Designing Marketing Programs

to Build Brand Equity

CHAPTER-5
 Learning Objectives
• Identify some of the new perspectives and developments in marketing.

• Describe how marketers enhance product experience.

• Explain the rationale for value pricing.

• List some of the direct and indirect channel options.

• Summarize the reasons for the growth in private labels.

New Perspectives in Marketing
✔ Rapid technological developments;
✔ Greater customer empowerment;
✔ Fragmentation of traditional media;
✔ Growth of digital and mobile marketing options;
✔ Channel transformation and disintermediation;
✔ Increased competition and industry convergence;
✔ Globalization and growth of developing markets;
✔ Heightened sustainability concerns, with an increased emphasis on corporate
social responsibility;
✔ Greater empowerment of consumers because of their ability to influence
opinions through social media and word of mouth.
The New Capabilities of the New Economy
Consumers:
▪ Can wield substantially more customer power.
▪ Can purchase a greater variety of available goods and services.
▪ Can obtain a great amount of information about practically anything.
▪ Can more easily interact with marketers in placing and receiving orders.
▪ Can interact with other consumers and compare notes on products and
services.
Companies:
▪ Can operate a powerful new information and sales channel with augmented
geographic reach to inform and promote their company and its products.
▪ Can collect fuller and richer information about their markets, customers,
prospects, and competitors.
▪ Can facilitate two-way communication with their customers and prospects, and
facilitate transaction efficiency.
▪ Can send ads, coupons, promotions, and information by e-mail to customers
and prospects who give them permission.
▪ Can customize their offerings and services to individual customers.
▪ Can improve their purchasing, recruiting, training, and internal and external
communication.
 Personalizing Marketing
⮚ Experiential Marketing:

o Experiential marketing is marketing strategy that

engages the consumer and creates real-life

experience that will be remembered.

o It promotes a product not only by

communicating a product’s features and benefits

but also by connecting it with unique and

interesting consumer experiences.

 Personalizing Marketing

Brand Experience Scale

 Personalizing Marketing
⮚ Relationship Marketing:

o Relationship marketing is a form of marketing

developed from direct response marketing

campaigns that emphasizes customer retention

and satisfaction rather than sales transactions.

o It attempts to provide a more holistic,

personalized brand experience to create stronger

consumer ties.
 Personalizing Marketing
o The following are just a few of the basic benefits relationship

marketing provides:

✔ Acquiring new customers can cost five times as much as satisfying

and retaining current customers.

✔ The average company loses 10 percent of its customers each year

✔ A 5 percent reduction in the customer defection rate can increase

profits by 25 to 85 percent, depending on the industry.

✔ The customer profit rate tends to increase over the life of the

retained customer
 Personalizing Marketing
o Three concepts that can be helpful in relationship marketing:

1. Mass Customization- making products to fit customers’ exact specifications

2. Personalization Marketing- centered around personalized interactions with customers

3. Permission Marketing- Practice of marketing to consumers only after they give permission
 Personalizing Marketing
Five steps to effective permission marketing:

1) Situational permission: Prospects permit the company to access their personal information.

2) Brand trust: Prospects allow the company to provide for their needs.

3) Personal relationship: Prospects offer information based on a personal relationship with the provider’s

organization.

4) Incentive-based permission: Incentives such as points or free prizes are used to maintain permission to

access customer data.

5) Intravenous permission: Customers become dependent on the company, and the supplier controls the

supply of certain goods or services.

 Product Strategy
Perceived Quality-

• Perceived quality can be defined as the customer’s perception of the overall quality or

superiority of a product or service with respect to its intended purpose, relative to

alternatives.

• It is an intangible and overall feeling about a brand

• It cannot necessarily be objectively determined because it is a perception

• Perceived quality differs from satisfaction

 Product Strategy
Managing Customers Post-Purchase-

• User Manuals- To enhance consumers’ consumption experiences, marketers must develop

user manuals or help features that clearly and comprehensively describe both what the

product or service can do and how consumers can realize these benefits.

• Customer Service Programs- Customer service plays an important role in the post-purchase

phase. Investments in customer service offer multiple benefits, including the ability to

connect with customers and gain valuable feedback.

• Loyalty Programs- The purpose is “identifying, maintaining, and increasing the yield from a

firm’s ‘best’ customers through long-term, interactive, value-added relationships.”

 Pricing Strategy
Consumer Price Perceptions and Setting Prices-
Choosing a pricing strategy to build brand equity means determining-

▪ A method for setting current prices, and

▪ A policy for choosing the depth and duration of promotions and discounts.

Pricing Implication-
▪ Price cuts will effect different brands differently

▪ High quality brands can easily “steal” market share from low quality brands by cutting price

▪ At the same time, it may not always hold true

▪ But lower quality brands will not steal share from a high quality brands by cutting price
Pricing Strategy
 Pricing Strategy
• Value-based pricing strategies: A strategy of setting prices primarily based on a consumer's

perceived value of a product or service.

• Razor-and-blades pricing model: The process of selling one product at cost or for a loss in

order to sell a paired product later for a profit.

• Freemium model: Many start-up companies first launch a free service. After building a large

installed base, those who use the freemium model then promote a premium tier, which has a

price attached to it.

• Pay-as-you-wish pricing: A firm lets consumers decide what a product is worth to them and

how much they want to pay to get the product.

 Pricing Strategy

Razor-and-blades pricing model

Value-based pricing Pay-as-you-wish pricing

Freemium model
 Pricing Strategy
Value Pricing:
• Value pricing is the method of setting a price by which a

company calculates and tries to earn the differentiated

worth of its product for a particular customer segment

when compared to its competitor.

• The objective of value pricing is to uncover the right

blend of product quality, product costs, and product

prices that fully satisfy the needs and wants of

consumers and the profit targets of the firm.

 Pricing Strategy
• A successful value-pricing strategy should strike the proper balance among

three key components:

1. Product design and delivery: The first key to a successful value-pricing

strategy is the proper design and delivery of the product.

2. Product costs: The second key to a successful value-pricing strategy is to

lower costs as much as possible.

3. Product prices: The third key to a successful value-pricing strategy is to

understand exactly how much value consumers perceive in the brand and,

thus, the extent to which they will pay a premium over product costs.
 Pricing Strategy
• Communicating Value-

✔ Combining these three components in the right way to create value is crucial.

✔ Just delivering good value, while necessary, is not sufficient for achieving pricing success,

consumers need to understand and appreciate the value of the brand.

✔ In many cases, that value may be obvious, the product or service benefits are clear, and

comparisons with competitors are easy.

✔ In other cases, however, the value may not be obvious, and consumers may too easily default to

purchasing from lower-priced competitors. Marketers may then need to engage in marketing

communications to help consumers better recognize the value.

 Pricing Strategy
• Price Segmentation-

✔ Consumers may have differing value perceptions,

and therefore, could and most likely should receive

varying prices.

✔ Price segmentation sets and adjusts prices for

appropriate market segments.

✔ Starbucks similarly has raised the prices of some of

its specialty beverages while charging less for some

basic drinks.
 Pricing Strategy
Everyday Low Pricing:
• Everyday low price is a pricing strategy promising

consumers a low price without the need to wait for sale

price events or comparison shopping.

• EDLP saves retail stores the effort and expense needed

to mark down prices in the store during sale events, and

is also believed to generate shopper loyalty.

 Channel Strategy
Channel Design-
▪ Many possible channel types and arrangements exist, broadly classified into direct and indirect channels.

▪ Direct channels mean selling through personal contacts from the company to prospective customers by mail,

phone, electronic means, in-person visits, and so forth.

▪ Indirect channels sell through third-party intermediaries, such as agents or broker representatives, wholesalers

or distributors, and retailers or dealers.

▪ Increasingly, winning channel strategies will be those that can develop “integrated shopping experiences” that

combine physical stores, Internet, phone, and catalogs.

▪ From the standpoint of consumer shopping and purchase behaviors, channels can often blend three key

factors: information, entertainment, and experiences.

 Channel Strategy
Indirect channels-
• Indirect channels can consist of different types of intermediaries, but we concentrate on

retailers.

• Retailers tend to have the most visible and direct contact with customers and therefore have

the greatest opportunity to affect brand equity.

• Consumers may have associations with any retailer based on product assortment, pricing and

credit policy, and quality of service, among other factors.

• Retailers can have a profound influence on the equity of the brands they sell, especially

regarding the brand-related services they can support or help create.

 Channel Strategy
• Push and Pull Strategies- In addition to the indirect avenue of image transfer, retailers can directly

affect the equity of the brands they sell. Their methods of stocking, displaying, and selling

products can enhance or detract from brand equity, suggesting that manufacturers must take an

active role in helping retailers add value to their brands.

• Channel Support- A variety of services provided by channel members can enhance the value to

consumers of purchasing and consuming a brand name product. Although firms are increasingly

providing some of the services themselves through toll-free numbers and Web sites, establishing

a “marketing partnership” with retailers may, nevertheless, be critical to ensuring proper channel

support and the execution of these various services.

 Channel Strategy
• Retail Segmentation- Retailers are “customers” too.

Because of their different marketing capabilities and

needs, retailers may need to be divided into segments

or even treated individually so that they will provide the

necessary brand support.

• Cooperative Advertising- Traditionally, with co-op

advertising, a manufacturer pays for a portion of the

advertising that a retailer runs to promote the

Cooperative Advertising
manufacturer’s product.
 Channel Strategy
Direct channels-
• Company-Owned Stores- To gain control over the selling

process and build stronger relationships with customers,

some manufacturers are introducing their own retail

outlets, as well as selling their products directly to

customers through various means. These channels can

take many forms, the most complex of which, from a

manufacturer’s perspective, is company-owned stores.

Example- Hallmark, Goodyear

 Channel Strategy
Company stores provide many benefits.

✔ Primarily, they are a means to showcase the brand and

all its different product varieties in a manner not easily

achieved through normal retail channels.

✔ Company stores can provide the added benefit of

functioning as a test market to gauge consumer

response to alternative product designs, presentations,

and prices, allowing retailers to keep their fingers on the

pulse of consumers’ shopping habits.

 Channel Strategy
Disadvantage of company stores are also mentioned-

✔ A disadvantage of company stores is that some

companies lack the skills, resources, or contacts to

operate effectively as a retailer.

✔ Another issue with company stores is the potential

conflict between existing retail channels and

distributors. In many cases, however, company stores

can be a means of bolstering brand image and building

brand equity rather than as direct sales devices.

 Channel Strategy
• Store-within-a-Store- In addition to creating their own

stores, some marketers such as Nike, Polo, and Levi

Strauss (with Dockers) are attempting to create their

own shops within major department stores. The store-

within-a-store concept can take hold through actual

leasing arrangements or less formal arrangements in

which branded mini-stores are used. For retailers, these

arrangements help drive foot traffic and acquire new

capabilities quickly.
 Channel Strategy
Online Strategies-
• Many consumers value the convenience of ordering from

companies online or over the phone and picking up the physical

product at their local store rather than having it shipped. They also

want to be able to return merchandise at a store even if they

originally bought it and had it shipped outside the store.

• Many consumers also like the convenience of being able to access

their online accounts inside the store and use Internet kiosks to

research purchase decisions in the store itself.

THANK YOU