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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
Style and Design : Appeal or feel of quality

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 companys 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 customers 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 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.

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
5.14
Gamble

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 companys 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 customers 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
1. Creating Utility : Value
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 buyers
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
Manufacturer
Consumer
Channel 1

Channel 2

Manufacturer

Channel 3

Manufacturer

Channel 4

Manufacturer

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
toMarketing
use Direct
Marketing
Direct
Channel
is a marketingChannels
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 producers 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
manufacturers product and its availability in
the retailers 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.