1.

Analyze phases of product introduction within the context of discontinuous and

continuous innovation. Use examples to illustrate your arguments.
2. Discuss advantages and disadvantages of weak products elimination strategies in the
case when companies dominantly use brand extension strategies.
3. Discuss theattiudebywhich brand is presented as conditional asset.
4. Which organizational form makes the best pre-conditions for the successful introduction
of new products and services? Explain why and which are the key assumptions for shaping
this organizational form in practice?
5. Comment quality measurement models and possibilities of their practical use. In which
ways results of the quality measurement may help firms in defining marketing strategy?
6. Use a practical example for explaining difference between multi-branding and brand
extension strategies. What are advantages and disadvantages firms have to think about
when they decide to use these strategies?
7. Use an example of discontinuous innovation to explain the main changes that should be
made in the marketing area and amongst potential customers in order to ensure the
acceptance of the innovation. What are the possibleways for the firm to overcome these
challenges?
8. Explain the logic of product line management extension of the product line, decision on
rationalization or on shortening of the product line, that is, on elimination of certain
products and services?
9. Explain the core difference, advantages and dangers of financial methods used to
maximize value of the portfolio and non-financial methods for maximizing portfolio value.
(It is not necessary to list the methods or to calculate their values, it is rather required to
warn for dangers these methods bring, that is, to elaborate aspects they are stressing.)
10. Explain, support and/or criticize the standpoint that branded products/services should
be sold through different sales promotion actions. Use the knowledge you have about the
brand building concept (in terms of marketing instruments) and the logic of sales
promotion, as well as its goals
11. Outline the cases in which firms make decision on repositioning. Using the example,
real or hypothetical, explain the factors that impact this decision, phases of repositioning
strategy and differences between the repositioning and brand rejuvenation. Also discuss
potential risks of this decision regarding previously targeted segments.
12. In order to attract the potential customers, firms are often using different instruments
of marketing mix. Due to the fact that these instruments impact the expectations that
customers have before

entering the service encounter, explain the way in which firms may manage the perceptions
of service quality and the challenges that come with this process.
13. Explain the set of branding decisions, from the decision to brand or not to brand, to
the final one to reposition or not to reposition, using examples from B2C and B2B
markets.
14. Discuss relations among the number of target segments that company tries to reach and
the product mix consistency.
15. Discuss risks present when the decision about new product development is being made,
in the case of products which are new for the company but not for the market.
16. Companies can use different positioning strategies in order to create a distinct product
positioning in the mind of the customer. Discuss some of them and explain essential
differences among positioning strategies related to the product from those related to
customers.
17. Traditional approach of creating comparative advantage for the company includes
using additional services in order to expand a products utility and increase customer value
perception. Explain and discuss types of value which those servicesmay add to the product.
18. Discuss main critiques of product life cycle and their impact on line extension and
brand extension strategies.
19. Discuss main goals of portfolio management of new products and the methods
associated with each of these goals.
20. Product and services have different levels of properties/attributes/dimensions which
customers can use in the process of purchasing and quality evaluation. In which way those
differences influence the companys management of the total offer creation (product and
service combination).

1.

Analyze phases of product introduction within the context of discontinuous and

continuous innovation. Use examples to illustrate your arguments.
Main phases of product introduction are:
Introduction stage
In introducing a new product (line), management should offer a limited number of models with
modular design to permit the flexible addition of variants to satisfy new segments as soon as they
are identified. Quality and quality control is highly important during this stage. Growth stage
If the product gains acceptance, it moves into a stage of more rapid sales, known as the growth
stage, because of the cumulative effect of introductory promotion, distribution and word-ofmouth influence. During this stage, the companys profits increase. At this stage, management
should focus on best selling versions, the addition of few related models, the improvement of the
product, and the elimination of unnecessary specifications with little market appeal. As far as
pricing is concerned management should focus on the market broadening and promotional
pricing opportunities. Promotion should shift the emphasis from building product awareness to
nurturing product preference. Distribution should be intensive and extensive with the addition of
new distribution channels to gain additional product exposure.
Maturity stage
If the product has achieved the market acceptance associated with the growth stage, it might be
expected that competition would enter the market. If price was not crucial at the beginning the
advent of competition would lead to a reduction of prices. During the maturity stage sales cease
to grow exponentially and they tend to stabilize and the gross margin may be reduced. During
this stage, which lasts much longer than previous stages, management is facing the most
formidable challenges. Most products are in the maturity stage of the life cycle and most of the
product decisions (changes in the products physical configuration and in the augmented
product) discussed in the previous section are made at this stage. Management should try to
break out of a stagnant sales picture by initiating changes in the products tangible and intangible
characteristics that will attract new users and/or more usage from the current users. Price should
be reduced as a way of drawing new segments into the market as well as attracting customers of
competitive products.
Management should also search for incremental pricing opportunities including private branding
contracts.
Decline stage
Finally, the product reaches the stage of decline during which it ceases to be profitable. This may
occur because technologically advanced products become available and/or because of changes in
the buyers economic environment and habits. As the sales of the product decline at this stage,
management should either eliminate the product or in the case that it is offered in a number of
versions, sizes and models, should eliminate those items, which are not returning a direct profit.
Management could follow a milking strategy in which case it sharply reduces its marketing
expenses to increase its current profits, knowing that this will accelerate the rate of sales decline
and the ultimate demise of the product. If a hard-core loyalty remains strong enough at this stage
the product may be marketed at the old or even a higher price, which means good profits.

Three types of innovations going through introduction process are: continuous innovations,
dynamically continuous innovations, and discontinuous innovations.

Theses represent a continuum, where the first term represents relatively minor innovations and
the
last term represents radically new innovations.
To improve the management of innovations, it makes sense to distinguish between types of
innovations in terms of the behavioural consequences of innovation users. At one end of this
continuum of innovation types lie continuous innovations. Continuous innovations are those
that require minor changes in user behaviours. In other words, they have a minimally disruptive
effect, while still representing a change in past behaviour. One industrial example is the Millercycle internal combustion engine, which differs from the conventional Otto-cycle engine in
producing more torque by shortening the compression stroke.
Example:

Fads, fashion, and trends are all examples of continues innovations. They may be
distinguished partly in terms of time of diffusion. Fashions refer to particular combinations of
desirable attributes. For example, brightly colour and patterned Kente cloth, woven in thin strips
in Ghana, has become popular among African-Americans as a statement of ethnic pride

At the other end of our innovation continuum is what is called discontinuous innovations.
Discontinuous innovations entail major changes in behaviour in an area of importance to
individual or group. The adoption of Green Revolution rice in Asia with its complement of
fertilizers, insecticides, and changes in farming technique is one dramatic commercial example.
In the Triad countries, the Internet, in vitro human fertilization, CD-Rom computer technologies,
and the use of electronic pagers by busy family members, are all recent examples. In the
developing nations, such things as television fax machines and airplane travel may be thought of
as discontinuous innovations.
Example:
Relatively inexpensive airfares have brought the cost of making the pilgrimage to Mecca within
the reach of many peasant farmers in Africa and the Near East. Even common consumer nondurables may be thought of as discontinuous innovations if their introduction creates dramatic
changes in individual and social behaviour. In Sri Lanka, for example, the introduction of
Western cosmetics has fuelled a crisis in the role of women, and altered gender dynamics.
Shortage of important ideas in certain areas. There may be few ways left to improve some
basic products (such as steel or detergent).
Fragmented markets. Companies must aim their new products at smaller market segments,
which can mean lower sales and profits for each product.
Social, economic, and governmental constraints. New products must satisfy consumer
safety
and environmental concerns. They must also be resilient if economic times are tough.
Cost of development. A company typically must generate many ideas to find just one worthy
of development and thus often faces high R&D,manufacturing, and marketing costs.
Capital shortages. Some companies with good ideas cannot raise the funds to research and
launch them.
Shorter required development time. Companies must learn to compress development time

with new techniques, strategic partners, early concept tests, and advanced marketing planning.
Poor launch timing. New products are sometimes launched after the category has already
taken off or when there is still insufficient interest.
Shorter product life cycles. Rivals are quick to copy success. Sony used to enjoy a threeyear
lead on its new products. Now Matsushita can copy them within six months, barely leaving
Sony time to recoup its investment.
Organizational support. The new product may not mesh with the corporate culture or
receive the financial or other support it needs.

2.

Discuss advantages and disadvantages of weak products elimination strategies in the

case when companies dominantly use brand extension strategies
Apart from organizing for developing or/and managing products and services, a company should
decide upon the organizational arrangements for eliminating products and services which do not
meet their objectives. The organizational issues relating to product/service elimination refer to
both the involvement of various functions in the process and the formality of the elimination
process. Formality of product elimination process Apart from the modes of organization for
product elimination, another important organizational characteristic is the formality of the
product elimination process.
Product elimination process is composed from the following dominant structural characteristics
(Avlonitis, 1985):
Assignment of responsibilities the presence and/or degree of defined and specialized roles
and assigned responsibilities regarding product elimination decision making.
Documentation the extent and intensity of formal paperwork pertaining to product
elimination.
Systematic behaviour the degree to which regular systematic procedures and rules govern the
product elimination activities.
The higher the number of products in the companys product mix, the more formal is the
product elimination process.
Brand extension
The brand extension decision is particularly important for medium-sized companies that do not
have the necessary resources to support many different brands.
More specifically:
1) Brand extensions: (a) have lower start up and maintenance advertising costs compared to
brands introduced with a new name, although they usually enter more competitive markets. (b)
Achieve higher sales. (c) Have higher chances of surviving in the market, as only 30 per cent of
new brands were found to survive more than four years, while this percentage rises to more than
50 per cent for brand extensions.

2) The above results refer mainly to experience goods , whose quality cannot be visually
inspected, as well as products that are introduced after the early stage of the product categorys
life cycle.
3) The evaluation of brand extensions by consumers is influenced mainly from the quality of the
parent brand and the fit between this brand and its extensions. Fit refers to the perceived
applicability of the skills and assets of a competent manufacturer in the original product class for
making the product extension, the perceived product class complementarity, and the perceived
product class substitutability. These dimensions of fit are very important. Actually, the first two
are more important than the third one. Thus, a fit on either transfer of skills or complementarity
may be adequate.
4 ) The harder the brand extension is, the more positive is its evaluation.
5) The positive perceptions are usually related to brand extensions that do not refer so much to
functional attributes, for example, taste, but more to abstract symbolic attributes, for
example, style, quality.
6 )The positive reactions of consumers take place when there is consistency with the brand idea
and high similarity as far as product attributes are concerned. Certainly, brands that are prestige
oriented have higher possibilities of being extended to products with lower similarities, than
brands that are function oriented.
7) Previous successful brand extensions enhance the positive evaluations of a proposed brand
extension
8) There is high risk of hurting a well-established brand name by extensions that contain
attributes that are incompatible with the perceptions that hold for the original brand.
9) When consumer knowledge of the brands is high, the attributes and benefits of a brand that
differentiate it from competing brands are more important compared to brand affect and product
category similarity.
10) The number of products affiliated with a brand per se does not harm it, and it may even
strengthen it as long as there is no quality variance between these brands, which can very well
belong to different product categories.
11) A sub-branding strategy may mitigate the negative effects of brand extension and improve
consumer evaluations of extensions belonging to dissimilar product categories. This strategy
creates a distance (differentiation), which diminishes any negative evaluations.
12) The existence of consistency between the positioning of existing brands and its extensions
influence the evaluations of these extensions. In particular, if the extension is risky in terms of
brand category fit, product quality, or end-user acceptance a different positioning strategy can be
followed for the extension.
13) The risks associated with brand extensions are much lower than those associated with line
extensions, especially in the case of flagship products.
14) Brand extension is more accepted in the market, when it is perceived by consumers as being
associated with the parent brand relatively to attributes or image.
15) Unsuccessful brand extensions have a negative impact on the parent brand. The degree of
this impact depends on the equity of the parent brand.
Question 3.
Discuss the attitude by which brand is presented as conditional asset!

Question 4.
Which organizational form makes the best pre-conditions for the successful introduction of
new products and services? Explain why and which are the key assumptions for shaping
this organizational form in practice?
Organizing New-Product Development
Companies handle the organizational aspect of new-product development in several ways.Many
assign responsibility to product managers. But product managers are often busy managing
existing lines and may lack the skills and knowledge to develop and critique new products. Kraft

and Johnson & Johnson employ new-product managers who report to category managers.
Westinghouse has growth leadersa full-time job for its most creative and successful managers.
Some companies have a high-level management committee charged with reviewing and approving
proposals. Large companies often establish a new-product department headed by a manager with
substantial authority and access to top management whose responsibilities include generating and
screening new ideas, working with the R&D department, and carrying out field testing and
commercialization.
CROSS-FUNCTIONAL TEAMS 3M, Dow, and General Mills have assigned new-product
development to venture teams, cross-functional groups charged with developing a specific
product or business. These intrapreneurs are relieved of other duties and given a budget, time
frame, and
skunkworks setting. Skunkworks is informal workplaces, sometimes garages, where
intrapreneurial teams attempt to develop new products.
Cross-functional teams can collaborate and use concurrent new-product development to push new
products to market. Concurrent product development resembles a rugby match, with team
members passing the new product back and forth as they head toward the goal. Using this system,
Allen-Bradley Corporation (a maker of industrial controls) was able to develop a new device in
just two years, down from six under its old system. Cross-functional teams help ensure that
engineers are not driven to create a better mousetrap when potential customers dont need or
want one.
STAGE-GATE SYSTEMS Many top companies use the stage-gate system to divide the
innovation process into stages, with a gate or checkpoint at the end of each. The project leader,
working with a cross-functional team, must bring a set of known deliverables to each gate before
the project can pass to the next stage. To move from the business plan stage into product
development requires a convincing market research study of consumer needs and interest, a
competitive analysis, and a technical appraisal. Senior managers review the criteria at each gate to
make one of four decisions: go, kill, hold, or recycle. Stage-gate systems make the innovation
process visible to all and clarify the project leaders and teams responsibilities at each stage. The
gates or controls should not be so rigid, however, that they inhibit learning and the development of
novel products.

Question 5.
Comment quality measurement models and possibilities of their practical use. In which
ways results of the quality measurement may help firms in defining marketing strategy?
The service-quality model highlights the main requirements for delivering high service quality. It
identifies five gaps that cause unsuccessful delivery:
1. Gap between consumer expectation and management perceptionManagement does not
always correctly perceive what customers want. Hospital administrators may think patients
want better food, but patients may be more concerned with nurse responsiveness.

2. Gap between management perception and service-quality specificationManagement

might correctly perceive customers wants but not set a performance standard. Hospital
administrators may tell the nurses to give fast service without specifying it in minutes.
3. Gap between service-quality specifications and service deliveryEmployees might be
poorly trained, or incapable of or unwilling to meet the standard; they may be held to
conflicting standards, such as taking time to listen to customers and serving them fast.
4. Gap between service delivery and external communicationsConsumer expectations are
affected by statements made by company representatives and ads. If a hospital brochure
shows a beautiful room but the patient finds it to be cheap and tacky looking, external
communications have distorted the customers expectations.
5. Gap between perceived service and expected service this gap occurs when the consumer
misperceives the service quality. The physician may keep visiting the patient to show care, but
the patient may interpret this as an indication that something really is wrong.
Based on this service-quality model, researchers identified five determinants of service
quality, in this order of importance:
1. Reliability The ability to perform the promised service dependably and accurately.
2. ResponsivenessWillingness to help customers and provide prompt service.
3. Assurancethe knowledge and courtesy of employees and their ability to convey trust and
confidence.
4. Empathythe provision of caring, individualized attention to customers.
5. Tangiblesthe appearance of physical facilities, equipment, personnel, and
communication materials.
Based on these five factors, the researchers developed the 21-item SERVQUAL scale, they
also note there is a zone of tolerance, or a range where a service dimension would be deemed
satisfactory, anchored by the minimum level consumers are willing to accept and the level
they believe can and should be delivered. The service-quality model in Figure 13.6 highlights
some of the gaps that cause unsuccessful service delivery. Subsequent research has extended
the model. One dynamic process model of service quality was based on the premise that
customer perceptions and expectations of service quality change over time, but at any one
point they are a function of prior expectations about what will and what should happen during
the service encounter, as well as the actual service delivered during the last contact. Tests of
the dynamic process model reveal that the two different types of expectations have opposite
effects on perceptions of service quality.
1. Increasing customer expectations of what the firm will deliver can lead to improved
perceptions of overall service quality.
2. Decreasing customer expectations of what the firm should deliver can also lead to
improved perceptions of overall service quality.

Question 6.
Use a practical example for explaining difference between multi-branding and brand
extension strategies. What are advantages and disadvantages firms have to think about
when they decide to use these strategies?
ADVANTAGES OF BRAND EXTENSIONS Two main advantages of brand extensions are that
they can facilitate new-product acceptance and provide positive feedback to the parent brand and
company.

Improved Odds of New-Product Success Consumers form expectations about a new product
based on what they know about the parent brand and the extent to which they feel this
information is relevant. When Sony introduced a new personal computer tailored for multimedia
applications, the Vaio, consumers may have felt comfortable with its anticipated performance
because of their experience with and knowledge of other Sony products.
By setting up positive expectations, extensions reduce risk. It also may be easier to convince
retailer to stock and promote a brand extension because of anticipated increased customer
demand.
An introductory campaign for an extension doesnt need to create awareness of both the brand
and the new product; it can concentrate on the new product itself.80
Extensions can thus reduce launch costs, important given that establishing a new brand name for
a consumer packaged goods in the U.S. marketplace can cost over $100 million! Extensions also
can avoid the difficultyand expenseof coming up with a new name and allow for packaging
and labelling efficiencies. Similar or identical packages and labels can lower production costs for
extensions and, if coordinated properly, provide more prominence in the retail store via a
billboard effect. Stouffers offers a variety of frozen entrees with identical orange packaging
that increases their visibility when theyre stocked together in the freezer. With a portfolio of
brand variants within a product category, consumers who want a change can switch to a different
product type without having to leave the brand family.
Positive Feedback Effects Besides facilitating acceptance of new products, brand extensions can
provide feedback benefits.82 They can help to clarify the meaning of a brand and its core values
or improve consumer loyalty to the company behind the extension.83 Through their brand
extensions, Crayola means colorful arts and crafts for kids, Aunt Jemima means breakfast
foods, and Weight Watchers means weight loss and maintenance.
Line extensions can renew interest and liking for the brand and benefit the parent brand by
expanding market coverage. The goal of Kimberly-Clarks Kleenex unit is to have facial tissue in
every room of the home. This philosophy has led to a wide variety of Kleenex facial tissues and
packaging, including scented, ultra-soft, and lotion-impregnated tissues; boxes with drawings of
dinosaurs and dogs for childrens rooms; colourful, stylish designs to match living room dcor;
and a man-sized box with tissues 50 percent larger than regular Kleenex.
DISADVANTAGES OF BRAND EXTENSIONS On the downside, line extensions may cause
the brand name to be less strongly identified with any one product. Al Ries and Jack Trout call
this the line-extension trap. By linking its brand to mainstream food products such as mashed
potatoes, powdered milk, soups, and beverages, Cadbury ran the risk of losing its more specific
meaning as a chocolate and candy brand. Brand dilution occurs when consumers no longer
associate a brand with a specific or highly similar set of products and start thinking less of the
brand.
If a firm launches extensions consumers deem inappropriate, they may question the integrity of
the brand or become confused or even frustrated: Which version of the product is the right one
for them? Retailers reject many new products and brands because they dont have the shelf or
display space for them. And the firm itself may become overwhelmed.
The worst possible scenario is for an extension not only to fail, but to harm the parent brand in
the process. Fortunately, such events are rare. Marketing failures, in which too few consumers
were attracted to a brand, are typically much less damaging than product failures, in which the
brand fundamentally fails to live up to its promise. Even then, product failures dilute brand
equity only when the extension is seen as very similar to the parent brand. The Audi 5000 car
suffered from a tidal wave of negative publicity and word of mouth in the mid-1980s when it

was alleged to have a sudden acceleration problem. The adverse publicity spilled over to the
4000 model. But the
Quattro was relatively insulated, because it was distanced from the 5000 by its more distinct
branding and advertising strategy.
Even if sales of a brand extension are high and meet targets, the revenue may be coming from
consumers switching to the extension from existing parent-brand offeringsin effect
cannibalizing the parent brand. Intrabrand shifts in sales may not necessarily be undesirable if
theyre a form o preemptive cannibalization. In other words, consumers might have switched to a
competing brand instead of the line extension if the extension hadnt been introduced. Tide
laundry detergent maintains the same market share it had 50 years ago because of the sales
contributions of its various line extensionsscented and unscented powder, tablet, liquid, and
other forms.
The Advantages of Multi-Branding

Leaving less shelf space for competitors and obtaining more for yourself.

Effectively using brand-switchers, who love to experiment with different brands.

Competition between managers

If the initial business succeeds, it can develop a second brand without noticeable
expenses, through the franchise.
The Disadvantages/Risks of Multi-Branding

Cannibalization between brands.

Confusion caused by overlapping segments that will result in brand switching.

The public image of your brand may become profit oriented, rather than the customer.

Failure due to poor management.

Failure from wrong business choices.

Example :
Endorsed identities are like families i.e. products are proud they come from the same family
(Mariott, for example). Company stands behind them and guarantees certain quality, lends
product a piece of its reputation. Virgin is great example in this case as well.

Question 7.

Use an example of discontinuous innovation to explain the main changes that should be
made in the marketing area and amongst potential customers in order to ensure the
acceptance of the innovation. What are the possible ways for the firm to overcome these
challenges?
Innovation characteristics that Influence Adoption
When introducing new products, an organization is asking customers to change their behaviour
in some way. Implicitly, the organization is asking customers to take a risk by doing something
new. As a result, success is more likely when marketers can optimize the benefits associated with
new behaviour, while also minimizing the risks or disadvantages. From the standpoint of a
marketer, successful new product introduction plays an important role in profitability. Being
the first firm to market a product successfully in an emerging market often leads to what is called
the pioneering advantage. For example, Jeep defined in many consumers' minds what is now
termed the sport-utility vehicle. The fact that Jeep helped define the ideal point for this category
meant that later entrants were inevitability compared with the pioneer, and most often suffered in
such comparisons. Pioneering advantage, in turn, leads to market leadership as measured by
market share and return on investment. Successful new product development is an important
element in achieving long-term competitive superiority and profitability. For these reasons,
identification of product characteristics that influence speed and success of diffusion and
influence adoption decisions has been a focus of research not only in marketing but also across
the applied social sciences.
Part 2.
More specifically, the results indicate that two development activities can positively influence
the performance of both innovative and non-innovative new retail financial services, namely
marketing strategy and commercialization, and technical development. Although, it would be
normally expected that technical development, during which the service blueprinting is designed,
would be more critical for innovative compared to non-innovative services, the opposite stands.
This result is consistent with other research studies suggesting that, when financial service
providers develop innovative offerings, the main concern should not be on the seamless
operation of a set of established procedures.
It is known that such discontinuous innovations are targeted to innovators and early adopters
who, most likely, are more willing to make a trade-off between receiving an innovative service
and accepting minor deficiencies in its delivery process. By contrast, when the degree of
innovativeness of the new service diminishes, potential buyers perceive no scope for
compromising between the features of the new service offered and drawbacks in the delivery
process. In fact, it is very likely that, for me-too offerings the only significant benefits
perceived by the market are the improvements in their delivery process. Thus, financial service
providers must concentrate their efforts on minimizing any fail points that could occur in the
operating/delivery systems of non-innovative service offerings.

What are the possible ways for the firm to overcome these challenges?

Diffusion occurs through a fivestep decision-making process. It occurs through a series of

communication channels over a period of time among the members of a similar social system.
Ryan and Gross first identified adoption as a process in 1943. Rogers' five stages (steps):
awareness, interest, evaluation, trial, and adoption are integral to this theory. An individual
might reject an innovation at any time during or after the adoption process. Abrahamson
examined this process critically by posing questions such as: How do technically inefficient
innovations diffuse and what impedes technically efficient innovations from catching on?
Abrahamson makes suggestions for how organizational scientists can more comprehensively
evaluate the spread of innovations. In later editions of Diffusion of Innovation, Rogers changes
his terminology of the five stages to: knowledge, persuasion, decision, implementation, and
confirmation. However, the descriptions of the categories have remained similar throughout the
editions.

Example :
A discussion of the microwave provides a good example of the dramatic impacts discontinuous
innovations can have on behaviour. Microwaves became available to consumers in the 1960's,
but by 1980 only fifteen percent of North American households had microwaves. During the
decade of the 1980's, the re-entry of women in the workforce and the emergence of professional
women created new time pressures. As a result, by 1989, 80% of North American households
had microwave ovens. A Wall Street Journal survey found that microwaves were the respondents'
favourite household product. But the widespread use of the microwave has wrought tremendous
cultural changes. First, it has transformed North Americans' sense of time. The amount of time
many cooks are willing to devote to meal preparation has declined from about an hour in the
1970's to a little more than 10 minutes today. Second, it has transformed the division of labour
within the household. The conventional association between mothers, nurturance and food
preparation is undermined as the introduction of microwavable Kid's Kitchen, Kid Cuisine, and
My Own Meals product lines turns children into food preparers.

8. Explain the logic of product line management extension of the product line, decision
onrationalization or on shortening of the product line, that is, on elimination of certain
products and services?

Company objectives influence product line length. One objective is to create a product line to
induce up-selling: Thus BMW would like to move customers up from a 3-series vehicle to a
5-series and eventually even a 7-series vehicle. 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: Electrolux
offers white goods such as refrigerators, dishwashers, and vacuum cleaners under different
brand names in the discount, middle-market, and premium segments, in part in case the
economy
moves up or down. Companies seeking high market share and market 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 for a more complete product line to satisfy customers. But as items 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.
A company lengthens its product line in two ways: line stretching and line filling.
LINE STRETCHING Every companys product line covers a certain part of the total possible
range. For example, Mercedes automobiles are located in the upper price range of the
automobilemarket. Line stretching occurs when a company lengthens its product line beyond
its current range, whether down-market, up-market, or both ways.
Down-Market Stretch A company positioned in the middle market may want to introduce a
lower-priced line for any of three reasons:
1. The company may notice strong growth opportunities as mass retailers such as Walmart,
Best Buy, and others attract a growing number of shoppers who want value-priced goods.
2. The company may wish to tie up lower-end competitors who might otherwise try to move
up-market. If the company has been attacked by a low-end competitor, it often decides to
counterattack by entering the low end of the market.
3. The company may find that the middle market is stagnating or declining.
A company faces a number of naming choices in deciding to move a brand down-market:
1. Use the parent brand name on all its offerings. Sony has used its name on products in a
variety of price tiers.
2. Introduce lower-priced offerings using a sub-brand name, such as P&Gs Charmin Basics
and Bounty Basics.
3. Introduce the lower-priced offerings under a different name, such as the Gaps Old Navy
brand. This strategy is expensive to implement and means brand equity will have to be built
from scratch, but the equity of the parent brand name is protected.
Moving down-market carries risks. Kodak introduced Kodak Funtime Film to counter
lowerpricedbrands, but it did not price it low enough to match the lower-priced film. It also

found some of its regular customers buying Funtime, so it was cannibalizing its core brand.
Kodak withdrew the product and may have also lost some of its quality image in the process.
On the other hand,Mercedes successfully introduced its C-Class cars at $30,000 without
injuring its ability to sell other Mercedes cars for $100,000. John Deere introduced a lowerpriced line of lawn tractors called Sabre from John Deere while still selling its more expensive
tractors under the John Deere name. In these cases, consumers may have been better able to
compartmentalize the different brand offerings and understand functional differences between
offerings in higher and lower price tiers.
Up-Market Stretch Companies may wish to enter the high end of the market to achieve
moregrowth, realize higher margins, or simply position themselves as full-line manufacturers.
Many markets have spawned surprising upscale segments: Starbucks in coffee, Hagen-Dazs
in ice cream, and Evian in bottled water. The leading Japanese auto companies have each
introduced an upscale automobile: Toyotas Lexus, Nissans Infiniti, and Hondas Acura. They
invented entirely new names, because consumers might not have given the brand
permission to stretch upward when those lines were first introduced.
Other companies have included their own name in moving up-market. Gallo sells Gallo
Family Vineyards (priced at $10 to $30 a bottle) with a hip, young image to compete in the
premium wine segment. General Electric introduced the GE Profile brand for its large
appliance offerings in the upscale market.31 Some brands have used modifiers to signal a
quality improvement, such as Ultra Dry Pampers, Extra Strength Tylenol, and Power Pro
Dustbuster Plus.
Two-Way Stretch Companies serving the middle market might stretch their line in
bothdirections. Robert Mondavi Winery, now owned by Constellation Brands, sells $35
bottles of wines as the first premium New World wine, but it also sells $125 bottles of
Mondavi Reserve at high-end wineries, restaurants, and vineyards and through direct order, as
well as $11 bottles of Woodbridge created during the grape oversupply of the mid-1990s.
Purina Dog Food has stretched up and down to create a product line differentiated by benefits
to dogs, breadth of varieties, ingredients, and price:
Pro Plan ($34.89/18 lb. bag)helps dogs live long and healthy lives with high-quality
ingredients (real meat, fish, and poultry)
Purina ONE ($29.79/18 lb. bag)meets dogs changing and unique nutritional needs and
provides superpremium nutrition for good health
Purina Dog Chow ($18.49/20 lb. bag)provides dogs with complete nutrition to build,
replenish, and repair at each life stage
Alpo by Purina ($10.99/17.6 lb. bag)offers beef, liver, and cheese flavor combinations and
three meaty varieties
LINE FILLING A firm can also lengthen its product line by adding more items within the
present range. Motives for line filling include reaching for incremental profits satisfying
dealers who complain about lost sales because of items missing from the line, utilizing excess
capacity, trying to become the leading full-line company, and plugging holes to keep out
competitors.
LINE MODERNIZATION, FEATURING, AND PRUNING Product lines need to be
modernized. The question is whether to overhaul the line piecemeal or all at once. A
piecemeal approach allows the company to see how customers and dealers take to the new

style. It is also less draining on the companys cash flow, but it lets competitors see changes
and start redesigning their own lines.
In rapidly changing markets, modernization is continuous. Companies plan improvements to
encourage customer migration to higher-valued, higher-priced items. Microprocessor
companies such as Intel and AMD, and software companies such as Microsoft and Oracle
continually introduce more-advanced versions of their products. Its important to time
improvements so they do not appear too early (damaging sales of the current line) or too late
(giving the competition time to establish a strong reputation).
The product line manager typically selects one or a few items in the line to feature. Sears will
announce a special low-priced washing machine to attract customers. At other times,
managers will feature a high-end item to lend prestige to the product line. Sometimes a
company finds one end of its line selling well and the other end selling poorly.
The company may try to boost demand for slower sellers, especially if a factory is idled by
lack of demand, but it could be counterargued that the firm should promote items that sell
well rather than prop up weak ones. Nikes Air Force 1 basketball shoe, introduced in the
1980s, is a billiondollar brand that is still a consumer and retailer favorite and a moneymaker
for the company due to collectable designs and tight supplies. Since their introduction, Air
Force 1 shoes have been designed or inspired by many celebrities and athletes.
Using sales and cost analysis, product line managers must periodically review the line for
deadwood that depresses profits. One study found that for a big Dutch retailer, a major
assortment reduction led to a short-term drop in category sales, caused mainly by fewer
category purchases by former buyers, but it attracted new category buyers at the same time.
These new buyers partially offset the sales losses among former buyers of the delisted
items.In 1999, Unilever announced its Path to Growth program designed to get the most
value from its brand portfolio by eliminating three-quarters of its 1,600 distinct brands by
2003.39 More than 90 percent of its profits came from just 400 brands, prompting Unilever
cochairman Niall FitzGerald to liken the brand reduction to weeding a garden, so the light
and air get in to the blooms which are likely to grow the best. The company retained global
brands such as Lipton, as well as regional brands and local jewels like Persil, the leading
detergent in the United Kingdom.
Multibrand companies all over the world try to optimize their brand portfolios. This often
means focusing on core brand growth and concentrating resources on the biggest and most
established brands. Hasbro has designated a set of core toy brands, including GI Joe,
Transformers, and My Little Pony, to emphasize in its marketing. Procter & Gambles back
to basics strategy concentrated on brands with over $1 billion in revenue, such as Tide, Crest,
Pampers, and Pringles. Every product in a product line must play a role, as must any brand in
the brand portfolio.

9. Explain the core difference, advantages and dangers of financial methods used to
maximize value of the portfolio and non-financial methods for maximizing portfolio
value.
(It is not necessary to list the methods or to calculate their values, it is rather required to
warn for dangers these methods bring, that is, to elaborate aspects they are stressing.)

Financial methods for portfolio value maximizationNet present value is calculated whenthe
present value of the future cashflows is estimated after subtracting the initial investmentmade.
Expected commercial value (ECV): aims at maximizing the value of the new products
portfolio subject to certain budget constraints. According to Cooper et al. (1998), this
approach is one of the most well thought out financial methods, which introduces in the
analysis probabilities of technical and commercial success.
Productivity indexis another financial method for maximizing the value of a new products
portfolio, which has been popularized by the strategic decision group.
This index is derived from the following formula:
PI [ NPY Pts R&D]/R&D
where
PI: Productivity index ; NPV: Net Present value ; Pts: Probability of technical success ; R&D:
R&D costs remaining in the project (alternatively total costs remaining can be used)
New products or projects are rank-ordered according to this index in order to arrive at the
preferred portfolio.
Like other ranking metrics, PI is an approximation that may on some cases, reasonably
approximate the project portfolio that would be obtained based on costrained optimization.
Danger: Errors are often made in formulating the productivity index, and the approach will
not work if there are dependencies that cause a project's productivity index to change
depending on what other projects are conducted.
Dynamic rank ordered list: according to this value maximization method, new products or
projects can be rank-ordered according to several criteria concurrently without becoming
complex and time-consuming. Such criteria include net present value, return on investment,
strategic importance, probability of technical or commercial success and so on.

Non-financial methods for portfolio value maximization

Scoring models: the use of scoring models is based on a list of criteria, which is developed to
rate new products/projects. These criteria often capture well-reported determinants of new

product success (for example, product superiority, market fit). New products/projects are rated
on each criterionin terms of the degree they satisfy each criterion.
Checklists: a checklist is similar to a scoring model as it evaluates a new product/project on a
number of criteria. Their difference, though, is that when using a checklist the criteria are
rated with a yes or no. Even one no can lead to rejection of a new product. The checklist
method is a useful tool to discard the highly misfit new products. A scoring model can then be
used to rank and prioritize the remaining projects.
Paired comparisons: this method may be particularly effective in the very early stages of the
new product development process (namely, idea generation) when information is still quite
limited. When using the paired comparisons method, managers should compare new product
ideas against each other in pairs. Their decision should be based on which of the two ideas
they would select if they had a choice.
Danger:This method may be criticized as time consuming. For example, if nine ideas are
compared, then thirty-six paired comparisons must be made (the first idea with the remaining
eight, the second idea with the remaining seven and so on).
According to the study of Cooper et al. (2001), almost all companies in their sample use
multiple methods. The most popular methods are the financial methods, which aim at value
maximization, followed by the strategic buckets method, which refer to the goal of strategic
direction, and bubble diagrams seeking a balanced portfolio. Two non-financial methods of
value maximization are also used, namely scoring models and checklists.
It is ironic that the most popular financial methods, which are supposed to lead to projects
with high returns and profitability, are related to portfolios with the worst economic value.
In fact, these methods present the worst results in five of the six performance metrics:
The most effective companies tend to use multiple methods of managing new product
portfolios. The most popular methods are the financial methods followed by the strategic
buckets method, and bubble diagrams seeking a balanced portfolio.

10. Explain, support and/or criticize the standpoint that branded products/services
should be sold through different sales promotion actions. Use the knowledge you have
about the brand building concept (in terms of marketing instruments) and the logic of
sales promotion, as well as its goals.

The essence of strategies for brand strength is that management should actively "build,
maintain, and manage the four assets that underlie brand equity-awareness, perceived quality,
brand loyalty, and brand association. Promotion can aid a buyer's search for information. One
of the objectives of new product promotional activities is to help buyers learn about the
product Advertising is often a more cost-effective way to disseminate information than
personal selling, particularly when the information can be exposed to targeted buyers by
electronic or printed media. Brand builders have faced forms of some of these challenges in
the past, including increased competition and media fragmentation. Though the new
challenges certainly make it more difficult to build a strong brand, by no means to they make
it impossible. Other issues include brand backlash, which illustrates a different type of
accountability. As the repeated targeting during anti-globalization protests of retail locations
of multinational companies such as McDonalds, Gap, and Starbucks illustrates, a
recognizable brand can also become a lightning rod for criticism and protest. When a brand
builds up a respected relationship with us, the concept of closure can be successfully
employed in brand advertising. For example, Schweppes is such a well-regarded brand that
the name didnt have to appear in the nearly successful Schhh you know who campaign.
The problem with this campaign was that closure initially worked well for the brand but
eventually the actor was being promoted more than Schweppes.
Given the intense competition that characterizes todays markets as well as media clutter, no
brand can afford to ignore promos. What is required today while designing promotions is a
Strategic focus. The promotion must be in sync with the other elements of the marketing mix.
If designed and implemented properly promotions would become yet another weapon in the
Brand managers armory for Brand building

11. Outline the cases in which firms make decision on repositioning. Using the example,
real or hypothetical, explain the factors that impact this decision, phases of repositioning
strategy and differences between the repositioning and brand rejuvenation. Also discuss
potential risks of this decision regarding previously targeted segments.

As companies and brands today look to brand repositioning, they first have to ask what the
reasons are for repositioning the brand. They can include declining sales, loss of
consumer/user base, stagnant product benefits, or the competition, including such issues as
increased technology and new features.
Phase I. Determining the Current Status of the Brand
Phase II. What Does the Brand Stand for Today?
Phase III. Developing the Brand Positioning Platforms
Phase IV. Refining the Brand Positioning and Management Presentation
A company must position its brand in the minds of consumers. A brand manager must find
something new and different about that brand, get into the minds of consumers, and stake out
a bit of territory. A company would like to gain a tiny amount of brain space so that he thinks
of the brand while consuming a product in that category. Over time, brand managers will have
to reposition a brand. Repositioning a brand requires changing either the target market or the
value proposition of the brand. To change the value, we can try to change the core offering
itselfthat is, the products or the technology that underlines them, or the brands reputation
for quality. Or try changing the experience around the brand. Sometimes, people use the terms
brand repositioning and rejuvenation synonymously, but there is a difference between the two
terms. Brand rejuvenation is when the brand attributes and overall strategy is still sound, i.e.,
given the competitive set, customers, industry dynamics that the brand values still are valid,
marketable and meaningful (ROI)but there is a need to re-launch the brand messaging
strategy. If only some excitement and reminders about the presence of the brand is required,
while the basic positioning is still relevant and sound, then "rejuvenation" is the right word.
Updating the packaging, perhaps a change in the logo, advertising, etc. could be the solutions.
On the other hand, if we have a new and different target audience, or benefits that were never
part of the original package, then the brand has to be re-positioned. The brand image has to be
changed. Brand repositioning is when we need to reset the brand in terms of values and
attributesand then launch a brand messaging strategy. Brand Rejuvenation has a more
holistic perspective than repositioning. It creates wider space in terms of market
communication that includes escalated advertising and/or repositioning.
Example: United Airlines. Their brand positioning once way "solid, industry leader, serious,
you pay more but you receive higher quality, targeted at professional travelers". If United
wanted to revitalize that brand strategy, they would likely launch communications such as
interviews, PR, advertising, promotions that would emphasize that brand. On the other hand,
if United felt that the next high growth customer demographic is vacation travel and they want
to serve that demographic with appropriate brand value, then they would need to "shift" their
brand identity though not too drastic so as to isolate the old customers and confuse new
targets, but to the extent that they take some of the current valid brand attributes and
characteristics and augment them with "flexible, key partnerships" or whatever to reposition it
with values that are appropriate for the new target market.

12. In order to attract the potential customers, firms are often using different
instruments of marketing mix. Due to the fact that these instruments impact the
expectations that customers have before entering the service encounter, explain the way
in which firms may manage the perceptions of service quality and the challenges that
come with this process.

Different customers will value the same product differently, and they will have different
acquisition rates, retention rates, and margins (due to cross-buying); therefore, forecasting
models must account for customer heterogeneity . Third, it will be necessary to allocate costs
to individual customers. In direct marketing contexts, firms are able to assign the costs of
direct communication, delivery of the product, and promotions to individual customers.
However, in many industries, firms must create methods for accurately attributing the indirect
costs of marketing actions to individual customers or customer segments. Also cost allocation
can be particularly challenging for firms that invest in programmatic efforts, such as service
improvement efforts or investments in physical infrastructure. A fourth challenge is to
understand and incorporate competitive effects on customer acquisition and retention.
Accounting for competitors acquisition campaigns might explain customer behavior in most
markets. Optical scanner data provide competitive information in retail environments, but
information about competitive behavior is seldom available in other contextsIt began with
investigations of how customers formed their assessments of products (goods and services).
This research stream is extensive; therefore an extensive discussion of the antecedents of
customer assessments (e.g., perceived service quality and customer satisfaction) as well as the
implicit bonds (e.g., legal, economic, technological, knowledge, social, etc.) it is beyond the
scope of this section. Notably, customer satisfaction literature developed around the idea that
satisfaction is influenced by the difference between expectations and experience Service
quality literature developed along parallel lines- For example, Boulding and colleagues (1993)
brought together two streams of service quality research in showing that both expectations as
predictions (expectations about what will happen) and normative expectations (expectations
about what should happen, often based on communications from the service provider) are
important in determining perceived service quality. This stream of literature is extremely
useful in helping researchers build theory-based models of customer behaviour.

13. Explain the set of branding decisions, from the decision to brand or not to brand,
to the final one to reposition or not to reposition, using examples from B2C and B2B
markets.
So when it comes to the decision of to brand or not to brand in a business-to-business
environment, many marketers push forward the fundamen-tal differences between industrial
and consumer markets as justification for neglecting the relevance of brands and branding.

Most B2B companies share a modest growth rate throughout their whole lifetime. Now, you
might bethinking, Well, thats probably just the way it is. Our theory is that by
implementing a holistic brand approach, companies can accelerate and increase their overall
success. Numerous, very successful B2B brands are the smoking gun for this theory. While
some of them tapped into branding rather by accident, the majoritymade a conscious decision
for B2B branding. They identified the great potentials that a well-managed B2B brand can
offer them at anearly stage.
Holistic means that everything from the development, design, to the implementation of
marketing programs, processes, and activities is recognized as intersecting and
interdependent. The days when each was handled separately are gone for good. Holistic
marketing, just as holistic brand management recognizes that everything matters. It is
necessary to have a broad, integrated perspective to assure consistency of the comprehensive
approaches.Relationship marketing, integrated marketing, internal marketing,and social
responsibility marketing are components of a holistic marketing concept. It is thus an
approach to marketing that is characterized by the strong alignment of all marketing activities
to theiroverall scope and complexity.CaterpillarLet us take a look at Caterpillar. For eighty
years now, the earth-moving equipment of Caterpillar Inc. has boldly shaped the worlds
landscape and infrastructure. It is one of the few high-profilebrands that are prominent and
successful in two very differentfields: heavy machinery and clothing. In the B2B area, the
stylishyellow-tabbed CAT logo is best-known as the symbol of the leadingglobal
manufacturer of construction and mining equipment, dieseland natural gas engines and
industrial gas turbines.The history of Caterpillar dates back to the late 19th century,
whenDaniel Best and Benjamin Holt were experimenting with ways tofulfill the promise that
steam tractors made for farming. The Bestand Holt families collectively had pioneered tracktype tractors andthe gasoline-powered tractor engine. In 1925 the Holt Manufactur-ing
Company and the C.L. Best Tractor Company merged to formthe Caterpillar Tractor
Corporation.In 2004, the company gained sales and revenues of US$30.25 billionand a profit
of US$2.03 billion. Today, CAT is a truly global brand.Approximately half of all sales are
targeting customers outside theUnited States. The products and components of the global
supplierand leading U.S. exporter are
The strength and extraordinary appeal ofthe Caterpillar brand in B2C lies in its brand heritage
for rugged durability. CAT footwear, for instance, combines the rugged durabilityof work
shoes with the easy comfort of casual footwear.

14. Discuss relations among the number of target segments that company tries to reach
and the product mix consistency.
Decisions at the product-mix level represent the highest order decisions made by the company
constraining all the subsequent lower order decisions and identifying the busi- ness that the
company operates. A companys product mix refers to the total number of products that are
offered for sale. The product mix has certain width, length, depth and consistency (Kotler,
2003). The width of a product mix refers to the total number of different product lines of the

company. For example, width = 2 (pasta and pasta sauces). The length of a product mix
refers to the total number of brands in all of the com- panys product lines. For example,
length = 5 (three pasta brands and two brands of pasta sauce). The depth of a product mix
refers to the average number of variants of the companys products. For example, depth =4
(three pasta brands, each marketed in two sizes: 3 2 = 6 and 2 pasta sauce brands, each
marketed in 1 size: 2 1 = 2 means 6 + 2 = 8/2 = 4). The consistency of a product mix refers
to how closely related are the companys product lines in terms of characteristics, production
process, distribution channels to name just a few.
Product decisions at the product-mix level tend to determine the width of a companys
product mix. The basic product-policy/strategy issues at the product-mix level cluster around
the following questions:
1 Which product categories should we offer? Will we function primarily as a supplier of
materials and components or as a manufacturer of end products? 2 What are the groups and
classes of customers for which our products are intended to serve?
3 Do we seek to serve our markets as full-line suppliers or limited line specialists? Closely
allied to this is the degree of custom manufacturing to meet the needs of individual buyers
versus quantity production of a limited range of product types. 4 Will we attempt to take a
position of technical leadership or will we achieve greater success as a follower? 5 What are
the business characteristics (criteria) such as target rate of profit, payback period on
investment, minimum sales volume, etc., that each product line must meet in order to be
included in the product mix (portfolio)?
The answers to the foregoing questions tend to form the companys general product policy,
which will guide management in making decisions pertaining to the addition or elimination of
product lines from the companys product mix. In adding new product lines management has
to decide about the type and the nature of the product lines as well as the ways that these lines
should be added to the mix. The decision to add new product lines to the mix is ordinarily
described as diversification and it can be materialized through internal R&D, licensing,
merger and acquisitions, joint ventures or alliances.
Companies are also involved in contracting their product mixes through the elimination of
product lines. Decisions are made about identifying, evaluating and specifying which product
lines are to be removed from the market. If a company continues to devote time, money and
effort to a product line that no longer satisfies customers, then the productive operations of
marketing are not as efficient and effective as they should be. The procedure of eliminating
product lines from the companys product mix is called divestment or divestiture and unlike
the addition of product lines (diversifi-cation) is final with no alternatives.

15. Discuss risks present when the decision about new product development is being
made, in the case of products which are new for the company but not for the market.
Other companies could be more effective in producing product itself and have competitive
advantage in terms of cost savings.

Some products might already have highly established brands at the market (for example coca
cola has been on the market as prime brand for 10 years) making it challenging for new
products to shine. Furthermore, new product development therefore could require high
financial outlay to market the product which is something to be considered while making
decision.
With any new product, there is a risk that you may not produce what customers want. This
risk is typically higher when new product ideas are based on the availability of new
technologies or your own inspiration rather than being customer-led. So it's a good idea to aim
to solve or improve a customer experience rather than merely rehash existing products.
During the development process, you may need to overcome technical hurdles. There are also
likely to be a range of other operational risks: for example, ensuring that you have a secure
supply of reliable components.
Finally, there is the financial risk if your new product doesn't generate sufficient demand at
aprice that is profitable. Bear in mind that sales income will need to cover the cost of product
development, and that you may face additional marketing costs to stimulate demand for your
new product.

16. Companies can use different positioning strategies in order to create a distinct
product positioning in the mind of the customer. Discuss some of them and explain
essential differences among positioning strategies related to the product from those
related to customers.

Product positioning typically falls into one of three categories. Functional positions solve
problems and provide consumers with benefits. The glass cleaner gets glass surfaces clean,
the consumer benefits. If the glass cleaner is made of environmentally friendly ingredients, it
appeals to a symbolic position the consumer values. The cleaner helps the consumer boost his
self-image and provides social meaningfulness. The third positioning strategy is experiential.
If the cleaner has a fresh fragrance, it offers the consumer a sensory stimulation. Some
product positions can incorporate all three categories in an attempt to develop a sustainable
advantage.
The positioning strategies that can be implemented by a company in order to create a distinct
product position in the mind of the customer are as follows (Aaker and Shansby, 1982; Wind,
1982): Positioning by attribute: a specific product characteristic or attribute is emphasized,
for example, Think small of the Volkswagen Beetle. Positioning by benefits: emphasis is
given to the benefit provided to the customer, for example, Dentyne Ice: Nothing is cooler
than ice. Positioning by price/quality: the value of money paid by the customer is stressed,
for example, Good food costs less at Sainsburys. Positioning by competitor:
differentiation from competitive offerings is emphasized, for example, You have tasted the
German beer thats the most popular in America (namely, Lowenbrau). Now taste the German
beer thats the most popular in Germany (namely, Becks). Positioning by application:
emphasis is given to the product use, for example, Volkswagen announces a bus you really
can take anywhere (for VW Bus Syncro). Positioning by product user: the profile of the
target market is stressed, for example, Motrin-for people who dont fool around with pain.
Positioning by product class: emphasis is given to the creation of a distinct product class,
7UP The Uncola. Hybrid positioning: combination of more than one strategy as long as
they act com- plimentary and they do not create confusion to the customer.
In case a product is totally to the market, without intense competition, the company can more
easily choose among the aforementioned positioning strategies. In contrast, when there are
other competitive products in the market, the company has to study carefully the positioning
of the competition and make sure that it creates a unique position for its product in the mind
of the customer. Despite the efforts of companies to differentiate their products, on many
occasions the following mistakes can be made (Kotler, 2003): Underpositioning: buyers do
not understand any difference between the companys brand and competitive brands.
Overpositioning: buyers may have a narrow image of the brand. Confused positioning:
buyers may be confused as to what a brand stands for, usually because of the existence of
many different communication messages or the changes of positioning strategies. Doubtful
positioning: buyers may doubt about the claims in view of the products fea- tures, price of
distribution, etc.
One of the biggest errors in General Motors Car Service, is that cars are designed without a
distinguishing position. After producing the car, GM, tries to decide how to position the car.
Some companies, instead of a single position, prefer to create a multi positioning. The
pharmaceutical company, could call its medicine, the fastest and most reliable medicine in the
market. But then, another competitor could have selected 'the cheapest' position. It can be

seen clearly that, if a company is to claim too many superior qualities, it will not be
remembered or will not be credible. However, this could work from time to time, like
Aquafresh toothpaste, claiming to offer trio benefits: fights with decays, whitens teeth, and
provides a cleaner breathing
17. Traditional approach of creating comparative advantage for the company includes
using additional services in order to expand a products utility and increase customer
value perception. Explain and discuss types of value which those services may add to the
product.
The questions of how and what consumers perceive from products in the market request the
process and structure by which consumers value the products. Based on consumption
behavior analysis, there are cultural values, personal values, consumption values, and product
benefits for customer.
All companies use some form of experimentation to develop and test new products and
services. Yet the traditional approaches can be costly and time-consuming, and may saddle the
organization with an unreasonable burden of complexity. Furthermore, research based on
consumers perceptions is often a remarkably poor predictor of success. The real world is an
expensive medium for experimentation, and failed market-facing tests and pilots may
jeopardize a companys brand and reputation.
To overcome these barriers, a growing number of adaptive competitors are using an array of
new approaches and technologies, especially in virtual environments, to generate, test, and
replicate a larger number of innovative ideas faster, at lower cost, and with less risk than their
rivals can. Procter & Gamble is a case in point. Through its Connect + Develop model, it
leverages InnoCentive and other open-innovation networks to solve technical design
problems. It uses a walk-in, 3-D virtual store to run experiments that are quicker and cheaper
than traditional market tests. And by employing Vocalpoint and other online user
communities, it can introduce and test products with friendly audiences before a full launch.
In 2008 alone, 10 highly skilled employees were able to generate some 10,000 design
simulations, enabling the completion in hours of mock-ups that might once have taken weeks.
More than 80% of P&Gs new-business initiatives now make use of its growing virtual
toolbox.
Ikea, like Tesco, leverages existing assets and capabilities to experiment with business
models. After the company entered Russia, managers noticed that whenever it opened a store,
the value of nearby real estate increased dramatically. So Ikea decided to explore two business
models simultaneously: retailing through its stores and capturing the appreciation in real
estate values through mall development. It now makes more profit in Russia from developing
and operating malls than from its traditional retail business.

18. Discuss main critiques of product life cycle and their impact on line extension and
brand extension strategies.
Most products follow a predictable pattern from conception through obsolescence. This
product life cycle includes an introductory period, a growth spurt and a maturity phase before
sales falter and the product enters its decline. But manufacturers often can employ several
strategies to stave off decline, extend the profitable maturity stage and perhaps even foment a
renewed growth period for their product. Many of these strategies involve altered marketing
strategies, but others are directed at the products themselves. Brand extension is a part of
brand management to diversify and leveraging the existing brand by entering into new
product category by new product development. Positive images and strengths of existing
brand / parent brand are leveraged to bring another success story for new product. Brand
extension is increasingly used by companies as a part of strategy for product developments. It
is viewed as one of means to attain integrated brand architecture. The use of same brand on
existing product (parent brand) for a new product in different category (extension brand)
increases rate of new acceptance and purchase intention to consumer. The strategy maintains
efficiencies on advertising and promotion expenditures yet still can create new market
segment. Company is not in position to allocate marketing expenses at the same level as spent
by the parent brand, yet may gain similar level of success. A strong reputation of parent brand
can minimize risk of new product launch by taking advantages on consumers knowledge and
experiences of the established brand. In comparison, line extension strategy is sometimes
mixed up with brand extension. While taking completely different approach, line extension
offers new products, under the same brand name, in the same product category. Line
extension can also by extending same product and same brand with different product features
(e.g. introducing new flavors and selling different sizes of packaging). From risk management
perspective, brand extension poses more risk than line extension. Poorly executed extension
of brand to new product categories can jeopardize current image of parent brand. In less
degree of risk encountered, line extension deals only with the product itself with slight
connections to the brand. Entire processes of new product developments take significant hours
and efforts to bring about a success. Particularly for some type of products having short-term
product life cycle, a marketing strategy that leads to a shortcut of achievement is a preference
for a marketing program. Instead of working up from a zero point, one would start from an
established ground-base. From marketing view, brand extension strategy is a solid base and
perceived for a main choice to continue the legacy of a successful parent brand. Also, it
optimizes economic scale of companys intellectual property. However, brand extension
strategy is not a risk-free and does not fully secure the results. It poses some risks since the
brand associations of the parent brand must be appropriately transferred and linked to the new
product. The failure of associating brand to new product can negatively affect not only to the
new product, but also does affect the parent brand. The image and financial figures of parent
brand may be endangered due to the failure of strategy implementation.

19. Discuss main goals of portfolio management of new products and the methods
associated with each of these goals.
There are three main goals of managing a portfolio of new products:
1 Maximizing the value of the portfolio: this goal aims at allocating resources so as to
maximize the value of the portfolio against one or more corporate objectives (e.g.
profitability).
Fine in theory. but: The NPV method ignores probabilities and risk; it assumes that
financial projections are accurate (they usually are not!); it assumes that only financial goals
are important for example, that strategic considerations are irrelevant; and it fails to deal
with constrained resources the desire to maximize the value for a limited resource
commitment, or getting the most bang for the limited buck. A final objection is more subtle:
the fact that NPV assumes an all-or-nothing investment decision, whereas in new product
projects, the decision process is an incremental one more like buying a series of options on a
project
2 Achieving a balanced portfolio: this goal seeks to obtain a desired balance of new products
projects in terms of certain parameters, such as durability of competitive advantage (shortterm, long-term), risk (high, low), markets, product categories, technology, and so on.
Project types is yet another vital concern. What is your spending on genuine new products
versus product renewals (improvements and replacements), or product extensions, or product
maintenance, or cost reductions and process improvements? And what should it be? Pie charts
effectively capture the spending split across project types actual versus desired splits.
Markets, products and technologies provide another set of dimensions across which managers
seek balance. The question faced is: do you have the appropriate split in R&D spending
across your various product lines? Or across the markets or market segments in which you
operate? Or across the technologies you posses? Pie charts are again appropriate for capturing
and displaying this type of data.
3 A strong link to strategy: this goal aims at ensuring that first, the final portfolio of new
products reflects the corporate strategy, secondly, the breakdown of expenses across projects,
products, markets, and so on is directly tied to corporate strategy and thirdly, all projects and
products are on strategy.
The major strength of the Strategic Buckets Model is that it firmly links spending to the
businesss strategy. Over time, the portfolio of projects, and the spending across strategic
buckets, will equal managements desired spending targets across buckets. Another positive
facet of the strategic buckets model is the recognition that all development projects that
compete for the same resources should be considered in the portfolio approach. Finally,
different criteria can be used for different types of projects. That is, one is not faced with
comparing and ranking very different types of projects against each other for example,
comparing major new product projects to minor modifications. Because this is a two step

approach first allocate money to buckets, then prioritize like projects within a bucket it is
not necessary to arrive at a universal list of scoring or ranking criteria that fits all projects.
Portfolio management is fundamental to new product success. But its not as easy as it first
seems. Not only must you seek to maximize the value of your portfolio, but the development
projects in your portfolio must be appropriately balanced, there must be the right numbers of
projects, and finally, the portfolio must be strategically aligned. No one portfolio model can
deliver on all four goals, and so best-practice businesses tend to use multiple methods to
select their projects.

20. Product and services have different levels of properties/attributes/dimensions which

customers can use in the process of purchasing and quality evaluation. In which way
those differences influence the companys management of the total offer creation
(product and service combination).
Product and services have different levels of properties/attributes/dimensions which
customers can use in the process of purchasing and quality evaluation. In which way those
differences influence the companys management of the total offer creation (product and
service combination).