Chapter-5 Designing Marketing Program To Build Brand Equity

CHAPTER 5:
DESIGNING MARKETING
PROGRAMS TO BUILD
BRAND EQUITY
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Learning Objectives
 Identify some of the new perspectives and
developments in marketing
 Describe how marketers enhance product
experience
 Explain the rationale for value pricing
 List some of the direct and indirect channel options
 Summarize the reasons for the growth in private
labels

New Perspectives on Marketing
 As firms are dealing with enormous shifts in their
external marketing environments:
 Themarketing strategies and tactics have changed
dramatically
 Digitalizationand connectivity (through Internet, intranet,
and mobile devices)
 Disintermediation and reinter mediation (via new
middlemen of various sorts)
 Customization and customization (through tailored
products and ingredients provided to customers to make
products themselves)
 Industry convergence (through the blurring of industry
boundaries)
New Approaches Embraced by
Marketers
 Rapid technological developments
 Greater customer empowerment
 Fragmentation of traditional media
 Growth of interactive and mobile marketing options
 Channel transformation and disintermediation
 Increased competition and industry convergence
 Globalization and growth of developing markets
 Heightened environmental, community, and social
concerns
 Severe economic recession
Figure 5.1 - The New Capabilities of the
New Economy

Integrating Marketing
 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 should evaluate all possible means to create knowledge,
considering not just efficiency and cost but also effectiveness
 One aspect of integrated marketing communications is contacts.
 It is defined as any information-bearing experience that a customer or
prospect has with the brand, the product category, or the market that
relates to the marketer‘s product or service
 Marketers are increasingly trying a host of unconventional means of
building brand equity.

Integrating Marketing
Personalizing Marketing
Reconciling the Different

Marketing Approaches

 All of these approaches are a means to create deeper, richer, and

more favorable brand associations.
 Relationship marketing has become a powerful brand-building force.
 May creatively create unique associations
 May reinforce brand imagery and feelings
 Nevertheless, there is still a need for the control and predictability of
traditional marketing activities.
 Models of brand equity can help to provide direction and focus to the
marketing programs.
 To adapt to the increased consumer desire for personalization,
marketers have embraced concepts such as experiential marketing
and relationship marketing 5.8
Relationship
Experiential Marketing
Marketing

 Pine and Gilmore, pioneers on the topic, argued over a decade ago
that we are on the threshold of the ―Experience Economy,‖ a new
economic era in which all businesses must orchestrate memorable
events for their customers.
They made the following assertions:
• If you charge for stuff, then you are in the commodity business.
• If you charge for tangible things, then you are in the goods business.
• If you charge for the activities you perform, then you are in the service
business.
• If you charge for the time customers spend with you, then and only then
are you in the experience business.
5.10
Experiential marketing promotes a product by not only
communicating a product‘s features and benefits but
also connecting it with unique and interesting consumer
experiences.
 Focuses on customer experience
 Focuses on the consumption situation
 Views customers as rational and emotional elements
 Uses electric methods and tools
5.11
 Schmitt details five different types of marketing experiences that are
• Sense marketing appeals to consumers‘ senses (sight, sound, touch, taste, and
smell).
• Feel marketing appeals to customers‘ inner feelings and emotions, ranging from
mildly positive moods linked to a brand (e.g., for a noninvolving, nondurable
grocery brand or service or industrial product) to strong emotions of joy and
pride (e.g., for a consumer durable, technology, or social marketing campaign).
• Think marketing appeals to the intellect in order to deliver cognitive, problem-
solving experiences that engage customers creatively.
• Act marketing targets physical behaviors, lifestyles, and interactions.
• Relate marketing creates experiences by taking into account individuals‘ desires
to be part of a social context (e.g., to their self-esteem, being part of a
subculture, or a brand community).
5.12
Figure 5.2 - Brand Experience Scale

Relationship Marketing
• This broader set of activities is sometimes called relationship
marketing and is based on the premise that current customers are
the key to long-term brand success.
• Relationship marketing attempts to provide a more holistic,
personalized brand experience to create stronger consumer ties.
• Here are just a few of the basic benefits relationship marketing
provides:
• Acquiring new customers can cost five times as much as satisfying
and retaining current customers.
• The average company loses 10 percent of its customers each year.
• A 5 percent reduction in the customer defection rate can increase
profits by 25–85 percent, depending on the industry.
• The customer profit rate tends to increase over the life of the
retained customer
Relationship Marketing
Mass Customization
One-to-One Marketing
Permission Marketing

Mass Customization:
Competitive Rationale
 Making products to fit the customer‘s exact specifications.
 The advent of digital-age technology enables companies to offer
customized products on a previously unheard-of scale.
 Not only restricted to products
 Also provide supply-side benefit too
 Co-creation---------Nikes
5.16
One-to-One Marketing:
 Consumers help to add value by providing information.

 The basic rationale is that consumers help add value by
providing information to marketers; marketers add
value, in turn, by taking that information and
generating rewarding experiences for consumers
 Firm adds value by generating rewarding experiences
with consumers.
 Creates switching costs for consumers
 Reduces transaction costs for consumers
 Maximizes utility for consumers

5.17
 One-to-one marketing is thus based on several

fundamental strategies:
 Focus on individual consumers through consumer databases—
―We single out consumers.‖
 Respond to consumer dialogue via interactivity—―The
consumer talks to us.‖
 Customize products and services—―We make something
unique for him or her.‖
5.18
Consumer Differentiation
 Treat different consumers differently
 Different needs
 Different values to firm
 Current
 Future (lifetime value)
 Devote more marketing effort on most valuable
consumers (and customers)
5.19
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
5.20
Permission Marketing (Seth Godin)
 Permission marketing, the practice of marketing to consumers only after

gaining their express permission, was another influential perspective on
how companies can break through the clutter and build customer
loyalty.
 ―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.‖
 Anticipated
 Personal
 Relevant
 Permission marketing can be contrasted to interruption marketing.
5.21
Five Steps in Permission Marketing
1. Offer the prospect an incentive to volunteer.

2. Offer the interested prospect a curriculum over time,
teaching consumers about the product.
3. Reinforce the incentive to guarantee that prospect
maintains the permission.
4. Offer additional incentives to get more permission
from the consumer.
5. Over time, leverage the permission to change
consumer behavior toward profits.
5.22
Reconciling the Different Marketing
Approaches
 Mass customization and one-to-one and permission marketing are:
 Potentially effective means of getting consumers more actively
engaged with a brand
 Mass customization and one-to-one and permission marketing might
be particularly effective at creating greater relevance, stronger
behavioral loyalty, and attitudinal attachment.
 Experiential marketing, on the other hand, would seem to be
particularly effective at establishing brand imagery and tapping
into a variety of different feelings as well as helping build brand
communities.
 According to customer-based brand equity (CBBE) model:
 Different approaches emphasize different aspects of brand equity
Reconciling the Different Marketing
Approaches
 The four approaches can build stronger consumer–
brand bonds
 Firms must still devise product, pricing, and
distribution strategies as part of their marketing
programs

To Sum Up..
 Implication of the new approaches:
 The traditional ―marketing mix‖ concept and the notion
of the ―4 Ps‖ of marketing may not fully describe
modern marketing programs
 Firms must still devise product, pricing, and distribution
strategies as part of their marketing programs

Product Strategy
• At the heart of a great brand is invariably a great product
• Designing and delivering a product or service that fully
satisfies consumer needs and wants is a prerequisite for
successful marketing
• For brand loyalty to exist, consumers‘ experiences with the
product must at least meet, if not actually surpass, their
expectations
• How do marketers can go beyond the actual product to
enhance product experiences and add additional value
before, during, and after product use

Product Strategy
Perceived
Quality
Aftermarketing

Product Strategy
Perceived quality
• Customers‘ perception of the overall quality or superiority of a product
or service compared to alternatives and with respect to its intended
purpose.
• Research has tried to understand how consumers form their opinions
about quality.
• Research has identified the following general dimensions:
• primary ingredients and supplementary features;
• product reliability, durability and serviceability; and
• style and design

Product Strategy
Perceived quality
• Product quality depends not only on functional product performance but
on broader performance considerations like
• speed, accuracy, and care of product delivery and installation;
• the promptness, courtesy, and helpfulness of customer service and
training; and
• the quality of repair service.
• Brand attitudes may also depend on more abstract product imagery,
such as the symbolism or personality reflected in the brand.

Aftermarketing
User
Manuals
Customer
Service
Programs
Loyalty
Programs

Product Strategy
Aftermarketing
• To achieve the desired brand image: Product strategies should focus on
both purchase and consumption.
• Much marketing activity is devoted to finding ways to encourage trial
and repeat purchases by consumer.
• What Procter & Gamble calls the ―second moment of truth‖ (the ―first
moment of truth‖ occurs at purchase)
• Aftermarketing, that is, those marketing activities that occur after
customer purchase

Product Strategy
Aftermarketing
• User manuals - An afterthought, put together by engineers who use
overly technical terms and convoluted language.
• Customer service programs - Aftermarketing is more than the design
and communication of product instructions.
• Loyalty programs - Purpose is identifying, maintaining, and increasing
the yield from a firm‘s ‗best‘ customers through long-term, interactive,
value-added relationships.
• Some tips for building effective loyalty programs follow:
• Know your audience: Most loyalty marketers employ sophisticated
databases and software to determine which customer segment to
target with a given program.

Product Strategy
Aftermarketing
• Change is good: Marketers must constantly update the program to
attract new customers and prevent other companies in their category
from developing ―me-too‖ programs.
• Listen to your best customers: Suggestions and complaints from top
customers deserve careful consideration, because they can lead to
improvements in the program.
• Engage people: Make customers want to join the program. Make the
program easy to use and offer immediate rewards when customers
sign up.

To Sum Up..
 The product is at the heart of brand equity
 Product strategy entails choosing:
 Tangible and intangible benefits the product will
embody
 Marketing activities that consumers desire and the
marketing program can deliver

Pricing Strategy
Consumer Price
Perceptions
Setting Prices to
Build Brand Equity

Pricing Strategy
Consumer Price Perceptions
• The pricing strategy can dictate:
• How consumers categorize the price of the brand.
• How firm or how flexible they think the price is, based on how
deeply or how frequently it is discounted.
• Consumers rank brands according to price tiers in a category.
• Price bands: Range of acceptable prices that indicate the flexibility
and breadth marketers can adopt in pricing their brands within a tier.
• Value-based pricing strategies: Attempting to sell the right product at
the right price to better meet consumer wishes.
Figure 5.3 - Price Tiers in the Ice
Cream Market

Pricing Strategy
Setting Prices to Build Brand Equity
• Choosing a pricing strategy to build brand equity means determining
the following:
• A method for setting current prices.
• A policy for choosing the depth and duration of promotions and
discounts.

Value Pricing
Price
Segmentation
Everyday Low
Pricing

Value pricing
• Objective is to uncover the right blend of product quality, product costs, and
product prices that fully satisfies the needs and wants of consumers and the
profit targets of the firm.
• It should strike the proper balance among three key components:
• Product design and delivery
• Product costs
• Product prices
• Communicating value - Marketers may need to engage in marketing
communications to help consumers better recognize the value.
Price segmentation
• Sets and adjusts prices for appropriate market segments.
• Because of wide adoption of the Internet, firms are increasingly employing
yield management principles or dynamic pricing to vary their prices for
different market segments according to their different demand and value
perceptions. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Everyday low pricing (EDLP)
• Has received increased attention as a means of determining price
discounts and promotions over time.
• Reasons for Price Stability:
• Forward buying
• Diverting

Channel Strategy
Channel Design
Indirect Channels
Direct Channels
Online Strategies

Channel Strategy
Channel design
• Classified into direct and indirect channels.
• Direct channels sell through personal contacts from the company to
prospective customers by mail, phone, electronic means, and in-person
visits.
• Indirect channels sell through third-party intermediaries such as agents or
broker representatives, wholesalers or distributors, and retailers or
dealers.
Indirect channels
• Retailers - Can have a profound influence on the equity of the brands they sell,
in terms of the brand-related services they can support or help create.
• Pull strategy - Consumers use their buying power and influence on retailers to
―pull‖ the product through the channel.
• Push strategy - The manufacturer is attempting to reach the consumer by
―pushing‖ the productCopyright
through eachEducation,
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Publishing Prentice Hall. chain.
Channel Strategy
Direct channels
• Company-owned stores - To gain control over the selling process and build
stronger relationships with customers:
• Some manufacturers are introducing their own retail outlets, as well as
selling their product directly to customers through various means.
• Benefits:
• They are a means to showcase the brand and all its different
product varieties in a manner not easily achieved through normal
retail channels.
• Functioning as a test market to gauge consumer response to
alternative product designs, presentations, and prices.
• Disadvantages:
• Some companies lack the skills, resources, or contacts to operate
effectively as a retailer.
• Potential conflict with existing retail channels and distributors.
Channel Strategy
• Store-Within-a-Store - This concept can take hold through actual leasing
arrangements or less formal arrangements where branded mini-stores
are used.
• Goal in all these situations is to find ―win–win‖ solutions that benefit
channel partners and consumers alike.
• Other Means - Sell directly to consumers via phone, mail, or electronic
means.
Online strategies
• Multichannel retailers were able to acquire customers at half the cost of
Internet-only retailers, citing a number of advantages :
• They have market clout with suppliers.
• They have established distribution and fulfilment systems.
• They can cross-sell between Web sites and stores.
Figure 5.5 - Services Provided by
Channel Members

To Sum Up..
Channel members should be thought of and

treated as valuable customers whose
image and actions can hurt or enhance
brand equity

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retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.
Copyright © 2013 Pearson Education, Inc.

Publishing as Prentice Hall

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CHAPTER 5:

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Reconciling the Different

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

 All of these approaches are a means to create deeper, richer, and

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

 Focuses on the consumption situation

 Views customers as rational and emotional elements

 Uses electric methods and tools

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

 Consumers help to add value by providing information.

 Maximizes utility for consumers

 One-to-one marketing is thus based on several

 Permission marketing, the practice of marketing to consumers only after

1. Offer the prospect an incentive to volunteer.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Channel members should be thought of and

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2013 Pearson Education, Inc.

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