Professional Documents
Culture Documents
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L.1.1 The concept of value in marketing, brand equity and brand awareness
What is Marketing?
Marketing is the process (coherent, coordinated and aligned to company’s strategy) by which
companies create – in an ethical way – value (functional, symbolic, emotional or experiential) for
their current and potential customers and the communities where they operate and build strong
customer relationships in order to capture value (economic, social and reputational) from customers
in return.
Where can we observe the impact of a good marketing strategy and execution?
Power brands outperform the market represent an explicit firm’s assets and maintain leadership in
own categories overtime.
BSG compared the leading brands of 1925 and of 1985 in 22 products categories; in 19 categories
the leader was the same. The power of old names is strong and creates a big asset.
It gets stronger over the years as the number of exposures and experiences grows.
In other words: Customer Equity is the sum of Customer Life-time Value (CLV or CLTV) of all
company’s clients.
What is value? The definition of “customer profit” (and equity) (focus on lifetime value of a
customer).
Customer profit profit the firm makes from serving a customer (or customer group) over a
specified period of time.
Expected value of a prospect: value expected from the prospect minus the cost of prospecting
The value expected from the prospect is the expected fraction of prospects who will make a
purchase times the sum of the average margin the firm makes on the initial purchase and the CLV of
the newly acquired customer.
If PLV > 1, it is convenient for the company to proceed with the planned acquisition spending.
Can we have a value associated to a Brand even without transactions? What would it be?
Brand Equity Ten (Aaker) brand equity is a set of Brand Assets and Liabilities linked to a
brand, its name and symbol, that add to or subtract from the value provided by a product or a
service to a firm and/or to that firm’s customers.
Customer equity can persist without brand equity and brand equity may also exist without customer
equity.
Behavioral Loyalty “the frequency of being a customer for a product, constantly choosing the
same goods and services or a company”:
Calculated through purchase frequency.
Attitudinal Loyalty “attitudinal data are used to express the psychological and emotional
commitment of a customer to a brand”:
Calculated through attitudinal loyalty, customers’ preferences or the purchase intentions.
There is a difference between the customers who buy the product for convenience and the
customers who decide to buy it because they feel emotionally connected.
Mixed Approach “the help of factors including both attitudinal and behavioral elements such as
customers’ product preferences, brand loyalty tendencies, percentage of purchases, new purchases
and total purchase amount”.
It’s a combinations of customers’ positive attitudes towards the brand and continue percentage
behavior.
Determined comparing consumer response to the marketing of a brand with the response to the
same marketing of fictious named or unnamed version of the product or service.
Defined as Consumer perceptions, preferences, and behavior arising from marketing mix activity
(e.g., Brand Choice, Comprehension of copy points, from an ad, reactions to a coupon promotion,
or evaluation of proposed Brand extension).
Product placement an adverting technique used by companies to subtly promote their products
through a non-traditional advertising, usually through appearances in film, television, or other
media. Product placements are often initiated through an agreement between a product
manufacturer and the media company in which the media company receives an economic benefit.
A company will often pay a fee to have their product used, displayed or significantly featured in a
movie or show.
Podcasts podcasts are increasingly becoming part of advertisers’ content marketing menu. Using
podcasts to create awareness:
Successful podcasts start from a development process centered around content that steers
clear of overt brand messaging, and instead aims to entertain or inform.
According to the Reuters Institute for the Study of Journalism, about a third (29%) of
internet users listen to podcasts.
A May 2019 study from Edison Research and Triton Digital found that 36% of consumers
listened to podcasts monthly in 2019, up from 28% in 2018.
For instance, Accenture Canada, for example, has launched two podcasts in the last 18
months to provide in-depth content around two of its emerging practices: artificial
intelligence and digital marketing.
Spotify has over 299 million listeners across 92 markets worldwide. It is the second most popular
place to listen podcasts in the world and growing fast. Its podcast audience has nearly doubled since
the start of 2019. On Spotify, people can stream or download content on whatever they use to tune
in. Spotify provide insights on who the listeners are, what episodes they’re streaming the most, and
even the music they love.
Anchor is a free platform provided by Spotify for podcast creation, containing built-in uploading,
recording and editing tools.
Soundtrap is a freemium online cross-platform digital audio workstation for browsers that allows
users to create music or podcasts.
Clubhouse is an audio-based social network platform where users can communicate in audio chat
rooms that accommodate groups of thousands of people. It is an invite-only application and had
roughly ten million weekly active users, as of February 2021. The decrease in user downloads
signals a slowdown: Clubhouse saw about 922000 downloads globally in April, a 66% dip from
2,7million installs in March.
Clubhouse became available to Android users for the first time in May 2021 and this might explain
the new increase of downloads in June. Clubhouse could be no longer able to keep up with its direct
competitors, like Discord Stage Channels, Facebook Live Audio Room, etc.
Brand equity Ten (Aaker) 10 attributes of a brand that can be used to assess its strength:
- Differentiation.
- Satisfaction (or loyalty).
- Perceived quality.
- Leadership (or popularity).
- Brand Personality.
- Organizational associations.
- Brand Awareness.
- Market Share.
- Market Price.
- Distribution Coverage.
Aaker does not weight the attributes or combine them in an overall score (as he believes any
weighting would be arbitrary and would vary among brands and categories); it recommends tacking
each attribute separately.
BrandZ
Segmentation of the brand: since the same brand generates different economic value in different
segments, its value must be determined starting from the identification of the segments in which it
operates and estimated in each of them. The final evaluation of the brand will be given, therefore,
by the sum of the values determined in the different market segments identified.
Economic Value Added (EVA): the financial assessment of Interbrand method estimates the value
that the brand contributes to the overall value of the company. It is detected through the estimate of
the Economic Value Added (EVA), the financial evaluation method aiming to assess to which extent
a company is able to generate income after taxes and invested capital. The analysis is based, then,
on a projection of the expected turnover in five years, in which all costs are deducted (direct and
indirect, taxes included) and the remuneration of tangible assets (property, plant, capital stock).
What remains is a margin attributable to intangible assets, of which EVA represents an evaluation.
Demand Analysis (RBI): at this stage we evaluate the role that the brand has in generating demand.
The analysis initially identifies the key purchase drivers influencing demand in the segment
analyzed. They are, then, weighed by means of statistical indices according to their influence on the
demand and finally it is calculated the contribution of the brand for each individual driver.
The sum of the contributions of the brand for all identified drivers is the Role of Branding Index
(RBI).
Strength Analysis: the strength analysis is the evaluation of the potential of the brand of ensuring a
stable purchase application, taking into account the percentage of risk associated with the sector. It
represents the competitive strength of the brand. To estimate that percentage of risk, the brand is
compared with the competitors based on seven key factors:
- Markets.
- Trends.
- Diversification.
- Leadership.
- Sustainability.
- Stability.
- Protection.
What are the “basics” that will keep defining the core Marketing elements?
?
Brands are constantly present in our life and we are exposed to multiple stimuli. The American
Marketing Association identifies about 10000 Brand Messages that daily reach consumers.
Consumers control their smartphones 80-100 times a day looking for confirmation, information or
news.
Marketing is not a battle of products but a battle of perceptions. The name is the first point of
contact, between the message and the mind. It’s not goodness or badness of a name in an aesthetic
sense that determines the effectiveness of the message. It’s the appropriateness of the name.
Not only do you see what you want to see, you also smell what you want to smell. This is why the
single most important decision in marketing of perfume is the name you decide to put on the brand.
Brand experience consists of sensory, affective, cognitive, behavioral and relational stimuli that
provide consumers with a pleasurable and memorable experience. In contrast to traditional
marketing, with its emphasis on rational decision making based on functional benefits, it adds an
emotional element to marketing. It is therefore assumed to have a positive impact on creating brand
equity.
Strong brands enable premium prices.
Power brands recall premium price, even during promotional periods. They increase the sensitivity
of customers towards discounts and increase their sales in supermarkets during promotions vs. the
minor competitors even with higher prices. A research proved that in some supermarkets, during
promotions, products with higher prices and better quality “steal” substantial market shares from
same price-same quality brands and weaker brands; product with low quality and low price don’t
steal market shares from stronger brands.
What is a Brand?
Brand is the image of a product, or a service deeply anchored in the consumer’s mind and
differentiated vs. the competitors. It’s an identity + a set of associations.
The impact of a power brand has two directions:
Value for the company it increases the likelihood that an above-average number of
customers is convinced to buy a specific product/service and to become loyal. Hence, this
produces a higher cash flow compared to similar products, unbranded or with a weaker
brand. In the long period, it protects the company from possible product/service failures as
well as other operative issues.
Value for customers a power brands has three main functions through which it generates
value:
Imagery benefit
Imagery is a way of using our imagination and it has countless potential benefits. Via the medium of
storytelling, propaganda or advertising, human have used images to illustrate a point for thousand
years. A strong image can speak a thousand words. Images communicate thought and emotion
whilst communicating a narrative in a way which words on their own can sometimes lack.
Images act as storytellers. You can evoke an emotion, a dream or a vision simply by using a well-
placed carefully composed image. Visitors to your website will “read” the images and in a split
second make a decision whether or not the rest of your website content is relevant to them.
Building and managing a successful brand – Brand Value Telling Journey (BVTJ)
Identifying the reference market: a critical initial challenge that affects multiple operative choices.
What is an appropriate measure for Market Demand? Non-mandatory for the exam
Market concentration and HHI (Herfindahl Index) market concentration is the degree to
which a relatively small number of firms accounts for a large proportion of the market (also known
as concentration ratio).
Example: HHI is a market concentration metric derived by adding the squares of the individual
market shares of all the players in a market. As a sum of squares, this index tends to rise in markets
dominated by large players. For a give number of competitors, the HHI would be lowest if shares
were equally distributed.
Industry convergence convergence is the process by which the boundaries between markets or
sectors or consumer experience blur. The process:
- Reshape and increase customer’s proposition;
- Provides opportunities for new businesses.
Different and heterogeneous companies go beyond the boundaries of their original sectors,
investing in innovations that produce offers and experiences of consumption:
- New.
- Previously distinct or separated.
Segmentation segmentation allows you to identify homogeneous needs as basis for the
development of specific products and services.
Geo segmentation: is a marketing strategy that presents potential customers with targeted
messaging based on their geographic location.
Demo Segmentation is an evolution of the geo-based type and multi-cultural marketing. In some
countries, ethnic groups and communities keep on using their homeland language, which is
different from the official one in the country they currently live in. In doing so, they hold on to the
bond with their country of origin.
So, Demo Segmentation is a number of specific activities, related to the product and the mean of
communication adopted, which are specific for an ethnicity/community, which has a different
cultural background, in terms of language, customs and traditions.
Gender segmentation: is the process of dividing of potential markets based on gender (male or
female). Gender segmentation is done when a company which manufactures products wants to
focus only on boys or girls, as the products are very gender specific.
From research carried out in 2017 about over 2000 ads in 10 years during the Cannes Lions, the
number of male characters is twice that of women; 25% of advertising has exclusively male actors
as protagonists (vs 5% who only have women); 18% with only male voices vs. 3% with only female
voices. There is no real improvement over the years: the percentage of women in advertising was
33.9% in 2006 and 36.9% in 2016; men, passed from 66.1% in 2006 to 63.1% in 2016.
The presence of figures that behave like leaders or that speak of “power” is 29% higher among men
characters and “achievement” is 28% higher vs. women character. Women in advertising are mostly
in the age range of 20-30 years, while men are aged 40 (more associated with leadership). Men are
more likely to be represented with intelligence characters and one third of the time are represented
as having an occupation. Women have a probability of being represented in the kitchen 48% more
vs men, while men are 50% more likely to be represented at sporting events.
Income-based segmentation: considers how much people earn and how much disposable income
they have. It enables brands to create a pro-active marketing strategy, centred around a combination
of the consumer’s intent and ability to purchase; the market is segmented on a personal-income
basis.
- Level of loyalty segmentation based upon the level of customers’ brand loyalty. Splitting
the market according to: “die hard” users; users who purchase a limited number of other
brands (loyal 2/3 brands); etc.
- Intensity of usage market is segmented in: heavy users; light users; etc. It is relevant
when a part of potential customers is responsible for the majority of usage/consumption.
Lifestyle segmentation: is the process of dividing a market of potential buyers into different groups
of people with similar ways of living.
Cognitive style and web page characteristics appropriate for each of four cognitive style profiles
derived from combination of analytic vs. holistic and verbal vs. visual dimension:
Positioning map
Positioning map is based on the consumers’ perception; it shows where existing products and
services are positioned in the market. Thanks to the positioning map, the company can decide where
would like to place its product.
The positioning map drivers are useful to suggest a segmentation-based market. In this case, the
positioning map is either based on the items’ price and on the brand level of consciousness.
C. Quantity is often associated with quality, thus the higher the actual demand, the higher the
future’s.
Price index
Full impact is ensured when the Brand Identity is mirrored in the Brand Image in consumers mind.
Brand Image a brand image is defined as “perceptions about a brand as reflected by the brand
associations held in consumer memory” (Keller). According to him, brand image consists of various
associations in consumers’ mind namely attributes, benefits and attitudes.
A brand image is how the consumers perceive the brand.
Consumers develop various associations with the brand. Based on these associations, they form
brand image. It is a unique bundle of associations within the minds of the target audience.
Brand Identity a brand identity is the outward expression of the brand, including its name, logo,
tone, tagline, symbols and visual appearance. A company’s brand identity is how that business
wants to be perceived by consumers.
The visual identity of a brand catches the eyes of consumers. In many cases, people tend to form
their opinions and perceptions about a brand before they even know who it is and what it is about.
This is why visual presence is essential in order to differentiate brand effectively amongst the
competition and build trust with consumers.
- Ease of use the product must be easy to use, without renouncing to quality.
- Sustainability the packaging must be made of renewable materials, mostly recyclable,
respecting health and environment, free from synthetic and toxic substances.
Frontline dress-code should also ensure the enhancement of brand recognition (providing a good
execution is in place).
Sound as an identity element Barilla is answering to the question “What a brand might sound
like?” with the launch of the playlists on Spotify. Barilla succeeded in clearing the taboo of pasta
cooking minutes by creating 8 branded playlists with the same duration of the different cooking
times of pasta types. Given that the cooking time on pasta packages is not so readable, consumers
now can cook to the beat of music and drain pasta at the end of the playlist. Every playlist, updated
regularly, is dedicated to a type of pasta. Each time is represented by two musical genres including
Pop, Hip Hop, Indie and Great classics. Spotify’s songs are meant to translate Barilla’s brand
identify into sound.
Design as an identity element this initiative includes also figurative art: the cover of each
playlist was illustrated by Italian artists of international level. Every artist published his artwork on
his personal Instagram account.
Sounds, Images and flavors come together to give life to a new way of interpreting the time spent in
the kitchen trying to relaunch a brand that has made the history of the Italian economy and that
wants to restart from Italy itself.
Payoff
Payoff is a short sentence often placed under the logo, which represents the company, it expresses
its identity making the brand recognizable in any circumstance.
The payoff summarizes corporate values and make a promise to the general public, making the
company attractive, interesting, recognizable.
Strong power brands are easy to recognize also through their payoff and thanks to their “iconic”
products.
Physical assets
A physical asset is an item of economic, commercial or exchange value that has a material
existence. It is also known as tangible assets and can be seen and touched, with a very identifiable
physical presence.
Brands creates unique and very different, depending on the target segment, kind of emotions.
Power brands create different kind of emotions through their stories.
At the deepest level of the trajectory, values are structured according to the logic of semiotic square
– Brand identity system.
The exemplary semantic universe of brand’s value is organized into four types defined by logical
relations of contrariety, contradiction and implication.
The core of brand’s meaning is identified in branding with a set of values that endow it with
character and position it compared to other brands. This set of values can be interpreted as an
axiological semantic organization of positions in a semiotic square.
The Greater Bay Area (GBA) refers to the Chinese government’s scheme to link the cities of Hong
Kong, Macao, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguang, Huizhou, Jiangmen and
Zhaoqing into an integrated economic and business hub.
China’s NEW NORMAL China’s next phase of economic growth has been defined by Xi
Jinping (2014) as the “new normal”: the key to sustainable growth is financial, fiscal, administrative
and social reforms.
1. China’s economic growth estimated around 6-7%
2. China must continue to loosen control over interest rates and cross-boarder capital flows
with full rate liberalization; the financial reform process includes the bank sector, the
opening of the capital account, the drive for Renminbi internationalization
3. Domestic consumption should play a more important role in propelling growth as
investment and exports moderate
4. The Hukou reform (resident permit): it legalizes migrant workers’ citizenship and social
entitlements in cities. Its aims are to help the urbanization process and to boost economic
growth within China
5. The elimination of regulations and barriers for the private sector to enter specific industries
previously dominated by state-owned enterprises, the expansion of free trade zones, strong
willingness from the Chinese government to encourage entrepreneurship and innovation
Product positioning refers to the consumers’ way to define the product, it is based on its most
important attributes, and the place they occupy in the minds of consumers according to competing
products.
It consists of a set of perceptions, feelings and evaluation that a consumer manifests in relation to
a product (or a service, experience, relationship). It is not based on objective data but on
percpetions.
How to map relevant, potential or different benefits (and other decision elements) in the
category? “BRAND DIAMOND”: classifying and structuring category benefits
Emotional benefits consumer associate emotional benefits to a brand if it reinforces their self-
representation/self-image (image transfer), and self-realization/self-expression. This kind of benefits
help the awareness (and reputation) of the self-image; identify and support own ego; clarify the
social membership; guarantee an emotional compliance to top own (and own community)
standards.
Functional benefits all the measurable benefits the brand brings to the consumers fall into this
category. Functional benefits can be expressed in the product or its function (e.g., comfortable
seats), the transaction process (e.g., convenient transaction handling) or in the relationship of the
consumer to the brand or provider (good consultation from friendly staff).
This kind of benefits are related to tangible brand elements (e.g., a high-speed train offer the
rational benefit of reduced travel time).
Corporate employees represent ordinary people, evoking feelings like “they could be me”;
they humanize the brand. On the other hand, they can evoke skepticism towards their
objectivity and credibility. Nevertheless, they are less persuasive than CEOs.
BRAND CHARACTER Brand character is one core element of the Brand personality, together
with Tone of the voice and Style.
Brand personality is the way the company wants to be perceived by consumers. It is expressed as
element of the character related to a real person with whom the consumer initiates, interacts, and
develops his/her relationship with the brand itself. Brand personality is an essential element to
justify the existence of a consumer brand relationship. To have a true relationship with the brand,
however:
- It is necessary to legitimize the brand as a relational partner.
- Anthropomorphize of humanize the brand, through human qualities, such as emotions,
feelings and wishes.
Consumers establish relationships with branded brands to meet certain need arising from their own
self. Relational approach adds meaning or changes to the consideration that individuals have of
themselves – likewise in the personality approach the brand is regarded as an extension of self. In
this approach the brand does not have an objective existence: it is a collection of perceptions
instilled in the mind of the consumer.
The relationship between consumer and brand is also defined as an implicit contract between two
parties, who embodies the roles and behavioral rules valid in the relationship. This contract is based
on the signals that the brand send through the marketing mix and its reference in the strength of the
relationship. If the brand needs to be successful, the brand manager must create significant, stable
and sustainable relationships. Such co-creation can easily move out of management control as the
consumer becomes the owner of the brand.
Consumer and brands: there are many different types of consumer (brand relationships). Each type
of relationship is governed by a social contract of rules. The rules of relationship define the “gives
and gets” and thus determine its value to the customer and the company.
15 types of relationships to use to categorize the “relationship portfolio” of each individual
consumer:
RELATIONSHIP FORM DEFINITION CASE EXAMPLES
circumstances. Adherence to
exclusivity rules expected.
Highly specialized,
situationally confined,
enduring friendships
Compartmentalized characterized by lower Vicki and her stable of
friendships intimacy than other friendship perfumes.
forms but higher
socioemotional rewards and
Short-term, time-bounded
engagements of high Vicki’s trial size shampoo
FLINGS emotional reward, but devoid brands.
Characterized by feelings of
disgust at the targets of the
Cool Hate Disgust target group that are seen as
sub-mummies and with which
there is nothing to do.
Characterized by feelings of
Hot Hate Anger/Fear anger or fear (or both) against
a threat that can be reacted or
attacked or run away.
Characterized by thought of
Cold Hate Devaluation unworthiness towards the
target group.
Characterized by repulsive
feelings towards the target
group that may vary over time:
Bolling Hate Devaluation + Anger/Fear if in a given period the target
is perceived inhumanly, in
another it can be seen as a
threat to be neutralized to
avoid worse dangers.
Characterized by feelings of
Simmering Hate Disgust + Devaluation repugnance toward the target
that last over time.
Companies are not economic subjects with a social responsibility, but they are social subjects with
an economic responsibility. The future belongs to those brands that will be able to generate credible
social value through a concrete commitment to sustainable development.
According to Linkedin’s 2019 purpose at work report:
- 85% of purpose-led companies showed positive revenue growth.
- While 42% of non-purpose led companies showed a drop in revenue.
In 2019, 70% are buying or boycotting brands based on the brand’s position on a social or political
issue (35% more than 2016). 75% agree on “A company can take specific actions that both increase
profits and improve the social conditions in the community where it operates”. 80% agree that
CEOs should be personally visible in discussing societal issues. For 78% of customers of belief-
driven buyers, will not buy a brand because it stayed silent on an issue it had an obligation to
address.
A purpose-driven brand is one that consciously puts its social values and it’s “why” at the forefront
of everything, and these values determine how the brand communicates and how it “does business”.
By employing purpose-driven marketing are more likely to get an emotional connection from
consumers, while earning trust and loyalty.
Most organizations recognize the importance of “social commitments and reputational assets”. They
aren’t always accustomed to creating content around their efforts in a way that wll both engage their
audience and drive them to participate. Success is all about developing the right strategy and
executing it in an authentic, organic way that brings mutual benefit to everyone.
Brand purpose is the “why” of the brand, something that goes beyond profit and concerns the whole
organization. Knowing your why is the foundation for building the how (e.g., the corporate culture,
the brand experience) and the what (e.g., which products and services the company offers).
Brand-purpose has nothing to do with what customers and the market want, but it is inherent to the
company and its history. It gathers around a community of people who identify with the brand
message.
In the famous Ted Talk “How great leaders inspire action” Simon Sineck explains the brand-
purpose through the Golden Circle theory. The why is the heart of the business and affects the
decision-making processes of internal and external stakeholders on emotions. Within a company,
knowing why is fundamental, it determines the motivation of the employees, the business strategies,
the lasting success of products and services.
Value and values are key to marketing, especially when brands have to find the right balance
between short-term and long-term objectives. In the short-term, companies need to adapt to a highly
volatile environment, but at the same time without losing sight of the long-term marketing strategy
and the vision it has for its brands. While brands often talk about the need to look at price
architecture and how to appeal to cash-strapped consumers in times on uncertainty, it is as important
to focus on what a brand stands for. Building brands with purpose could act as a point of difference
as people usually are expecting brands to also be a solution to societal problems.
Brand-purpose driven organizations inspire, differentiate and create a feeling of trust and belonging
with their internal and external stakeholders. The reason is simple, “people don’t buy what you do,
but why you do it”. Assuming that consumers’ decisions are 95% irrational, providing a purpose
beyond mere profit affects emotions and decision-making processes.
This statement is particularly fitting in the case of Millennials who are so eager to identify
themselves, make their mark and find purpose in both the product they buy and the companies they
work for. 91% of American Millennials would switch one brand to another if the latter embraced a
cause. 64% of global consumers also say they choose brands for their positions on political and
social issues.
Brands have become an opportunity to change the world. They allow us through the purchase of
their products and our loyalty to contribute to the great causes they defend and identity ourselves
with their purpose.
In order to credible a real purposeful marketing strategic “long term” approach needs to clearly
identify a:
Measuring brand purpose the Purpose Power Index (PPI). PPI identifies a different breed of
brand leaders with a higher mission at their core.
Brand purpose relates to a brand’s mission in society, the higher order reason to exist beyond
making a profit. PPI: largest study ever measuring perceptions of brand purpose, based on more
than 17500 individual ratings among over 7500 U.S. consumers, and encompassing more than 200
different brands.
One of the algorithms used for a brand’s Purpose Power is based on strong agreement on 3 out of 4
of these statements:
1. Is the brand committed to changing the world for the better?
2. Does it do things to benefit all stakeholders, not just shareholders?
3. Does it have a higher purpose that’s bigger than profit?
4. Does it do things to improve the lives of people and their communities?
Understandings jobs to be done in order to understand the real people’s needs, find out what jobs
people want to get done. Develop purpose brands: products or services consumers can “hire” to
perform those jobs.
Ensuring “authenticity”, leveraging bias and overcoming the principal/agent problem. Authenticity
is a key role in:
- Building
- Sustaining
- Defending reputation
In the end, “value” is not enough anymore. Build a meaningful purpose brands have become an
opportunity to change the world.
Brand purpose and Woke washing the positive contribution that brands can bring to the world is
becoming an important ingredient for the brand strategy. However, it has happened more and more
often in recent times that brands embrace social causes or give an ethical value to products and
services solely for advertising, reputation and increase in sales.
The contribution is therefore reduced to advertising campaigns and does not permeate the
organization with concrete behavior by the company: this phenomenon has been defined as Woke-
Washing. Woke washing can be considered a set of behaviors that can cause repercussions for the
brand, consumers, and the significance of the social cause itself.
Selling and advertising a product or providing a service that does not meet the purpose of the brand
in the long run creates a rift, it will appear false to customers and relevant stakeholders of the
company. When they understand and feel that the message does not correspond to concrete actions,
they will no longer have faith in the company and gradually they will move away.
Customers don’t simply buy product or services: they pull them into their lives to make progress.
Using a metaphor, this progress could be called the “job” customers are trying to get done.
Customers “hire” products or services to solve these jobs. Each job has functional, social and
emotional dimensions.
Three steps to create a product or service that accomplishes a Job to be Done. They include:
1. Understanding the job
2. Defining the experiences required to do that job
3. Developing processes to enable those experiences.
Instead of trying to understand the “typical” customer, find out what jobs people want to get done.
There are dome rules that enable companies to capitalize on the opportunity of purpose brand
extension while minimizing the risk:
1. Do extend the brand onto new products that can be hired to do the same job, because
extension will not compromise that the brand does.
2. Don’t extend the original purpose brand to target other jobs, if companies do this, the brand
will lose its meaning and one-to-one mapping. Different jobs demand different purpose
brands.
3. Companies can use parent brand to endorse the quality of a product that does another job.
They must also create a new purpose brand for the product. These “sub-brands” do not hurt
the original brand as long as they fulfill their own job.
4. Do use a two-word brand architecture to distinguish the endorser brand from created
purpose brand.
Marketing touchpoint tripling with the exponential growth of touchpoints, each one with
specific content and format logics, it’s more and more difficult to communicate with customers in a
coherent way.
MARKET ANALYSIS:
- Customer & technology trends: based on data, understand experience gaps, define key
experience principles and identify disruptors.
97% of people use smartphone during day breaks; 40% of consumers think new
technologies improve experience; >90% of companies currently invest in loyalty program.
- External market analysis: before you can set course, you need to know where you are.
These frameworks provide structure and insight to the competitive dynamics of the industry
and market.
- Inspirational case studies: widen the lens in search of better and more creative ways
looking outside industry boundaries.
Design thinking approach is transforming product development by embracing a design
method that puts the customer first, cultivating empathy for users, emphasizing iteration and
prototyping. Instead of relying on people’s gut instincts, this new design framework allow to
thoroughly analyze customer experience, identify pain points and co-create
services/products with customers.
- Customer discovery: different search methods and survey for understanding situation and
customers behaviors.
Examples: shadowing & customer journey (ethnographic method used to understand a
participant’s work or life flows, routines, patterns and decision-making); surveys (to
discover customer tastes in order to be able to better engage them).
MARKETING STRATEGY:
- Customer DNA definition: based on data, definition of personas profile to improve the
effectiveness of segmentation and create relevant action plans.
- Target identification: leverage on personas insights to design services and products more
targeted to the needs of users.
The identification of a set of personas supports the brand in addressing the editorial plan,
content strategy and activating initiatives personas to create a relevant customer
experience.
- Marketing positioning: distinguish from competitors and provide brand values with a
compelling positioning.
Starting from the needs and preferences of the targeted personas, to define a value
proposition that will distinguish the company from the competition.
Marketing mix strategy strategic initiatives:
- Increase share of wallet: increase revenue through physical and virtual events to
acknowledge customers about product features and functionalities.
- Increase customer engagement: increase brand awareness launching social campaign with
industry influencers.
- Increase market share: use premiumization to unlock future growth by offering new high-
end products.
A set of marketing initiatives need to be activated to meet the planned goals with a clear supporting
business case to prioritize the launch.
MARKETING MIX: THE 4+1 Ps the perfect combination of elements you need to get right
for effective marketing.
EXECUTION & MONITORING monitoring & optimization; campaign design & strategy;
campaign execution.
Digital campaign objectives:
- Awareness: touchpoints that aim to convert a prospect into a hot contact.
- Qualification: touchpoints that aim to enrich and qualify an existing contact
- Conversion: sales touchpoints with promotional content or dedicated offers.
- Retention: touchpoints that aim to build a lasting relationship.
Content creation:
- Print material design print ADV, material for event design, etc.
- Direct email design.
- Digital campaign asset creativity banner template creative refresh; social ADV assets
creative refresh.
- Brand video production new video concept production and editing.
- Web website design; new SEO driven pages
1. Basic marketing metrics: lifetime value; CPA (Cost per acquisition); payback time; ROMI.
2. Customer satisfaction & loyalty: Churn Rate; NPS; ARPU
3. Advanced marketing metrics: market share; customer equity; brand image & awareness;
brand equity.
4. Communication metrics: media coverage; share of voice
Marketing return on investment (MROI) analytics helps optimize marketing spends for a sharper
marketing strategy.
Memorizing Resonance Reputation index (MRRI) highly significant correlation between the
long-term reputation trends and a stock index of comparable composition.
- Functional reputation: linked to the performance targets of the respective function systems
(demonstrating competence, associated successes must be demonstrated, measured by how
profitably a company is managed).
- Social reputation: the extent to which an actor is a good citizen.
- Expressive reputation: emotional judgments of taste. Actors with a positive expressive
reputation appear fascinating and unique.
That the social dimension of reputation, understood as macroeconomic responsibility, is desirable,
and directly influences future economic expectations, becomes clear from the fact that stock market
trends unlike during the crisis of confidence of the years 2002-2003, are increasingly decoupled
from the functional reputation dynamics, which return to positive values from 2009.
Functional reputation and stock market trends for the major global banks were subject to the same
dynamics between 2002 and the end of 2009, and thus run a parallel course.
Reputation dynamics start to change fundamentally from 2010. Whereas functional reputation
continues to improve from this time, and already stands significantly above its initial values of 2002
at the close of the analysis period at the end of May 2011, the corresponding share price trend
stagnates.
Bad reputation has a consequence in pay a premium high salary; bad reputation costs a company at
least 10% more per hire. How to address? Better communicate the positives of what’s like in the
company.
- Vision and leadership: excellent leadership; clear vision for future; recognizes
opportunities.
- Social responsibility: support good causes; displays environmental responsibility; displays
community responsibility.
Managers need to build reputational capital overtime, because “someone, sooner or later, will spend
it”.
Crisis managers believe in the value of a favorable, pre-crisis reputation. The prior reputation can
create a halo effect that protects an organization during a crisis.
The prior reputation/halo might work as a shield that:
- Deflects the potential reputational damage from a crisis
- Or the prior reputation/halo might encourage stakeholders to give the organization the
benefit of the doubt in the crisis (reduce attributions of crisis responsibility)
Researchers failed in producing a halo effect to prior reputation in crisis situations.
Among other hazards, a crisis poses a threat to an organization’s reputation. A favorable prior
reputation is an important resource during a crisis.
On a basic level, a favorable prior reputation functions as a bank account containing reputation
capital. An organization with bountiful reputational capital can afford to spend or lose some capital
in a crisis and still maintain a strong, favorable post-crisis reputation. On another level, a favorable
reputation (strong bank account) may act as a halo that protects an organization’s reputation during
a crisis.
Offline referral marketing is based on WOM that is one of the main influential factors of consumers
decision-making process. WOM is based on:
- Nodes strength: influencer, connectors and experts
- Social proof: mechanism that encourages consumers to imitate the behavior of neighboring
people in social networks.
In addition to reaching more people, early adopters influence others first and more effectively than
people with a restricted network.
The network effect on the new product physician adoption. The network effect allows to accelerate
the adoption rate of the product and increase the market share compared to traditional sales and
marketing techniques.
The silent-but-digital forum for public outrage may benefit companies by:
- Exhibiting feedback
- Pressuring needed change
- Holding companies accountable about their actions
Social media platforms also:
- Allow companies to collect information about their fans
- Gather rich insight
- Encourage micro-communities
- Encourage loyalty-driving conservations
Many journalists, activists and political figures are in the “outrage business” dwelling on
frightening topics that:
- Attract large audiences
- Advertising dollars
- Financial contributions
Companies will even mobilize public anger against a competitor to gain an edge.
Bad news fast:
- Human brains evolved to heavily weigh negative input in order to dodge dangers and keep
out of harm’s way
- Negative complaints, personal insults or incriminating gossip make far bigger impacts on us
than do positive comments
- Given the right environment, have the ability to spread like wildfire.
When handled with care, a company can:
- Recover from negative and accusatory attacks
- By correcting the source of the problem and collaboratively rebuilding the public’s trust
Sequencing:
- Deeply listening to the public’s complaints and suggestions of how to fix the problem
- Before apologizing
- Attempting to fix it themselves
- Gives the public a chance to vent and the company a more compassionate image
Without outrage, companies are far less likely to clean up their acts. As pressure builds, costs accrue
in the form of lost sales, fines and dropped accounts.
Companies maximizing shareholder value will defer to outrage when resisting it, eventually
becomes unprofitable. Some companies consider public outrage a factor of their strategic decision-
making process.
CRISIS, REPUTATION AND HALO EFFECTS a favorable reputation may create a halo
effect that protects an organization’s reputation from any reputation loss. Two possible explanations
for a reputation halo effect in a crisis:
- Halo as benefit of the doubt
- Halo as shield
Situational Crisis Communication Theory (SCCT): the crisis frame or type is a micro-level
feature that influences the reputational threat of a crisis. Frames are cues that stakeholders use to
interpret crises.
- Technical error frame: indicates the cause of the accident was beyond the control of the
organization
- Human error frame: indicates the accident was a result of an employee not doing his or
her job doing it poorly.
Stakeholders attribute significantly greater crisis responsibility to human-error crises than to
technical-error crises. Increased perceptions of crisis responsibility intensify the reputational threat
of a crisis, making the human-error accident a greater reputational threat.
In the halo as benefit of the doubt explanation, the holistic evaluation of person or organization is
assumed to affect specific judgments about the person or organization. If a stakeholder holds a
general favorable view of the organization, this positive reputation (halo) will affect how the
stakeholder attributes responsibility for a crisis.
A stakeholder might give the organization the “benefit of the doubt” by assigning the organization
less responsibility for the crisis. Weaker attributions of crisis responsibility will result in less
reputational damage from the crisis.
Halo affect as a “shield”: part of the psychological phenomenon of expectancy confirmation the
prior reputation functions as a shield that deflects potential reputational harm from a crisis. The
media and other stakeholders will continue to support the organization, rather than criticize it for the
crisis. Halo effect has the potential to prevent reputational damage from a crisis.
The favorable reputation halo also could lead stakeholders to dismiss the crisis. Consistent with
expectancy confirmation theory, stakeholders cling to the favorable reputation and ignore the
negative information associated with the crisis.
People are reluctant to revise initial expectations even when confronted with clear disconfirming
evidence. For favorable reputations, stakeholders may be inclined to discount or ignore the negative
information about the organization. Stakeholders will focus on the positive aspects of the
organization and ignore the recent negative information created by the crisis.
Stakeholder are biased when processing new information to support previous conclusions/beliefs.
Case 1. Human error when the cause of an accident is human-error and the halo can act as a
shield.
- Ordinarily, a human-error cause increases the attributions of crisis responsibility and
reputational threat of a crisis as compared to a technical cause.
- The halo effect might blunt this effect by having stakeholders evaluate the reputation of the
organization in the human-error cause similar to those in the technical-error cause situation.
- The halo as shield effect might prevent the increased threat from a human-error cause.
Case 2. No cause when no cause is offered for an accident and the halo provides a benefit of the
doubt.
Stakeholders are:
- Likely to commit the fundamental attribution error
- Consider the cause to be human-error – something internal to the organization in crisis
The halo effect might:
- Prevent the fundamental attribution error
- Lead stakeholders to view a no cause crisis as a technical-error accident
SCCT posits that as the reputational threat increases, crisis managers must use strategies that are
more accommodative. Managers must demonstrate great concerns for the victims and intensify
perceptions of taking responsibility for the crisis.
Crisis managers find greater accommodation results in greater costs. Providing compensation costs
more than simple expression of concern. A full apology, publicly accepting responsibility, escalates
costs because the organization will be found liable in most crisis-related lawsuits.
A crisis manager would utilize more expansive crisis response strategies in a human-error accident
than in a technical-error accident. The halo as shield effect seems to:
- Prevent the increased reputational threat of a human-error accident even though attributions
of crisis responsibility increase
- Protect when no cause is given
Respondents either treated the crisis as a technical-error accident or considered the reputational
threat equal to a technical-error crisis. Crisis managers do not have to conclude a “no cause” given
accident will inflict the same reputational damage as a human-error accident.
Does a favorable prior reputation create expectations about how an organization should respond?
Will “good” organizations be expected to exceed the normal response? It may be that if a prior
reputation is favorable, an organization will need to use the most expensive response regardless of
the crisis situation. No evidence as of yet supports this conclusion. Favorable reputation does not
protect an organization if it uses an inappropriate response.
Does the nature of the accident limit the halo effect as shield?
General theory of fairness postulates that stakeholders consider whether or not an event was
realistically under the control of the organization. Frames (technical or human) can shape those
conclusions. When no frame is given, the nature of the crisis itself may lead to different
interpretations that the organization could control the actions.
Research shows a general bias toward internal causes for accidents.
Crisis response strategies are matched to the nature of the crisis situation.
Crisis response strategies – what an organization says and does after a crisis hits has significant
ramifications for its reputation instructing information represents what stakeholders need and
want to know after a crisis hits. There are three types of instructing information:
1. Crisis basics: the basic information about what happened in the crisis event.
2. Protection: what stakeholders need to do to protect themselves from harm.
3. Correction: what the organization is doing to correct the problem/prevent a repeat of the
crisis.
Instructing information must be provided (it is not an option). The crisis managers must tell
stakeholders immediately what to do to protect themselves; crisis manager will not always know all
of the necessary instructing information early in the crisis management process (e.g., the cause of a
crisis, part of the crisis basics, may not be known at first and no corrective action ca be planned).
Crisis managers choose which to use in a crisis to protect the organizational reputation or “repair”.
Crisis response strategy:
1. Establish that no crisis exists (deny), then no reputational threat.
2. After the attribution about the crisis event to make it appear less negative to stakeholders
(diminish).
3. After how stakeholders perceive the organization-work to protect/repair (deal) the
reputation.
N.B. DON’T HIDE BAD NEWS IN TIME OF CRISIS. Reputation is a long-term game, despite
hiding bad news is a “reflex” in any organizations. “Worst before better”; the reputation hit from the
release of bad news today is likely to earn dividend in the form of future reputational gain.
However, need for management to have “psychological safety”: a climate where people can raise
questions, concerns and ideas without personal repercussions.
Transparency is “job one” for leaders in a crisis. Be clear on:
- What you know
- What you don’t know
- What you are going to learn more.
Can’t manage a secret.
Effects of apologies and crisis responsibility on corporate and spokesperson reputation 2x2
scenario experiment: (1) spokesperson making apologies versus no apologies; (2) accidental versus
preventable crisis.
The effect of crisis response strategy and crisis responsibility on corporate trust (left) and
spokesperson trust (right):
The effect of crisis response strategy and crisis responsibility on corporate reputation (left) and
spokesperson reputation (right):
The crisis has more impact on corporate reputation than on the spokesperson’s reputation. The crisis
is seen as a collective responsibility of the organization rather than the personal responsibility of the
spokesperson. Thus, even though strictly, as a CEO, the spokesperson in the scenario was
responsible for the crisis, participants do not blame the crisis on the CEO personally as much as
they blame it to the organization in general.
Two different levels of corporate participation:
- The individual level.
- The level of the organization.
Even though the spokesperson in the scenario was the CEO of the organization, and in the
preventable scenario big mistakes were made by the board of directors, the impact of crisis
responsibility on corporate reputation was by far greater than the impact on the individual
reputation of the particular CEO. This indicates that, in this case, the crisis is viewed as a collective
organizational failure, rather than a failure on the part of the leader.
An explanation for this depersonalization of responsibility could be that stakeholders generally take
the social context of organizations into account, which reduces individual autonomy.
This shifts the blame, at least partly, from the individual to the environment. This raises further
questions concerning the conditions under which crises and crisis communication affect the
reputation on other organizational levels, such as the workgroup, the department, a parent company
or even on the level of the branch. If the public attributes some crisis responsibility to an
organization, what part of the organization is blamed? And, as a consequence, what reputation is
under threat? Contrary to our expectation, the crisis response strategy did not significantly affect
people’s responses to the crisis in terms of trust and reputation.
A closer look at the delivery of the control message in the video provides a possible explanation; the
response in the non-mortification condition may have been as just as professional, empathetic and
appropriate as the apology.
Denial vs admission of guilt. Does admission of guilt affect a firm’s reputational integrity?
Denials are used to avoid any legal liabilities that may arise through an admission of responsibility
(guilt). By engaging in excuse making the organization may minimize negative repercussions such
as:
- Reducing negative effect;
- Damage to their identity and finally punishment for their failures or transgressions.
Mortification is a strategy that:
- Is designed to seek public forgiveness for any wrongful acts;
- Involves apologizing, delivering admission of guilt, expressing regret and remorse.
A company may have to face numerous legal threats after a crisis from customers, investors and
employees. Acknowledging guilt paves the way for costly litigation with affected stakeholders.
There is a delicate balance between estimating the reputational cost and the litigation cost of a
company’s responses to a crisis. One may have short-term repercussions but the other could
jeopardize the long-term financial viability of the firm.
Risk assessment and brand equity Trading-off amplifying and mitigating factors. Risk can be
influenced by a number of factors:
- Trust
- Familiarity
- Media
- Dread
- Catastrophic potential
- Scientific uncertainty
- Controllability
- Impact on children
- Receptivity
- Voluntariness of exposure
- Reversibility
- Attribution
If a firm is perceived by its constituents as having positive reputational equity, then the well
regarded company is likely to face fewer risks of crises. Furthermore, if a company has a reputation
for social responsibility then this can be of great benefit for a company facing crises.
If the crisis event had generated further stakeholder amplification or scrutiny, then possibly this
could have been devastating for the brand. Companies need to take:
- Proactive steps to avoid amplification of a crisis event.
- The company out of the spotlight.
However, stakeholders will never truly forget about a company’s past indiscretion. The ever-
watchful media will readily showcase a company’s past crisis event, and this will feed into shaping
future news stories about the company. Any crisis can have enduring legacy effects, which will
affect consumers’ attitudes and behaviors, and influence other key stakeholders.
By adopting an excuse strategy it may undermine the reliability of the organization, the very
character of the organization is under threat. Indeed, there is insufficient evidence that “doing good”
also can lead to a firm “doing well” financially.
RUMOR, GOSSIP AND WORD-OF-MOUTH rumor, gossip, speculation, hearsay and half-
truths abound in the public domain during a crisis event. Crisis communication responses provide
organizations with an opportunity to counter these inaccuracies and giving stakeholders their
account of events.
Rumors:
- Circulate rapidly when stakeholders face uncertainty and when they lack reliable
information from credible sources.
- Become self-reinforcing, when stakeholders only hear rumors as to the reasons for a crisis
event.
- Can be damaging to a firm’s reputation, as it may modify stakeholders’ beliefs towards an
organization.
- Tend to circulate within social groups who have a strong interest in certain types of
information.
A firm has to have a proactive communications policy to avoid an information vacuum. Information
presented in “company generated information” sources (press releases, annual reports) significantly
influence stakeholder attitudes towards post-crisis.
BRAND AND STORYTELLING the brand is a semiotic phenomenon, a sign that by referring
to something produces meanings. The production of meanings is based on storytelling.
It is therefore necessary to carry out a specific narrative programming for the Brand, i.e. a “logical
organization” that correlates meanings and systematizes reasons and emotions.
The fundamental role of the “obstacle” to be eliminated, of the conflict that generates tension (and
attention) and the means to overcome it: in the brand story, in order to act, the subject must be
driven by a will (or a duty) and then performed through a power or knowledge.
Modalities are entered in “lack or threat” mode. Starting from a hostile situation, the brand resolves
by implementing processes of “salvation” o improvement.
How does a negative impact on reputation spills on endorsed brand despite some of the recent
examinations of an athlete’s reputational crisis (ARC), their negative spillover effects on endorsed
and completing brands have been overlooked. Relationships between:
- Perceived severity
- Athlete endorser credibility
- Attitudes towards endorsed and competing brands
- Moderating role of consumer knowledge
Results indicated that the severity of an athlete’s reputational crisis (ARC) is associated with the
perceived incompetence, untrustworthiness of local athletes. Perceived incompetence is associated
with negative evaluation of an endorsed brand. This impact is significantly stronger for consumers
with greater knowledge of the athletes than those who are less knowledgeable.
Interestingly, competitor for consumers received negative impact indirectly from the athlete
endorsers’ incompetence. This spillover effect is also manifested differently depending on the level
of consumer knowledge – incompetence to competitor brands are stronger for novice consumers
than expert consumers.
Spillover effects refer to “the extent to which a message influences beliefs related to attributes that
are not contained in the message”. In human memory, various nodes in memory are those theorized
as being associated and activated simultaneously. Based on this argument, it could be reasoned that
Lance Armstrong’s PED scandal, for example, had adverse impacts on Nike as an official endorsed
brand, but also affected competitor brands of Nike. Competitor brands also-experience adverse
impacts due to the product category associations with Nike..
How to monitor the situation through a digital reputation index? Substance is the foundation of
effective communications, supported by authenticity.
How to represent the digital reputation of the companies in a digital world? Quantitative
methodology for aggregating digital quantities collected from social network sites; company web
pages; blogs and wikis.
STRATEGIC CRISIS MANAGEMENT: a basis for renewal and crisis prevention major crisis
families:
- Economic: includes events or situations as strikes, market crashes, and shortage of labor
opportunities.
- Informational: there is a loss of important information or organizational records, public or
confidential.
- Physical: includes compromised major equipment, loss of suppliers or a major disruption at
a key operating plant.
- Human resources: loss of a key executive or member of the team, vandalism or workplace
violence.
- Reputational: rumors and gossip which can hurt the reputation of the organization.
- Psychopathic acts: unthinkable acts such as terrorist attacks, kidnapping or even tampering
with products.
A strong positive reputation should generate increased financial returns to competitors. A corporate
reputation reflects the organization’s strategy, culture and values. Managing corporate reputation
can yield three major strategic benefits:
- Firms prefer doing business with a company that has a strong reputation over similar
competitors.
- Strong reputation can sustain the company in times of crisis.
- Financial returns to the company in the marketplace.
Global brands must face with multiple correlated stakeholders and on which must be carried out a
detailed analysis before making choices on brand.
Need for new identity and distinctive for all the new positioning should reflect the new growing
interest in cleaner and sustainable energy sources, such as natural gas and solar energy.
Creativity is:
- The solution of problems with relevance and innovation.
- Finding new ideas or solutions.
We build brand so that we can sell more, have more profit. Brands are remembered and preferred by
people when buying products and services. You invest in new brands to be able to “cash cow” them
somewhen in the future. When you have a brand is easier to sell an assortment of products; or you
can divest it and make money by selling its “equity” to some other company.
Brands are built by companies with a brand positioning idea in mind. But they are known by people
with a brand perception in their mind and hearts. So, brand positioning is always twofold: desired
by company, perceived by consumers. The two faces rarely correspond, we work hard to achieve
this.
BRAND POSITIONING positioning refers to the place that a brand occupies in the minds and
hearts of the customers and how it is distinguished from the products of the competitors. In order to
position products or brands, companies may emphasize the distinguishing features of their brand or
they may try to create a suitable image through the marketing mix. Once a brand has achieved a
strong position, it can become difficult to reposition it.
Six questions to address for brand positioning:
1. WHAT do we do and HOW do we do it?
2. WHO are we here for?
3. What do we VALUE the most?
4. What makes us DIFFERENT?
5. What’s our IDENTITY?
6. Why are we here?
Communication strategy 5 are the strategic elements, 3 of which are specifically the copy
strategy:
1. Definition of target
2. Brand purpose
3. Brand/product benefit
4. RTB – Reason to Believe
5. Brand character
- Mandatories any elements the company wants to be seen or heard in the advertising, no
matter what. Could be any execution elements that we want to keep in the campaign, like a
testimonial under contract.
- Signatures for brand managers it is fundamental to align senior management on the
advertising projects, being them investment-intensive and being very visible. It is important
to align Marketing Directors and General Managers on: the objectives of the project,
process, agencies, creative brief contents and therefore also creative proposals choice and
finalization.
2. Behavioral models:
- Brand value as quantitative concept
HISTORICAL COST METHOD the historical cost method estimated the brand value on the
basis of the expression to current values of the costs incurred in the past for the “building” of the
intangible asset.
Valuation approach:
- Definition of capital expenditures useful to the creation and valuation of the brand
- Problem: Which costs should be included?
Brand analysis considers only launch and consolidation costs, excluding marketing costs.
The Operational Approach, however, introduces the concept of marginality utility of
marketing costs: only those that increase the brand value are considered.
- Identification of the “Point H”: maximum investments limit, after that a flat market share is
expected.
- Capitalization: based on costs for promotions, advertising, design, brand registration,
sponsorship and, in some cases, R&D.
- Determination of the economic life of the brand: period within which the brand will be able
to generate cash flows.
Brand enhancement:
REPLACEMENT COST METHOD the replacement cost method estimates the brand value as
the investment needed to reproduce it today.
Valuation approach:
- Application problems -> the investments valuation must take place through the following
drivers:
Diffusion: investments necessary to achieve the same brand awareness on the area
Reliability: investments necessary to maintain unchanged the quality characteristics of the
brand.
Differentiation: is the primary element that stimulates the first purchase and allows the
consumer to appreciate the brand quality. It includes monetary investments and others, for
the satisfaction of customer needs.
Brand enhancement:
1. Synthetic method:
2. Analytical method: based on the accurate identification of necessary activity volumes and
unit prices. For example, for a known brand you can identify the number of advertising
campaigns and their cost.
PREMIUM PRICE METHOD the premium price method is based on the differential price that
the brand can apply when it is associated to a product, compared to a similar “unbranded” one.
Valuation approach:
- The value of the brand results as the discounting of the emerging differential flows from the
costs and revenues of the same product from the company A (branded) and B (unbranded).
The valuation process can be summarized in the following steps:
The economic advantage (Premium Price) is determined as the difference between the unit
price of the product of A and that of B.
The price differential is multiplied by the quantities sold by A and the weight of the taxes
is deducted. The total net differential is then discounted.
Brand enhancement:
2. Operative free cash flow method: the required operating FCF is determined to be aware of
any relative differences between working capital and investments. However, it is rarely
used.
Formule:
EBITDA branded = %Revenues
EBITDA unbranded = %Revenues
Differential flow = EBITDA branded – EBITDA unbranded
Cash flows = Differential flows – Taxes
Discounted Cash flow =
COST OF LOSS METHOD the cost of loss method estimates the brand in according to the
margin reduction after the brand loss. The estimated loss is discounted, taking into account the
estimated period for restoring the equilibrium situation.
Valuation approach:
- A reasonable period is defined during which the brand is deemed to be exploitable.
- Simulations on operating conditions, in which the company is working without the
contribution of the brand, and valuations, in a different way, of margins obtained from the
operating condition supported by the presence of the brand.
- With this approach, therefore, it is valuated the minimum price below which the company
would not have convenience to sells its own brand or, on the contrary, the maximum price
that the company would be willing to pay to take back the transferred brand.
- The valuation of the brand is done by the following definition of the differential margin.
Brand enhancement: differential margin to be discounted. Indirect costs that ceased to exist:
- Lower contribution margin due to the brand
- Investments for restructuring the competitive capacity lost with the sale of the intangible
asset.
ROYALTIES RELIEF METHOD the royalties relief method estimates the brand on the basis of
the exclusive right to use it by a third party. This approach is one of the most used in the brand
valuation.
Valuation approach:
- The basic principle is that the brand value corresponds to the royalties obtainable from its
disposal to third parties. These proceeds, distributed over a medium-long period of time,
have to be discounted.
- The royalties method is one of the criteria most adopted by the doctrine and evaluative
practice, and it is considered the most appropriate method for the brand valuation in
according to the accounting field and to the tax field for the transfer pricing regulation.
Brand enhancement:
r = royalty rate
s = turnover derived from the sale of branded products
Royalties flows are considered net of figurative taxes.
EXERCISE:
Royalty (% ricavi) = 8%
Tax rate = 28%
Discount rate = 11%
Revenue growth rate post Year 5 = 1%
Business plan
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Revenues 50 55 58 62 65
The valuation of a brand is driven by the measurement of different types of metrics that put the
customer at the heart of the brand’s focus:
- Survey-based Customer perception metrics: the customer perception measurement based
on survey and feedback mechanism, is one of the measurement frameworks mainly used in
marketing. Such metrics lead to a “static” measurement of customer perception of a brand.
Customer perceptions are driven by a series of features based on specific attributes, such as
number of available channels or staff awareness and behavior, that the brand can leverage.
Trust is built over time through the interaction between customers and the brand; is the basis
of loyalty, support and satisfaction. Brands face the challenge to measure the “trust” metric
effectively and thoroughly. Organizations that effectively measure the trust metrics and
adjust their performance over time, according to the customer needs, have a competitive
advantage. Three metrics are particularly effective in measuring the degree of customer trust
towards the brand (customer effort score, customer satisfaction, net promoter score):
Customer perception metrics are assessed through focused questions leading to a numerical
valuation of the answer. Customer perception measurement leads to evaluate and,
subsequently, monitor on a regular basis the level of customer satisfaction towards a
product/service and are obtained through questionnaires and surveys answered by customer
themselves.
- Social listening: social listening enables to have a “real-time” view of what customers state
on the web, through conversations, about a brand.
Today’s the brand’s performance on its interaction with online users, “web reputation”, has a
relevant weight on the brand’s valuation. Social listening analysis of the Big Four, Social
Media are key to engage users and drive results and KPMG has the greatest number of
followers on Facebook and LinkedIn. The possibility to create customer engagement is the
distinguish feature that differentiates Social Network from other media. The experience is
more memorable as the user has an active role and the company promotes a conversation
with the brand.
Social Listening enables to extract online conversations referred to the brand and to value
them quantitatively. Social listening is the process of digital channels monitoring as to
understand what is said about a company, an individual, a product/service, a brand. It
consists in the extraction of online conversations from digital sources through key words
that can be reworked as to enable “data mining” activities. Such data can be used to analyze
a general or used specific sentiment, to understand consumers behavior, defining the
customer perception of the brand, also compared to competitors.
Activity phases:
Listening relevant online sources mapping; user-generated content collection.
Classification data cleaning filtering “spam” and “duplicate”; domain structure
definition; automatic classification of messages and opinions through semantic analysis by
sentiment and topic.
Analysis results analysis and insights elaboration; ad hoc reports.
Besides sentiment analysis it is possible to spot other indicators, such as “share of voice”,
and examine the range of interaction.
- Emotional pillars: customers value products services also based on the brand’s capability
establish an emotional connection. Such emotional levers have a direct connection with the
economic performance of the brand and enable to forecast behavior of the target customer
base.
Emotional levers have a direct connection with the economic performance of the brand: the
brand’s capability to establish an emotional connection; the brand’s capability to managing,
meeting and exceeding customer expectation economics value. When companies over or
under invest or deliver on customer expectations, profit suffers.
In order to monitor the relationship between customers and the brand, it is important to
evaluate the performance on emotional levers through an ad hoc survey; KPMG Nunwood
has developed a methodology to identify the brand positioning according to the level of
client satisfaction, underlying pain points and areas to delight. KPMG Nunwood has
recognized 6 pillars able to define an effective emotional connection between customers and
brand:
Personalization using individualized attention to drive an emotional connection
Integrity being trustworthy and engendering trust
Expectations managing, meeting and exceeding customer expectations
Empathy achieving an understanding of the customer’s circumstances to drive deep
rapport
Time and effort minimizing customer effort and creating frictionless processes
Resolution turning a poor experience into a great one.
Evaluating the performance on emotional levers enable brands to predict customer future
behaviors. Personas identification and emotional levers performance analysis on a specific
touchpoint enable brands to understand customers behavior, evaluate a specific target desires
and, therefore, reorganize the business strategy to respond effectively to those needs.
When a celebrity has been engaged for the first time as a brand ambassador?
Kurt Lewin studying and trying to understand how individual behavior works; in the first half of the
XX century, he discovered that influence is a function of interaction between a person and the
surrounding environment.
B = f (P,E)
B = behavior
P = person
E = environment
- Mature: mature profile is the intermediate stage of the process, characterized by the
involvement of several actors. The brand takes part in the decision-making process as the
“conductor” of the project. The Media Centre is the owner of the operational process, from
Influencers are young (almost 60% are under 30). A trend that can be explained by the growing
relevance of the influencer and, above all, from the use of platforms such as Instagram and YouTube
by mainly younger audience. 69.8% of influencer started being creators 2 years ago; 18.2% of those
who have been in the industry for at least 4 years certainly recall the world of blogs and Twitter and
the first Instagram experiments.
Among the most represented industries, we can find fashion, travel and lifestyle. Followed by Food
& Beverage, Beauty and Technology, that are being extremely relevant to brands and their
influencer marketing projects. Channels preferred by influencers:
- Instagram 53,2%
- Facebook 18,5%
- Blog 9,2%
- Twitter 7,9%
- YouTube 5,1%
- LinkedIn 4,2%
- Snapchat 1.9%
Brand proposal not always match with the influencer’s request. The type of remuneration proposed
in fact sees free products of top, significantly detaching from the financial compensation.
There are different types of influencers:
- Celebrities
- Disruptors: NGOs, activists
- Experts: beauty, hair & skin experts, etc.
- Doctor/scientists: pediatricians, researchers, etc.
- Social media stars: vloggers, bloggers, other social platforms
- Editors/journalists
- Daily consumers: ordinary people
Buzzoole is the promoter of transparency and effectively runs counter fake profiles, monitoring
effective engagement with proprietary algorithms.
Audience analytics is a new measurement tool in our campaign reports. This function allows you
to have a clear picture of the overall audience reached by our influencer marketing campaigns.
Reach we are able to get the effective reach of our campaigns thanks to the use of the first party
data.
Impressions Buzzoole, thanks to the use of first party data, is able to provide the customer with
the exact number of impressions obtained from each content of the campaign.
A brand effect study allows you to investigate the effect of a campaign, highlighting different
“brand uplift” KPIs to make apparent the real contribution of communication on a series of KPIs
called primary and secondary:
- Top of mind
- Spontaneous and solicited awareness
- Favourability
- Recommendation
- Intention to buy
A Nielsen study that allows you to estimate the deduplicated reach, i.e. the number of people
actually reached by a Buzzoole Influencer Marketing campaign. The methodology starts from the
analysis of the real results of the campaign posts carried out, collected by Buzzoole. These are
accompanied by a survey on a sample of exposed and unexposed subjects in order to:
- Identify a relationship between hoe many have seen the posts and how many have interacted
- Detect the degree of overlap between the followers of the different creators involved
AIDA MODEL Attention, Interest, Desire, Action model. Simple theoretical model which
summarizes four fundamental points: attention, interest, desire, action. Introduced by Elias St. Elmo
Lewis, and in the 1920s by E.K. Strong, to then become popular starting from the sixties as a
behavioral model to implements an advertising campaign.
CUSTOMER JOURNEY the process or sequence that a customer goes through to access or use
a company’s offering.
CUSTOMER DECISION JOURNEY the decision-making process and the way consumers
research, interact, buy and engage with products and brands. It allows to analyze consumer behavior
and therefore, to build differentiated product and experiences according to customer needs and
wants.
Linear funnel: help customers evolve step-by-step (awareness, familiarity, consideration, purchase
and loyalty) from one step to the next, supported by specific touchpoints, such as attract, convert,
engage, sell or connect.
Brand Funnel and BrandMatrics:
- Process steps: shows what percentage of the target group has reached their target step.
- Progress (or transfer) step: shows the percentage of customers passing from one step to
the next.
Competition boundaries competitors are those who meet the same need (according to the
principle of product substitutability). In order to achieve effective differentiation and positioning
strategies, enterprises must first understand who their competitors are and what threat they represent
on their goals, their resources and competences and their strategies. You have to overcome the
“marketing myopia” and avoid defining the competition in traditional terms, industry of product
category.
The performance along the funnel vs. own competitors enable the company to identify where it is
losing its own customers (bottlenecks).
POINTS OF PARITY (POPs) attribute or benefit associations that are not necessarily unique,
but that may also:
- Be share with other brands
- Be part of the basic offer of any product in the category.
They can be:
- Category associations
- Competitive associations
They are attributes or benefits that consumers view as essential to a legitimate and credible offering
within a certain product or service category. We would also need to consider that “correlated
elements of parity” are potentially negative associations for the product or brand, even if they
originate from established positive associations related to brand history.
The next step is to understand which attributes to use to update/build your own value proposition.
An attribute deserves to be emphasized if it is:
- Significant
- Single
- Higher
- Communicable
- Original
- Accessible
- Profitable
What are the priority and dominant strategies in terms of benefit selection? Identifying relevant of
differentiating brand drivers allows you to redesign the value proposition.
The number of touchpoints is increasing and consumers are becoming hyper-connected. How is the
sharp increase of touchpoints reshaping and evolving the customer decision journey?
Any time a customer comes into contact with a business, even remotely, he has an opportunity to
form an impression of the brand itself and comparatively on its own competitors. Hypothesis: the
success of a brand and a company relies on the ability to manage every interaction with clients and
to generate a positive result from each interaction. Impact happens if the option offered to the client
is considered “better than others” available in the market. Not all moments are equal, but there are
some where it is necessary to be outstanding and succeed, otherwise the brand will be removed
from the alternatives contemplated by the consumer himself.
FIRST MOMENT OF TRUTH (FMOT) FMOT is when the purchase responsible gets in
touch with a specific product/service and recognize the product, compares it and decides whether to
purchase it or not. It’s a very short moment in which all marketing efforts should focus on the
immediate impression of benefits the consumer could only obtain from that products in relation to
competition.
SECOND MOMENT OF TRUTH (SMOT) SMOT is when the end customer use a product
and it delivers a delightful and memorable experience (or not), feel if he/she is satisfied or
dissatisfied and then decides whether to buy it again. The user/end-customers that experienced the
product/service could be different from the purchase responsible.
THIRD MOMENT OF TRUTH (TMOT) TMOT is where the product experience catalyzes an
emotion, curiosity, passion or even anger to talk about the brand and consequently when consumers
could provide written and verbal feedbacks on product and share their own experience.
How ratings positively impact purchase intention:
- Higher ratings or reviews are positively associated with sales
- Ratings, website quality, and the perceived credibility of electronic word-of-mouth
messages all positively impact purchase decisions
- Positive electronic word of mouth messages with higher source credibility predicts higher
purchase intention, and electronic word of mouth is a critical driver of purchase intention
- Higher perceived credibility of online customer recommendations has been linked to
greater purchase intention and, among other factors, the trustworthiness of a website
positively affects the perceived credibility of electronic word of mouth messages, which in
turn amplifies purchasing decisions.
ZERO MOMENT OF TRUTH (ZMOT) ZMOT occurs when consumers research a product or
are made aware of the product, and it is the new decision-making moment that takes place a
hundred million times a day on mobile phone, laptops and wired devices of all kinds.
It’s a moment where marketing happens, where information happens, and where consumers make
choices that affect the success and failure of nearly every brand in the world.
Micro-moments: moments when customers interact with their device to get an answer on a need: I
want to go, I want to do, I want to buy, I want to know, I want to learn, etc.
Micro-moments could be adapted and reshape the way an industry looks at its journey. Micro-
moments occur when people reflexively turn to a device to act on a need to learn something, do
something, discover something, watch something, or buy something. They are intent-rich moments
when decisions are made, and preferences are shaped. In these moments, consumers’ expectations
are higher than ever.
The opportunity to engage can buyers doesn’t just happen in person anymore. These days, the
average car buyer makes just two visits to dealerships. Brands should be there and useful in key
auto micro-moments to shape consumer preferences and influence purchase decisions.
Home assistant are an example of IoT device that can allow to integrate home devices and online
activities.
How does a BOT work?
- Occurrence of a trigger event
- BOT capture and analyze the event
- Real Time response with a defined action
Augmented reality: is a form of technology that allows images and digital information to be
overlapped on a real physical environment.
LESS-THAN-ZERO MOMENT OF TRUTH less than zero moment of truth has been
introduced in 2014. It refers to the moment that a company should manage in the time interval
between:
- The arise of a need/the reception of stimulus
- The moment when the consumer starts his online research
It is linked to marketing automation, event driven marketing and to the ability to anticipate and
identify the exact moment in which the need arises, driving the consumer through the product
research and into the funnel of lead generation, lead nurturing, conversion e gestione
dell’esperienza, engagement e advocacy.
AFTER EXPERIENCE MOMENT OF TRUTH after experience moment of truth, that is the
time interval between the online product purchase and the product delivery. This moment includes
that part of the experience that is linked to the consumer perception of the supply chain and to the
consumer post-purchase gratification.
How would companies like to see their decision journey? Some digital marketers evolve the funnel
into a double-funnel, or with more “single-minded” view on digital fitting-in mainly to digital
analytics, KPIs and behaviors.
How intent is redefining the marketing funnel today, people are following less a linear path from
awareness to consideration to purchase. They turn to their devices to get immediate answers.
For some people, research is paramount, and their journey widens and narrows as they not only
consider multiple brands but entire categories. So, the number of touchpoints has exponentially
increased. People now expect to be assisted everywhere, so it is critical that companies measure and
understand the impact of their media touchpoints.
It is fundamental to help the marketing team understand the intent and interactions that are driving
long-term growth. To succeed, brands must deliver experiences that are fast and frictionless. It’s
time to invest in mobile experiences as well as a machine learning and automation strategy.
Moreover, people respond to brands that understand their needs. So, it is important to optimize
media for both relevance to the consumer and lifetime value for the brand.
A limited correlation exists between the usage and influence of a touchpoint into the path to
purpose. Consumers have a high level of engagement towards online content, being both users and
co-creators of it. In a situation of fragmented usage of media, where a clear, unique and aggregating
platform do not exist, there are many media characterized by a high level of usage and a variable
ability to influence the consumers’ decision journey. There is very little correlation between usage
and influence of media touchpoints; influence scores are calculated as subset of the usage based on
self-reported usage of the media platform.
Journey widens and narrows as consumers not only consider multiple brands but entire categories.
What would be the shape of the new CDJ then? The new customer decision journey illustrated the
new complex process followed by customers.
Initial consideration set it is not enough to reach the consideration set (as in the case of the
funnel) in order to be sure to get to the end of the decision process. The risk to be removed from the
consideration set exists, up to the last moment before arriving at the physical or virtual shelf.
Brands in the initial consideration set (ICS) have 3x average probability to be chosen compared to
the ones added during the evaluation phase. The consumer is thrown in the purchase process by a
need that must be satisfied or by an external stimulus/impulse that reawakes the need itself. The
consumer is immediately redirected towards what is already present in his or her memory.
The brands that have previously performed an optimal marketing activity on the target group have
then the advantage to be immediately recalled (fast processes) in consumer’s mind and have a
higher chance to be purchased.
Most recently and frequently used “touchpoints” have a strong influential role, becoming important
tools of activation and recall.
Therefore, a strong relationship between initial consideration and customer-base growth exists.
Some indicators, such as the “customer growth index” (CGI), calculated as the ratio between “initial
consideration score” and brand market share, let us understand if the product requires and increases
in the investments or not, and if there are chances to perform better than the average of the market.
It is then necessary to attract potential consumers at the beginning of the decision journey, mainly
influenced by consumer’s past direct experiences, influencers, word-of-mouth, and overall
company’s marketing plan.
Active evaluation the second challenge is to manage the active evaluation step by remaining or
entering into the set of alternatives considered by the potential customer.
This is critical for those brands who were not originally in the initial consideration set and that, in
this way, have the chance to get back in consumers’ panel of alternatives. During this step, brands
keep on getting in and out of the consideration set, depending on the stimuli. The number of brand
added to the list of potential alternatives could then be higher than the number of the brands
originally present into the initial consideration set.
The brand manager’s ability consists of:
- The ability to select the right “touchpoints” used by the consumer to choose which brand
to purchase.
- The ability to develop effective marketing campaigns able to capture the attention of the
consumer that has already started to compare different products.
- The ability to allocate efficiently resources and to manage actively the trial-stimuli
strategies in order to facilitate the change in consumer’s decision.
The evaluation process is getting more and more complex and non-linear. The process of evaluation
and re-evaluation of choices could last for a long period and serve as basis to generate micro-stimuli
to engage the customer.
More than 60% of the touchpoints are empowered by customers. Moving from the initial
consideration set to the active evaluation step, both relevance and efficacy touchpoints change. The
efficacy of consumer driven actions doubles, while the efficacy of company driven actions
decreases in a complementary way.
Loyalty loop the capability of managing the post-purchase phase is critical to retain customers
into the loyalty loop, maximizing the return for the company and the brand.
During the loyalty loop, in fact, the customer builds biases that affect the next decision journey.
Exiting from the loyalty loop, due to a bad product or service experience, involves a potential long-
term exit of the brand from the consideration set. To re-engage, it would be necessary to radically
change the opinion present in consumer’s mind in order to be included again in the ICS. Strong
investments are required, e.g. for brand repositioning or improvement the quality of the
product/service.
Loyalty loop might not be activated: 58% of the consumers change brand from one purchase cycle
to the next one. Availability and access to information and the presence of websites that allow to
compare prices, performance and perceived coolness makes the consumer feel almost obligated to
try more alternatives.
Moreover, a strong transparency exists about what personal influencers think about a
product/service, about its usage and about its ability to provide self-enhancement. Consumers can
be influenced by different (also distant and unknown) influencers: therefore it’s necessary to build
progressively consumers’ trust along the loyalty loop.
Inner dis-loyalty: business leaders are starting to rethink what loyalty means for their customers and
for their business as traditional loyalty programs are costing significantly more, and delivering
significantly less.
- 36% consider loyalty irrelevant to their spending
- 71% claim loyalty programs do not engender loyalty
- 77% of all consumers admitted they now retract their loyalty more quickly than they did
three years ago
- 23% demonstrate a negative or non-existent reaction to companies’ loyalty efforts.
Brand disloyalty factors:
- Pull-away: new and changing technology; price; brand image; software related; social
influence.
- Push-away: technical issues; service issues; variety seeking; negative word-of-mouth; third
party service failure.
- Beyond controllable: workplace mandates; relocation; abandonment.
ZOMBIE-MARKETING zombies are companies that earn just enough money to continue
operating and service debt but are unable to pay off their debt. Zombie companies are typically
subject to higher borrowing costs and may be one just event away from insolvency or a bailout.
6-SECOND MARKETING researchers found that the 6-second format is becoming more
widespread. Pre-roll ads, bumper ads, and short-form videos can capture attention and lead viewers
to a call-to-action.
Digital can become a commodity, a combination of excellence in digital processes and human
interaction is required. Digital and human interaction serve different points of the CDJ – B2B:
CDJ of different stakeholder in the process are typically concatenated and inter-connected.
MESSY-MIDDLE is a space of abundant information and unlimited choice that shoppers have
learned to manage using a range of cognitive shortcuts.
Why do they so? And why marketing is helping to achieve these company’s objective?
Central vs. peripheral route: high effort vs. low effort the mechanism that often causes emotion
to overhaul reason remains hidden to us.
THE POWER OF SHOWING-UP simply giving the shopper the option to choose their second
choice brand was enough to entice 30% away from their initial choice (even if the second is a fake
one).
The consequence: an inner need for variety. Variety seeking is the tendency to abandon past brand
or brand already used in multiple occasion.
Many of the biases are easy to execute and provide an high-impact. When second favourite brands
are supercharged with multiple cognitive biases, the result is a shift away from the favourite.
Journey and customers customer journey has become an increasingly important concept to
understand complex consumer behaviors and get insights into their experiences. Customer journey
as:
1. Service satisfaction
2. Failure and recovery
In these two cases, customers continuously adjust their perceptions of a brand at every touchpoint
they encounter. A series of customer interactions with touchpoints over an extended period, which
start before and ends after the actual transaction, accumulate to a service evaluation of a customer.
A fulfilled interaction, contribute to customer satisfaction. Confused and frustrating interactions
may lead to customer dissatisfaction and an increase in a chum rate.
The customer journey is the actual process which represents the formation of customer experience
and facilitates the understanding of how customer goals, expectation and behaviors evolve over
time. Customer journey should focus on: (i) critical touchpoints; (ii) their sequences, that positively
or negatively contribute to a service evaluation of a customer in a customer journey.
The insights enable the company to design a touchpoint sequence that improves customers
satisfaction, while minimizing dissatisfying moments. A well-designed service process pays
particular attention to the moments in a customer journey that are most responsive to CX. Hence,
customer journey mapping is useful for companies in service improvement and new service
development.
3. Co-creation: a greater level of customer engagement does not always enhance customer
experience. While a reduction in the involvement of the customers is also not always
favorable. Technology has enabled companies to collect customer data more easily than
ever. The customer knowledge generated at touchpoints creates opportunities for
companies to actively listen to their customers and extract insightful information for
strategic planning. The collected information enables companies to: better profile their
customers; customize touchpoints for specific segments; serve them in a way that
promotes customer loyalty. However, raw data is usually unstructured, fragmented and
incompatible for actionable planning. Companies have to integrate their database fully and
measure the incremental value of individual touchpoints along with their interactions in the
customer journey. This information can enable companies to quantify the contribution of
each touchpoint, avoid overlapping campaigns and optimize budget allocation.
4. Customer response: the ability to communicate and exchange cognitive and effective
information reduces perceived risks; increases engagement and builds the emotional
connections of customers. Customers utilize technology to help them recall details about a
journey, while using social media to seek social approval both before and after the
purchase. An exposure to options and common preferences of people on the social media
prior to making a decision can influence the final choice of customers. However, customer
responses are complex and there is no ultimate service design that fits in every context.
All touchpoints from the start to the end of the service delivery process must communicate
consistent values and messages to support the formation of brand associations. Customers
utilize different judgment strategies to process the wide range of information that they
encounter across the journey. The coherence in the process underlines connections
between diverse brand attributes and service stimuli, which reinforce customers’ learning
and enhance their perceptions towards the brand.
the design of the service delivery process should support the perspective, movement and
pacing of customers during their navigation. Brands should also provide clear, concise, and
credible information to prevent confusion and the risk of customers dropping out.
Customers expect to navigate around the service process at their own pace with some hint
of direction to minimize time pressures and cognitive effort.
5. Channels and technological disruption: technological advance has resulted in an abundance
of new innovative touchpoints that overcome time and location constraints in the service
environment. The introduction of new technologies, channels and devices has significantly
transformed the way customers experience services and interact along their journey.
Innovative touchpoints enable companies to provide values; connect with customers;
deliver experiences, in a new fundamental way that increases sales and relationship-
building opportunities. The recent technological development that integrates a virtual and
a real-world environment, such as virtual reality and augmented reality, has embedded,
embodied and extended customer experiences.
The technologically enabled touchpoints provide real-time, interactive and multisensory
experience to customers by overlaying a virtual object into the physical world or fully
immersing the user in a virtual world.
The integration offers a sense of authentically and realism to customers, closes the channel
gap between online and offline channels and enhance the seamless experience. The
technological embodiment that involves integration between the human body and a device
also generates strong emotional bonds to customers due to its immersive capacity and
sensory attachment. Innovative touchpoints assist companies in collecting more
accurate/granular customer data at a precise time and location, deepening understanding
of customer behavior and personalize real-time offers.
Facing the stressed and emotional customers:
Stressed in the offline world: interaction with unfriendly SA; untangle the store layouts to
search for products; being followed by SAs during the research process.
Stressed in the online world: non-working coupons during checkout; app bugs that
interrupt the purchase in the checkout phase; slow system response time.
Emotional: shopping because of distraction, boredom, social anxiety, awkwardness.
Customer response to the introduction of new technologies can range from excitement to
anxiety. Innovative touchpoints that collect personal data and offer personalized
recommendations raise suspicious and fear in customer driven by privacy concerns.
Intrusive brand messages in private spheres can create feelings of oppression and
harassment that may eventually overpower customers’ perceived sense of control and
empowerment. The level of privacy influences customer perception of value, fairness, trust
and satisfaction. Companies may reduce these concerns by communicating the terms and
conditions and offer transparent privacy policies to customers related to their services.
Uncanny Valley theory: is a term used to describe the relationship between the human-like
appearance of a robotic object and the emotional response it evokes. In this phenomenon,
people feel a sense on unease or even revulsion in response to humanoid robots that are
highly realistic.
12 shopper journey archetypes that characterize the common paths that consumers traverse when
shopping, depending on their needs and motivations:
The customer journey is made increasingly complex by the ways in which it is affected by the
others. Social Customer Journey highlights the important role that social others play throughout
the CDJ. Social others, individually or in aggregate, can influence an individual customer’s decision
journey at the various stages while also themselves being influenced by that customer. Some
customer journeys occur more than one decision-making unit.
The social distance continuum based on the closeness of other to the decision-making unit, helps
understand and characterize the various roles and influences that social others can play in a social
customer journey.
Social distance can be affected by many social relationship dimensions: number of social others,
extent to which the other is known, temporal and physical presence, group membership, and
strength of ties. A preponderance of these factors makes a social other proximal or distal:
- Proximal social others: typically specific, individuated others that provide distinct, discrete,
articulated inputs to the focal customer’s journey. Tend to be close, in terms of temporal
and physical proximity, members of the customer’s in-group and have strong ties to the
focal consumer.
- Distant social other: larger groups or the whole of society, whose members may not be
individuated, present, temporally proximal, or even know to the consumer. When a distal
other is a single individual, this individual will tend to be someone the consumer does not
know personally, such as a YouTube tutorials or an anonymous review writer.
The decision-making process regard the way consumers research, interact, buy and engage with
products and brands. It allows to analyze consumer behavior and therefore to build differentiate
products and experiences according to customer needs and wants.
Question:
1. Never heard of Samsung
2. Heard of it but didn’t consider
3. Considered but didn’t bought
4. I bought Samsung products but definitely would not buy again
5. I bought it more than once but it is not one of my favorite brands.
Where is the brand losing its consumers (in proportion) more than its competitors? How can we
understand it? performance along the funnel vs. own competitors enable the company to identify
where it is losing it’s own customers (bottlenecks).
Why is the brand under-performing compared to its competitors? How can we understand the
reasons why the brand is losing its potential customers along the funnel?
Reason for underperformance are connected to brand benefits/drivers:
The next step is to understand which attributes to use to update/build your own value proposition.
Identifying relevant and differentiating brand drivers allows you to redesign the value proposition.
Key questions:
1. What information sources should you focus on?
2. Which drivers to prioritize? (which drivers to leverage? Which drivers to improve?)
How to know your brand bottlenecks? Where do you lose a large amount your customers?
Defining the brand funnel performance:
Steps:
1. Open the assigned dataset
2. Go to “Funnel performance – 3 step”
3. Define the amount of aware, familiar, consider, purchase and loyal
4. Define the process steps
5. Define the progress steps
Procedural steps 1,2,3:
- Subtract “never heard” to the total to get “aware”
- Subtract “heard of it but didn’t consider” to “aware” to get “familiar”
- Subtract “considered but didn’t bought” to “familiar” to get “consider”
- Subtract “definitely would not buy” to “consider” to get “purchase”
- Subtract “I would not buy it again” to “purchase” to get “loyal”
Procedural steps 4,5:
- Divide “aware” on total to get “aware %”
- Divide “familiar” on total to get “familiar”
- Divide “consider” on total to get “consider”
- Divide “purchase” on total to get “purchase”
- Divide “loyal” on total to get “loyal”
- Divide “aware” on total to get the transfer rate
- Divide “familiar” on “aware” to get the transfer rate
- Divide “consider” on “familiar” to get the transfer rate
- Divide “purchase” on “consider” to get the transfer rate
- Divide “loyal” on “purchase” to get the transfer rate
How to compare your performance with competitors? Which drivers to leverage? Which
drivers to improve?
Positioning analysis steps:
1. Go to “driver performance – step 4”
2. Rank the file by driver relevance
3. Calculate the drivers mean of “competitor 1” and “competitor 2” and find the benchmark
4. Analyze your strengths and weaknesses in relation to the benchmark
5. Subtract the driver value of the benchmark to the same driver value your company
Translate the business strategy into consumer behavior example of business strategy:
A.1. Build “from scratch” the user base
A.2. Increase current user base
B.1. Increase product usage in the user base through a more frequent/intense usage
B.2. Increase product usage identifying new types of product usage
C. Avoid loss of customers
D. Reconquer/re-gain customers
Why are those strategies different from each other? Because they answer very different types of
customer’s unmet needs.
The concept development phase is separate from the development phase of advertising copy:
1. Concept: it identifies a winning strategy for a target large enough to reach the desired level
of revenue. It describes how a product, service or brand enhances a consumer life. It
develops and optimizes the product’s core idea: what do my target customers need; as my
product manages to meet the needs of my target segment better than my competitors.
2. Positioning (ready for Copy Development): communicates/carries out a winning strategy.
What element connects concept to positioning?
A strong and well-structured concept offers a completely new and relevant benefit, which is now
not offered by existing products on the market. It has a strong comparative claim vs. competition. It
eliminates some important negative perceptions of existing products in its category.
BENEFIT BARRIERS benefit barriers are ways of thinking, emotions, feelings. They are
related to the strategic benefit decided in the positioning. They take root in the minds of a
considerable set of potential consumers. They are in-between what consumers are doing now and
what we would like them to do.
Brand-category relationship:
- Different product categories covered by the same brand (range brand)
- Results from brand extension/stretching strategies
- The breadth of the portfolio derives from the number of categories/products covered by
the brand
Category-brand relationship:
- Different brands of the same company could cover the same product category
- Brand might be focused on different segments in the same product category
- They refer to different markets
- The depth of the portfolio derives from the number of brands from the same company that
cover each category.
BRAND HIERARCHY:
1. Corporate brand: identify organization, company, group
2. Family brand: referred to different product categories; might differ from corporate brand
3. Line brand: span over more complementary products
4. Product brand: distinguish single product or typology
5. Brand modifier: identify a specific product or variant
MONOLITHIC IDENTITY in ever market relationship: it is used only one name; it exists only
one identity mix (master brand). The corporate brand is associated with all products in the portfolio
(umbrella brand). Descriptions are used to differentiate products, but they do not have a real brand
role. Possible in case there is a strong consistency of values between corporate brand and other
group activities.
Advantages: helps in promoting the brand portfolio extension policies over time; brand corporate
reputation can reduce costs for the launch of new products.
Disadvantages: limited possibility of differentiation; risk of brand characteristics weakening;
dilution.
- Endorsed brands: they are associated with a top-level brand, but less direct vs. sub-brands.
Advantages: ensure a greater flexibility of action. Support more in purchase decision
process. Excessive proliferation can create confusion in the brand portfolio and lose focus
on the master brand.
BRANDED IDENTITY each product has a strong and independent brand equity. There is not
corporate brand in the different identity mix.
Advantages: it successfully controls market niches offering specific and particular benefits. It
avoids mental associations to the master brand that are not compatible with the specific offer. It
avoids channel conflicts. It increases mature market coverage, satisfying several kinds of
consumers. It support M&A process.
Disadvantages: onerous in financial terms and managerial responsibility. Each brand is an
independent profit centre.
PRICING
Pricing as a marketing lever: only price decisions have immediate and direct effects on the company
economic performances.
All marketing decisions needs investments and generate costs that hopefully later will turn into
revenues (through increase in quantity sold or premium price – demand curve translation).
Price increase should be calculated on the previous price base. Assuming volume is not changing, it
is possible to calculate the target price increase starting from the available data on current and target
revenues, with relative variation given by:
- Revenues before price change:
- Price change (increase/decrease): :
- New price: :
- Revenues after price change: : (
- Revenue change in absolute terms:
- Revenue change in percentage terms:
- Assuming constant volume, Q remains flat
- Price change in absolute terms:
- Price change in percentage terms:
Pricing room:
How can we determine price roof and floor? PRICE SENSITIVITY METER
Price sensitivity meter was introduced in 1976 by Dutch economist Peter van Westendorp and it is a
market technique for determining consumer price preferences. The techniques has been used by a
wide variety of researchers in the market research industry. Participants in a PSM exercise are asked
to identify price points at which they can infer a particular value to the product or service under
study. PSM claims to capture the extent to which a product has an inherent value denoted by price.
Determinants:
- Differentiation: factors that affect sensitivity are product image, presence of specific
unreplaceable product qualities, absence of substitutes and difficulty of comparisons.
- Risk/Involvment: factor that affect sensitivity are relative relevance of product
expenditure, importance of the product in consumers’ preferences, effects of shared and
sunk costs and possibility to store the product.
Critical price points:
1. Optimal price points (OPP): the price at which the number of consumers who rated the
product too expensive equals the number rating it cheap. It is the equilibrium price
between not buying the product and doubting its quality.
2. Indifferent price points (IPP): the price at which the number of consumers who rated the
product as expensive equals the number rating it a bargain.
3. Point of marginal cheapness (PMC): the lower bound of a range of acceptable prices where
consumers are on the edge of margin of questioning the product’s quality.
4. Point of marginal expensiveness (PME): the upper bound of a range of acceptable prices
where consumers are on the edge or margin of viewing the product as outside their means.
For a linear demand function, the slope is constant but elasticity NOT. Slope is the change in
quantity for a small charge in price. Elasticity, by contrast, is the percentage change for a small
percentage change in price.
Fishbein approach for measuring customer value Fishbein multi-attribute model is based on
salient benefits and attribute importance:
Measurement salient beliefs and attribute importance are measured through a 5-point Likert
scale.
How to use:
- Strengthen perceived product/attribute
- New attribute
- Influence competitors’ ratings
- Capitalize on relative advantage
COMPETITION-BASED PRICING:
PROMOTION marketing activities usually specific to a time period, place or customer group,
which encourage a direct response from consumers or marketing intermediaries, through the offer
of additional benefits. Types:
- Non-standard: promotions are usually temporary and may be limited to certain customer
groups (such as airline frequent flier schemes) or specific to a particular distribution
channel.
- Response oriented: promotions seek a direct response from customers, or those who deal
with customers on the producer’s behalf. The direct response sought is not necessarily a
sale. Promotions may encourage consumers to send for a brochure, visit a dealer or
consumer a sample. The ultimate aim is always sales, but this is true of marketing generally.
- Benefit orientated: promotions offer their targets additional benefits, beyond the standard
marketing mix. The enhanced mix could include extra product, a reduced price or an added
item, service or opportunity.
Promotion Effectiveness Index (PEI): companies specializing in the production of market data
such as Nielsen and Information Resources develop a Promotional Effectiveness Index (PEI)
determined by the technique of incremental sales. Sales in the promotional period are compared to
the baseline, an estimated value of sales that would have been achieved in the absence of
promotion. Promotion effectiveness index measures total volume relative to what would have
normally been sold in the absence of any store level promotional activity. It synthesizes the
effectiveness of each promotional activity by assessing the ratio of baseline sales total sales made.
PRICE DETERMINATION:
1. COST BASED METHOD: (i) design and engineer a superior product; (ii) determine product
costs; (iii) fix the price based on cost; (iv) convince consumers/buyers of the product value.
2. VALUE BASE METHOD: (i) verify customer needs and value perception; (ii) set the target
price corresponding to the perceived value of the customer; (iii) determine maximum costs
that can be incurred; (iv) design the product in order to offer the desired value at the target
price.
Like everything else in marketing, a good pricing strategy starts with the customer.
Mark-up pricing:
Target profit:
Price bundling: price bundling leads to a disassociation or decoupling of transaction costs and
benefits, thereby reducing attention to sunk costs and decreasing a consumer’s likelihood of
consuming a paid-for service. Multi-performance ticket holders are more likely to forgo a given
theatrical performance than are single performance ticket holders, all else held constant. Decreased
attention to sunk costs brought about by price bundling can be either cognitively driven or
motivationally driven.
The impact of digital payments on price perception: there is a different perception among
merchants about the benefit that digital payments can bring. A consistent percentage of Millennials
use digital payments to purchase online or in other offline channels. The positive perception vary
among different generations. At the same time, lots of digital users are not prepared to use these
kind of payment due to the lack of safety.
How consumers perceive the difference between relative and absolute discounts:
PRICE PREMIUM price premium, or relative price, is the percentage by which a product’s
selling price exceeds (or falls short of) a benchmark price. Marketers need to monitor price
premiums as early indicators of competitive pricing strategies. Changes in price premium can also
be signs of product shortages, excess inventories, or other changes in the relationships between
supply and demand.
Competitor price: The simplest calculation of price premium involves the comparison of a brand’s
price to that of a direct competitor.
Average price paid: Another useful benchmark is the average price that customers pay for brands in
a given category. This average can be calculated in at least two ways: as the ration of total category
revenue to total category unit sales, or as the unit-share weighted average price in the category.
Average price displayed: marketing managers who seek a benchmark that captures differences in
the scale and strength of brand’s distribution might weight each brand’s price in proportion to a
numerical measure of distribution. Typical measures of distribution strength include numeric
distribution, ACV (X), and PVC (%).
Average price charged: this benchmark requires knowledge only of prices. As a consequence, the
price premium calculated using this benchmark, serves a slightly different purpose. It captures the
way a brand’s price compares to prices set by its competitors, without regard to customer’s reaction
to those prices. It also threats all competitors equally in the calculation of the benchmark price.
Large and small competitors are weighted equally when calculating average price charged.
Price variation: researchers show how same brands changed the price among different market in
the same zone. The range of variation goes from a minimum of 0,7 to a maximum of 1,3 for a fruit
juice.
VOLUME VARIANCE volume variance can be caused by demand variance or share variance.
It is equal to the difference between actual sales volume at time t and expected sales volume for the
same period:
LINE PRICING prices of products belonging to the same product line should have at least a
minimum difference in price so that this difference is perceived by customers.
3.Exchange
3.Buyer-Seller Negotiation
TRIAL a way of persuading customers to buy a product by allowing them to use it for a limited
time without paying. Drive customers to purchase a product/service/experience for the first time.
When projecting sales for relatively new products, marketers typically use a system of trial and
repeated calculations to anticipate sales in the future periods. The penetration of a product in a
future period can be estimated on the basis of:
- Population size
- Trial rates
- Repeat rates
Trial rates: the percentage of a defined population that purchases or uses a product for the first
time in a given period.
FIRST-TIME TRIERS IN PERIOD t (#) the number of customers who purchase or use a
product or brand for the first time in a given period.
Growth is the aim of virtually all business. Indeed, perceptions of the success or failure of many
enterprises are based on assessments of their growth.
PROJECTION OF SALES Projections form customer surveys are especially useful in the early
stages of product development or in setting the timing for product launch. Through such
projections, customer response can be estimated without the expense of a full product launch.
Public relations are a set of tools that promote or protect the image of a business/product. A key role
to:
- Launch a new product
- Product repositioning
- Interest awakening of a category
- Influence on a specific targets