Chapter 6 – Product Strategy & New Product Development: Creating Offerings
- Understand the branding decisions firms make when they’re developing new products.
- Identify the various levels of packaging for new products.
What comes to mind when someone says Apple, Coca Cola, Nike, or Microsoft? According to Forbes magazine and InterBrand, the Apple brand is the strongest brand in the world in 2020 (Swant, 2020; Interbrand, n.d.). What is a “brand” and what do these studies mean when they report that one brand is the strongest or the best?
We have mentioned brands periodically throughout this chapter. But what is a brand? A brand is a name, picture, design, or symbol, or combination of those items, used by a seller to identify its offerings and to differentiate them from competitors’ offerings. Branding is the set of activities designed to create a brand and position it in the minds of consumers. Did you know that the 1960’s musical group The Beatles started a recording studio called Apple? When Apple Computer (the iPhone company) was formed, Apple Corp., Ltd. (the Beatles’ recording studio), sued Apple Computer because two companies with the same name can create confusion among consumers. This wasn’t much of a problem when Apple was only selling computers, but following the release of the iPod and launch of Apple’s iTunes program, a case could be made that the companies’ offerings are similar enough for consumers to confuse the two companies and their products. In fact, it wasn’t until very recently that the lawsuit over the name was settled, some thirty years after the initial lawsuit was filed. Nonetheless, the situation signifies how important brand names are to the companies that own them.
A successful branding strategy is one that accomplishes what Coca Cola and Apple have done—it creates consumer recognition of what the brand (signified by its name, picture, design, symbol, and so forth) means. Consequently, when marketing professionals are considering whether a potential new offering fits a company’s image, they are very concerned about whether the offering supports the organization’s brand and position in the mind of the consumer. For this reason, many consider branding to be much more than how the product is packaged or labeled, and they are right. Characteristics of the offering, such as pricing and quality, have to support the brand’s position. If Apple (the brand) stands for innovation, then products and services have to be innovative. But branding itself refers to strategies that are designed to create an image and position in the consumers’ minds.
A brand name, like Apple, is the spoken part of a brand’s identity. A brand mark is the symbol, such as Nike’s swoosh or Puma leaping wild cat, associated with a brand. Brand names and brand marks are important to companies because consumers use them to make choices. That’s why it was important to sort out the Apple brand. Each company wanted to make sure that consumers were getting what they wanted and would know what each brand meant.
An important decision companies must make is under which brand a new offering will be marketed. For example, Black & Decker makes power tools for consumers under its Black & Decker brand, while tools for more serious do-it-yourselfers and professionals are under its Dewalt brand. If Black & Decker decided to add to its Dewalt line, new products such as coolers, portable radios, and other accessories construction professionals might find useful at a job site, the company would be creating a brand extension. A brand extension involves utilizing an existing brand name or brand mark for a new product category.
Why would Black & Decker add these accessories to the Dewalt line? If the company did, it would be because Dewalt already has a good reputation for high quality, long-lasting durability, and performance among construction professionals. These same professionals would trust the Dewalt brand to deliver. For now, let’s consider whether it is better for a company to market a new product via a brand extension or create an entirely new brand for the product.
One thing firms have to consider when they’re branding a new offering is the degree of cannibalization that can occur across products. Cannibalization occurs when a firm’s new offering eats into the sales of one of its older offerings. (Ideally, when you sell a new product, you hope that all of its sales come from your competitors’ buyers or buyers that are new to the market.) A completely new offering will not result in cannibalization, whereas a line extension likely will. A brand extension will also result in some cannibalization if you sell similar products under another brand. For example, if Black & Decker already had an existing line of coolers, and portable radios when the Dewalt line of them was launched, the new Dewalt offerings might cannibalize some of the Black & Decker offerings.
Some marketers argue that cannibalization can be a good thing because it is a sign that a company is developing new and better offerings. These people believe that if you don’t cannibalize your own line, then your competitors will.
Another set of questions to consider involves the packaging on which a brand’s marks and name will be prominently displayed. Sometimes the package itself is part of the brand. For example, the curvaceous shape of Coca-Cola’s bottle is a registered trademark. If you decide to market your beverage in a similar-shaped bottle, Coca-Cola’s attorneys will have grounds to sue you.
Packaging has to fulfill a number of important functions, including;
- communicating the brand and its benefits;
- protecting the product from damage and contamination during shipment, as well as damage and tampering once it’s in retail outlets;
- preventing leakage of the contents;
- presenting government-required warning and information labels.
Sometimes packaging can fulfill other functions, such as serving as part of an in-store display designed to promote the offering.
Primary packaging holds a single retail unit of a product. For example, a bottle of Coke, a bag of M&Ms, or a ream of printer paper (five hundred sheets) are all examples of primary packages. Primary packaging can be used to protect and promote products and get the attention of consumers. Primary packaging can also be used to demonstrate the proper use of an offering, provide instructions on how to assemble the product, or any other needed information. If warning or nutrition labels are required, they must be on the primary packaging. Primary packaging can be bundled together as well. Consumers can buy bottles of Coke sold in six-packs or cans of Coke in twelve-packs, for example.
Secondary packaging holds a single wholesale unit of a product. A case of M&M bags is an example, as are cartons of reams of paper. Secondary packaging is designed more for retailers than consumers. It does not have to carry warning or nutrition labels but is still likely to have brand marks and labels. Secondary packaging further protects the individual products during shipping.
Tertiary packaging is packaging designed specifically for shipping and efficiently handling large quantities. When a Coca-Cola bottler ships cases of Coke to a grocery store, they are stacked on pallets (wooden platforms) and then wrapped in plastic. Pallets can be easily moved by a forklift truck and can even be moved within the grocery store by a small forklift.
A product’s packaging can benefit the customer beyond just protecting the offering while it’s being shipped. No-spill caps, for example, can make it easier for you to use your laundry detergent or prevent spills when you’re adding oil to your car’s engine. And, as we have noted, secondary packaging (and also tertiary packaging) can serve as part of an in-store display, thereby adding value for your retailers.