MKT 427-Chapter 5

1. MKT 427-Chapter 5 Designing Marketing Programs to Build Brand Equity

2. New Perspective on Marketing • Rapid technological developments • Greater customer empowerment • Fragmentation of traditional media • Growth of interactive and mobile marketing options • Channel transformation and disintermediation • Increased competition and industry convergence • Globalization and growth of developing markets • Heightened environmental, community, and social concerns • Severe economic recession

3. Consumers • Can wield substantially more customer power. • Can purchase a greater variety of available goods and services. • Can obtain a great amount of information about practically anything. • Can more easily interact with marketers in placing and receiving orders. • Can interact with other consumers and compare notes on products and services. Companies • Can operate a powerful new information and sales channel with augmented geographic reach to inform and promote their company and its products. • Can collect fuller and richer information about their markets, customers, prospects, and competitors. • Can facilitate two-way communication with their customers and prospects, and facilitate transaction efficiency. • Can send ads, coupons, promotion, and information by e-mail to customers and prospects who give them permission. • Can customize their offerings and services to individual customers. • Can improve their purchasing, recruiting, training, and internal and external communication.

4. Integrating Marketing Personalizing Marketing Experiential Marketing • If you charge for stuff, then you are in the commodity business. • If you charge for tangible things, then you are in the goods business. • If you charge for the activities you perform, then you are in the service business. • If you charge for the time customers spend with you, then and only then are you in the experience business.

5. Schmitt details five different types of marketing experiences that are becoming increasingly vital to consumers’ perceptions of brands: • Sense marketing appeals to consumers’ senses (sight, sound, touch, taste, and smell). • Feel marketing appeals to customers’ inner feelings and emotions, ranging from mildly positive moods linked to a brand (e.g., for a non involving, nondurable grocery brand or service or industrial product) to strong emotions of joy and pride (e.g., for a consumer durable, technology, or social marketing campaign). • Think marketing appeals to the intellect in order to deliver cognitive, problem-solving experiences that engage customers creatively. • Act marketing targets physical behaviors, lifestyles, and interactions. • Relate marketing creates experiences by taking into account individuals’ desires to be part of a social context (e.g., to their self-esteem, being part of a subculture, or a brand community).

6. Relationship Marketing • Acquiring new customers can cost five times as much as satisfying and retaining current customers. • The average company loses 10 percent of its customers each year. • A 5 percent reduction in the customer defection rate can increase profits by 25–85 percent, depending on the industry. • The customer profit rate tends to increase over the life of the retained customer. Mass Customization One-to-One Marketing • Focus on individual consumers through consumer databases – “We single out customers” • Responds to consumer dialogue via interactivity – “the consumer talks to us” • Customize products and services – “We make something unique for him or her”.

7. Permission Marketing • Offer the prospect an incentive to volunteer. • Offer the interested prospect a curriculum over time, teaching the consumer about the product or service being marketed. • Reinforce the incentive to guarantee that the prospect maintains the permission. • Offer additional incentives to get more permission from the consumer • Over time, leverage the permission to change consumer behavior towards profits Reconciling the Different Marketing Approaches

8. PRODUCT STRATEGY Perceived Quality • After Marketing • Customer information file • Blueprinting customer contacts (identifying and Characterizing point ) • Analyzing customer feedback (explore the nature of satisfaction and dissatisfaction) • Concluding customer satisfaction surveys • Formulating and managing communication programs (sending customer newsletters) • Hosting special customer events or programs • Identifying and reclaiming lost customers

9. User Manuals Customer Service Programs Loyalty Programs • Know your audience • Change is good • Listen to your best customers • Engage people PRICING STRATEGY • Consumer price perceptions • Consumer may combine their perception of the quality of the product with the price of the product to arrive at an assessment of its perceived value. • Consumer perception of value should obviously exceed the cost to the company of making and selling their product • Hitachi and general Electric jointly owned a factory in England that made identical televisions for the two companies. The only difference was the brand name on the television. Nevertheless, the Hitachi televisions sold for a $75 premium over the GE television. Moreover Hitachi sold twice as many sets as GE despite the higher price.

10. Setting Prices to Build Brand Equity • A method or approach for how current prices will be set • A policy for choosing the depth and duration of promotions and discounts Value Pricing • To uncover the right blend of product quality, product cost and product pricing • That fully satisfies the needs and wants of consumers and the profit target to the firm. • Wal-Mart’s slogan “we sell for less” describes the pricing strategy that has allowed them to become the world’s largest retailer. • Southwest airlines combined low fares with no frills-but friendly- service to become a powerful force in the airline industry. • Taco bell reduced operating costs enough to lower prices for many of the items on their menu to under $1 sparking an industry wide trend in fast foods.

11. Product Design and Delivery • Product value can be enhanced through many types of well conceived and executed marketing programs • Proponents of value pricing point out that the concept does not mean selling stripped down versions of products at lower prices. • Product Costs • Meeting cost targets invariably requires additional cost saving through • Productivity gains • Outsourcing material substitution (less expensive and less wasteful materials) • Product reformulations • Process changes (automation or other factory improvements)

12. Product Prices Communicating Value: • Combining these three components in the right way to create value is crucial. Just delivering good value, however, is necessary but not sufficient for achieving pricing success—consumers have to actually understand and appreciate the value of the brand. • In many cases, that value may be obvious—the product or service benefits are clear and comparisons with competitors are easy. In other cases, however, value may not be obvious, and consumers may too easily default to purchasing lower-priced competitors. Price Segmentation:At the same time, different consumers may have different value perceptions and therefore could—and most likely should—receive different prices. Price segmentation sets and adjusts prices for appropriate market segments. • Apple has a three-tier pricing scheme for iTunes downloads—a base price of 99 cents, but $1.29 for popular hits and 69 cents for oldies-but-not-so-goodies.58 Starbucks similarly has raised the prices of some of its specialty beverages while charging less for some basic drinks

13. Everyday Low Pricing Well-conceived, timely sales promotions can provide important financial incentives to consumers and include sales • As has been well documented, trade discounts rose considerably in past years in both breadth and depth. Reasons for Price Stability: • With forward buying, retailers order more product than they plan to sell during the promotional period so that they can later obtain a bigger margin by selling the remaining goods at the regular price after the promotional period has expired. • With diverting, retailers pass along or sell the discounted products to retailers outside the designated selling area.

14. CHANNEL STRATEGY Channel Design Branded Niketown stores NikeStore.com Outlet stores: Nike’s outlet stores feature discounted Nike merchandise. Retail: Nike products are sold in retail locations such as shoe stores, sporting goods stores, department stores, and clothing stores. Catalog retailers Specialty stores Direct Channel • Products information needs are high • Products customize is high • Product quality assurance is important • Purchase lot size is important • Logistics are important Indirect channels • A broad assortment is essential • Available is critical • After sales service is important

15. Push and Pull strategies Channel Support Service provided by channel members • Marketing research • Communications • Contact • Matching • Negotiations • Physical distribution • Financing • Risk-taking • Service

16. Retail Segmentation • Cooperative Advertising • Direct Channels • Company owned stores • Store-Within-a-Store • Besides creating their own stores, some marketers—such as Nike, Polo, and Levi Strauss (with Dockers)—are attempting to create their own shops within major department stores. • Other Means • Finally, another channel option is to sell directly to consumers via phone, mail,or electronic means. • Online Strategies