product and portfolio management

7/31/2019 Product and Portfolio Management

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Product and Portfolio

Management

By

Dr. Tuhin Chattopadhyay


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Trial Rate (%)

The percentage of a defined population that

purchases or uses a product for the first time

in a given period.


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Schematic of Simulated Test Market

Volume Projection


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First-time Triers in Period t (#)

The number of customers who purchase or use

a product or brand for the first time in a given

period.

Penetration t (#) = [Penetration in t-1 (#) *

Repeat Rate Period t (%)] + First-time Triers

in Period t (#)

Projection of Sales (#) = Penetration (#) *

Frequency of Purchase (#) * Units per

Purchase (#)


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Distribution

Survey respondents who say theylldefinitely try a product are unlikely to do so

if they cant find it easily.

In making this adjustment, companiestypically use an estimated distribution, a

percentage of total stores that will stock the

new product, such as ACV % distribution.

Adjusted Trial Rate (%) = Trial Rate (%) *

Awareness (%) * ACV (%)


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After making these modifications, marketers

can calculate the number of customers who

are expected to try the product, simply by

applying the adjusted trial rate to the target

population.

Trial Population (#) = Target Population (#) *

Adjusted Trial Rate (%)


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To forecast trial volume, multiply trial

population by the projected average

number of units of a product that will bebought in each trial purchase. This is often

assumed to be one unit because most

people will experiment with a single unitof a new product before buying larger

quantities.

Trial Volume (#) = Trial Population (#) *

Units per Purchase (#)


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TOTAL VOLUME

Total volume is the sum of trial volume and

repeat volume, as all volume must be sold to

either new customers or returning customers.

Total Volume (#) = Trial Volume (#) + Repeat

Volume (#)


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Time Horizon Influences Perceived

Results


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Ever-Tried

The percentage of the target population thathas ever (in any previous period) purchasedor consumed the product under study. Ever-

tried is a cumulative measure and can neveradd up to more than 100%.

Trial, by contrast, is an incremental measure.It indicates the percentage of the populationthat tries the product for the first time in agiven period.


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Forced Trial: No other similar product is

available. For example, many people who

prefer Pepsi-Cola have tried Coca-Cola in

restaurants that only serve the latter, and vice

versa.

Discounted Trial: Consumers buy a new

product but at a substantially reduced price.

Forced and discounted trials are usually

associated with lower repeat rates than trialsmade through volitional purchase.


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Evoked Set

The set of brands that consumers name in

response to questions about which brands

they consider (or might consider) when

making a purchase in a specific category.

Evoked Sets for breakfast cereals, for example,

are often quite large, while those for coffee

may be smaller.


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New Products

Number of New Products: The number of

products introduced for the first time in a

specific time period.

Revenue from New Products: Usually

expressed as the percentage of sales

generated by products introduced in the

current period or, at times, in the most recentthree to five periods.


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Target Market Fit

Of customers purchasing a product, targetmarket fit represents the percentage who

belong in the demographic, psychographic, or

other descriptor set for that item. Target marketfit is useful in evaluating marketing strategies.

If a large percentage of customers for a

product belongs to groups that have not

previously been targeted, marketers may

reconsider their targetsand their allocation

of marketing spending.


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New Products

Margin on New Products: The dollar orpercentage profit margin on new products.

This can be measured separately but does not

differ mathematically from margincalculations.

Company Profit from New Products: The

percentage of company profits that is derived

from new products. In working with this

figure, it is important to understand how new

product is defined.


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Year-on-Year Growth (%)


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Compound Annual Growth Rate

(CAGR)

The CAGR is a constant year-on-year growth

rate applied over a period of time. Given

starting and ending values, and the length of

the period involved, it can be calculated as

follows:


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Cannibalization Rates

A market phenomenon in which sales of one

product are achieved at the expense of some of a

firms other products.

Cannibalization is the reduction in sales (units or

dollars) of a firms existing products due to theintroduction of a new product.

The cannibalization rate is generally calculated

as the percentage of a new products sales thatrepresents a loss of sales (attributable to the

introduction of the new entrant) of a specific

existing product or products.


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Cannibalization

A market phenomenon in which sales of one

product are achieved at the expense of some

of a firms other products.

The cannibalization rate is the percentage of

sales of a new product that come from

specific set of existing products.


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Fair Share Draw

The assumption that a new product will

capture sales (in unit or dollar terms) from

existing products in direct proportion to the

market shares held by those existing products.


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Brand Equity Metrics

Brand Equity Ten (Aaker)

Brand Asset Valuator (Young & Rubicam)

Brand Equity Index (Moran) Brand Valuation Model (Interbrand)

Purpose: To measure the value of a brand.


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Brand Equity Ten (Aaker)1. Differentiation

2. Satisfaction or Loyalty3. Perceived Quality

4. Leadership or Popularity

5. Perceived Value6. Brand Personality

7. Organizational Associations

8. Brand Awareness9. Market Share

10.Market Price and Distribution Coverage


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Brand Equity Index (Moran)

Marketing executive Bill Moran has derived an

index of brand equity as the product of three

factors: Effective Market Share, Relative Price,

and Durability.

Brand Equity Index (I) = Effective Market

Share (%) * Relative Price (I) * Durability (%)


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1. Effective Market Share is a weighted average.It represents the sum of a brands market shares

in all segments in which it competes, weightedby each segments proportion of that brandstotal sales.

2. Relative Price is a ratio. It represents the price

of goods sold under a given brand, divided bythe average price of comparable goods in themarket.

3. Durability is a measure of customer retention orloyalty. It represents the percentage of a brandscustomers who will continue to buy goodsunder that brand in the following year.


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Brand Asset Valuator (Young &

Rubicam)

Differentiation: The defining characteristics ofthe brand and its distinctiveness relative to

competitors.

Relevance: The appropriateness andconnection of the brand to a given consumer.

Esteem: Consumers respect for and attraction

to the brand. Knowledge: Consumers awareness of the

brand and understanding of what it represents.


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Young & Rubicam Brand Asset

Valuator Patterns of Brand Equity


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Leon Ramsellar of Philips Consumer

Electronics, for example, has reported using

four key measures in evaluating brand equity

and offered sample questions for assessing

them.

Uniqueness: Does this product offer

something new to me?

Relevance: Is this product relevant for me?

Attractiveness: Do I want this product?

Credibility: Do I believe in the product?


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Brand Valuation Model (Interbrand)

Interbrand, a brand strategy agency, draws upon

financial results and projections in its own modelfor brand valuation. It reviews a companysfinancial statements, analyzes its marketdynamics and the role of brand in income

generation, and separates those earningsattributable to tangible assets (capital, product,packaging, and so on) from the residual that canbe ascribed to a brand. It then forecasts futureearnings and discounts these on the basis ofbrand strength and risk. The agency estimatesbrand value on this basis and tabulates a yearly

list of the 100 most valuable global brands.


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A method of estimating customers by assessingthe overall preferences customers assign to

alternative choices.

Conjoint Preference Linear Form (I) =[Partworth of Attribute 1 to Individual (I) *

Attribute Level (1)] + [Partworth of Attribute

2 to Individual (I) * Attribute Level (2)] +[Partworth of Attribute 3 to Individual (I) *

Attribute Level (3)] etc.

Conjoint Analysis

product and portfolio management

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