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Lecture 8Product Management and Pursuit of Brands

Economic development

• Consumer behavior is influenced by economic development– Consumers in highly developed countries tend to demand

extra performance attributes in their products

– Consumers in less developed countries, value basic features as more important

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Consumer Demands

• There are cultural differences that affect consumer needs.• China is a developing country (middle income) with several

distinctive market segments compared with a developed economy with a majority middle class.

• There are heterogeneous needs and wants• As income grows and the gap widens, different need segments

have emerged

Integrating R&D, marketing and production

• High failure rate ratio– Between 33 % and 60% of new products fail to earn

adequate profits

• Reasons for failure:– Limited product demand– Failure to adequately commercialize product– Inability to manufacture product cost-effectively– R&D generally lower among Chinese firms

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Management of Product Lines

• Each company has a product mix• Evaluation existing products and lines

– Line extension: add new items, downward or upward (For great market share and profitability)

– Line filling: add new items in between– Line reduction: item reduction, due to proliferation– Line adjustment (Differentiation, cannibalization)

Example: Coca Cola Product lines可口可乐 Coca-Cola香草味可口可乐 Coca-Cola Vanilla Flavor健怡可口可乐 Diet Coke柠檬味健怡可口可乐 Lemon Flavor Diet Coke青柠味健怡可口可乐 Lime Flavor Diet Coke香草味健怡可口可乐 Vanilla Flavor Diet Coke樱桃味健怡可口可乐 Cherry Flavor Diet Coke雪碧 Sprite雪碧冰薄荷 Sprite Icy Mint雪碧姜汁汽水 Sprite Ginger Soda芬达 Fanta雪菲力 1 Chivalry "Xue Fei Li"雪菲力苹果味汽水 Chivalry Apple Flavor Soda雪菲力橙味汽水 Chivalry Orange Flavor Soda雪菲力柠檬汽水 Chivalry Lemon Soda雪菲力乌梅汽水 Chivalry Plum Soda雪菲力饮用纯净水 Chivalry Purified Drinking Water美汁源 Minute Maid美汁源果粒橙 Minute Maid Orange Juice with Pulp醒目果味碳酸饮料 Smart (Xingmu) Fruit Flavor Carbonated Beverage醒目苹果汽水 Smart Apple Soda醒目西瓜汽水 Smart Watermelon Soda醒目水蜜桃汽水 Smart Peach Soda醒目葡萄汽水 Smart Grape Soda醒目桃汽水 Smart Peach Soda醒目椰子汽水 Smart Coconut Soda醒目提子汽水 Smart Grape Soda醒目香草冰淇淋汽水 Smart Vanilla Ice Cream Soda

醒目冰柠檬茶汽水 Smart Lemon Ice Tea Soda醒目苹果汁汽水 Smart Apple Juice Soda醒目香橙汁汽水 Smart Orange Juice Soda雀巢冰爽茶 Nestea Ice Tea雀巢柠檬绿茶(冰极) Nestea Lemon Green Tea (Iced)雀巢咖啡 Nestea Coffee即饮雀巢咖啡 Nestea Ready to Drink Coffee酷儿果汁饮料 Qoo Juice Drinkr酷儿苹果味 Qoo Apple Flavor酷儿香橙味 Qoo Orange Flavor爽白酷儿乳酸味饮料 Qoo Lactic Beverage活力酷儿运动饮料 Qoo Sports Drink阳光茶饮料 "Yang Guan" Tea岚风蜂蜜绿茶 "Lan Feng" Honey Green Tea天與地矿物质水 Tian Yu Di Mineral Water飛雪矿物质水 Bonaqua Mineral Water冰露纯净水 Ice Dew Purified Water水森活纯净水 "Shui Sen Huo" Sensation Purified Water茶研工坊 "Cha Yan Gong Fang"保锐得运动饮料 "Bao Rui De" Sports Drink津美乐苹果汽水 2 JinMeiLe Apple Soda津美乐菠萝汽水 JinMeiLe Pineapple Soda津美乐橙汽水 JinMeiLe Orange Soda津美乐清柠檬汽水 JinMeiLe Apple Soda津美乐荔枝汽水 JinMeiLe Lychee Soda玉泉汽水 3 Schweppes Brand Soda

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Product Management

• Decision about the nature of product: – positioning and unique selling proposition (USP)

• Brand Management• Product packaging• Quality assurance and warranty• Safety• Learn from local firms

Boundaries of Product Management

Price

Quality

Target

Segments?

Of course, there are many ways of doing the perceptual mapping and positioning.

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Preparation before launching

• Market research

• Consumer research

• Market segments

• Target market(s)

• Positioning

• Value position

• IMC (integrated marketing campaign)

Perceptual Mapping

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Gap Analysis

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P&G Case

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KFC Case: Local adaptation

• Mandatory– legal requirements– infrastructure– physical requirements

• “Discretionary”– local tastes: – fit into cultural environment

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Fashion Case: Extension

• Brand name effect enlarge

Common Routes of Local Brands

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The Brand Transmission of Fame Orientation

• Brand bidding– During Chinese New Year

– CCTV

• Celebrity effect Li Ning, Yaoming

• News sensation– Hard to tell advertisements from news

– Ethical concerns, relationship with the media

– Deceptive advertising

• Enthusiasm in brand ranking– National and local rankings

Brand Recognition with Visual Orientation

• According to local ad agencies, it is important to design a beautiful and meaningful Logo first when planning for a brand recognition system.

• Brand recognition with vision orientation has a certain discriminative communication effect.

• Too many brands lack unique brand identity with many copycats

• Some Chinese brands also use foreign names

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Building up Corporate (company) Brand

• Two extremes: every product uses different brand (P&G); all products use the brand of the corporation (Lenovo), an umbrella corporate brand with many product bands.

• Chinese firms prefer corporation brand strategy for the following reasons: limited fund, cultural differentiation, platform of trust, and difference in demand and competition environment.

Entrepreneur-driven Brand Value

• Entrepreneurs contribute a lot to the brand value. Jack Ma• Entrepreneurs are like stars and heros! Jack Ma• Entrepreneurs put their values and characteristics into the

corporate brand. Entrepreneurs guide the direction of brand development and determine the brand’s future.

• The speaks and talks of the entrepreneurs become the lively advertisement of the brand.

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International Brands’ Strategies in China

Market Entrance by Joint Venture

• Joint venture is a common module to enter Chinese market by joint venture for international corporations.

• When entering western countries, corporations often use their own investment.

• With the familiarity of Chinese market, many corporations will no longer choose joint venture.

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Government and Public Relation Marketing

• Politics power and public relation are very important for marketing.

• International corporations concern about government and social public relation because they can both obtain supports from government and local people

• Social public relation activities of international corporations: education support, sports sponsor, cultural communication promotion, disaster rescue, and support for western development.

City Centric Marketing Strategy

• Compared with local brand, the international brand mainly focus on the city markets, where brand awareness is higher.

• Rural markets are complicated and dominated by local brands. • City consumers have more purchase power and can accept

foreign brands more easily• City consumption behavior can help promote similar

consumption behavior in rural markets. 。

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Product

Existing New

Market

Existing

New

Market penetration Product

Ford Motor Development 3M

Market Development Diversification

Haier GE

Growth Strategies

Physical Product vs. Communication Adaptations

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Localization Strategies

• Localization is the need for strategy and also a result of the specific Chinese environment.

• Some foreign companies have either developed or acquired local brands, such as Coca Cola.

• Because of the marketing competition, international corporations adopt the localization strategies, including perspectives of product research and development, manufacturing, brand, promotion, distribution channel, purchasing, human resource and capital operation.

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Swire Pacific Beverages

• Swire Guangdong Coca-Cola produces and sells Coca-Cola, Coke Light, Lemon Coke Light, Sprite, Fanta, Smart, Tian Yu Di mineralised water, Sensation purified water and Qoo juice and also distributes Minute Maid, Nestea and Modern Tea Workshop beverages.

Diversification vs. Focused Strategy

• HBR article

• Leading discussion

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