Transcript Designing Marketing Programmes to Build Brand Equity I

Ashesi University
COURSE TITLE : STRATEGIC BRAND
MANAGEMENT
SEMESTER : SECOND, 2009/2010
MODULE 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?
New Perspectives on Marketing
• The 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)
5.3
Implications for the Practice of Brand
Management
• They 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.
5.4
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.
5.5
Integrating the Brand
Into Supporting Marketing Programs
Supporting marketing mix should be designed to
enhance awareness and establish desired brand
image.
• Product strategy
• Pricing strategy
• Channel strategy
5.6
Product Strategy
Designing 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 value
Perceived quality is customers’ perception of the overall
quality 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
5.7
Product Strategy
Perceived quality and value
– Brand 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)
5.8
Product Strategy
Using Relationship Marketing Perspective in Formulating
Product Strategy and Offering
• Customer relationship management (CRM) is the overall
process of building and maintaining profitable customer
relationships by delivering superior value and
satisfaction
• Uses a company’s data systems and applications to track
consumer activity and manage customer interactions
with the company
Product Strategy
Relationship Marketing
Mass Customization
Making products to fit the customer’s exact specifications e.g. Dell
Computers, NIKEiD Website, Jerseys, Premier Account of Barclays etc.
AfterMarketing
Those 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 programmes
Identifying, maintaining, and increasing the yield from a firm’s 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.
Pricing Strategy
• Price : 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.
5.11
Pricing Strategy
• Price premiums are among the most important brand
equity benefits of building a strong brand.
• Consumer price perceptions
– Consumers often rank brands according to price tiers in a
category.
– The relationship between price and quality
5.12
Pricing Strategy
Value to Customers or Perceived Value for Money
Value 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:
1. Status
2. Service and after sales service quality
3. Level of differentiation from competitor products
4. Quality of any packaging
5. Product functionality
6. Any substitute products which may be available
Pricing Strategy
• Setting prices to build brand equity
Value pricing
To 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
5.14
Pricing Approaches
Value-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
company’s sales will suffer.
Pricing Strategy
8 Steps to Better Pricing
1. Assess what value your customers place on a product
or service
2. Look for variation in the way customers value the
product
3. Assess customer’s price sensitivity
4. Identify an optimal pricing structure
5. Consider competitors’ reactions
6. Monitor prizes realized at the transaction level
7. Access customers’ emotional response
8. Analyze whether the returns a worth the cost to serve
5.16
Channel Strategy
Marketing 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.
5.17
Channel Strategy
• Channel strategy includes the design and
management of intermediaries such as
wholesalers, distributors, brokers, and
retailers.
5.18
Channel Design
• Direct channels
– Selling through personal contacts from the company to
prospective customers by mail, phone, electronic means,
in-person visits, and so forth
• Indirect channels
– Selling through third-party intermediaries such as agents
or broker representatives, wholesalers or distributors, and
retailers or dealers
– Push and pull strategies
• Web strategies
5.19
Channel Design: How Channel
Members Add Value
1. Creating Utility : Time, place, possession, form
2. Facilitating exchange efficiencies
3. Alleviating Discrepancies e.g. quantity and
assortment
4. Standardising Transactions: products,
packaging, pricing, delivery is standardised
through the channel
5. Customer Service e.g. technical advice, dealing
with customer enquiries, after sale service etc.
Channel Design : Functions of Members of
Marketing Channel
Information 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 persuasive
communications about an offer
Contacts refers to finding and communicating with prospective
Buyers
Matching refers to shaping and fitting the offer to the buyer’s
needs, including activities such as manufacturing, grading,
assembling, and packaging
Negotiation refers to reaching an agreement on price and other
terms of the offer so that ownership or possession can be
transferred
Functions of Members of Marketing Channel
Physical 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 final
buyer
Channel 1
Manufacturer
Channel 2
Manufacturer
Channel 3
Manufacturer
Channel 4
Manufacturer
Consumer
Retailer
Wholesaler
Retailer
Agent Wholesaler Retailer
Consumer
Consumer
Consumer
NB: Hybrid Marketing Channels or multi-channel distribution, as when a single firm
sets up 2 or more marketing channels to reach one or more customer segments.
Establishing Channel Strategies
Channel strategy decisions involve the
following :
1. The selection of the most effective
distribution channel,
2. The most appropriate level of
distribution intensity
3. 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?
1.Market Factors :
2.Producer Factors
3.Product/Brand Factors
4.Competitive Factors
Establishing Channel Strategies :Channel
Selection
1. 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 buyers
• The location and geographical concentration of
customers
Establishing Channel Strategies :Channel
Selection
Producer Factors
• Resource 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
1.
2.
3.
4.
5.
Product Customization is high
Product information needs are high
Product quality assurance is important
Purchase lot size is important
Logistics are important i.e. degree of difficulty in carrying
the product e.g. storage etc.
Indirect Channel
1. Availability is critical
2. 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 that
has no intermediary levels. The end user is served
directly .e.g. through the internet, mail order, own retail
shop or outlet etc.
1. Greater Control
2. Lower Cost
3. Value Added Subsequent to Production Process
4. Direct Contact with Customer Needs
5. Quicker Response or Change in Marketing Mix
6. Suitable Middlemen Not Available
Establishing Channel Strategies :Distribution
Intensity
3 broad options are intensive, selective and exclusive:
1. 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. Selective
is a strategy when a producer uses more than one but fewer than
all of the intermediaries willing to carry the producer’s products
•
Televisions
•
Appliances
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 automobiles
•
High-end apparel
Channel Management: Push and
Pull Strategies
• By 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.
5.32
Channel Support
• Two such partnership strategies are retail
segmentation activities and cooperative advertising
programs.
• Retail segmentation
– Retailers are “customers” too
• Cooperative advertising
– A manufacturer pays for a portion of the advertising that a
retailer runs to promote the manufacturer’s product and
its availability in the retailer’s place of business.
5.33
Key Points
1. All 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.