Chapter 5

PRODUCT
STRATEGIES
Colgate and Its Valiant Attempts to Stretch the Brand
Colgate has been (and probably always will be) known as a brand for oral
care. In fact, this is its core strength. Colgate brand of toothpaste is the leader in
many markets globally while the Colgate brands of toothbrushes and
mouthwashes can always be relied upon to be either number one or number two
in their respective categories.
But if you were an ambitious marketer, you would be seeing this success
from a different perspective: you would think that Colgate is such a powerful
brand that it deserves to be on more products. By not doing this, it would be a
waste of brand potential.
So, in 1982, the company launched Colgate Kitchen Entrees that was a
line of frozen foods which hoped to capitalize on the growing demand for
microwaveable meals. Furthermore, the idea here was that after eating a Colgate
meal, the happy consumers would move on to brush their teeth with Colgate
products.
Result: Not only did the product turn out to be a horrendous flop but it
also dragged the entire Colgate oral care line down with it as sales for Colgate
toothpaste and related products fell.
The lesson here was that if your brand is heavily associated with a
particular product category, trying to stretch it toward other categories may only
end up hurting your flagship products as the association of the brand with the
original category gets diluted.
Postscript: This did not stop Colgate from trying again and again. They
will eventually experiment with Colgate shaving cream, Colgate deodorant, and
even Colgate foot powder---none of which succeeded in the market (thankfully)
“The brand is the repository of a product’s market
value. It is the marketer’s primary duty to protect the
brand.”

There are traditionally four “P’s” that are used for communicating
the essence of a product and its brand---product, price, place, and
promotions. Together, these form what is known as the marketing mix, or
the mix of Ps that makes up the communication strategy. This chapter
covers the first of these four “Ps,” Product, and includes issues such as
new product development, and product mix management.
LESSON 1

NEW PRODUCT STRATEGY

The New Product
How do you make something truly marketable?

Have you ever had a seemingly brilliant idea for a new product
at one time or another? Here is a harsh truth that we will have to
swallow: anybody can have a great product idea. But unless you do
something about it, then it will always remain as just an idea. Pretty
soon, someone will come along who will think up the same idea but
this time will do something about it. Then, that idea will no longer be
yours.
The new product development certainly begins with the idea,
but that is just the tiniest bit of the iceberg. Most of the work involves
the hardy task of building the real business around the idea. This
includes the preparation of the business plan, market studies, demand
estimation, and marketing strategy. This is where the real value of the
idea gets created.
Creating the Business Model
Business model refers to the mode by which the product concept
seeks to make money so that it can have a sustainable operation. You can
think of a business as a machine that generates revenues. In order for it to
continue going, it should be generating enough revenues to cover both its
costs of operations, as well as providing a decent return on its investment.
If business cannot accomplish this, then it will not survive.
The business model should therefore involve a way of making
money that best fits the nature of the product idea. The following are some
examples of alternative business models:

 Facebook began its first years purely as a social media site with no clear
business model in place. But eventually the model became clear: claim as
many users as possible (now over a billion worldwide) and then utilize
them as a massive pool of captive viewers for attracting advertising
revenues.
 Newspapers and magazines have always been funded by advertising
placements. But as fewer and fewer people read the papers (because of TV and
the Internet), advertising here has become less and less attractive. Print
publishers are therefore struggling to find a suitable business model for going
online, leading to some hits and a lot of misses. Newsweek, which was
formerly a weekly news magazine, has completely shut down its historical ad-
based print business model. Instead, it has been retooled into an aesthetically
pleasing online magazine that hopes to draw loyal readers through well
researched long-form articles---something that is uncommon on the Internet---
and going for less obtrusive sponsorships rather than advertising (which can be
eyesores).
 Buffets have become very popular as alternatives to a la carte fare in
restaurants. Places such as Vikings and Buffet 101 use a business model that is
based on a bit of statistic: their gamble is that, even on their “eat all you can”
spreads, the average person will not be able to consume an amount of food that
costs more than what was paid for. While some people with big appetites will
be able to, most people will not. The trick is to find the proper balance of
attractive food choices and a price point that still allows the business to make a
decent profile
Businesses do not need to be dependent on actual consumer purchases for their
business model. Here are some alternative forms of revenue generation that may be
considered:
 Advertising. You get to consume the product with no cash outlay and with the
costs of providing the product being covered for by a number of third party
advertisers. This has always been the business model for much of print, radio,
and television enterprises.
 Sponsorship. Alternately, instead of constantly finding a number of small
advertisers to support ad-based businesses, you may opt to focus on a few big
sponsors instead. This leads to less “clutter” on the media (as there are fewer
advertisers) and more focused messages from the sponsors.
 Donations. This is often the business model of choice for non-profit
organizations but also the model that fuels a number of online and mobile
products such as games and productivity apps. These organizations and
developers hope that while their products or services are being offered for free,
enough people will be grateful and provide a sufficient pool of funding to keep
the services going on.
 Rent or Lease. For expensive assets, such as machinery or vehicles, they
sometimes become more attractive for the market to consider through renting
rather than outright ownership. This is because ownership represents
significantly large cash outlays while rents or lease options allows to space out
payments in predictable and manageable regular amounts. This works best when
dealing with established businesses because long-term relationships can be built.
•Subscription. Certain products and services lend well to a subscription
model. Instead of consumers buying the product at stores, a subscription
business sends the products regularly to their door in exchange for a fixed
monthly fee. This has proven to be successful for some specialty coffee
retailers, for instance, that ship coffee beans to the homes of self-styled
coffee connoisseurs and even for providers of the products such as shaving
products like Harry’s in the U.S. The advantage of subscription? Your
clients are locked in for a long term and businesses will be looking at
predictable cash flows
 But even if your business model relies on simple purchase
transactions, there are still issues that need to be made clear. Would you be
selling to individual consumers? If so, are you selling single packages or
services, or are you selling in bulk? Would you rather sell to organizational
and bulk buyers as these assures you of greater volume of sales per
transaction?
The critical part of the business modeling would be the balancing act
between the target number of consumers, the profit margin goal per unit
sold, and the acceptability of the resulting price. This is where the proper
selection of a target market comes in.
If you are selling high quality spa services with highly paid attendants
and plush amenities, then there will be a need for high prices in order to
cover the high overhead. Therefore, it may be best to focus all sales efforts
toward an upscale clientele. Otherwise, average consumers may find the
prices too prohibitive. Part of the business modeling then includes the
development of strategies for reaching out attracting an upscale market.
Also, you will need to balance sales volume with profit margins. As a
rule, if you are selling in low volumes, then you will need high margins. If
you are selling high volumes of your product, then you can afford to have
low margins, then this is the sweet spot that you would want to always be
in (though it is common). If you have low volume and low margin, then
you business is unlikely to survive
The Business Plan
Plans rarely come to fruition exactly as conceptualized but this is not a reason
to not plan everything out. The business plan serves as the road map for bringing the
product idea to life and it specifies the details that would help to make the selected
business model work.
There is no single standard for preparing a business plan. Some of the most
successful businesses began as plans scribbled on a few pieces of paper. Others are
more comprehensive and could even be the result of detailed doctoral dissertations.
However these are written, a business plan would best contain the following at the
very least:
 Statement of opportunity. This refers to the identified market opportunity that the
proposed business seeks to address. It could be in the form of an untapped market,
growing demand for an existing product category, or even a potential market for an
untried product offering.
 Environmental analysis. Key issues and trends in the environment, both macro and
micro, that should be noted when assessing the business proposal.
 Market estimates and market segments. Estimated size of the total potential
market along with descriptions of the different possible market segments and their
estimated sizes.
 Competitive analysis. A roundup of the existing competition along with existing
substitutes and potential substitutes together with their strengths and weakness. An
analysis of the ease or difficulty of entry into the industry would also help.
 Business strategy. Details of the proposed business including the product
concept, the logistics required for its mobilization, the organization
structure needed, and the methods for product distribution among other
things. The details are often what will have to be adjusted, refined, or even
drastically modified moving forward. But at the very least, this will serve
as a draft blueprint on how to bring the idea of life.
 Risk analysis. Informally speaking, this is a list of things that could go
wrong along with a corresponding list of safeguards and contingency
actions to address these. The sooner these are anticipated, the more airtight
the plan becomes.
 Financial forecasts. Estimates of financing required for initial
capitalization, asset acquisition, working capital, and inventory. The
forecasts could be for the first three to five years of operations and should
include cash flow forecasts. Ideally, cash flows should become positive
within that period, indicating a self-sustaining venture. For proof of
viability, the venture should eventually become profitable and yield an
acceptable return on investment.
Competitive strategies
Much of your business development plans will center around the
question of “How can I compete effectively in the market?” even if you
manage to create a new product or service idea that is very unique and
with no pre-existing competition, this question will still be relevant
because you still will have to determine how you can compete over the
long term, especially once competition does come in.
There are generic competitive strategies that you can consider
when developing your business idea. These are (1) least cost, (2)
differentiation, and (3) niche strategies.
Least cost. This strategy involves producing goods or services a
the least possible cost, and then passing these to consumers through low-
priced, affordable products. This strategy requires an obsessive attention to
operational efficiency---finding the cheapest ways to produce a product or
service, investing in the most economical production methods and
technologies, and constantly doing research on even more economical
ways of offering the products in order to sustain this ,low-cost leadership
for the long run. A recognized low-cost leader such as CD-R King, for
instance, has invested in building supply-chain relationship with
economical gadget manufacturers in China.
 Differentiation. This strategy involves a lot of brand-building, with
an effort to get the market to associate the brand with particular benefits
that. Hopefully, will be distinctly associated with the brand. The classic
example of a differentiator is Coco-Cola. It invests a substantial percentage
of its revenues to marketing and promotions in order to constantly build its
brand image. Coca-Cola may not be the “best” beverage in the market
today but in the minds of countless consumers, it is the best because they
have learned to associate a number of attributes and benefits with the
product.
Niche. A niche strategies is one that focuses on the needs of a very
specific target market, usually a market that is small enough or specialized
enough that it requires particular expertise. For instance, a company can
focus on the production of tools for architects or a textbook publisher can
focus on the needs of a surgeons. Small markets do not draw as much
attention and therefore tend to not be as competitive as large markets are.
Therefore, if you are a small enterprise, finding a niche market to serve
that is sized just about right for your own enterprise’s size can make for an
effective match.
LESSON 2

SERVICE STRATEGIES
Goods vs. Services
What makes selling services different from selling tangible goods?
We have noted how, for our purposes, the term “product” applies to anything that is
offered to satisfy the needs and wants of consumers, whether these are tangible goods or
intangible services. Nevertheless, we do need to step back momentarily, at least for this
lesson, in order to discuss the critical differences between goods and services.
Goods, refers to tangible products that consumers can actually observes with their
senses. Goods are objects with physical manifestations and attributes that can be detected by
our senses.
Services, on the other hand, refer to intangible offerings that are abstract in nature
and cannot be observed with our senses. In fact, a key characteristic of services is that act of
delivery itself is the product.
Here are some examples of service as products:
 Banking, investments, and insurance
 Hotel accommodations
 Restaurants, bars, and catering
 News and entertainment
 Transport and freight
 Education
 Health care
 Wholesaling and retailing
 Professional consultation
 But wait, you may ask, does not banking involve tangible
banks with tangible tellers and tangible papers? Does not hotel
accommodation involves tangible hotel rooms and grand lobbies?
Does not restaurants offer tangible food on tangible tables and
tangible chairs?
The answer is yes, but although banks do features tangible
furnishings, banks are not selling these per se. Banks sell financial
packages (intangible) and financial advice (intangible). Everything
else simply helps to support these primary business offerings.
While hotels do offers hotel rooms with luxurious beds, again
these amenities per se are not being sold. Instead, their use for a
given period of time is what is being sold and this too an intangible
offering.
Restaurants offer a mix of both the tangible and the intangible.
This explains why food critics, for example, rate both the food
(tangible) and the quality of service (intangible).
So aside from tangibility, what else differentiate services
from goods? Here are some distinctions:
 While customers get to own goods, they do not gain ownership
of a service. This is because, obviously, there really is not
anything to own.
 The customer is typically an active participant in the production
of the service. Legal consultation, for instance, involves heavy
interaction between the lawyer and the client. On the other
hand, ordering food at a diner involves the waiters taking
orders from the customers.
 The product experience is typically a composite of a number of
factors. Your experience of a hotel is often the sum total of the
quality of the furnishings, the efficiency of the wait staff, the
courteousness of the reception, lighting, food choices, facilities,
and a whole lot of other elements.
 There is a greater variability in the inputs and the outputs of a
service. Medical care, for instance, depends on how much
information a client is willing to offer along with the actual
skills of the attending physician. Therefore, it is far more
difficult to control the quality of the product (the service).
 It is typically difficult for customers to evaluate the quality to
the service itself. Clients are generally not experts in assessing
service quality on a technical level. Therefore, they rely on
other indicators that become proxies for quality, including
amiability and pleasing personalities of the service providers.
 Time is a significant factor for assessing service quality. This
could go either of two ways: consumers are either procuring
the service because of its promise of speed and efficiency,
such as in the case with over-the-counter banking services, or
they are getting the service for pampering and indulgence, in
which case they are looking for as long a service offering as
possible.
Because customers have difficulty assessing the technical quality of
service delivery, the average consumer will tend to evaluate a service
based on the person-to-person experience.
A study was conducted in the U.S. to determine the kinds
of doctors that typically get sued by their patients. Surprisingly,
the study discovered that there were doctors who did everything
right and still got sued. At the same time, there were doctors who
made mistakes that seriously affected their patients’ health and
yet they did not get sued. The study discovered that the common
denominator of doctors who do not get sued was that they
typically have very cordial relationships with their patients, with
great bedside manner and good social skills. Meanwhile, the
doctors who did everything right and yet still got sued typically
had more questionable social skills and did not engage their
patients on a person-to-person level, preferring to be strictly
business when dealing with them. Clearly, it was not the success
or failure of the service that mattered but rather their rapport
with their patients.
Types of service processes
Services can be enacted through the use of tangible objects (i.e., the service is
still intangible, but it is served via tangible tools) or it can be purely intangible.
Services can also either be directed toward the “processing” of people or services
can be applied to the processing of people’s possessions.

Table 1
Types of Service Processes

Directed at People Directed at Possessions

Tangible Acts People Processing Possessions Processing

Airlines, hospitals, hotels, Freight, repair, cleaning,

restaurants landscaping, retail
Intangible Acts Mental stimulus Processing Information Processing

Broadcasting, consulting, Accounting, banking,

education, therapy insurance, legal, research
 Airlines, for instances, primarily involve the delivery of
people to different destinations, in effect “processing” them.
Again, the act of delivery is the product itself. When applied
to their possessions rather than to the people themselves, the
service is now considered as freight handling and it is a
service that is now directed toward the processing of what
people own. In the same way, appliance repair is a service that
is directed toward the processing of tangible objects.
Services can also be applied to the processing of
information. Accounting services, for instance, involve the
generation of reports based on transactions---all of which
involve the processing of data rather than actual objects.
When that information is transmitted directly to customers,
then this is considered to be mental stimulus, as is the case
with education.
Building Up the Service Experience
Since consumers will have difficulty in assessing the technical
quality of a service, good customer engagement matters. Again, this is
because customers will tend to evaluate services based on the quality
of their interaction rather than the merits of the actual service itself.
Why do Jollibee and its affiliate stores (Chowking and Greenwich)
offer a level of service quality for the mass market that is superior to that
of lesser quick-service stores? The answer lies in training, training, and
training. The benchmark has been McDonald’s that has its very well
regimented training program for its service crew. Jollibee early on sought
to emulate the McDonald’s model, standardizing crew service quality and
ensuring that everyone serves with a smile. It is not always perfect,
especially when dealing with crews of franchise branches, but
mechanisms are also in place so that if ever there is indeed an
unsatisfactory customer experience with the service, the customer can
report the branch to Jollibee’s head office. Branches that do not follow the
strict customer service satisfaction protocols could go so far as lose their
franchise!
The following are service elements that should be taken into
consideration in order to build an excellent overall customer experience:
Personnel Selection and Training
For services that are delivered through personnel, great attention
should be given to the selection and training of sales and front-liners as
they serve as the primary conduits between the business and clients. A
retail store, for instance, will often be evaluated based on the quality of
the interaction between the sales personnel and the customers.
Personnel must be trained to converse confidently with the target
market and to speak their language as best they can. A business that
targets an upscale clientele, for instance, may have to hire service
personnel who are also from a high socio-economic class in order for
them to be able to engage comfortably with the clients.
Personality will also have to be taken into account. Does the
service require effervescent kinds of personalities, for instance? This will
be difficult attain via training alone. Therefore, the selection of service
crew will be of primary importance. Personnel may in fact have to be put
through exercises that evaluate how well they can perform under duress
or under performance-level situations.
User Interface
For service that are delivered through automated means, such as
ATMs and online services, the quality of the service will be assessed
based on the ease of use of the service. This is why online services
need to have excellent user interfaces (UIs), making it easy for
consumers to navigate website and being intuitive enough to be used
with little or no assistance.
Points of Contact
As services are evaluated based on a composite of factors, all
points of contact or avenues for interacting with customers should be
managed and controlled. This includes the atmosphere of the service
venue, the quality of the seating in waiting areas, the type of music
played, and perhaps even the scent in the air.
• Many utility firms use third-party contractors when handling home
servicing issues. Problems, however, arise when these contractors are
simply hired with little or no training or brand management s per the
usual standards of the utility firm. The result is that a contractor may
do a house call while driving a beaten up truck, for instance, and this
instantly affects the customer’s perception of the utility firm itself---
even if the contractor is not exactly employed by the firm.
 Banks may do their best in making the service experience as
excellent as possible inside their promises. But they may forget all
about the security guard who happens to be provided by a security
agency. At worst, the guard may exhibit an intimidating
personality that immediately puts off an incoming customer which
effectively destroys their perceptions about the quality of the
bank’s services.
 A restaurant may strive to offer the best possible food and
customer experience. But if parking space is hard to find or if it
poses a great difficulty to customers, then this can affect their
overall experience as well.
LESSON 3

BRANDING
What is in a Brand?
The social contract that lies behind every brand.

You may say that modern marketing is pretty much

obsessed about the brand. Brands are developed, nurtured,
grown, expanded, and generally managed in order to maximize
their value both to the business and to their consumers at large.
Well-managed brands reward their owners with generous
business valuations and popular brands can even become
cultural movers and shakers.
Seeing that it is the symbol, the shortcut, and the cerebral
device that best connects customers with a manufacturer's
product, a brand has to be managed with utmost fervor.
A BRAND is a mark of distinction that can be sensed
usually in the form of names or terms, signs or symbols, design
elements, or even a combination of these, and utilized for the
purposes of identifying and distinguishing the goods or services
of one provider from another.
 Most people tend to think of a brand as being simply a label. But
the truth is, brand go beyond just being quick reference for labelling
goods and services. A brand, in fact, represents a concise and imputed
contract between the producer and the consumer. It consists of
everything that comes to the customer or potential customer’s mind
when they see or hear the name or logo.(Drew 2013)
Here is hot it works: a consumer has a need that has to be
addressed. The consumer searches for possible solutions (competing
products) and tries you product. The consumer really likes your
product. The consumer then remembers your product’s brand so that
in the future, the consumer will know to just pick you product.
This scenario has two implications: first, it implies that a key
purpose of a brand is to serve as a mnemonic device that facilities that
reconnection of a customer with a particular experience that has
proven to be satisfying. Second, it also implies that there will be
consistency in the experience---that if the customer buys the product
again, there is implied assurance from the producer that the experience
will still be the same.
Consistency is a significant factor in brand management. Consistency, in
fact, is what makes the imputed contract between producer and
consumer possible.
The following are the function of a brand:
 It identifies the product or service, enabling customers to
accept, reject, or communicate their opinions about it to others.
 It communicates message to the markets and to the public at
large, whether the messages are intentionally or unintentionally
generated.
 It functions as a legal property, allowing its owner to invest
in building up the value of the brand.
Origins of branding
The etymology of the word brand itself provides glimpses into the
origins of branding. Back in the days of Medieval Europe, it was a
common practice to claim ownership of cattle and other chattel by
branding or making them with a hot iron (brand = burn in German).
Since literacy was rare, brands were generally in the form of visual
symbols. This also held true for heraldry, which was the complex
system of coats of arms and heraldic badges that were used to signify
membership to a particular family, location, or organization
While branding in that respect reflected issues of ownership and
belonging, visual signifiers were also eventually used to distinguish
the products of specific artisans, such as on tools by blacksmiths and
metalwork. Visual signifiers also made it easy for people to identify
specific commercial establishments, such as market stalls, butchers,
and taverns.
Branding as we know it today, however, was a necessary
outcome of industrialization. As products were produced in bulk for
wide distribution, there came the need to identify the source of the
product in order to properly trace their origins. Before products
became individually packaged, manufacturer logos were typically
branded onto the crates and barrels that were used for shipping.
The brand activist book No Logo explains the origin of branding
this way:
“The first task of branding was to bestow proper names on
generic goods, such as sugar, flour, soap, and cereal, which
had previously been scooped out of barrels by local
shopkeepers. In the 1880’s, corporate logos were
introduced to mass-produced products like Campbell’s
Soup, HJ. Heinz pickles and Quaker Oats cereal. As design
historians and theorists Ellen Lupton and J. Abbott Miller
note, logos were tailored to evoke familiarity and
folksiness... In an effort to counteract the new and upsetting
anonymity of packaged goods.” (Klein 2009)

As products expanded their reach toward territories that were new grounds,
there came a need for products to “explain themselves” or else face difficulty
competing with the existing local competition. This, along with increasing
literacy, led to the development of packaging that both sought to attract
customers on an aesthetic level while seeking to also explain the product’s
benefits.
Elements of the Brand
A brand is not just a name. Today’s brands are composites of various
elements including:
 Trade name: The trademarked name by which the product
is to be known as, such as Coca-Cola, Google, and
Jollibee. Trade names are registered through the
Intellectual Property Office.
 Generic Category: the category in which the brand would
fall under, such as beverages, search engine, or quick
service restaurant. The Intellectual Property Office
requires that brands explicitly specify the categories 65that
they would fall under.