In 10 weeks sales increased by 100%

(3) It started in the wheat bread category, where Schulstad had a series known as “Denmark’s loveliest”. It was a high-quality product but had an anonymous name and packaging. Customers’ awareness had dwindled and their experience of the bread’s quality had little to do with the facts.

(4) In 1995 we tested a series of concepts. Customers reacted very positively to the notion of raising Schulstad’s brand profile. Kunde & Co.’s strategic advice to Schulstad was therefore to go ‘back-to-basics’ and focus on the key values in the product series – the carefully selected raw ingredients. The tests showed us that two important relationships to the brand should be changed: the plastic packaging and the name.

(5) This resulted in Kunde & Co – together with Schulstad – developing paper packaging for the bread shelves. The name was also changed to “The good wheat bread”. We then initiated a focused and consistent marketing plan. 10 weeks after the re-launch sales increased by 100% - and after three years the market share had increased to 25%.

A new category within rye breads

(6) Tests also showed that it was time to start work in the revitalization of Schulstad’s profile. With the introduction of “The good wheat bread” a platform had been established from which to attack new categories.

(7) In the light of the success it was decided that Schulstad should put their efforts into traditional Danish rye bread. In four simple stages we succeeded in setting a new standard within the rye bread category.

1. We went against the trend for sliced rye bread and produced a whole loaf to achieve higher quality.

2. We created a soft kernel rye bread - a rye bread with softness similar to that of a good white loaf.

3. We packaged the loaves into the still innovative paper bags.

4. We made a creative solution utilizing modern visual techniques in which the loaf became the hero.

(8) The results were quick to come. In a short time, “The good rye bread” became a market leader, with Schulstad experiencing an annual growth rate of 25%. The competition couldn’t just sit back and witness this success and before long, an entirely new bread category was created.

(9) With the launch of the concept “The good”, a platform was established that - thanks to constant development – became Denmark’s largest bread brand with a market share close to 20%.

The good creates growth

(10) During the years following the launch, Schulstad’s sales and marketing share grew. A previously stagnant category suddenly became a rapidly growing category. Schulstad’s growth during these years was 25% per annum on rye bread, 41% on white bread and 22% on rolls. The growth continues.

(11) With “the good” we strengthened the quality experience within the bread category. Schulstad has done this by making what they consider to be the best bread in whichever category they enter. There’s no ‘me-too’ products here – there’s already enough of those around. Each new launch had its own particular characteristics, its own unique history.

The good story

(12) Schulstad spends considerable time on product development – and that’s a good story to be told. Our communication concept therefore focused quite simply on telling what we had done to create the best bread and to create refreshed interest in the category among consumers.

(13) At Kunde & Co we think that getting attention is important, but that involvement is equally valuable. It’s precisely this that Schulstad achieved through their communication for “the good”. Even though others make more noise, Schulstad still managed to achieve the greatest sales results in the bread market.

The pleasure of bread

(14) Together with Schulstad, Kunde & Co built up the concept “Bread with character”. “Bread with character” is bread that stands out, both for its quality and its ability to deliver new exciting experiences to the consumer. It wasn’t enough for Schulstad to simply improve a category as they did with “the good”. As market leader it’s important to drive the category and to remain innovative.

(15) In the period that Schulstad and Kunde &Co worked together between 1995 and 2002 when we created a strategy and marketing concepts for bread producers’ products, the bread category has developed explosively. Bread’s share of total grocery sales has grown from 2.6% to 3.8% - that’s by 50%! Schulstad has driven this development and reaped the fruits of their labors.

(16) The trade has acquired a dynamic new category with a higher market share. This can be seen directly in income. All this has happened simply because customers have increased their visits to the bread racks as it’s become a more inspiring experience. At Kunde & Co we call this a win-win situation.

►Read the case, define and classify analytical competences (ex. brand and customer auditing) that Schulstad and Kunde & Co have followed in the brand building, and discuss these competencies’ applicability to marketing other goods and services.

►Make a talk on how Schulstad, with the help of Kunde & Co, acquired the brand success and succeeded by addressing the following questions:

• Who are you?

• Why are you here?

• How are you unique?

• How can you make dramatic difference?

• Who cares? Do you care?

►Choose a product from among those well-known on the local market but seemingly generic and not so popular. Build up a strong and credible market position for the product by climbing the following steps:

• Analyze the existing brand profile (use the BCG analysis)

• Suggest the product development

• Suggest the brand development by devising the right communicative intention, concept behind the brand and the logo

• Use visual aids to support you quest

‘BATTLE’ POINT

►Team up with your classmate and start to develop your arguments about the following statement:

‘Brand equity is everything you say? Don’t make me laugh. Whatever the quality of a product is, price is a determining factor. Ask a consumer if you think otherwise.’

‘PREPOSITION’ POINT

►Fill in the blanks with the correct prepositions:

1. The new corporate strategy made the company strong enough to succeed ___ stealing the market share from our main rivals.

2. ___ the interests of getting more market share, the firm introduced a brand new package of services.

3. Good brand management results___ the application of marketing techniques to a specific product, product line or brand.

4. Employee morale was slipping a bit, resulting ___ higher turnover.

5. SkinTech series flopped disastrously on the consumer market and eventually was withdrawn ___ the market.

6. Wal-Mart carried ___ extensive marketing research before implementing the ‘cross-docking’ system, that is shifting goods off trucks from suppliers and straight on to trucks heading for the company’s store, without them ever hitting the ground at a distribution center.

7. One of the key techniques of an effective brand management is to impose a distinctive identity ___ goods and services.

8. ___ regard ___ our brand management, I think we have to focus more on increasing the product’s perceived value to our customer.

9. Brand switchers usually tend to revert ___ familiar brands if and when dissatisfied with newcomers.

10. Brand equity allows the producer to charge a premium ___ and ___ the value of the basic benefits provided by the underlying product.

11. ___ our seven brands, this one is the most successful.

‘TRANSLATION-2’ POINT

►Translate into Russian:

(1) Companies must work hard to build brands. David Ogilvy insisted: “Any damn fool can put on a deal, but it takes genius, faith and perseverance to create a brand.” The sign of a great brand is how much loyalty or preference it commands. Harley Davidson is a great brand because Harley Davidson motorcycle owners rarely switch to another brand. Nor do Apple Macintosh users want to switch to Microsoft.

(2) A well-known brand fetches extra pennies. The aim of branding, according to one cynic, “is to get more money for a product than it is worth.” But this is a narrow view of the benefits that a trusted brand confers on users. The user knows by the brand name the product quality and features to expect and the services that will be rendered, and this is worth extra pennies.

(3) How are brands built? It’s a mistake to think that advertising builds the brand. Advertising only calls attention to the brand; it might even create brand interest and brand talk. Brands are built holistically, through the orchestration of a variety of tools, including advertising, public relations (PR), sponsorships, events, social causes, clubs, spokespersons, and so on.

(4) The real challenge is not in placing an ad but to get the media talking about the brand. Media journalists are on the lookout for interesting products or services, such as Palm, Viagra, Starbucks, eBay. A new brand should strive to establish a new category, have an interesting name, and tell a fascinating story. If the print media and TV pick up the story, people will hear about it and tell their friends. Learning about a brand from others creates credibility. Learning about it only through paid advertising is easy to dismiss because of the biased nature of advertising.

(5) A company needs to think through what its brand is supposed to mean. What should Sony mean, Burger King mean, Cadillac mean? A brand must be given a personality. It must thrive on some trait(s). And the traits must percolate through all of the company’s marketing activities.

(6) When a brand is successful, the company will want to put the brand name on additional products. The brand name may be put on products launched in the same category (line extension), in a new category (brand extension), or even in a new industry (brand stretch).

(7) Line extension makes sense in that the company can coast on the goodwill that it has built up in the category and save the money that it would otherwise have to spend to create brand awareness of a new name and offering. Thus we see Campbell Soup introducing new soups under its widely recognized red label. But this requires the discipline of adding new soups while subtracting unprofitable soups from the line. The new soups can cannibalize the sales of the core soups without bringing in much additional revenue to cover the additional costs. They can reduce operational efficiency, increase distribution costs, confuse consumers, and reduce overall profitability. Some line extensions are clearly worth adding, but overuse of line extensions must be avoided.

(8) Brand extension is riskier: I buy Campbell’s soup but I might be less interested in Campbell’s popcorn. Brand stretch is even more risky: Would you buy a Coca-Cola car?

(9) Well-known companies tend to assume that their great name can carry them successfully into another category. Yet whatever happened to Xerox computers or Heinz salsa? Did the Hewlett-Packard/Compaq iPAQ Pocket PC overtake the Palm handheld or did Bayer acetaminophen overtake Tylenol? Is Amazon electronics as successful as Amazon books? Too often the company is introducing a me-too version of the product that ultimately loses to the existing category leaders.

(10) The better choice would be to establish a new name for a new product rather than carry the company’s name and all of its baggage. The company name creates a feeling of more of the same, rather than something new. Some companies know this. Toyota chose not to call its upscale car Toyota Upscale but rather Lexus; Apple Computer didn’t call its new computer Apple IV but Macintosh; Levi’s didn’t call its new pants Levi’s Cottons but Dockers; Sony didn’t call its new videogame Sony Videogame but PlayStation; and Black & Decker didn’t call its upgraded tools Black & Decker Plus but De-Walt. Creating a new brand name gives more opportunity to establish and circulate a fresh public relations story to gain valuable media attention and talk. A new brand needs credibility, and PR is much better than advertising in establishing credibility.

(11) Yet every rule has its exceptions. Richard Branson has put the name Virgin on several dozen businesses, including Virgin Atlantic Airways, Virgin Holidays, Virgin Hotels, Virgin Trains, Virgin Limousines, Virgin Radio, Virgin Publishing, and Virgin Cola. Ralph Lauren’s name is found on numerous clothing products and home furnishings. Still a company has to ask: How far can the brand name be stretched before it loses its meaning?

‘CHECK’ POINT

►Question/Answer session:

1. What is the essence of a good brand?

2. Why is branding so advantageous?

3. What are the main points of successful brand management?

4. Explain the Growth Matrix Structure visually.

5. Give a one-sentence definition to ‘brand stretch’, ‘brand franchise’, ‘brand equity’, ‘brand extension’, ‘line extension’ and ‘trademark’.

(Revised Unit 10 from Business & English by Levon Gzokyan)

‘WARM-UP’ POINT

►Question/Answer session:

1. What do you think the PLC is? Define it on your own.

2. To what extent is it possible to predict the length of the PLC?

3. What products have the longest PLC? The shortest?

‘THEORY-1’ POINT

PLC: from dawn till dusk

(1) This is the idea that all products have a birth, a life and a death, and that they should be financed and marketed with this in mind. Even as a new product is being launched, its manufacturer should be preparing for the day when it has to be killed off. Its sales and profits start at a low level, grow (it is hoped) to a high level and then decline again to a low level. Sometimes this cycle is simply referred to in marketing circles as PLC.

(2) Philip Kotler, one of the world’s leading authorities on marketing, breaks the product life cycle into five distinct phases.

1. Product development. It is the phase when a company looks for a new product. New products do not have to be ‘out-of-the-blue’ new (like the video-cassette recorder or the compact disc). They may be merely additions to existing product lines (the first cigarette with a filter tip, for instance) or improvements to existing products (a new whiter-than-white washing powder). But one feature products have to possess is USP or unique selling proposition (see ‘USP’ Point). At this phase producers also use planned or built-in obsolescence – designing products so that they will not last a long time, or will be replaced by new products that are more efficient or economical before the old one is worn out (see ‘Planned Obsolescence’ Point).

2. Introduction. The product’s costs rise sharply as the heavy expense of advertising and marketing any new product begin to take their toll. At this phase consumers must be aware of the product’s existence and persuaded to buy it. Some producers apply a market-skimming strategy (price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, and then lowers the price over time). It is a temporal version of price discrimination/yield management. It allows the firm to recover its sunk costs (costs that have already been incurred and which cannot be recovered to any significant degree) quickly before competition steps in and lowers the market price. Other producers employ a market-penetration strategy (see ‘Market Penetration’ Point).

3. Growth. As the product begins to be accepted by the market, the company starts to recoup the costs of the first two phases. ‘Early adopters’ join the ‘innovators’ who were responsible for the first sales, so that sales rise quickly, producing profits. This generally enables the producer to benefit from economies of scale. Competitors will probably enter the market, usually making it necessary to reduce prices, but the competition will increase the market’s awareness and speed up the adoption process.

4. Maturity. By now the product is widely accepted and growth slows down. Before long, however, a successful product in this phase will come under pressure from competitors. The producer will have to start spending again in order to defend the product’s market position. Product managers can attempt to convert non-users, search for new markets and market segments to enter, or try to stimulate increased usage by existing users. Alternatively they can attempt to improve product quality and to add new features, sizes or models, or simply to introduce periodic stylistic modifications.

5. Decline. The company will no longer be able to fend off the compe­tition, or some change in consumer tastes or lifestyle will render the product redundant. At this point the company has to decide how to bring the product's life to an end - what is the best end-game that it can play? (The end game is a strategy that a company evolves for a product that seems to be on its last legs. Should the company bleed the product for all it is worth before it dies? Or should it introduce an aggressive pricing policy aimed at forcing its competitors out of business and allowing it to continue in a much reduced niche market? In her book Managing Maturing Businesses, Kathryn Harrigan, a Harvard professor, argues that end games can be highly profitable. She writes: ‘The last surviving player makes money serving the last bit of demand, when the competitors drop away.’ When some competitors choose to withdraw from a market, those who remain will obviously gain a temporary increase in sales as customers switch to their product.) A product can be replaced by new ones, due to advances in technology, or to changes in fashions and tastes. When a product has clearly entered its decline stage, some manufacturers will abandon it in order to invest their resources in more profitable or innovative products.

(3) Although managers know that a new product will follow this cycle, they are not sure when each phase will start and for how long each one will last. Although some products appear to have been around forever (Kellogg's corn flakes, for example, or Kodak cameras) the products that bear these names today are entirely different from the ones that carried the same brand 50 years ago. The continuity of the brand name helps to disguise the fact that the product itself has been through several life cycles.

(4) Products of fashion, by definition, have a shorter life cycle, and they thus have a much shorter time in which to reap their reward. A distinc­tion is sometimes made between fashion items, such as clothing, and pure fads. It is not always immediately obvious into which of these two categories a product falls. When they were first introduced in the early 1980s, in-line skates seemed as if they might be a brief fad. But 20 years later they were still selling strongly, firmly set in the mature stage of their life cycle. They may not be destined for the life cycle of the corn flake, but they have already outlived many seemingly more permanent fashions.

►Summarize the content of the text by using expressions from ‘Summary-1’ Point. Be sure to check off or cross out each of the expressions while holding your show.

► Read the sentences below describing the life cycle of the Stallion, one of the GMM’s cars, and put them in the right order:

The Gear Motor Manufacturing (GMM) is one of the largest car manufacturers. The company has to regularly bring out new models in order to stay competitive. GMM carries out market research to test market the model.

1. GMM’s competitors bring out cars which are technologically superior to the Stallion.

2. GMM builds up to world production levels of 800,000 cars per year.

3. GMM spends $6 billion and 6 years developing the model.

4. GMM’s competitors are now producing models that can successfully compete with the Stallion.

5. GMM launches the model at motor shows in Europe and the USA.

6. GMM pays off the $6 billion development costs and uses profits to start developing other cars in the range.

►Make up a Gear-like story of an established company (a household name).

‘SUMMARY-1’ POINT

►Translate the phrases below into Russian and make them stick in your mind:

1. additions (improvements) to existing product lines

2. to employ/apply a market-skimming or market-penetration strategy

3. set a relatively low/high price for

4. to lower the price over time

5. to benefit from economies of scale

6. to increase the market’s awareness

7. to speed up the adoption process

8. to come under pressure from competitors

9. to defend the product's market position

10. to convert non-users

11. to search for new markets or market segments to enter

12. to stimulate increased usage by existing users

13. to improve product quality/modify a product

14. to be on its last legs

15. to bleed the product for all it is worth

16. to introduce an aggressive pricing policy

17. to withdraw from a market/ abandon a product

18. to gain a temporary increase in sales

19. to invest resources in more profitable or innovative products

20. to reap the reward

‘PUZZLE-1’ POINT

►Replace the underlined with the similar expressions from ‘Summary-1’ Point:

1. BEYOND’s R&D survey allowed the company to get the highest benefit last year.

2. The company is under heavy attack to improve pay and working conditions.

3. Our equipment is in a very bad condition and it needs fixing.

4. Before withdrawing a product from the market, a company has to get as much money as possible from it.

‘PUZZLE-2’ POINT

►Fill in the blanks:

distribution channels to revitalize sales growth

sales and profits dwindle increasing profits

to identify the declining product growth stage

a new-product idea decline stage life cycle

sales growth slows down profits stabilize reduce low profits product development rapid sales growth dropped

maturity stage introduction stage new market segments slow growth to improve the product

Each product has a ­(1)__________ marked by a changing set of problems and opportunities. The sales of the typical product follow an S-shaped curve made up of five stages. The cycle begins with the (2)__________ stage when the company finds and develops a (3)__________. The (4)__________ is marked by (5)_________ and (6)__________ as the product is being pushed into distribution. If successful, the product enters a (7)__________ marked by (8)__________ and (9)__________. During this stage, the company tries (10)__________, enter (11)__________ and (12)__________, and (13)__________ its prices slightly. Then comes a (14)__________, in which (15)__________ and (16)__________. The company seeks strategies (17)__________, including market, product and marketing mix modification. Finally, the product enters a (18)__________, in which (19)__________. The company's task during this stage is (20)__________ and decide whether it should he maintained, harvested or dropped. If (21)__________, the product can be sold to another firm or liquidated for salvage value.

‘THEORY-2’ POINT

Planned obsolescence

(1) Planned or built-in or inbuilt obsolescence is a business strategy in which the obsolescence (the process of becoming obsolete - that is, unfashionable or no longer usable) of a product is planned and built into it from its conception. This is done so that in future the consumer feels a need to purchase the new products and services that the manufacturer brings out as replacements for the old ones.

(2) Consumers sometimes see planned obsolescence as a sinister plot by manufacturers to fleece them. But Philip Kotler, a marketing guru, says ‘Much so-called planned obsolescence is the working of the competitive and technological forces in a free society - forces that lead to ever-improving goods and services.’

(3) A classic case of planned obsolescence was the nylon stocking. The inevitable ‘laddering’ of stockings made consumers buy new ones and for years discouraged manufacturers from looking for a fiber that did not have this quality. The garment industry in general has built-in obsolescence because of the influence of fashion. Last year’s skirts, for example, are rendered obsolete by this year’s new models.

(4) The strategy of planned obsolescence is common in the computer industry. New software is often carefully designed to reduce the value to consumers of the previous version. This is achieved by making programs upwardly compatible only; in other words, the new versions can read all the files of the old versions, but not the other way round. Someone holding the old version can communicate only with others using the old version. It is as if every generation of children came into the world speaking a completely different language from their parents, and while they could understand their parents’ language, their parents could not understand theirs.

(5) The production processes required for such a strategy to be successful are well illustrated by Intel. This American semiconductor firm is working on the production of the next generation of PC chips before it has begun to market the last one.

(6) A strategy of planned obsolescence can backfire. If a manufacturer produces new products to replace old ones too often, consumer resistance can set in. This has occurred at times in the computer industry when consumers have been unconvinced that a new wave of replacement products is giving sufficient extra value for switching to be worth their while.

►Question/Answer session:

1. Why is obsolescence built into a product from its conception?

2. Why do you think consumers see planned obsolescence as a sinister plot by manufacturers to fleece them?

3. What does Philip Kotler mean by his definition of planned obsolescence?

4. How does the strategy of planned obsolescence manifest itself in the computer industry?

5. In what way can a strategy of planned obsolescence backfire?

►Think of well-known businesses and/or industries exploiting planned obsolescence as an integral part of their production process. Be sure to explain the reason(s).