BUS 620 Week 3 Assignment

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Chapter 7

Product Differentiation and Brand Positioning

Associated Press

Learning Outcomes

By the end of this chapter, you should:

Understand the nature of the brand as the primary unit of analysis in marke�ng management and its rela�onship to brand awareness and image. Conceptualize key brand-related concepts including brand equity, loyalty, and perceived quality. Recognize the significance of product posi�oning as the key element of marke�ng strategy that drives all of the marke�ng mix decisions. Develop a prac�cal understanding of how to iden�fy the best posi�oning strategy for a brand within a compe��ve market. Appreciate the strategic significance of product differen�a�on and know the alterna�ve bases for differen�a�ng a brand from its rivals. Recognize that the essen�al character of services makes them difficult to differen�ate from one another and iden�fy the available bases for differen�a�ng the quality of one service provider from another.

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Ch. 7 Introduction A brand can be defined as a “name, term, design, symbol, or any other feature that iden�fies one seller’s good or service as dis�nct from those of other sellers” (The American Marke�ng Associa�on, 2011). Brands can be assigned to iden�fy a single product, a collec�on of related products, or all items of goods and services created by a single seller. The most essen�al func�on of a brand name is to uniquely iden�fy one product or family of products as dis�nct from others. The brand provides a conceptual founda�on to which sellers can a�ach product a�ributes, promo�onal messages, and percep�ons to shape a unique iden�ty in the marketplace.

The first sec�ons of this chapter focus on the meaning of brands and branding. The concept of brand equity is introduced as a means of capturing the value and significance of crea�ng powerful product iden��es. Building from this base, product posi�oning and differen�a�on are explored. A four-step posi�oning process model is introduced based on an understanding of the linkages between buyers’ percep�ons of brands and their product-specific needs and expecta�ons. The final sec�on of the chapter focuses on product differen�a�on and its rela�onship to product strategy. Three poten�al sources for effec�vely differen�a�ng one brand from its compe�tors are iden�fied: tangible a�ributes, perceived benefits, and price.

* * *

It is common to hear people in nonmarke�ng areas of business management doubt the impact of marke�ng programs. A brand manager for a large West Coast retail chain found an interes�ng way to respond to a colleague when she expressed her doubts about the power of branding. He challenged her to put her skep�cism to the test. “Over the next few days, try replacing your 7-year-old’s favorite brand of cereal with a similar one. Remove the brand-iden�fying patches and logos that are s�tched into her sneakers and backpack. Replace your 5-year-old son’s Mickey Mouse DVD with one featuring Mighty Mouse. They’re about the same, right? And insist that the kids change brands of toothpaste before they go to bed tonight.” I guess we can’t know the outcome of this test with certainty since she was unwilling to make even one of the changes he proposed.

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Familiar and consistent packaging themes promote brand awareness and recogni�on for Maxwell House coffee.

Associated Press

7.1 Building Brand Image and Brand Awareness Brand image is a term used to refer to the percep�on of a brand in the minds of current and prospec�ve buyers. Some�mes referred to as brand iden�ty or brand personality, it is a composite of what the brand means to the buyer in terms of a�tudes and expecta�ons. A consumer’s percep�on of brand image serves several important func�ons. It simplifies the shopping process. If a buyer was pleased by a prior purchase, the brand enables him or her to find the same product again next �me. In this way, brand names convey informa�on to buyers about product a�ributes, quality, and consistency. Over �me, this promotes brand loyalty among sa�sfied customers.

In all markets, brand names enable buyers to organize informa�on about compe�ng products in their mind. Brands provide anchor points to which posi�ve and nega�ve associa�ons are a�ached over �me. These a�achments may even extend across genera�ons. Preferences for Maxwell House coffee, Ivory soap, or Ford trucks may be built on percep�ons carried forward from parents to children. As we saw in Chapter 4, an individual’s a�tude toward a brand provides the psychological framework for organizing product knowledge in a systema�c way.

The brand is typically the unit of analysis and planning for marke�ng managers. Marke�ng plans and specific marke�ng mixes are usually created to promote, distribute, and sell products iden�fied by one specific brand name. In this sense, the func�on of the marke�ng mix for any given product is to shape buyers’ percep�ons of the brand’s image. Central to this task are the promo�onal elements of the marke�ng mix. Adver�sing messages, sales presenta�ons, publicity events, and sales promo�ons are all intended to shape the target market’s percep�on of the brand. Decisions related to pricing strategy, distribu�on channels, and the quality of the product itself also impact the process of building a brand image. In the final analysis, brand images are created by customers based on the influence of marketer-controlled inputs, the counterac�ng impact of compe�tors’ marke�ng programs, and the customers’ direct experience with the brand and its alterna�ves in the product category.

Brand awareness is a general measure of consumers’ knowledge of the existence of a brand. It is the first preliminary step in the purchase decision process that ul�mately leads to a sale. Since it is a necessary prerequisite to sales, it is a primary marke�ng objec�ve for all brands. As a commonly used performance metric, brand awareness is expressed as the percentage of the target market that recognizes or knows of the brand by name. Top-of-mind awareness is measured by asking customers to indicate the first brand that they recall when the product category is men�oned as a prompt.

Think About It

Ask some friends outside of class which brands come to mind when you men�on the following product categories: car �res, toothpaste, fast food, and canned soups. All of their answers won’t be iden�cal, but certain brands will usually wind up on top. If you were to pose this ques�on to a random sample of 1,000 people, the percentage of people responding Goodyear, Crest, McDonald’s, and Campbell’s would be higher than the brands’ actual market share.

Why should this be the case?

The rela�ve value of high brand awareness in any specific situa�on will depend on several factors. For low involvement products (e.g., candy), the absence of brand awareness may represent a low barrier to sales since consumers exert rela�vely li�le effort in the decision-making process. In this context, simply being an unfamiliar name could be an advantage if the buyer is seeking a new experience. For first-�me buyers in high involvement product categories (e.g., home appliances), the brand name itself represents a unique bit of informa�on that is o�en relied upon as an indicator of product quality. The lack of confidence that comes from having no experience in the category tends to inflate the value of familiar brand names as first-�me buyers seek to minimize the risk of making a poor choice. Consequently, newlyweds shopping for appliances o�en look for brand names that they are familiar with from their childhood.

Think About It

Although percep�ons of brand image tend to become very well established over �me, consumers who are new to any purchase situa�on represent a blank slate for marketers. Consider the way that colleges and universi�es work to shape the ini�al impressions of prospec�ve students and their parents. Long before se�ng foot on the campus, poten�al recruits are o�en inundated with posi�ve images and messages about schools, par�cularly from online sources. Compare this process to way in which both real estate agents and banks approach first-�me home buyers.

How do these types of customers and brands differ?

What brand features are typically stressed to persuade each of these audiences?

Over �me, familiar brand names become synonymous in consumers’ minds with the products that they represent just as personali�es are inseparable from people. The unique iden�ty and corresponding a�tudes acquired by a brand name have substan�al value when they are consistently reinforced by posi�ve experiences with the product. These posi�ve associa�ons in the mind of the consumer have real, tangible market value that is o�en referred to as brand equity.

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The brand equity concept is complex and mul�faceted. It encompasses many dimensions of the rela�onship between consumers and brands.

7.2 Brand Equity Management Brand equity is, in simplest terms, the value of a brand based on consumer a�tudes about posi�ve brand a�ributes and the favorable consequences of brand use. When considered in greater depth, however, brand equity can also be appreciated as a fairly intricate, mul�faceted construct. Figure 7.1 illustrates the full complexity of brand equity as developed by David A. Aaker (1996).

Figure 7.1: Aaker’s model of brand equity

In this dissec�on of the concept, brand equity is defined by a set of five underlying classes of assets that contribute to a posi�ve percep�on of the brand name in the mind of the buyer: brand loyalty, brand awareness, perceived quality, brand associa�ons, and other proprietary assets.

Dimensions of Brand Equity

In B2C markets, brand loyalty refers to the reliable tendency of consumers to consistently purchase the same brand within a given product class. In B2B markets, the emphasis tends to shi� from product-specific loyalty to consistency in buying from the same supplier repeatedly over �me, rather than purchasing across mul�ple suppliers within a category. In both kinds of markets, the value of brand loyalty to sellers is mul�dimensional. A core cons�tuency of loyal buyers provides sellers with a degree of both opera�onal and financial stability from a base of reliable sales. It reduces the costs of marke�ng and improves unit margins on sales to loyal customers. It also provides a buffer against compe��ve threats and a pla�orm for a�rac�ng new customers.

Brand awareness is a stepping stone, an essen�al first step to crea�ng sales. Though awareness by itself does not convey brand preference, higher levels of awareness provide a more familiar pla�orm or stage upon which to build posi�ve a�tudes toward the brand. In the absence of addi�onal informa�on, B2C consumers tend to have greater confidence in brand names with which they are more familiar.

Perceived quality of the brand is instrumental to a buyer’s assessment of product value and, ul�mately, sa�sfac�on with the purchase of the product. Though necessarily a subjec�ve appraisal, both B2B and B2C consumers become experts in judging product quality over the course of repeated category purchases. Consequently, the ability of a brand to meet or surpass quality expecta�ons provides buyers with reasons to repeat brand purchases. As an integral feature of the bundle of benefits delivered by the product, quality is essen�al to product differen�a�on and posi�oning strategy.

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The posi�ve brand associa�ons that consumers have with Smucker's jelly products have been created and reinforced over a span of more than 100 years.

Associated Press

As discussed at the outset of this chapter, brand associa�ons define brand image. One possible outcome of building posi�ve brand associa�ons over �me is the opportunity to leverage these exis�ng a�tudes to promote the successful launch of related products through brand extensions. For example, the posi�ve brand equity in Smucker’s jams and jellies was used effec�vely to launch its brand of peanut bu�er in a very compe��ve consumer market. Brand extensions of this type leverage posi�ve a�ributes (e.g., brand awareness, product quality) while reducing related marke�ng costs and lowering the risk of a new product trial for consumers.

The category of other proprietary assets includes legally protected intellectual property such as copyrights, trademarks, and patents. Though primarily intangible assets, items such as scien�fic discoveries, manufacturing innova�ons, and ar�s�c works have taken on greater importance and value in the informa�on age. Computers and the emergence of the Internet pose challenges to intellectual property protec�on laws; such laws were developed in an era when machine patents were intended to protect proprietary assets within manufacturing industries. Providing comparable safeguards to protect the expression of ideas through so�ware programs, algorithms, and source codes has been problema�c. Preven�ng the piracy of games, music, and movies via the Internet remains a huge challenge.

Counterfei�ng Brands

The the� of intellectual property is probably most familiar to consumers in the form of pira�ng so�ware and books and illegally downloading music from the Internet. However, the illegal appropria�on and use of trademarks, brand names, and patent-protected goods and processes represents a serious form of compe��on to the vic�ms of intellectual property the�. In the short term, sales and profitability are damaged directly. In the long term, however, the the� of intellectual property has the poten�al to discourage companies from inves�ng in new product development and innova�on.

Effec�ve intellectual property protec�on is essen�al to promo�ng innova�on in many types of industries. So�ware development, pharmaceu�cal R&D, and even entertainment-related industries require the legal means to protect proprietary ideas and products. Just as tradi�onal industries are discouraged from inves�ng in new products if they have no guarantee of realizing the full economic benefit of their crea�ons, crea�ve intellectual endeavors can be also be suppressed if financial incen�ves are reduced due to brand counterfei�ng.

According to FBI, Interpol, World Customs Organiza�on, and Interna�onal Chamber of Commerce es�mates, roughly 7 to 8 percent of world trade every year is in counterfeit goods. That is the equivalent of as much as $512 billion in global lost sales. Of that amount, U.S. companies lose between $200 billion and $250 billion. This type of the� has a major impact at home, too. According to the U.S. Chamber of Commerce, the the� of intellectual property costs 750,000 U.S. jobs a year (Interna�onal Trade Administra�on, U.S. Department of Commerce, 2012).

The retail sale of counterfeit goods and online piracy of intellectual property pose a serious threat to businesses by exposing their legi�mate goods to unfair compe��on at home and abroad. However, the impact of counterfeit goods can be par�cularly damaging to a brand’s reputa�on for quality if the imita�on products are poorly made. For most products, the inferior quality adversely impacts the level of sa�sfac�on that a customer derives from its use. For pharmaceu�cals, however, the impact of counterfeits can be deadly.

It has been es�mated that 1 to 2 percent of drugs sold in North America are fraudulent. Worldwide, drug counterfei�ng generated an es�mated $75 billion, according to the Center for Medicine in the Public Interest. Of par�cular concern is evidence that counterfeit pharmaceu�cal sales are increasing at nearly twice the pace of legi�mate pharmaceu�cal sales—approximately 13 percent annually (Center for Medicine in the Public Interest, 2012). The composi�on of fraudulent drugs can include glue, chalk, and pes�cides, as well as a wide range of addi�onal toxic and poten�ally fatal elements. People consuming counterfeit drugs are at risk for serious health problems including unexpected side effects, allergic reac�ons, and a worsening of the health condi�on the drug was intended to treat or cure.

The sale and distribu�on of counterfeit drugs has serious implica�ons throughout the world. The World Health Organiza�on’s (www.who.int) malaria eradica�on ini�a�ve has suffered significant setbacks over the past few years due to the sale of fake pharmaceu�cals. The latest and most effec�ve treatment for malaria comes from a plant origina�ng in China known as artemisinin. However, its effec�veness is being undermined by fake and poor-quality an�-malarial drugs that are also being traced back to China and are flowing into Africa and Southeast Asia. Counterfeit an�-malarial drugs not only are poten�ally harmful to the individuals who consume them, but also may help the malaria parasite develop an immunity to artemisinin (ABC News, 2012). Though it is difficult to precisely calculate the impact of the damage, there’s no doubt that it is substan�al since hundreds of thousands of packets of fake an�-malarials are in circula�on annually.

Measuring Brand Equity

Although brand equity could be a poten�ally valuable metric for marke�ng managers to use in evalua�ng the value added by marke�ng programs, there is not a single generally accepted basis for assessing it. However, two measures of brand equity can be used to provide an inexact appraisal of a brand’s equity value.

The price premium that a branded product commands above and beyond the retail price associated with generic or unbranded compe�tors provides a general approxima�on of the brand’s equity value. For example, if buyers are willing to pay 25 percent more for Starbucks coffee over generic compe�tors, the difference

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Consistent quality and taste are important ingredients in Starbucks’ recipe for differen�a�ng itself from compe�tors.

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can be a�ributed to brand equity. This is an ROI perspec�ve that recognizes the value of past expenditures on efforts to market the brand as investments in building equity.

An alterna�ve, less specific assessment of brand equity can be made based on consumer a�tude research. The target market’s strength of posi�ve product-specific associa�ons for a given brand demonstrate brand equity. Assessing the rela�ve strength of one baseline brand versus others can provide a valuable perspec�ve on the brand equity of compe�tors within a product market. Of equal value, this type of research can reveal opportuni�es to reinforce weak spots in the market’s perceived quality of a given brand.

Building substan�al brand equity is ul�mately dependent on how consumers perceive the value and characteris�cs of the brand rela�ve to its nearest compe�tors. One of marke�ng managers’ primary responsibili�es is to create a blueprint for developing the most advantageous impression possible of a brand. The term most o�en used to describe this strategic impera�ve is product posi�oning.

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7.3 Positioning Strategy Product posi�oning is defined as “the way consumers, users, buyers, and others view compe��ve brands or types of products” (American Marke�ng Associa�on, 2011). The term is also commonly used to describe the strategy used to achieve the intended posi�on in the market rela�ve to compe�ng brands. It is an essen�al, central concept in the process of marke�ng management. Following market segmenta�on and the selec�on of a target market, managers need to determine how the brand will be posi�oned rela�ve to compe�ng brands within the product market. All of the marke�ng mix decisions that determine the success or failure of the brand are based on this core strategic decision.

The purpose of product posi�oning is to communicate and establish the intended brand image in the mind of the target audience. How the brand is posi�oned rela�ve to its compe�tors must reflect an understanding of the target market’s needs and the compe��ve advantages inherent to the brand. Successfully posi�oned brands are clearly understood by the intended audience. They are aware of the brand, understand the benefits of using the brand, and know how the brand is different from compe�tors’ products. The ul�mate objec�ve of posi�oning in this regard is to provide a brand that is understood by the intended customer as fi�ng his or her needs and preferences be�er than any available alterna�ves.

Both tangible and intangible perceived differences contribute to the process of differen�a�ng a brand and establishing the desired posi�on in the consumer’s mind. An emphasis on the promo�on of product features related to the substan�al, physical quali�es of the product (e.g., monitor screen size or resolu�on) is generally preferred when communica�ng a posi�oning strategy for high involvement products. The lack of substan�ve points of differen�a�on and consumer mo�va�on to evaluate brands for low involvement products favors reliance on broad conceptual themes (e.g., popularity with peers).

Without regard to the primacy of tangible or physical characteris�cs in the posi�oning of a brand, a perceptual dimension is invariably involved simply because the process ul�mately takes place in the mind of the consumer. This becomes increasingly evident over �me as buyers learn to associate the physical characteris�cs of the product with the brand. That is, the customer’s percep�on of brand image or personality comes to represent a composite of the underlying tangible traits. This imaging effect occurs in both B2C and B2B markets.

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Jollibee posi�ons its brand in part on the basis of several intangible quali�es such as value, fun, and originality.

Associated Press

7.4 The Positioning Process The cri�cal importance of posi�oning in driving marke�ng mix decisions warrants the development of a systema�c, process-oriented approach to making this core strategic decision. The posi�oning process described here is intended to aid managers in establishing brand image goals and developing the strategic path to achieve them.

Step 1: Identify the Competitive Set

Since a brand’s posi�on is defined by its rela�onship to compe�tors’ products, it is essen�al to begin with an understanding of who the compe�tors are. These are not always limited to others in the immediate product market. Consider the case of the Jollibee fast-food restaurant chain based in the Philippines. The company entered the U.S. market in 1998 featuring an eclec�c menu of burgers, rice-based meals, noodle dishes, hot dogs, pasta, and fried chicken. When evalua�ng the market to determine Jollibee’s nearest compe�tors, it is apparent that not all of its rivals are fast-food restaurants. The menu items drawn from authen�c Southeast Asian cuisine only have direct counterparts in tradi�onal, full-service restaurants. Consequently, its compe��ve set includes the usual fast-food alterna�ves as well as some Asian-inspired fine dining restaurants. Similarly, within the fast-food category, some compe�tors will be posi�oned closer to Jollibee’s desired brand image than others. How the company defines its target market will determine who its closest compe�tors are.

Step 2: Determine Target Market Perceptions

Developing an effec�ve posi�oning strategy requires a thorough understanding of the target market. This necessitates reliable market research on the composi�on of customer a�tudes with par�cular emphasis on the target benefit segment of interest. The most essen�al informa�on required to create the best possible fit between the brand and target market is the focus of the mul�-a�ribute model of a�tude forma�on presented in Chapter 5. Using this approach to market research, three cri�cal ques�ons must be answered before the best posi�oning strategy can be determined. What product a�ributes or benefits do these customers use to evaluate alterna�ve brands? How important are each of these dimensions to the construc�on of their product-related a�tudes and decision-making? How do each of the brands compare on the most heavily weighted a�ributes?

Based on the responses to these ques�ons, marke�ng managers can determine the key elements of brand differen�a�on and posi�oning that will have the greatest value in crea�ng the desired brand image in buyers’ minds. These elements may be func�onal, tangible product a�ributes or something more abstract and conceptual. In highly compe��ve markets, the benefits most earnestly prized by consumers may be delivered equally well by mul�ple compe�tors. In these cases, the focus of the differen�a�on strategy may be on less important features where brands are truly dis�nct from each other or shi� en�rely to abstract a�ributes unrelated to the performance characteris�cs of the product.

In the case of Jollibee, the target market for its U.S. franchises seems to be families with young children. Research would need to determine which product features are most important to this segment when choosing a fast-food restaurant. The alterna�ve tangible a�ributes could include factors such as loca�on, availability of a kid’s menu, variety, nutri�on, and product quality. However, intangibles such as good value for money, a fun place, and something different could also play a significant role in the differen�a�on and the ul�mate posi�oning of the brand.

Step 3: Analyze the Positions of the Brand and Its Competitors

Working from the market research collected in the preceding stage, the next step is to evaluate the brand’s strengths and weaknesses rela�ve to compe�tors’ brands and the target consumers’ expecta�ons of an ideal brand. In most cases, brand perceptual maps or posi�oning maps are created to compare compe��ve brands on the a�ributes or benefits that the target market regards as most important. Figure 7.2 is a simple posi�oning map for local fast-food alterna�ves based on the summary criteria of price and quality.

Figure 7.2: Posi�oning map for fast-food restaurants

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Understanding how brands compete on the basis of price and quality is o�en a first step in the development of a more detailed and thorough understanding of the posi�oning strategy.

Consider the specific compe��ve challenge confron�ng Jollibee foods as a result of its decision to enter the U.S. fast-food market. The compe��on from solidly entrenched rivals such as McDonald’s, KFC, and Pizza Hut poses a formidable obstacle. When evalua�ng the strengths and weaknesses of the Jollibee brand concept against these alterna�ves, marke�ng managers might iden�fy opportuni�es along several important dimensions. In terms of menu variety and uniqueness, for example, the product array offered by this newcomer differs substan�ally from the usual mix of fast-food op�ons available in most markets. In addi�on, an uncompromised focus on serving children and their parents might also provide a significant and valued point of product differen�a�on. However, although this new franchise would need to provide good value for money in mee�ng the needs of its target market, the ability to compete directly on price with price leaders such as McDonald’s may not be feasible.

Posi�oning maps are a par�cularly useful tool for marketers since they can be used to provide visual representa�ons of how rival brands are perceived. These charts can be designed to convey the informa�on in any manner the user finds most helpful. Sta�s�cal techniques such as mul�dimensional scaling (MDS) enable researchers to display more than two product a�ributes on the same map by transla�ng data into a visual representa�on of the pa�ern of similari�es between objects. In Figure 7.3, MDS is used to plot research data on customers’ percep�ons of compe�ng car brands. Brands perceived to be most like each other are nearest each other, and those most different from one another are placed at a greater distance.

Figure 7.3: Mul�dimensional scaling illustrates elements of brand posi�oning

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Mul�dimensional scaling on customer percep�ons of car brands illustrates sharp contrasts between the posi�oning strategies of different manufacturers.

In some instances, the target customers’ ideal brand is also plo�ed on posi�oning maps to provide a point of reference. It is important to keep in mind, however, that the best posi�oning strategy for any given brand is not simply to provide the maximum level of performance or benefit on one specific a�ribute. Rather, it is the unique combina�on of features and benefits that determines how successfully a brand will appeal to its target market.

Step 4: Determine Combination of Attributes

When all customers within a target market converge on a common ideal brand posi�on, each firm will compete for their business by posi�oning its brand as near to the ideal point as possible. Since no brand can ever be perfect in this respect, the resul�ng posi�oning strategy for each compe�tor is a compromise between providing a li�le more of one a�ribute at the expense of another. Consumers respond to the alterna�ve pairings of a�ribute levels according to their personal preferences and the product’s price. This is consistent with buyer percep�ons of product value (Chapter 2) as the buyer’s es�ma�on of the overall bundle of benefits received from the product rela�ve to the price paid to acquire them. The trade-offs that target customers make in this situa�on reflects their personal valua�ons of the importance and worth a�ached to each product a�ribute or benefit.

The alterna�ve situa�on exists when more than one ideal point exists within a target market. For example, buyers may want both whiter teeth and fresher breath from the toothpaste they buy, but the specific importance of each benefit and the preferred combina�on of benefits shi�s from one subset of the target market to the next. In this case, the strategy for each compe�tor is to provide the best possible fit of its brand with a por�on or microsegment of the target market by posi�oning closest to a demand cluster.

In both instances, the essence of the posi�oning strategy is to deliver a combina�on of product benefits that meets the needs of the customer be�er than alterna�ve brands. This usually entails the considera�on of more than two product a�ributes, however, since price is also an important factor in many buyers’ decisions. The rela�ve importance of product price to the value equa�on for any given segment of the market is ini�ally iden�fied in the process of market segmenta�on that precedes posi�oning analysis.

The final determina�on of the best combina�on of a�ributes to occupy the desired posi�on in target consumers’ minds is a pivotal point in marke�ng the brand. All of the marke�ng mix decisions for this brand follow from this determina�on. In terms of the overall compe��ve strategy for the brand, it specifically establishes the primary bases and direc�on for differen�a�ng one brand from the others.

Think About It

Go to Jollibee’s website (h�p://www.jollibeeusa.com/ (h�p://www.jollibeeusa.com/) ) and read about the company’s mission, values, and vision. Review the informa�on provided under the “About Us” tab to get a clear sense of the corporate culture. Then review the Menu and Services sec�ons in detail.

Based on the informa�on that you have acquired about Jollibee and your exis�ng knowledge of its fast-food compe�tors, how do you think the company should compete in the U.S. market?

Specifically, what combina�on of a�ributes and benefits will enable Jollibee to occupy the desired posi�on in target consumers’ minds?

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Volkswagen built its early reputa�on in the United States on product reliability.

Transtock/SuperStock

7.5 Differentiation Strategies for Products Product differen�a�on is the process of meaningfully dis�nguishing one product or brand from another in a way that renders it more appealing to a given target market. The strategic intent is to provide the brand with a sustainable advantage over compe�tors. This means providing buyers with value-added differences or product improvements that directly contribute to greater customer sa�sfac�on. Ideally, the basis for differen�a�ng one brand from the pack should also be difficult for compe�tors to imitate.

There are three poten�al sources for differen�a�ng one brand from compe�tors within the category: tangible brand a�ributes, perceived product benefits, and price. Price advantages, as discussed in previous chapters, are typically grounded in economies of scale and experience curve effects. Consequently, it is an op�on usually reserved for the larger compe�tors within an industry. Differen�a�on strategies based on product a�ributes or benefits can be built into the brand in many ways. The annotated list of differen�a�on factors provided here iden�fies several of the variables most commonly used to differen�ate one brand from another.

Physical Appearance: Form, Shape, Style, and Size

One of the most obvious differences between compe�ng brands in any given product category is the physical appearance. Many successful brands can be readily recognized simply from the shape of the product or packaging. Consider, for example, the dis�nc�ve shape of a Volkswagen Beetle, a KFC bucket, or a Pringle’s potato chip. The appeal of economy-sized packaging or convenience-sized products depends on the buyer’s lifestyle.

Although style preferences are subjec�ve ma�ers, the styling of a product is a physical or tangible a�ribute. Many consumer products are differen�ated primarily on style-related dimensions. For some market segments, style is the primary determinant and the course of brand preference for everything from cars and clothes to mountain bikes and home appliances.

Colors also play a significant role in product differen�a�on. Consider how fan percep�ons of NFL and college football teams are �ed to the team colors. Would McDonald’s or Wendy’s seem the same if their familiar signage were in black and green? If Black & Decker power tools weren’t black and orange anymore, would they s�ll be the same?

Product Features and Attributes

Product features are the elements of the product that relate to its basic u�lity or func�ons. They are the a�ributes that improve or impede the func�onal value or opera�on of the product. Core features are those that are essen�al to the product’s func�on (e.g., a fuel-injected engine in a car). Supplemental features are those elements that enhance the level of performance (e.g. a fuel-injected engine with a supercharger). Most consumer goods categories include several brands with added features that enhance product performance. With respect to how new features are included and incorporated into exis�ng brands, marke�ng managers need to be par�cularly mindful that buyers are responding to the overall bundle of benefits being sold. Consequently, addi�onal features must be consistent with the target segment’s expecta�ons of product quality and compa�ble with their percep�on of the brand’s image.

Think About It

Product features are a key element in differen�a�ng one brand from another. However, the natural forces of compe��on make it difficult to sustain meaningful differen�a�on on this basis for very long in most markets. Consider how quickly consumer electronics evolve over �me. New features that are ini�ally unique to one brand are quickly copied by rivals.

Patents seem to provide limited protec�on in this regard. Why?

What other steps can marketers take to extend the effec�ve life of brand differen�a�on strategies that are rooted in tangible, physical features?

Adding new features can accomplish several objec�ves for marke�ng managers. It can renew customers’ interest in a brand and keep it current with respect to shi�ing consumer priori�es. Environmentally friendly, minimal packaging designs and the use of post-consumer recycled materials are opportuni�es for packaged goods companies to respond to the contemporary concerns of many buyers. New features can also be an effec�ve strategy for extending a brand’s reach to markets or market segments. Specializing products to provide a be�er fit with the preferences of new clusters of buyers is an example of the mul�ple-segment specializa�on strategy introduced in the previous chapter.

The risks of adding addi�onal product features to differen�ate a brand are associated with losing sight of what the customer wants. Whether trying to improve the brand’s fit with exis�ng buyers’ preferences or pursuing an en�rely new target market, marke�ng managers need to make decisions based on a sound understanding of what customers are seeking from the product they are buying. Too o�en, the tendency is to add features because we can, because compe�tors already have, or because management believes it would improve the product.

The addi�on of new features, as with other bases for brand differen�a�on, comes with costs a�ached. The most common costs relate to produc�on and promo�on of the new product element, though new distribu�on-related costs are almost inevitable when any changes are made to standardized consumer goods. As with

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Cra�sman built its brand image on the trust customers had in the Sears brand name.

Ge�y Images News/Ge�y Images

every element of the marke�ng plan, the costs associated with altera�ons to the brand’s core or supplemental features must be treated as investment in future sales and evaluated based on their projected rate of return.

Performance Level and Consistency

Performance level refers to the brand’s opera�onal capabili�es with respect to the product’s essen�al func�onal a�ributes. In short, how well does it do what it is intended to do? The performance level and quality of a brand are primarily compara�ve measures. Prospec�ve buyers typically have a range of choices that correspond to the trade-offs between price and quality, called product value. The extent to which consumers are willing to pay more for be�er performance and product quality determines their percep�ons of value. Dis�nguishing between groups of buyers along the value preference dimension is a common way to segment product markets. Sears and Best Buy are among the stores best known for using this approach, breaking down product lines into good, be�er, and best categories.

Marke�ng managers need to iden�fy the preferences within their target markets and create product offerings that correspond to the range of performance levels their buyers desire. The brand op�ons made available by compe�tors will also impact product posi�oning strategies in this regard. As product markets grow increasingly mature and compe��ve, companies need to differen�ate their brands by providing be�er overall value than compe�tors’ brands. This requires providing buyers with higher levels of quality and performance for the same or less money.

Maintaining consistent and reliable levels of product performance and quality over �me is essen�al to building a valued brand image, a trusted iden�ty, and posi�ve brand equity. Consistency extends beyond the quality of the product itself to other marke�ng mix considera�ons. The promo�onal strategy for the brand must shape and reinforce a consistent percep�on of the brand over �me. The distribu�on strategy and all of the elements of the supply chain must work together to ensure reliable availability of the brand. If a product is unavailable, some poten�al new customers will be forfeited to those brands that are on the shelves; some previously loyal buyers could be lost once they are compelled at try an alterna�ve brand due to stock-outs.

Durability

The meaning of product durability is highly variable and relates to the nature of the product being sold. It is a usually a measure of how long a product will con�nue to exist or perform as it was designed to work without significant deteriora�on or loss of func�on. In B2B contexts, it is frequently used to refer to the opera�onal effec�veness, efficiency, or capacity of a product when it is being used under rou�ne condi�ons.

The value of durability is greater for some types of products than other. Many inexpensive products within a category (e.g., $3 wristwatches), convenience purchases (e.g., Styrofoam coolers), and fashion-specific purchases (e.g., a purse to match shoes) are not bought with durability in mind. For other types of products, however, the brand’s reputa�on for long-las�ng performance warrants substan�al price premiums in the market. Dr. Martens boots, Cra�sman tools, Maytag appliances, and Oshkosh B’Gosh clothing are some of the brands that have built their brand image on durability. However, B2C products that excel in this area can be found in almost every conceivable product category.

Other Differentiation Factors

The range of possible bases for differen�a�ng one product from another includes other possibili�es as well. The choice of distribu�on channels and retail outlets can make a significant impact on how prospec�ve buyers view alterna�ve brands. The manufacturer’s provisions for obtaining service a�er the sale, product warran�es, and the perceived ease of repairing a damaged product also can be used to differen�ate brands. And promo�onal messages and themes, independent of the tangible characteris�cs of the brand, always provide an opportunity to establish a unique brand image or personality within the target market.

Many goods sold in both B2C and B2B markets are a composite of both products and services. When parity exists between the product dimension of compe�tors, companies o�en seek to differen�ate their brand along service lines. Further, many valued goods consist almost exclusively of services, such as educa�on, health care, and financial and legal services. In both situa�ons, differen�a�ng services and service providers from each other encompasses some unique opportuni�es and challenges for marke�ng managers since services themselves are largely intangible.

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Domino’s Pizza rose to prominence as a na�onal chain with its 30-minute delivery guarantee.

Associated Press

7.6 Differentiation Strategies for Services The character of services can make them difficult to differen�ate from one another. Since services are intangible, they cannot be easily displayed or demonstrated. All of the physical appearance bases of differen�a�on associated with products have li�le relevance. The quality of services is typically dependent on and inseparable from the talents of the service provider and, in many instances, services are produced and consumed simultaneously (e.g., educa�on, dental care). Overall, the quality of services provided is o�en more difficult for buyers to evaluate than product quality. These characteris�cs render conven�onal product segmenta�on bases much less useful.

In both business-to-consumer and business-to-business markets, the most commonly used bases for differen�a�ng brands of services are order and delivery; installa�on and instruc�on; and maintenance, repair, and complaint response. Each of these features represents ways in which service managers can provide added value and higher levels of service quality.

Order and Delivery

To be of value, a service needs to be provided where and when the buyer wants it, regardless of whether the good being sold is en�rely a service or primarily a product. One way that marketers can help bridge the gaps posed by �me and space is to make the process of placing an order as simple and straigh�orward as possible. Increasingly, for almost every type of hybrid product/service sold, this means online ordering. For these products, the online environment provides the ini�al point of buyer–seller contact and interac�on. Whether ordering a pizza for delivery, buying e-books, or scheduling a plumber, the simplicity and ease of the ordering process has a direct bearing on buyers’ willingness to return to the site on future occasions.

Delivering the product or service to the customer is of equal or greater importance to crea�ng customer sa�sfac�on. The dimensions of importance to product delivery include speed and accuracy. High levels of performance on these two elements are typically expected by customers as a ma�er of professionalism in B2C markets and basic competence in B2B markets. Failure to meet customer expecta�ons in terms of providing quick, on-�me delivery will create nega�ve differen�a�on of the brand or service provider in buyers’ minds.

Installation and Instruction

For goods that have a substan�al service component, installa�on may be required. This refers to all of the ac�ons required to make the product perform in accordance with its intended opera�on and the seller’s commitment. This includes everything from se�ng up household appliances (e.g., washers and dryers) to large commercial installa�ons that may require weeks to complete (e.g., enterprise applica�on so�ware, oil refinery processing equipment).

In many instances, a customer’s employees will also require specialized training services from the seller on how to properly use the equipment. In some B2B contexts par�cularly, complex products require substan�al instruc�onal or consul�ng services for a lengthy period following the ini�al sale. These services may be provided on-site or online. Increasingly, sellers use online videoconferencing to help buyers learn how to make the best use of the products they have purchased.

Maintenance, Repair, and Complaint Response

Once the ini�al purchase and installa�on have been completed, many types of products require extended service a�er the sale. The maintenance and repair service features provided by a company are intended to maintain the product in good working order and keep the ongoing rela�onship with the buyer on the best possible terms. It provides opportuni�es at regular intervals for the seller to renew his or her commitment to customer sa�sfac�on and reinforce a posi�ve brand image through the provision of necessary services. Complaints from buyers should be regarded as irregular or unplanned opportuni�es to preserve or create sa�sfied customers.

The quality of post-sale customer service varies substan�ally across many product categories. Consequently, excellent service a�er the sale provides opportuni�es to posi�vely differen�ate one brand from many of its compe�tors. The efficiency and effec�veness of a firm’s response to customers’ calls for help with products impacts more than how one specific buyer feels about the seller. Their level of sa�sfac�on with these encounters is reflected in both informal (e.g., word-of-mouth, blog pos�ngs) and formal (e.g., published customer sa�sfac�on ra�ngs) communica�ons. Companies noted for their excellence in service a�er the sale recognize that prompt and helpful responses to their customers’ most urgent concerns have a dispropor�onately great impact on customer loyalty.

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Ch. 7 Conclusion The primary strategic goal of brand differen�a�on is to shape a unique brand image and capture a compe��ve posi�on that be�er meets the preferences of the target market than compe�ng brands. Market segmenta�on, brand posi�oning, and product differen�a�on combine to reduce the threats posed by direct compe��on in the product market category. As the iden�ty of brands becomes thoroughly integrated into the minds of consumers, the costs of compe�ng decrease, unit margins increase, and opportuni�es to build on the equity of a well-established brand become evident.

In most cases, successful differen�a�on will shi� the nature of the brand’s marke�ng emphasis farther away from price-based compe��on to value- and benefit- oriented approaches. When successful, this enhances the perceived value of the product for the target market and reduces buyers’ price sensi�vity, thereby crea�ng opportuni�es to maintain a premium pricing strategy. One consequence of this shi� is to increase the rela�ve prominence of distribu�on and promo�onal strategies in the marke�ng mix. The unique contribu�ons of market segmenta�on, brand posi�oning, and product differen�a�on to the development of a firm’s compe��ve marke�ng strategies are examined in Chapter 8.

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Ch. 7 Learning Resources

Key Ideas

Cri�cal Thinking Ques�ons

1. Based on your personal experiences, do you think that consumers are consciously aware of how brands work? Under what circumstances might buyers realize that a specific experience with a product is impac�ng their a�tude toward the brand?

2. Brand loyalty is typically much stronger for consumers over the age of 50 than for younger age segments. Why do you suppose that this is true? Are future genera�ons of consumers more or less likely to be brand loyal?

3. Brand loyalty requires posi�ve reinforcement over �me. Would a bad personal experience with a brand do more damage to brand loyalty for low or high involvement products? Why?

4. Many consumers regard the the� or piracy of downloaded music, computer games, and movies as “less wrong” than stealing the same products from store shelves. Why do you think they might feel this way? What can sellers do to counteract that belief?

5. It was stated that brand equity can be measured by the price premium consumers are willing to pay for a brand rela�ve to its generic alterna�ve. Under what circumstances might this be misleading?

6. Brand posi�oning is a central concept within marke�ng management since all marke�ng mix decisions are driven by posi�oning strategy. What would happen if a manager tried to develop a marke�ng plan without first reaching a decision on brand posi�oning?

7. Brainstorm with your colleagues to come up with a new restaurant concept for your community. Iden�fy the target market. Determine how to differen�ate it from compe�tors. Work through the four-step model for developing a posi�oning strategy. Did you work through an itera�ve process or a fairly linear one to reach the final posi�oning strategy? Why?

8. Based on the work you completed for the previous ques�on, iden�fy all of the different types of bases that you might use to differen�ate a restaurant from its compe�tors. Name which ones you are most unlikely to use and explain why.

9. When devising a differen�a�on strategy for a product/service hybrid, would you be more likely to focus on the product features or service features? Provide examples to support your answer.

Key Terms

Click on each key term to see the defini�on.

brand (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A name, term, design, symbol, or any other feature that iden�fies one seller’s good or service as dis�nct from those of other sellers.

brand associa�ons (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The posi�ve and nega�ve impressions that consumers link to the outcomes related to buying and using a specific brand. They are reflec�ons of the perceived brand image.

brand awareness (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A general measure of consumers’ knowledge of the existence of a brand; the first preliminary step in the purchase decision process that ul�mately leads to a sale.

brand equity (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

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The value of a brand based on consumer a�tudes about posi�ve brand a�ributes and the favorable consequences of brand use. It is a mul�faceted construct defined by five underlying classes of assets: brand loyalty, brand awareness, perceived quality, brand associa�ons, and other proprietary assets.

brand image (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The percep�on of a brand in the minds of current and prospec�ve buyers; a composite of what the brand means to buyers in terms of their a�tudes and expecta�ons. Some�mes referred to as brand iden�ty or brand personality.

brand loyalty (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The reliable tendency of consumers to consistently purchase the same brand within a given product class.

microsegment (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A term used to describe a small, limited, precisely iden�fied division of a market. It refers to a targeted sub-segment or component of a larger defined segment.

mul�dimensional scaling (MDS) (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A set of related sta�s�cal techniques that enables researchers to visualize informa�on in ways that help iden�fy pa�erns of similari�es or dissimilari�es in data. MDS can display informa�on about two or more product a�ributes on a perceptual map to evaluate the perceived distances between compe�ng brands.

perceived quality (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The consumer’s subjec�ve opinion of of a brand’s or product’s capability to meet his or her expecta�ons and product-specific needs.

posi�oning process (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A four-step model used to iden�fy the best posi�oning strategy for a brand. Steps include iden�fying the compe��ve set, determining target market percep�ons and determinant a�ributes, analyzing compe�tors, and determining the a�ributes required to meet posi�oning objec�ves.

price premium (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The addi�onal monetary value that a customer will spend for a specific branded product above and beyond the retail price associated with generic or unbranded compe�tors.

product differen�a�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The process of meaningfully dis�nguishing one product or brand from another in a way that renders it more appealing to a given target market.

product posi�oning (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The way that consumers view compe��ve brands or types of products. The term is also commonly used to describe the strategy or strategic plan that is developed to achieve the intended posi�on in the market rela�ve to compe�ng brands.

proprietary assets (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Tangible or intangible items that contribute posi�ve economic value to a brand. This includes legally protected intellectual property such as patents, trademarks, and copyrights.

top-of-mind awareness (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A measure indica�ng which brand is first recalled when customers are prompted by the name of the product category.

Web Resources

This website links to a long and detailed PowerPoint presenta�on on the topic of product posi�oning that was created by Dr. Ed Forrest, a professor of marke�ng at the University of Alaska–Anchorage. It is very informa�ve on the topic of brand posi�oning strategy and contains many good examples and illustra�ons. h�p://www.cbpp.uaa.alaska.edu/afef/BA343-wk5-Posi�oning.ppt (h�p://www.cbpp.uaa.alaska.edu/afef/BA343-wk5-Posi�oning.ppt)

This website provides many interes�ng observa�ons and insights on the topic of product differen�a�on for small-business owners. h�p://www.more-for-small-business.com/product-differen�a�on.html (h�p://www.more-for-small-business.com/product-differen�a�on.html)