Product and Brand Management

Session 2 Category, Competitor and Customer Analysis Francis Rodrigues

Scope

Topics Covered:

Introduction to Product Management Role and Operations of Product Managers in Marketing Product Analysis Category/Customer/Competitor Brand Vs. Product, Brand Elements Brand Identity Brand Equity Brand Building Strategies

Category Attractiveness Analysis

Aggregate category factors

Category Size Category Growth Stage in product Life Cycle Sales Cyclicity Seasonality Profits

Attractiveness of Market Variables

Attractiveness High Market Size Market Growth Sales Cyclicity Sales Seasonality Profit Level Profit Variability + + + Low + + +

Category Attractiveness over the Product Life Cycle

Sales

Maturity Growth Introduction

Stage of product life cycle Category size Category growth

Decline

Introduction

Growth

Maturity

Decline

Time

Small Low

Moderate High High

Large Low Low/high

Moderate
Negative Low

Low Category attractiveness

Category Factors

Threat of new entrants Bargaining power of buyers Bargaining power of suppliers Current category rivalry Pressure from substitutes Category capacity

Five Forces Analysis

New Entrants

Suppliers

Rivalry

Buyers

Substitutes

Michael Porters Five Force Model

Industry Concentration Measures

1. The share of the largest firm 2. The combined shares of the three largest firms 3. The number of firms with at least x percent of the market (e.g., 1 percent) 4. The share of the largest firm divided by the share of the next three largest competitors 5. Herfindahl-Hirschman Index (HHI): - The Sum of Squared Shares of the Firms in the Industry - Use Thresholds: below 1000; 1,000 to 1,800; above 1,800

Buyer Bargaining Power is High When:

Product

bought is a large percentage of the buyers cost. Product bought is undifferentiated Buyers earn low profits Buyer threatens to backward integrate Buyer has full information Substitutes exist for the sellers product or service

Supplier Bargaining Power is High When:

Suppliers

are highly concentrated, that is, dominated by a few firms There is no substitute for the product supplied Supplier has differentiated its product or built in switching costs Supply is limited

Major Characteristic of Categories Exhibiting Intensive Rivalries

Many or balanced competitors

Slow growth High fixed costs Lack of product differentiation Personal rivalries

Impact of Category Factors on Attractiveness

Environmental Factors
Technological Political Economic Regulatory Social

Typology of Technical Developments

* Includes agronomic and biomedical developments.

Conceptualizing Political Risks

Business Implications of Social Changes

The Shrinking Day

Connected Individual Body + Soul

Category to Competitor Analysis

Define the competitive set Boundary Industry Analysis Macro level Competitor Analysis Micro level

Competitor Analysis System

Secondary data Primary data
Key questions: Who are they? What are the competing product features? What do they want? What is their current strategy?

Differential competitor advantage analysis i.e. Who has the competitive product advantage?

What are they going to do?

Key Questions to Ask

Do you know? What are the Capabilities of competitors? What are the Competitors Objectives? What are the Current Strategies being used and how successful have they been? What are their likely Future Strategies?

Secondary Sources of Competitor Information

Customer communications Consultants Trade press Internet Internal sources Local newspapers Annual reports Patent filings

Secondary data

Promotional literature

Business press
Trade associations News releases Electronics databases Government

Primary Sources of Competitor Information

Investment bankers Consultants/ Specialized Firms Sales force

Primary data

Employees Customers

Suppliers

Other Sources of Information

Help-Wanted Ads Reverse Engineering Monitoring Test Markets Hiring Key Employees Plant Tours

Information Sources with Ethical Considerations

Aerial Reconnaissance Buying/Stealing Trash (Garbology) Printers Phony Want Ads

Step1: Assess Competitors Objectives

Three Categories Market share or profit Issues to consider

Ownership

structure Operating philosophy and procedures Country of origin

Step 2: Assess Competitors Current Strategies

Assess

competitors Marketing Strategy Target Market Selection Core Strategy (Value-chain comparison) Implementation (Supporting Marketing Mix)
Pricing Promotion

Distribution
Product/Service

Capabilities: Product Features Matrix

Value Chain
Support Activities

Firm Infrastructure Human Resource Management Technology Development Procurement

Inbound Logistics

Operations Outbound Logistics

Marketing and Sales

Service

Primary Activities

Step 2: Assess Current Strategies (Contd)

How to Assess Competitors Strategies Two key elements of a strategy: Segments appealed to Core strategy For Industrial Products: Sales literature For Consumer Products: Media Tracking (SOV) Marketing Mix variables: Ask Distributors, Salespeople, Customers

Step 2: Assess Current Strategies (contd)

Assessing Competitors Technological Strategy 1. Technology selection or specialization 2. Level of competence 3. Sources of capability: internal versus external 4. R&D investment level 5. Competitive timing: initiate versus respond 6. R&D organization and policies

Step 2: Assess Current Strategies (contd)

Four Basic Technological Strategies 1. First to Market 2. Second to Market 3. Late to Market or Cost Minimization 4. Market Segmentation

Step 3: Assess Competitors Capabilities

Ability to conceive and design Ability to produce Ability to market Ability to finance Ability to manage

What to do with all the information? (Differential Advantage Analysis)

Simplified Competitive Analysis: Paints (Indian Market)
Market Factors Nerolac ICI Asian Paints Sherwin Williams Nippon

Commitment to Paints business

Financial strength

2 5

3 1 2

1 3 1

4 2 4

5 4 5

Brand awareness

3
Management ability

3
Highest = 1 Lowest = 5

Step 4: Assess A Competitors Will and Future Strategy

Questions to assess a competitors will - How crucial is this product to them? - How visible is the commitment to the market? - Who is involved? To Figure out Future Strategy Forecast with historical data Simulation with historical data Game Theory

A Competitive Conjecture Process

First period

Our total outcome

Second period Should we cut price?

In summary, you need to know

Major Competitors Objectives Major Competitors Strategies Target Market Core Strategy Major Competitors Capabilities

Customer Analysis

What we need to know

Who buy and use the product What consumers buy and how they use it. Where consumers buy When consumers buy How consumers choose Why the prefer a product How they respond to marketing programs Will they buy it (again)?

What we need to know

Who What Where When How Why How Will Target for product development and communication Consumer values, product development Distribution strategy Distribution and communication strategy Product development, Communication and Promotion strategy Product developing, product strategy, brand strategy. Communication, promotion strategy Brand equity, promotion programs.

Who buy and use the product

Buyer VS users Initiator who identify the need for product Influencer who has informational or preference inputs to the decision. Decider who makes the final decision through budget authorization. Purchaser - who makes the actual purchase. User who actually use or consume the product

Buying Roles and Needs/Benefits Sought

Basis for describing consumers

1.

2.

3.

Demographic (age, sex, geographical location, and stage of life cycle) Socioeconomic ( income, education, occupation, social class) Psychographic and values or Lifestyle (sports, traveling, art, music, etc. Personality

4.

Major Segmentation Variables for Consumer Markets

Geographic Region, city, density, climate Demographic Age, gender, family size, income, occupation, education, religion, race, nationality, Psychographic Social class, lifestyle, personality Behavioral Occasions, benefits, user status, usage rate, loyalty status, attitude towards product,.

Major Segmentation Variables for Business Markets

Demographic

Industry, company size, location Technology, user/non-user status, capabilities Purchase-function organization, power structure, Nature of existing relationship, general purchasing policies, purchasing criteria. Urgency, specific application, size of orders Buyer-seller similarity, attitude towards risks, loyalty

Operation variables Purchasing approaches

Situation Factors

Personal Characteristics

What customer buy and how they use it

Benefits:

Product benefits, consumer values.

Recency, Frequency, Monetary value Brand switching How, with what else?

Purchase pattern

Product assortment

Use

Potential customers

Unaware Aware Accepting willing to use Attracted positive attitude Active buy the product Advocate buy, loyal, actively encourage others to buy

Where consumer buy

Things to consider: Convenience Price advantages Reliability Expected after sales service

When consumer buy

Things to consider: Seasonality Needs Purchasing power Shelf-life of products Consistency of supply Price consistency or price expectation

How Customers Choose

Finding how consumer choose a product (from many products and brands) in a category? Multiattribute Model Questions Which attributes do customers use to define a product? What are the perceptions of the products on the attributes? What are the importance weights? What decision rule is used to combine the information?
Compensatory Noncompensatory

1. 2.
3. 4.

Bank Perceptual Map

B A
Courteous personnel

C D
Convenient ATM locations

Why consumer prefer a product

Customer value of a brand composes of 3 basic elements: Importance of the usage situation Effectiveness of the product category in the situation Relative effectiveness of the brand in the situation Sources of Customer Value

1. 2. 3.

Economic Functional Psychological: Brand Equity

Measuring Brand Equity

1. Awareness 2. Associations 3. Attitude

4. Attachment

Manifestation of customer value

Signs of the value of a product. (NOTE: Value can more or less than price) Price Price sensitivity Satisfaction Complaints or compliments Word of mouth Margin or profit contribution Sales Competitive activity Repeat purchase rate

Assessing the Value of the Product Category

1. 2. 3. 4.

Determine the uses of the product Estimate the importance of the uses List competing products for the uses Determine the relative effectiveness of the product category in each usage situation

Assessing the Value of the Brand/Product

Direct Ratings Constant Sum Ratings Graded Pair Comparison

Conjoint Analysis

Paired Comparison Example: Soft Drink Preference

How consumers respond to marketing programs

Methods for assessing sensitivity: 1. Expert judgment 2. Customer survey-base methods. 3. Experiments; controlled setting or actual market observation. 4. Analyses of past data

Will consumers buy the product (again?)

To estimate expected repeat purchase in order to forecast sales and design marketing mix. 2 major factors: 1. Satisfaction

Expectation of performance / quality Perceived performance / quality The gap between expectation and performance

2.

Intention

Consumer Segmentation
Why? Consumers are different. Each individual is unique. Consumers can be grouped somehow, who have something in common or who prefer similar things. Yet tailor made for individuals is too costly

Desirable criteria for segments

1.

2.
3. 4. 5. 6.

Identifiable Sizable Reachable Respond differently Coherent Stable

Methods for Market Segmentation

Cluster analysis Collect data about descriptors and behaviors variables from a sample of customers and then form groups. Tabular analysis Categorize based on consumer response. Regression analysis Use model, e.g. Usage = a + bX1 + cX2 + dX3 Latent class analysis Brand switching data

Methods for market segmentation

Descriptive

Purpose Cluster Analysis Tabular Analysis Prescriptive Purpose Regression Analysis: Individual-based Latent Class Analysis: Segment-based

Cluster Analysis Illustration

Summary : What we need to know

Who buy and use the product What consumers buy and how they use it. Where consumers buy When consumers buy How consumers choose Why the prefer a product How they respond to marketing programs Will they buy it (again)?