1. Ashesi University COURSE TITLE : STRATEGIC BRAND MANAGEMENT SEMESTER 2 : SPRING 2016 MODULE 5: How do you design marketing programmes to Build Brand Equity ? I : Product, Pricing and Channel Strategies Lecturer: Ebow Spio

2. Learning Outcomes Identify some of the new perspectives and development in marketing Learn how to design marketing programmes (i.e. product, pricing and distribution strategies) to build brand equity Understand how marketers can integrate these activities to enhance brand awareness, improve the brand image, elicit positive brand responses, and increase brand resonance

3. 5.3 New Perspectives on Marketing The strategy and tactics behind marketing programs have changed dramatically in recent years as firms have dealt with enormous shifts in their external marketing environments: – Digitalization and connectivity (through Internet, intranet, and mobile devices) – Disintermediation and reintermediation (via new middlemen of various sorts) – Customization and customerization (through tailored products and ingredients provided to customers to make products themselves) – Industry convergence (through the blurring of industry boundaries)

4. 5.4 Implications for the Practice of Brand Management They have a number of implications for the practice of brand management. Marketers are increasingly abandoning the mass-market strategies that built brand powerhouses in the 1950s, 1960s, and 1970s to implement new approaches. Even marketers in staid, traditional industries are rethinking their practices and not doing business as usual.

5. 5.5 Integrating Marketing Programs and Activities Creative and original thinking is necessary to create fresh new marketing programs that break through the noise in the marketplace to connect with customers. Marketers are increasingly trying a host of unconventional means of building brand equity.

6. Customer-Based Brand Equity Model Consumer- Brand Resonance Brand Salience Consumer Judgments Consumer Feelings Brand Performance Brand Imagery INTENSE, ACTIVE LOYALTY RATIONAL & EMOTIONAL REACTIONS POINTS-OF- PARITY & POINTS-OF- DIFFERENCE DEEP, BROAD BRAND AWARENESS

7. Sub-Dimensions of CBBE Pyramid LOYALTY ATTACHMENT COMMUNITY ENGAGEMENT QUALITY CREDIBILITY CONSIDERATION SUPERIORITY WARMTH FUN EXCITEMENT SECURITY SOCIAL APPROVAL SELF-RESPECT CATEGORY IDENTIFICATION NEEDS SATISFIED PRIMARY CHARACTERISTICS & SECONDARY FEATURES PRODUCT RELIABILITY, DURABILITY & SERVICEABILITY SERVICE EFFECTIVENESS, EFFICIENCY & EMPATHY STYLE AND DESIGN PRICE USER PROFILES PURCHASE & USAGE SITUATIONS PERSONALITY & VALUES HISTORY, HERITAGE & EXPERIENCES

8. 5.8 Integrating the Brand Into Supporting Marketing Programs Product strategy Pricing strategy Channel strategy Supporting marketing mix should be designed to enhance awareness and establish desired brand image.

9. 5.9 Product Strategy Designing and delivering a product or service that fully satisfies consumer needs and wants is a prerequisite for successful marketing How do consumers form their opinions about Products? Perceived quality and value Perceived quality is customers’ perception of the overall quality or superiority of a product or service compared to alternatives and with respect to its intended purpose Perceived Quality Dimensions: Performance : Levels which primary characteristics operate (low, medium, high or very high Features : Secondary elements that complement primary characteristics Conformance Quality: Degree at which product meets specification products Reliability: Consistency of performance over time and from purchase to purchase Durability : Expected economic life of the product Serviceability : Ease of servicing the product Style and Design : Appeal or feel of quality

10. 5.10 Product Strategy Perceived quality and value – Brand intangibles : Factors in addition to product performance such as speed, accuracy, care of product delivery and installation, the promptness, courtesy, and helpfulness of customer service. – 3- D Marketing approach by McKinsey Consulting : Functional Benefits, Process Benefits and Relationships Benefits – Value chain : Create customer value through primary value creating activities (such as inbound logistics, operations, outbound logistics, marketing and sales, & service) and support activities (firm infrastructure, hum resources management, technology development, procurement)

11. Product Strategy Using Relationship Marketing Perspective in Formulating Product Strategy and Offering Customer relationship management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior value and satisfaction Uses a company’s data systems and applications to track consumer activity and manage customer interactions with the company

12. Product Strategy Relationship Marketing Mass Customization Making products to fit the customer’s exact specifications e.g. Dell Computers, NIKEiD Website, Jerseys, Premier Account of Barclays etc. AfterMarketing Those marketing activities that occur after customer purchase. It is aimed at enhancing the product consumption experience and thereby build brand equity e.g. innovative design, effective communication such as product manual, customer service programmes or aftersales service, sales of complementary products etc. Loyalty or Frequency programmes Identifying, maintaining, and increasing the yield from a firm’s best customers through long-term, interactive, value-added relationships. Airlines giving free trips and upgrades based on mileage flown. It also involves co-branding e.g. Airlines and Hotels etc.

13. 5.13 Pricing Strategy Price : The amount of money charged for a product or service. It is the sum of the values that consumers exchange for the benefits of having or using the product or service Price is the only element in the marketing mix that produces revenue, all other elements represent costs.

14. 5.14 Pricing Strategy Price premiums are among the most important brand equity benefits of building a strong brand. Consumer price perceptions – Consumers often rank brands according to price tiers in a category. – The relationship between price and quality

15. Pricing Strategy Value to Customers or Perceived Value for Money Value is the benefit the customer derives from the purchase of the product. The firm needs to understand the value that the customer places on the benefits received and then price accordingly. Effectively, customers assess the price and measure the benefits received. Factors that affect the value they place on the product: 1.Status 2.Service and after sales service quality 3.Level of differentiation from competitor products 4. Quality of any packaging 5.Product functionality 6.Any substitute products which may be available

16. 5.16 Pricing Strategy Setting prices to build brand equity Value pricing To uncover the right blend of product quality, product costs, and product prices that fully satisfies the needs and wants of consumers and the profit targets of the firm. Everyday low pricing (ELPD) Maintaining consistently low prices on major items every day to build brand loyalty and fend off private label inroads and reduce manufacturing and inventory costs e.g. Procter and Gamble

17. Pricing Approaches Value-based pricing: Setting price based on buyers’ perceptions of product values rather than on cost. The targeted value and price then drive decisions about product design and what costs can be incurred. Pricing begins with analysing consumers needs and value perceptions and a price is set to match consumers’ perceived value -Market research is required to ascertain the value buyers assign to product and that of competitors. This can be difficult. -If a seller charges more than buyers’ perceived value, the company’s sales will suffer.

18. Price Sensitivity Measure – Consumers ACCEPTABLE PRICE RANGE OPTIMAL PRICE Brand Price Percent 1.2Kg BASE CONSUMERS 200

19. Price Sensitivity Measure – Food vendors ACCEPTABLE PRICE RANGE OPTIMAL PRICE Brand Price Percent 1.2Kg BASE FLOUR SELLERS 50

20. Price Sensitivity Measure – Flour sellers ACCEPTABLE PRICE RANGE OPTIMAL PRICE Brand Price Percent 1.2Kg BASE FLOUR SELLERS 50

21. 5.21 Pricing Strategy 8 Steps to Better Pricing 1.Assess what value your customers place on a product or service 2. Look for variation in the way customers value the product 3.Assess customer’s price sensitivity 4. Identify an optimal pricing structure 5. Consider competitors’ reactions 6. Monitor prizes realized at the transaction level 7.Access customers’ emotional response 8. Analyze whether the returns a worth the cost to serve

22. 5.22 Channel Strategy Marketing Channels Set of interdependent organizations involved in the process of making a product or service available for use or consumption. The manner by which a product is sold or distributed can have a profound impact on the resulting equity and ultimate sales success of a brand.

23. 5.23 Channel Strategy Channel strategy includes the design and management of intermediaries such as wholesalers, distributors, brokers, and retailers.

24. 5.24 Channel Design Direct channels – Selling through personal contacts from the company to prospective customers by mail, phone, electronic means, in-person visits, and so forth Indirect channels – Selling through third-party intermediaries such as agents or broker representatives, wholesalers or distributors, and retailers or dealers – Push and pull strategies Web strategies

25. Channel Design: How Channel Members Add Value 1.Creating Utility : Time, place, possession, form 2.Facilitating exchange efficiencies 3.Alleviating Discrepancies e.g. quantity and assortment 4.Standardising Transactions: products, packaging, pricing, delivery is standardised through the channel 5.Customer Service e.g. technical advice, dealing with customer enquiries, after sale service etc.

26. Channel Design : Functions of Members of Marketing Channel Information refers to the gathering and distributing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange Promotion refers to the development and spreading persuasive communications about an offer Contacts refers to finding and communicating with prospective Buyers Matching refers to shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging Negotiation refers to reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred

27. Functions of Members of Marketing Channel Physical distribution refers to transporting and storing goods Financing refers to acquiring and using funds to cover the costs or carrying out the channel work Risk taking refers to assuming the risks of carrying out the channel work

28. Types of Distribution Channels Consumer Goods Channels Channel Level A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer Channel 1 ManufacturerConsumer Channel 2 Manufacturer Retailer Consumer Channel 3 Manufacturer Wholesaler Retailer Consumer Channel 4 Manufacturer Agent Wholesaler Retailer Consumer NB: Hybrid Marketing Channels or multi-channel distribution, as when a single firm sets up 2 or more marketing channels to reach one or more customer segments.

29. Establishing Channel Strategies Channel strategy decisions involve the following : 1.The selection of the most effective distribution channel, 2.The most appropriate level of distribution intensity 3.The degree of channel integration

30. Establishing Channel Strategies :Channel Selection Why will Procter and Gamble sell its brands through supermarkets rather than selling direct to consumers ? Why Dell will sell direct to end users and not necessarily through retailers? 1.Market Factors : 2.Producer Factors 3.Product/Brand Factors 4.Competitive Factors

31. Establishing Channel Strategies :Channel Selection 1.Market Factors : Buyer Behaviour, Buyer needs information, installation & technical assistance etc. Willingness of channel intermediaries to market product The profit margins demanded by wholesalers & retailer and commission by sales agents The number and size of buyers The location and geographical concentration of customers

32. Establishing Channel Strategies :Channel Selection Producer Factors Resource availability : Financial and Managerial resources Product Mix Desired Degree of Control of Channel Operations (price, stocking of new products etc) Competitive Factors Control of traditional channels of distribution through franchise or exclusive dealing arrangements

33. Establishing Channel Strategies :Channel Selection Products/Brand Factors Direct Channel 1. Product Customization is high 2.Product information needs are high 3. Product quality assurance is important 4. Purchase lot size is important 5.Logistics are important i.e. degree of difficulty in carrying the product e.g. storage etc. Indirect Channel 1. Availability is critical 2.After –sales service is important

34. Establishing Channel Strategies :Channel Selection Why a Firm May like to use Direct Marketing Channels Direct Marketing Channel is a marketing channel that has no intermediary levels. The end user is served directly.e.g. through the internet, mail order, own retail shop or outlet etc. 1.Greater Control 2.Lower Cost 3.Value Added Subsequent to Production Process 4.Direct Contact with Customer Needs 5.Quicker Response or Change in Marketing Mix 6.Suitable Middlemen Not Available

35. Apple Shop in Shanghai

39. Credit Roy Zipstein

40. Nike Store

42. Niketown

43. Nike Studio

44. Establishing Channel Strategies :Distribution Intensity 3 broad options are intensive, selective and exclusive: 1.Intensive is a strategy used by producers of convenience products and common raw materials in which they stock their products in as many outlets as possible e.g. foods, toiletries, beer etc. Aim is to achieve saturation coverage of the market 2. Selective is a strategy when a producer uses more than one but fewer than all of the intermediaries willing to carry the producer’s products Televisions Appliances

45. Establishing Channel Strategies :Distribution Intensity 3. Exclusive is a strategy in which the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories e.g. only one wholesaler, retailer or industrial distributor is used in a geographic area. Luxury automobiles High-end apparel

46. Rolex Store

47. 5.47 Channel Management: Push and Pull Strategies By devoting marketing efforts to the end consumer, a manufacturer is said to employ a pull strategy. Alternatively, marketers can devote their selling efforts to the channel members themselves, providing direct incentives for them to stock and sell products to the end consumer. This approach is called a push strategy.

48. 5.48 Channel Support Two such partnership strategies are retail segmentation activities and cooperative advertising programs. Retail segmentation – Retailers are “customers” too Cooperative advertising – A manufacturer pays for a portion of the advertising that a retailer runs to promote the manufacturer’s product and its availability in the retailer’s place of business.

49. Key Points 1.All of the four Ps – not just promotion – have important roles to play in the creation and maintenance of brand equity. 2.The products and services that firms design are the cornerstones of customer-based brand equity. 3.Pricing strategy must be based on consumers and the competition, as well as cost and quality considerations. 5.Channel members should be thought of and treated as valuable customers whose image and actions can hurt or enhance brand equity.

50. Tutorials Choose a product category. Profile all the brands in the category in terms of pricing strategies and perceived value.