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Strategic challenges for branding
352
J PROD INNOV 1995;12:34&357
MANAG
and made measurements that revealed some interesting happenings. The factors considered to be relevant in affecting trial and adoption were as follows: 1. Product quality: Assessed by experts, based on dosage, side effects, and efficacy. 2. Product class characteristics: Three separate dimensions here were lifethreatening diseases or not, ambiguous versus clear symptoms, and acute versus chronic diseases. 3. Market characteristics: Four separate dimensions were market size, market growth rate, competitiveness, and the market familiarity of the firm introducing the product. 4. Launch strategies: The two dimensions here were launch timing (order of entry) and launch investment (money spent on detailing and advertising). This list of four categories of factors influencing trial and repeat usage can probably be applied to almost every other situation, considering that they cover the product variable itself, the power of the marketing effort, the amount of competitor reaction, and the basic inclination of customers toward new solutions to the medical problem present. Strong product claims, large marketing budgets, low competitive response, and high customer readiness would all presumably lead to trial and repeat. The outcomes were diverse and rather closely related to the specific variables and how they were measured and assumed. Furthermore, the article is more focused on explaining repeat sales and making a sales forecast than on measuring the impact on trial. But here are some sample findings, illustrative of what this method can determine: 1. The repeat rate on a new drug is closely related to the dosage and side effects of the drug, the growth in the market, and familiarity of the seller with the market. Surprisingly, there was no positive relationship with the drug’s efficacy (!), whether the disease was lifethreatening, market size, absence of competition, and launch investment. 2. The promotion’s effectiveness was substantially affected by the drug’s quality and the growth of the market, but not by market size, competition, and expenditures. 3. The amount of word-of-mouth was substantially affected by efficacy of the drug, the acuteness of the disease, and the absence of competition-all medically sound relationships.
ABSTRACTS
The relationships are very complex, as one might expect, and the authors offer many comments on various aspects of the findings where there were surprises, and on relationships with previous models. The overall conclusion was that the new model does a good job of predicting market success. Strategic Marketing
Challenges for Branding, Peter Farquhar, Management (Number 2, 1994), pp. 8-15
This short article allows a leading expert on branding to summarize the current situation on a powerful tool and the problems brand owners will have in the future. First, he reminds us that brand power came about in three ways. The first is obvious-awareness. Modem branding emerged with the advent of mass advertising, where producers created benefit and usage “positions” in consumers’ minds. Second was protection, stemming partly from law and partly from careful promotion of brands by their owners. The author is concerned that many brand owners today are flirting with losing their brand power by cooperative branding (Pizza Hut meal eaten inside a Marriott Hotel.) Another potential problem is branded ingredients, where brand powers are not equal and consumer usage not balanced in blame and credit. But the third requirement for powerful branding (beyond awareness and protection) was availability. Branding is a consequence of today’s transportation systems and sometimes of fluke events such as CocaCola’s huge benefit from being available to GIs in World War II. He makes the point: “Much of what is called ‘brand equity’ is, in reality, manufacturer power in the distribution channels. ” For the future, watch for two key trends. First is an increase in uncertainty in purchasing and consumers’ consequent desire to find brands that they can trust. Second, there are now so many brands in many categories that consumers are becoming brand-blind. Only great effort will keep these brands from losing their power. Given these problems, brand owners face two challenges. First is to make sure their brand “gets the credit. ’ ’ Unfortunately, for them, “solution providers” are growing more and more powerful-system integrators, travel agents, and specialty retailers, for example, now make product choices for their customers; they select the brand, and for a different set of reasons. To the solution provider’s name (brand) goes credit for the choices and quality of the “package.” The second challenge is to find ways to add value to
ABSTRACTS
J PROD INNOV 1995;12:346-357
their brands. And supply that value at the end of the supply chain, visibly, at the time of purchase. This means creative product innovation. There will be less niche marketing (the value gets lost going through the supply chain.) From this analysis, the author predicts four strong branding strategies for the future: 1. Give brands new value/power through innovations that are both clear and relevant to the buyer, positioned on benefits not features. 2. Try gaining this power by leapfrogging other brands into the consumers’ minds. Mitsubishi’s current strategy of positioning its brand for highquality, big-screen television is an example. 3. Offer customized solutions. Some of the solution providers (e.g., travel agencies) are already doing this, to their benefit. Some manufacturers will use more channel partnering to reach the end-point. 4. Create alternative channels to bypass the powerful channel masters in so many trades today. Dell and other computer firms bypassed established computer manufacturers’ channels by going to direct mail. Alamo car rental went after the leisure market as a bypass. There will be other strategies, but action on branding is worth the effort. Managing the Marketing/R&D Interface, Philippe Deschamps, Prism (Fourth Quarter pp. 5-19
Jean1994),
The staff at A. D. Little recently decided to apply concepts of process management (and reengineering) to the Marketing/R&D interface. They surveyed 733 managers in the U.S. and Europe for the information discussed here. The author agrees that the interface is critical and that there are problems in it (though less inflammatory and combative than often portrayed.) The first viewpoint discussed was functional roles-whether one takes the lead, has an equal partnership, or has isolated management. All three exist-each phase of activity being assessed differently. There are 13 different activities: Technology strategy Selection of fundamental research projects Selection of innovation and advertising projects Review of innovation and advertising projects Assessment of competitive offerings
MANAG
353
Product strategy Product cycle plan Idea generation for totally new Idea generation for extensions Idea evaluation and selection New product specifications Approval of technical specifications Project review Managers advocate equal partnerships only for project review on development projects, selection and evaluation of development projects, generation of ideas for totally new products, and review of advanced projects. The other activities call for functional leadership (participation by both), along lines commonly expected. Close to single ownership is supported only for product strategy and cycle plan (marketing) and selection of research projects and technology strategy (R&D). The author questions the latter-sole ownership. All activities benefit from crosspollination of experience and ideas. Interface effectiveness is the second area of interest, and it didn’t score well. Respondents feel there is ineffectiveness on technology strategy, selection of longer-term projects, and life cycle planning. Nearterm activities seem to be working much better. The key finding was that R&D people feel they are not getting adequate guidance from marketing, partly for good reason (different time horizons) and partly for bad (reluctance by marketing to “stick its neck out.“) On the third topic, interface problems, the good news is that neither function is seen as very “ivory tower” today, and outright conflict is very limited. The bad news is that both functions tend to be dictatorial on their interests and neither optimally builds on the thinking of the other even when they have it. Fourth, regarding underlying obstacles, the findings were considered by the author to be well known. Each of the two functions seems to willingly take a back seat to the other in consumer goods industries and in technology-driven industries. The one finding is that marketing departments are not very well organized for a partnership role here. Marketing people often do not know what they really are expected to do. Fifth, it seems that the respondent companies have not set up many special organizational mechanisms to deal with the interface problem-the multifunctional committee being the only one in widespread use. Strategic marketing functions are not common (a third have one), nor are senior product managers for new
J PROD INNOV 1995;12:34&357
MANAG
and made measurements that revealed some interesting happenings. The factors considered to be relevant in affecting trial and adoption were as follows: 1. Product quality: Assessed by experts, based on dosage, side effects, and efficacy. 2. Product class characteristics: Three separate dimensions here were lifethreatening diseases or not, ambiguous versus clear symptoms, and acute versus chronic diseases. 3. Market characteristics: Four separate dimensions were market size, market growth rate, competitiveness, and the market familiarity of the firm introducing the product. 4. Launch strategies: The two dimensions here were launch timing (order of entry) and launch investment (money spent on detailing and advertising). This list of four categories of factors influencing trial and repeat usage can probably be applied to almost every other situation, considering that they cover the product variable itself, the power of the marketing effort, the amount of competitor reaction, and the basic inclination of customers toward new solutions to the medical problem present. Strong product claims, large marketing budgets, low competitive response, and high customer readiness would all presumably lead to trial and repeat. The outcomes were diverse and rather closely related to the specific variables and how they were measured and assumed. Furthermore, the article is more focused on explaining repeat sales and making a sales forecast than on measuring the impact on trial. But here are some sample findings, illustrative of what this method can determine: 1. The repeat rate on a new drug is closely related to the dosage and side effects of the drug, the growth in the market, and familiarity of the seller with the market. Surprisingly, there was no positive relationship with the drug’s efficacy (!), whether the disease was lifethreatening, market size, absence of competition, and launch investment. 2. The promotion’s effectiveness was substantially affected by the drug’s quality and the growth of the market, but not by market size, competition, and expenditures. 3. The amount of word-of-mouth was substantially affected by efficacy of the drug, the acuteness of the disease, and the absence of competition-all medically sound relationships.
ABSTRACTS
The relationships are very complex, as one might expect, and the authors offer many comments on various aspects of the findings where there were surprises, and on relationships with previous models. The overall conclusion was that the new model does a good job of predicting market success. Strategic Marketing
Challenges for Branding, Peter Farquhar, Management (Number 2, 1994), pp. 8-15
This short article allows a leading expert on branding to summarize the current situation on a powerful tool and the problems brand owners will have in the future. First, he reminds us that brand power came about in three ways. The first is obvious-awareness. Modem branding emerged with the advent of mass advertising, where producers created benefit and usage “positions” in consumers’ minds. Second was protection, stemming partly from law and partly from careful promotion of brands by their owners. The author is concerned that many brand owners today are flirting with losing their brand power by cooperative branding (Pizza Hut meal eaten inside a Marriott Hotel.) Another potential problem is branded ingredients, where brand powers are not equal and consumer usage not balanced in blame and credit. But the third requirement for powerful branding (beyond awareness and protection) was availability. Branding is a consequence of today’s transportation systems and sometimes of fluke events such as CocaCola’s huge benefit from being available to GIs in World War II. He makes the point: “Much of what is called ‘brand equity’ is, in reality, manufacturer power in the distribution channels. ” For the future, watch for two key trends. First is an increase in uncertainty in purchasing and consumers’ consequent desire to find brands that they can trust. Second, there are now so many brands in many categories that consumers are becoming brand-blind. Only great effort will keep these brands from losing their power. Given these problems, brand owners face two challenges. First is to make sure their brand “gets the credit. ’ ’ Unfortunately, for them, “solution providers” are growing more and more powerful-system integrators, travel agents, and specialty retailers, for example, now make product choices for their customers; they select the brand, and for a different set of reasons. To the solution provider’s name (brand) goes credit for the choices and quality of the “package.” The second challenge is to find ways to add value to
ABSTRACTS
J PROD INNOV 1995;12:346-357
their brands. And supply that value at the end of the supply chain, visibly, at the time of purchase. This means creative product innovation. There will be less niche marketing (the value gets lost going through the supply chain.) From this analysis, the author predicts four strong branding strategies for the future: 1. Give brands new value/power through innovations that are both clear and relevant to the buyer, positioned on benefits not features. 2. Try gaining this power by leapfrogging other brands into the consumers’ minds. Mitsubishi’s current strategy of positioning its brand for highquality, big-screen television is an example. 3. Offer customized solutions. Some of the solution providers (e.g., travel agencies) are already doing this, to their benefit. Some manufacturers will use more channel partnering to reach the end-point. 4. Create alternative channels to bypass the powerful channel masters in so many trades today. Dell and other computer firms bypassed established computer manufacturers’ channels by going to direct mail. Alamo car rental went after the leisure market as a bypass. There will be other strategies, but action on branding is worth the effort. Managing the Marketing/R&D Interface, Philippe Deschamps, Prism (Fourth Quarter pp. 5-19
Jean1994),
The staff at A. D. Little recently decided to apply concepts of process management (and reengineering) to the Marketing/R&D interface. They surveyed 733 managers in the U.S. and Europe for the information discussed here. The author agrees that the interface is critical and that there are problems in it (though less inflammatory and combative than often portrayed.) The first viewpoint discussed was functional roles-whether one takes the lead, has an equal partnership, or has isolated management. All three exist-each phase of activity being assessed differently. There are 13 different activities: Technology strategy Selection of fundamental research projects Selection of innovation and advertising projects Review of innovation and advertising projects Assessment of competitive offerings
MANAG
353
Product strategy Product cycle plan Idea generation for totally new Idea generation for extensions Idea evaluation and selection New product specifications Approval of technical specifications Project review Managers advocate equal partnerships only for project review on development projects, selection and evaluation of development projects, generation of ideas for totally new products, and review of advanced projects. The other activities call for functional leadership (participation by both), along lines commonly expected. Close to single ownership is supported only for product strategy and cycle plan (marketing) and selection of research projects and technology strategy (R&D). The author questions the latter-sole ownership. All activities benefit from crosspollination of experience and ideas. Interface effectiveness is the second area of interest, and it didn’t score well. Respondents feel there is ineffectiveness on technology strategy, selection of longer-term projects, and life cycle planning. Nearterm activities seem to be working much better. The key finding was that R&D people feel they are not getting adequate guidance from marketing, partly for good reason (different time horizons) and partly for bad (reluctance by marketing to “stick its neck out.“) On the third topic, interface problems, the good news is that neither function is seen as very “ivory tower” today, and outright conflict is very limited. The bad news is that both functions tend to be dictatorial on their interests and neither optimally builds on the thinking of the other even when they have it. Fourth, regarding underlying obstacles, the findings were considered by the author to be well known. Each of the two functions seems to willingly take a back seat to the other in consumer goods industries and in technology-driven industries. The one finding is that marketing departments are not very well organized for a partnership role here. Marketing people often do not know what they really are expected to do. Fifth, it seems that the respondent companies have not set up many special organizational mechanisms to deal with the interface problem-the multifunctional committee being the only one in widespread use. Strategic marketing functions are not common (a third have one), nor are senior product managers for new