Ashesi University COURSE TITLE : STRATEGIC BRAND MANAGEMENT SEMESTER : SECOND, 2009/2010MODULE 5: Designing Marketing Programmes to Build Brand Equity I: Product, Pricing and Channel Strategies Lecturer: Ebow Spio

Learning Outcomes Learn how to design marketing programmes (i.e. product, pricing and distribution strategies) to build brand equity

Understand how can marketers integrate these activities to enhance brand awareness, improve the brand image, elicit positive brand responses, and increase brand resonance?

5.*New Perspectives on MarketingThe strategy and tactics behind marketing programs have changed dramatically in recent years as firms have dealt with enormous shifts in their external marketing environments: Digitalization and connectivity (through Internet, intranet, and mobile devices)Disintermediation and reintermediation (via new middlemen of various sorts)Customization and customerization (through tailored products and ingredients provided to customers to make products themselves)Industry convergence (through the blurring of industry boundaries)

5.*Implications for the Practice of Brand ManagementThey have a number of implications for the practice of brand management. Marketers are increasingly abandoning the mass-market strategies that built brand powerhouses in the 1950s, 1960s, and 1970s to implement new approaches. Even marketers in staid, traditional industries are rethinking their practices and not doing business as usual.

5.*Integrating Marketing Programs and Activities Creative and original thinking is necessary to create fresh new marketing programs that break through the noise in the marketplace to connect with customers. Marketers are increasingly trying a host of unconventional means of building brand equity.

5.*Integrating the BrandInto Supporting Marketing ProgramsProduct strategyPricing strategyChannel strategySupporting marketing mix should be designed to enhance awareness and establish desired brand image.

5.*Product StrategyDesigning and delivering a product or service that fully satisfies consumer needs and wants is a prerequisite for successful marketing How do consumers form their opinions about Products? Perceived quality and valuePerceived quality is customers perception of the overallquality or superiority of a product or service compared to alternatives and with respect to its intended purpose Perceived Quality Dimensions: Performance : Levels which primary characteristics operate (low, medium, high or very high Features : Secondary elements that complement primary characteristics Conformance Quality: Degree at which product meets specification products Reliability: Consistency of performance over time and from purchase to purchase Durability : Expected economic life of the product Serviceability : Ease of servicing the product Style and Design : Appeal or feel of quality

5.*Product StrategyPerceived quality and valueBrand intangibles : Factors in addition to product performance such as speed, accuracy, care of product delivery and installation, the promptness, courtesy, and helpfulness of customer service. 3- D Marketing approach by McKinsey Consulting : Functional Benefits, Process Benefits and Relationships Benefits Value chain : Create customer value through primary value creating activities (such as inbound logistics, operations, outbound logistics, marketing and sales, & service) and support activities (firm infrastructure, hum resources management, technology development, procurement)

Product StrategyUsing Relationship Marketing Perspective in FormulatingProduct Strategy and Offering Customer relationship management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior value and satisfactionUses a companys data systems and applications to track consumer activity and manage customer interactions with the company

Product StrategyRelationship Marketing Mass Customization Making products to fit the customers exact specifications e.g. Dell Computers, NIKEiD Website, Jerseys, Premier Account of Barclays etc.AfterMarketingThose marketing activities that occur after customer purchase. It is aimed at enhancing the product consumption experience and thereby build brand equity e.g. innovative design, effective communication such as product manual etc. Loyalty or Frequency programmesIdentifying, maintaining, and increasing the yield from a firms best customers through long-term , interactive, value-added relationships.Airlines giving free trips and upgrades based on mileage flown. It also involves co-branding e.g. Airlines and Hotels etc.

5.*Pricing StrategyPrice : The amount of money charged for a product or service. It is the sum of the values that consumers exchange for the benefits of having or using the product or service

Price is the only element in the marketing mix that produces revenue, all other elements represent costs.

5.*Pricing StrategyPrice premiums are among the most important brand equity benefits of building a strong brand. Consumer price perceptionsConsumers often rank brands according to price tiers in a category.

The relationship between price and quality

Pricing StrategyValue to Customers or Perceived Value for MoneyValue is the benefit the customer derives from the purchase of the product. The firm needs to understand the value that the customer places on the benefits received and then price accordingly. Effectively, customers assess the price and measure the benefits received. Factors that affect the value they place on the product:StatusService and after sales service qualityLevel of differentiation from competitor products Quality of any packagingProduct functionality Any substitute products which may be available

5.*Pricing StrategySetting prices to build brand equityValue pricingTo uncover the right blend of product quality costs, and product that fully satisfies the needs and wants of consumers and the profit targets of the firm.

Everyday low pricing (ELPD)Maintaining consistently low prices on major items every day to build brand loyalty and fend off private label inroads and reduce manufacturing and inventory costs e.g. Procter and Gamble

Pricing ApproachesValue-based pricing: Setting price based on buyers perceptions of product values rather than on cost.The targeted value and price then drive decisions about product design and what costs can be incurred. Pricing begins with analysing consumers needs and value perceptions and a price is set to match consumers perceived value Market research is required to ascertain the value buyers assign to product and that of competitors. This can be difficult. If a seller charges more than buyers perceived value, the companys sales will suffer.

5.*Pricing Strategy8 Steps to Better Pricing Assess what value your customers place on a product or service Look for variation in the way customers value the productAssess customers price sensitivity Identify an optimal pricing structure Consider competitors reactions Monitor prizes realized at the transaction levelAccess customers emotional response Analyze whether the returns a worth the cost to serve

5.*Channel StrategyMarketing Channels Set of interdependent organizations involved in the process of making a product or service available for use or consumption.

The manner by which a product is sold or distributed can have a profound impact on the resulting equity and ultimate sales success of a brand.

5.*Channel StrategyChannel strategy includes the design and management of intermediaries such as wholesalers, distributors, brokers, and retailers.

5.*Channel DesignDirect channels Selling through personal contacts from the company to prospective customers by mail, phone, electronic means, in-person visits, and so forthIndirect channelsSelling through third-party intermediaries such as agents or broker representatives, wholesalers or distributors, and retailers or dealersPush and pull strategies

Web strategies

Channel Design: How Channel Members Add Value Creating Utility : Time, place, possession, formFacilitating exchange efficiencies Alleviating Discrepancies e.g. quantity and assortmentStandardising Transactions: products, packaging, pricing, delivery is standardised through the channel Customer Service e.g. technical advice, dealing with customer enquiries, after sale service etc.

Channel Design : Functions of Members of Marketing ChannelInformation refers to the gathering and distributing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange

Promotion refers to the development and spreading persuasivecommunications about an offer

Contacts refers to finding and communicating with prospectiveBuyersMatching refers to shaping and fitting the offer to the buyersneeds, including activities such as manufacturing, grading, assembling, and packagingNegotiation refers to reaching an agreement on price and otherterms of the offer so that ownership or possession can be transferred

Functions of Members of Marketing ChannelPhysical distribution refers to transporting and storing goods

Financing refers to acquiring and using funds to cover the costs or carrying out the channel work

Risk taking refers to assuming the risks of carrying out the channel work

Types of Distribution Channels Consumer Goods Channels Channel Level A layer of intermediaries that performs some work in bringing the product and its ownership closer to the finalbuyer Channel 1 Manufacturer ConsumerChannel 2 Manufacturer Retailer Consumer Channel 3 Manufacturer Wholesaler Retailer Consumer Channel 4 Manufacturer Agent Wholesaler Retailer Consumer NB: Hybrid Marketing Channels or multi-channel distribution, as when a single firmsets up 2 or more marketing channels to reach one or more customer segments.

Establishing Channel Strategies

Channel strategy decisions involve the following :The selection of the most effective distribution channel, The most appropriate level of distribution intensity The degree of channel integration

Establishing Channel Strategies :Channel Selection Why will Procter and Gamble sell its brands through supermarkets rather than selling direct to consumers ? Why Dell will sell direct to end users and not necessarily through retailers? Market Factors : Producer FactorsProduct/Brand Factors Competitive Factors

Establishing Channel Strategies :Channel Selection Market Factors : Buyer Behaviour, Buyer needs information, installation & technical assistance etc. Willingness of channel intermediaries to market product The profit margins demanded by wholesalers & retailer and commission by sales agents The number and size of buyersThe location and geographical concentration of customers

Establishing Channel Strategies :Channel Selection Producer FactorsResource availability : Financial and Managerial resources Product Mix Desired Degree of Control of Channel Operations (price, stocking of new products etc)

Competitive Factors Control of traditional channels of distribution through franchise or exclusive dealing arrangements

Establishing Channel Strategies :Channel Selection Products/Brand Factors Direct Channel Product Customization is highProduct information needs are high Product quality assurance is important Purchase lot size is importantLogistics are important i.e. degree of difficulty in carrying the product e.g. storage etc.Indirect Channel Availability is critical After sales service is important

Establishing Channel Strategies :Channel Selection Why a Firm May like to use Direct Marketing Channels Direct Marketing Channel is a marketing channel thathas no intermediary levels. The end user is served directly .e.g. through the internet, mail order, own retailshop or outlet etc.Greater Control Lower Cost Value Added Subsequent to Production ProcessDirect Contact with Customer NeedsQuicker Response or Change in Marketing MixSuitable Middlemen Not Available

Establishing Channel Strategies :Distribution Intensity 3 broad options are intensive, selective and exclusive:Intensive is a strategy used by producers of convenience products and common raw materials in which they stock their products in as many outlets as possible e.g. foods, toiletries, beer etc.

Aim is to achieve saturation coverage of the market

2. Selectiveis a strategy when a producer uses more than one but fewer than all of the intermediaries willing to carry the producers productsTelevisionsAppliances

Establishing Channel Strategies :Distribution Intensity 3. Exclusive is a strategy in which the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories e.g. only one wholesaler, retailer or industrial distributor is used in a geographic area.Luxury automobilesHigh-end apparel

5.*Channel Management: Push and Pull StrategiesBy devoting marketing efforts to the end consumer, a manufacturer is said to employ a pull strategy. Alternatively, marketers can devote their selling efforts to the channel members themselves, providing direct incentives for them to stock and sell products to the end consumer. This approach is called a push strategy.

5.*Channel SupportTwo such partnership strategies are retail segmentation activities and cooperative advertising programs. Retail segmentationRetailers are customers too Cooperative advertising A manufacturer pays for a portion of the advertising that a retailer runs to promote the manufacturers product and its availability in the retailers place of business.

Key PointsAll of the four Ps not just promotion have important roles to play in the creation and maintenance of brand equity.2.The products and services that firms design are the cornerstones of customer-based brand equity.3.Pricing strategy must be based on consumers and the competition, as well as cost and quality considerations.5.Channel members should be thought of and treated as valuable customers whose image and actions can hurt or enhance brand equity.

Tutorials Choose a product category. Profile all the brands in the category in terms of pricing strategies and perceived value.

2222At the heart of a great brand is invariably a great product. The product itself is the primary influence on what consumers experience with a brand, what they hear about a brand from others what the firm can tell others about the brand. For brand loyalty to exist, consumers experiences with product must at least meet, if not actually surpass their expectations. 22Based on the premise that current customers are key to long term brand success.*222222222222