Designing Marketing Programs to Build Brand Equity

Building Customer-Based Brand Equity

BRAND BUILDING TOOLS AND OBJECTIVES CONSUMER KNOWLEDGE EFFECTS BRANDING BENEFITS

Choosing Brand Elements

Brand name MemorabilityLogo MeaningfulnessSymbol AppealCharacter TransferabilityPackaging AdaptabilitySlogan Protectability

Developing Marketing Programs

Product Tangible and intangible benefitsPrice Value perceptionsDistribution channels Integrate”push” and “pull”Communications Mix and match options

Leverage of Secondary Associations

CompanyCountry of originChannel of distributionOther brandsEndorsorEvent

AwarenessMeaningfulnessTransferability

Possible Outcomes

Greater loyalty

Less vulnerability to competitive marketing actions and crises

Larger margins

More elastic response to price decreases

More inelastic response to price increases

Greater trade cooperation and support

Increased marketing communication efficiency and effectiveness

Possible licensing opportunities

More favorable brand extension evaluations

Brand Awareness

Depth

Breadth

RecallRecognition

PurchaseConsumption

Brand Associations

Strong

Favorable

Unique

RelevanceConsistency

DesirableDeliverable

Point-of-parityPoint-of-difference

New Perspective on MarketingChanges in the new economy have led to Mass

Marketing approaches being increasingly abandoned

5 major drivers of the new economy1. Digitalization and connectivity

2. Disintermediation and reintermediation (middlemen)

3. Customization and customerization (tailored products and ingredients to make products)

4. Industry convergence (blurring of boundaries)

5. New customer and company capabilities

Personalizing Marketing

Personalizing marketing has become important and possible because of the internet and other digital devises

The Personalising Marketing concepts are - Experiential marketing One-to-one marketing Permission marketing

New Capabilities in the New EconomyConsumers

Substantial increase in customer power because of - Greater variety of available goods and services Great amount of information Ability to chat with strangers and compare notes on

products and services Greater ease in interacting and in placing and receiving

orders

New Capabilities in the New EconomyCompanies

Use of internet for new information, sales channel, augment geographic reach, to inform and promote products Can collect fuller information Can facilitate two-way communication and transaction

efficiency Can send ads, promotion material, information by email, Can customize offering for individual customers Can improve purchasing, training, recruitment,

communication

Personalizing Marketing Relationship Marketing – gaining in

importance to create stronger consumer ties and provide a more holistic, personalized brand experiences Mass customization After-marketing CRM and loyalty programs

The new marketing activities are Relationship Marketing activities Experiential Marketing Permission Marketing One-to-One Marketing

Experiential Marketing

EM is about - connecting the brand with unique and interesting experiences (not just selling the brand but demonstrating how it enriches life) Disney says - Experiences come as – education,

entertainment, aesthetics, escapist Bernd Schmitt say - it is distinct from

traditional marketing in many ways - Focuses on consumer experiences Focuses on consumption situations Views consumers as rational and emotional animals Uses eclectic methods and tools

He details 5 different types of experiences – sense, feel, think, act, and relate

Experiential Marketing

Pine and Gilmore pioneers of EM ‘when you charge for the time customers spend with you, then and only then you are in the experience business’ Combines brand education with

entertainment Employs multiple touch points and multiple

senses Involves special events, contests,

promotions, sampling, on-line activities, etc.

Distinctive and relevant

One-to-One Marketing:Competitive Rationale

Don Peppers and Martha Rogers popularized the concept in the context of changing trends

The basic premise is - Consumers add value by providing information

and …… Firm adds value by generating rewarding

experiences with consumers. Thus - Creates switching costs for consumers Reduces transaction costs for consumers Maximizes utility for consumers and builds strong

profitable realtionships

One-to-One Marketing:Consumer Differentiation

Based on some fundamental concepts Focus is on individual customers (with a data

base) Response is a dialogue using interactivity Customization of products and services

Treats different consumers differently because of Different needs Different values to firm

Current value future life-time value

Devotes more marketing effort on the most valuable consumers (and customers)

One-to-One Marketing:Five Key Steps

Identify consumers, individually and addressably

Differentiate them, by value and needs Interact with them more cost-efficiently

and effectively Customize some aspect of the firm’s

behavior Brand the relationship

Permission Marketing (Seth Godin)

Permission marketing can be contrasted to interruption marketing Marketing to customers only after gaining their permission

(instead of interruption marketing – mass media, etc.) Breaks out of clutter and builds customer loyalty Permission marketing “encourages consumers to

participate in a long-term interactive marketing campaign in which they are rewarded in some way for paying attention to increasingly relevant messages”

Communication impact is different as messages are – Anticipated Personal Relevant

5 Steps in Permission Marketing

1. Incentive - offer overt, obvious, and clearly delivered incentive to prospect to volunteer – samples, discount, contest. That can potentially develop a relationship for further communicationBut customer wishes are respected and consumers must be willing to become involved

2. Over time, teach the consumer about the product or service

3. Reinforce the incentive over time4. Increase the level of permission the marketer

receives from the customer5. Leverage permission to generate profits

Drawback of Permission Marketing

A draw back - PM presumes that the client knows what they

want to some extent They may need guidance for forming and

communicating their preference

Participatory marketing (consumers and marketers work together) may be a more appropriate term and concept to employ to satisfy consumer goals.

10 Questions to Evaluate Permission Marketing Program What’s the bait?

What does an incremental permission cost? How deep is the permission that is granted? How much does incremental frequency cost? What’s the active response rate to communications? What are the issues regarding compression? Is the company treating the permission as an asset? How is the permission being leveraged? How is the permission level being increased? What is the expected lifetime of one permission?

Buzz Marketing(Emanuel Rosen)

Keep it simple – Simple messages spread across social networks more easily.

Tell us what’s new – The message must be relevant and newsworthy for people to want to tell others about it.

Don’t make claims you can’t support – Making false claims will kill buzz or, worse, lead to negative buzz.

Ask your customers to articulate what’s special about your product or service – If customers can explain why they like the product or service, they can then communicate this to others.

Start measuring buzz – To determine which strategies generate the most buzz.

Listen to the buzz – Monitoring consumer reaction can yield insights such as how to improve the product or service.

Reconciling New and Traditional Marketing Approaches New approaches help reinforce a number of

important marketing concepts and techniques. Eliciting a positive brand response Get customers more actively involved iwith the brand Create deeper, richer, and more favorable brand

associations Create brand resonance and build BE by working differently in the

CBBE model context

But There is still a need for control and predictability of

traditional marketing activities Models of BE can help to provide direction and focus

to the marketing programs

Integrating the Brand Into Supporting Marketing Programs

Product Strategy Deliver tangible and

intangible benefits Relationship Marketing

Pricing Strategy Understand

perceptions of value Balance price, cost,

and quality

• Channel Strategy• Blend channel “push”

with consumer “pull”• Develop and brand

direct marketing options

• Communication Strategy• Mix and match

communication options

Design marketing mix to enhance awareness and establish desired brand image.

Product Strategy

Integrating the Brand into Supporting Marketing Programs

Product Strategy considers 2 topics 1. Perceived quality and value2. Relationship Marketing in formulating

product strategy and offerings

Product Strategy1. Perceived quality and

value Performance level Supplementary features Conformance quality Product reliability Durability Serviceability Style and design

Brand Intangibles – Product imagery TQM and ROQ Value Chain

2. Relationship Marketing Mass customization After-marketing CRM & loyalty programs

Integrating the BrandInto Supporting Marketing Programs

Product Strategy considers 2 topics 1. Perceived quality and value

Perceived quality - overall assessment of product quality / superiority (perception)

Satisfactory levels of perceived quality are difficult to achieve because of continuous product improvements which leads to heightened consumer expectations

The CBBE model specifies the following general dimensions of product quality

Integrating the BrandInto Supporting Marketing Programs Product Strategy considers 2 topics

1. Perceived quality and value CBBE model specifies general dimensions of product

quality Performance level at which the primary characteristics

of the product operates Supplementary features – secondary elements

complement the primary characteristics Conformance quality – degree to which the product

meets the specifications and is absent of defects Product 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 – appearance or feel of quality

Consumer beliefs along these dimensions underlie perceptions of quality and influence attitude and behavior towards brand

Integrating the BrandInto Supporting Marketing Programs Product Strategy considers 2 topics

1. Perceived quality and valuePerceived quality is also about Brand Intangibles – Product imagery – symbolism / personality

reflected in the brandBrand decisions may not always be taken on the

basis of perceived quality and consumers may adopt heuristics

Integrating the BrandInto Supporting Marketing Programs Product Strategy considers 2 topics

1. Perceived quality and value Total Quality management and Return on

QualityTQM – leads to a being noncustomer focused at timesROQ (return on quality) focuses on improvements on

dimensions that are produces tangible consumer benefits, lowers costs, increases sales etc.

Value Chain – ‘the strategic tool for creating more customer value’ Michael Porter

To assess a product consumers combine quality perceptions with cost perceptions (opportunity, time, energy, psychological involvement, etc.)

Integrating the BrandInto Supporting Marketing ProgramsProduct Strategy considers 2 topics

1. Perceived quality and value - Value chain 5 primary value creating activities

1. Inbound logistics2. Operations3. Out bound logistics4. Marketing and sales 5. Service

4 support activities that occur through primary activities1. Firm infrastructure2. Resource management3. Technology development4. Procurement Core businesses processes and cross functional integration

and cooperation is also important Competitive advantage can also come from partnering with

other members of the value chain

Competitive advantage and reduction of cost can be created in every activity

Integrating the BrandInto Supporting Marketing ProgramsProduct Strategy considers 2 topics

2. Relationship Marketing – based on the premise that current customers are key to brand success

Benefits of RM Acquiring new customers is 5 times more

expensive 5% reduction in defection rate can increase

profit by 25% to 85% depending on the industry

Average company loses 10% of customers annually

Customer profit rate increases over life

Integrating the BrandInto Supporting Marketing ProgramsProduct Strategy considers 2 topics

2. Relationship Marketing – broader set of activities

RM provides a more holistic, personalized brand experiences to create stronger consumer ties through –

Experiential Marketing Permission Marketing One-to-One Marketing

Integrating the BrandInto Supporting Marketing ProgramsProduct Strategy considers 2 topics 2. Relationship Marketing – 3 important

issues1. Mass customization2. After-marketing3. Loyalty programs

Integrating the BrandInto Supporting Marketing ProgramsProduct Strategy considers 2 topics

2. Relationship Marketing – 3 important issues

1. Mass customization – digitalization allows customization at a scale never heard of

– Customers interact directly with marketers – Dell, NIKEiD program

– Offers supply side benefit – reducing inventory etc. Asian Paints - Mix Your Own Choice

– Services are also customized – allocate less to TQM and more to customer satisfaction, retention and loyalty

– Internet sites – do it most effectively Limitations

– Not every product is easily customized, or all demands customizable

Integrating the BrandInto Supporting Marketing ProgramsProduct Strategy considers 2 topics 2.Relationship Marketing – 3 important

issues2. After marketing - activities that occur after

purchase – Multimedia / illustrated manuals, help-lines, call

centers, etc. Calls for a new mind-set for retention activities

that build relationships to last a life-time Can improve the sale of complementary products,

upgrades

Integrating the BrandInto Supporting Marketing Programs Product Strategy considers 2 topics

2. Relationship Marketing – 3 important issues3. Loyalty Programs (frequency marketing) – to

identify, maintain and increase yields from the best customers through long-term, interactive, value added relationships

With programs that are a mixture of specialized services, incentives, news letters

Sometimes involving co-branding or brand alliances

Create switching costs for consumers Reduces price competition amongst brands

Integrating the BrandInto Supporting Marketing ProgramsProduct Strategy considers 2 topics

2. Relationship Marketing – 3 important issues3. Loyalty Programs – tips for building effective loyalty

programs Know your audience –data base software to determine

segments to target purchasing behavior that can be changed

Change is good – update and change programs to avoid me-too programs

Listen to your best customer – suggestions and complaints

Engage people to make them want a program – easy to use, immediate reward, to sign-up, made to feel special

Integrating the BrandInto Supporting Marketing ProgramsProduct Strategy - Summary –

Products are at the heart of BE but they must be manufactured, marketed, sold, delivered, serviced – Create a positive image that is unique, strong and

favorable associations That create favorable judgments and feelings And foster greater brand resonance

Product strategy entails choosing tangible and intangible benefits to be embodied in the product and marketing activities desired by the consumer and deliverable by marketing programs

Perceived quality and value are important brand associations that drive consumer decisions

RM is a priority because of the importance of loyalty Product experience, after marketing activities, and CRM

are important to build CBBE

Pricing Strategy

Integrating the BrandInto Supporting Marketing ProgramsPricing Strategy –

The revenue generating elements of marketing mix and …

Price premium are important benefits of CBBE

Pricing strategy must consider - Different pricing perceptions Different pricing strategies

Pricing Strategy

Price Perception• Price bands - high, low, medium –

• Price variability – flexibility and breadth of pricing within the tier

Pricing Strategies• Value based pricing

Product design and deliveryProduct costProduct price

• Everyday low price

Integrating the Brand Into Supporting Marketing ProgramsPrice perceptions – play multiple roles in

brand assessment Consumers categorize the price as – high, low,

medium, and how firm or flexible. They think - Price tier associations and level of brand in category

Range of acceptable prices or price bands Indicates the flexibility and breadth of pricing within a

tier Infer quality of product and assessment of value

Value based pricing strategies - right price for right product

Price premium based on unique aspects in tangible and intangible considerations

Infer varying price volatility and variance (frequency and magnitude of discounts)

Integrating the Brand Into Supporting Marketing ProgramsSetting prices to build BE

Pricing strategy choice entails determining the following - A method for how the current prices will be

set Value pricing Everyday low price

A policy and set of guidelines for the depth and duration of promotions and discounts over time.

Integrating the Brand Into Supporting Marketing Programs Pricing strategy -

Value pricing – charging a fairly low price for a high-quality item

Popular approach because of competition and more demanding consumers

Objective is to uncover what will satisfy consumer needs and wants - right blend of product quality, product cost, product

prices Keys for success of VP are the balance between -

Product design and quality delivery Product cost Product price

Integrating the Brand Into Supporting Marketing Programs Pricing strategy entails determining the

followingValue pricing – keys of success 1. Product design and delivery – (does not mean a

stripped down version) Nano Prices can be increased with new value-added

products –Gilltte, Dr Scholl2. Product cost – lower costs as much as possible for

productivity gains - material substitution, product reformulation, process changes

But cost reduction should not compromise quality3. Product price – understand how much value is

perceived and to what extent they are prepared to pay a premium over product costs

Integrating the Brand Into Supporting Marketing ProgramsPricing strategy

Value pricing – keys of success Techniques for determining value

perceptions Directly seeking consumer perception of price in

different waysSummary - Price should be found appropriate and

reasonable Lowering price may not be the answer, and value

added costs may be more profitable Different segments have different perceptions –

price segmentation can be considered depending on demand and value perception

Integrating the Brand Into Supporting Marketing ProgramsPricing strategyEveryday low price (EDLP) – a constant low price

with few or no price promotions or special sales (complementary pricing approach)

Helps build brand loyalty, Fend off private labels Reduces manufacturing and inventory

costs Reduces over reliance on trade and

consumer promotions that lead to spurt in demand

But timely, well conceived sales promotions still induce sales

Integrating the Brand Into Supporting Marketing ProgramsPricing strategy - Summary –

Marketers must determine strategies for setting prices and adjust them over the short and long run

These decisions must reflect the consumer’s perception of value

EDLP is a complementary pricing approach that maintains consistently low, value-based prices on major items on a day-to-day basis, and determines the nature of price discounts, promotions, over time

Channel Strategy

Integrating the Brand Into Supporting Marketing Programs Channel Strategy

Marketing channels -‘a set of interdependent organizations involved in the process of making products available for purchase or consumption

Channel strategy - design and management of intermediaries – distributors, brokers, retailers,etc

Channel design Hybrid channel design - multiple channel types Indirect channels – selling through third party

intermediaries Direct channels – selling through personal

contacts from the company to customers by phone, mail, etc.

Integrating the Brand Into Supporting Marketing Programs Channel Strategy – Channel design –

Hybrid channel design - multiple channel types adopted by most Direct channels is preferable when

Product information needs are high Product customization is necessary Product quality assurance is important Purchase lot size is important Logistics are important

Indirect channel is preferable when A broad assortment is essential Availability is crucial After-sales service is important

Integrating the Brand Into Supporting Marketing Programs Channel Strategy - Channel design

Indirect channel – retailers affect BE the most - most visible and have direct contact with customers Consumers are attached to retailers for various

factors Retailers strive to create their own equity through

- Product assortment, pricing, credit policy, quality of

service and other unique associations Retailers influence on the brands they sell, particularly

in terms of brand related services There is also an interplay between the store image and

the retail image Marketing activity of retailers can directly impact BE

Retailers come in many forms

Integrating the Brand Into Supporting Marketing Programs Channel Strategy - Channel design

Indirect channel – Push and Pull strategies Manufacturers are today vulnerable to the

retailer’s pressures and actions - increased their power over manufacturers

One way to regain lost power is by creating strong brands through brand building tactics – Pull strategy

Or they can devote marketing effort to trade – Push strategy

Although one strategy may dominate, most use a blend of both strategies

Integrating the Brand Into Supporting Marketing Programs Channel Strategy

Channel design – the goal is to - maximize channel coverage and effectiveness while minimizing channel cost and conflict

BE implications of channel design type Channel Support – to establish channel

partnership is critical as a number of services are offered by the channel that enhance the value for consumers

Channel partnership – 2 aspects are critical1. Retail segmentation 2. Cooperative advertising

Integrating the Brand Into Supporting Marketing Programs Channel Strategy -Channel partnership

- two aspects are critical1. Retail segmentation – to devise an

optimum retailer program they are segmented depending on their marketing capability Different retailers have to be given different product mix, special delivery systems, customized promotions, sometimes own branded version of products - branded variants

Integrating the Brand Into Supporting Marketing Programs Channel Strategy -Channel partnership - two

aspects are critical2. Cooperative advertising – manufacturer pays

for a portion of the promotion that retailer runs. (% of business / upto a certain limit, based on purchases)

It has a local impact and more relevance to selling To be eligible the retailer must follow the manufacturer’s

stipulations about the nature of brand exposure in the ad

Unfortunately brand image cannot be tightly controlled and the emphasis could shift to the store, or the promotion, and may run counter to the desired image of the brand

The challenge is to create effective co-op ads and get involved in designing the campaign – selling the brand while pushing the store

Integrating the Brand Into Supporting Marketing Programs Channel Strategy - Channel partnership

– Summary Elicit channel support through

merchandising and marketing programs aimed at trade

Important to consider how channel activity can encourage trial purchase, communicate or demonstrate product information, to build awareness, unique and favorable associations and elicit a positive brand response

Integrating the Brand Into Supporting Marketing Programs Channel Strategy-

Direct Channel – Company owned stores Other means Web strategies

Integrating the Brand Into Supporting Marketing Programs Channel Strategy- Direct Channel – to build strong

relationships Company owned stores – most expensive

form, but provides many benefits Bolster brand image, education and build BE more than a

direct sales device – Nike Town – ads / tourist attraction Showcases the brand and product variety Test market alternative designs, presentation, price – keep

finger on the consumer pulse and shopping habits A way to hedge bets with retailers who push their own

labels May cause conflict with existing retail channel on turf

issues Manufacturer have to explain that not a threat but a show

case for the brand

Integrating the Brand Into Supporting Marketing Programs Channel Strategy-Direct Channel – to build strong

relationshipsOther means – Own shop within dept stores

It appeases retailers / benefit from the retailer’s image At the same time retain control over the design and

product presentation at POP

Direct Selling via phone mail or electronic means,

magazines, web-sites not only sell but become a means to BE by building awareness, range, understanding of key benefits

Engage in a dialogue, Establish a relationship

Integrating the Brand Into Supporting Marketing Programs Channel Strategy- summary

Channel strategy must build BE by - Designing and managing direct and indirect channels

to build awareness, strength, uniqueness of brand associations

Direct and indirect channels offer varying advantages and disadvantages and must be matched carefully Direct channel can enhance BE

Through better consumer understanding of depth, breadth, and variety of products and any distinguishing characteristics

Indirect channel can influence equity through Actions taken and support given to the brand by

retailers and , transfer of any associations Developing an integrated shopping experience using

stores, web-site, telephone, catalogue etc.