Marketing Exam 5
Marketing Advantage of Strong Brands
- Improved perceptions of Product Performance - Greater Customer Loyalty - Less Vulnerability to Marketing Crises - Higher Profit Margins - More inelastic consumer response to price increases - More elastic consumer response to price decreases - Greater Trade cooperation and support - Increased marketing communications effectiveness - Possible Licensing opportunities - Additional brand extension opportunities (tough - Jeep baby strollers) - Improved Employee recruiting and retention - Greater Financial Market returns
Variables that Shift Market Demand
- Income - Prices of Related Goods - Tastes - Population and demographics - Expected future prices
Drivers for Price Increases
- Increased Material Costs - Increased Labor Costs - Increased employee benefit costs (insurance) - Market demand exceeds supply - government regulated product changes (cost up, price up) - reduce or elimination of discounts and/or rebates
Cost-Based Pricing Chart
- Internally Driven - Design good product --> Determine Product Costs --> Set Price Based on Cost (what's gross margin on other products (%)) --> Convince Buyers of Product's Value (Marketing and sales) - Research and Development tend to overdesign, Manufacturing builds product without flexibility higher costs, Actual Product price higher, lower price off the get go to convince ppl to buy
Examples of Brands
- Kleenex - Chevy Brand - Bowtie symbol - Mercedes Benz symbol - Starbucks Coffee Logo - Kool Aid - Hot Wheels Logo
Value-Based Pricing Chart
- Market Driven - Assess Customer Needs and Value Perceptions (Quizzes about features; solving problems with products from other manufacturers) --> Set Target Price to Match Customer Perceived Value --> Determine costs that can be incurred --> Design Product to deliver desired value at target price
Customer Value Pricing Strategy Key Components
- Understand firm's pricing and profitability objectives - Understand firm's product (material) and operational costs - Understand needs and problems of customers (by customer, by channel (wholesale, retail), by product category - Understand each of the benefits available to customers that impacts their total price (Understand quantitative value of each benefit, clearly communicate the value of each to customers - Understand Competitor Landscape (Understand how total benefit programs is better than those offered by competitors)
Other Price Strategy Factors
1. Geographical - Metro Market Level - State level - region level - country level 2. Product Line Pricing 3. Optional Feature Pricing 4. Captive Product Pricing 5. Product Bundling Pricing (cable, internet, tv)
4 Main Steps of Strategic Brand Management
1. Identify and Establish Brand Positioning 2. Planning and Implementing Brand Marketing - Level of Investment in brand 3. Measuring and Interpreting Brand Performance 4. Growing and Sustaining Brand Value
Brand Building Criteria for Choosing brand elements and identity choices
1. Memorable to Target Market 2. Meaningful 3. Likeable - Hot Wheels logo
Bottom Right Eroding/Declining
Low Strength, High Stature - very well known and held in high regard but not as relevant as once was and not much investment into differentiation of the brand
Bottom Left New/Unfocused
Low strength, Low Stature
4. Value-Added Pricing
attaches value-added features and services to differentiate a company's offers while charging higher prices - energized differentiation - AMC's Cinema suites (movie theatres adding incentives - Panera Bread isn't about the lowest prices but the value customers receive (good fast-casual, clean food, outstanding service and the experience
2. Cash Cow Brands
a) not as much investment; profitable b) kept around despite dwindling sales c) Brand Equity d) Ex. Older Gillete Razor Blade Designs: Atra, Sensor, Mach III e) keep selling until target market dries up
1. Flanker Brands
a) positioned with respect to competitors' brands - Chevy Malibu, Toyota Camry -Product Brands b) helps more important and more profitable flagship brands retain desired positioning c) Ex. development of Lexus and Infiniti brands by Toyota and Nissan (Luxury Market)
4. High-End Prestige
a) relatively high-priced brand often to add prestige and credibility to entire portfolio - expectations high from target market b) Example = Corvette for Chevy and Viper for Dodge
Price
amount of money charged for a product or service or the sum of values that customers exchange for the benefits of having or using the product or service
Brand Contact
any information-bearing experience (positive or negative) a customer or prospect has with the brand, its product category, or its market - personal observation and use - word of mouth - interactions with company personnel - online or telephone experiences - payment transactions
Product Quality Leadership
best quality - leverage dominant position in industry by positioning at highest price point
1. Energized Differentiation
brand's point of difference; relates to margins and cultural currency - consumers excited and energized to go out and buy this differentiated brand
Simulate Price Increase without Increasing Price Points
by lowering the cost of the firm's (manufacturing) existing products/services - manufacturing costs are up (raw materials, freight, etc); ask Walmart for price increase, they say no because competitors willing to hold price; what to do to simulate Price Increase result on manufacturing costs a) shrinking packaging size for same price (obvious, cereal, soup, etc) b) substituting less expensive raw materials c) reducing/eliminating less valued product features d) removing product services e) using less expensive packaging material f) reducing number of packs and sizes offered g) creating new economy brands
1. Survival
costs basis higher, not super profitable; at least minimum profit, break even at earnings - not making enough to reinvest in the company
Market Demand
demand by all consumers of a given item or service
Inelastic Demand
demand hardly changes with small change in price --> gasoline
1. Brand Element or Identity Choices
devices, which can be trademarked, that identify and differentiate the brand
Program Multiplier
distinctiveness, relevance to customer, integration, value, excellence --> Customer Mindset
2. Maximum Current Profit
don't lower prices, maintain current levels of profit
Leveraging Secondary Associations
in order to create brand equity by linking the brand to other information in memory that conveys meaning to consumers - Russia and good vodka - Brand to other brands, people, places, things
Brand Promise
the marketer's vision of what the brand must be and do for the consumers - Virgin America picture of luxury flight, must back it up
Strategic Brand Management
process that combines the design and implementation of marketing activities and programs (marketing mix) to build, measure, and manage brands to maximize value
Excellence in pricing program can be equal to
product in the market with no competitive equal
4. Customer Stocking Commitment
take addition X% off purchases based on 4 tier stock level schedule
5. Non Compete Agreement (single source only)
take additional 5% off all purchases if carrying only our brand - typically durable goods
3. Large Quantity or Bulk Purchase
take additional 7% off purchase if purchased in full truck loads - freight savings
Price is
the only element in marketing mix that creates revenue - all other components (place, promotion, product (materials, labor)) represent costs
Brand Valuation
turning qualitative feel about brand into quantitative measures; metric that quantifies the worth ($) of powerful but intangible corporate assets; enables brand owners, investment community, and others to evaluate and compare brands and make faster and better informed decisions
Brand Tracking Studies
use the brand audit as input to collect quantitative data from consumers over time, providing consistent, baseline information about how brands and marketing programs are performing - was I able to move needle of my brand in target market
Customer Value Based Pricing
uses buyer's perceptions of value as the key to pricing; KEY: pricing is developed concurrent to other marketing mix components
Brand Equity Models
varying methods that evaluate and rate a brand's strength 1. Brand Equity Valuator 2. Brandz 3. Brand Resonance Model
Elastic Demand
when demand changes greatly with small change in price - precious metals
4. Relationships
wnat about you and me? - adopting brand loyalty - intense active loyaly to brand - Corvette Car
Top Left Niche/Momentum
High Strength (Energized Differentiation and Relevance) and Lower Stature
Top Right Leadership
High Strength, High Staure
Brand Strategy for new products may employ:
- Brand Extension: Jeep Compass, Patriot, etc - Sub Brand: Lexus luxury brand of Toyota - Parent Brand: company brand of Toyota - Master/Family Brand - Line Extension: Jeep Wrangler Unlimited
Competition and Other External Factors
- Competitors' strategies and prices - Marketing strategy, objectives, and mix - Nature of the Market and Demand
Consumer Perceptions of Value
- Price Ceiling - No demand above price
Product Costs
- Price Floor - No profits - Sell at Gross Margin - Sell at Net Costs
Example of Leveraging Secondary Associations
- Snow board maker Burton subbrand Slipstream by Burton (surfboards) --> cobrand with Dow Chemical for special chemical - strong material used for boards - could sell in popular surf shops - endorsements - sponsor surf competitions - secure and publicize favorable ratings from 3rd parties
2. Revitalize Brand
- almost any kind of revitalization starts with the product - ex. Burberry focused on core products, and refocused on heritage and style
9. Performance Rebates
- customer receives quarterly rebate checks based on pre-determined purchase price - some industries, rebates can be very significant with large customers
Price reductions can cause
- cut profits and initiate price wars - cheapen perceptions of brand equity (cut costs in operation but don't cut quality of brand)
Price Attributes
- determines share and profitability (lower price, more customers at low cost, lower profitability if costs are high) - Most flexible mix component - Prices can change quickly - #1 problem facing most marketing executives (proactively change/adjust pricing, force competitors to react) - Most companies do not manage pricing well - Most companies see it as a competitive strategic weapon
Competitor Based Pricing
- find out where competitors are and how low have to go to compete - setting prices based on competitors' strategies, prices, costs, and market offering - boutiques can't compete with box store prices so have to go above and beyond to reach target market and increase sales...niche approach (Hot Mama Boutique)
1. Reinforce Brand
- requires brand to always be moving forward - protect brand
3 Key Equity Drivers
1. Brand, element, or identity choices (logos) 2. Product that is attached to brand (must be good match) and accompanying marketing 3. Leveraging Secondary Associations (young company trying to establish gravitas (seriousness) and gain value can attach to or associate with more well known brand to help gain value and show worth)
5 Ways of Branding
1. Branding "physical goods" - Cholesterol Medicine (Lipitor brand under Pfizer) 2. Branding "a product provider" - Stores (Macy's) 3. Branding "a service" - Health Insurance (Blue Cross Blue Shield) 4. Branding a "product or service provider" - Persons (Prince - the artist formerly known as Prince) 5. Branding soccer team - Real Madrid
Discounts and Allowances
1. Early Payment Discount 2. Cash Discount 3. Large Quantity or Bulk Purchase 4. Customer Stocking Commitment 5. Non Compete Agreement (single source only) 6. Special Event Pricing 7. Start Up Financial Incentives 8. Loss Leader Pricing 9. Performance Rebates
4 Types of Customer Value Based Pricing
1. Every-Day-Low-Pricing 2. High-Low Pricing 3. Good-Value Pricing 4. Value-Added Pricing - Retailer to Consumer
Deciding how to brand new products is especially critical and can be accomplished 3 different ways:
1. Develop new brand elements for new products 2. Apply some existing brand elements 3. Use combination of new/existing brand elements
Managing Brand Equity
1. Reinforce Brand 2. Revitalize Brand
Brand's Role for Consumers
1. Set and fulfill expectations (restaurants) 2. Reduce Risk (Johnson and Murphy shoes - don't risk spending more money and being disappointed) 3. Simplify Decision Making 4. Take on Personal Meaning (great match for person - Ford or Chevy Man) 5. Become part of identity (Corvette Ambassadors wearing jackets and hats for Corvettes all the time)
Brand's Role for Firms
1. Simplify Product Handling (resellers carrying only brand that target market really likes) 2. Organize Inventory and Accounting 3. Offer Legal Protection (Assurance that company will stand behind product product during hard times) 4. Create Brand Loyalty 5. Secure Competitive Advantage (supplier that is the number 1 seller of product; if reatailer can sell that brand of product-->Competitive Advantage)
Price Setting Objectives
1. Survival 2. Maximum Current Profit 3. Maximum Market Share 4. Maximum Market Skimming 5. Product Quality/Leadership
Leveraging and Preserving Brand Equity Criteria for Choosing brand elements and identify choices
1. Transferrable 2. Adaptable 3. Protectable - Kool Aid - forsee future
1. Brand Asset Valuator
4 Pillars that diagnose Brand Health 1. Energized Differentiation 2. Relevance 3. Esteem 4. Knowledge
Brand Resonance Model (Pyramid)
4. Relationships / Resonance - what about you and me? -adopting brand - loyalty 3. Response - what about you, response to 1 and 2 2. Meaning - what are you? meaning what is product or service in marketplace 1. Identify - Who are you? what is your product or service
Customer Mindset
Awareness, Associations, Attitudes, Attachment, Activity --> Customer Multiplier
Most new products are
Brand Extensions
Brand Stature
Current Indicator - Current Operating Value - Esteem - Knowledge - Are brands really well known?
Business to Business Pricing
Firm to retailers and distributors
Middle
Drivers that drive price up or down - competitor's strategies - internal factors - Gas prices and other economic, etc factors - External Factors
Branding has been around a long time
Ex. Bayer (aspirin, heroin, lycetol) and Chlorox (toothpaste)
2. Cash Discount
If paid via direct pull from bank (cash) account vs credit card --> 2% discount (Gas Stations)
Brand Strength
Leading indicator - Future Growth Value - Energized Differentiation - Relevance - Must be able to adapt and update as competitors change and target market changes
Price Spectrum
Left ($): Product Costs and Price Floor Middle: Competition and Other External Factors Right ($$$): Consumer Perceptions of Value and Price Ceiling
1. Early Payment Discount
Net 45 days payment terms, if paid in less than 25 days --> Discount
Price Ceiling
No demand above price - products that are "best of best" - small market where people will buy these extremely high priced products - $1 million vehicle - Price is not an issue for target market; want the best
1. Identity
Salience (bottom of pyramid) -Deep, broad brand awareness
Marketers of the 21st century brands must excel at
Strategic Brand Management
Brand Equity BE
Strengths: a) tends to Emphasize Strategic Issues: - Managing Brands - Creating and leveraging brand awareness - Image with customers b) Provides Practical guidance for specific marketing activities Weaknesses: - tends not to focus on BE related detailed customer analysis - tends not to focus on the long term profitability BE creates - Usually lacks sharp segmentation schemes - Usually lacks personalized, customized marketing programs - Generally Fewer Financial Considerations with BE
BrandAsset Valuator Graph
Top Right: Leadership Top Left: Niche/Momentum Bottom Left: New/Unfocused Bottom Right: Eroding/Declining
Value =
Total benefits - Total Cost
Cost Based vs Value Based
Tough economic times tend to Drive a) CBP companies to "cut costs and price" - can't afford to lose sales; costs go up, efficiencies go down, cut costs (lay people off, cut advertising) and lower price b)VBP companies to "sell added value to the market - willing to give more for same price (BOGO, 2 for 1) - show enough value to keep customers around - increase advertising
3. Esteem
how you regard your brand "target market" - perceptions of quality and loyalty --> Adoption
Companies Use different brands to be able to change positions in the market
a high end vehicle brand like Mercedes would have to sub brand or create a different brand to market a cheaper brand; if Mercedes marketed a cheaper vehicle, it could hurt reputation for excellence because the cheaper vehicle would have to lack the quality of the higher end, higher priced vehicles
Brand
a name, term, sign, symbol, design, or a combination of the above intended to identify goods or services of one seller or group of sellers and to differentiate them from those of competitors
3 Major Pricing Strategies
a) Customer-Value Based Pricing b) Cost-Base Pricing c) Competitor Based Pricing
3. Low-End Entry Level: Opening Price Point
a) attract customers to the brand franchise b) retailers feature these "traffic builders" because they are able to trade customers to a higher priced brand - toothpaste company c) Toyota's Scion brand targeted specific younger demographic market - post customization and cheaper; hopefully as younger demographic sticks with Toyota once older
Drivers for Price Cuts
a) excess plant capacity (industry or lost customer driven) b) Competitor price reductions c) Excess system (plants and warehouse) inventory d) Phasing out soon to be obsolete or obsolete products - don't respond to these lower prices due to dumping products e) Aggressive price activities - new competitor seeking share f) Introduction of functional driven, price programs
Customer Multiplier
competitive reactions, channel support, customer size and profile --> Brand Performance
Brand Audit
focused on series of procedures to assess the health of the brand, uncover its sources of brand equity and suggest ways to improve and leverage its equity - current health baseline score which quantrant?
2. Relevance
how appropriate brand is to you; relates to considerations and trial - relates to target market
4. Knowledge
intimate understanding of the brand; relates to awareness and consumer experience - Apple Brand, look forward to updates; beta testers of updates
1. Every-Day-Low-Pricing
involves charging a constant everyday low price with few or no temporary price discounts -Have Multiple suppliers to get low price -ex. Amazon
2. High-Low Pricing
involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items -clothing stores: Kohl's -Loyalty incentives - more discounts -Manufacturer/Supplier must be on board - get better price to sell
Cost Based Pricing
involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk - if accounting and finance take over, thin ice, watch every nickel
Price Floor
lowest price to sell at and still stay in business, no profits below price - Gross Margin (Profit): Price = Manufacturing costs (materials, overhead, labor, warranty, freight) - Net Earnings: no earnings, no profit (all costs including costs that help the company such as Research and Development, marketing, sales organization, Ads; below the line
Market Multiplier
market dynamics, growth potential, risk profile, brand contribution - higher gas prices, more push for electric car
Law of Demand
price of product falls, increase quantity demanded vice versa - measure of sensitivity of demand to change in price
How to Build Brand Equity
marketers creating the right brand knowledge structures with the right consumers starting with understanding of the Key equity drivers
Brand Performance (advantages)
price premiums, price elasticities, market share, expansion success, cost structure, profitability --> Market Multiplier
7. Start Up Financial Incentives
new customers may be provided or offered longer payment terms and price discount on order for initial stock of inventory
3. Good-Value Pricing
offers the right combination of quality and good service at a fair price - fitness centers - service side
3. Maximum Market Share
penetration pricing to steal competitor market share, lower prices
Customer Value
perceived worth of the total benefits received by a customer in exchange for the total cost of the offer while taking into consideration available competitive offers - bad to have nothing but low prices - Find Right Marketing Mix
2. Meaning
performance and imagery - points of parity and difference
3. Response
positive, accesstible reactions ; Judgement vs Feelings
How much investment ($) into creating brand value
product, communications, trade, employee's thoughts, other --> Program Multiplier
Brand is
promise between firm and consumer
Brand Strategy
reflects the number and nature of both common and distinctive brand elements - deciding how to brand new products is especially critical and can be accomplished 3 different ways: 1. Develop new brand elements for new products 2. Apply some existing brand elements 3. Use combination of new/existing brand elements
6. Special Events Pricing
retail trade shows - often, manufacturers through retail partners offer discounts off orders taken from retail B2B (business to business) customers during show hours
8. Loss Leader Pricing
retailers known for publishing flyers on "bottom of the barrel" pricing on specific product category items that tend to draw customers to the store to buy other products - Levi's jeans at clothing store to get people in, don't make money on the jeans so need customer to buy a belt or other item as well
4. Maximum Market Skimming
set highest price points that don't result in lost market share - high enough to make money and to be profitable but - small enough to not lose share in the market or spark a reaction from competitors
Brand Portfolios
set of all brands and brand lines a particular firm offers for sale in a particular category or market segment; 4 categories: 1. Flanker Brands 2. Cash Cow Brands 3. Low-End Entry Level: Opening Price Point 4. High End Prestige
2. Product and Accompanying Marketing
should be holistic in nature regarding the development of a strong brand; accomplished through a range of contacts and touch points
Customer Equity (CE)
strengths: - Focuses on bottom line financial value - quantifiable measures of financial performance weaknesses; for the most part ignores: - guiding go to market strategies - attracting higher quality employees - eliciting stronger support from channel and supply chain partners - Creating growth opportunities through line and category extensions and licensing opportunities - competitive moves and counter moves Customer to Customer Recommendations
Brand Value Chain
structured approach to assessing the sources and outcomes of brand equity and the way marketing activities create brand value
Brand Equity
the added value endowed to products and services with consumers - consumers put value on brand by purchasing products and services over and over
Customer Based Brand Equity
the differential effect brand knowledge has on consumer response to the marketing of that brand; trying to drive: - Differences in consumer response - Brand Knowledge - Perceptions, preferences, and behavior
What price is most important to a firm's unit sales, sales dollars, and profit dollars?
the price to distributor
Branding
the process of endowing products and services with the power of the brand - brand complements product