Marketing Management Lecture 7

What are some advantages of the “Private brand” for retailers?

• higher profit margin (difference between purchase and sales price)

• less price competition (no competition with other retailors regarding PBs (unlike with MBs)

• higher store loyalty

What are some disadvantages of the “Private brand” for retailers?

• higher advertising expenses (PB is not popular like MB so has to be marketed more)

• no slotting fees (new products are often very risky for retailers, so manufacturers pays the retailer a small amount to make up for the risk/losses

What advantages does the retailer have over the manufacturer?

• the retailer is the buyer and can make the final decision (buy or not buy)

• control the location of brands in shelves (eye level)

• retailer can set the price

What is a big issue that PBs deal with?

quality issue (same quality, perception of quality)

What are the three strategies for PBs?

• Sub-brand strategy: using main brand name (PB’s name is still Homeplus) to take advantage of brand equity (people already know the brand, less marketing costs therefore)

• Independent brand strategy: new brand name (Kirkland > Costco)

• Quality Issue: MPB Manufactured private brand: Name of the manufacturer is listed on the packaging

  • increased brand equity

  • retailer doesn’t worry about product quality

What are some brand strategies?

1. Line extension

2. Brand extension

3. Multiple Brand strategy

4. New Brand strategy

Explain the “line extension” brand strategy!

introducing additional items in an existing product category under the same brand name (coke: cherry coke, zero coke)

> not a lot of money needed for promotion, good to satisfy different consumer demand

• be careful about cannibalization effect: introducing cherry coke comes at the expense of lemon coke

Explain the “brand extension” brand strategy!

use of successful brand name to launch new products in a new category (Honda: automobile, motorcycles, lawn mowers)

Explain the “multiple brand strategy”!

promoting individual brands that compete with one another to appeal to different buyers (P&G: different shampoos like Head & Shoulders, Lepentane)

What is a problem that comes with the multiple brand strategy?

Brand paradox: too many choices -> confusion + consumers don’t buy the products (important for convenience goods) and don’t want to feel the regret of choosing the “wrong” product

Explain the “new brand strategy”!

create a new brand name when it enters a new product category

What is service marketing?

intangible product that cannot be owned

What are some characteristics of services?

• intangibility: can’t be seen, tasted, felt, heard, smelled (plane ticket)

• inseparability: can’t be separated from providers (doctors, hair stylist), interaction is very important (vs. goods: no direct interaction requited)

• variability: quality + customer satisfaction depends on provider (internal marketing!!)

• perishability: can’t be stored

What are some different types of goods and services?

• pure goods: goods without services (shampoo)

• goods with accompanying services: car with service guarantee, laptop

• major service with accompanying minor goods: hotels with free shampoo

• pure service: haircut, consulting

What are some service strategies?

• developing differentiated offer

• managing service quality: employees (give employees authority + incentives), watch service performance

• managing productivity

What is internal marketing?

motivate customer-contact employees to provide customer satisfaction + high service quality