Differentiated Products

1
Differentiated Products

• AG BM 460

2
Introduction

• These products have a distinct identity
• The manufacturer has leverage over the price
• It need not sell for the same price as everything
  else
• Key to success is product characteristics
• Entry very difficult

3
Advertising

• Backbone of differentiated products remind
  consumer of the differences
• Costs lots of money
• Lots of effort spent

4
Growth

• Hard to win customers from competitor
• May raise prices for a while
• Entering new markets can be difficult
• New product strategy common

5
Rationale for New Product Development

• emerging demands
• counter competitors
• broaden product line
• product life cycle

6
Types of New Products

• Innovative new to all - Pringles
• New to firm Sprite for Coke (7up copy)
• Product line extension Vanilla Coke
• Product improvements new Cheer

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Source Advertising Age
Total Market 10 bil. cases
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Market Share Cereal Companies2001

• Kellogg 30.8
• General Mills 32.4
• Kraft (Post) 15.8
• Quaker Oats 8.9
• Private Labels 7.4

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Leading Brands 2001

• G M Cheerios 8.8
• K Frosted Flakes 4.5
• K Raisin Bran 3.5
• GM Chex 3.2
• K Frosted Mini Wheats 2.9
• Q Capn Crunch 2.7
• P Pebbles 2.7
• G M Cinnamon Toast Crunch 2.7
• K Froot Loops 2.6
• G M Lucky Charms 2.4
• Each is worth 76 mil.

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Ability to raise prices

• For years cereal companies raised prices
• Over time private label cereals became available
• Finally they had to stop
• Post cut prices
• In recent years prices stable
• However private label and changing tastes
  controlling prices not competition w/ brands

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Intensity of Rivalry

• Intensity of rivalry is high
• Rivalry is increased by
• Few similar sized competitors
• Slow industry growth
• High fixed costs
• High degree of differentiation
• Low consumer switching costs

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Vale Wood farms

• Farm in family since 1816, Loretto, PA
• Selling milk since 1933
• 200 cows
• Process fluid, ice cream, butter, cottage cheese,
  juices iced tea
• Family corporation
• Home delivery of milk
• Small dairy store spring fall farm tours
• Some sold through local stores

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Challenge

• Want firm to continue to grow and prosper
• Who is competition?
• What makes you unique?
• How do you find new customers?
• How do you set prices?

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Concluding Comments

• Branded foods have special role in marketplace
• Consumer loyalty
• Merchant must carry strong brands
• Gives manufacturer leverage
• Requires investment in brand
• Price competition rare