Brand Design

Brand design and pricing are the most important factors determining market demand within the Marketplace. All of the other variables modify the effect of these two variables.

The brand design element of the Marketplace model is rather complex. First, players must realize that customers buy benefits and not components. Second, the attractiveness of a brand is built up by adding together a set of components that satisfy the expressed needs of the market. Third, more of a feature will not always satisfy a customer; sometime less is better. Fourth, each segment has a minimum performance requirement that players try to fulfill as they select features from the available list or bring on-line through R&D. Fifth, a firms brand design is not compared only to the absolute requirements of the segment but also to the relative attraction of competing brands. Sixth, the appeal of older technology will decline as new and better R&D features enter the market. Seventh, multiple brand designs can appeal to the same segment, though the costs will differ and cannibalization is a factor to consider. Finally, brand loyalty can be built up over time, allowing players to consider strategies relative to how they manage a portfolio of products, including cash cows, product lines, and entry into established markets.

Each of these elements of the brand design model will now be discussed. In addition, coaching tips will be provided so that instructors can help students understand the market they face and work through problems that might arise.

Customers Buy Benefits, Not Components

Customers buy ease of use, not components. Some customers will want the ability to use a computer while traveling, or the ability to work on tiny details in engineering design. On the other hand, the students manufacture components such as disk drives, modems, and monitors. The challenge for the students is to select the correct components in their brand designs so that the final product will deliver the desired benefits.

For example, using the computer on the road is an important benefit for the Traveler segment. Students must determine which features would provide this benefit. From the list of available components, the student could choose 1) a liquid crystal display (LCD) in order to reduce the computers size and weight, 2) a rugged design so that computer can be carried around and be able to handle bumps and falls, and 3) a modem to provide internet connection to the home office.

Coaching tip: Students must translate components into benefits and select those components that yield the greatest value for the target customers.

In the help files, the students are advised to focus on one segment at a time and start by listing all benefits with a rating over 110 in the end user profile. Some of these benefits will be service or image related. Pull these out while focusing on those that are only product related. Also, try to determine how the product will be used (applications).

For each benefit or application, have the students look at the list of components and try to determine which ones would directly or indirectly provide the needed benefit. In many cases, several components might be necessary to provide the complete benefit (i.e., use on the road) and in a few cases only one component might be necessary to fulfill the need or application.

If the students are unfamiliar with the product category, suggest that they do some homework in the real world. Have them visit a retail establishment selling the product and inquire about the value of each feature and to whom it would be of use. They need to realize that not everyone will find each feature to be equally desirable.

The ultimate goal is to match up the list of benefits provided by a component with the list of benefits sought by a target segment. This matching process should enable the students to identify which features are likely to appeal to which segments. While the exercise is not foolproof, it should provide a logical basis for designing brands.

Caution: The brand design decision is very difficult to execute. The analysis is very complex plus the information from potential customers is imperfect. The end user survey is nothing more than a set of buyer intentions. Buyer intentions are notoriously inaccurate because the consumer cannot always know what they will want in the future, especially with an unknown product. Thus, the students should approach the brand design decision with caution. The best strategy in the early quarters of the game is to try out a few designs and test the markets reaction to these designs. The test market results will provide the most reliable information on customer preferences.

Creating Customer Satisfaction

Students create the potential for customer satisfaction by selecting components from a large list of available options. Each component within a group of components (i.e., monitors) has a certain want-satisfying capability. Those components that provide more of the desired benefit (portability) will yield greater satisfaction with the final design. Thus, a 10-inch, flat LCD screen will provide greater satisfaction for the Traveler segment than a 21-inch, high-resolution color monitor. A 12-inch, flat LCD screen will cause even greater satisfaction.

The essential task is to build up the satisfaction level, layer by layer. As the students pick components, the potential satisfaction for the brand design goes up or down depending upon how well each component meets needs of the target segment. As discussed in the next section, some components will add greatly to customer satisfaction, others will add only a little. Some components will cause dissatisfaction.

The students cannot know in advance the level of satisfaction they are trying to create in their brand designs. They will discover it only after the product is placed on the market and the customer has a chance to react to its design and usefulness. The Marketplace provides a separate Brand Judgment or satisfaction rating for each brand on the market. The rating is different by segment since each segment has different needs and wants and the same component is not likely to have the same want-satisfying capability for all segments. Coaching tip: The players would like to know how satisfied customers will be with a new brand before it is placed on the market for sale, but it is not realistic for them to do so. Every new venture is faced with this difficult decision, investing in a new product before they know for sure how much the market will really like it. The best guidance to give to players is to experiment with different brand designs and test the market in order to discover what is really preferred or not preferred.

More Is Not Always Better

The usual assumption is that more of a feature adds value to the customer. This is not true. There are many different response functions. Seven different functions are used in the brand design area, all but one are nonlinear. See Figure 2.

The response functions that are used for each component group within the brand design area are described below. The following is excerpted from the Professor Help file with the Marketplace software, thus it is available to students.

1. More of a feature is always better. See Figure 2i. This is the assumption most engineers and product managers make, and in a large number of cases it is true. For example, a faster processor on a PC will create increasing excitement and product use among calculation (engineers) and data intensive (order processors) end users. Greater miles per gallon, battery life, insulating capability, and rpm are almost always desired.

However, it is wrong to assume that more of a feature is always better. Some consumers have different response functions where more does not add value and may even detract from it. Thus, adding more function keys on a keyboard might excite one segment, add little value to another, and actually turn another one off.

2. More of the feature will add value to a brand up to a point, but then it ceases to add anything more. See Figure 2ii. For example, TV manufacturers have found that the addition of stereo sound to a TV created lots of enthusiasm (almost 90% of all primary TVs sold today have stereo sound). However, adding further sound capability (adding a broader range of sound reproduction or more powerful speakers) creates no further excitement or additional sales. Some consumers feel this way about modem speed or storage capacity on a hard drive. Others reach a plateau with the number of channels on cable TV, the size of a PC monitor, the horsepower of an engine, or the durability of a fabric.

3. More of the feature will add value up to a point, and beyond that point more of the feature will detract from the experience or enjoyment. See Figure 2iii. For example, romance in a movie can be enjoyable, but too much romance can be overbearing. And, attentive waiters can be an asset to a restaurant, but they can quickly become a nuisance to customers if they constantly interrupt the dinner conversation. And, the amount of carbonation, syrup, and water in a fountain drink all have tight tolerances where too much or too little is undesirable.

4. A little of a feature is just right, more only takes away value. See Figure 2iv. Some consumers do not want anything more on a calculator than the basic four functions: addition, subtraction, division, and multiplication. Each additional function only adds to confusion and frustration. In other cases, increasing the number of gears on a bicycle, the length of a computer manual, the amount of fat in prepared foods, or the number of commercials on a TV show will reduce satisfaction for some consumers.

5. Any amount of the feature is bad. See Figure 2v. Some consumers feel this way about violence in a movie or TV show. Other consumers are turned off by sugar or caffeine in soft drinks, the use of prepared foods in a restaurant, plastic wrapped fruits and vegetables in the produce department, or polyester in clothes.

6. There is little interest until a threshold is crossed. See Figure 2vi. In some cases, more of a feature does not cause the desired positive response until some threshold is crossed. For example, ease of use is a primary benefit in the use of computers and the Internet. It was not until the introduction of Windows 95 that computers became easy enough to use that the home market for PCs took off. Similarly, the World Wide Web crossed the threshold of ease of use when Netscape was introduced. In the Marketplace, the Mercedes segment will not cross the threshold of buying until the PCs are very powerful, well beyond the capability of the components available at the start of the exercise.

7. The presence of some features in a product can have no affect on consumer excitement. See Figure 2vii. Adding a spreadsheet or accounting software to a PC is not likely to cause even a ripple of excitement in customers who are only concerned about graphic art applications. Other consumers might be indifferent to high-resolution graphics, fuel injection carburetors, or extended warranties.

Coaching tip: I try to illustrate the whole concept of response functions by asking students to think about designing a candy bar. In particular, I ask them to think about the elasticity of the peanut. Would their happiness increase with every new peanut we added to the candy bar? Is there a limit?

A good way to illustrate this idea in class is to bring in Baby Ruth, Snickers, Payday, and Milky Way candy bars and ask the students to raise their hands to vote on which one they like the most. The Payday has the most peanuts and Snickers has the least, with the Milky Way having none. Few students like the Payday and the Milky Way. Most will like the Snickers or the Baby Ruth, suggesting that a few peanuts is just right.

Also ask the students to indicate who does not like coconut in their candy bar. This will indicate that some ingredients are disliked. In other words, the response function is negative. The same question can be asked for chocolate, caramel, rice, peanut butter, etc.