Summary–1

Summary of Product Management

Professor Carl MelaMarketing 460

Product ManagementFuqua School of Business

• Brand Management System

• On Building A Brand

• Managing Across Brands– Product Lines– Global– Communities– Summary

Summary–2

Agenda

• PharmaSim Wrap-up– Insights from the marketing plan– Insights from the game

• Course Summary

Summary–3

PharmaSim Wrap-up

• Marketing Planning Lessons• Strategies and Performance by Group

Summary–4

Marketing Planning Lessons

• Situation Analysis– Length

• Is it germane to strategy and tactics

– Information ->Insights->Implications• If no implications, then consider omitting

– The plan is also a request for resources• Affects tone

Summary–5

Marketing Planning Lessons

• Situation Analysis– Internal consistency

• If it is in the situation, is it in the summary? The objectives? The strategy?

– Assumptions• Includes growth, competitive reactions, etc.

– Objectives - are they attainable?• Bonuses and merit raises• Forecasts

Summary–6

Marketing Planning Lessons

• Competitor and Customer Analyses– What do the customers want?

• Table of benefits by segment or perceptual map

– Who provides it?• Table of benefits by competitor or perceptual map

– Are there positioning gaps?– Who will rush to fill them and what are the

threats?

Summary–7

Marketing Planning Lessons

• Strategy and Tactics– Link objectives, strategy and tactics

• Pricing Analysis– Most teams adopt competitive positioning, but

is this profit maximizing?– Why high discounting (off invoice) with

premium position?– Discuss channel pricing as well as consumer.

Summary–8

Marketing Planning Lessons

• Product Design Analysis– Articulate rationale (from customer and

competition “C”’s)– Promotional and advertising tactics

should vary by product

Summary–9

Marketing Planning Lessons

• Promotion Analysis – Caution in reallocating marketing support from core

product (recall the Nielsen/Bases study)– Trade deals across channel and sales allocation across

channel differ from stated distribution strategy– How do consumer promotions vary across lines?

• Different stages in decision process by product/segment– How do trade promotions vary across channels?

• Where does target shop?• What promotions are effective in channel?

Summary–10

Marketing Planning Lessons

• Advertising Analysis – Objective of primary demand is often not

commensurate with a line extension or a lower share brand (increases competitor’s sales)

– Explicate message and target– Advertising positioning between segments– Approach

• Competitive parity• % of revenue• Task and budget

Summary–11

Marketing Planning Lessons

• Specificity– How many sales people? What ad budget? What

allocation of trade promotions? What price?

Summary–12

Game Results

• Groups maximized share and sales as opposed to net income - marketing bias?

Team Market Share Mfr Sales Mfg. Income Stock Pricedkcm_01 1 1 2 2dkcm_02 1 1 2 1dkcm_03 2 1 4 2dkcm_04 1 1 4 2dkcm_05 1 1 2 1dkcm_06 1 1 1 1dkcm_07 1 1 4 2dkcm_08 1 1 3 1dkcm2_01 1 1 2 1dkcm2_02 1 1 2 2dkcm2_03 1 1 2 2dkcm2_04 2 1 3 2dkcm2_05 1 2 4 3dkcm2_06 1 1 1 1dkcm2_07 1 1 2 2dkcm2_08 1 1 3 3dkcm2_09 1 1 3 1Average 1.12 1.06 2.59 1.71 Mode 1.00 1.00 2.00 2.00

Summary–13

Game Results: Team Strategies

• Tend to like promo, dislike salesforce as tools– Only one #1 in price though most stated goal was premium!

• How to link performance to strategy?

Team Avg Price Promo Sales Force Advert 3rd Product

dkcm_01 2 1 3 3 1dkcm_02 3 1 3 1 0dkcm_03 2 3 3 3 1dkcm_04 2 1 4 3 1dkcm_05 2 1 4 1 0dkcm_06 2 1 2 1 1dkcm_07 3 3 3 3 1dkcm_08 2 1 2 3 1dkcm2_01 2 1 3 2 0dkcm2_02 1 1 2 1 1dkcm2_03 4 1 3 1 0dkcm2_04 2 2 4 3 0dkcm2_05 5 3 4 3 1dkcm2_06 2 1 1 3 1dkcm2_07 2 1 3 1 1dkcm2_08 5 3 3 3 0dkcm2_09 2 1 3 3 0Average 2.53 1.53 2.94 2.24 0.59 Mode 2.00 1.00 3.00 3.00 1.00

Summary–14

Data

Team

Cum. Net Income

Cum Unit Sales

Stock Price

Market Share %

Cum Promo

(MM's)Cum Adv

(MM's)

Cum Sales Force

(MM's)Shelf

SpaceAvg Retail

Price3rd

Product

dkcm_01 1,033 1,131 97 26.1 96 200 91 3.64 6.54 1dkcm_02 938 1,246 106 30.5 102 258 93 3.76 5.82 1dkcm_03 710 1,066 66 22.8 67 228 105 3.14 6.47 1dkcm_04 725 1,152 77 25.7 100 231 74 3.54 5.91 1dkcm_05 1,095 1,246 138 30.5 110 283 73 3.37 6.21 1dkcm_06 1,260 1,272 160 32.2 119 283 108 3.84 7.05 1dkcm_07 680 1,117 71 24.7 69 206 104 2.60 5.46 1dkcm_08 776 1,203 95 28.2 129 184 104 3.56 6.15 1dkcm2_01 1,014 1,261 134 30.5 105 243 98 3.54 6.28 1dkcm2_02 1,164 1,066 104 26.9 92 276 108 3.50 6.97 1dkcm2_03 929 1,245 105 28.6 86 264 105 3.79 5.68 1dkcm2_04 921 1,134 79 24.5 81 205 87 2.69 6.20 0dkcm2_05 559 1,131 59 24.8 74 196 71 3.55 4.96 1dkcm2_06 1,167 1,250 129 30.5 131 210 131 3.60 6.47 0dkcm2_07 1,015 1,153 102 28.0 101 256 101 3.55 6.07 1dkcm2_08 713 1,211 61 24.7 63 206 99 3.62 4.95 1dkcm2_09 876 1,178 94 27.1 102 232 102 3.40 6.07 1Avg 916 1,180 99 27.4 96 233 97 3.45 6.07 0.88 Std Dev 199 67 29 2.7 20 32 15 0.35 0.59 0.3

Summary–15

DataEffect of Promo $'s on Unit Sales

R2 = 0.29

3,5003,7003,9004,1004,3004,5004,7004,9005,1005,3005,500

65 75 85 95 105 115 125 135

Promo $'s (,000,000)

Man

uf. S

ales (

,000

,000

uni

ts)

Inefficient Spend

Summary–16

DataEffect of Promo $ on Stock Price

R2 = 0.34

85

95

105

115

125

135

145

155

165

75 85 95 105 115 125 135

Promo $ (Millions)

Stoc

k

Efficient Promotional Spend

Inefficient Promotional Spend

Summary–17

Game Results - Correlations• Correlation between teams’ strategies and teams’ results

• Promotions move all performance measures, even stock & net!• Sales force and 3rd product have no effects• Ads increase revenue but not income.• Higher price has increases share!

– But correlated about 0.50 with ads and promotions – so is it the product or the marketing – need regression

– Use higher price to fund promotion– so is it price or promotion?

Cum. Mfg. Revenue

Cum. Net Income

Cum Unit Sales

Stock Price

Market Share %

Cum Promo (MM's) 0.74 0.63 0.57 0.76 0.80Cum Adv (MM's) 0.65 0.63 0.30 0.64 0.58Cum Sales Force (MM's) 0.37 0.40 0.14 0.30 0.25Avg Retail Price 0.59 0.78 -0.02 0.65 0.413rd Product -0.17 -0.24 -0.07 -0.07 -0.01

Summary–18

Game Results - Regression

• Lower price, more ads and promos increase sales.– Question: what do coefficients mean?

• Ads and promos increase revenue, only ads increase income– Tradeoff between costs and revenue

• Higher margins offset lower sales on revenue and income– Be wary of univariate correlations!!

IndependentVariables

Share(%)Cum. Unit

Sales (MM)Cum. Mfg. Rev.($MM)

Cum. Inc. ($MM) Stock ($)

Allright(0/1) -0.32 -28.32 -233.4 -150.49 -7.03Price($) -1.64 -87.81 -57.3 113.91 3.29Cum. Ads ($MM) 0.05 1.03 7.1 3.07 0.45Cum. Promo($MM) 0.11 2.68 10.0 2.45 0.81SlsFrc($MM) 0.02 0.71 4.3 1.58 0.14R2 0.87 0.66 0.9 0.87 0.84Bold, Italic, Underline p < 0.01Bold, Italic p < 0.05Italic p < 0.10

Dependent Measures

Summary–19

Game – Results Regression

• So what are normative implications of promotion and price results?– How does promotion influence net income?

• Increases sales with diminishing return• Increases costs with linear effect

– What price should one charge (sales up but net down)?– Rough analyses that follow can be better done with fine

tuning• e.g., break promotion into consumer and trade• e.g., break analysis down by product line

Summary–20

Exploring the Effect of Promotion on Sales and Profits

Effect of Cumulative Promotion on Cumulative Net Income

500600700800900

1,0001,1001,2001,300

60 70 80 90 100 110 120 130 140

Promotion Spend ($MM)

Cum

ulat

ive

Net

($M

M)

Net = -719 + 29 * Cum_Prom - 0.119 * Prom2; R2 = 0.46Peak Net of 1048 at Promo = 122

Summary–21

Exploring Price Effects on Revenue and Income

Unit Sales and Price

R2 = 0.00Elasticity = -0.01

6.966.987.007.027.047.067.087.107.127.147.16

1.55 1.65 1.75 1.85 1.95 2.05

Ln(Price)

Ln (U

nit S

ales (

MM

))

• Looks like some room to increase price

Summary–22

Exploring Price Effects on Revenue and Income

Profit = (Retail Unit Sales) * (Manufacturer Price - Manufacturer Cost) By definitionAssumes negligible inventory effect

Retail Unit Sales = a - b * Retail Price Linear demand curveRetail Price = Manufacturer Price * Retail Markup

Profit = (a - b * (Retail Markup * Manufacturer Price)) * Substitute demand curve and manufacturer price into profit

(Manufacturer Price-Manufactuer Cost)

Optimal Price = 0.5 * (a/(b*Markup) + Manufacturer Cost) Take first derivative of profits with respect to price and set

Manufacturer Cost = 0.35*Manufacturer Price to zero. Then simplify.

a 1713 From sales regression b 88 (plus or minus 57) Retailer Markup 29% From game data Average Retail Price 6.06$ From game data Implied Manufacturer Price 4.70$ Mfg Price * (1 + Markup) = Ret Price Manufacturer Cost of Goods Sold 35% From game data Implied Manufactuter Cost 1.64$ Mfg Cost = Mfg Price * COGS

Optimal Manufacturer Price 34.53 Use profit formula Lower Bound 96.90 Caution -- beyond range of data

Summary–23

Game Results - Regression

• Few groups explicated analysis – e.g., correlations, regressions, etc.– Use lessons from stats and core marketing– More common in consumer goods and services than

high tech

Summary–24

PharmaSim Wrap-up

• Experience with marketing planning– Number of lessons with respect to writing a plan

• Goal-setting experience– How did you do vs. plan

• Experience managing a brand– Most teams did well– Correlates of success

• Real world, ambiguity and live with results of decision– Fish or cut bait? Meet objectives or not?– No other way to gain such insights into own behavior– Thus, worth the effort in my view– Play on if you want – send me a note

Summary–25

Course Overview

• Objective - Theoretical and practical grounding in brand and product management

• Structure– Part I: Brand Management System– Part II: On Building A Brand– Part III: Managing Across Brands

Summary–26

Structure

• Part I - The Brand Management System– Brands and Brand Management: Class 1

• The Nature and Benefits of a Brand– Awareness, brand knowledge structures– Antecedents and consequences

• Brand/Product Management• An Application to the Pepsi Syringe Scare.

– Sophisticated organizational structure– Integrated plan– Facilitated information flows to and from markets– Result: brand not affected

Summary–27

Structure

• Part I – The Brand Management System– The Marketing Plan: Class 2

• Plans serve to coordinate and formalize research and decisions

• Planning process• Planning format

Summary–28

Structure

• Part I – The Brand Management System– Managing a New Brand: Class 3

• Process– Develop brand identity – Create consistent brand message – Develop brand awareness

• Implementation at Samsung Electronics Corporation– Senior management support – Tilt compensation from region to corporate performance– $400M budget as incentive to obtain cooperation– Market research to support position– Personal visits to country and product managers to build support– Training sessions to develop market orientation

Summary–29

Structure

• Part I - The Brand Management System– Managing a Mature Brand: Class 4

• P&G Case– The brand management system gives brands attention– In mature categories, be wary of product proliferation – P&G turns around in 2004

• Live Commentary from P&G– Pantene Relaxed and Natural– Challenges of implementing decisions (approvals and

interactions)– Promise of targeted marketing

Summary–30

• Part II - Building Brands– Private Label Product: Class 3

• Private Label– Growing (20% of P&G sales; #1 Grocery Brand in US’ 40%

of Wal-Mart Revenue)– Fragmentation of Media and Consolidation of Retail– Strategies – Categorized Along Price/Quality space

» Do nothing, Better retail support, Differentiate, Reduce price gap, Fighter brands, Can’t beat ‘em, join ‘em(fabricate or be partner)

Structure

Summary–31

Structure• Part II - Building Brands

– Product Launch: Class 5• Donna Novitsky, Partner MDV

– Development and marketing are linked:» Whiteboard to alpha: first customer adopters » Debugging and beta: product feedback/building credibility.» Production ready: paying customers » Product goes live: references » Global roll out: market has been developed

• Bayer AG– What’s a brand worth?– How to revive a moribund brand

Summary–32

Structure • Part II - Building Brands

– Promotional Event Marketing/Branding of Services: Class 6• Event marketing creates excitement and leverages secondary associations

– E.g., sports marketing• Hurricanes Case

– Business model of NHL requires operational and promotional changes» Grass roots event marketing and/or TV

– Targeting (Hardcore v. Families) and Message (Game v. Entertainment)• Hurricanes Assistant GM Jason Karmanos

– NHL Relaunch» Increased promotion of players» Partnerships with Hollywood» A new media strategy - web, social networks, key word search» New game rules

– Be where and when fans want service

Summary–33

Structure

• Part II - Building Brands– Promotion (Advertising): Class 7

• How to do it – whom and when – differs from core focus on strategy.

» Agency – selection, organization, compensation» Role of clutter which is mitigated by …» New media – explosive growth and new outlets

• Andrew Delbridge, Executive Director McKinney» Creative process/Creative Brief» Media management/Media Brief

Summary–34

Structure • Part II - Building Brands

– Pricing and Price Promotions: Class 8• Sales Promotion

– Brand effects of sales promotion (trade and consumer)» Equity Building» Equity Imparing

– The role of the mix on brand equity – product matters most• JP Beauchamp, VP IRI and Todd Juenger GM TiVo

– Organization of IRI (data, analytics and software)– Emerging trends

» Old: 3 TV stations no remote» New: Internet TV, DVR, DVD, VOD, Interactive Programs,

Internet, Gaming, Cell, iPod, Satellite, Slingbox, etc.– Business models for TiVo – media software or hardware?

Summary–35

Structure

Clutter

Summary–36

Structure • Part II - Building Brands

– Place and Product: Class 9• Brand Elements

– Name, logo, symbol, characters, slogans, package and jingles– Memorable, meaningful, protectable, transferable, adaptable

• Distribution– Breadth – extensive v. selective: front line to customer– Depth – own stores as a promotion: is a promotion, but hard to update

• Café de Colombia– Brand threatened by generics and premiums– Choice to move brand down (McD’s) or up (Own Chains)– Regressions to verify data claims in case

Summary–37

Structure

• Part III - Across Brands and Markets– Brand Hierarchies: Class 10

• Levels– Corporate– Family– Individual– Modifier

• Appropriate depth depends on differences in segments, abstractness of associations, and associations desired to be emphasized

– Teradata, a Division of NCR

Summary–38

Structure

• Part III - Across Brands and Markets– Product Extensions: Class 10

• Product Extensions– Tremendous efficiencies– Consumer confusion– Issues of fit

• The Black and Decker Case and Video– Demonstrates effect of extensions on parent brand– Strategies to mitigate negative brand associations

» Rebrand» Inimitable points of differentiation (service, sales relationships)

Summary–39

Structure• Part III - Across Brands and Markets

– Branding Communities: Class 11• Three markers of brand community

– Consciousness of kind– Rituals and traditions– Responsibility to community

• Managing communities (word of mouth)– Talkers, Topic, Tools, Take part, Track– Create Communities

» Grassroots Marketing, Community Marketing, Conversation Creation, Web Spaces and Lists

– Spread the Word» Buzz Marketing, Viral Marketing, Evangelist Marketing, Referral

Programs, Product Placement, Influencer Marketing, Cause Marketing, Brand Blogging, Social Networking

Summary–40

Structure

• Part III - Across Brands and Markets– Global Branding: Class 11

• Mike Riegel, Director IBM Global Services– Applications

» Global Internet» Exporting Corio brand» International ingredient branding

– Global branding strategies» Benefits (e.g., efficiency)» Liabilities (e.g., customization)» Building (extend, acquire, partner)

Summary–41

Structure

• Part III - Across Brands and Markets– Wrap-up and PharmaSim Summary: Class 12

• You are here!!

– At a Glance

Summary–42

Course On a Page• Part 1 - Brand Management System

– Brands and Organizational Design– Marketing Planning

• Part 2 - On Building A Brand– Price to Image– Distribution Presents Image– Promotion to Develop Image– Product is Image (Private Label)

• Part 3 - Managing Across Brands & Regions– Marketing Plan– Manage Across Line– Manage Across Geographies– Manage Across Consumers

Summary–43

Approach

• Highly Applied and Interactive• Seven Guest Speakers (Many Industries) • Cases – Qualitative and Quantitative• Web Sites (In Class and For Class)• Simulation• Videos• Lectures• In-class Exercises (e.g., Private Label)• Student Experiences

Summary–44

Approach

• Innovation meant risk– Guest speakers cancel or reschedule or are new– New topics take time to cover – or are not fully

understood – but are also source of advantage– Live assignments have bugs but are also current

• If you want “standard” lecture/case format, this was not the ideal course– Tolerance for potential “glitches”

• Benefit is more wholistic and “real” orientation, multidimensional learning, and currency

Summary–45

Good Luck!

• Stay in touch– Guest speaking– Examples– Feedback regarding preparation– Vexing issues faced this summer or next year– Job opportunities for students

• Great time to be in brand – the world has changed• This makes it a fun course for me. Hope you

enjoyed it, too!