Designing and Managing Integrated Marketing Communications

Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers -- directly or indirectly - about the products and brands they sell. They represent the voice of the company and its brands and help the firm establish a dialogue and build relationship with consumers. They can contribute to brand equity -- by establishing the brand in memory and creating a brand image -- as well as strengthen customer loyalty, drive sales, and even affect shareholder value.

The Changing Marketing Communications Environment

Technology and other factors have profoundly changed the way consumers process communications, and even whether they choose to process them at all. Commercial clutter is rampant. Marketing communications in almost every medium and form have been on the rise, and some consumers feel they are increasingly invasive. Therefore, marketers must be creative in using technology without intruding in consumers' lives.

Marketing Communications, Brand Equity and Sales

The marketing communications mix consists of eight major modes of communication:

1. Advertising -- Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.
2. Sales promotion -- A variety of short-term incentives to encourage trial or purchase of a product or service.
3. Events and experiences -- Company-sponsored activities and programs designed to create brand-related interactions.
4. Public relations and publicity -- Programs directed internally or externally to promote or protect a company's image or its individual product communciations.
5. Direct marketing -- Use of mail, telephone, fax, e-mail, or Internet to communicate directly with or solicit response or dialogue from specific customers and prospects.
6. Interactive marketing -- Online activities and programs to engage customers or prospects and directly or indirectly raise awareness, improve image, or elicit sales.
7. Word-of-mouth marketing -- People-to-people oral, written, or electronic communications that relate to the merits or experiences of purchasing or using products or services.
8. Personal selling -- Face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions, and procuring orders.

Communications Process Models

Marketers should understand the fundamental elements of effective communications. Two models are useful: a macromodel and micromodel. Two represent the major parties -- sender and receiver. Two represent the major tools -- message and media. Four represent major communication functions -- encoding, decoding, response, and feedback. The last element is noise, random and competing messages that may interfere with the intended communication.

 

Fig. Elements in the Communication Process

Developing Effective Communications

Developing effective communications requires eight steps. The basics are

1. Identifying the target audience -- potential buyers of the company's products, current users, deciders, or influencers, and individuals, groups, particular publics, or the general public.
2. Determining the objectives -- category need, brand awareness, brand attitude, brand purchase intention.
3. Designing the communications -- message strategy (management searches for appeals, themes, or ideas that will tie in to the brand positioning and help establish points-of-parity or points-of-difference), creative strategy (the way marketers translate their messages into a specific communication) and message source (messages delivered by attractive or popular sources can achieve higher attention and recall, which is why advertisers often use celebrities as spokespeople).
4. Selecting the channels -- means to carry the message becomes more difficult as channels of communication become more fragmented and cluttered.
5. Establishing the budget -- industries and companies vary considerably in how much they spend on marketing communications. Expenditures might be 40 percent to 45 percent of sales in the cosmetics industry, but only 5 percent to 10 percent in the industrial-equipment industry, with company-to-company variations.
6. Deciding on the media mix -- companies must allocate the marketing communications budget over the eight major modes of communication: advertising, sales promotion, public relations and publicity, events and experiences, direct marketing, interactive marketing, word-of-mouth marketing, and the sales force.
7. Measuring the results -- after implementing the communications plan, the company must measure its impact by asking members of the target audience whether they recognize or recall the message, how many times they saw it,what points they recall, how they felt about the message, and what are their previous and current attitudes toward the product and company.
8. Managing integrated marketing communications (IMC) -- defines as "a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time." This planning process evaluates the strategic roles of a variety of communications disciplines -- and skillfully combines these disciplines to provide clarity, consistency, and maximum impact through the seamless integration of messages.

Coordinating Media

Media coordination can occur across and within media types, but marketers should combine personal and nonpersonal communications channels through multiple-vehicle, multiple-stage campaigns to achieve maximum impact and increase message reach and impact. Many companies are coordinating their online and offline communications activities.

Implementing IMC

Integrated marketing communications can produce stronger message consistency and help build brand equity and create greater sales impact. It gives someone the responsibility -- where none existed before -- to unify brand images and messages through thousands of company activities. IMC should improve the company's ability to reach the right customers with the right messages at the right time and place.

 Summary

Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers -- directly or indirectly - about the products and brands they sell. They represent the voice of the company and its brands and help the firm establish a dialogue and build relationship with consumers. Technology and other factors have profoundly changed the way consumers process communications, and even whether they choose to process them at all. Commercial clutter is rampant. Marketing communications in almost every medium and form have been on the rise, and some consumers feel they are increasingly invasive. Therefore, marketers must be creative in using technology without intruding in consumers' lives.They can contribute to brand equity -- by establishing the brand in memory and creating a brand image -- as well as strengthen customer loyalty, drive sales, and even affect shareholder value. Integrated marketing communications can produce stronger message consistency and help build brand equity and create greater sales impact. It gives someone the responsibility -- where none existed before -- to unify brand images and messages through thousands of company activities. IMC should improve the company's ability to reach the right customers with the right messages at the right time and place.

Personal Point of View

The most crucial fact for me is the intent of the message the marketer wants to send out to the target segment carries a company's image, product and brand value. After being carefully evaluated the messages, we can emphasis on the type of the media that we are going to use to reach out the target segment. These days, reaching out to the target media is a lot easier than before with the improved and developed technologies. 

Managing Retailing, Wholesaling, and Logistics

Retailing includes all the activities in selling goods or services directly to final consumers for personal, nonbusiness use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. Any organization selling to final consumers - whether it is a manufacturer, wholesaler, or retailer - is in retailing.

Types of Retailers

Consumers today can shop at store retailers, nonstore retailer, and retail organization. Different formats of store retailers will have different competitive and price dynamics. Retailers can position themselves as offering one of four levels of service:

1. Self-service - is the cornerstone of all discount operations. Many customers carry out their own "locate-compare-select" process to save money.
2. Self-selection - customers find their own goods, although they can ask for assistance.
3. Limited service - these retailers carry more shopping goods and services such as credit and merchandise-return privileges. Customers need more information and assistance.
4. Full service - salepeople are ready to assist in every phase of the "locate-compare-select" process. The high staffing cost, along with the higher proportion of specialty goods and slower-moving items and the many services, result in high-cost retailing.

Nonstore retailing has been growing much faster than store retailing. It has four major categories (1) direct selling, a multibillion-dollar industry with hundreds of companies (such as Avon) selling door-to-door or at home sales parties; (2) direct marketing, with roots in direct-mail and catalog marketing, also includes telemarketing and Internet selling (1-800-FLOWERS); (3) automatic vending used for impulse items such as soft drinks and cosmetics; and (4) buying service, a storeless retailer serving a specific clientele that is entitled to discounts in return for membership.

Retailer Marketing Decisions

• Target Market - Until it defines and profiles the target market, the retailer cannot make consistent decisions about product assortment, store decor, advertising messages and media, price, and service levels.
• Channels - Based on a target market analysis and other considerations, retailers must decide which channels to employ to reach their customers.
• Product Assortment - The retailer's product assortment must match the target market's shopping expectations in breadth and depth. Another challenge is to develop a product-differentiation strategy by offering brands not available at competing stores, featuring mostly private-label goods, presenting distinctive merchandise events, changing merchandise frequently or offering surprise merchandise, featuring new merchandise, offering customizing services, or offering a highly targeted assortment.
• Procurement - The retailer must establish merchandise sources, policies, and practices for procurement. Stores are using direct product profitability (DPP) to measure a product's handling costs from the time it reaches the warehouse until a customer buys it in the store.
• Prices - Prices are a key positioning factor and must be set in relationship to the target market, product-and-service assortment mix, and competition. Retailers generally fall into the high-markup, lower-volume group (fine specialty stores) or the low-markup, higher-volume group (discount stores).
• Services - Retailers must decide on the services mix to offer customers. Prepurchase services include accepting telephone and mail orders, advertising, window and interior display, and fitting rooms. Postpurchase services include shipping and delivery, gift wrapping, adjustments and returns, and alterations.
• Store Atmosphere - Atmosphere is another differentiation tool. Every store has a look, and a physical layout that make it hard or easy to move around. 
• Store Activities and Experiences - The growth of e-commerce has forced traditional brick-and-mortar retailers to respond.
• Communications -Retailers use a wide range of communication tools to generate traffic and purchases, including advertising, special sales, money-saving coupons, frequent-shopping rewards, and in-store food sampling. 
• Location - The three keys to retail success are "location, location, and location." Retailers can place their stores in the following locations:
• Central business districts: the oldest and most heavily trafficked city areas, often known as "downtown."
• Regional shopping centers: large suburban malls containing 40 to 200 stores, a mix of smaller stores and one or two nationally known anchor stores or a combination of big-box stores.
• Community shopping centers: smaller malls with one anchor store and 20 to 40 small stores.
• Shopping strips: a cluster of stores, usually in one long building, serving a neighborhood's needs for groceries, hardware, dry cleaning, and more.
• A location within a larger store: concession space rented by McDonald's or another retailer within a larger operation, such as an airport or a department store.
• Stand-alone stores: free-standing retail sites not directly connected to other stores.

Private Labels

A private label brand (also called a reseller, store, house, or distributor brand) is a brand that retailers and wholesalers develop.

Wholesaling

Wholesaling includes all the activities in selling goods or services to those who buy for resales or business use. It excludes manufacturers and farmers (because they are engaged primarily in production) and retailers. Wholesalers (also called distributors) differ from retailers in several ways. First, wholesalers pay less attention to promotion, atmosphere, and location because they deal with business customers rather than final consumers. Second, wholesale transactions are usually larger than retail transactions, and wholesalers cover a larger trade area than retailers. Third, wholesalers and retailers comply with different legal regulations and taxes.

Wholesaling Functions

Savvy wholesalers are adding value to the channel by adapting their services to meet their suppliers' and target customers' changing needs. They are increasing asset productivity by managing inventories and receivable better and cutting costs by investing in materials-handling technology and information systems. Yet wholesaling remains vulnerable to one of the most enduring trends - fierce resistance to price increases and the winnowing out of suppliers based on cost and quality.

Market Logistics

Market logistics includes planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer requirements at a profit. Market logistics planning has four steps:

1. Deciding on the company's value proposition to its customers.
2. Selecting the best channel design and network strategy for reaching the customers.
3. Developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management.
4. Implementing the solution with the best information systems, equipment, policies, and procedures.

Integrated Logistics Systems

The market logistics task calls for integrated logistics systems (ILS), which include materials management, material flow systems, and physical distribution, aided by information technology to shorten the order-cycle time, reduce errors, and improve control. Companies are concerned about the total cost of market logistics, which can amount to as much as 30 percent to 40 percent of the product's cost. Lower market-logistics costs will permit lower prices, yield higher profit margins, or both. Even though the cost of market logistics can be high, a well-planned program can be a potent tool in competitive marketing.

Market-Logistics Objectives

Many companies state their market-logistics objective as "getting the right goods to the right places at the right time for the least cost." Unfortunately, no system can simultaneously maximize customer service and minimize distribution cost. Given the market-logistics objectives, the company must design a system that will minimize the cost of achieving these objectives. Each possible market-logistics system will lead to the following cost:

M = T + FW + VW + S

where M = total market-logistics cost of proposed system
           T  = total freight cost of proposed system
         FW = total fixed warehouse cost of proposed system
         VW= total variable warehouse cost (including inventory) of proposed system
           S  = total cost of lost sales due to average delivery delay under proposed system

Market-Logistics Decisions

The firm must make four major decisions about its market logistics: (1) How should we handle orders (order processing)? (2) Where should we locate our stock (warehousing)? (3) How much stock should we hold (inventory)? and (4) How should we ship goods (transportation)?

Order Processing

Most companies want to shorten the order-to-payment cycle - the elapsed time between an order's receipt, delivery, and payment. The longer this cycle takes, the lower the customer's satisfaction and the lower the company's profits.

Warehousing

Every company must store finished goods until they are sold, because production and consumption cycles rarely match. More stocking locations mean goods can be delivered to customers more quickly, but warehousing and inventory costs are higher. To reduce these costs, the company might centralize inventory and use fast transportation to fill orders.

Inventory

Salespeople would like their companies to carry enough stock to fill all customer orders immediately. However, this is not cost-effective. Inventory cost increases at an accelerating rate as the customer-service level approaches 100 percent. Management needs to know how much sales and profits would increases as a result of carrying larger inventories and promising faster order fulfillment times, and then make a decision.

Transportation

Transportation choices affect product pricing, on-time delivery performance, and the condition of the goods when they arrive, all of which affect customer satisfaction. Shippers are increasingly combining two or more transportation modes, thanks to containerization, putting goods in boxes or trailers that are easy to transfer between two transportation modes. Piggyback describes the use of rail and trucks; fishyback, water and trucks; trainship, water and rail; and airtruck, air and trucks. Each coordinated mode offers specific advantages.

Shippers can choose private, contract, or common carriers. If the shipper owns its own truck or air fleet, it becomes a private carrier. A contract carrier is an independent organization selling transportation services to others on a contract basis. A common carrier provides services between predetermined points on a scheduled basis and is available to all shippers at standard rates.

Organizational Lessons

Market-logistics strategies must be derived from business strategies, rather than solely from cost considerations. The logistics system must be information-intensive and establish electronic links among all the significant parties. Smart companies will adjust their logistics strategies to each major customer's requirements. The company's trade group will set up differentiated distribution by offering different bundled service programs for different customers.

Summary

Retailing includes all the activities in selling goods or services directly to final consumers for personal, nonbusiness use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. Any organization selling to final consumers - whether it is a manufacturer, wholesaler, or retailer - is in retailing. Wholesaling includes all the activities in selling goods or services to those who buy for resales or business use. It excludes manufacturers and farmers (because they are engaged primarily in production) and retailers. Wholesalers (also called distributors) differ from retailers in several ways. First, wholesalers pay less attention to promotion, atmosphere, and location because they deal with business customers rather than final consumers. Second, wholesale transactions are usually larger than retail transactions, and wholesalers cover a larger trade area than retailers. Third, wholesalers and retailers comply with different legal regulations and taxes.

Personal Point of View

I believe wholesaling will take another stage in the next century. In the near future, wholesalers will skip the retailers and reach out to customers directly by opening "warehouse club" or "wholesale club." People will start shopping at "warehouse club" or "wholesale club" more frequently than retailers. The weak point is locations and easy access in the community. If wholesalers can open "warehouse clubs" in the every community such as Costco in California, then reality of succeeding in reaching directly out to customers is possible. 

 

Designing and Managing Integrated Marketing Channels

Successful value creation depends on successful value delivery. Holistic marketers are increasingly taking a value network view of their business, examining the entire supply chain that links raw materials, components, and manufactured goods and shows how they move toward the final consumers.

Marketing Channels and Value Networks

Most producers do not sell their goods directly to the final users; between them stands a set of intermediaries performing a variety of functions. These are marketing channels (also called trade channels or distribution channels), sets of interdependent organizations participating in the process of making a product or service available for use or consumption.

The Importance of Channels

A marketing channel system is the particular set of marketing channels a firm employs, and decisions about it are among the most critical ones management faces. In managing its intermediaries, the firm must decide how much effort to devote to push versus pull marketing.

A push strategy uses the manufacturer's sale force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users. In a pull strategy the manufacturer uses advertising and other communications to persuade consumers to demand the product from intermediaries, thus inducing the intermediaries to order it.

Hybrid Channels and Multichannel Marketing

Hybrid channels or multichannel marketing occurs when a single firm uses two or more marketing channels to reach customer segments. In multichannel marketing, each channel targets a different segment of buyers, or different need states for one buyer, and delivers the right products in the right places in the right way at the least cost. Companies must make sure their multiple channels work well together and match each target segment's preferred ways of doing business.

Value Networks

The company should first think of the target market, however, and then design the supply chain backward from that point, a strategy called demand chain planning. A value network is a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.

The Role of Marketing Channels

Through their contacts, experience, specialization, and scale of operation, intermediaries make goods available and accessible to target markets, and usually more effectively and efficiently than the producer can achieve on its own.

Channel Functions and Flows

A marketing channel performs the work of moving goods from producers to consumers. It overcomes the time, place, and possession gaps that separate goods and services from those who need or want them.

Channel Levels

The producer and the final customer are part of every channel. A zero-level channel, also called a direct marketing channel, consists of a manufacturer selling directly to final customers through door-to-door sales, home parties, mail order, telemarketing, TV selling, Internet selling, manufacturer-owned stores, and other methods. A one-level channel contains one selling intermediary. A two-level channel contains two intermediary typically a wholesaler and a retailer. A three-level channel contains three intermediaries. Obtaining information about end users and exercising control becomes more difficult for the producer as the number of channel levels increases.

Service Sector Channels

As Internet and other technologies advance, service industries such as banking and travel are operating through new channels. Marketing channels also keep changing in "person marketing."

Channel-Design Decisions

To design a marketing channel system, marketers must analyze customer needs and wants, establish objectives and constraints, and identify and evaluate major channel alternatives.

Channel-Management Decisions

After a firm has chosen a channel system, it must select, train, motivate, and evaluate individual intermediaries for each channel. It may also modify channel design and arrangements over time.

Channel Integration and Systems
Vertical Marketing Systems

A conventional marketing channel consists of an independent producer, wholesaler(s), and retailer(s). Each is a separate business seeking to maximize its own profits, even if this goal reduces profit for the system as a whole. No channel member has complete or substantial control over other members.

Horizontal Marketing System

A marketing system in which two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. Each company lacks the capital, know-how, production, or marketing resources to venture alone, or it is afraid of the risk. The companies might work together on a temporary or permanent basis or create a joint venture company.

Integrating Multichannel Marketing Systems

It is a system in which the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through one or more other channels. One benefit of adding more channels is increased market coverage. Not only are more customers able to shop for the company's products in more places, but those who buy in more than one channel are often more profitable than single-channel customers. A second benefit is lower channel cost - selling by phone is cheaper than personal selling to small customers. A third benefit is more customized selling, such as by adding a technical sales force to sell complex equipment. However, new channels typically introduce conflict and problems with control and cooperation.

Conflict, Cooperation, and Competition

Channel conflict is generated when one channel member's actions prevent other channel member from achieving its goal. Channel coordination occurs when channel members are brought together to advance the channel's goals, as opposed to their own potentially incompatible goals.

Types of Conflict and Competition

Horizontal channel conflict occurs between channel members at the same level. Vertical channel conflict occurs between different levels of the channel. Multichannel conflict exists when the manufacturer has two or more channels that sell to the same market.

Causes of Channel Conflict

One major cause of channel conflict is goal incompatibility. Another cause is unclear roles and rights. Conflict can also stem from differences in perception, as when a producer is optimistic about the economy and wants dealers to carry higher inventory, but its dealers are pessimistic. At times, conflict can occur because of intermediaries' dependence on the manufacturer such as auto dealers are profoundly affected by the manufacturer's product and pricing decisions.

Managing Channel Conflict

Some channel conflict can be constructive and lead to better adaptation to a changing environment, but too much is dysfunctional.

Dilution and Cannibalization

Marketers must be careful not to dilute their brands through inappropriate channels. This particularly important for luxury brands whose images often rest on exclusivity and personalized service.

Legal and Ethical Issues in Channel Relations

Companies are generally free to develop whatever channel arrangements suit them. In fact, the law seeks to prevent them from using exclusionary tactics that might keep competitors from using a channel.

E-Commerce and M-Commerce Marketing Practices

E-Commerce uses a Web site to transact or facilitate the sale of goods and services online. Online retailers compete in three key aspects of a transaction: (1) customer interaction with the Web site, (2) delivery, and (3) ability to address problems when they occur. Pure-click companies are those that have launched a Web site without any previous existence as a firm; brick-and-click companies are existing companies that have added an online site for information or e-commerce.

M-commerce (m for mobile) channels and media can keep consumers connected and interacting with a brand throughout their day-to-day lives. However, mobile marketing and the fact that a company can potentially pinpoint a customer or employee's location with GPS technology also raises privacy issues.

Summary

Successful value creation depends on successful value delivery. Most producers do not sell their goods directly to the final users; between them stands a set of intermediaries performing a variety of functions. These are marketing channels (also called trade channels or distribution channels), sets of interdependent organizations participating in the process of making a product or service available for use or consumption. A marketing channel system is the particular set of marketing channels a firm employs, and decisions about it are among the most critical ones management faces. In managing its intermediaries, the firm must decide how much effort to devote to push versus pull marketing. Three main marketing channels are Horizontal, Vertical, and Integrating Multichannel Marketing systems. Channel conflict is generated when one channel member's actions prevent other channel member from achieving its goal.

Personal Point of View

In my opinion, unless a manufacturer is a very well-known brand such as Coca-Cola, most of the brands goes through the middle-man to sell their products. It is a safe pathway to go through from middle channel to reach out to customers because they know which target segments and strings to pull. Majority of customer these days shop online not only because it is convenience but also some sellers do not charge for sale tax. M-Commerce is a good way to lure in more customers to their original website but baby boomers and elderly population will prefer to use the PC and laptop to shop rather than on a mobile due to their declining health restrict them able to see fine prints and details of the products they are looking for. I personally prefer to shop online using my laptop for both security purpose and internet speed of loading web pages. Thus by far, in order to overcome from e-commerce to m-commerce, I think mobile needs the speed which is faster than LTE or 4G otherwise young population will not appreciate the m-commerce shopping.

Designing and Managing Services

A service is any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Service industries are everywhere.

Categories of Service Mix

The service component can be a major or minor part of the total offering. Five categories of offerings are:

1. Pure tangible good - a tangible good such as toothpaste, with no accompanying services.
2. Tangible good with accompanying services - a tangible good, like a cell phone, accompanied by one or more services.
3. Hybrid - an offering, like a restaurant meal, of equal parts goods and services.
4. Major service with accompanying minor goods and services - a major service, like air travel with additional services or supporting goods such as drinks.
5. Pure service - primarily an intangible service, such as babysitting or psychotherapy.

Distinctive Characteristics of Services

Four distinctive service characteristics greatly affect the design of marketing programs:

Intangibility - Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before they are bought.

Inseparability - Services are typically produced and consumed simultaneously.

Variability - Services are highly variable because the quality depends on who provides them, when and where, and to whom.

Perishability - Services cannot be stored, so their perishability can be a problem when demand fluctuates.

The New Services Realities
A Shifting Customer Relationships

Savvy services marketers must recognize three new services realities: the newly empowered customer, customer coproduction, and the need to engage employees as well as customers.

Customer Empowerment - customers are more sophisticated about buying support services and are pressing for "unbundled services" so they can select the elements they want.

Customer Coproduction - the reality is that customers do not merely purchase and use a service: they play an active role in its delivery. Their words and actions affect the quality of their service experiences and those of others, and the productivity of frontline employees.

Satisfying Employees as Well as Customers - Excellent service companies know that positive employee attitudes will promote stronger customer loyalty. Employees thrive in customer-contact positions when they have an internal drive to (1) pamper customers, (2) accurately read customer needs, (3) develop a personal relationship with customers, and (4) deliver quality service to solve customers' problems.

Managing Service Quality

Service quality is tested at each service encounter. Two important considerations in delivering service quality are managing customer expectations and incorporation self-service technologies.

Managing Customer Expectations

Customers form service expectations from many sources, such as past experiences, word of mouth, and advertising. In general, customers compare the perceived service with the expected service. If the perceived service falls below the expected service, customers are disappointed. Successful companies add benefits to their offering that not only satisfy customers but surprise and delight them. The service-quality model in the following figure highlights five gaps that can cause unsuccessful service delivery.

Fig. Service-Quality Model

Managing Product-Support Services

Manufacturers of equipment - small appliances, office machines, tractors, mainframes, airplanes - all must provide product-support services, making this a battleground for competitive advantage. Some equipment companies such as Caterpillar and John Deere, make a significant percentage of their profits from product-support services. In the global marketplace, companies that make a good product but provide poor local service support are seriously disadvantaged.

Identifying and Satisfying Customer Needs

In general, customers have three worries about product service. First, they worry about reliability and failure frequency. The second issue is downtime. The third issue is out-of-pocket costs. A buyer considers all these factors and tries to estimate the life-cycle cost, which is the product's purchase cost plus the discounted cost of maintenance and repair less the discounted salvage value. Product companies must understand their strategic intent and competitive advantage in developing services. To offer the best support, a manufacturer must identify the services customers value most and their relative importance. It should also plan for delivering service after the purchase.

Personal Point of View

It is a very hard subject for most companies to approach these days because the consumers are getting greedier and causing all the root problems related to services. Companies need to be more creative in ways to handle the consumers' needs as well as making profits. I personally think, United States consumers are really hard to handle when it comes down to services. They demand more and complain more with hardly satisfying desires.

Setting Product Strategy and Marketing Through the Life Cycle

A product is anything that can be offered to a market to satisfy a want or need.

Product Characteristics and Classifications

In planning its market offering, the marketer needs to address five product levels. Each level adds more customer value, and the five constitute a customer-value hierarchy. The fundamental level is core benefit: the service or benefit the customer is really buying. At the second level, marketer must turn the core benefit into a basic product. At third level, the marketer prepares an expected product. At the fourth level, the marketer prepares an augmented product that exceeds customer expectation. At the fifth level is the potential product, all the possible augmentations and transformations the offering might undergo in the future.

Product Classifications

Marketers classify products on the basis of durability, tangibility, and use (consumer or industrial). Each type has an appropriate marketing-mix strategy.

Product and Services Differentiation

To be branded, products must be differentiated. Marketers face an abundance of differentiation possibilities, including form, features, customization, performance quality, conformance quality, durability, reliability, repairability, and style.

Services Differentiation

When the physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving their quality. The main service differentiations are ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair. Product returns are an unavoidable reality of doing business, especially with online purchases. One basic strategy is to eliminate the root causes of controllable returns while developing processes for handling uncontrollable returns.

Design Differentiation

As competition intensifies, design offers a potent way to differentiate and position a company's products and services. Design is the totality of features that affect how a product looks, feels, and functions to a consumer. Design offers functional and aesthetic benefits and appeals to both our rational and emotional sides. Each design should reflect bold simplicity, real authenticity, the power of red, and a "familiar yet surprising" nature.

Product and Brand Relationships

Each product can be related to other products to ensure that a firm is offering and marketing the optimal set of products. A product system is a group of diverse but related items that function in a compatible manner. A product mix (product assortment) is the set of all products and items a particular seller offers for sale.

Packaging, Labeling, Warranties, and Guarantees

Many marketers have called packaging a fifth P, along with price, product, place, and promotion. Most, however, treat packaging and labeling as an element of product strategy. Warranties and guarantees can also be an important part of the product strategy.

New Product Development

Idea Generation - The process starts with the search for ideas. Some experts believe the greatest opportunities and highest leverage with new products are found by uncovering the best possible set of unmet customer needs or technological innovation.

Idea Screening - Most companies require new product ideas to be described on a standard form for a new-product committee's review. The description states that the product idea, the target market, and the competition, and roughly estimates market size, product price, development time and costs, manufacturing costs, and rate of return.

Concept Development - A product idea is a possible product the company might offer to the market. A product concept is an elaborated version of the idea expressed in consumer terms. Next, the product concept is turned into a brand concept.

Concept Testing - Concept testing means presenting the product concept to target consumers, physically or symbolically, and getting their reactions.

Marketing Strategy Development - After a successful concept test, the firm drafts a preliminary three-part strategy for introducing the new product. The first part describes the target market's size, structure, and behavior; the planned product positioning; and the sales, market share, and profit goals sought in the first few years. The second part describes the long-run sales and profit goals and marketing-mix strategy over time. This plan forms the basis for the next step, the business analysis.

Business Analysis - The firm evaluates the proposed product's business attractiveness by preparing sales, cost, and profit projections to determine whether they satisfy company objectives. If they do, the concept can move to the development stage. As new information comes in, the business analysis will undergo revision and expansion.

Product Development - The R&D department will develop a prototype that embodies the key attributes in the product-concept statement, performs safely under normal use and conditions, and can be produced within budgeted manufacturing costs; this process is being speeded by virtual reality technology and the Web.

Market Testing - After management is satisfied with functional and psychological performance, the product is ready to be branded with a name, logo, and packaging and go into a market test.

Commercialization - At commercialization, which is the costliest stage in the process, the firm contracts for manufacture or builds or rents a manufacturing facility. It also prepares its communications campaign, which can cost $25 million to $100 million for the first year of a new consumer packaged good introduced nationally.

The Consumer-Adoption Process

Adoption is an individual's decision to become a regular user of a product and is followed by the consumer-loyalty process. New-product marketers typically aim at early adopters and use the theory of innovation diffusion and consumer adoption to identify them.

 Fig. Time of Adoption of Innovations

Marketing through the Product Life Cycle

Most product life-cycle curves are portrayed as bell-shaped. This curve is typically divided into four stages: introduction, growth, maturity, and decline. In introduction, sales grow slowly as the product is introduced; profits are nonexistent because of heavy introduction expenses. Growth is a period of rapid market acceptance and substantial profit improvement. In maturity, sales growth slows because the product has achieved acceptance by most potential buyers, and profits stabilize or decline because of higher competition. In decline, sales drifted downward and profits erode.

Fig. Sales and Profit Life Cycles

Personal Point of View

Knowing the product life cycle along with the target market is the most important for me. As for new product development, we need a team consists of different background, ethnic, religon, and culture because the bigger the diverse group, the better mix of ideas will come out in order to penetrate a new market with a new product. After we learn market and develop a new product, it is all about timing to launch a new product. These days, marketers have to keep an eye on the market trends all the time or early bird gets the worm.

 

 

Crafting the Brand Positioning and Competing Effectively

Creating a compelling, well-differentiated brand position requires a keen understanding of consumer needs and wants, customer capabilities, and competitive actions.

Developing and Establishing a Brand Positioning

All marketing strategy is built on segmentation, targeting, and positioning. A company discovers different needs and groups in the marketplace, target those it can satisfy in a superior way, and then positions its offerings so the target market recognizes the company's distinctive offerings and images.

Positioning is the act of designing a company's offering and image to occupy a distinctive place in the minds of the target market. The goal is to locate the brand in the minds of consumers to maximize the potential benefit to the firm.

Competitive Frame of Reference

The competitive frame of reference defines which other brands a brand compete with and therefore which brands should be the focus of competitive analysis. A good starting point is to determine category membership - the products or sets of products with which a brand competes and which function as close substitutes.

Points-of-Difference and Points-of-Parity

Once marketers have fixed the competitive frame of reference, they can define the appropriate point-of-difference and points-of-parity associations. Points-of-difference (PODs) are attributes or benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand. Strong brands may have multiple points-of-difference.

Three criteria determine whether a brand association can function as points-of-difference.

1. Desirable to consumer - Consumers must see the brand association as personally relevant to them.
2. Deliverable by the company - The company must have the resources and commitment to feasibly and profitably create and maintain the brand association in the minds of consumers. The ideal brand association is preemptive, defensible, and difficult to attack.
3. Differentiating from competitors - Consumers must see the brand association as distinctive and superior to competitors.

Points-of-parity (POPs) are attributes or benefit associations that are not necessarily unique to the brand but may be shared with other brands. Category points-of-parity are associations come in two forms: category and competitive. Category points-of-parity may change over time due to technological advances, legal developments, or consumer trends.

Choosing POPs and PODs

For choosing specific benefits as POPs and PODs to position a brand, marketers may use perceptual maps, visual representations of consumer perceptions and preferences. These provide quantitative portrayals of market situations and consumer perceptions along various dimensions, revealing "openings" that suggest unmet consumer needs and marketing opportunities.

Brand Mantras

A brand mantra is an articulation of the brand essence and promise, economically communicating what the brand is and what it is not in short, three- to five-word phrases. For brands seeking growth, it is helpful to define the product or benefit space in which the brand would like to compete, as Nike did with "athletic performance." This helps employees and marketing partners understand the brand so they can act accordingly. A good brand mantra should communicate the category and clarify the brand's uniqueness; be vivid and memorable; and stake out ground that is meaningful and relevant.

Establishing Brand Positioning

Establishing the brand positioning requires that consumers understand what the brand offers and what makes it a superior competitive choice. Three ways to convey a brand's category membership are:

1. Announcing category benefits - To ensure consumers that a brand will deliver on the fundamental reason for using a category, marketers frequently use benefits to announce category membership. Thus, industrial tools might claim to have durability.
2. Comparing to exemplars - Well-known, noteworthy brands in a category can help a brand specify its category memebership.
3. Relying on the product descriptor - The product descriptor that follows the brand name is a concise means of conveying category origin. Amazon.com calls its Kindle a "wireless reading device" to communicate category membership.

Differentiation Strategies
Dimensions of Differentiation

The obvious means of differentiation, and often the most compelling to consumers, related to aspects of the product and service.

• Employee differentiation - Companies can have better-trained employees who provide superior customer service. 
• Channel differentiation - Companies can design their channels' coverage, expertise, and performance to make buying easier, more enjoyable, and more rewarding for customers.
• Image differentiation - Companies can craft powerful, compelling images that appeal to consumers' social and psychological needs.
• Services differentiation - A service firm can differentiate itself by delivering more effective and efficient solutions to consumers.

Rational and Emotional Components of Differentiation

Many marketing experts believe a brand positioning should have both rational and emotional components, with points-of-difference and points-of-partiy that appeal to the head and the heart. Therefore, the firm should analyze potential competitive threats by monitoring:

• Share of market - The competitor's share of the target market.
• Share of mind - The percentage of customers who named the competitor in responding to the statement, "Name the first company that comes to mind in this industry."
• Share of heart - The percentage of customers who named the competitor in responding to the statement, "Name the company from which you would prefer to buy the product."

Competitive Strategies for Market Leaders

The market leader holds 40 percent; another 30 percent belongs to a market challenger; and 20 percent is claimed by a market follower willing to maintain its share and not rock the boat. Market nichers, serving  small segments larger firms don't reach, hold the remaining 10 percent.

To stay number one, the market leader must find ways to expand total market demand, protect its current share through good defensive and offensive actions, and increase market share, even if market size remains constant.

Expanding the Total Market

When the total market expands, the dominant firm usually gains the most. A company can search for new users among three groups: those who might use it but do not (market-penetration strategy), those who have never used it (new-market segment strategy), or those who live elsewhere (geographical-expansion strategy).

Protecting Market Share

While trying to expand total market size, the dominant firm must actively defend its current business. The most constructive response to protecting market share is continuous innovation. Even when it does not launch offensives, the market leader must leave no major flanks exposed. Defensive strategy reduces the probability of attack, diverts attacks to less-threatened areas, and lessens their intensity. A leading firm can use six defense strategies.

• Position Defense - This means occupying the most desirable market space in consumers' minds, making the brand almost impregnable.
• Flank Defense - The market leader should erect outposts to protect a weak front or support a possible counterattack.
• Preemptive Defense - A more aggressive maneuver is to attack first, perhaps with guerrilla action - hitting one competitor here, another there - and keeping everyone off balance. Another is to achieve broad market development that signals competitors not to attack.
• Counteroffensive Defense - The market leader can meet an attacker frontally so the rival will have to defend itself or exercise economic or political clout.
• Mobile Defense - Here, the leader stretches into new territories through market broadening and market diversification
• Contraction Defense - Sometimes large companies can no longer defend all their territory.

Increasing Market Share

In many markets, one share point can be worth tens of millions of dollars, which means that much depends on the company's strategy for expanding share. Because the cost of buying higher market share may far exceed its revenue value, firms should consider four factors first:

1. The possibility of provoking antitrust action - frustrated competitors are likely to cry "monopoly" and seek legal action if a dominant firm makes further inroads.
2. Economic cost - after a certain point, profitability might fall, not rise, with market share gains.
3. Pursuing the wrong marketing activities - firms that gain share typically outperform competitors in three areas: new-product activity, relative product quality, and marketing expenditures.
4. The effects of increased market share on actual and perceived quality - too many customers can strain the firm's resources, hurting product value and service delivery.

Other Competitive Strategies
Market-Challenger Strategies

Many market challengers have gained ground or even overtaken the leader. Given clear opponents and objectives, five attack strategies for challengers are:

1. Frontal attack - the attacker matches its opponent's product, advertising, price, and distribution.
2. Flank attack - a flanking strategy is another name for identifying shifts that are causing gaps to develop, then filling the gaps. Flanking is particularly attractive to a challenge with fewer resources and more likely to succeed than frontal attacks.
3. Encirclement attack - Encirclement attempts to capture a wide slice of territory by launching a grand offensive on several fronts; this makes sense when the challenger has superior resources.
4. Bypass attack - Bypassing the enemy to attack easier markets offers three lines of approach: diversifying into unrelated products; diversifying into new geographical markets; and leapfrogging into new technologies, shifting the battleground to an advance where the challenger has an advantage.
5. Guerilla attack - guerrilla attacks are small, intermittent attacks, both conventional and unconventional, including selective price cuts, intense promotional blitzes, and occassional legal action, to harass the opponent and secure footholds.

Market-Follower Strategies

The innovator bears the expense of developing the new product, getting it into distribution, and informing the market. The reward for all this work and is normally market leadership. Many companies prefer to follow rather than challenge the market leader, but some followers use a counterfeiter strategy, duplicating the leader's product and packages and selling on the black market or through disreputable dealers. Normally, a follower earns less than the leader. Therefore, followership is often not a rewarding path.

Market-Nicher Strategies

An alternative to being a follower in a large market is to be a leader in a small market or niche. Smaller firms normally avoid competing with larger firms by targeting small markets of little or no interest to larger rivals. A niche might dry up or be attacked, however, so nichers must seek to create niches, expand existing niches, and protect their niches.

Personal Point of View

After reading this chapter, I see clearly how Cox and AT&T has been codepending on each other market share and playing with price range. I see how Pepsi openly attack Coca-Cola in commercials. I also see how Apple and Microsoft mock each other on TV. It is really interesting how these marketers put the terms on those defenses and attacks when we just see it as plain old common sense. Nonetheless it is indeed very interesting chapter to read.

Creating Brand Equity

The American Marketing Association defines a brand as "a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors." A brand adds dimensions that differentiate the offering in some way from other offerings designed to satisfy the same need. These differences may be functional, rational, or tangible - related to product performance of the brand. They may also be more symbolic, emotional, or intangible - related to what the brand represents.

The Role of Brands

Brand identify the source or maker of a product and allow consumers - either individuals or organizations - to assign responsibility for its performance to a particular manufacturer or distributor. As consumers' lives become more complicated, rushed, and time-starved, a brand's ability to simplify decision making and reduce risk becomes invaluable.

Brands also perform valuable functions for firms.

• Simplify product handling or tracing.
• Organize inventory and accounting records. 
• Offers the firm legal protection for unique features or aspects of the product.

The brand name can be protected through registered trademarks; manufacturing processes can be protected through patents, and packaging can be protected through copyrights and proprietary designs.  Theses intellectual property rights ensure that the firm can safely invest in the brand and reap the benefits of a value asset. Loyalty also can translate into customer willingness to pay a higher price - often 20 percent to 25 percent more than competing brands.

The Scope of Branding

Branding is endowing products and services with the power of a brand. It's all about creating differences between products. For branding strategies to be successful and brand value to be created, consumers must be convinced there are meaningful differences among a category's brands. It is possible to brand a physical good (Ford, Flex automobile), a service (Singapore Airline), a store (Nordstorm), a person (snowboarder Shaun White), a place (the city of Sydney), an organization (American Automobile Association), or an idea (free trade).

Defining Brand Equity

Brand equity is the added value endowed on products and services. It may be reflected in the way consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability the brand commands. A brand has positive customer-based brand equity when consumers react more favorably to a product and its marketing when the brand is identified, than when it is not identified. A brand has negative customer-based brand equity if consumers react less favorably to its marketing activity under the same circumstances.

Three key ingredients of customer-based brand equity are -

1. Brand equity arises from differences in consumer response.
2. Differences in response are a result of consumer's brand knowledge, all the thoughts, feelings, images, experiences, and beliefs associated with the brand.
3. Brand equity is reflected in perceptions, preferences, behavior related to all aspects of the brand's marketing.

Stronger brands lead to greater loyalty and revenue, larger profit margins, less vulnerability to competition, and increase marketing communications effectiveness. A brand promise is the marketer's vision of what the brand must be and do for consumers.

Fig. BrandDynamics Pyramid

 

Fig. Brand Resonance Pyramid

Building Brand Equity

Marketers build brand equity by creating the right brand knowledge structures with the right consumers.

Choosing Brand Elements

Criteria for Choosing Brand Elements

For Building the Brand

• Memorable: Is the element easily recalled and recognized at purchase and consumption? Example Tide
• Meaningful: Is the element credible and suggestive of the category? Does it suggest something about an ingredient or a brand user? Example: DieHard
• Likable: Is the element appealing and inherently likable visually, verbally, and in other ways? Example: Flickr

For Defending the Brand

• Transferable: Can the element introduce new products in the same category or other categories? Does it add brand equity across geographic boundaries and segments? Example: Amazon.com
• Adaptable: Can the element be adapted and updated? Example: Betty Crocker image
• Protectable: Is the element legally and competitively protectable? Can the firm retain trademark rights? Example: Yahoo!

Measuring and Managing Brand Equity
For brand equity to guide strategy and decisions, marketers need to fully understand

1. the sources of brand equity and how they affect outcomes of interest
2. how these sources and outcomes change, if at all, over time. Brand audits are important for the former; brand tracking for the latter.

Devising a Branding Strategy

A firm's branding strategy reflects the number and nature of both common and distinctive brand elements. Deciding how to brand new product is especially critical. A firm has three main choices -
    (1) develop new brand elements for the new product
    (2) apply some of its existing brand elements
    (3) use a combination of new and existing brand elements

Brand Portfolios

The brand portfolio is the set of all brands and brand lines a particular firm offers for sale in a particular category or market segment. Brands can also play a number of specific roles as part of a portfolio.

• Flankers - flanker or "fighter" brands are positioned with respect to competitor's brands so that more important flagship brands can retain their desired positioning. 
• Cash cows - some brands may be retained despite dwindling sales because they remain profitable with virtually no marketing support.
• Low-end entry level - the role of a relatively low-priced brand in the portfolio may be to attract customers to the brand franchise.
• High-end prestige - a relatively high-priced brand can add prestige and credibility to the entire portfolio.

Brand Extensions

Many firms leverage their most valuable asset by introducing new products under their strongest brand names. In fact, most new products are line extensions - typically 80 percent to 90 percent in any one year. Brand dilution occurs when consumers no longer associate a brand with a specific product or highly similar set of products and start thinking less of the brand.

Brands serve as the "bait" that retailers and other channel intermediaries use to attract customers from whom they extract value. Customers are the tangible profit brands to monetize their brand value.

Personal Opinions

Coca-Cola is the most valuable brand equity in the world. Brand name is important in marketing because companies stand behind their brands and standards. Consumers spend more money on brands because of their standard and guaranteed quality of their products. Personally, I will pay more attention to brand when it comes to fruits, vegetables or foods (Example: Dole) because I know some big brands in food industry will stand behind their labels. I do not really concern about brands in clothing, jewelery, cosmetics, and so on. Building up brand equity is good for a company to make big profit and reap on the return but personally, I care much less when it is not related to foods or drugs.