Term Paper on "Product Strategy Addresses Issues of Branding"

Term Paper 8 pages (2399 words) Sources: 1+

[EXCERPT] . . . .

product strategy addresses issues of branding, product features and positioning. The product has a couple of key selling features. The first is the coloring. This coloring will help to differentiate Wow Butter from other peanut butters on the market. The peanut butter market is mature, so entering this market will bring the company into direct competition with some powerful, long-established names in the business. In order to break into this market, the product must be differentiated in some way so as to attract consumer attention. For Wow Butter, the color is the primary source of differentiation. The color will make Wow Butter more attractive than other peanut butters to our core end user (children) and will help to differentiate our product with our other target markets as well.

In addition to the product differentiation, the branding will be unique. The name Wow Butter was chosen to reflect the stark difference between our peanut butter and others on the market. It is believed that consumers will have a visceral "wow" reaction when they first encounter Wow Butter, and we want to convey that sense of wonder and astonishment in the name. Having this name reinforces the fun image, and it is also reinforces the degree of differentiation in our product. A more common name may cause some confusion in the marketplace as to which peanut butter has the colors. The name Wow Butter is so radically different than other names in the industry that it is unlikely that there would be any confusion as to the colored peanut butter -- it is the one that makes you say "Wow!"

The second product strategy is to focus on the nutrition element. Peanut butter is a natural wholesome snack food, in contrast to the heavily processed foods commonly found in school lunches. Parents with concern for their children's well-being can use Wow Butter in order to improve the nutritional content of school lunches. The same can be said for schools that provide lunch programs. Wow Butter will be positioned with the product benefit of nutrition, distinguishing it from the majority of products that are intended for children today.

The product strategy, therefore, creates a high degree of differentiation for our product. In addition, it conveys to the consumer the reaction that they can expect to have to our product, reinforcing such sentiments. In addition, the word "wow" conveys an expression of childlike wonder, which is consistent with the target end user. By achieving this high degree of differentiation it is believed that Wow Butter will be able to command a premium selling price. The use of non-conventional packaging will help to disguise the higher price per ounce of our peanut butter as well. If premium pricing is to be achieved, it will help our company to grow since we will be able to earn higher margins than our competitors and therefore be able to fuel a more rapid pace of growth.

Product differentiation and powerful branding will help to support a premium pricing strategy. There are two main pricing strategies for new products -- skimming and penetration. For a firm attempting to maximize profit margin, skimming is more appropriate; for a firm attempting to gain market share, the penetration strategy is more appropriate (NetMBA.com, 2007). Wow Butter will essentially employ a variant of the skimming strategy. The skimming strategy is best employed in situations where a company is attempting to recoup the cost of investment, which is essentially the position of the company since it is being started to launch and market Wow Butter. It is believed that there are enough prospective customers to buy the product but that the key point of differentiation will dissuade competitors from raising their prices. The higher price also supports the differentiation and higher value proposition that Wow Butter has relative to other peanut butters on the market. It is also believed that lowering the price would have little impact on the demand for the product. The demand for Wow Butter is expected to be based on the features of the product, not the price. Therefore, with what is expected to be low price elasticity of demand (relative to other consumer staples) a penetration pricing strategy is not appropriate as reductions to the contribution margin would be accounted for with increased sales.

For Wow Butter, a product line pricing strategy is the most appropriate tactic. The product line pricing strategy implies that all products within a line be priced at the same point. In this instance, each color of Wow Butter will have the same price. The point of differentiation is superficial and has little impact on the cost of inputs. As such, from an internal point-of-view product line pricing is appropriate. The consumer will also see each color as being equivalent to the others, with the choice between them merely a matter of personal preference. The customer will not perceive a material, functional difference between the different colors of Wow Butter. This implies that if all are priced at the same level, demand will be roughly equal to society's general color preferences. The importance of any given color in a direct function of demand for that color, so there is no need for pricing strategy to reflect differences in a product's value to the company, as there is none (Bovay, 2008).

The other pricing tactics are inappropriate for the launch of Wow Butter. Value pricing is not congruent with the differentiation strategy that Wow Butter is pursuing. Differential pricing is entirely inappropriate for this product launch. Pricing consistency will allow for the nature diffusion of the product through different channels. Retailers, however, may choose to price the product at points other than the suggested retail price. Some discounters, for example, may inherently price products at a lower point than other retailers (grocery stores, convenience stores). The company will not engage in differential pricing between the different distribution channels, and certainly not by geography, but it is entirely possible that the retailers in each channel will implement different mark-ups that result in differential pricing. Wow Butter does not have the bargaining power with these channels (such as a firm like Coca-Cola would have) to ensure total pricing consistency across channels. Across geographies, however, the company will again avoid differential pricing, even though some areas will be more expensive to serve due to transportation costs.

There are no ethical issues arising from the pricing strategy that is being proposed for Wow Butter. The outcomes to all stakeholders are fair and equitable. The pricing strategy both at the wholesale and retail level is entirely transparent. The higher pricing merely reflects the degree of differentiation that we are attempting to create for the Wow Butter product and brand.

There are also no known legal issues with respect to the Wow Butter product and pricing strategy. All nutritional information will be provided in accordance with the law. The dyes used to color the peanut butter are all legal and certified food safe. Pricing is transparent and in accordance with the law.

Assignment 5. The promotional strategy will be twofold. The first will be an extensive advertising program aimed at children's media, in particular those programs that receive a large parental audience as well. This will raise awareness of Wow Butter with the target demographic and attract that demographic to the product. In addition, this will be supported with advertising in parenting magazines and nutrition-oriented magazines. The initial marketing campaign will be substantial -- Wow Butter is going to be taken nationwide through major distribution channels. Gaining access to those channels will require evidence of a strong market program to support the product. A website will also be established to promote the product. It will feature integrated entertainment elements and content regarding food nutrition information.

To reach the school lunch market, a more focused direct marketing campaign will be required. This campaign will piggyback on the demand created among the nation's children. School lunch program administrators will be targeted through direct mailings and through telephone communications. A special website will be established that will promote directly to school lunch program administrators. This site will facilitate contact between the company and program administrators and will promote the benefits of Wow Butter relative to other common school lunch content.

There are some ethical considerations with respect to Internet marketing to children and marketing to children in general. Often, these considerations stem from the marketing of unhealthy or unsafe products. This is not the case with Wow Butter, which is a healthy product and bears only the risk of peanut allergy. Our promotions will contain warnings about checking for peanut allergy prior to use, since Wow Butter does not in terms of its color resemble a traditional peanut product. Overall, Wow Butter is a beneficial product and many of the concerns with respect to marketing to children do not apply to Wow Butter. One point of concern is that the Internet site will not be able to gather information about our underage customers.… READ MORE

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