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Chapter 5: Designing Marketing Programs to Build Brand Equity

Overview• How do marketing activities in general—and product, pricing,

and distribution strategies in particular—build brand equity? • How can marketers integrate these activities to enhance

brand awareness, improve the brand image, elicit positive brand responses, and increase brand resonance?

.The four major drivers of this new economy are:

1. Digitalization and connectivity (internet, intranet, mobile devices)

2. Disintermediation and reintermediation (middlemen)

3. Customization and customerization ( tailored products and ingredients provided to customers to make their own

products)

4. Industry convergence (blurring of industry boundaries (laptops+tablets+GSM phones etc…)

New perspective on marketing

.Customers: - Have more power- Have a large variety of available goods and services- Can obtain more information- Can easily interact with marketers in placing and receiving orders- Can interact with other consumers and

compare notes

Companies: - Can collect fuller and richer information about markets, customers, competition

- Better communication technologies and transaction efficiency

- Can use the internet and e-mail to send promotional messages to customers

- Can customize their offerings to individual customers

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5.5

Implications for the Practice of Brand Management

• 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.

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There is a move away from mass-market strategies

• The 21st century has forced marketers to change how they develop their marketing programs.

• Integration and Personalization are crucial factors in building and maintaining strong brands

Marketing is changing!

IMPACT TO…

INTEGRATING MARKETING PROGRAMS AND ACTIVITIES

Product

brand building efforts

marketing activities

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.IMPACT TO…

PERSONALIZING MARKETING• Experiential marketing• One-to-One marketing• Permission marketing

.• Expression of individuality

• Consumer desire for personalization

“The idea is not to sell something, but to demonstrate how a brand can enrich a customer’s life”

Experiential marketing connects a product to unique and interesting experiences

The Fundamental Strategies of One-to-One Marketing:- Focus on individual consumers through consumer databases- Respond to consumer dialogue via interactivity- Customize products and services

Marketing to consumers only after gaining their express permission

“anticipated, personal and relevant” - Godin

.Product Strategy

“At the heart of a great brand is invariably a great product”

• How do consumers form their opinions of the quality and value of a product? • How can marketers use the relationship marketing perspective in formulating product strategy and offerings?

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Perceived Quality and Value

Dimensions of Quality:

• Performance • Features • Conformance Quality • Reliability • Durability • Serviceability • Style and Design

Brand Intangiblesspeed, accuracy, delivery and installation, courtesy, helpfulness of customer service and training

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Product or Service Benefit Dimensions:

1. Functional benefits: Product and performance attributes

2. Process benefits: ease of access to product information; broad product selection; convenient transactions

3. Relationship benefits: personalized service; strong emotional relevance; loyalty rewards

“By improving the fuller customer experience, companies can keep consumers happier and hold on to them longer”

(McKinsey)

Value Chainquality perceptions + cost perceptions = assessment of value

opportunity costs of time, energy and psychological involvement in the decision

The firm is a collection of activities that are performed to design, produce, market, deliver and support products

Firms can achieve competitive advantages by improving performance and reducing costs in

any or all of the value creating activities

.Relationship Marketing

current customers are the key to long term brand success

- Mass Customization

- Aftermarketing

- Loyalty Programs

Customization addresses the need for individuality

To achieve the desired brand image, product strategies should focus on both purchase and consumption

Activities that occur after customer purchase (User Manuals, Complimentary Products)

Loyalty programs offer different mixtures of services, newsletters, premiums and incentives for a firm’s “best” customer

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Pricing Strategy

. Revenue generating element from of the mix

Its belongs in the performance CBBE model( Chapter 2 )

Consumers willing to pay price premiums , when there is a perceived added value = Stronger brands

Aspects of pricing Strategy : 1. Price perceptions 2. Setting prices

Pricing Strategy

.

• Consumers rank brand according to prices

• Price Bands = range of acceptable prices

• price - product meaning - value and quality they received

Price Perceptions

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Pricing Strateg

yNeeds and wants of

consumers

Costs of producing the product Relative prices of competition

Profit margin of the company

Greater emphasis on the end consumer

Value strategies

Everyday low pricing EDLP strategies

Setting PricesSell the right product and the

right price- to better meet consumer needs

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1. Assess what value the customer places on your brand2. Look for variation in assessing customers value3. Asses customers price sensitivity4. Identify an optimal pricing structure5. Consider competitors reactions6. Monitor prices at a transaction level7. Asses customer emotional response8. Analyse if the returns are worth the cost

8 steps to better Pricing

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. Value pricingProduct

design and delivery

Product costs

Product prices

Setting Prices

Innovations , improvements , and convenience

Outsourcing , material substitution , technology, product reformulation , factory improvement .Cost reductions can’t sacrifice quality

Understand what consumers are willing to pay, if there are premiums and then adjust it for cost and competition

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.Everyday low pricing EDLP

Discount and promotions over time

Builds brand loyalty and awareness

Incentives to consumers to buy

Setting Prices

Everyday base prices

Consistent low prices on major items will bring consumers back to buy

- Forward buying versus diverting

Channel Strategy

. Marketing channels =“ a set of interdependent organizations

involved in the process of making a product / service available for use “

This involves designing a channel and managing intermediaries.

Channel design :1. Indirect - sell through third party intermediaries2. Direct – sell through personal contacts

Try develop : “integrated shopping experiences “

Channel Strategies

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DIRECT

Product info is high Customisation Quality assurance is important Lot size is important Logistics are important

INDIRECT

Broad assortment is essential Availability is critical After sales service is important

Indirect Vs Direct channels

-Hybrid approach = combing the both , must be careful not to have too many not too little

- The goal is to maximize channel coverage and effectiveness while minimizing cost and conflict

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- It concentrates on retailers even though there are many other intermediaries

- Retailers have the most contact to customers – affect brand equity

- The image of the product and the image of the retailer is important to consider as customers tend to form associations.

- Consider : 1. Push and pull strategies 2. Channel support

- Retail segmentation - Cooperative advertising

Indirect Channels

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1. Push and pull strategies

Retailers have power over manufactures and directly affect brand equity.- Demand lucrative and frequent trade promotions - Compensation to stock a new brand - Cash payments for shelf space (slotting allowances) - Introductory deals (“ one free with three”)- Postponed billing- Advertising or promotion to supports a new brand

Manufactures can overcome this power by creating unique products the consumer demands

Devoting marketing efforts to the end consumer = PULL STRATEGY( broad distribution)

Devoting marketing efforts to the channel members , offering them incentives to buy the brand = PUSH STRATEGY( selective distribution)

Indirect Channels

2. Channel support

Services provided by channel members may help enhance the value to consumers and the brand. Establish “ Marketing partnership with retailers is critical to ensure channel support”

Two channel support strategies are :

1. Retail segmentation – segmenting the retailers according to similar characteristics , as

different retailers might need different product mixes , special delivery systems

customised promotions or even there own branded version of the product

2. Cooperative advertising- manufacturer pays for a portion of the advertising to

promote the product and the availability at the retailer.

.Manufacturers who sell directly to the public

1. Company owned stores – by means to showcase the brand and all its products. Helps build stronger relationships with it’s customers. This may cause competition with the retailers.

2. Other means - create there own shops within a department store ; sell through phone , mail or electronic means ( Catalogue)

3. Web strategies – online retail channel

Direct Channels