branding & distribution issues mktg 485 may 10, 2004
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Branding & Distribution Issues
MKTG 485
May 10, 2004
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Week 7
• Branding– Yahoo
• Distribution– Internet’s Role in Economy
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Branding
• It is through the creation of a recognized and desired brand name that marketing creates value to a business or organization.
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Battle of the Brands
What’s different between them?
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World’s Most Valuable Brands(Source: Business Week, August 6, 2002
(1995))1. Coca Cola $69 (72) billion
2. Microsoft $64 (70) billion
3. IBM $51 (53) billion
4. GE $41 (38) billion
5. Intel $30 (39) billion
6. Nokia $29 (38) billion
7. Disney $29 (34) billion
8. McDonald’s $26 (28) billion
9. Marlboro $24 () billion
10. Mercedes $21 () billion
11. Ford $20 (36) billion
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Power of Branding
“A product is something that is made in a factory; a brand is something that is bought by a customer.”
“A product can be copied by a competitor; a brand is unique.”
“A product can be quickly outdated; a successful brand is timeless.”
Stephen KingWPP Group, London
PRODUCT
BRAND
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Leading Brands in 1920’s
WheatiesIvory SoapSwift Premium BaconColgate toothpasteDel Monte canned fruitWrigley’s chewing gumEveready flashlight batteriesGillette razorsLipton teaGoodyear tiresCampbell’s soupSherwin-Williams paint
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Longevity of Brands
• Brand Awareness
• Perceived Quality
• Brand Associations
• Brand Bonding
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Brand AwarenessAwareness is the extent to which consumer readily identify your brand name with certain products and also identify certain products with your brand name
High Low
Coke Canada Dry
Colgate Aim
McDonalds Jack in the Box
Northgate Aurora Village
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Brand AwarenessAwareness is the extent to which consumer readily identify your brand name with certain products and also identify certain products with your brand name
Top of Mind Awareness - % mentioning a brand name first when asked to name brands in a product category.
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Perceived QualityPerceived quality is the extent to which
consumers believe that the branded products are superior to other branded products
HighLow
Starbucks Folgers
Diet Coke Diet Pepsi
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Quality -- Schlitz1974 - 2nd in Market Share (16%)
Market value - $1.67 billionSchlitz equity - $1.08 billion“The Great Light Beer with Gusto”
1975 - Speeded up brewing process & used cheaper ingredients
1978 - preservatives added making beer cloudy- had to recall 10 million bottles“It’s the Right Product”
1979 - “Take Away My Gusto”1980 - Superbowl taste test
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Brand AssociationsBrand Associations are the qualities (thoughts and feelings) that consumers readily associate
with the brand name.
High Low
Clairol Gillette
GE Black & Decker
Costco Sears
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Associations - Weight Watchers
Heinz purchased Weight Watchers in 1978 for $120 million.
Competing products were called Lite, Slim Light
Had to overcome several problems1. Terrible Taste2. Advertising/packaging3. Limited offerings (now over 210 items)
In 1989 - sales were $1.3 billionprofits were over $100 million
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Brand BondingBrand Bonding is the extent to which consumers are enthusiastic believers in the vision/meaning
established for the brand.
High Low
VW in 60’s VW in 80’s
VW in 00’s
Nike Converse
Microsoft LotusApple Computers
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Brand Bonding -- Nintendo
• Once, leading electronic game manufacturer with over 90% market share
• Introduced SuperNintendo game and machines that were incompatible with existing Nintendo games and machines
• Forced consumers to have multiple machines in order to play all of their games
• Created an opening for Sega and later Sony to become one of the multiple machines
• Slow to innovate – color Gameboy, cdrom games, etc.• Now, facing a battle with Microsoft as well as Sony – Sega
has given up making machines
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Microsoft and XP• Office XP and Windows XP require that users activate the
program with the computer it is installed on.
• Otherwise, the program will stop operating after a few users
• Programs can not be installed on another machine
• Even when enough new peripherals are installed, program may think that it is being installed in a new computer and refuse to operate.
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Distribution Strategy
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FedEx Remakes Itself
• UPS purchases MailBox Etc. to give itself a stronger retail presence
• FedEx decides that it must upgrade its dropoff facilities to prevent a substantial market share decline.
• Ziba – a design firm from Portland takes on the assignment of remodeling the sites
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FedEx Remakes Itself
PREPARED UNPREPARED
Do Not Crave Reassurance
Frisbee Do It Yourself
CraveReassurance
Confirmers HighMaintenance
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FedEx Remakes Itself
PREPARED UNPREPARED
Do Not Crave Reassurance
Drop Box Inside Front Door
Self-ServiceStation at Front
CraveReassurance
Feedback(put through
slots)
Counter in the Back
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Process Research
• Find It
• Enter & Orient
• Educate
• Implement
• Reassurance
• Exit
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FedEx
• Find It – Large Clock hung on outside of building – Barber Shop Pole
• Enter/Orient – Zoning with Labels
• Transaction – Signage (some digital for uniformity & check updates)
• Reassurance – sorted slots
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Levi’s New Product & Distribution Strategy
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Levi’s New Product & Distribution Strategy
Model Price Stores
Levi’s Vintage $145-$220 Neiman Marcus, Sharon Segal
Type One $35-95 Kohl’s, Barney’s New York
Levi’s Red Tab $27-35 Macy’s, Sears, K Mart
Levi Strauss Signature
Under $30 Wal-Mart
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Product - Customer’s View
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CLASSIFICATION OF CONSUMER GOODS- I
• Convenience Goods - goods that the customer usually purchases frequently and with a minimal effort to compare alternatives before buying.
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Classification of Goods
Convenience Purchased frequently with little effort
Shopping Selection involves feature and price comparisons
Specialty Unique characteristics resulting in special effort
Impulse Desire strongly associated with availability
Unsought Need but little desire to purchase
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Length of Distribution
Producer
Consumer
Producer
Retailer
ZeroStage
One-Stage Two-Stage
Producer
Wholesaler
ConsumerConsumer
Retailer
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What Intermediaries Add To The Cost Of A Compact Disc
Production of disc .74Packaging (tuck box, etc.) 1.72American Federation of Musicians dues .27Songwriters’ royalties .39Recording artists’ royalties 1.01Freight to wholesaler .36Manufacturer’s advertising and selling expenses 1.74Manufacturer’s administrative expenses 1.76Manufacturer's total cost $7.99Manufacturer’s profit margin 1.10Manufacturer’s price to wholesaler $9.09Freight to retailer .38Wholesaler’s administrative expenses .47Wholesaler’s cost $9.94Wholesaler’s profit margin .80Wholesaler’s price to retailer $10.74Retailer’s advertising, selling, and administrative expenses 1.76Retailer’s profit margin 3.49Retailer’s price to consumer $15.99
$6.90
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Disintermediation
• The elimination of intermediaries from the channel of distribution.
• Examples– Travel Agents (received a 5% commission)– Airlines – book your own flights– Expedia, Travelocity, Orbitz
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Internet Evolution
Jan, 1996 Jan, 1999 Nov, 2001
1. AOL.com2. Webcrawler.com3. Netscape.com4. Yahoo.com5. Infoseek.com6. Prodigy.com7. Compuserv.com8. Umich.edu9. Primenet.com10. Well.com
1. AOL.com2. Yahoo.com3. MSN.com4. Geocities.com5. Go.com 6. Netscape.com7. Excite.com8. Microsoft.com9. Lycos.com
10. Tripod.com
1. Aol.com2. Yahoo.com
3. MSN4. Microsoft5. Lycos6. American Greeting7. Ebay8. Amazon9. Google10. Walt Disney
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Internet Automobile Sales
• AutobyTel – Referral System
• Cars Direct – Intermediary
• CarPoint (Microsoft-Ford) – build to order
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Intermediary Efficiencies
P C
P
P
P
C
C
C
P C
P
P
P
C
C
C
M
TOTAL = P X C = 16 TOTAL = P + C = 8
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ECONOMIES IN FLOWS
A. Physical Flow1. Transportation2. Storage3. Handling
B. Title or Use Rights
C. Payment
D. Information
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Distribution Questions
• What criteria should be used to identify outlets for an organization?
• What and how many resellers should be included in the distribution system?
• What function should each member perform?
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Distribution Questions
• What remuneration should be given for performing these functions?
• What strategies should be used to facilitate cooperation among channel members to increase efficiency and effectiveness?
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Considerations in Establishing a Distribution System
• Customer Service
– Why Starbucks owns its stores
– Why eBay leads on the internet
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Considerations in Establishing a Distribution System
• Cost minimization– Soma.com (bought by CVS located in Ohio near
pharmaceutical warehouse & air shipping fields & pharmacy schools
– Now cvs.com
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Retail Banking
$1.07
$0.68
$0.27
$0.05$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
Branch Telephone ATM Internet
Average Cost per Transaction
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Considerations in Establishing a Distribution System
• Flexibility – Egghead closed its stores & went completely to
the internet– Charles Schwab (stock trading)
• Store fronts
• Telephone
• Internet
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Considerations in Establishing a Distribution System
• Power vs. Dependence
– because Wal Mart sells so much, it can dictate terms to suppliers
– Compaq & Dell promoted Internet Explorer in order to continue to get favorable terms for Microsoft’s operating system.
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Extent of Distribution
Strategy Exclusive Selective Intensive
Outlets One Several Many
Reasons Control & Focus Adds Competition but with some control & focus
Maximize competition with high product availability
Drawbacks Low coverage Free riders Hard to monitor & control distributors
Consumer Rolls Royce Buick Coke, Kodak film
Business Dell Computers Apple Computers HP/Compaq computers
Services Seattle Pacific UW-Seattle, Bothel, Tacoma
University of Phoenix
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Sales Mkt Share
# Stores Outlet Share
Sales/Store
Walgreens $13.4 23% 2,363 14% $5.67
Rite Aid 11.8 20 3,963 23 2.97
CVS 11.1 20 3,909 23 2.84
Eckerd 8.8 15 2,786 17 3.16
Am. Drug Stores
5.2 9 882 5 5.93
Longs 2.8 5 337 2 8.4
Shoppers 2.8 5 801 5 3.52
Jean Coutu 1.2 2 483 3 2.38
Phar-Mor 1.1 2 104 1 10.38
Medical 1.0 2 1,236 7 .84
Total/Avg $59.2 100% 16,864 100% $3.51
Distribution & Market Share
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Sales by OutletsSales by # Stores
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
Walgreens
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Video Rentals by # Outlets
Revenue OutletsRevenue
/OutletMarketShare
Outlet Share
Blockbuster $2,831 5035 $562,264 21.8% 17.9%Hollywood $287 851 $337,250 2.2% 3.0%Movie Gallery $254 972 $261,317 2.0% 3.5%West Coast $230 531 $433,145 1.8% 1.9%Video Update $84 308 $272,727 0.6% 1.1%Movies, Inc. $82 323 $253,870 0.6% 1.1%Family Video $36 84 $428,571 0.3% 0.3%Blowout $30 200 $150,000 0.2% 0.7%Easy Video $21 38 $552,632 0.2% 0.1%Video Galaxy $20 31 $645,161 0.2% 0.1%All others $9,125 19,727 $462,564 70.2% 70.2%
$13,000 $28,100 $396,318
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Revenue by Outlets
$0
$50
$100
$150
$200
$250
$300
$350
0 200 400 600 800 1000 1200
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Consumer Problems with Internet Shopping Can be Serious
• CyberRebate
• Founded by Joel Granick, 24-year old law school student
• Based on CompUSA–Office Depot Promos
• “Free After Rebate”