association
tests in Step III.
Attributes to which : A&B
name was associated
Now look into the number of potential consumers who associated the name
to attribute A. Find the ratio of the number of these potential consumers to
the whole sample. This ratio gives the market share that is being generated
by this attribute. Similarly, determine the market share generated by attribute
B. Find out the number of potential consumers who have associated the
name both to attributes A & B. Next step is to determine the following ratio:
No. of potential consumers who
associated the name to both the Proportion of consumers
attributes A&B. for attribute A associating the
No. of potential consumers who name to attribute B
associated the name to attribute A.
Similarly determine the proportion of consumers for attribute B associating
the name to attribute A. With the help of market shares for the two attributes
and the above ratios, a Venn diagram can be constructed. The total market is
represented by the universal set, on it are drawn the market share generated
by attribute A (set of consumers who associate the name to attribute A) and
the market share generated by attribute B. The intersection of two subsets A
& B is shown. The union of the two subsets A & B shall represent the actual`
associational value of the name (Figure 2).Next, determine the market
shares generated for each of the four values. Not construct a Venn diagram
for each name in which the universal

Set is represented by the total market of the product. On this universal

set is shown the union of the set of consumers, for associational value,
memorizational value, descriptional value and motivational value. The
interlaps among these sets is determined by the same type of procedure
as outlined for determining the intersection for market shares of different
attributes for their associational value in (Fig. I). Figure 3 shows such type
of a Venn diagram.
A comparison of the Venn diagram constructed for the different names will
help in picking on the right name-this falls in line with your marketing
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strategy. This depends on two things (1) the total area covered by the union Brand Concepts and Evolution
of the four sets viz., set of consumers for associational value, memorizational
value etc. (II) the interlaps or the intersections of these sets.
Today, a few marketing research specialists have developed a variety of
mathematical techniques to help in brand name selection. This should
not baffle you, because the logic does not change. These mathematical
techniques are only tools to help marketers give expression to their logic and
to assist them in applying their logic in more precise terms. Logic obviously
remains supreme and reigns.
The various steps and tests involved in “brand name selection process” as
described above needs an exercise on the pattern discussed. Thus, a proper
brand name chosen for the product, keeping consumers’ point of view in
forefront would make marketing effort easy and rewarding as it introduces
the element of rationality in an otherwise wholly subjective decision.
Activity 3
Assume that you are developing
a) A new breakfast snack
b) A new electric car
c) A new Wi-Fi service provider
How would you find an appropriate brand name for your product using the
model described above?
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9.7 HOW TO BUILD A BRAND?

Brands do not become established or leading brands over night. Brand
building should be a conscious effort well planned and systematically
executed. Thus, brand building is similar to building concrete structures. If
you observe, all concrete structures are built systematically brick by brick
over a specified period of time and later maintained on a continuous basis.
Similar analogy applies to brand building i.e. the marketer should develop,
innovate, nurture and make consistent value addition in relation to changing
needs and aspirations of the ultimate .customers. This explains that brand
building is an ongoing process (Exhibit-l). The model may be used to
illustrate the salient steps of various inputs outcomes, and assessment.
Inputs
●● Identification of key customer groups or segments.
●● Understanding customer expectations needs and aspirations.
●● Assessing competitive offering including substitutes.
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Brand Management ●● Building customer confidence by
- customizing the product.
- establishing key image of the brand.
- dealer support-easy availability and push.
- in case of online delivery, ensuring easy search, access and
payments options along with timely delivery
- innovative communication including effective use of social
media and promotion schemes, supported by elegant packaging
- ensuring consumer engagement through emotional and
functional value association
●● Total brand management-both hardware and software aspects.
Output
●● Market share
●● Customer retention
●● New customers attracted
●● Customer loyalty
●● Increased profitability
●● Brand knowledge

Identifying key segments Building

and understanding customers
customers' expectations confidence

Input

Total Assess
brand competitive
management offerings

Customer and dealer Input

feedback

Development of
customer
satisfaction
scale

Brand
strength
score

Customer Customer
segmentwise loyalty and
market new customers
share attracted

Outcome

Increased Brand
profitability image

Note : Adapted from David A. Aakey's, Managing Brand equity, the Free Press, New York: 1991.

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Assessment Brand Concepts and Evolution

●● Continuous feedback from customers as well as trade channels

●● Continuous monitoring of consumer comments , reviews and feedback
on social media and mining that data for actionable information for
marketing decisions
●● Scientific inquiry into customer satisfaction determining
- who is the customer and profile of the targets segment,
- what constitutes customer satisfaction, designing the scale to
measure customer satisfaction,
- measuring current levels of customer satisfaction, and
- trend analysis and pointers for management of customer
satisfaction.
●● Brand strength score.

9.8 BRAND IMAGE

Brand image is the perception of the brand in the mind of the customer.
It is an aggregate of beliefs, ideas, and impressions that a customer holds
regarding the brand.
As pointed out by Kptler, An image is the set of beliefs, ideas, and impression
that a person holds regarding an object
The term `brand image’ reflects and signifies the distinction, reputation and
the goodwill as perceived by a consumer. Generally consumers are unable
to distinguish the differences among various brands when their labels
are removed. But when the brand names are mentioned, they show clear
preferences. As you have studied in your Course on Marketing Management
and in your Course on Consumer Behavior, consumers seek congruence
between their self image and brand image and use brand images as a form
of making a self expression.
Generally speaking, brand image has a more significant role in product
situations where the choice is made more on the basis of subjective criteria.
or where the brand has a prestige image and where the consumption is
publicly visible for example buying a Jaguar or a SUV or a Bullet motorbike
for the image that one seeks to portray through ones consumption reputation
peer.
Dimensions of Brand Image
Each brand has a unique blend of identity, symbolic meaning and functional
evaluation in the eyes of its consumers. Broadly speaking, the totality of
any brand’s image is made up of three types of appeals.
Appeal to reason: Very often you find yourself, self-questioning when you
decide upon buying a certain brand for instance, if you have plans to buy a
smart TV then you ask for yourself how the brand would perform, how it is
different from other brands, what benefits and special functions does it offer
etc. Thus the first dimension focuses more on performance factor based on
features and their evaluation.

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Brand Management Appeal to senses: Continuing the example of buying a Smart TV the
assessment and evaluation now shifts your attention towards the sensory
gratification/appeals of the brand: you would be more bothered about how
the audio/sound performs feature like tonal control, the picture quality and
visual quality, surround sound, colors and hues control options, and the
appearance, for example the Frame model series from Samsung, and other
aesthetic features etc.
Appeal to emotion: In addition as a buyer you would also consider social
considerations for if you plan to buy a specific Smart TV brand keeping in
mind how your friends, relatives and neighbor etc. would look upon the
choice and how you yourself would feel owning the brand.. Thus emotion
is another dimension for brand image. As a result you would consider the
brands style, the mood it evokes and the psychological rewards it offers.
All this factors are intangible in nature yet they have a strong impact and
impression on the consumer.
In addition, research has also revealed the contribution of the Reference
appeal which is the consumer’s assessment of how his relevant to others,
i.e. family, friends, relatives and colleagues view a given brand. The social
prestige of a brand has an impact on the buyers own assessment of the brand
image.
All the appeals discussed above collectively produce the brand image.
The core of the brand image is created together by the product features
and integrated marketing communication, including the inroads into the
consumer’s chosen social media...
Activity4
As consumer, you would be using say
A brand of Coffee
A brand of toilet soap/shampoo
An automobile brand
For the brands used in each case, state the kind of brand image you hold for
the brand and analyze how the components of the various appeals discussed
here have contributed to the images held by you.
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9.9 BRANDING OF COMMODITIES

If you make an attempt to look back majority of Indian commodities
were sold in unbranded form earlier... Today, the scenario is reversed. The
trend was set in early nineties when food grains and spices started getting
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branded and offered to the market. As the results were encouraging, this was Brand Concepts and Evolution
followed by vegetables, salt, sugar etc. Today, more marketers have jumped
on to the bandwagon: for example, Tata salt, Dhampur Sugar, Himalayan
Pink Salt, MP brand Wheat, lalkila basmati rice and so on. The acceptance
and demand for branded commodities is the result of changed lifestyles of
people with disposable income specially working couples for whom quality
and convenience are important factors. Therefore they would demand a
certain standardization and assurance of quality in their commodity buying.
Other examples in the industrial markets space are cement, commercial
adhesives, paint thinners and even nails and screws to name a few.
Challenges in Branding Commodities
The commodity market is generally driven by price consideration, besides,
consumers, by and large; view this as a low involvement buying situation.
Under such conditions, to make them in sensitive to price itself is very
difficult task. And, later to create a preference for a specific option calls
for amore sustained effort on the part of any marketer. Of course, the
shift has already taking effect in a major way in the cities and big towns
where consumers are able to appreciate the benefits of buying a branded
commodity.
Branding a commodity is a marketing task at a very fundamental level.
Unlike in a consumer goods market where the marketer can play around with
consumer perception, brand differentiation etc., in a commodity market,
branding is about going to the basics or exploring at the grass root level.
To quote, David Aaker, “it involves overturning the rules of the market,
establishing new selling propositions in the market which so far has been
driven largely by price. And everything from positioning, pricing, brand
value and packaging takes on anew sensitivity”.
Brand building involves cost, apart from additional cost incurred in
packaging, labeling, advertising, legal protection-and a risk that if the brand
should prove unsatisfactory to the user, the company’s image would suffer
and it may even affect market for other products of the company. Thus the
challenges involved are formidable. Still many marketer prefers to brand it
because of many unique advantages as stated below:
 The brand name makes it easier for the marketer to process orders and
track own problems associated with the brand.
 The marketer’s brand name and trademark provide legal protection
(patent or copyrights) of the unique features, which would otherwise
be copied by competitors.
 Branding gives the marketer the opportunity to attract loyal and
profitable segment of customers. Loyalty created over time offers
the unique advantage of having assured customer base against
competition and greater control in their marketing programme.
 It is wrong to’ assume that any commodity market is a homogeneous
mass. Instead, the task lies in skillfully identifying the different
segments and understanding their specific needs, tastes and
preferences. Branding help marketer to form suitable segmentation
of the market. Different brands can be aimed at different segment
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Brand Management of customers and overall effective coverage of the market can be
improved.
 In the long run it helps to build a strong association with the consumers
as well as the trade. By highlighting the same name, and consistently
managing quality level, long term consumer and trade confidence can
be sustained.
Branding leads to commodity differentiation and hence enables tapping into
consumer preference. This translates into greater choice and quality for the
consumers. To the producers branding provides the opportunity to increase
gross margins by increasing the value perception of their product.
Special consideration in Branding of a Commodity
As stated earlier, brand is a name, term, sign, symbol, design, or a combination
of them, intended to identify the goods or services of one marketer. In
particular, to differentiate an offering from those of the competitors. The
major issues involved in the branding of any commodity are:
1. Offering sufficient value to the customer to induce change from a
price sensitive commodity to a benefit driven branded option.
2. Role and degree of consumer involvement in buying decision.
3. Segmenting the market, selecting a target segment and positioning of
the product to match with the target segment characteristics.
4. Communicating price-quality position offering sufficient turnover
and long term growth.
5. Managing channel power the distribution dynamics on the basis of
market pull of the brand.
6. Selecting suitable packaging.
7. channelising marketing investment for brand building.
Activity 5
Pick up any three successful branded commodities and also three
unsuccessful commodities brands of your choice. Analyze and bring out the
reasons for their success and failure accordingly.
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9.10 SUMMARY
This unit focuses on the concept and development branding and its various
dimensions. The strategic relevance of building a brand is discussed and
the major branding policy options shared. Brand name selection, one of the
most important brand management decisions has been shared with the help
of a framework for brand name selection

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Brand image, what a customer believes and perceives about a brand and its Brand Concepts and Evolution
dimensions has been discussed. Lastly, in view of the growing importance,
branding of commodities has been discussed with focus on the challenges
that a firm should consider while branding commodities.

9.11 SELF-ASSESSMENT QUESTIONS

Q1. Which of the following correctly describes how brands work through
association sets in customers’ minds?
a) Brands work through unique identifiers for the product.
b) Brands work through information stored in customers’ memories
about the product.
c) Brands work through identifiers stored in customers’ mind
alongside the memories of the product.
Q2. Which of the following is true about brands?
a) Brands allow organizations to increase their asset base.
b) Even strong brands need to be carefully managed over time
Q3. Pick up the strongest brand in the following categories
a) FMCG
b) Financial services
c) Consumer Electronics
Based on what you have just studied and on your own experience, identify
the factors that have contributed to this market position for each brand
identified by you
Q 4 What kind of role does consumer play in building a brand. Substantiate
your answer with illustrations.
Q5. As a Brand Manager of a leading holiday resort firm with all India
operations, what brand name you would suggest for honeymoon
package conceived and targeted for newly married urban couples.
Interact with elderly folks/citizens in your location and enquire as how
they used to buy products/commodities in the era of non-branding of most
commodities. Try and compare the scene with the current scenario, list out
the factors responsible for the shift from Non-Branding to Branding.

9.12 REFERENCES/ FURTHER READINGS

Leslie da Chematony, “From Brand Vision to Brand Evaluation, 2010,
Butterworth-Heinemann
David A. Aaker, Christine Moorman,Strategic Market Management, 11th
Edition, Wiley Publications 2017
YLRMoorthi, Brand Managemen The Indian Context ,Vikas Publications
2003.
Ramanuj Majumdar, Product Management in India.3rd Edition, PHI
Learning Pvt. Ltd 2005 -

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 UNIT 10 BRAND EQUITY

Objectives
After reading this unity you should be able to:
●● explain the concept of brand equity and its contribution to competitive
advantage
●● describe the components of brand equity
●● discuss and apply measures to assess brand equity
●● explain customer based brand equity and discuss it from other
approaches to brand equity
●● discuss steps to building brand equity and developing strong brands.
Structure
10.1 Introduction
10.2 The Concept of Brand Equity
10.3 Measurements of Brand Equity
10.4 Composite Measure of Brand Equity
10.5 Customer Based Brand Equity
10.6 How Brand Equity is created?
10.7 Building Brand Equity
10.8 Summary
10.9 Self-Assessment Questions
10.10 References/Further Readings

10.1 INTRODUCTION
Branding has been central to marketing for more than a century. One of the
important skills a marketing professional should possess is the ability to
create, nurture, enhance and protect the brands for the company. American
Marketing Association defines a brand as a name, term, sign, symbol, or
design, or a combination of these, used to identify the product and services
of a company. For the consumer brand may stand for several things, like
product attributes, product benefits, values, culture, personality, and user.
Product attributes: Relates to product features may be physical, functional,
or attributes. Tata passenger cars suggests spacious, Indian built, economy
and other product features.
Product benefits: Consumers expectation from a product are mainly the
benefit it offers. Dettol, the brand provides two kinds of benefits, one the
functional benefit and the second, the emotional benefit. Dettol is related to
a functional benefit-protection from infection. If I use Dettol soap I am safe
from infection is an emotional benefit.
Values: The brand stands for the value of the producer, for example, the
name Tata relates to reliable, professional, dependable manufacturer and
supplier.
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Culture: Brand also represents certain culture, Samurai or Suzuki represents Brand Equity
Japanese culture.
Personality: Brand can also project certain personality. Lux projects
beauty, Lifebuoy projects a sturdy sports person, Marlboro stands for macho
personality.
User: Brands suggest the kind of users also, for example, Enfield Bullet for
a policeman, Johnson & Johnson kids soap for children.
A good marketer would use this different meanings attributed by the
consumers in brand management decision-making. Depending on the
meanings given by the consumers the brand may be anchored deep or
shallow on the meanings. More enduring meanings of brands are the values,
culture and personality. These meanings in fact define the essence of a brand.
Hence, brands play a very vital role in differentiating the company product
from that of competitors. In a market the amount of power and value a brand
enjoys differ considerably.

10.2 tHE CONCEPT OF BRAND EQUITY

The term `brand equity’ was first used widely by American advertising
practitioners in the early 1980s. It was not defined precisely; but in practical
terms it meant the brand’s long term customer franchise, and the financial
value of that franchise. The argument was that:
Brands are financial assets, and should be recognized as such by top
management and the financial market.
The financial value of a brand depends on its `Brand Strength’, and the
strength of its customer franchise. For most consumer products and trade
franchises, with the latter being ultimately based on the former.
The brand’s customer franchise can be strengthened by, inter alia, investing
in product quality and in advertising. In contrast, trade and consumer price
promotions produce short-term sales increases but do nothing to build long-
term brand equity and arguably might even erode it.
The value of brand equity as a desired value was shown by a 1995 study on
brand buying behavior “72% of the consumers will pay a 20% premium
of their favored brand choice over their closest competitors.
The importance of assessing the value of Brands as financial assets is evident
by the fact annual listing of India’s most valued with Brands is published
and so are global listings of the world’s most valuable Brands
The 2020 listing of India’s most valuable brands by Statistica https://www.
statista.com/statistics/323944/most-valuable-brands-india shows HDFC
Bank as the most valuable brand with a value of over 22 billion USD,
followed by the Life Insurance Corp of India valued at over 18 billion
USD
The 2022 list of most valuable global Brands, is unsurprisingly dominated
by technology giants with the four spots held by Apple (war 355 billion
USD) Amazon (over 350 billion) Google (over 263 Billion) Microsoft
(over 184 Billion) and so on.

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Brand Management In this unit you will study in detail how brand equity is created and measured.
Activity 1
Talk to 10 friends, family members or associates from work about the
most valuable brands in the category of Food Products, Financial services
products and Technology products. Discuss with them to identify what in
their view makes the brands so strong or valued. Analyze their comments
and share them here.
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David Aaker specifies five levels of attitudes towards a brand.
1) No brand loyalty; due to price differential customer will switch brands.
2) No reasons to switch the brand; consumers are overall satisfied.
3) Customers are satisfied with the brand, and would in incur cost by
switching the brand.
4) Customers relate them with the brand.
5) Customers is devoted to the brand.

Brand equity is mainly related to the levels 3, 4, and 5. Aaker (1996) defines
brand equity as a set of assets (liabilities) linked to a brand’s name and
symbol that adds to (or subtracts from) the value provided by product or
service to a firm and/or that firm’s customers.
Components of Brand Equity
To understand the concept of brand equity, its development and the value it
creates for the organization, let us refer to the fig 10.1 below:
As proposed by Aakers model of brand equity. The left column of the figure
shows the components that contribute to the development of Brand Equity,
the middle section shows the outcomes generated by the components and
the right section shows the value created by the components and their inter
relationships

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 Brand Equity

Fig. 10.1
Source: David Aaker, Building Strong Brands. The Free Press,
New York,. 1996
The main assets that contribute to the development of brand equity are brand
name awareness, brand loyalty, perceived quality, and brand associations
and other proprietary assets belonging to the organization these assets create
value in different ways. The assets create value not only to the customers
but also for different intermediaries, and the firm.
Let us now look at the components that enable the formation of brand equity
BRAND AWARENESS
Awareness refers to the strength of a brand’s presence in the consumer’s
mind. Awareness is measured in different ways in which consumers
remember a brand ranging from recognition (Have you been exposed to
this brand before?) to recall (what brands of this product class can you
recall?) to “top of the mind” (the first brand recalled) to dominant(the only
brand recalled).At times the brand recognition is so strong that it becomes
a generic name for the product category itself- Xerox , which was just one
brand of photo copiers but being the introductory brand in many countries
became synonymous with the category itself, to the extent that it started
getting used as a verb… terms like Xeroxing something, ,Xeroxed copy
became part of common office parlance.
Recognition reflects familiarity gained from past exposure. It does not
involve remembering where the brand was seen before, why it differs from
other brands, or what the brand’s product class is. It is simply remembering
that there was a past exposure to the brand. A brand (for example); Mediclaim
is said to have recall if it comes to consumer’s mind when its product class
`medical insurance’ is mentioned. The ultimate awareness level is brand
name dominance where in a recall task; most customers can only provide
the name of a single brand - e.g., Xerox, Amul Butter, Godrej Storewell
steel cabinet. Creating awareness is important and increasingly becoming
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Brand Management expensive because of proliferation of brands in the market. Further, just
creating awareness for recognition or recall is not sufficient, the effort
should be focused on creating awareness that consumers remember and
recall for right reasons and not otherwise.
PERCEIVED QUALITY
Perceived quality is the overall judgment about the quality of the product.
It is the bottom-line measure of the impact of brand identity. Quality
perceptions cannot be sustained unless the claims are true and substantive.
For creating a high quality product and in turn high-quality perception, the
marketer has to understand what quality means to the consumer segments,
and what are the supportive elements like culture, social groups, reference
groups and family.. Perceived quality may differ from that of technical or
functional performance of a product. Perceived quality is built over a period
of time, if the claims and functional qualities as desired by the consumers
are matching, then the quality perception of the product is reinforced. If the
claims and functional performances were different the quality perception
among the consumers would be eroded. Apart from the claims about the
product, the company also vouches for quality. If the consumers have a past
perceived quality image it takes considerable time and effort to change that;
for example, before World-War 11 the Japanese products were consider
being of poor and cheap. It has been slowly and steadily altered to high
quality products over a period of time by sustained effort by really offering
functionally superior products and the associated claims made by the
companies.
Second, a company may be achieving quality on a dimension that consumers
do not consider important. During the 80's Zenith offered cold water flow
from a tap on the door of the refrigerator on the press of a pedal consumers
did not recognize any benefit from it. This model never made it big.
Third, consumers rely on one or two cues that they associate with quality.
Thus it is important to understand the little things that they use as a basis
for making a judgment of quality. If people kick the car tyres to judge its
sturdiness, then the tyres have to be sturdy.
Fourth, because consumers may not know how best to judge quality a
metaphor or visual image can help them to see the context correctly e.g.,
For the first time diamond buyers it should be indicated that quality is not
reflected by price tags or carat claims. Marketers also make an attempt,
especially in case of a new product or services to educate the consumers
regarding quality indicators to verify before they decide
BRAND LOYALTY
Brand loyalty is a key consideration when placing a value on a brand that is
to be bought or sold, because a highly loyal customer base can be expected
to generate very predictable sales and profit stream. It is less costly to
retain customers than to attract newer ones. Enticing new customers is a
mistake while neglecting existing ones. The loyalty acts as an entry barrier
to competitors. Brand loyalty is a key component of brand equity as it is
sustained evidence of the consumers seeking continued value in a given
brand and retaining their patronage of the same.
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Loyalty segmentation provides strategic and tactical insights that will Brand Equity
assist in building strong brands. A market can usually be segmented into
the following groups: Non customers (those who buy other brands), prices
switchers (price sensitive people), the passively loyal (those who buy out of
habit not reason or account of this brand being the only one they are exposed
to on account of local availability), fence sitters (in different between two or
more brands) and the committed.
The passively loyal are often neglected, which is wrong. Distribution gaps
should be avoided or brand switching may occur. The committed or loyal
customers need to be engaged and retained at any cost as these represent the
successful relationships that the brand has been able to cultivate over time.
If the competition is able to make any inroads into this segment, it represents
gaps in your strategy or some unattended need that was inadequately served
.Patanjali’s Dantkanti being able to carve out large chunks from the loyal
customer base of Colgate showcases exactly this situation of the loyal
segment needs to be nurtured and constantly monitored so that changes
in their aspirations are captured by the company. Firms should avoid
diverting resources from the loyal core to the non-customers and price
switchers. To increase brand loyalty, companies often resort to frequent
buyer; programmers, volume discounts, discounts on wrappers, even some
companies do form user clubs and provide special offers to the members.
For example, AKAI the Television brand of 80’s started customer service
club. Make My Trip awards loyalty benefits to regular users of their services
and many large banking services providers like HDFC and Kotak Mahindra,
create a separate segment of the loyal valued and premium segment.
BRAND ASSOCIATIONS
The brand equity formation draws heavily from the associations that
consumers form about and around the brand. The associations might range
from attributes, symbols, music, celebrities and so on. Brand associations
are largely driven by the brand identity-which is what the company wants the
brands to stand for in the minds of consumers. Some of the classic examples
are the Boost advertisements use Sachin Tendulkar as the spokesperson,
endorsing that Boost is the secret of his energy; the background music in
Liril advertisement, is yet another iconic example which is immortal and the
leading Bollywood actresses endorsing for Lux, the enduring health beauty
association brought in by the brand tag line and consistently reinforced
by the music in audiovisual ads. Associations can be critical factors in
differentiating and positioning, creating a reason to buy to those potential
customers who are looking for specific associated physical or emotional
features
PROPRIETARY BRAND ASSETS
Proprietary brand assets refer to patents, trademarks and channel
relationships which can provide strong competitive advantage. Being
proprietary these assets enable legal protection to a brand against competitive
maneavours. For example the Nestle logo, which is a proprietary trade
mark, protects the brand by preventing other food manufacturers to use
similar symbols to confuse the consumers into buying their look alike
brands. The unique Coca Cola lettering, the secret formula used to produce
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Brand Management the beverage, patented technologies that distinguish a brand and provide it
with a unique competitive advantage are thus legally protected to ensure
that the advantage remains the property of the brand manufacturer.
Activity 2
Critically analyze the above discussed components for your most favored
brand of smart phone and footwear brand. In your own assessment, suggest
how these components have resulted in the brands enjoying the market
power that they do.
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How does Brand Equity help in marketing effectiveness
Brand equity helps in building competitive advantage for the company in a
number of ways such as:
●● The cost of marketing could be lower because of higher consumer
awareness and loyalty.
●● Company could enjoy more channel power and have leverage in trade
negotiations.
●● Price realization could be higher because of higher perceived
quality. As brand loyalty insulates consumers against price based
differentiation it could help off price competition.
●● Brand could be easily leveraged for brand extensions.
To gain advantage the managers have to carefully understand the-drivers of
brand equity.
Activity 3
In the recent past brand buying (acquisition) and selling have emerged as a
new trend in the FMCG sector. Give two examples of such brands and list
out the market forces responsible as perceived by you.
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 Brand Equity
10.3 MEASUREMENT OF BRAND EQUITY
Brand Equity measures could be developed using either a quantitative
approach or a quantitative method.
Qualitative Measures will include measures of Brand imagery, Brand
Personality, perceived benefits Association analysis and the methods applied
are focus groups, in depth interviews, perceptual mapping
Quantitative Measures will include assessing awareness, liking, preference,
loyalty, sales, and channel off take, price premiums, cash flows and
projections over time
Methods that are applied to arrive at these figures are surveys, tracking
studies, Data management and mining of sales data
Young and Rubicam (Y & R), a major advertising agency, developed. Brand
Asset Valuator, for measuring the brand equity across products the main
parameters used in the evaluation are:
●● Brand personality;
●● Differentiation of brand in terms of how distinctive the brand is in the
category;
●● Relevance – a measure of evaluating the meaning of a brand to the
respondent, i.e., whether there is personal relevance of the brand to
him;
●● Esteem - It is closely related to perceived quality, it is used to evaluate
what kind of regard the brand is enjoying.
●● Knowledge-what a brand stands for?
Y & R hypothesis is that brands are built sequentially, starting from
differentiation, relevance, esteem and knowledge.
Equitrend has developed brand equity measure based on three brand assets,
namely salience, perceived quality and user satisfaction.
1. Brand salience, refers to the degree to which your brand is thought of
or noticed. It is the measure that tells you how well people recognize,
notice, or think about your brand when they’re making purchasing
decisions... It goes beyond the measures like awareness, recognition,
and recall.
2. Perceived quality is measured using a eleven point scale ranging from
`outstanding’ to ` unacceptable’.
3. User satisfaction is measured by obtaining quality rating of the
consumers who use the brand most often. These three measures are
used to develop a composite brand equity score.
David Aaker suggested “brand equity ten” for construction of a composite
brand equity measure. Four criteria are used in selecting the measures:
●● The measure should reflect brand equity, i.e., the conceptualization and
definitions should be followed to develop the measure. Sustainable
Advantage has been given importance because the brand assets
created should not be easily duplicated by the competitors.

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Brand Management ●● The measure should reflect the market. The managers can use the
movements on a measure to understand the movements that can
happen on price levels, sales, and` returns.
●● The measure should be sensitive, i.e., if there is a change in brand
equity it should reflect on the measure with a very short time lag.
●● The measure should be usable across brands, product, categories, and
markets.
BRAND EQUITY TEN
Ten measures were chosen using the four criteria set forth earlier, and
presented in five categories in Table 10.1. These are described below:
Table10.1: Brand Equity Ten
01 Price premium Loyalty Measures
02 Satisfaction
03 Perceived quality Perceived Quality/
Leadership
04 Popularity/Leadership
05 Perceived value Differentiating Measures and
Association
06 Brand personality
01 Organizational association
08 Brand awareness Awareness
09 Market share Market Behavior Measures
10 Market price & distribution
coverage
Source: David Raker 1997: Building Strong Brands.
1) Price Premium
It is an indicator of how much the customer is willing to pay for the brand in
comparison to another brand offering very similar benefits. It is a measure
of brand loyalty. However, the price premiums could be affected by the
brands used for comparison. Hence, in practice a set of competitive brands
is specified for comparison. Direct questioning like “How much more would
you like to pay to buy a packet of `Nescafe instead of `Bru’?” are used to
elicit information from consumers. More reliable and sensitive estimates
of price premium can be obtained by the use of indirect trade off analysis
like conjoint analysis. Price premium is one important indicator because it
directly captures brand loyalty- of the consumers. This measure does suffer
due to certain inadequacies like:
●● Specifying competitive brands would change the value of price
premium;
●● If the brand is competing with different competitors, in different
market segments, then defining competitive bench marks is difficult;
and
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●● If the prices are controlled by legislation, price premium cannot be a Brand Equity
good measure.
2) Customer Satisfaction``
Willingness for repeat purchase and sticking to the same brand can be
directly measured by customer satisfaction. The range of questions are used
to elicit satisfaction directly from the consumers:
●● Are you satisfied with the brand?
●● Is the brand meeting your expectations?
●● Would you buy the same brand on you next purchase?
Brand Loyalty: Sustained loyalty of consumers is a measure of their
continued satisfaction and in fact the loyalty to the brand, which in turn
is used to measure the power of the brand at retail. Or brand equity which
is demonstrated by their repeat purchases despite competitors’ efforts to
lure them away. Firms invest significant amounts of resources and effort in
customer service and marketing to create and maintain brand loyalty for an
established product. You just need to recall the loyalty that Apple consumers
exhibit towards their brand to imagine the significant contribution that brand
loyalty makes towards brand equity, so loyalty measures are also used as
strong indicators of Brand equity
3) Perceived Quality
Perceived quality is an important measure found to have direct impact on
ROL It has very close association with other factors like functional benefits,
organizational association. Perceived quality is measured using-semantic
differential scale.
For example, for a specific brand the respondents are asked to rate on the
following parameters:
High quality 1 2 3 4 5 Low quality
Best in the 1 2 3 4 5 Worst in the category
category
Consistent 1 2 3 4 5, Inconsistent
Reliable 1 2 3 4 5 Unreliable
As the measure is sensitive to the frame of reference, it is important to
clarify to the respondents before they rate the brands.
4) Popularity and Leadership Position
Three important factors need to be considered for defining a brand leadership.
1) the proportion of market buying the brand,
2) how well the brand matches the market dynamics of consumer
preferences, and,
3) technical superiority.
5) Brand Value
Functional and emotional benefit of a brand creates value to the consumers.
All other things being equal, a brand that generates good value to the
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Brand Management consumers will be stronger than the brands of competitors in the market
place. The common measure used is direct questioning.
Is the brand providing good value for money?
This measure is also sensitive to the comparative set of brands used by the
consumers.
6) Brand Personality
Emotional and self-projective benefits of brands are captured by brand
personality measures. This is an important measure for products with very
low differentiation and consumed in social setting for e.g., Cigarettes,
liquor, soft drinks, fast food joints etc.
7) Organizational Association
Association of a brand to an organization can be a powerful driver of
differentiation. For example, a product from the house of Tata’s, vouch for
its quality. To understand this association the respondent’s agreement on a
scale for statements like the following can be used.
●● I trust the organization, which brings out this brand.
●● I would be proud to do business with the organization.
●● I will be willing to buy related products introduced by the organization.
8) Brand Awareness
It is a measure of presence of a brand in the minds of consumers. Brand
awareness includes both knowledge and salience of the brand in consumer’s
mind. In practice brand awareness is measured at different levels, like,
recognition, recall, top of the mind, brand dominance, brand familiarly and
brand salience.
For instance in case of Recognition Have you heard of IFB Bosch Washing
Machines? Recall what brands of washing machines can you recall? Top
of the mind First brand name are called in the test. Brand dominance the
only brand recalled in the product category. Brand familiarity is the brand
familiar to you? Brand salience. Do you have an opinion about the brand?
9) Market Share
Performance of a brand ultimately reflects in the market share. Market share
data is more objective and easily available to the firm. However, problem
like specifying the product class or served market would affect the value
of market share. Apart from the effect of brand equity, market shares can
be affected by changes in prices or distribution and so on. Segregating the
effects of other variables and evaluating the effect of brand equity is difficult.
Activity 4
Which measures of Brand Equity (BE) in your view would be most suitable
to measure the BE for:
1 A telecommunication service brand which has become a market
sensation with its entry a couple of years ago.
2 A runaway market success like the pulse candy

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Give appropriate justification for your choice of measures to be used Brand Equity

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10) Market Price and Distribution Coverage
Relative price of a brand in market place is another factor to be considered
important in measuring brand equity. Relative price is calculated by dividing
the price of a brand in a particular period, by average price of all the brands
in the product category.
Distribution coverage is another measure considered important. It is
measured by the percentage of stores stocking the brand, and percentage of
consumers, who have access the brand.
Activity 5
Consider any two leading consumer durable brands of your choice. Apply
the ten measures technique suggested by David Aaker and study the
effectiveness of the brand equity measurement if applied to these brands.
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10.4 COMPOSITE MEASURE OF BRAND EQUITY

As mentioned above measuring brand equity using several measures would
be difficult and misleading .For developing a composite measure the four
following issues have to be considered.
1. Deciding on the constructs that are going to be basis of brand equity
measurement system. And importantly, how to measure these bases?
2. Whether all bases have same weightage or there is a need for finding
appropriate weights for different measures.
3. How to combine the chosen measures?
4. How to decide the competitive brands for comparison?
The above issues need to be considered seriously because it would help in
constructing the measure, which is more relevant to the brand in question.
Just to illustrate, if you have chosen to use Brand Awareness, Brand Loyalty,
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Brand Management Price, and Brand Association, and on the basis of analysis of buying behavior
of your target market have assigned importance weights as shown in the
table 10.3 below, you can create a composite index of brand Equity for your
brand in a given market.
Table 10.3

Adapted from Trent and Mahr” Marketer’s methodologies for valuing Bran
Equity, CPA journal, October 2917.

10.5 CUSTOMER BASED BRAND EQUITY-

(CBBE)
Keller (1998) has proposed a customer based brand equity framework.
The rationale for this approach is that customer plays a central role in the
creation and management of brand equity. Brand equity is viewed as the
differential effect that customer’s brand knowledge has on their response to
the marketing of the brand (refer Figure’10.2). The brand will have positive
customer based brand equity when the customers respond favorably to the
product and the marketing strategy of the company, when it is compared
to the unnamed. version of the brand. The power is gained or lost based on
their learning and experience over a period of time. Brand knowledge is
created by associative network in the minds of consumers.
Brand awareness is related to the consumer’s ability to recognize and recall
a brand in different conditions. The depth of brand awareness refers to the
likelihood that a brand is recalled or recognized. On the other hand breadth
of brand awareness means in variety of purchase and consumption contexts
in which the consumer get the brand in their mind.

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Brand image is related to the consumer’s preferences for and perceptions of Brand Equity
a brand. Various brand associations in the minds of consumers reflect it. In
fact brand associations can be of many forms, but very often used ones are,
product attributes and product benefits.
Figure 10.2: Dimension of Brand Knowledge

Reproduced from Keller 1998 Page 94.

Keller’s Model of CBBE enables ways to enhance customer’s involvement
and loyalty to the brand by highlighting the brand knowledge linkages that
need to be strengthened or dissociated if negative.
Positive customer-based brand equity has many advantages like long term
revenues, customers’ willingness to seek out for themselves new channels
of distribution, the ability of firms to command higher prices and the
effectiveness of marketing communications (Keller, 2003).

10.6 HOW BRAND EQUITY IS CREATED?

In the previous sections we discussed about what brand equity means.
The brand equity starts building up when the customers have higher brand
awareness and brand recognition. Having these two is not just sufficient;
consumers should have strong association of the brand that too favorably
and uniquely. In low involvement products even brand awareness may
be sufficient, but in high involvement products the brand association is
important because the consumers have sufficient motivation to seek more
and more information. This intensive information search and processing the
accumulated information will change the brand association over a period of
time. Associations will generate value when they are
1. Strong
2. Favorable and
3. Establish brand uniqueness.
Strength of brand association: The levels of information processing by
the consumers determine the strength of brand association. The nature of
information, quality, and quantity of information also has impact on the
association. More deeply a consumer thinks about a product, more will
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Brand Management be the brand association. Similarly, the information search will be higher
when the brand has more personal relevance. Further consistency of the
information also has impact on strength of brand association.
Favorable brand association: It is created when the company develops
marketing strategy effectively to deliver product-related and non-product-
related benefits that are desired and preferred by the consumers. This process
has to be consistent over a period of time.
Unique brand associations: It is necessary to create a set of meaningful
points of different brand associations to gain competitive advantage and
establish an understanding of the uniqueness of the brand on given attributes
in comparison to the competitors

10.7 BUILDING BRAND EQUITY

Three considerations are important for building brand equity. They are:
1. Choice of brand elements that make up the brand.
2. Developing and implementing marketing support programs
3. Leveraging secondary associations by linking the brand to other
entities.
It is necessary to consider the complementarily and consistency of various
ways and means of building brand equity. The complementarily factors
are, choice of different brand elements and different marketing support
programmes. The strengths of some elements have to be compensated for
the short comings of the others elements.
Consistency refers to the fact that different brand elements, marketing
activities sharing same common meaning. It also implies that the meaning
is communicated to the consumers without much distortion. Keller has
suggested six guide lines for building brand equity; they are presented in
Table 10.4
Table10.4: Guidelines for Building Brand Equity
1. Mix and match brand elements: brand names, logos, symbols,
characters, slogans, jingles and packages etc.
Choose different brand elements to achieve specifically identified
objectives and design brand elements to be mutually complementing
each other for the greatest synergistic effect.
2. Create rich brand image and enhance perceived quality by
developing, and linking product and non-product related associations
to the brand.
3. Value-based pricing: Set prices and discount policies over time to
reflect value. Perceptions of the consumers, and incorporate their
willingness to pay a premium.
4. Channel synergy: Blending `push’ strategies for channel members
and ‘pull’ strategies for consumers.
5. Marketing Communication: A wide range of communication
channels including social and digital media can be used to create
awareness, strengthen favorable and unique brand associations.
Utilize the integrated marketing communication approach to ensure
synergies
Apart from creating the above it is essential to maintain consistency
for reinforcing the developed associations.
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 Brand Equity
6. Leverage Secondary association: When some dimensions are
missing it can be compensated by associating other entities like
company, channel, other brands, celebrities, or endorsers that
build the brand image, for example the intel inside a is a powerful
secondary association used by computer brands

Source: Adapted from Keller (1998).

Further, it is to be noted that just building brand equity is not sufficient.
It has to be sustained and managed over longer period of time and ideally
enhanced over time. For this the managers have to take a broad view of brand
equity. This is important especially when the firm is operating in multiple
markets. Creating brand hierarchy is critical in these cases. The brands
should have unique brand elements. To achieve this new brands and brand
extensions have to be designed to maintain an optimal product portfolio.
Brand awareness and positive brand image has to be created in each of the
market the firm is doing business. Long term view is necessary because, the
marketing support activities will have impact not only in the current period
but also in the future. A special challenge to maintaining brand equity over
time arises when the brands go through brand repositioning exercises. While
the repositioned brand may resonate with some existing customers and
attract some new ones, some of the regular ones may even feel alienated.
The long term impact on brand equity in such situations needs to be closely
monitored and analyzed for informed managerial action
Building Strong Brands
What is a strong brand? Interestingly, marketers are not particularly
articulate in identifying the characteristics of brand strength. beyond market
share. However, when asked to identify strong brands with no supporting
guidelines, there is a great deal of agreement about which brands are strong
and which are not.
Several attributes characterize brands that marketers describe as strong,
including salience with respect to the product category. Leavitt (1987)
noted that strong brands more likely to have shape and substance. They
evoke a more extensive, richer set of associations. Visual images and word
or phrases linked with strong brands are likely to be more easily retrieved
from memory. Finally, strong brands are held in high regard. Interestingly
strong brands often enjoy high market share, but market share alone does
not distinguish them from other brands. Aaker (1996) and Keller (1998)
suggest the following guidelines for building strong brands (Table10.5).

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Brand Management Table 10.5
1. Build Brand Identity: Consider brand as a. person, or organization,
or a product. Brand image is different from identity. Image refers
how the brand is perceived, and identity is how the company aspires
to be perceived.
2. Commit for a Value Proposition: Each brand has a driving value
proposition. Find out the driver and the functional, emotional, anti
self’-expressive benefits that consumer expects. Build the brand
relationship to strengthen the above.
3. Position the Brand: The positioning should consider necessary and
desired points of parity and points of differentiation in the product
category. Clear positioning will guide a clear communication
strategy.
4. Implement with Consistency: The communication should be
aimed at creating awareness. brand association etc. Also it should
be consistent and durable.
5. Consistency over Time: Maintain logos, symbols, imagery. If there
is a need for change, understand the consumer minds before doing
any modifications.
6. Brand System: The brands in the portfolio should have synergy.
7. Leveraging the Brand: Plan for extensions carefully to increase
the brand identity, image, and other positive associations.
8. Monitoring Brand Equity: Monitor the brand over time, including
awareness, perceived quality, brand loyalty, brand associations.
Communication channels and messages are also need to be tracked
regularly.
9. Brand Responsibility: Assign responsibility of a brand to someone
who can coordinate all the brand related activities organization
wide.
10. Invest in Brands: Continue to invest on brands to nurture them.
It is important to enhance brand equity by continuous product
innovation, distribution, etc., to sustain the consumer relevance and
user and usage imagery.

10.8 SUMMARY
Brand equity is like any other intangible assets difficult to evaluate and
manage but highly valuable to the company in terms of the market power
it enables. It can be defined as the consumer franchise for the brand.
Various measures have been proposed for valuing the brand equity. Some
of the important measures are brand awareness, brand association, brand
personality, Price premium, customer satisfaction, perceived quality,
brand salience and so on. Composite index can be constructed using these
measures by weighted average for arriving at a single value. The weights
have to be chosen carefully to reflect the product category, served market
and so on. Brand equity can be nurtured and built by careful planning and
implementation of marketing strategies. Merely building brand equity is

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not sufficient, it has to be managed and sustained over longer period of Brand Equity
time. To do so the managers have to take a much broader view of brand
management than managing a single brand.

10.9 SELF-ASSESSMENT QUESTIONS

1. Developing brand Equity is a process spread over time and consistent
brand building effort. Select a strong Indian brand and trace its brand
building effort.
2. Evaluate the various methods of brand valuation in the Indian context.
3. Creation and management of Brand equity revolves round the
consumer. Do you agree or disagree substantiate your answer.
4. How does brand equity add to the competitive advantage of an
organization, Take three examples from the Indian context to illustrate.
5. Use the composite brand equity measure discussed in the unit to try
and assess the brand equity of a brand that your organization or any
organization that you are familiar with has developed.

10.10 REFERENCES/FURTHER READINGS

Kevin Lane Keller, A Parsuraman, I Jacob; Building, Measuring and Manage
in Brand Equity; Fourth Edition, Pearson 2015
Gavin Turner Branding and Marketing Practical Step-by-Step Strategies on
How to Build by, E.C. Publishing, 2016
Alice M. Tybout and Tim Calkins ( Eds),: Kellog on Branding: The
Marketing Faculty of Kellog Scholl of Management , Oct 2005
Sobro to Sengupta, Brand Positioning: Strategies for competitive Advantage,,
Second Edition, Tata Mcgraw Hill Publishing company limited ,Delho 2005
Kotler, P. and Keller, K.L. (2012) Marketing Management. 14th Edition,
Pearson Education.

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 UNIT 11 Brand Building Blocks:
Identity Image and
Positioning

Objectives
After reading this unit you should be able to:
●● discuss the rational behind branding
●● identify the steps involved in brand building
●● define a brand building block
●● identify and assemble the brand building blocks
●● design a strategy for building of a strong brand
●● evaluate the implications of brand building
Structure
11.1 Introduction
11.1.1 Branding
11.1.2 Rationale behind Branding
11.2 Brand Building Blocks
11.2.1 Brand Identity
11.2.2 Brand Performance
11.2.3 Brand Imagery
- Brand Positioning
11.2.4 Brand Judgments
11.2.5 Brand Feelings
11.2.6 Brand Resonance
11.3 Summary
11.4 Self-Assessment Questions
11.5 References/Further Readings

11.1 Introduction
Consumers buy brands and not products. If you closely examine this
statement you would appreciate the importance of branding of product/
service offering by a firm. Brand helps us in simplifying our buying
decisions and enables in deriving customer satisfaction. This unit will take
you through the various stages and processes involved in transforming a
product into a strong brand over a period of time. As you go through the unit
you will understand and appreciate the intricacies of all the brand building
tasks and will also endorse the absolute need for branding of for every
market offering thus creating a win-win situation both for the marketer and
consumer.
This unit is conveniently divided in to three sections. The first part
introduces you with the relevance of brand building whereas the second
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section focuses and identifies the various brand building blocks and then Brand Building Blocks:
suggests on how building blocks can be assembled altogether to achieve the Identity Image and Positioning
objective of building of a strong brand. Subsequently, the last section of
this unit acquaints you with the implications of brand-building which you
may try and implement in real life situations.
11.1.1 Branding: An Overview
A brand is a name, sign, design, sound, symbol, term or a combination of
some or all of these that are specifically fixed to a product, good or a service
to facilitate its identification by its users, buyers, retailers, and manufacturers
etc. The name, sign, design, sound, symbol, and terms that a marketer or a
manufacturer choose to make his or her goods or services identifiable with,
are called brand elements.
Brand elements play a very significant role and as a result, selection of
these brand elements becomes a very demanding and daunting task for
the marketers. Every marketer wishes that his offerings should sell more,
however, to make them more saleable, they need to be made easy identifiable
and recognizable at first sight. Brand elements should be chosen in such a
way that they are:
 meaningful for example Volkswagen means “the people’s car”,
Decathlon means a an athletic event comprising of ten activities,
paytm means pay through mobile
 updatable for example Volkswagen has updated its logo more than
10 times since its inception in 1937
 memorable for example LG – life is Good, Fair & Lovely cream
 transferable Jio was initially launched as a telecom service provider
and now it is extended to fibre sector as well
 legally protectable the sale of trademark of Ambassador brand by
Hindustan Motors to Peugeot SA for sure will protect Peugeot SA
from any unauthorized usage of Ambassador by anyone else
 differentiable for example in automobile OEMs, the brand elements
like Tata, Mahindra & Mahindra, Ford, Ashok Leyland are easy to
differentiate from others and so are their products like Safari, Thar,
Scorpio, eComet, Fusion, Mustang and Comet etc. Further, dark red
colour of Vodafone make it easily and quickly identifiable from others
brands.
Once the selection of brand elements is decided on the bases of
aforementioned pointers, they need to be registered as one’s trademarks
with the concerned authorities to avoid other marketers to use the
trademark in their marketing and selling activities. For instance, Adani
group is looking forward to foray into automobile sector in India and prior
to their foray it has registered ‘Adani’ trademark for vehicles operating in
water and on land.
The process that starts with ideation of brand elements, and then expands
to making a special space in the minds of customers on some aspects in
relation to the competitors, especially through adapting an appropriate
marketing mix, is known as branding.
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Brand Management 11.1.2 Rationale behind Branding
There are a number of reasons for which a marketer needs to take serious
initiatives regarding branding. Some of these initiatives are explained below:
(i) For Identification and Brand Association
As discussed in the earlier section, the very first objective of branding
is to assist the customers and other stakeholders in identification of a
brand.
If you recall or look back how your day had begun and ended is quite
interesting which you alone can self evaluate to understand. Assume
that as soon as you wake up in the morning the very first thing you
may check the mobile phone say a Samsung/Mi/Apple/ mobile phone
for getting an update regarding messages and e-mails. Then it’s
time for a morning walk with a pair of Reebok/ Adidas/ Decathlon/
Nike/ Fila walking shoes and also a track of one of the above brands
mentioned against your walking shoes. Back from morning its time
to brush teeth with the preferred tooth paste and then fresh up with
Lux/ Dettol/ Liril/ or may be any other brand of your choice. At the
breakfast table you eat whatever is there on the menu may be roti/
paratha prepared by using any branded Atta and a cup of tea/coffer/
milk/health drink as per your choice and the brand that is used by the
family.
Now, it’s time to get ready for school/college/job as the case may
be you wear a Peter England/Raymond/Black Berry/ dress and
shoes of Woodland/Bata/Red Tape/any other brand. In case if it is
a school, every school as a well defined school uniform of varied
colour combination. If you are in college it would be different brand
of trouser, T shirt and footwear brand.
Once you return back say from school, college or job you are exposed
to a number of discussions or conversations with our friends and peers
on various topics besides our core responsibilities such as games,
movies, sports persons etc. Before dinner you may watch news on a
particular channel on your LED television of LG/SONY/ etc. Once
again on the dinner table you may enjoy roti or paratha made of
from either one among this Rajdhan/Ashirwad/Fortune/Annapurna/
Patanjali or any other make, and may eat rice and lentils of a specific
brand etc.
Before going to bed you may take milk of Mother Dairy/Amul/any
other make. Undoubtedly, in our sleep, we generally dream about
various things and through them again you are exposed to various
brand names. Therefore, in our daily life, we come across a large
number of brands. While being around them over the years, we start
associating ourselves with them and it becomes a little difficult for
us to deflect to other brands. This is what is really appreciated by
marketers as this exerts a significant influence on their top and bottom
lines.

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(ii) For Protection of an Innovation Brand Building Blocks:
Identity Image and Positioning
A brand is always a reflection of an idea. However, many times it is
a platform through which an innovator can protect his/her innovation
as well.One can register copyrights and patents in the name of an
individual(s) or a brand(s). Therefore, a brand can be a platform
through which one can protect the innovation and commercialise the
innovation for profit making. For example In 2013, Kansai paint got
patent for paint protection sheet and is now keeping all other firm at
bay from using it in their operations. Besides patents and copyrights, a
brand also allows one to prohibit other from the usage of logo, design,
name, sound, and trademark as well. For instance In 1993, Bisleri
sold the trademark MAAZA and its formulation rights to Coca-Cola
for US $ 1 million but in 2008 it filed for MAAZA trademark in
Turkey and initiated exporting of fruit drink under MAAZA name
again. Later, it was sued by Coca-cola and the honourable court asked
Bisleri to stop the usage of MAAZA trademark with immediate effect
as trademarks are protected worldwide.
(iii) For Sustainability
Products pass through the stages of introduction, growth, maturity and
decline before they actually become obsolete. On the contrary brands
are everlasting and they never die. For e.g. rolling out of ‘BS IV’
standards in 2011 was the time when Ambassador Car was outlawed
and forced to stop its production in 2014. However, it was in 2017
when Peugeot SA, an automobile OEM from France, acquired the
trademark rights of Ambassador from Hindustan Motors for INR 80
crore. Even though no automobile/car is being manufactured form any
of the facilities of Hindustan Motors, the brand name Ambassador is
still live and will take its rebirth when Peugeot SA launches a car with
a brand name of Ambassador. Even if Peugeot SA does not launch
any of their products with Ambassador, it will still be alive and keep
on take rebirths whenever its users talk and share their experiences
about it. Therefore, a brand can sustain while a product for sure dies.
(iv) For long lasting Value
If we look at the top 100 brands of previous years and match with
them with that of present years, we find that most of the brands
that were there in that list are still ranking good in the present era.
Therefore, whether new or old, good brands if managed appropriately
and thoughtfully endure for generations. For example As per Kantar
Brandz, top four brands in 2021 are Amazon, Apple, Google, and
Microsoft while top four brands in 2010 were Google, IBM, Apple,
and Microsoft. It shows that brands endure over time.
Activity 1
Download the Kantar Brandz list of top 100 brands for 2010, 2015 and
2021 and prepare a list of brands that are enduring and explain the reasons
thereof.
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Brand Management ………………………………………………………………………………
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11.2 Brand Building Blocks

According to Keller (2013), there are six building blocks in brand building
namely
1. Brand identity
2. Brand performance
3. Brand imagery
4. Brand judgments
5. Brand feelings
6. Brand resonance

When assembled in an order (see Figure 1) can provide a base required for
building of a strong brand. These blocks are being discussed below:-

(Source: Adapted from Keller, K. L. (2013). Strategic Brand Management

Pearson: Building, Measuring and Managing Brand Equity. Pearson
Education Ltd.)
Figure 1. Brand Building Blocks

11.2.1 Brand Identity

Brand identity measures how often a brand is evoked across different settings
and situations. These situations can be the ones during an actual purchase, it
can also be the ones during the word of mouth recommendations or may be
the ones during the future planning of a purchase. During there situations, it
will be really interesting to know
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 How…… Brand Building Blocks:
Identity Image and Positioning
 easy is it to recall a brand?
 well a brand is recognized?
 often a brand is getting recalled?
 the potential customers are recognizing a brand?
 the target customers are recalling the brand?

Brand awareness is responsible for providing an identity to a product by

establishing a connection of brand elements with product categories and
consumption conditions. How easily we recall a brand and how likely a
brand element is recalled is brand awareness’s depth. On the other hand,
the range of consumption and purchase situations in which a brand element
is recalled is known as brand awareness’s breadth. Marketers are of the
opinion that products can be grouped at different levels and can be arranged
hierarchically. Marketers also assume that in consumers psyche there exists
a product hierarchy from top to bottom and information regarding brands at
the last level.

Figure 2. Product Category Structure of Passenger Car

Let’s take the example of passenger car product class fig.2 there are
eight different product categories namely sports utility vehicles (SUVs),
convertibles, minivans, sedans, hatchbacks, sports car, station wagon and
coupe. Among these, SUVs are again of four types and they are compact
crossover, crossover, mid-size and full size. The convertibles, on the other
hand, are of two types, namely two-seater and four-seater, whereas mini
vans are either one-box or two-box. When it comes to sedans, there are four
types and these are sub-compact, compact, mid-size, and full-size, where as
hatchbacks are of two types, namely five door and two door respectively.
Sports car can be any one among the supercar, high performance and hyper
car, while coupe can be any one among the club coupe, combi coupe, coupe
suv, opera coupe, hardtop coupe, quad coupe, berlinetta, three door and
business coupe.
The way the product hierarchy prevails in one’s memory plays a significant
role on the awareness and consideration of a specific brand. While in case
of oral care, if a customer chooses to have a toothpaste, then next it is the
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Brand Management choice has to make among sensitive, whitening, fluoridated, tartar control,
children’s’ and herbal. If one picks a whitening option, then the next decision
has to involve with is the brand choice.
The depth of one’s brand awareness’s influences the probability of a brand
recall, whereas, the brand awareness’s breadth on the other hand, covers
all the different situations during which a brand can appear in one’s mind.
Normally, toothpastes have a better depth on awareness front and they are
easily there in one’s mind whenever one deals with different consumption
related situations. Their availability is also better than that of tooth powder,
floss, mouthwash, and chew sticks.
If one looks at the practical example of product hierarchy structure of oral
care, most of the time it is the toothpaste that comes to mind when one thinks
of oral care. Further, most of the times Colgate that is recalled whenever
a customer thinks about toothpaste. Colgate has become synonym with
toothpaste and as a result, whenever a customer goes to a nearby grocer for
toothpaste, generally asks for Colgate even when if someone may be there
to buy some other brand of tooth paste. Therefore, breadth and depth of
awareness of Colgate brand is very high. It is also reflected in Kantar brandz
list of 2020 wherein it is ranked 48 in top 75 brands from India.
Activity 2
Measure brand Identity of footwear product category in your neighborhood
through the following questions –
i) Which of the products of daily use you identify footwear with?
ii) Which of the brands you identify with the product identified in the
last question?
iii) Which of these brands you mostly think of?
iv) If you are supposed to buy one of these brands, which brand will you
go for?
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11.2.2 Brand Performance
A product offering is one through which a brand fulfils its promises it has
made to the potential buyers. The buyer buys and consumes and based
on their consumption experiences the buyer forms their own perception
towards the brand in question. Conceiving, designing and developing a
brand and eventually commercializing, and offering the brand to the target
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market which is capable of meeting the needs and wants of the target Brand Building Blocks:
customers becomes obligatory for all the brands by the marketer. In reality, Identity Image and Positioning
brand performance measures how aptly the offering of a brand have met
customer’s expectations.
Brand Positioning
Brand positioning is the art of communicating the brand by way of creating
a distinct image and position in the minds of the target customers. Usually,
the strongest or the best brand positioning can’t be worked out unless and
until it is overpowering other brands on performance aspect. For example
Bangur Cement claims that are not cheap, though they are the best. In saying
so, they can position themselves as the best cement brand only if their
cement is actually better than rest of the cements on various parameters the
consumer consider while purchasing cement.
There are five facets which measures brand performance and they are
discussed below:
a) Reliability, serviceability and durability of product(s)
A product is said to be reliable if it performs consistently the same way, over
the time, across different purchases. If the product can be repaired if needed
then the product is scoring well on serviceability aspect, and if a product
is long lasting it is said to be durable in nature. Take for example Xiaomi
brand of smart phone which was launched in India around 2014 with its Mi3
model but people were reluctant to buy as the service centers were not since
place in the beginning. Once the firm started its manufacturing in India
in August 2015, most of the customers were assured on serviceability as
spare parts were available for servicing the phone. However, when it comes
the durability, Xiaomi phone are not that rugged, even then, because of its
features, Xiaomi is the no 1 Smartphone brand in India in third quarter of
2021.
b) Effectiveness, empathy and durability of service(s)
Primarily, customers are found to possess performance related affiliation
with the services. Though the magnitude of this affiliation again depends on
how the brand provides the right service, i.e. effectiveness, and providing
services right, i.e. efficiency. However, in the absence of any concern for
the customers’ feelings and opinions, a service will not have any kind of
long lasting effect on consumers in spite of being effective and efficient.
Therefore, apart from being an effective and efficient service provider, a
brand should always have empathy for the customer’s views, opinions and
suggestions and to be respected at all times.
c) Design and style
Product design always adds to the brand functions. Buyers sometimes also
go beyond the functional characteristics of a product, like color, shape,
size, style, smell etc. In a nutshell, aesthetics play a pivotal role in letting
the customers decide about a product purchase. For example Ikea, a firm
founded in Sweden and headquartered in Netherland, is a well known brand
in furniture. Its Adde chair comes in four colors, Grey, White, Red and
Black. Its legs are made up of steel, while seat and backrest are made up
of polypropylene. It is portable because it can be dismantled easily. It is
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Brand Management designed in Sweden and looks cool and attractive. You can also identify and
examine many such innovative and flexible brands which made their mark
and positioned in the market place.
d) Credentials of an offering
By and large, customers have opinion about the standards by which the
ingredients of products function (not so good, good, very good, the best)
besides other issues like (patent, copyright, warranty, guarantee etc.) even
thou there are supplementary in nature yet they have a bearing on the
customers in their purchase decisions. If you look at the automobile brand
M&M Thar it offers a good 4 x 4 ride during off road visits to a customer,
and at the same moment the customer is free to choose in between soft and
hard roof tops options available during the purchase.
e) Price
Price is one of the most important aspect on which consumers decide
their purchases. Premium customers look for higher prices whereas lower
middle class consumers search for discounted products. Price also works as
a cue to quality for consumers. It is normally perceived that higher priced
brands have better quality while lower priced brands are relatively inferior
in quality. For example most of the Maruti Suzuki passenger cars, models
namely Swift, Baleno, S-presso, have failed safety test conducted by global
NCAP but still they are no 1 in market share in India. It is mainly because
passenger cars cost relatively less and are affordable with value for money.
11.2.3 Brand Imagery
Brand imagery is how customers abstractly perceive a brand and here they
do not watch what a brand in actual does. It is more of an intangible facet
of a brand and consumers establish imagery associations either through
their own experiences with the brands or through the communications they
receive from various marketer and non-marketer information sources, like
word of mouth, advertising, public relations, sales promotion etc. Though
there can be many types of intangible associations that consumers espouse
to form brand imagery, the most predominant among them are the following
four.
a) Values and personality
According to Aaker (1997), if all the brands are considered as human beings,
they may be in any of these five forms i.e sincere, exciting, competent,
sophisticated and rugged. They are also supposed to have human values
as per Plummer (1985), these values are lively, modern, exotic and passé.
For example if one looks at Royal Enfield, it seems to have a rugged brand
personality.
b) Heritage and history
Brands also showcase their history and milestones achieved in past to create
an image in the minds of the customers. These can be associated with the color
of the product, packaging of the product, commercial aired, country where
the product is manufactured, firm manufacturing the product, geographical
indications, endorsers of the brand, and events the brand sponsors etc. These
secondary associations for sure make a point of difference.
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c) Buying and consuming settings Brand Building Blocks:
Identity Image and Positioning
The circumstance under which a brand is shown to have been consumed,
especially during commercials, also creates an image among its buyers.
These circumstances can reflect upon a particular season, week, month, day,
year or even a particular time of a day. For instance the TV commercial of
Maggi reminds that whenever you are hungry you can reach out to prepare
Maggi noodles which takes just two minutes of your time and also focuses
on the how simple it is to prepare. Similarly, an old commercial of Coca-
cola with Amir Khan portrays that ‘Thanda Matlab Coca-Cola’, which
again suggests that whenever you wish to have something cold you should
go for Coca-Cola.
d) User Imagery
Consumers also give importance to find out the individuals and firms who
are using /consuming the brand. In doing so they try to analyze looking at
the following aspects which are mentioned below:
Race: In northern India, people prefer bread /loaves over cooked rice.
Since childhood they are being consuming wheat as their staple food. Thus
they keep associating themselves more with flour brands and less with rice
brands. Surprisingly, in some cases, they do not even know any wheat brand.
Therefore, whenever, people from Northern part of India have an image in
their mind that people from north consume wheat alone..
Gender: The wellness brand Fair & Lovely is targeted at female gender
while Fair & Handsome is targeted for male users. Boys ride Royal Enfield
while girls ride Pleasure.
Income: Hidesign leather brand of bags, wallets etc are primarily targeted
at women over and above 25 years of age and are high income professionals
who are also frequent travelers for their official trips.
Age: Cadburry brand generally showcases that their chocolate brand is
consumed by youngsters whereas insurances are shown to have been bought
by mature people. Again youth are related with cigarette brands while old
are associated with cigar brands.
Brand Imagery, as discussed above, and brand performance, as explained in
the earlier section are strongly related to yet another facet of brand building,
called brand positioning which is being discussed below:
Brand Positioning
It is the art of creating a distinct position or image of a product or a service
in the mind of its target customers: (Ries, and Trout, 2000).the distinct
image is with reference to the image(s) of the competitor(s). To decide upon
the brand positioning, a firm has to consider the following aspects namely:
(a) frame of reference,
(b) point of parity and point of difference,
(c) brand mantra.

(a) frame of reference

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Brand Management A frame of reference is the (product) category a brand belongs to. A
brand has to identify its competitors in that category. After identifying the
competitors, the firm has to analyze the objectives, current management,
financial condition, and size of these brands. A brand has to also analyze
how actually the customers perceive about all these competitors. For
example – Royal Enfield belongs to the two wheeler product category and
specifically it competes with all the two wheelers, namely Bajaj, Hero
Honda, Ola electric, and TVS etc. on analysis of all these firms, they can
easily identify which of these firms are actually competing with them and
what their financial condition, sizes, policies are. They can also conduct
research to see how all these competitors are perceived by the two wheeler
customers.
(b) Points of parity and points of difference
After deciding about the frame of reference, the next step is to decide the
points of parity and points of difference. Points of parity are the aspects
or benefits customers perceive to be present across all the brands in the
concerned frame of reference, whereas, points of difference are the benefits
or aspects customers assume to be present in a particular brand. For example
– In the case of Royal Enfield, points of parity can be (i) a two wheeler, (ii)
cubic capacity of 350 or 500 (c) ruggedness and (d) pricy etc.At the same
time, its points of difference areits (i) sound (ii) load carrying capacity (iii)
off road capability and (iv) heritage and history etc. Though, the problem
with the Royal Enfield is that it certainly misses to stand strong on ‘modern’
and ‘quick’ aspects of point of parity. To deal with quick aspect, the brand
has launched a number of quicker models, namely Himalayan, Interceptor,
Scram, Meteor and Continental. On the other hand, to deal with modern
aspect, the classic 350 series is launched with all new colors, namely dark
stealth black, signals marsh grey, halcyon green, redditch sage green,
halcyon grey, redditch red, gunmetal grey, signals desert sand, redditch grey
and halcyon black.
(c) Brand mantra.
Brand mantra is a phrase of 4-5 words through which a brand expresses its
heart and soul. A brand mantra highlights the points of difference. It guides
the employees and channel partners in understanding what essentially to
symbolize with the customers. While designing a brand mantra, it should
ensure that phrase of brand mantra should that to be selected in such a way
that it is simple and has the ability to communicate the uniqueness of the
brand. For example – Brand mantra of BMW is ‘build the ultimate driving
machine’. This mantra highlights how BMW is different from others. It also
guides employees of BMW on what they actually have to symbolize the
customers with.
Once a brand is done with frame of reference, point of parity and point of
difference, and brand mantra, it should communicate to the target customers
there aspects. For example – Bajaj “Hathi Mat Pallo” campaign to tell the
customers that Bajaj (also) belongs to the 350 cc category bikes and is a
far better option for the customers looking to purchase a vehicle in this
category. By targeting Royal Enfield in this campaign, Bajaj portrayed that
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Bajaj Dominar 400 was a better option than Royal Enfield. In claiming so, Brand Building Blocks:
they showcased agility and control as the point of differences wherein Bajaj Identity Image and Positioning
Dominar 400 was shown to have hyper agility and hyper control whereas
Royal Enfield was shown to score really bad on agility and control.Through
this campaign, Bajaj tried to create a distinct image regarding the model in
the psyche of the target customers.
Therefore, as per the aforementioned discussions on brand positioning and
the earlier discussions held on brand performance and brand imagery in
section 8.2.2 and 8.2.3, it is concluded that brand performance and brand
imagery can assist a brand in creation of a strong brand positioning for a
brand.
11.2.4 Brand Judgments
Customers form opinions about the brands on the bases of imagery and
brand performance. These opinions are called brand judgments. There can
be a number of brand judgments. However, the four most important among
these are credibility, superiority, quality, and consideration.
a) Credibility
Consumers keep on rating brands on their likability, expertise, and
trustworthiness and these ratings decide their credibility. For example
– Apple, as a brand, is perceived to be very innovative and competent
(expertise); dependable (trustworthiness); and interesting, attractive and
funny to be with (likeable).
b) Superiority
When consumers find some brands unique and better than rest of the other
brands, they are considered to be superior brands. For example – Tesla, a
brand by Elon Musk, is considered to be unique and the most innovative
automobile brand in these days.
c) Quality
Consumers have mental predispositions regarding brands and these are
relatively permanent. Among all these predispositions, the predisposition of
a customer about a brand regarding the fulfillment of his/her expectations is
the most important one.
d) consideration
A customer comes across a number of brands daily, form opinions about
them, and even form favorable attitude about some of them, however, it is
not important until and a customer finally considers the brand for purchase.
For example – In India, Tata Nano was a good idea. People appreciated it,
especially the price it was offered at. However, buyers of automobile in
India did not consider it for their purchase. It was mainly because, in India
an automobile in India is considered as a status symbol, and with Tata Nano
the customer was not finding any increment in their status. The customer
was generally of the opinion that if s(h)e purchases Tata Nano, no onewill
appreciate it. As a result, customers did not consider it and it failed.

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Brand Management 11.2.5 Brand Feelings
Whatever reactions customers give to a brand are demonstrations of their
brand feelings. The feelings can be negative or positive, and they can be
acute or mild.Brands employ creative advertising these days to influence
the consumers’ opinions of the actual consumption of the brand. There are
six types of brand feelings which contribute the highest in brand building -
a) Fun
Cheerful feelings are supposed to make consumers relaxed, entertained,
happy, and lighthearted. For example – In the commercial of Hero Pleasure,
Alia Bhatt, reiterates that why should all the fun had by boys only. By saying
so, she hints at the fun a girl can also have with Pleasure rides which are
easy, funny and cheerful always.
b) Coolness
The “cool” facet is generally associated with young and these are again
young only who marketers look at to really understand about new trends.
Band coolness aspect has a substantial amount of informative power.
Brands rejuvenate the customers during the actual consumptions, as well
as through communications with customers, and it creates a sense of
something specialness among consumers. Cool branding let the marketers
earn new growth avenues of growth stances for themselves. For example –
Facebook used to be considered a cool in the starting by users but because
of various transformations it went through, it was no more being considered
cool. Though, Instagram and WhasApp are still considered cool by their
users. To deal with the issue, Facebook started rebranding of Instagram
and WhatsApp by adding ‘from Facebook’ in to their description to borrow
some coolness of these two brands to Facebook.
c) Warmth
When brands provide soothing and peaceful feelings to the consumers, they
feel affectionate and warmhearted about brands. For example – Vistara
airlines provides a soothing experience to its flyers through the espousal of
delicious and hygienic food, and caring and accommodating cabin crews.
d) Security
One of the main reasons of purchasing brands is security and safety.
Consumers want to do away with psychological, social, financial, and time
risk and any brand they are sure is going to assist them in doing that, they
purchase that. For example - The great Khali in one of the commercials
talk about his fearful experiences of living in a home and then how Ambuja
cement helped him in getting over the fear by providing him solid structure
to live in. Through this commercial Ambuja cement wants to portray that
they do care about safety of consumers and they provide the cement on
which consumers can rely.
e) Self-respect
Consumers buy brands to feel proud as brands really let them feel confident.
For example – An HDFC Life – Sir uthakejio commercial wherein a lady
tells her father that she will be able to fulfill her dream of running a cafe even
when she has lost her husband. On this, when her father asks about finances,
188 she simply tells him that her husband had arranged all in advance. By saying
so, she was referring to the HDFC insurance policy he had purchased well Brand Building Blocks:
before his untimely demise. Through this commercial, HDFC Life conveys Identity Image and Positioning
that investing in life insurance with HDFC will always let your beloved
ones live their life with self respect and dignity as they will no more be
required to ask someone for financial help.
f) Social Approval
Through consumption of brands, consumers try to showcase what they really
are. In doing so, they also satiate their self-esteem need because whenever
their peers and friends see them consuming well known brands they get
appreciation from them. Opposite to it, if buyer does not go for well known
brands, s(h)e does not get the appreciation which otherwise s(h)e would
have received. For example – Think weddings, think Raymond commercial
of Raymond is to push the notion that a marriage is always incomplete
without Raymond because it for sure misses the social approval it deserves.
11.2.6 Brand Resonance
This is last building block of brand building wherein a customer is supposed
to be in sync with the brand and s(h)e should in a strong relationship with
the brand. The resonance can be divided in to two dimensions, one is the
intensity of bonding that a buyer feels to have with the brand,while the other
is the magnitude of activities s(h)e performs to showcase the loyalty s(h)e
has with the brand. These two attributes can be further broken into four sub
attributes-
a) Loyalty
Loyalty of customers to a brand is an invaluable asset. Not only it let the
brands save a lot of money they otherwise would have spent on promotion
of products/services, but it also let the brands put their energy on doing
something productive. From the perspective of customer lifetime value, it is
not so difficult to understand that how the loyal customers keep on financing
the firm throughout their lives. For example – Customers of Apple are so
loyal to the brand that they are even ready to sell their kidneys for iphones.
b) Attachment
Loyalty, as discussed in the last part, is not the only thing a firm can rely
on. Loyalty to a brand may be due to compulsion as there is only one
brand offering the product/service. Loyalty to a brand may also be due to
non-availability of other brands on the outlets one can afford to visit for
the purchases. Therefore, in order to maintain loyalty even when the other
brands are available for purchase, one has to have firm personal attachment
with a brand.
c) Community
Through brand communities, brands should also provide an environment
to its present and future customers wherein they can feel camaraderie,
relationship, and affiliation with other each other and also with the employees
of the firms. For example – Royal Enfield, through its Facebook page is
maintaining an online community wherein it discloses the information
regarding the riding camps. It invites users to participatein these camps to
create camaraderie among the users and employees of the firm. Once, a
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Brand Management camp is organized, pictures are shared on Facebook page to create a buzz
regarding them. It not only motivates those who attended the event, it also
motivates non-participants to join future riding camps.
d) Engagement
Lastly, the customers should engage and invest their time, money, energy
and any other resource to increase their engagement with others stakeholders
of the brands. For example – These days, firms are having ‘Official as well
as unofficial groups, to actively engage their employees
Activity 3
Analyze brand feelings of Bajaj motorcycles after measuring them from
your neighborhood through the following questions. -
i) Does ………. brand provide you warmth?
ii) Does it appear to be a fun feeling for you?
iii) Does it really excite you?
iv) Does it make you feel secure?
v) Does it provide you a notion of social approval?
………………………………………………………………………
………………………………………………………………………
………………………………………………………………………
………………………………………………………………………
………………………………………………………………………
………………………………………………………………………
………………………………………………………………………
………………………………………………………………………
………………………………………………………………………

11.3 SUMMARY
This unit focuses on brand building blocks. By starting with an introduction
to branding and rationale behind branding, it prepares base required for the
whole unit. The discussion pertaining to brand building blocks wherein six
brand building blocks are discussed in detail to provide in-depth information
on what these blocks are and how they are related to one another. To provide
a better learning experience in this regard, live examples from corporate
scenario are discussed in detail.

11.4 Self-Assessment Questions

1. Why branding is important for customers? What role does the
registration of intellectual property rights, especially trademarks,
play in branding?
2. Can we change the sequence in which brand building blocks are
assembled ? Justify your answer with a suitable example.
3. Which of the six building blocks are most important? Justify your
answer with suitable examples from industry.
4. How do you think the product category structure is relevant to the
marketers in their branding decisions?
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5. Prepare a product category structure for a product category of your Brand Building Blocks:
choice and analyse the various brands, available in category. Identity Image and Positioning

11.5 REFERENCE/ Further Readings

Aaker, D. A. (2012). Building strong brands.Simon and Schuster.
Aaker, D. A., Biel, A. L., & Biel, A. (2013). Brand equity & advertising:
advertising’s role in building strong brands. Psychology Press.
Cudny, W. (2019). City branding and promotion: The strategic approach.
Routledge.
Keller, K. L. (2013). Strategic Brand Management Pearson: Building,
Measuring and Managing Brand Equity. Pearson Education Ltd
Kotler, P., Pfoertsch, W., & Pförtsch, W. A. (2010). Ingredient branding:
Making the invisible visible (p. 76). Berlin: Springer.
References
Aaker, J. (1997). Dimensions of Brand Personality, Journal of Marketing
Research,34, 347–357.
Keller, K. L. (2013). Strategic Brand Management Pearson: Building,
Measuring and Managing Brand Equity. Pearson Education Ltd
Plummer, J. T. (1985).How Personality Makes a Difference,Journal of
Advertising Research 24, 27–31.
Ries, A., & Trout, J. (2001). Positioning: The battle for your mind.McGraw
Hill.

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 UNIT 12 BRAND ARCHITECTURE and
Brand Extension

Objectives
After reading this unit you should be able to:
●● define brand architecture and its components;
●● create a brand architecture strategy;
●● build and rationalize a brand portfolio
●● assemble a basic brand hierarchy
●● understand the concept of brand extensions
●● define the different type of brand extensions
●● launch new brand extensions.
Structure
12.1 Introduction
12.2 Developing a Brand architecture strategy
12.3 Brand Architecture guidelines
12.4 Brand Portfolios
12.5 Rationalizing the Brand Portfolio
12.6 Brand Hierarchies
12.7 Levels of Brand Hierarchy
12.8 Brand Hierarchy Decisions
12.9 Corporate Branding
12.10 Brand Extensions
12.11 Types of Brand Extension
12.12 Advantages and Disadvantages of Brand Extension
12.13 Launching a Brand Extension
12.14 Summary
12.15 Self-Assessment Questions
12.16 References/Further Readings

12.1 Introduction
When you visit a store to buy a soft drink/water you see different bottles of
Coca-Cola, Thums Up, Fanta, Sprite, Limca, Kinley, Minute Maid, Maaza.
These brands look very different in terms of packaging, taste, benefit and
price. But they do share a commonality. They all belong to Coca Cola India.
In fact, Coca Cola has 13 brands in India and have 200 brands worldwide.
This may lead to several questions in your mind. Why a company is
launching several brands with different names? Why the price points are
very different? Is it good for a firm to have so many brands? The unit will
192
try to address these issues and help in understanding the strategies used by Brand Architecture and
various companies to reach larger consumer base by launching number of Brand Extension
brands.
Competition is getting intense and consumer trends are evolving. Brand
creates value for the company. A brand that doesn’t evolve and adapt to the
consumers requirement becomes redundant with time. Firms have many
options regarding branding strategy. It helps in understanding the nature and
various choices available to the managers about branding strategy. It helps
in gaining clarity about the number of common and distinctive branding
elements that can be used for their products and services. Managers need to
analyze and track their brands and help in sustaining the brands.

12.2 Developing a Brand architecture

strategy
Brand Architecture: It relates to the organizing the structure of the brand
portfolio. It aids marketers in deciding which products and services to
launch, as well as which brand names, logos, and symbols to use on new
and existing items. Brand architecture strategy helps in defining the brand
breadth and depth of the brand. The brand architecture plays two important
roles:
●● Brand Awareness: It improves the ability of the consumers to recognize
the brand under different conditions.
●● Brand Image: It relates to the perception of the consumer about the
brand which are reflected by the brand associations held in consumers’
mind. This improves the trial and repeat purchase intentions among
the consumers

Fig 1: Brand Architecture Strategies and Decisions

Source: Keller, Kevin Lane, M. G. Parameswaran, and Isaac Jacob. Strategic brand
management: Building, measuring, and managing brand equity. Pearson Education India
Developing brand architecture: It is complex and requires in depth
understanding about the brand. It involves three key steps:

193
Brand Management i. Defining Brand potential: The management needs to articulate
the brand vision. The management need to realize the long-term
potential of the brand. The management need to define the brand
boundaries. All brands have boundaries, thus, on the basis of brand
vision and positioning the management needs to identify the products
the brands wants to offer and the needs it wants to satisfy. For instance,
Maruti has set its boundaries by offering automobiles. It would be
very difficult for Maruti to introduce a clothing line or shoes. This
the reason that Toyota (Japanese Carmaker) introduced its luxury car
with a new brand named, Lexus. Brand positioning adds specificity
to brand vision. It describes the emotional and functional benefits and
the points of differences from that of the competitors.
ii. Identifying Brand Extension Opportunities: Brand extension
strategy is about using established brand names to launch new
products. When a firm launches new products within existing
categories it is called line extensions (Colgate Vedshakti toothpaste)
and when a new product is introduced in a new category it is called
category extensions (Colgate Vedshakti Mouth Protect Spray)
iii. Specifying Brand Elements for Branding New Products and
Services: This refers to the decisions pertaining to the specific brand
elements that can be applied to any new product related with the brand.
The new products must be branded in a way that gives consumers
more clarity and understanding. Brands can think of employing either
“branded house” or “house of brands.” Major brands like Apple,
Citi are exemplary models of branded house. Their focus is on the
single, popular brand. House of Brands on the other hand is home to
numerous brands which are independent of each other. For instance,
Unilever have Lux, Lifebouy, Dove, etc. as their brands in Soap
category. Lux is positioned as a beauty soap and celebrities are used
to promote the product. Lifebouy is positioned as a soap that protect
from germs and families (Mother and Children) are portrayed in the
ads. Dove is positioned as skin enrichment and moisturizing product
with ¼ moisturizing cream in the soap. It is promoted through people
of all body sizes, age and colour. Celebrities are not used, and they
focus on self-esteem and self-image of women. The strategy allows
Unilever to position their brand clearly on the basis of a unique value
proposition and dominate specific segments. Thus, all the brands are
independent of each other and target different set of consumers.

Dominance of Parent Brand

House of Endorsed Co-brand/Ingredient Sub Branded

Brands Brands Brands Brand House

Unilever Apple
Liva
Microsoft Samsung
Aditya
XBOX Galaxy
Birla

Fig 2: Brand strategies

194
Endorsed Brands: In this strategy the firm, launches many products and Brand Architecture and
services as separate brand, however they are supported by the master brand Brand Extension
or corporate brand. For instance, Xbox from Microsoft, Courtyard by
Marriott. Endorsed brands are a good choice as it helps in targeting different
audience and the endorsed brand can utilize the power of master brand. The
presence of master brand also help in reducing promotional expenditures.
Co-brand/ Ingredient Brands: Co-branding, also known as brand bundling
happens when two established brands come together to create an offering. The
two brands can be from different firms or same firms. For example, Amazon
and ICICI bank collaborate to offer Amazon Pay ICICI Bank Credit Card.
Ingredient branding is a unique type of co-branding. This entails branding
the components, materials, or parts that are used in or included by other
branded items. Liva is fabric marketed by Aditya Birla Fashion. Liva is
used by W, Peter Englands, etc. Similarly, on your laptops you may find a
label Intel. They are the leading manufacturers of microprocessors.
Sub-brands: A sub-brand approach is giving a product or service a distinct
name that can grow into its own brand over time. Each sub-brand has its
own target market. Customers’ expectations and personalities differ from
those of the parent company. Sub-brands are essentially spin-off concepts
that are indirectly related to your existing company but have their own
identity, personality, and values so that they attract a new set of customers
and revenue flow. Sub-brand as a strategy gives a freedom to the firms to
expand and explore beyond their current portfolio. For example, the Samsung
Galaxy sub-brand stands for on-the-go-tech products which include tablets,
smartphones, watches etc.

12.3 Brand Architecture guidelines

Building brand architecture is a complex activity. It takes a lot of effort
and strategic planning to design architecture. It necessitates both marketing
creativity and science. It is critical to establish the norms and principles that
must be followed consistently. Concurrently, the firm needs to be flexible
and creative enough to address the dynamic challenges of the markets.
There are no unanimous rules as to which branding strategy will be best for
the firm. There have been cases where within a firm also hybrid strategies
have been used. For instance, Tata follows branded house strategy. But for
the business in jewelry segment, they named it Tanishq which became a
popular brand. Later, Tanishq launched an endorsed brand by the name
of Mia by Tanishq. Mia was positioned as office wear jewelry with 14K
and 16K gold purity. So, we can summarise that Tata has followed hybrid
strategy keeping in view the meaning and relevance of the brand names and
its relation and impact on the parent brand.
Hence, the marketers should follow the following guidelines to optimize
brand architecture:
 Companies should focus on the customer. Determine and comprehend
what customers know and expect from the brand. How they will
behave if a change is done in the brand.
 Create strong umbrella brands. This help in maximizing the synergies.

195
Brand Management  Avoid over branding and too many brands in your portfolio. It may
result in dilution of brand equity.
 Be very careful while using sub-brands. Sub-brands can strengthen
the parent brand by communicating relatedness and distinctiveness.
 Brand extension strategy should be selectively used. It may help in
enhancing the brand equity.
 Acquired brands should gel with the current brand architecture of
the firm. Inconsistent efforts to rebrand an acquisition could lead to
negative consequences which may lead to reduced brand equity.
Activity 1
Name a “House of brands” and “Branded House”. List the names under
their aegis and define their relationships.
1. ………………………………………………………………………..
…………………..................................................................................
2. ………………………………………………………………………..
…………………..................................................................................

12.4 Brand Portfolios

Brand Portfolios: It will include all brands that a firm offers in a product
category. The goal of a successful brand portfolio is to maximize brand
equity. The equity of other brands in a portfolio should not be harmed or
cannibalized by the brand. A question may arise that what is the benefit
of having multi brands? The answer is it enhances the reach of the firm to
maximum consumer thus expanding the market coverage. It also induces
trial among consumer who display variety seeking behavior thus avoids
consumers to switch to competitors’ brand. For instance, P&G offers Ariel
and Tide in detergent segment, enhancing the company’s consumer base,
shelf space in retail thus, contributing to higher sales. Kotler and Keller
(2006) suggested four specific roles of brands. They are:
 Flankers: Flankers are also known as fighter brand. The objective of
flanker brands is to create stronger points of parity with competitors’
brands which aids in protecting the flagship brands or more profitable
brand. Usually, low-cost product is launched as flanker brands as it
helps in competing with stores brands as well private labels. This acts
as protection for the higher priced brands from the firm. For instance,
P&G repositioned Luvs diaper as affordable brand to serve as price
fighter against competitors. This helped in protecting their premium
brand Pampers. Similarly, Tata Agni acts as flanker brand in Portfolio
of Tatas, protecting their premium range Tata Tea Premium. Surf
Detergent in bid to compete with Nirma, launched the brand Wheel
to serve the masses.
 Cash Cows: Cash cows are brands that are retained by the firms
despite the declining sales. This can be because of the sufficient
number of customers still buy the brand and the brand is profitable
without any marketing efforts. Thus, the marketer’s strategy is to
milk the brand by capitalizing the existing brand equity. For instance,
196
 Gillette has launched technological advanced brand like Fusion and Brand Architecture and
much of the sales are derived from it. However, it continues to sell its Brand Extension
older brands Mach3, Vector.
 Low-End/Entry level: Many firms use line extensions in a certain
product category that vary in price and quality. Launching of low-
end and entry level products help attracting the customers towards its
brand portfolio. These sub-brands leverage associations. For instance,
Tata motors launched Nano as a low-end product and stretched their
product line.
 High End/ Prestige Brands: Companies launch brand to reach the
consumers at the top of social ladder. Relatively expensive and high-
priced brand brings status and credibility to the company’s portfolio.
The price Parle on the other hand in a bid to position themselves as
a company offering premium product launched Parle platina which
offered sandwich cookies and chocolate filled rolls. Toyota also
launched a premium car with a different brand name “Lexus” in order
to create a luxury image in the mind of the consumers. Similarly,
Maruti launched a prestige product by the name “Kizashi” but it
failed miserably as it was priced very high at Rs. 17 Lakhs onwards
and the consumer were not able to associate the parent brand Maruti
with premium cars.

12.5 Rationalizing the Brand Portfolio

Broadly there are two principles to design a brand portfolio. They are
maximise the market coverage and minimize brand overlap. These principles
help in addressing the demands of various types of products from the
consumers and at the same time brands offered by a company should have a
distinctive benefit, target audience and positioning in the market. However,
at times it is necessary for the companies to decide about which brands to
retain in their portfolio to avoid redundancy and maintain relevance. Sarkar
and Singh (2005) suggested the following strategies to rationalize the brand
portfolio:
a) Liquidation means the company terminates the brand and utilizes its
assets to discharge its liabilities.
b) Merging with another brand can be done if the company feels that the
brand is important for their portfolio
c) Selling the brand is also an option. Tata sold their Lakme brand to
HUL.
d) Milking is done when the company focuses on deriving maximum
sales and do not invest in R&D, promotions, etc.
e) Elimination can be done when the company feels that the brand is
obsolete and merging the brands is not possible. Maruti 800 was
eliminated so that Maruti may focus on Wagon R, Alto etc.
f) Consolidation is done when the brand is performing well, and the
company attempts to build and expand it further.

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Brand Management Activity 2
List two brands each as examples for flanker brands and prestige brands and
try to assess the positioning of the brand:
1. ………………………………………………………………………
………………………………………………………………………
2. ………………………………………………………………………
………………………………………………………………………
3. ………………………………………………………………………
………………………………………………………………………
4. ………………………………………………………………………
………………………………………………………………………..

12.6 Brand HIERARCHIES

A graphic representation of a company’s branding strategy is known as
a brand hierarchy. It’s useful since it captures the potential branding ties
between the company’s numerous products and services. It shows the
amount and nature of common and distinctive brand features across all
the company’s goods, revealing the explicit ordering of brand aspects. It
clarifies that the firm has the ability to brand a product/service in a variety
of ways, depending on the quantity of new and old brand elements it can
employ and how they are incorporated into any given offering.

12.7 Levels of Brand Hierarchy

Corporate/Company brand: On top of the brand hierarchy is the company
or corporate brand. Company name or corporate names are interchangeably
used as consumers may not necessarily distinguish between the two. Due
to legal reasons, you will also find the name of the company on the product
or package. Companies specifically in the domain of technology and
engineering may focus more on their corporate name only such as L&T,
Dell. Other companies may blend their corporate brand with family or
individual brands. For instance, ITC is mentioned on the pack of Bingo
chips. The focus is more on the sub-brand Bingo and Tedhe Medhe.

Family/Range brand: At the next level is Family brand/range brand. It is

used in multiple product categories and is not necessarily the name of the
company. Hence, it is also called as umbrella brand. For instance, Bingo is
an umbrella brand for ITC which sells namkeens, potato chips, puffs, spindle
shaped snack, triangle shaped snack. Applying family brand names is more
useful when the product categories are of very different nature. It helps in
relating specific set of associations across a group of related products. ITC
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also has another family brand i.e. Classmate which sells notebooks, pencils, Brand Architecture and
pens, art stationary, geometric boxes and scholastic products. Different Brand Extension
family brands help in positioning of the brand.
Individual brand: An individual/product line brand is one that has been
limited to essentially one product category, however it may be used for a
variety of distinct product kinds within that category. Bingo, for example
offers Tedhe Medhe, Mad Angles, No Rulz under the “finger snack” product
category. Each brand enjoys a dominating position in its specialised product
area within the broader finger snack product category. Sub-branding refines
primary product brands.
Modifier level: A modifier is a way of identifying a certain item, model
type, flavour, product version, or configuration. As a result, many Tedhe
Medhe snacks are available in different flavors named as Tedhe Medhe
Tomato Masti, Tedhe Medhe Pudhina Twist, Tedhe Medhe Masala Tadka,
Tedhe Medhe Achaari Masti
Product descriptor: The product descriptor is not considered a brand
element in and of itself, rather it is used to describe a product. For a branded
product, a product descriptor could be a key component of a branding
strategy. The description of the item it aids people in understanding what the
product is and what it does, as well as defining the necessary terms. It may
be difficult to describe a new product with unexpected functionalities or
even an old product that has undergone significant changes simply in some
circumstances. For example, public libraries are used not only for borrowing
books or taking your child for story time. It is a full-service facility. The
modern public library is a hub for community educational, cultural, social,
and recreational activities. Using a familiar product name to introduce a
truly new product may help with basic familiarity and comprehension, but it
may come at the expense of a deeper understanding of how the new product
differs from similar products that already exist.

Figure 3: Levels of Brand Hierarchy of ITC

12.8 Brand Hierarchy decisions

When designing a branding strategy, different levels of the hierarchy may
be given varied weight. Think about it. GM has generally avoided using
its corporate name in automotive branding, although the name has recently
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Brand Management become increasingly prominent in the company’s supporting marketing
efforts. Such adjustments in focus are an attempt by the company to
capitalize on the good connections of different brands in various situations
while minimizing the bad associations, and there are a variety of ways to
place emphasis on the various parts that make up the brand. Following
are key decisions that brand managers need to take while deigning brand
hierarchy:
 Determine which items are to be introduced: The firm may think for
penetrating, expansion of product development in a market. The firm
should focus on the growth opportunities according to the return-on-
investment opportunities. The master brand’s brand equity should be
enhanced as a result of the brand expansion.
 Determine the number of levels: The firm should employ few levels
as it helps in simplifying the organization of brands. There should be
clear logic and understanding of all the elements of brand.
 Determine the levels of awareness and the types of associations that
will be made at each level: To remain relevant, the firm should create
abstract associations and points of differences across the individual
products and brands.
 Determine how to connect brands from various levels for a product:
The relative importance of brand elements influences product distance
perceptions and the image type formed for new items.
 Determine how to connect a brand across products: The firm should
attempt to find the common elements which the products share, this will
help in maintaining strong linkages and make branding robust.
Activity 3
In the below mentioned image, identify the different levels of brand
hierarchy.

1. ………………………………………………………………………
………………………………………………………………………..

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2. ……………………………………………………………………… Brand Architecture and
……………………………………………………………………….. Brand Extension

3. ………………………………………………………………………
………………………………………………………………………..
4. ………………………………………………………………………
……………………………………………………………………..…
5. ………………………………………………………………………
……………………………………………………………………......

12.9 Corporate Branding

A corporate brand is different from a product brand. It is a larger concept

and can have wide range of associations. Corporate Branding utilizes the
brand name of the company in various promotions and communication to
the stakeholders. A successful corporate branding showcases the company’s
mission, values and objectives. It is the intangible asset and provides a
distinguishing identity in the industry and in the minds of consumers. For
corporate branding the messages are designed with general content. The
communications should capture the spirit and essence of the brand. Product
branding on the other is narrow and try to distinguish the brand from those
of the competitors. For instance, SBI while engaging in corporate branding
focuses on the quality and customer orientation on the other hand in product
branding the message is narrower and revolves around the benefits of the
products i.e. low interest rates on home loans.

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Brand Management Corporate branding can be powerful tool to create corporate image dimensions.
Corporate may communicate about the quality and innovativeness as their
main philosophy. This will help in evoking positive perception about the
brand. The company should also portray themselves as a company which
value people and relationships. They should focus on being customer
orientated. Retail stores, banks, hotels etc. derive their brand equity from
their employees. The consumer should have faith that their grievances
would be heard and addressed. Corporate should invest in expressing their
social, economic, and environmental philosophy and vision to customers,
employees, and others. A socially responsible and environment concerned
company is preferred by all. The corporate may also communicate certain
abstract but valuable associations such as expertise, trustworthiness and
likability to the consumers. This enhances the credibility of the company.

12.10 Brand Extensions

Brand extension is a marketing approach in which new items are introduced
in the market under the umbrella of an established brand. Brand extensions,
according to Aaker and Keller (1990), are new items launched under an
existing brand name or a new entrant in a different category than the parent
brand. Brand extension success is not certain. Nielsen (1999) found that
FMCG products have higher rate of failure which is around 80%. The
brand elements of the extended products help the managers in reducing the
chances of failure. These elements aid in assessing consumers’ attitudes
toward the extended brand and comprehending their choices.

12.11 Types of Brand Extension

Line Extensions: Line extensions are new products introduced under
an existing brand or parent brand in the same product category. A line
extension may add a different flavor, ingredient, shape, size or form. An
example is Colgate toothpaste. It is available in different variants like
strong teeth, sensitive plus, maxfresh, visible white, herbal, total, active
salt, charcoal clean. Line extensions can be a useful strategy to address the
diversified demands of the consumers. More variety offered by the brands
help in retaining a larger set of consumers. Due to competitive reasons also,
extending product lines is a wise approach. It helps in capturing a higher
shelf space in the retail stores. As consumers have different paying capacity,
the firms launches variety of products in different sizes. For instance, in
order to penetrate the rural markets HUL launched Rs.1 or 2 sachets of
Clinic Plus, Dove and Sunsilk. According to Pitta and Katsanis (1995) line
extensions can further be classified into two:
1) Horizontal line extensions: When an established brand name
is applied to launch a new product in the same product class. For
example, Horlicks used the established brand name of Horlicks to
launch Horlicks Lite which offered the product in No added sugar
version. It promoted healthy lifestyle of Active Adults.

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 Brand Architecture and
Brand Extension

2) Vertical line extensions: When an established brand name is

employed to “launch a related brand in the same product category but
with different price quality” it is called vertical line extensions. The
automobile sector has very successfully used this strategy to expand
their brand portfolio. Vertical extensions can further be divided into
two:
 Upscale Extensions: When the brand introduces a product with
better quality and higher price, it leads to upscale extensions.
For instance, Tata motors launched Tata Harrier at a price of
Rs. 15 Lakh onwards which helped to stretch their portfolio
upwards.
 Downscale Extensions: When the brand introduces a product
at a lower price with lower quality. The gives the consumers
an opportunity to try the product/brand. This leads to increased
market share. Tata Tiago is an example of downscale extensions.
Category Extensions: Category extension refers to when a company uses
an existing brand name to launch a new product in a different category.
Tauber (1988) mentioned that category extensions helps in “leveraging an
established brand name into categories new to that brand and called it brand
franchise extension.” Reliance is an example of category extensions. They
have extended their brand into petrochemicals, retail, textile, telecom and
solar power etc.
Category extension is a useful to leverage the brand equity that has been
created over time. As the brand is already established, it becomes easy
to launch new products by capitalizing the advertising efficiencies. For
instance, Dettol has a very strong positioning of “germ protection”. It
started its journey in 1993 as antiseptic liquid. It has successfully utilized
their brand name over the years to enter in multiple categories such as toilet
soaps, liquid hand wash, liquid body wash, liquid sanitisers, kitchen dish
and slab gel, sanitizer wet wipes. Similarly, Parle is an established leader
in the biscuits. It has leveraged the same brand name to enter in segments
like snacks, rusk, cakes, atta and during the pandemic it also launched hand
sanitizers.
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Brand Management

Source: https://www.parleproducts.com/brands.
aspx?mpgid=3&pgidtrail=3, accessed on April 07, 2022
Activity 4:
In the image shown below, identify line extension and brand extension

1. ………………….................................................................................
………………......................................................................................
2. ………………….................................................................................
…………………..................................................................................

12.12 Advantages and Disadvantages of

Brand Extension
Most of the companies face dilemma while extending a brand. The
apprehension is also about when, where and how to extend the brand.
Brand extension is a strategic tool to increase the length and breadth of
the parent brand however, brand extensions can have both advantages and
disadvantages.
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The benefits of brand expansions are listed in the following section: Brand Architecture and
Brand Extension
i. It increases the brand image of the parent brand. The new launched
brand may attract the non-users and thus may also help in increasing
the market share.
ii. It reinforces the key associations attached with the parent brand.
For example, Dettol is known for germ protection so their entry
from antiseptic liquid to a antiseptic soap was a successful one and
reinforced the benefit of germ protection.
iii. It increases the rate of trail and helps in gaining more shelf space in
the retail stores. The reputation of the parent brand is also capitalized
to help convince the retailers to stock and promote the product.
iv. It helps in optimizing the promotional expenditures. When a new
brand is launched by the company, it can focus on communicating
about the brand extensions only as the consumers are already aware
about the parent brand. Thus, increasing the advertising efficiencies
v. It helps in defending the brand. Extensions provide brands at various
price, varieties etc. thus, the consumers have options to choose from
instead of switching to the competitor’s brand.
vi. It helps in revitalizing the brand. To maintain the relevancy of the
brand, the company opts to extend the line and launch products in the
same product category.
vii. Diversified brand helps in gaining superior profits. Many brands starts
as mono-products and over time launches diversified brand that helps
the brands cater to different set of consumers. Thus, generating huge
returns.
Following are the disadvantages of brand extensions:
i. Different extensions may cause consumers to become confused as
to which version is best for them. Studies have pointed that more
product variety may attract the consumers to buy less. Consumers
may reject new extensions and prefer purchasing their tried products.
ii. If the extension chosen is not the right “fit” then there are high
chances of failure. For instance Colgate is now synonymous to
toothpaste. Consumer associate Colgate to oral hygiene. However,
when Colgate marketed ready-made frozen meals by name “Colgate
Kitchen Entrees”, it failed miserably. The reason was the consumers
find it difficult to fit this extension into the perception of related to the
brand Colgate.

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Brand Management iii. Overexpansion through brand extensions can lead to dilution of brand
meaning. Brands like Gucci suffered when their product line had
22,000 items which was later reduced to 7,000 to focus on high-end
prestige items only.
iv. Line extensions are about adding variants in same product category.
This results in competition among the same brand’s extensions.
However, this may lead to cannibalization of the parent brand and
may result in loss in sales.
v. Extensions may also lead to diminishing identification with any one
category. When the brand is into number of categories offering both
related and unrelated products, it results in lack of identification.
Tata, Reliance, Adani, adopts corporate branding, have confronted
this issue.
vi. Brand extensions encourage the brands to launch new product under
the same brand name which results in foregoing the opportunity to
create and launch new brands. For example Everest launched Heena
powder under the same brand name “Everest”. It could have launched
its Heena under a separate brand name for “beauty products”.

12.13 Launching a Brand Extension

Based on Tauber (1981), Aaker (1990) and Aaker (1991), brand extension
is a six-step process:
Step 1: Company identifies the brand that need to be extended. Companies
need to evaluate the strengths of the brand and choose which brands needs
to be extended. For instance, Parle has KrackJack, Milano, Monaco etc. It
can decide whether to extend KrackJack, Milano or Monaco or launch new
biscuit brand.
Step 2: The Company needs to identify key associations of the brand. Brand
should select those associations which provide a competitive leverage
by providing a link with other categories. For example, for Parle the key
association is quality and affordable biscuits.
Step 3: The next stage is to highlight alternative definitions of business on
the basis of each key associations. This also involves the idea generation
for possible related categories. For Parle it will be biscuits, confectionaries,
rusk, and snacks.
Step 4: This involves identification of products related to each category.
Thus, for biscuits it would be rolled biscuits, drop biscuits, wafer biscuits,
digestive biscuits, cookies, sandwich biscuits, tea biscuits etc.
Step 5: In this stage, the company selects the “candidate products” out of
different products identified. Let us assume, Parle decides to launch wafer
biscuits. For a successful launch, point of advantages and the “fit” in the
portfolio will be considered.
Step 6: The extended brand will be launched at the final stage. Companies
can lessen the risk of brand extensions failing by not overly associating the
brand name with the new product. The company should create a balance in
endorsing the brand and maintaining distance from the brand.
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 Brand Architecture and
12.14 Summary Brand Extension
Brand help in sustaining and differentiating the company’s offering to the
consumers. One of the key aspects of managing brand is to adopt a suitable
brand strategy. Brand names helps the firms to communicate about the brand
elements. The brand architecture strategy aids in determining the strategy
to launch the various brands and enhance the brand portfolio. Firms offer
multiple brands in a category or multiple products in different categories
to expand their market share. This unit highlights how to manage different
brands and what strategies the firm can use to extend their brand. Managers
should try to make the brand relevant and can use various tools to rationalize
the brand portfolio.
Various strategies that can be used to extend the brands have been discussed.
The advantages and disadvantages of the extending a brand gives an insight
about how brand extension can be beneficial on the other hand too much
extension or launching a “misfit” may be harmful for the brand

12.15 Self-Assessment Questions

1. Pick any corporate brand and examine their websites. Explain why
their corporate brand image is so strong.
2. Elaborate the brand architecture of Patanjali.
3. Select a company. Describe its brand portfolio and hierarchy. What
changes would you make to the company’s branding strategy?
4. Analyse the brand extension strategy of Tata.
5. With the help of suitable example discuss two line extension. Discuss
the advantages of these line extensions

12.16 references/Further Readings

Aaker, D. (2014). Aaker on branding: 20 principles that drive success.
Morgan James Publishing.
Aaker, D. A. (2006). Brand portfolio strategy. Strategic direction.
Keller, Kevin Lane, M. G. Parameswaran, and Isaac Jacob. Strategic brand
management: Building, measuring, and managing brand equity. Pearson
Education India
Kapferer, J. N. (2008). The New Strategic Brand Management: Creating
and Sustaining Brand Equity. Kogan Page
Lane Keller, K. (2014). Designing and implementing brand architecture
strategies. Journal of Brand Management, 21(9), 702-715.
Aaker, D. A., & Keller, K. L. (1990). Consumer evaluations of brand
extensions. Journal of marketing, 54(1), 27-41.
Keller, K. L. (2003). Understanding brands, branding and brand
equity. Interactive marketing, 5(1), 7-20.

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 MMPM – 003
Product and Brand Management

Indira Gandhi National Open University

School of Management Studies

Block

4
MANAGING BRAND EQUITY
UNIT 13
Enhancing Brand Equity 211
UNIT 14
Managing Brands over Time and Geographies 225
UNIT 15
Measuring Brand Equity 243

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 BLOCK 4 MANAGING BRAND EQUITY
The fourth block is primarily devoted to brand equity and how the firm
should manage and enhance its brand equity is the essence of this block.
The first unit discusses the design and development of brand building
programmes with a view to enhance the brand equity by employing
integrated marketing communication to strengthen brand associations.
The second unit focuses on the strategy development of how to build the
brand globally. The various approaches to building global brands are touched
upon. Besides the decision of choosing the right marketing strategies in a
global context is also emphasized.
The final unit is characterized by the need for brand equity measurement and
the approaches involved in measuring and tracking brand equity position or
status.

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UNIT 13 ENHANCING BRAND EQUITY
Objectives
After reading this unit you should be able to:
●● understand how to design and develop brand building programmes
●● discuss how brand differentiation can be sustained
●● learn how integrated marketing communication helps to strengthen
brand associations.
●● crisis
Structure
13.1 Introduction
13.2 Brand foundation-authenticity and believability
13.2.1 Levers for enhancing brand equity
13.2.2 Selecting and managing the brand elements
13.2.3 Delivering on the brand promise and maintaining differentiation
13.2.4 Building desired associations and customer engagement
13.2.5 Deepening the emotional connect and building brand advocates
13.3 Summary
13.4 Self-Assessment Questions
13.5 References/Further Reading

13.1 INTRODUCTION
Launching a Brand with a clear brand identity and positioning is only the
first step in building strong brand equity. Aaker has defined brand equity
as “the set of assets (and liabilities) linked to a brand’s name and symbol
that adds to (or subtracts) from the value provided by a product or service
to a firm and/or that firms’ customers” (Aaker, 2002). These assets which
add value and create equity include Brand Awareness, Perceived Quality,
Brand Associations, Brand Loyalty and Other Proprietary Brand Assets
(patents, channel relationships etc) (Aaker, 2002). Each of these aspects of
brand equity needs to be managed and strengthened to enhance the brand
equity and thereby the value generated for the brand’s customers and the
firm. The outcome of a successful branding strategy would be a brand that
is connected to customers and deeply resonates with them leading to high
levels of engagement, loyalty, love and commitment.
In order to establish and maintain resonance with its customers, a brand
must ensure that it continues to have salience in its category. It must not
only be recognized but it must also be remembered and recalled by the
customer in the relevant product/ service category. Mere recognition of a
brand name or its logo is not enough. The brand must strive to ensure that
its customers have the right knowledge about what the brand stands for or
what it can do for them.
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Managing Brand Equity In order to build on each of the above aspects, brands need to focus on the
following

13.2 BRAND FOUNDATION - AUTHENTICITY

AND BELIEVABILITY
A strong brand needs to command both love and respect. In order to build
a good branding strategy, it is important to focus on the principles of
authenticity and believability.
Authenticity
Authenticity implies that a brand remains true to its purpose and true to
its promise. A brand is after all best defined as a promise to the customer.
And this promise has to be real and true. A brand also needs to stand for
something. It is important to define the raison d’etre for a brand in terms of
its fundamental beliefs and values. The questions a brand needs to answer
are- What is its place in the world, what defines the brand at its very core?
Today’s customers care about the brands that care! And they are quick
to reject fakes. Lip service to a cause is not acceptable. The brand has to
embody its purpose and values in everything it does. To quote Simon Sinek,
“People don’t buy what you do; they buy why you do it”. Authenticity can
also be a significant differentiator for a brand. Body shop stands for “Enrich
not Exploit” and has carried this philosophy right through its product
formulation, manufacturing, packaging, retail experience, employee
hiring and community engagement. Their products are made from natural
ingredients and the brand believes in fair trade practices and in protecting
the environment.
The Indian ayurvedic brand Patanjali was able to carve a space for itself in
the FMCG market because it built on its core of ayurvedic origins and focus
on natural ingredients. As the brand stretches its portfolio, it has to take care
that it does not dilute its core promise and identity. It is also imperative that
the brand which has taken a strong pro natural, anti artificial positioning
delivers on this promise. A recent controversy damaged the authenticity of
its brand promise when a CSE study in 2020, reported 13 of the biggest
brands of packaged honey in India, including Patanjali were adulterated
with sugar syrup (Das, 2020). Another case in point is Dove which was
built on the functional positioning of cleansing without drying as the bar
contained 1/4th moisturizing cream. However, as the Dove brand grew and
expanded its offerings to other hair care and skincare products, it needed to
go beyond functional benefits. It needed to find a deeper meaning to connect
with customers. In 2004 the brand decided to espouse the concept of “real
beauty”. A major global study, The Real Truth About Beauty: A Global
Report, had revealed that only 2% of women around the world considered
themselves beautiful and societal norms of what constitutes beauty were
restrictive (Etcoff et al, 2004). The “Campaign for Real Beauty” launched
by Dove in 2004, focused on the message that differences in physical
appearance should be celebrated and accepted. The campaign encompassed
different media and showcased ordinary real women instead of airbrushed
models representing stereotypical notions of beauty. The idea was to begin a
discussion on the way society views beauty and to establish Dove as a brand
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which understands and supports women for what they are (Youtube, 2013). Enhancing Brand Equity

Though the campaign was successful to a large extent and the brand’s point
of view was lauded by many, some critiques felt that the brand was only
providing lip service to the notion of real beauty while it continued to sell
products which were related to beauty and personal appearance. Over a
period of time, the brand continued to build on the real beauty campaign and
extended it beyond advertising to online videos, activities and workshops
related to self-esteem, thereby gaining more acceptances.
Dove in India also follows the Dove Real Beauty Pledge (dove.com) to
always feature real women, never models, to portray women as they are in
real life and not digitally distort the images and to reach out to 40 million girls
to build body confidence and self-esteem. Dove India launched the #Stop
The Beauty Test campaign on TV and social media (see Take the pledge to
#Stop The Beauty Test (youtube, 2021). The brand also collaborated with
Vogue India and the fashion photographer Mario Testino where in Testino
photographed six Indian women, who, for Dove, “redefine what it means to
be beautiful – helping Indian women realise their beauty potential, whatever
their age, body shape, skin tone or hair colour” (dove.com.in).
Box 1: Dove Real Beauty
#StopTheBeautyTest, 24 Feb, 2021,

YouTube, 24 Feb, 2021, https://www.youtube.com/watch?v=jEpTa2cMl_I

YouTube, 19 June 2013, https://www.youtube.com/watch?v=g-I4LIwe4_c

Dove Real Beauty Sketches
Believability
Believability implies that the promise a brand makes to its customers has to
be meaningful and believable. There has to be a strong “reason to believe
(RTB)” for the claim the brand is making. The RTB could be rational or
emotional. For example, I could believe in a brand because of its ingredients,
as in the case of Saffola Cooking oil, which spoke of heart care with its
low PUFA content. Or belief in a brand’s capability could be a result of
brand heritage or country of origin as in BMW. Or the believability could
stem from past customer delight and the brand image. Any product claim
of technological superiority will be readily accepted by the customer if it
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Managing Brand Equity comes from Google or Apple. The believability strengthens or weakens
over time with the actual customer experience. If the brand does not match
up to expectations, it starts to lose trust. Believability is as much to do with
the actual reality of the brand offering as it has to do with the perception.
So, brand credibility and desired associations need to be built over a period
of time.
13.2.1 Levers for Enhancing Brand Equity
Crafting the Brand Identity and launching a brand successfully is only the
first step in the life of the brand. They key to moving from a good to great
brand is ensuring continued value and connect with the customer. In order
to build on the brand’s foundations, the branding strategy must encompass
the following-

13.2.2 Selecting and Managing the Brand Elements

Brand elements refer to the elements like logo, symbols, characters, and
social media handles etc which help to identify and differentiate the brand.
These brand elements can help make a brand noticeable and memorable,
thereby building awareness and recall. They may also improve like ability
of the brand and support desired brand associations.
Keller (2015), has identified the following six criteria for choosing brand
elements-
 Memorable- should aid easy recognition and recall
 Meaningful- should enhance relevance and help in persuasion
 Likeable- should be warm/ fun/pleasing, invoking a positive response
 Transferable- should be applicable across the range of products
represented but the brand should work equally well in different
geographies
 Adaptable- Should be possible to update to changed contexts
 Protectable-should be legally protected
Intel: building awareness and differentiation- In order to build awareness
and customer pull for its brand of processors used in PCs and laptops, Intel

214
created a distinctive logo “intel inside” which became a hallmark of quality Enhancing Brand Equity
for computers. It created awareness of intel, a brand which is sold to the
computer manufacturing firms and is not visible to the consumer. Through
the use of the intel inside logo on the computers and in advertisements, Intel
was able to differentiate itself from other brands and also build associations
of being the “brain in the computer”. In addition to the logo the distinctive
sound used in the brand communication, helped make it memorable for the
customer. In terms of the product offerings, intel processors were generally
named numerically, for instance 486, 486, etc. However, these were not
very meaningful for consumers and very importantly these were also not
legally protectable. Competing brands could sell their processors of same or
older generation with similar names thereby eroding intel’s differentiation.
Therefore, intel decided to create unique brand names for each of its
processors, starting with Pentium which connoted 5th generation technology,
sounded scientific and like an ingredient due to the use of “ium” and was
legally protectable and unique to intel. For consumers it was also easy to
understand and remember (intel.com). The brand name intel Pentium was
also acceptable in different parts of the world.
The Amul Girl- The Amul girl is one of India’s most loved brand mascots.
The Amul girl was created by Eustace Fernandes, the art director of DaCunha
Communications in 1966, and the tagline “Utterly Butterly” was coined by
Nisha DaCunha. Both have endured over the years, helping make Amul a
household brand with very high awareness and popularity. The Amul girl
particularly has helped keep the brand updated by offering tongue in cheek
comments on contemporary issues ranging from sporting events to political
decisions to social causes (Pal, 2016).
1.1.3 Delivering on the Brand Promise and Maintaining Differentiation
Delivering on the brand promise is non-negotiable if the trust and quality
perception of the customers is to be maintained. This is a necessary step
in building brand equity and in order to build differentiation and maintain
consistency a brand needs to ensure the following-
●● Putting systems and processes in place to deliver on the brand promise
●● Ensuring a seamless customer experience
Putting Systems and Processes in Place
The key to building and sustaining brands over a period of time is to ensure
that the brand delivers exactly what it promises in each and every interaction
with the customer. Consistency in performance, and consistency with the
brand identity, is both equally important. For the customer, affection and
trust is built on the foundation that the brand is a familiar friend, one can
bank on at all times. This is critical for a marketer to remember. Each brand
occupies a unique space in the customer’s mind and therefore not only does
the brand need to be consistent in the delivery of its promise, it also needs
to ensure consistency of its promise. Strong brands do not keep changing
their positioning or messaging frequently. Strong brands also work hard to
ensure that systems and processes are in place to provide expected or better
than expected performance outcomes for the customer each and every time.

215
Managing Brand Equity For instance Amazon could not have become such a big brand, if it had
not ensured well defined processes with checks and balances to provide an
experience consistent with expectations at any time and in any part of the
world. Consistency does not mean that the brand does not evolve, or its
attributes don’t change. It merely refers to doing whatever it takes to deliver
on the brand promise, whether that promise is to provide the best customer
support or the promise to provide the fastest delivery, or the promise of
providing the lowest cost solution.
It goes without saying that the brand offering or promise to the customer
has to be desirable from the customer point of view and well differentiated
from competition. It should add value and make the customer better off in
terms of what they desire from the category/ experience. It doesn’t help
if a brand is the best in terms of some attribute or benefit which is not
important for the customer. The starting point for any marketing strategy
has to be the customer and what the customer wants. It is our job as brand
managers to understand their needs and pain points and strive to create
customer delight with our solutions. The brand has to be brutally truthful
in answering the question, “Why will they buy me?” The reasons could be
functional, emotional, self-expressive, or a combination of these. Insighting
plays a very important part in understanding customer motivations and
concerns. Getting the insight right is half the battle won! It can help you
decide what to offer and how to make it appealing to the customer. The
phenomenal success of Apple is almost entirely to do with the fact that it
gave customers solutions which were far superior to that offered by anyone
else. Unquestioned functional superiority coupled with the aspiration and
emotional connect with the customers is a deadly combination almost
impossible to break. Desirability results from a combination of benefits,
the cost and convenience to the customer, the emotional connect and the
match with the desired associations. In some brands some of these would be
more important than others but failure on any count could make the brand
vulnerable on its desirability score.
In order to ensure consistency, desirability and differentiation the brand must
be backed by systems and processes, which help it, deliver on its promise
to customers, thereby leading to customer satisfaction or even customer
delight. Each and every element of the marketing mix form designing the
brand offering, to its pricing, distribution and communication, must work in
perfect alignment.
Implementing Tajness - Taj chain of luxury hotels in India prides itself
on the spirit of “Tajness’ which has been built over decades of dedication
towards incredible hospitality. The spirit of Tajness defines every element of
the hotel, providing unparalleled customer experience which rests on the six
pillars of Nobility, Sincere Care, and Homage to Local Culture, Sensorial
Journeys, Pioneering Spirit, and Authenticity (tajhotels.co.uk)
The then MD and CEO of the Taj Hotels Resorts and Palaces, in an interview
to the Conde Nest Traveller in 2006, explained- “Tajness is a brand
promise, a philosophy and a strategy. It’s actually a strategy that speaks
to our operational excellence; to all our shareholders regardless of size of
shareholding; to our guests; to our colleagues, to the environment, to our
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plan for developing and extending the footprint of the Taj in the right places Enhancing Brand Equity
The Tajness experience will focus on delivering a consistency in service and
providing a taste of Indian tradition mixed with authentic local experiences.
It will come to life for guests through a set of signature rituals to guide their
journey from the moment of arrival.”
This spirit of Tajness is implemented through the choice of properties,
the décor of the hotels, the staff selection, and the design of the guest
experience. While focusing on local culture, the Taj also needs to maintain
its exclusivity and premiumness. Therefore, the pricing and communication
strategy is also designed keeping the premium image in mind.
Ensuring a Seamless Customer Experience
Providing an end to end seamlessly perfect experience for the customer
has to be one of the most important goals for a brand. The mantra is not to
look at what the brand is designed to offer but instead to look at how the
customer consumes the brand and where it fits into their life. Mapping the
customer journey and identifying Moments of Truth help the brand to work
towards customer delight. The experience is even more important today
in the platform economy where there may be many players, co-created
offerings, multiple channels and on demand consumption. From merely
being a connector of travelers and hosts, Airbnb worked towards building
curated customer experiences, right from helping them choose the right
property through photographs and ratings, to suggesting tour activities in
collaboration with other players to building wish lists and memories for its
customers.
Airbnb- Airbnb was launched in 2008 to provide people find accommodation
other than hotel rooms. People could offer rooms in their homes or the
entire home to guests for payment through the Airbnb site. For guests
Airbnb offered a home like ambience, personal connect, ease of booking
and searching and at a price generally lower than most hotels. The hosts
were able to monetize their property and earn an income through Airbnb.
The platform also provided them visibility and connected them to potential
guests in addition to providing the booking interface and support. With a
strong value proposition, Airbnb received a positive response. In order to
ensure that it delivers a great experience for both guests and hosts, Airbnb
had to invest in developing a good platform to ensure ease of use, verify
the properties, help people post and check reviews and testimonials and put
in place a mechanism to address grievances and complaints. In 2009, the
founders noticed that some properties were not getting much traction. They
went to New York and visited several properties themselves. They found
that many of these looked much better than the pictures put up by the hosts
on the Airbnb site. They decided to hire photographers to click professional
pictures and this simple investment lead to room bookings jumping up 2-3
times and doubling of monthly revenues. They then started a Photography
Programme in 2010 where they on boarded professional photographers in
Airbnb who property hosts could connect with. By 2012, Airbnb had over
2000 photographers covering 13000 listings across 6 continents (Chatterjee,
2016).

217
Managing Brand Equity In order to maintain and strengthen its differentiation, Airbnb mapped the
customer journey and looked at where they could add value. The brand
evolved from a cheaper alternative to a hotel towards becoming a social
discovery form of planning travel. So Airbnb was not only about where one
stays, but also about what one does and with whom once we are there. The
brand wanted to encompass the entire customer experience. But this did
not mean they had to do everything themselves. They identified partners
to work with and connected them in the platform to ensure a seamless
experience for their customers. One such initiative involved launching
Airbnb neighborhoods where they tied up with local communities to prepare
itineraries and provide information about the neighborhood activities which
visitors could look up depending on their interests. Airbnb also tied up with
local editors and street photographers thereby curating a unique experience
for the visitor.
1.1.4 Building Desired Associations and Customer Engagement
For a brand to sustain its differentiation and relevance, it needs to
continuously work at building and strengthening brand associations. This
can be done through the kind of customer experience provided, brand
imagery, messaging, use of influencers, etc. Today with the advent of
technology the possibilities and manner of connection with the customers
have increased manifold. Building the right associations in line with the
desired positioning and brand values, helps in creating positive evaluations
and brand preferences, through strengthening of functional, emotional and/
or self-expressive benefits. In order to do so a brand must find to be clear
on the kind of associations it wishes to build and the kind of touch points
which can be used to convey these ideas and experiences to the customer.
Taj Mahal a tea brand launched in 1966 by Unilever was positioned as a
premium tea brand for connoisseurs. In order to build these associations,
they decided to leverage classical music and used well renowned
classical musicians to bring alive the exhilarating taste of Taj Mahal tea.
This association was deepened over the years with the brand becoming
synonymous with the much loved Ustad Zakir Hussain saying Wah Taj! To
further build on the exclusive experience of enjoying a cup of Taj Mahal
tea, the brand set up the Brooke Bond Taj Mahal Tea House in Mumbai in
2015. As per the brand’s website, the Tea house is designed to appeal to
“tea connoisseurs, classical live music enthusiasts, book lovers, and many
an artistic soul. It features the choicest of fine Indian tea and tea blends
curated by our tea sommeliers, constructed into authentic tea recipes.”
(www.tajmahalteahouse.com).
Surf tried to enhance its customer connect by going beyond the functional
space of better cleaning of clothes to connect to the customer’s life. The
brand celebrated stains with its campaign of “daag achche hai” (dirt is
good), focusing on how kids should be allowed to explore, play and grow
without worrying about stains. Since 2005, all of Surf Excel’s ads have
chosen kids as their central character. In March 2021, the Executive Director
& VP – Home Care, South Asia, Hindustan Unilever Ltd, explained that
“We believe that children should have the freedom to get dirty, because
it’s only then that they can truly learn and develop. And if kids get dirty in
the process of doing something good, then dirt is good.” (Business insider,
2021)

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Surf adopted a 360-degree approach to connect with its customers. This Enhancing Brand Equity
included advertising through traditional media like TV and print as well
as online ads. The brand also leveraged designed unique sales promotions
like the one where customers got a stained cloth in the pack of Surf and
on washing this they could get a promo code entitling them to a gift or
discount. The brand went beyond its category to help kids explore and learn.
They shared information on kids’ hobby classes and associated themselves
with on ground activity platforms like the Kala Ghoda Arts Festivals. Surf
leveraged social media also extensively. In addition to brand films on you
tube as well
Over the last 15 years, Surf’s communication platform has focused on
the philosophy of dirt is good and has focused on children getting dirty in
the process of doing something good and demonstrating good values. By
enabling parents not to worry about stains, the brand became their partner
in helping their children to learn. Surf followed a purpose-led philosophy to
occupy a meaningful position in the customers’ lives. The brand has stayed
true to the philosophy but added new dimensions/ contexts over the years
building a strong emotional bond with its customers. The brand moved
from immediate family contexts to a larger social perspective and brought
in the contexts of different festivals like Eid, Diwali and Holi, which served
as a backdrop theme of helping others who are less privileged or not so
lucky. These campaigns included #NekiEkIbadat, #AbLagRahiDiwali.
Subsequently Surf further extended the campaign with #HaarKoHarao,
reminding the kids who deal with exam pressure that failure is a part of life.
Ways to Build Desired Brand Associations:
●● Product/ service design (including packaging)
●● Imagery and Brand messaging
●● Brand Activity platforms
While multiple means can be used to build brand associations, the brand
must ensure that it adopts an integrated approach in using these means to
maximize the synergy and impact of its initiatives. A well-crafted brand
strategy should result in building positive attitudes towards the brands,
desired quality perceptions and enhanced credibility.
Product/ Service design- This aspect largely relates to the performance of
the product but also contribute to the brand’s perception on other aspects
such as premiumness, usage occasion etc, Cadbury shifted its association
from a purely chocolate category to the gifting category through design
of special gift packs for different occasions. The layout and structure of
a shopping website and the kind of products / services offered influences
consumer’s perceptions of the brand. For example, Amazon is perceived as
a trusted, value for money shopping portal.
Imagery and Brand messaging: Brand imagery relates more to the
intangible aspects of the brand. The use of certain colors, visuals, type of
users, purchase situations, values, heritage and experiences reflected in the
brand’s communication help to build desired mental image of the brand. For
example, Pepsi tries to appeal to a younger target group (TG) as compared
to Coke and this is reflected in the kind of situations and people shown in
the Pepsi communication. Axe deodorant depicts good looking men and
attractive women to highlight the aspect of desirability and masculinity.
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Managing Brand Equity Paper Boat beverages leverage the nostalgia factor which is reflected in
their pack designs, product names as well as the advertising messaging.
Use of celebrities to build certain associations is also common. The choice
of celebrities however has to be done carefully to ensure that they fit the
brand image and can connect with the brand’s TG. Brand Imagery and
messaging can also highlight purchase or usage contexts for example
Cadbury commercials showing gifting of chocolate boxes on Diwali or
Knorr soups suggesting serving soups during evening snack time to satisfy
‘chhoti chhoti bhook” (small hunger pangs).
Brand imagery and personality are very important in certain categories like
perfumes, cars etc where the brand is often a means for self-expression
or for the consumer to present a desired image. This is especially true of
luxury brands, where choice of brands is more on the basis of how closely
the brand’s image matches the self-image or desired image of the customer.
Brand Activity Platforms- Creating or associating with events and
activities which reflect the brand’s personality also help building desired
associations. For example, Femina Miss India strengthens the perception
of Femina as brand for “Women of Substance”. Similarly, the Kingfisher
Calendar and Kingfisher Derby strengthen associations of fun and glamour.
The choice of activity platform for a brand should be based on its ability to
reinforce desired brand benefits/ image, its level of appeal with the target
customer and its ability to cut through competitive clutter and give visibility
to the brand.
1.1.5 Deepening The Emotional Connect and Building Brand Advocates
The difference between good brands and great brands is usually in terms
of the depth of relationship and emotional connect the brands have with
their customers. Apple users buy the brand not only for its high quality and
performance but also because they love the brand and feels that it expresses
who they are. They identify with the brand and feel that it an intrinsic part
of their lives, one they cannot do without. They would not like to switch
to competitive brands and will generally be eager to try out new offerings
from the Apple portfolio. Not only that, Apple fans usually also becomes
advocates of the brand, urging others to switch to the “Apple experience”.
Keller has used the term Brand Resonance to describe the extent of such a
relationship. He defines resonance in terms of the intensity of the emotional
connect and the outcome of this connect in terms of attachment, engagement
and loyalty. Brands can look at building broadly six types of feelings-
warmth, fun, excitement, security and social approval (Keller, 2015). But
how brands go about building these emotional bonds? The most important
step here is to keep the focus on the customers and look at them beyond
their usage of the brand offerings. Understanding their lives, aspirations
and worries can help a brand find to reach out to them in a meaningful way.
Bringing in personalization, high levels of engagement and opportunities
for conversations have been very effective in building strong relationships.
Leveraging the Power of Stories
Stories can be a strategic asset which brands can leverage to forge strong
emotional bonds with its customers over time. Signature stories need to be
authentic, intriguing, involving and strategic and can be used for internal
and/or external branding. Stories can be motivated by a variety of heroes
such as customers, employees, programs, a founder, an offering, a business
220
revitalization strategy or a future business revitalization strategy. 3M, a Enhancing Brand Equity
brand known for innovation for instance, regularly shares stories about how
innovation is encouraged in the organization along with stories of innovation
successes and failures. Inviting customers to share experiences can also be a
powerful way to build engagement and emotional connect.
The Maggi Bond:- Maggi has been a much loved brand in India for many
years. Very early on Maggi had moved beyond its functional promise of
two minute noodles to becoming a friend with whom one has many shared
memories. Eating Maggi is not about just satisfying hunger pangs, it is
about the special recipe one‘s mother used for Maggi or the memories of a
trekking trip or the moments shared with friends in the hostel. Maggi has
often reached out to its customers through its packaging, advertising as well
as social media handles asking them to talk about their experiences with
Maggi. One such very successful campaign was the Me and Meri Maggi
campaign in 2009, where customers were asked to share their Maggi stories,
and selected stories were printed on Maggi packs. These stories were also
shared through TV commercials and on YouTube (Me and Meri Maggi,
youtube 2009). In 2012, the campaign took another step forward by inviting
people to share the moment of joy that the Maggi brought into their life.
This campaign was called the ‘Meri Maggi - 2 minute mein Khushiyan’.
The idea was to deepen the emotional bond and give customers a platform
to share the everyday moments of happiness they have experienced with
Maggi. These stories were then related by leading Bollywood actors in the
Maggi TV commercial (afaqs, 2012, youtube 2012)
Box 2: Maggi Stories
Me and Meri Maggi

YouTube, 2009, https://www.youtube.com/watch?v=A5Vaki6CqM8

‘Meri Maggi - 2 minute mein Khushiyan’

YouTube, 23 June, 2012, https://www.youtube.com/

watch?v=A5Vaki6CqM8
221
Managing Brand Equity Beyond the commercials Maggi has also successfully leveraged the power
of social media. Its Facebook Page Me and Meri Maggi reflects the theme of
how Maggi brings people together for a happy time and this page has recorded
high levels of engagement with many people sharing their pictures and
stories and talking about why they love Maggi (social samosa, 7 Jan 2013).
When Maggi was hit by the controversy about high levels of Monosodium
Glutamate (MSG) in some of its packs, the brand voluntarily withdrew its
stocks from shelves even while re-assuring customers that the product was
safe., Despite Maggi and Nescafe were criticized many on social media,
yet there was also a large number of consumers who defended Maggi and
stood by the brand. The re-launch of Maggi Noodles on November 9, 2015,
received mixed reactions on social media, but sentiment analysis of user
posts indicated that the positive polarity scores were much higher than the
negative polarity scores in the period November 1-30, 2015. The comments
posted on Maggi’s Facebook page revealed that not only were the user
sentiments positive, many of them excitedly welcomed back Maggi. This is
in line with theory which highlights that forgiveness by customers is one of
the virtues of a strong brand (Mishra and Sharma, 2019).
Building a Sense of Community
Identification with a brand community provides customers with strong
sense of affiliation to the brand and to other brand users/ employees/ brand
representatives. The Harley Owners Group is the most well-known example
of a brand community bound by their passion for riding, and it has been
a key factor in taking the Harley brand to iconic status. Currently, there
are more than 1,400 official H.O.G.™ chapters around the world, with
each chapter sponsored by an authorized Harley-Davidson® dealership
(Harleydavidson.com, accessed April 2020)

13.3 SUMMARY
A good branding strategy should lead to development of brand with high
levels of awareness and recall, strong and unique brand associations, high
credibility and quality perceptions and deep emotional connect, leading to
high levels of engagement, loyalty, love and commitment. Marketers can
use a combination of levers to enhance brand equity. While representations
of these levers and steps may vary somewhat across different frameworks,
the underlying principles and the basis of enhancing a brand’s equity
remain as described above in this unit. The following framework adapted
from Keller’s Brand Resonance Model, summarizes the four broad steps to
building brand equity. A brand needs to work on building each of these over
time.

222
Figure 1: Steps for Building Brand Equity Enhancing Brand Equity

●● Brand recognition and recall in the context of the product/

Brand Identity service category or customer need

●● What the brand stands for in the customer's mind in terms of its
Brand image and associations
Relevance
and meaning

●● What customers think or feel about the brand. How do they

Response and evaluate the brand
Attitude
towards
Brand
●● How strong is the customer-brand relationship and emotional
Brand connect
Resonance

(Adapted from Brand Resonance Model, Keller et al, 2015)

13.4 SELF ASSESSMENT QUESTIONS

1) What are the factors to be kept in mind in choosing brand elements
and how do they help in building brand equity?
2) Pick any successful brand (other than those described in this unit) and
analyze the levers which have been used to enhance brand equity

13.5 REFERENCES/ FURTHER READING

Aaker D.A (2002), Building Strong Brands: Free Press Business, UK
Afaqs (2012), Maggi: Spreading happiness in ‘2 minutes’, afaqs! news
bureau, 10 Jul 2012, https://www.afaqs.com/news/advertising/34668_
maggi-spreading-happiness-in-2-minutes
Celebre A, Denton A.W (2014), The good, the bad, and the ugly of the Dove
Campaign for Real Beauty. The Inquisitive Mind, Issue 19, https://www.
in-mind.org/article/the-good-the-bad-and-the-ugly-of-the-dove-campaign-
for-real-beauty
Chatterjee S (2016), Airbnb: Business Model Development and Future
Challenges, Ivey Publishing
Das K (2020), Dabur, Patanjali among 13 brands adulterating honey with
sugar syrup: CSE study, India Today, December 3, 2020, India Today, https://
www.indiatoday.in/business/story/dabur-patanjali-among-13-brands-
adulterating-honey-with-sugar-syrup-cse-study-1746297-2020-12-03
Dove.co.in, Redefining Beauty with Vogue, https://www.dove.com/in/
stories/campaigns/redefining-beauty-with-vogue-india.html)
Dove.com, Dove Real Beauty Pledge, https://www.dove.com/in/stories/
about-dove/dove-real-beauty-pledge.html
Etcoff, Orbach, Scott, & D’Agostino (2004), The Real truth About Beauty,
Report commissioned by Unilever, Sep 2004, https://www.clubofamsterdam.
com/contentarticles/52%20Beauty/dove_white_paper_final.pdf
Harley-davidson.com, Local Chapters, https://www.harley-davidson.com/
in/en/content/hog/local-chapters.html
223
Managing Brand Equity Intel.com, Ingredient Branding- End User Marketing and Intel Inside,
https://www.intel.com/content/www/us/en/history/virtual-vault/articles/
end-user-marketing-intel-inside
Keller K.L, Parmeswaran, M.G, Jacob, I (2015), Building, Measuring and
Managing Brand Equity: Pearson, 4th edition, India
Mishra M.S and Sharm, R.W (2019), Brand Crisis-Sentiment Analysis
of User-Generated Comments About @Maggi on Facebook, Corporate
Reputation Review, Springer, Vol 22:48–60
Pal S (2016), Utterly Butterly Wonderful: The Story of India’s Most Loved
Ad Icon, the Amul Girl, The Better India, Oct 17, 2016, https://www.
thebetterindia.com/71904/amul-girl-golden-jubilee/
Sharma K (2021), How Surf Excel’s Daag Acche Hain has evolved over
the years, Business Insider, Mar 26, 2021, https://www.businessinsider.in/
advertising/brands/article/how-surf-excels-daag-acche-hain-has-evolved-
over-the-years/articleshow/
Social Samosa (2013), Social Media Strategy Review, 7 Jan, 2013, https://
www.socialsamosa.com/2013/01/social-media-strategy-review-maggi/
Tajhotels.co.uk, Tajness, https://www.tajhotels.co.uk/tajness
Tajmahalteahouse.com, Taj Mahal Tea House, https://www.
tajmahalteahouse.com/pages/taj-mahal-tea-house
Thani D (2016), What’s in a Taj, Conde Nest Traveller, 5 August 2016,
https://www.cntraveller.in/story/whats-in-a-taj/
Youtube, 2013, Dove Real Beauty Sketches, 19 June, 2013, https://www.
youtube.com/watch?v=g-I4LIwe4_c
Youtube, 20201, #StopTheBeautyTest, 24 Feb, 2021, https://www.youtube.
com/watch?v=jEpTa2cMl_I
Aaker D.A (2002), Building Strong Brands: Free Press Business, UK
Keller K.L, Parmeswaran, M.G, Jacob, I (2015), Building, Measuring and
Managing Brand Equity: Pearson, 4th edition, India

224
UNIT 14 MANAGING BRANDS
OVER TIME AND ACROSS
GEOGRAPHIES
Objectives
After reading this unit you should be able to:
●● understand the different approaches to building global brands
●● learn how to choose between standardized vs customized marketing
strategies
●● explore the strategic options for managing brands over time.
Structure
14.1 Expanding to International Markets
14.2 Global Marketing: Standardized vs Customized Approach
14.3 Planning the Global Marketing Strategy
14.4 Factors Impacting Customization
14.5 Developing the Global Branding Strategy
14.6 Managing Brands Over Time
14.7 Levers for Sustaining Brand Value
14.8 Augmenting the Brand Offering
14.9 The Pricing and Distribution Levers
14.10 The Communication Lever
14.11 Summary
14.12 Self-Assessment Questions
14.13 References /Further Reading

14.1 EXPANDING TO INTERNATIONAL

MARKETS
According to Interbrand, the World’s leading brand consultancy firm has
named Apple, Amazon, Microsoft, Google and Samsung are the world’s
top five most valuable brands of 2021 followed by Coca Cola, Toyota,
Mercedes Benz, McDonald’s and The Walt Disney Company. All of these
are big global brands with a wide geographical footprint. In fact, all top
100 brands in the Interbrand list have a significant international presence.
The reasons brands-expand to international markets can be varied and can
include one or more of the following:
 Saturation in domestic market
 Increased competition in domestic market
 Untapped potential in international markets
 Global mobility of target customers
 Reduction in costs due to economies of scale
 Reduction in business risk 225
Managing Brand Equity Phases of Internationalization
While some brands in sectors like technology products or luxury brands
may start with targeting a global customer base, most brands start with
a domestic focus and then expand internationally. Initial triggers for
international expansion could be those listed above. Due to any of these
reasons the brand may decide to explore markets in other countries. The
first step then is to identify the country/ countries the brand can enter. This
will be decided based upon the market potential, ease of entry, ease of doing
business, the needs and preferences of the target segment in these countries,
level of competition, ability to service that market, etc.
Having selected the country/ countries to enter, the next step is to select
the mode of entry, which can vary from setting up full scale operations in
the host country to marketing tie ups with a local partner, depending on
the market potential, investment required and degree of control required.
For example, Apple initially established only a marketing presence in India
and only after few years did it set up a manufacturing base in India with
a contract manufacturer. Firms may also choose to initially enter a new
country with a limited product range and subsequently take a decision on
the timing of entry for other products in its portfolio.
Post the first phase of initial market entry comes the second phase of local
market expansion, where the firm starts tailoring the marketing strategy
for its brands to better align with the local market. Over time it may also
develop or acquire new products for the local market outside of its domestic
portfolio. If you recall Nokia launched a low price range of mobile handsets
especially for the Indian market to increase brand penetration and capitalize
on the demand from the low affordability segment. While in phase one the
brand generally offers its original product as it was sold in the home country,
in this phase some features or attributes of the brand offering can be tweaked
to cater to local tastes and preferences. Also while in the early phase the
entire marketing strategy and expenses are managed by headquarters in the
home country, in phase two as the brand starts to grow in the new (host)
country, the marketing expenses begin to be shared with the host country
operations bearing and managing at least some of the distribution and
communication activities.
As the brand becomes well established in the host country and gains
experience of managing international markets, it may decide in phase
three to enter other countries and expand its international footprint. As the
brand establishes its presence in multiple markets and grows its portfolio in
each of these markets, it reaches the fourth phase of global rationalization
which involves co-ordinating some aspects of the marketing strategy across
geographies, integrating sourcing and production and taking a global
portfolio approach to allocate resources and achieve growth in line with
the firm’s global objectives. At this stage some of the local market concerns
could be overlooked in favour of a more globally aligned strategy.
Global Marketing in Cross Cultural Contexts
Global Marketing propounded by Levitt was based on the premise that the
worldwide marketplace has become homogenized and consumer’s basic
needs, wants and expectations transcend geographic, national and cultural
226
boundaries. Emotions like happiness, mother’s love, fear etc are common Managing Brands Over Time
across the world. Apple’s “Think Different” television commercial from the and Across Geographies
late ‘90s had global appeal and connected to customers across the world.
This campaign spoke about Einstein, John Lennon, Gandhi, and Martin
Luther King as the crazy ones who contributed to “pushing the human race
forward” and highlighted that “the people who are crazy enough to think
they can change the world are the ones who do.”
While there is some commonality of values and visual representations
across the world, there are many differences as well. For example,
●● the colour blue represents warmth in Holland, death in Iran, coldness
in Sweden and fresh and pure in India.
●● dominance of the husband is found to be stronger in Turkey than in
the USA for family purchase decisions (Kaynak and Kucukemiroglu
2001).
Lack of understanding of cultural differences can lead to marketing failures.
For example,
 during the early years in Japan, a P&G campaign for Camay soap
which showed a Japanese husband in the room while his wife was
bathing, ended up alienating its customers, as the Japanese found it
distasteful.
 A soft drink was introduced into Arab countries with an attractive
label that had stars on it--six-pointed stars. The Arabs interpreted this
as pro-Israeli and refused to buy it.
 PepsiCo advertised Pepsi in Taiwan with the global theme “Come
Alive with Pepsi”. But the literal translation of the slogan meant,
“Pepsi will bring your ancestors back from the dead”! (Swallow,
2009).

14.2 APPROACHES TO GLOBAL MARKETING:

STANDARDIZED VS CUSTOMIZED
When a brand operates across multiple geographies, it needs to choose its
strategic approach. On one hand is a completely standardized marketing
strategy with a same brand, identical positioning, identical offerings and
benefits, same pricing and distribution strategies and same communication
across all geographies. On the other hand, is the customized approach,
where brands retain their core essence but customize other elements of the
marketing mix to better align with local cultures and preferences.
Advantages of a Standardized Approach
1) Cost Savings: - A standardized approach to branding strategy will
lead to economies of scale. If there are no variations in the product
specifications, then sourcing can be common, it may also be possible to
centralize production in a few locations for lower cost and consistency
in quality. With brand positioning and communication is standardized,
each country need not create individual brand campaigns, leading to
significant savings in terms of spends and manpower.
2)
227
Managing Brand Equity 3) Utilization and transfer of know how: - With standardization,
country managers can share ideas and experiences easily and thus
help in faster development of marketing strategies and programs for
global brands.
4) Uniform image of quality and service: - Customers see the same
images, product descriptions and more no matter where they are
avoiding contradictions or dilution of brand image. This is especially
important for brands with customer base with high global mobility.
Their experience with the brand would remain the same irrespective
of the geography. A standardized approach also helps in transfer of
positive attributes/associations across multiple markets.
5) Easier co-ordination and control: - With application of uniform
standards across nations, a standardized approach helps in better
coordination for the global brands. Global brand teams can easily
manage multiple geographies with smaller support teams in each
region. Uniform guidelines and performance standards make it easier
to monitor and ensure adherence.
Standardized Example: Apple
Apple, the most valuable Global Brand (Interbrand, 2021) has always
followed a highly standardized approach to product design, with identical
products in terms of design and performance across all geographies. Apple
stores worldwide also maintain the same look and feel to a great extent,
but there is some level of customization in the service protocol and on the
website content to suit local requirements.

Advantages of a Customized Approach

1) Catering to differences in customer characteristics: Global
brands can incorporate the needs of customers in different markets
more naturally, be it differences in customer characteristics or
response patterns. Their socio-cultural values, lifestyles and desired
associations can be targeted better.
2) Government regulations and restrictions: Sometimes product/
advertising rules and regulations and government tariffs require
customization. Different standards and quality norms for products/
services may necessitate changes to the brand offering. For example,
different countries have differing voltage requirements for electrical
appliances. Laws relating to environmental compliances can also
differ across countries. Tariff structures across geographies for inputs
and/ or finished products can vary forcing an adaptation of the pricing
strategy.
3) Differences in marketing infrastructure: Lack of well-developed
marketing infrastructure in some geography can necessitate changes
in the distribution and communication strategy. For example, in India
some regions do not have access to electricity and mass media like
TV. So brands may spend a greater proportion of marketing spends on
outdoor advertising like wall paintings. Unilever reached out to media
dark regions in Bihar with the award winning “Kaan Khajura Station”

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 campaign where people could give a missed call on a given number Managing Brands Over Time
and then receive a call back where their choice of songs would be and Across Geographies
played on the mobile interspersed with ads of Unilever brands.
4) Local competition- Depending how the local brands respond to
competition, the strategies for global brands can shift. Type of
competitors may also be different. For example, while Surf was
competing with Ariel in most markets, in India it was attacked by
small value for money brand Nirma. Therefore, its marketing strategy
had to be adapted to counter the threat posed by Nirma, leading to the
creation of a highly localized “Surf ki kharidari mein hi samajhdari
hai” campaign.
Customization Example: NETFLIX
International expansion has been a key business driver for Netflix. Asia
Pacific has been a major growth area for Netflix and its success in large
part has been due to its highly customized approach. Zameczkowski, Vice
president for business development in APAC at Netflix, was quoted by
CNBC (Choudhury, 2020) as saying that since this region was primarily
mobile first, they focused on mobile-only plans in India, Malaysia,
Indonesia, the Philippines and Thailand. The pricing strategy also differed
with the mobile only subscription following penetration pricing at below
$5 a month, as against premium pricing in United States about $14 standard
subscription costs. The Rs 199 ($2.68) per month plan was introduced in
India in 2019, enabling subscribers to watch Netflix on a smartphone or
tablet at any one time. Content creation is also highly customized in each
geography, with the company making heavy investments in the production
of original local content. Shows like Sacred Games and Bombay Begums
in India have gained immense popularity with the local audiences.

14.3 PLANNING THE GLOBAL MARKETING

STRATEGY
It would generally be difficult to follow either a completely standardized or
a completely customized approach, with significant risks in both strategies.
Branding strategy for global brands would fall somewhere between the full
standardization to full customization spectrum. A carefully thought through
tailored approach is required towards each element of the business system
and marketing programme. As it is said, brand need to “Think globally.
Compete locally. Sell personally”.
Quelch and Hoff (1986) designed a matrix to help managers plan their global
marketing strategy. Below diagram helps you in understanding how brands
A and B can adopt different marketing strategies when approaching global
markets. While brand A follows a more customized approach, Brand B
favours a more standardized approach. But the extent to which each element
needs to be customized / standardized needs to be determined based on the
brand objectives and the strategic priorities of the organization. Brands can
also vary their strategy from region to region. In Table 1 below, Brand A
follows a more customized approach in Country Y as compared to Country
X.

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Managing Brand Equity
Global Marketing Planning Matrix
Customize Standardize
FULL PARTIAL FULL PARTIAL
BUSINESS R&D A B
FUNCTIONS
Manufacturing A B
Finance & A B
Acct
PRODUCTS Cultural A B
sensitivities
MARKETING Product Design A B
MIX
ELEMENTS
Price A B
Promotion B
Distribution A B
REGION Country X A B
Country Y A B
Adapted from Quelch and Hoff (1986)

14.4 FACTORS DRIVING CUSTOMIZATION

I. In deciding the degree to which each element in the marketing
mix should be customized for global brands, organizations need to
consider multiple factors. While designing the international product
strategy for instance, marketers may simply to decide to extend the
existing product line in the new products that is they gradually bring in
products from their home market into the new markets. For example,
regular Coca Cola was launched in India first, followed later by Diet
Coke.
II. Brands could also offer modified versions of their existing products/
services. For example, the very popular Barbie Doll is offered in
multiple looks and costumes to help children of different race and
cultures identify with her.
III. Sometimes brands may expand their portfolio with new offerings
to cater to local demand or to conform to local laws. For example,
Colgate introduced Colgate Salt and Colgate Vedshakti in India to tap
into the high demand for toothpastes based on natural ingredients and
ayurvedic benefits.
Product and Packaging Customization
Factors influencing the product customization decisions include:
●● Nature of Product (for example consumer goods may need more
customization as compared to industrial goods)
●● Stage of Market Development (if the new market is at a very nascent
stage of market development as compared to the home country, a
different product offering may be required)
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●● Costs involved in customization Managing Brands Over Time
and Across Geographies
●● Legal requirements / industry norms (example indication of shelf life,
different voltage requirements)
●● Nature of Competition (Basis of competition can differ in different
regions, necessitating enhancement or reduction of certain features)
●● Availability, preference and cost of support systems (distribution
channel, transport systems, storage technology)
●● Physical Environment (climate, topography etc)
●● Market Conditions (cultural differences, economic prosperity &
customer perceptions, tastes and preferences)
Examples of product customization:- In addition to customizing the
messaging for its high performance brand Surf to counter local low priced
competitor Nirma in India, Unilever also launched a new lower priced
detergent brand Wheel positioned directly against Nirma. Mc Donald’s
restaurants in India, offer many vegetarian options which have been
developed only for the Indian market to cater to the preferences of the local
population a large percentage of who are vegetarian. As highlighted in the
earlier section, Netflix offers a mobile only subscription plan as Indian
market stage of development with respect to household wifi penetration and
laptop/ smart TV penetration is in the early stages of adoption.
Factors impacting packaging customization include:
●● Purchase/consumption patterns (influences pack size and container
type)
●● Cultural sensitivities (pack design, colour scheme, symbols, logos)
●● Local language labelling
●● Climatic conditions
●● Safety and environmental concerns
●● Type of Distribution channels
●● Government regulations
Examples of packaging customization:-Include the modification of
labels for food products which include a green dot for products with only
vegetarian ingredients, and inclusion of information on “Best Before” date,
in conformance with Indian laws. Castrol, the leading lubricants brand in
India, added a hologram seal on its containers to avoid pilferage/ adulteration
of the lubricant. While US customers buy many household products in bulk
preferring large pack sizes, in India many consumers prefer purchasing
smaller pack sizes. In some cases, like shampoos and sauces, sachets
have been introduced by many brands especially for the Indian market to
increase penetration and make their brand accessible to customers in the
lower income bracket.
Modification of Pricing and Distribution Strategies
Factors impacting pricing strategy include:
●● Demand conditions and price sensitivity in different markets
●● Competing and substitute products available in the local market
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Managing Brand Equity ●● Relative emphasis on cost leadership vs differentiation
●● Differences in local factor costs, shipping, freight, distributor margins
etc
●● Government regulations and duties
Examples of modification of pricing strategy: - When Revlon entered the
Indian market in 1990s, its cost of production was much higher compared
to local competitors, due to smaller volumes and higher quality inputs. Also
global brands had a higher quality perception and an aspirational element at
that time, therefore, Revlon adopted premium pricing in India even though
it was a mass brand in its home market of USA.
The need to increase penetration in small towns and rural areas, amongst
consumers with lesser ability/willingness to pay, Coca Cola in India launched
a Rs 5 pack size in early 2000’s, helping them expand their consumer base
considerably.
In addition Amazon and Uber are examples of global brands which modified
their payment terms to accept cash payments due to preferences of Indian
consumers. Many global pharmaceutical brands have to offer lower pricing
in India due to government caps on maximum price for certain categories
of drugs.
Factors impacting distribution strategy include:
●● Differences in customer purchasing patterns and desired services
●● Competitor control over channels
●● Technological sophistication of channel members
●● Fragmentation of distribution
●● Government regulations (location of stores, protection of small
retailers etc)
Examples of adaptation of distribution strategy: - Petrol Pumps generally
account for a large percentage of lubricant sales. However, in India since all
petrol pumps were under the control of public sector oil companies which
sold their own brands of lubricants, Castrol developed a completely new
distribution channel, selling lubricants through spare part shops and local
garages.
Many global brands which were early entrants in the Indian market for frozen
foods, had to limit distribution of their products due to underdeveloped cold
chain warehousing and transport facilities. When the camera film brand
Kodak first entered the Japanese market, many distribution points like
railway stations were blocked by Japanese competitors, so Kodak adapted
its distribution strategy in Japan by focusing on small photo studios.
Communication Strategy Customization
Factors impacting customization of communication strategy
●● Consumption Patterns
– Different target customer segment / influencers
– Purchase habits and usage behaviour

●● Psychological Characteristics
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 – Psychological, social, economic factors influencing purchase Managing Brands Over Time
and Across Geographies
– Symbolic Contexts
– Stage of market in product adoption cycle
– Conflict of global approach with past communication in local
market
●● Cultural Criteria
– Societal restrictions on use of a product /service in any form/
by any age group
– Interference of usage with tradition
●● Government regulations
– laws on surrogate advertising, depiction of children in ads,
comparative advertising, etc
Examples of customization of brand positioning and communication:
- E-commerce in India had limited penetration due to hesitation on part of
consumers who were used to buying from the familiar kirana store next
door and perceived e commerce purchases to have high risk. To counter this
Amazon launched the “apni dukan” (our own shop) campaign, providing re
assurance to first time online shoppers, reducing the foreign association with
use of colloquial expressions and reducing risk perception by highlighting
features like easy return.
Kit Kat’s core messaging across the world has focused on “taking a break”.
However, consumer research in Japan revealed that the kind of breaks shown
in the Kit Kat ads were not considered good breaks. For the Japanese good
breaks were those which helped relieving stressed and the biggest stressors
for young students were exams. Nestle Kit Kat leveraged the local practice
of giving good luck charms to those struggling to overcome a challenge.
The marketing team identified “juken”, an entrance exam faced by high
school students, as an opportunity to engage with its young customers. The
name Kit Kat in the Japanese Kyushu dialect is pronounced “kitto katsu”
which means “to surely win”. In 2002, Kit Kat made this its key messaging
platform, leading to high visibility in stores and mass media. Special packs
were launched, designed to be gifted as good luck charms to students
preparing for the juken exam. These special packs also provided a space
to write personal good luck messages. This strategy was hugely successful
leading to a 150 percent increase in sales year on year between 2002-2007
(Sugai and Sossna 2017).
Approaches for Global Communication Strategy
Brands can choose from amongst different approaches for their global
communication strategy. They may stay with a largely standardized
communication like Benetton, or go with largely independent local
campaigns like Nestle. A third option is adopting a pan-regional approach
where same theme can be used across a given region with some similarities
in culture. For example, Master Card’s “for everything else there is Master
Card” campaign used the same creatives for the Asia Pacific region. A
fourth approach is to go with standard themes but contextualize it with
local contexts/ language/ models. For example, McDonald’s launched the
“I’m lovin it” campaign globally but in each country the same theme was
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Managing Brand Equity depicted using local contexts. A fifth approach to managing communication
strategy for global brands is for the headquarters in the home country to
issue approved guidelines related to brand communication and then allow
each country to design their own communication.

14.5 DEVELOPING A GLOBAL BRANDING

STRATEGY
Global brands are a term generally used to refer to brands which are known
and distributed across multiple countries. There are three distinct facets to
a brand- a concept, a name and a product or a service. Kapferer (2005)
used a combination of these three facets to postulate seven strategic options/
alternatives on the continuum of globalization to customization (Table 2).
Table 2: The 7 patterns of Globalization
Strategy Examples
Type 1 No adaptation Luxury brands

Type 2 Different positioning Ford Fiesta is a small car in

strategies German market but considered
a family car in Portugal.
Knorr soups positioned itself as
a healthy snack for satisfying
hunger at non meal times like
evening or late night, as soups
were not a regular part of meals
in Indian homes
Type 3 Introduce important product Colgate has launched a number
adaptations of toothpastes variants in India
based on natural ingredients
with ayurvedic benefits.
Type 4 Different positioning and Nestle markets Gervais as an
offerings when brands are Ice Cream brand, while Danone
split between companies offers a range of dairy products
under the same brand name.
Type 5 Different brand names in Burger King is called Hungry
different countries due to Jack’s in Australia.
legal or cultural reasons P&G’s brand of sanitary
napkins is sold under the brand
name in most of the countries
but in India and some Asian
countries the brand name was
changed to ‘Whisper”, due to
the secrecy and embarrassment
associated with periods in these
cultures.

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 Managing Brands Over Time
Type 6 When almost similar High end Volkswagen cars are and Across Geographies
products are sold under two priced similar to Audi entry
world brands with different level models
price positioning

Type 7 Operating with local brands Thums up was purchased by

Coca Cola to increase market
share in India.
Darlie a leading toothpaste
brand in the Chinese market
was purchased by Colgate
to strengthen its presence in
China.
Adapted from Kapferer (2005)

14.6 HOW TO MONITOR AND MANAGE

BRANDS OVER TIME
Brands become successful based on the value they provide to customers
and the relationship they build with them over time. Through these
functional, emotional and/ or self-expressive elements of value they create
for the customers, brands differentiate themselves and create competitive
advantage. However, the meaningfulness of this value or the competitive
advantage can erode over time due to multiple factors. These include
changes in technology, changes in the environment, changes in customer
needs and preferences and / or changes in competitive offerings. Therefore,
marketers need to create additional sources of value to remain relevant to
the customer. They can look for opportunity to add value. The answer lies
in observation and customer insighting. Marketers should not look only at
the purchased and consumption of their brand, but they should take a wider
view of the customers’ life and what role their brand plays in it. Mapping
customer journeys is a useful place to start to identify pain points and
potential value gaps. Sometimes the value gaps and customer needs may not
be immediately apparent. In such cases in depth insighting, helps marketers
identify the underlying rational and emotional needs of the customer. This
understanding can then be used to see how the brand can fulfil these needs in
a manner better than before and better than competition. Sometimes a brand
may have become very successful on the strength of its strong positioning.
However, what was once meaningful, relevant and differentiated may no
longer remain so, necessitating a re look at the positioning. Either positioning
can be deepened to make it more meaningful or it can be modified to appeal
to the evolving customer.
In order to sustain brand equity, marketers need to ensure that there is
high brand awareness and knowledge and the desired brand associations
are strengthened over time. While looking for new sources of value, it
is important to protect the existing sources contributing positively to the
brand’s current equity.

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Managing Brand Equity
14.7 LEVERS FOR SUSTAINING BRAND VALUE
In order to sustain brand value over time, marketers can work with one or
more of the following levers:
 Changing the Basic Product offering
 Augmenting the Product offering
 Changing Pricing Strategy
 Changing Distribution Strategy
 Changing Communication and/or Positioning
While working with the first four levers, will lead to change in the actual
value delivered to the customers, the last lever is focused on change in the
perceived value, without necessarily changing actual value.
In addition to identifying the levers for sustaining value, marketers also
need to decide which segment would these levers be applied to? They
could either focus on existing customers or new customers. New customers
could also be further divided into those who are new to the brand (users of
competitive brands) or those who are new to the category itself (non-users
or users of substitute products).
Choice of the lever and the target customer group would depend on the
reasons for the erosion of value and the brand’s objective. For example, if
a brand is losing its customers to higher performance alternatives it may
wish to work out strategies to enhance brand relevance and performance
for existing customers to increase stickiness. However, if the brand has
reached saturation in the current market segment, then it may need to appeal
to a broader/ new segment to sustain growth.
By putting together, the levers with the intended segment, a planning grid
can be created to help marketers list multiple options and choose the most
appropriate one.
Existing New segment New segment
segment (for brand) (for category)
Change in actual value to consumer
Modify/Augment
existing product/
service
Launch new
product/service
under existing
brand (extensions)
Change pricing

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 Managing Brands Over Time
Modify/create/ and Across Geographies
leverage new
distribution
channels
Change in Perceived value
Modify
communication/
positioning/image
Source- Sharma R.W (2007) Rekindling Brand Growth: Three Brand
Stories,

14.8 NEED FOR AUGMENTING THE BRAND

OFFERING
In order to sustain value and ensure growth, brands could look at improving
their product/ service, adding new products and / or adding new customers.
Adding to the brand offering can also help the brand create new sources of
brand equity by moving into new territory. For example, as health concerns
became more prominent, McDonald’s added healthier options to its menu
and promoted its breakfast meals to broaden its association beyond greasy
fast food. Since McDonald’s is already associated with kids, family and
fun, extending the brand to family motels or amusement parks could also be
considered in future to find new directions for the brand.
Augmenting the offering for existing customers -Product modifications/
additions could be designed to target more revenue from existing customers.
This will help the brand expand to other areas of the customer’s life and
strengthen its ties with the customer. For example, amazon prime was started
as a way to provide additional value to loyal amazon customers. In addition
to getting free and quick delivery, prime members could also get additional
offers and access to the prime entertainment services, thereby creating
more value for customers, increasing their engagement with amazon and
deepening the differentiation with competing e commerce brands at a time
when offering wide variety and promotional offers became more a hygiene
factor than a differentiator.
Another example is that of Asian Paints, which looked at the customer
journey and tapped into a new opportunity to create value- offering painting
services and design inputs to its customers. The brand is no longer only
about good quality paint, but more of an enabler in creating happy homes
through personalized end to end customer experiences. Such a strategy
can also be used by business to business brands. For example, Cummins
augmented its products by offering cloud based analytics and monitoring
services for its engines, thereby reducing downtime and expenses for the
customer.
A third example is that of Cadbury’s chocolates which created new
sources of equity, by extending the brand into the realm of traditional

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Managing Brand Equity sweets by creating gift boxes for different occasions and promoting the
use of chocolates to celebrate with the “Khuch meetha ho jaye” (lets have
something sweet) campaign. This initiative gave a new growth spurt to the
brand and increased consumption occasions for existing customers as well
pulling in more customers.
Augmenting the offering for new customers- Maruti Suzuki, the leader in
the passenger car market in India, was very strong on the value for money
association but this association while strength also became a weakness as
customers moved away to other brands when they decided to upgrade to
more premium cars. Buyers of other brands also did not switch to Maruti
for their next buys. In order to attract buyers looking for a better more
aspirational experience, Maruti launched Nexa for distribution of selected
models. Nexa showrooms were designed to create a superior customer
experience with great ambience and prersonalized service.
Similarly, Philips Lighting introduced the T Bulb- which was an innovation
in linear lighting (battens/ tubelights). Most automobile companies have
also begun to add electric cars to their portfolio given the shift in favour of
environment friendly options. For the segment of customers who did not
buy tubelights because of additional effort involved in the installation and
the bulky looks, T bulb offered a good solution because it could be fitted
into the existing bulb socket.
While the brand offering can be augmented by enhancing features or adding
new products and services, additional value can also be created through
networks and collaborations to enhance the overall customer experience
and removing pain points in their journey. A good example of this is the
collaboration between electrical product brands like Phillips with tech
brands like Alexa and Google. As a result of such tie ups customers can
connect and control their smart appliances and lighting solutions through
Alexa / Google Assistant, taking the customer experience to another level
and helping the brand enter a new market space.

14.9 THE PRICING AND DISTRIBUTION

LEVERS
Over time customer criteria for product choices may change, changing the
relative importance of pricing in the customer’s brand choice. Or influencers
and decision making roles may change. In such cases a change in the pricing
strategy can help a brand retain its customers or expand business with them.
For example, when decision making power shifted from doctors to hospital
administrators in the UK, Baxter which was the leader in renal care fluid
bags started losing market share to lower price competitors. Since cost
saving was important for the hospital administrators, Baxter decided to offer
lower and uniform prices for different types of fluid bags and also provided
support services like trained nurses, patient training etc to hospitals thereby
bringing down their cost. Baxter agreed to settle for only part of the business
but insisted that the patient assigned to them should stay with them for
the complete treatment. With more efficacious solutions, Baxter treatments
enabled the patient to survive better bringing down total cost of treatment.

238
Baxter was able to add value by managing the total cost of treatment rather Managing Brands Over Time
than focusing only on the per bag price. In order to strengthen its value for and Across Geographies
money proposition and attract customers with lesser ability to pay, Maruti
had come up with a very successful instalment pricing campaign where
customer could pay in easy instalments of INR 2599/-.
One of the sources of enhancing value for customers is to make it easier to
buy and use the brand offering. Distribution can also be leveraged to attract
new customers by lowering their barriers or pain points. For example, for
customers averse to buying from online sites, the introduction of try and
return facility helped in convincing them to try the service. In order to
spur growth in rural areas in India, Unilever started a unique distribution
programme called i-Shakti where rural women were recruited as agents to
educate and sell products to other women in nearby villages. By improving
accessibility, Unilever was able to deliver value to this group of untapped
customers, thereby creating value for the company itself.

14.10 THE COMMUNICATION LEVER

The communication lever is a very powerful lever available to marketers
as it helps to demonstrate value and make/ keep the brand relevant. In
order to sustain value for existing customers it is necessary to continuously
strengthen and refresh existing associations and deepen the emotional
connect with customers. It is also important to ensure that brand image stays
aligned to the self-image of customers.
An example of refreshing associations and ensuring alignment between
brand image and self-image is the evolution of the brand communication
with changes in societal norms and evolution of the customer perse.
Fair and Lovely, India’s leading fairness brand is a case in point. Initially
the brand messaging revolved around the girl wanting to look good for a
prospective groom or for her husband, but as the target customer evolved
the brand too updated itself.
Fair and Lovely started highlighting the confidence it gave to girls to
achieve what they want. From a marriage context the brand moved to a
career context. More recently as there was increasing discourse against
discrimination on the basis of skin colour and promotion of stereotypical
beauty standards, Fair and Lovely moved away from its core benefit of
fairness to a more generic benefit of glowing skin.
Deepening emotional connect is a must do if brands wish to stay strong over
time. While Coca Cola’s global messaging from 1970s to 1990s, focused
largely on the cola itself with campaign themes like “It’s the real thing”,
Can’t beat the real thing” and “Always Coca Cola”. In 2009 the Open
Happiness Campaign moved towards deepening the customer connect by
moving the focus from the drink itself to the joy of celebrating spontaneous
moments of happiness. As part of this campaign, Coca Cola Hug Machines
was installed in strategic locations like universities. These machines were
labelled with “Hug Me,” in the logo font. When people stepped up and
hugged the machine by squeezing its sides, it would dispense free coke
much to the delight of everyone. According to Leonardo O’Grady, ASEAN
IMC Director, The Coca Cola Company, “The strategy was to deliver doses
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Managing Brand Equity of happiness in an unexpected, innovative way to engage not only the
people present, but the audience at large” (Kosner, 2012). This campaign
also provided a huge opportunity to enhance conversations and visibility
on social media. When brands enhance engagement and foster love and
warmth it binds the customer very strongly and makes it difficult for a
competing brand to break in. While functional benefits can be replicated, it
is very difficult to negate or break emotional bonds which brands forge with
their customers.
Changes in positioning and messaging can also be used to make the brand
relevant to non-customers, thereby expanding customer base and ensuring
growth. This approach is also useful to enhance relevance for the target
customers by neutralizing negative associations and / or adding new
associations.
For example, in the 1980s Saffola was positioned as premium cooking oil
for people with heart problems. This was a very successful positioning,
highly relevant and strongly differentiated. Saffola witnessed good growth
and dominated this niche.
However, as the niche neared saturation, Saffola needed to find other avenue
to sustain brand growth. It decided to broaden the target group slightly
and shift the brand from a therapeutic (treatment oriented) to a preventive
positioning.
In line with this positioning the communication campaigns centred on the
message to using Saffola to keep the heart healthy. While the brand kept
to its core of heart care, it broadened its association to preventive heart
care. To make the brand more likeable and reduce negative associations of
hospitals and aloofness, the brand also worked at building a more positive
and approachable image, showcasing happy family situations with a dash
of humour.
14.11 SUMMARY
Effective Brand Management entails not only successfully launching
a brand but also designing strategies to manage the brand over time and
across geographies. The underlying principles of staying true to the brand
promise and creating value for the customer remain the foundation of
branding strategy. However, marketers need to adapt to different cultures
and environment and different stage of development of the market in order
to ensure relevance and differentiation.
Some level of customization is required for most global brands, but which
elements of the marketing mix and decision making process need to be
customized and to what extent depends on a number of factors. Based on
the combinations of customization of one or more of the three facets of a
concept, a name and a product or a service, Kapferer has outlined seven
strategic options for global branding strategy.
Brand management involves taking a long term view to maintain and
enhance brand equity over a long period of time. In order to continue to
create value for customers and the firm, the brand needs to proactively track
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changes in the environment, customer preferences, technology etc and take Managing Brands Over Time
steps to reinforce existing sources of brand equity and / or find new sources and Across Geographies
of brand equity. In order to sustain growth, brand could enter new territory,
increase usage of existing customers and/ or pull in new customers. This can
be achieved by expanding the depth and breadth of brand awareness leading
to increase in quantity and frequency of consumption and usage and also by
strengthening the favourability and uniqueness of brand associations which
helps to bolster fading associations, neutralize negative associations and
create new associations (Keller 2015).
4.12 SELF-ASSESSMENT QUESTIONS
1) What are the advantages of a standardized vs customized approach to
building global brands?
2) Describe with examples any 5 factors influencing the extent of
customization required in different geographies.
3) What are the seven strategic options for global branding strategy?
4) What are the 5 levers which brands can use to sustain value over
time? Describe any two of these with examples
5) In order to maintain or enhance brand equity over time, explain how
can brands can leverage existing customers and how they can tap into
new customers.
14.13 REFERENCES / FURTHER READING
Keller K.L, Parmeswaran, M.G, Jacob, I (2015), Building, Measuring and
Managing Brand Equity: Pearson, Chapter 13, 4th edition, India
John A. Quelch and Edward J. Hoff (1986), Customizing Global
Marketing, Harvard Business Review 64, no. 3 (May–June): 59–68.
Choudhury S. R (2020), Netflix bets big on Asia as it sees ‘significant potential’
in these markets, CNBC.com, 8 Nov. https://www.cnbc.com/2020/11/09/
netflix-nflx-its-strategy-in-asian-markets-like-india-indonesia.html
Interbrand (2021), Best Global Brands Report 2021, www. interbrand.com
John A. Quelch and Edward J. Hoff (1986), Customizing Global Marketing,
Harvard Business Review 64, no. 3 (May–June): 59–68.
Kapferer J. N (2005), The post-global brand, Journal of Brand Management
12, 319–324 (2005). https://doi.org/10.1057/palgrave.bm.2540228
Kaynak E & Kucukemiroglu, O. (2001), A comparative study of family
decision making in US and Turkish households by correspondence analysis,
Journal of Targeting, Measurement and Analysis for Marketing. doi 9.
10.1057/palgrave.jt.5740020.
Keller K.L, Parmeswaran, M.G, Jacob, I (2015), Building, Measuring and
Managing Brand Equity: Pearson, Chapter 13, 4th edition, India
Kosner A.W (2012), Hug Me: Coca-Cola Introduces Gesture Based
Marketing in Singapore, 11 April, 2012, https://www.forbes.com/sites/
anthonykosner/2012/04/11/hug-me-coca-cola-introduces-gesture-based-
241
Managing Brand Equity marketing-in-singapore/?sh=4a735a6226fe
Sharma R.W (2007), Rekindling Brand Growth: Three Brand Stories,
Teaching Note, Ivey Publishing
Sugai P and Sossna A (2017), Nestle Kit Kat in Japan (A): Sparking a
Cultural Revolution, Ivey Publishing
Swallow D (2009), Cross Cultural Marketing Blunders, Deborahswallow.
com, https://www.deborahswallow.com/2009/08/20/cross-cultural-
marketing-blunders

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UNIT 15 MEASURING BRAND EQUITY

Objectives
After reading this unit you should be able to:
●● appreciate the need for measurement of brand equity
●● understand how to measure and track brand equity
●● discuss the different approaches for brand valuation
Structure
15.1 Introduction
15.2 Measuring Elements of Brand Equity
15.3 Frameworks for Brand Equity Measurement
15.4 Brand Report Card
15.5 Need for Brand Valuation
15.6 Methods of Brand Valuation
15.7 Summary
15.8 Self-Assessment Questions
15.9 References/ Further Reading

15.1 INTRODUCTION
Developing and building brands will entail considerable investment and
therefore it is important to measure if this investment is leading to the desired
outcomes. Measuring brand equity can help an organization understand if
their brand strategy and spends are in the right direction. It can also help in
planning future brand strategy and identifying the optimum ways to invest
in building a strong brand. It is said that a brand is owned by a consumer.
Therefore, it is important to understand what space the brand occupies in the
hearts and minds of consumers. How strong is the brand awareness? What
are their thoughts, feelings and associations towards the brand? Insights into
how well the brand is known and what it is known for can help marketers
make strategic changes which can lead to better success in the marketplace.
In the earlier units, the components of Brand Equity as defined by Aaker
(1996), have been described as follows-
●● Brand Awareness
●● Perceived Quality
●● Brand Associations
●● Brand Loyalty
●● Other Proprietary Brand Assets
To measure Brand Equity, we need to measure each of these components.

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Managing Brand Equity
15.2 MEASURING ELEMENTS OF BRAND
EQUITY
Brand Awareness
Brand awareness indicates if the brand is recognized and recalled by its
target customers. Brand recognition implies that the customer is familiar
with the brand due to prior exposure to the brand. However, on its own
brand recognition is not of much value as mere familiarity does not mean
that the customer has any knowledge about the brand. What is more relevant
in brand recall, when the customer is able to recall the brand in the context
of its category. Brand awareness can be looked upon as the strength of the
brand’s presence in the customer’s memory. There are different levels of
brand awareness-
Figure 1- Levels of Brand Awareness

Unaided recall or spontaneous recall, measures the percentage of people

who are aware of the brand and can spontaneously recall it in the context of
its category. For example, if Allen Solly wanted to test the level of unaided
recall for its range of men’s shirts, it would ask respondents to name the
brands of shirts they know of. The percentage of respondents, who name
Allen Solly spontaneously as being among the first few brands to come to
mind, would constitute unaided recall. So if 390 out of 600 respondents
name Allen Solly, then unaided recall for the brand would be 65%. This
implies that the brand occupies reasonably high salience in the customers’
minds. For 65% of the people, Allen Solly is one of the brands they think
of when they think of men’s shirts. This means that the brand is strongly
associated with the category in the customers’ mind and has a chance of
being included in the consideration set of the customers for purchase of
shirts.
Aided recall occurs when the respondent is not able to spontaneously name
the brand, but can recognize and associate it with its category. So while there
is brand awareness, the strength of awareness is not very high. The brand
may not be in the first few brands which come to mind, but is definitely
known to the customer. In the above example 390 people out of a sample of
600 spontaneously named Allen Solly as one of the brands of men’s shirts.
If the rest of the sample were asked if they know of Allen Solly Shirts, and
120 of them said yes, then aided recall would be 20% (120/600). In this
case total brand awareness would be 85% (aided +unaided). For 65% the
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awareness is quite strong, while 20% are able to recollect the brand only on Measuring Brand Equity
prompting.
A brand is said to be top of mind when it is the first brand named by the
customer. This means that the presence of the brand in the customer’s mind
is very strong with respect to that category. It is the first brand the customer
thinks of when the category is mentioned. To go back to the Allen Solly
example, if out of the 390 people who mentioned Allen Solly spontaneously,
200 of them mentioned Allen Solly first before listing other brands, top of
mind recall for the brand would be 33% (200/600).
A brand will strive to be top of mind in its category for most of its target
group. If not top of mind it should at least have high unaided recall. In
order to track brand awareness, survey of customers can be carried out
periodically. More than the absolute percentage of awareness, change in
awareness over a given period would be a useful measure to see the impact
of marketing investments in the brand.
Brand managers need to…….
●● Track change in brand awareness over a given period
●● Track brand awareness relative to key competitors
●● Track Purchase Intention / inclusion in consideration along with
brand awareness
Perceived Quality
Perceived quality refers to the customers’ perception of overall quality
as compared to its intended purpose and as compared to its alternatives
and substitutes. The quality referred to here is not objective quality or
manufacturing quality, it only refers to customers’ perception of quality.
Perceived quality can be measured through one or more of the following:
●● Customer Satisfaction Studies
●● Performance ratings (largely perception driven)
●● Current usage – brand and category
●● Intention to use
The last two are more indirect and supporting indicators, as a customer is
likely to use/ be inclined to use a brand only if it of acceptable quality.
Brand Associations
The associations which customers hold for a particular brand contributes to
the brand images they carry in their mind. One can elicit these associations
by asking customers what they think or feel about a particular brand or one
can also take an existing set of associations and test how strong or weak is
the brand on each of those associations.
Eliciting Brand Associations- Various qualitative techniques can be used
to try and understand what customers associate with a given brand. Some of
these techniques which can be used to generate both positive and negative
brand associations, as explained below-
1) Free Association- Ask customers what comes to mind when they
think of a given brand. This is the simplest method but sometimes
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Managing Brand Equity may be able to generate only limited associations as customers
themselves may not be consciously aware of all associations. Other
indirect methods listed below may therefore be able to generate richer
brand associations.
2) Picture Interpretation- Pictures of different people or animals or
situations can be shown to the respondents and they can be asked
to select the ones which they feel are representative of the brand in
some way. By asking them why they think so or what made them
choose those particular pictures, we can get an understanding of what
they associate with the brand. For example- one person may pick the
picture of a rabbit and another picks the picture of a cheetah. When
asked for the reason behind their choice they say “speed”. So it is
clear that they associate the brand with speed.
3) Description of the brand user- Asking people to describe the typical
brand user also gives insights into the brand associations. For example,
people may say that macho men who love the outdoors and don’t
always conform to rules are typical users of Harley Davidson. These
clearly highlight the associations of Harley Davidson in their mind.
However, this brand is currently not unavailable in the Indian market.
4) The Decision Process and values driving the brand choice- A
detailed dissection of how customers arrived at the brand choice,
their rationale and evaluations are also an effective way to generate
insights.
5) Description of brand personality- Asking respondents to describe the
brand as a person is a very powerful way to elicit brand associations.
This helps them describe the softer more intangible aspects of the
brand. For example, when asked to imagine National Geographic as
a human being, people describe someone who is male, in his mid-
forties, educated and well informed, straight forward, grounded,
environment conscious, loves the outdoors, generally dresses in smart
casuals and likes photography and listening to news.
Brand personality can also be measured using existing scales and
frameworks, one of which is described below.
Brand Loyalty
Customer loyalty commanded by a brand is a key contributor to the value the
brand brings to the firm. Over time the brand’s strategy is to try to strengthen
the ties of local or committed customers to the brand as well as the fence
sitters. Loyal customers tend to buy the brand repeatedly and prefer it over
other brands. There are types of measures used tracking loyalty which are
discussed below
• Repeat purchase and continued repeat
• Trial rate
• Preferred Brand
The simplest way to measure loyalty is to look at the number of times a
customer buys the brand in question out of total number of purchase
occasions in a given period. This is termed as repeat purchase rate. For
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instance, if a household buys 4 cakes of soaps in a month, and 3 times out Measuring Brand Equity
of 4 they buy the given brand, they would be considered loyal customers. In
case of durable goods this can be extended to customer purchases of different
offerings from the same brand. Repeat purchase rates, and continued repeat
purchase over a longer period of time is usually the most often used way to
measure loyalty. Repeat purchase rates can be measured through records of
actual purchase per customer, or through syndicated data of research firms
which monitor purchase made by a sample panel of customers over time. In
the retail industry instead of simply looking at repeat purchase rate, firms
track recency of purchase, frequency of purchase as well as the monetary
value of purchase (RFM analysis).
Trial rate or willingness to try new offerings from the brand is another
indicator of loyalty. Loyal customers of the brand would be inclined to
try out new brand extensions because of their trust and love for the brand.
Measuring the percentage of customers’ willingness to try new offerings
from the brand is therefore a good measure of loyalty. A third more indirect
measure is the percentage of target customers who list the brand as their
most preferred brand. In case people are buying a given brand because of
non-availability of another brand, they will have a high repeat rate but are
not really loyal customers as they will switch brands once their preferred
brand becomes available. Therefore, along with repeat purchase rate, it
is good to look at the preferred brand score and correlate it with actual
purchase behaviour.

15.3 FRAMEWORKS FOR BRAND EQUITY

MEASUREMENT
There are two available frameworks that can be used to measure the strength
of the brand on selected dimensions. Two of these frameworks are discussed
below-
1) Brand Personality Framework- Jennifer Aaker (1997) has defined
five types of brand’s personality. For each type she has given a set of
adjectives which describe that personality and there is a set of scales
rate how strongly the respondent feels that the adjectives apply to the
brand concerned.
Figure 2: Aaker’s Dimensions of Brand Personality

Adapted from Aaker (1997)

2) Brand Asset Valuator- Young and Rubican’s Brand Asset Valuator
measures a brand’s equity along two dimensions which are plotted on
a grid termed as the Power grid. These two dimensions listed below
cover four Brand Pillars.

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Managing Brand Equity a. Brand Strength which covers Differentiation and Relevance
b. Brand Stature which covers Esteem and Knowledge
Differentiation refers to a brand’s ability to capture attention. It can help set
a brand apart from competition and can be a leveraged to drive advocacy
and pricing power. Relevance is about how appropriate and meaningful a
brand is to consumers. This can drive brand consideration and trial. Esteem
is a measure of how highly regarded a brand is and how well it delivers
on its promises. leads to trial and commitment. Knowledge refers to the
depth of understanding people have of a brand – both positive and negative
thoughts, beliefs and feelings about the brand (bav.com)
Based on the two dimensions of Brand Strength and Stature, brands can be
classified as New/unfocused, Niche/ unrealized potential, Power leaders,
and Eroding Brands.

Figure 3- Brand Asset Valuator: Power Grid

A 2012 study on packaged drinking water brands in India, by BAV group
mapped the equity of competing brands in this category using he Y&R
dimensions of Brand Stature and Brand Strength (Figure 4)
Figure 4- Power Grid for Bottled Water Brands

Source- Economic Times, 28 Dec, 2012

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 Measuring Brand Equity
15.4 BRAND REPORT CARD
Brand Managers need to periodically and systematically track and review
how their brand is performing on key dimensions. Keller (2000) developed
the format for a Brand Report Card using which brands could be rated on
ten characteristics. Based on the scores, a brand’s strengths and limitations
can be identified providing useful input for fine tuning the branding strategy.
It would also be a useful exercise to compare a brand’s report card with that
of its competitors.
For the Brand report card, Keller (2000) identified the following Ten
characteristics which are by the world’s strongest brands:
i. The brand excels at delivering the benefits that customers truly
desire. The attributes, of a brand’s offering, along with its image,
associations, and other tangible and intangible factors, are viewed as
a whole by the customers. And these benefits go beyond functional
benefits to include emotional and /or self-expressive benefits.
ii. The brand stays relevant. Brands need to continue to strengthen
areas of their core competency and product performance. At the same
time refreshing other sources of brand equity to remain relevant over
time keeping pace with changes in environment and/ or customer
outlook.
iii. The pricing strategy is based on consumers’ perceptions of value.
Value perception for a brand is formed by a combination of the actual
benefits delivered, brand image, additional services etc and pricing
needs to be consistent with the customer’s perceived value. For
example, a lower price offered by a premium brand can damage its
exclusivity associations. Similarly, a brand not known for its technical
prowess is unlikely to be able to price its tech products at a premium.
iv. The brand is properly positioned. Strong brands occupy distinct
positions in the minds of the customers. They ensure that they are
well differentiated from competition, meaningful to the customers
and have a believable brand promise. Brands that are well positioned
create points of parity to neutralize competitor’s differentiators and
create points of difference to have an edge over competitors.
v. The brand is consistent. Brands need to ensure continuity and
consistency while updating some aspects to remain relevant.
Communication needs to be clear with consistent non conflicting
messaging.
vi. The brand portfolio and hierarchy make sense. Brands at each
level of the hierarchy contribute to the overall equity of the portfolio
and help in fostering favourable associations.
vii. The brand makes use of and coordinates a full repertoire of
marketing activities to build equity. Managers need to ensure that
all activities of the marketing mix are in sync and build on each
other to achieve synergy and enhance brand equity. This includes
design of the offering, packaging, pricing, customer purchase and
usage experience, service support, user/ usage imagery, engagement
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Managing Brand Equity opportunities for customers and channel members etc. It is important
that brands take an integrated 360-degree approach and ensure that
the essence of the brand is the same across all activities.
viii. The brand’s managers understanding what the brand means to
consumers. Managers need to understand all dimensions of their
brand’s image as perceived by the customer. Brand initiatives need
to align with customer perceptions and desires and stay true to the
meaning customers derive from the brand.
ix. The brand is given proper support, and that support is sustained
over the long run. There are no shortcuts to brand building. Building
strong brands needs time, effort and investment. Brands need to
continuously work at ensuring deep and wide brand awareness along
with strong, favorable, and unique associations.
x. The company monitors sources of brand equity. Managers need
to conduct periodic brand audits and ongoing brand-tracking studies.
A brand audit looks at the internal aspects of the brand inventory
(an inventory of its marketing initiatives) and the external aspects
of exploring what customers think about the brand. Put together the
brand audit can be looked at as an indicator of brand health. Tracking
studies help analyze the short-term effectiveness of marketing
programs and activities, by collecting information over time on
consumers’ perceptions, attitudes, and behaviors.
While it is important to optimize all ten parameters listed above, this is not
always easy to implement. Therefore, brand managers need to periodically
score their brand on these parameters to decide on corrective action if any
and to fine tune the future brand strategy. The Brand report card scores
the brand on each of these parameters on a scale of 1 to 10, (one being
extremely poor and ten being extremely good). There are set of questions
given for each parameter which help decide the scoring which can be given.
Examples of such questions for the two parameters are given below.
Extract from Brand Report Card (Keller, 2000)
“The brand excels at delivering the benefits customers truly desire.
Have you attempted to uncover unmet consumer needs and wants?
By what methods?
Do you focus relentlessly on maximizing your customers’ product and
service experiences? Do you have a system in place for getting comments
from customers to the people who can effect change?
The pricing strategy is based on consumers’ perceptions of value.
Have you optimized price, cost, and quality to meet or exceed customers’
expectations?
Do you have a system in place to monitor customers’ perceptions of your
brand s value? Have you estimated how much value your customers
believe the brand adds to your product?”

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 Measuring Brand Equity
15.5 NEED FOR BRAND VALUATION
Brand Value refers to the financial value of a brand. Brand equity has been
described as a set of assets and we need to put a value to these intangible
assets because it helps to justify marketing investments to sustain and build
brand image and equity. If brands need to be bought and sold, then the brand
needs to be valued separately from the physical assets. Just as physical
assets can be used for a long period to produce goods and services, brand
have the power to generate future income and reduce marketing risks.
In a study titled Intangible Asset Market Value Study (Tavassoli, 2020) it
was found that while in 1985 intangible assets accounted for only around
30% of the market value of S&P 500 firms, by 2020 this had increased to
90%. Brands are a key intangible asset contributing significantly to overall
market value of the firm. Therefore, it is important to measure brand value.
Interbrand regularly publishes the list of top brands by brand value. In 2020
the top 5 global brands by brand value were as follows (Interbrand, 2020):
1) Apple
2) Amazon
3) Microsoft
4) Google
5) Samsung
The 2021 Best Global Brands recorded the largest brand growth ever, even
in the context of major social, economic and technological changes during
this time. As per Interbrand, the top 100 brands recorded a total value of
$2,667,524 million in 2021, as compared to $2,326,491 million in 2020.
The fastest risers significantly outperformed other brands on three factors
namely…..
1. Direction: Set a clear direction. Ensure that the entire organization
knows where they are going, and are working towards the same
ambition.
2. Agility: Move fast. Bring new products and services to market quickly,
and where necessary, pivot to address changing customer needs.
3. Participation: Bring people on a journey with you, and make them
part of the movement to create an engaging brand world. (interbrand.
com)
15.6 METHODS OF BRAND VALUATION
In May 2019, Reliance acquired British toy major Hamleys in a cash deal
of $88.6 million. RIL’s regulatory filings show that Hamleys reported a net
profit $ 3.13 million in FY 2018 after reporting losses of $ 14.8 million
in 2017 (Your story, 2019). So why then did Reliance pay such a high
valuation for Hamley’s? The reason is the potential of the Hamley’s a global
brand with very high awareness and brand equity. It has very high perceived
quality, brand loyalty and strong positive brand associations in the toys

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Managing Brand Equity category. Thus properly leveraged it can be a strong source of income and
growth in the future.
There are different methods to estimate brand value, while some look at the
earning potential and market value, others look at the investments made in
the brand.
Cost Based Methods
Cost based Brand Valuation can take any one of the following three
approaches-
i) Historical Cost
ii) Replacement Cost
iii) Market Value
Historical cost method is used for past investments in building the brand as
the basis to arrive at the brand value. While this method is easy it may not
be a true indicator of brand value in the current context. Also, if past spends
on the brand were inefficient, then again it would not represent actual value
(Chandon, 2004).
Replacement cost method take into account the amount of expenditure
needed if the brand were to be built to the same stature but in the present
day context. For example, if Flipkart brand was to be built now, one would
estimate its value by estimating the investment that would be required to
build it to the same stature given that the competitive scenario now is much
tougher than it was earlier.
The market based approach estimates the differential profits between what
the brand earns and what it would earn if the same product/ service was
an unbranded offering. While expenditures in case of the branded offering
would be higher, it is likely that the revenue would also be higher due
to higher price and/or quantity. While price and quantity information for
generic vs branded products is available in the marketplace, there is some
level of subjectivity involved and data on marketing/ brand building spends
may not be easily available. It would be difficult to find a generic product
which is similar to the branded product in every aspect expect brand name
and price. Dummy prototypes could be used instead in case of a survey, but
this is difficult to implement. Another important limitation of this method is
that it only looks at current profit and not future earning potential (Chandon,
2004).
Income Based Methods
The income or contribution based method takes into account potential
earnings which can be expected from the brand and discounts these to arrive
at the present value. This is a good approximation of the brand value as
it takes into account future potential. However, the entire income is not
attributable to the brand and one needs to have a clear methodology of
estimating the income from intangibles and the brand’s contribution within
that.

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Interbrand Method Measuring Brand Equity

Interbrand’s method of brand valuation takes a combined approach using

both financial analysis and contribution. This method is based on three key
components that contribute to a brand’s cumulative value:
●● Financial performance of the branded products and services
●● Role the brand plays in influencing customer choice
●● Strength of the brand to command a premium price or secure earnings
for the company
Each of the above are estimated using the following measures-
i) The Economic Earnings (or EVA)
ii) Role of Brand Index- Contribution of the brand asset to these earnings
iii) Future Earning and Brand Strength- Resilience of the asset (or risk
associated with earnings being realized)
As per this method, brand value can be calculated as follows-
Brand Value
= (Earnings from Intangibles (INR) x Role of Branding Index (%)) /
Discount Factor (%)
The first step is to identify the major market segment/s addressed by
the brand for which valuation is to be done. For each segment financial
analysis is undertaken to arrive at the Economic Value Added (EVA) or the
component of due to intangibles. This can be calculated by subtracting cost
of capital employed from total earnings. Next one needs to determine how
much of these intangible earnings can be attributed to the brand. To do this
a Role of Brand Index (RBI) needs to be calculated. RBI can vary across
industries- for example it may be as low as from 10% for bulk chemicals
and as high as 80%-90% for soft drinks and perfumes. Typically, RBI is
estimated based on opinion of experts who have a good understanding of
the industry.
The third step involves estimating the Brand Strength score, which helps to
determine the risk/ uncertainty of future earnings. This is important to arrive
at a realistic discount factor. The higher the brand score the lesser would
be the risk associated with the future earnings. However, if brand strength
is lower, it implies higher risk and therefore a higher discount factor for
calculation of net present value of future earnings.
Brand Strength score is calculated on the basis of the following attributes
i. Market Potential
ii. Stability
iii. Leadership Position
iv. Growth Trend
v. Support
vi. Geographic Footprint
vii. Legal Protectability
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Managing Brand Equity Each of these attributes are scored against an ideal and a weightage is
assigned to each to arrive at the total Brand Strength Score. If for example a
brand operates in a growing market and has a leadership position with a wide
geographical footprint and strong market support it will have high brand
strength and therefore less uncertainty associated with future earnings. The
following factors will also impact the brand strength-
• Brand Weight- extent to which the brand dominates the market
• Brand Width- no. of customer categories covered
• Brand Stretch- no. of product categories to which it fits
• Brand Depth- Strength of relationship (loyalty)
The Interbrand approach is the most comprehensive and widely used method
brand valuation. While the details of the Interbrand process are proprietary.
Several consultants use variations based on the same principles of valuation.
Table 1: Interbrand- Best Indian Brands 2019

Brand Value
Top 15 Brand Change
(INR Billion)

1 TATA 787.22 6%
2 Reliance Industries 428.26 12%
3 Airtel 322.35 -13%

4 HDFC Bank 299.63 14%

5 LIC 280.95 9%

6 State Bank Of India 256.2 3%

7 Infosys 243.67 5%
8 Mahindra 183.89 9%
9 ICICI 169.93 5%

10 Godrej 168.97 6%

11 Maruti Suzuki 154.86 13%

12 Larsen & Toubro 149.91 8%

13 Bajaj Auto 137.28 18%

14 Wipro 134.5 -1%

15 Axis Bank 110.91 5%
Source: www.interbrand.com, March 14, 2019

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 Measuring Brand Equity
15.7 SUMMARY
Tracking and measuring brand equity needs to be a continuous process,
helping managers get insights on the strengths and limitation of their brands.
Each component of brand equity- brand awareness, perceived quality, brand
associations and brand loyalty can be measured through a mix of qualitative
and quantitative techniques. These measures need to be analyzed over time
and with respect to competitors to gain meaningful inputs for branding
strategy.
Brand Value refers to the financial value of a brand. This can be measured
through a combination of different approaches. While cost based methods
focus on the investment put in/ required for building the brand, income
based methods use future expected earnings as the basis of brand valuation.
The Interbrand approach uses a combination of financial and contribution
based approaches and is the most comprehensive method of calculating
brand value.
15.8 SELF ASSESSMENT QUESTIONS
1) Which components of Brand Equity can be measured? What are the
possible measures for each of these?
2) What do we mean by measuring brand value and how is it different
from tracking brand equity?
3) What are the different methods of brand valuation?
15.9 References/FURTHER READING
Aaker, D.A (1996), Building Strong Brands, Chapter 10, Free Press
Business, UK,
Keller K,L, Parameswaran, M.G, Jacob I (2015), Strategic Brand
Management: Building, Measuring, and Managing Brand Equity, Chapter
10, 4th Edition, Pearson, India
Aaker, J.L. (1997), “Dimensions of brand personality”, Journal of Marketing
Research, Vol. 34 No. 3, pp. 347-356, doi: 10.2307/3151897.
Aaker, D.A (1996), Building Strong Brands, Chapter 10, Free Press
Business, UK,
Aaker, J.L. (1997), “Dimensions of brand personality”, Journal of Marketing
Research, Vol. 34 No. 3, pp. 347-356, doi: 10.2307/3151897.
BAV, Brand Asset Valuator, https://www.bavgroup.com/about-bav/
brandassetr-valuator
Chandon, P (2004), Note on Brand Audit, INSEAD
Economic Times (28 Dec, 2012), Water Brands Not Just About Taste,
https://economictimes.indiatimes.com/industry/services/advertising/bav-
insights-water-brands-not-just-about-taste
Interbrand (2020), Best Global Brands, www. interbrand. com
Interbrand (2019), Interbrand unveils 2019 Best Indian Brands, https://
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Managing Brand Equity www.interbrand.com/newsroom/interbrand-unveils-2019-best-indian-
brands-celebrates-brave-growth-amidst-change/
Keller K,L, Parameswaran, M.G, Jacob I (2015), Strategic Brand
Management: Building, Measuring, and Managing Brand Equity, Chapter
10, 4th Edition, Pearson, India
Tavassoli 2020, Intangible Asset Market Value Study, 2020, in Brand Value
and Valuation,
Yourstory.com (2019), Reliance Hamleys British Toy Major Acquisition,
https://yourstory.com/2019/05/reliance-hamleys-british-toy-major-
acquisition

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