CHAPTER 5: DESIGING MARKETING PROGRAM TO BUILD BRAND

EQUITY

1. Learning Objectives:
After reading this chapter, you should be able to

1. Identify some of the new perspectives and developments in marketing.

2. Describe how marketers enhance product experience.
3. Explain the rationale for value pricing.
4. List some of the direct and indirect channel options.
5. Summarize the reasons for the growth in private labels.

2. List of Contents: Chapter 5 Designing Marketing Programs to Build Brand

Equity

1. New Perspectives on Marketing

1.1 Integrating Marketing

1.2 Personalizing Marketing
1.3 Reconciling the Different Marketing Approaches
1.3.1 Experiential marketing
1.3.2 One-to-one marketing
1.3.3 Permission marketing:

2. Product Strategy
2.1 Perceived Quality
2.2 Aftermarketing/ Relationship Marketing

3. Pricing Strategy
3.1 Consumer Price Perceptions
3.2 Setting Prices to Build Brand Equity

4. Channel Strategy
4.1 Channel Design
4.2 Push and Pull Strategies
4.3 Channel Support
4.4 Web Strategies

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3. Description of Contents:
1. New Perspectives on Marketing

The strategy and tactics behind marketing programs have changed dramatically in recent years
due to the shift to 'New economy'. And firms have dealt with enormous shifts in their external
marketing environments. According to Kotler this new economy has five major drivers and they
are:

 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)

 New customer and company capabilities

These phenomenons 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.

1.1 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.

1.2 Personalizing Marketing

 All of these approaches are a means to create deeper, richer, and more favorable brand
associations.

 Relationship marketing has become a powerful brand-building force. They can slip
through consumer radar, may creatively create unique associations, may reinforce brand
imagery and feelings

 Nevertheless, there is still a need for the control and predictability of traditional
marketing activities.

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  Models of brand equity can help to provide direction and focus to the marketing
programs.

 Personalizing Marketing Concepts

 Experiential marketing

 One-to-one marketing

 Permission marketing:

1.3 Reconciling the New Marketing Approaches

One-to-one, permission, and experiential marketing are all potentially effective means of getting
consumers more actively involved with a brand.

1.3.1 Experiential Marketing

 Focuses on customer experience

 Focuses on the consumption situation

 Views customers as rational and emotional elements

 Uses electric methods and tools

1.3.2 One-to-One Marketing

 One-to-One Marketing: Competitive Rationale

 Consumers help to add value by providing information.

 Firm adds value by generating rewarding experiences with consumers.

o Creates switching costs for consumers

o Reduces transaction costs for consumers

o Maximizes utility for consumers

 One-to-One Marketing: Consumer Differentiation

 Treat different consumers differently

o Different needs
o Different values to firm
 Current
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  Future (lifetime value)
 Devote more marketing effort on most valuable consumers (and customers)

 One-to-One Marketing: Five Key Steps

 Identify consumers, individually and addressably

 Differentiate them by value and needs

 Interact with them more cost-efficiently and effectively

 Customize some aspect of the firm’s behavior

 Brand the relationship

1.3.3 Permission Marketing (Seth Godin)

“Encourages consumers to participate in a long-term interactive marketing campaign in which

they are rewarded in some way for paying attention to increasingly relevant messages.”

 Anticipated
 Personal
 Relevant
Permission marketing can be contrasted to interruption marketing.

 Five Steps in Permission Marketing

1. Offer the prospect an incentive to volunteer.

2. Offer the interested prospect a curriculum over time, teaching consumers about the
product.

3. Reinforce the incentive to guarantee that prospect maintains the permission.

4. Offer additional incentives to get more permission from the consumer.

5. Over time, leverage the permission to change consumer behavior toward profits.

 Integrating the Brand Into Supporting Marketing Programs

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Supporting marketing mix should be designed to enhance awareness and establish desired brand
image.

 Product strategy
 Pricing strategy
 Channel strategy

2. Product Strategy

The product itself is at the heart of brand equity because it is the primary influence on
-what customer experience with a brand
-what they hear about a brand from others
-what the firm can tell customers about the brand in their communication
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. Achieving a
satisfactory
level of perceived quality has become more difficult as continual product improvements
over the years have led to heightened consumer expectations.

According to CBBE model dimensions of product quality can be searched out through
market research

a. Performance b. Features c. Conformance quality d. Reliability e. Durability f.

Serviceability g. Style and design

2.1 Perceived quality and value Consumers beliefs along these dimensions often
underlie Perceptions of the quality of the product that in turn can influence attitude
and behavior toward the brand.

 Brand intangibles
 Total quality management and return on quality (TQM and ROQ)
 Value chain
2.2 Relationship marketing
 Mass customization
 Aftermarketing
 Loyalty programs

Relationship marketing reduce defection rate and increase retention. Some tips to
build effective programs:
Know your audience
Change is good
Listen to your best customer
Engage people

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3. Pricing Strategy

Price is the one revenue- generating element of the traditional marketing mix, and price
premiums are among the most important brand equity benefits of building a strong brand.

3.1 Consumer price perceptions:

Consumers often rank brands according to price tiers in a category.

3.2 Setting prices to build brand equity

 Value pricing The objective of value pricing is 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. Marketers have
employed value pricing in various ways for years, sometimes learning the
hard way that consumers will not pay price premiums that exceed their
perceptions of the value of a brand. Perhaps the most vivid illustration was
the legendary price cut for Philip Morris’s leading cigarette brand, Marlboro.
 Everyday low pricing (EDLP) has received increased attention as
a means of determining price discounts and promotions over time. EDLP avoids
the saw tooth, whiplash pattern of alternating price increases and decreases or
discounts in favor of a more consistent set of “everyday” base prices on products.
In many cases, these EDLP prices are based on the value-pricing considerations
we’ve noted above.

4. Channel Strategy

The manner by which a product is sold or distributed can have a profound impact on the
equity
and ultimate sales success of a brand. Marketing channels are defined as “sets of
interdependent
organizations involved in the process of making a product or service available for use or
consumption.”69 Channel strategy includes the design and management of intermediaries
such
as wholesalers, distributors, brokers, and retailers. Let’s look at how channel strategy can
contribute
to brand equity.

 Channel strategy includes the design and management of intermediaries such as

wholesalers, distributors, brokers, and retailers.

4.1 Channel Design

 Direct channels

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  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

4.2 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.

4.3 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.

4.4 Web Strategies

 Advantage of having both a physical “brick and mortar” channel and a virtual, online
retail channel

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  The Boston Consulting Group concluded that multichannel retailers were able to acquire
customers at half the cost of Internet-only retailers, citing a number of advantages for the
multichannel retailers.

Case

Case 5.1: PROTON

Proton, the first Malaysian national automobile manufacturer, has undertaken a number of
activities to ensure customer loyalty, strengthen brand equity, and enhance its analytical and
operational efficiency. These activities have included a campaign called “Power of 1” to
communicate technological enhancements, the “Very Important Proton” (VIP) program to
maintain customer loyalty, and a “Zero Defect Campaign.” Other activities include the
establishment of a centralized logistics hub to manage sales, services, and warranties, and to
encourage feedback from customers. Currently, the advertising campaign for its latest product,
Proton Prevé, has the theme “Drive it to believe it.” Since its launch in April 2012, orders for the
Prevé have reached more than 11,000 units. In addition, activities are being carried out to capture
the after-sales segment in order to promote visits to Proton service centers, where better value-
for-money packages have been introduced. This tactical campaign is performed every quarter to
induce an element of surprise and enhance a “feel good” sentiment among Proton customers.
Overall, performance of Proton is better than in 2010. Its market position for 2011 is only 5.2
percent behind Perodua, the Malaysia automobile leader.

Source: Proton Annual Report 2011, http://www.proton.com;Malaysia Automotive Association

(MAA) Review Report 2012.

Collected From: “Strategic Brand Management: Building, Measuring, and Managing Brand
Equity”, Kevin Lane Keller, 4th Edition, PEARSON

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Case 5.2: TESCO

Celebrating its fifteenth anniversary in 2010, Tesco Clubcard is one of the world’s most
successful retail loyalty schemes. Each of the 10 million members in the program has a unique
“DNA profile” based on the products he or she buys. Products themselves are classified on up to
40 dimensions—such as package size, healthy, own label, ecofriendly, ready-to-eat, and so on—
to facilitate this customer categorization. In exchange for providing their purchase information
and basic demographic information, members receive a variety of purchase benefits across a
wide range of products and services beyond what is sold in their stores. Tracking customers’
purchases in the program, in turn, helps Tesco uncover price elasticities, offer targeted
promotions, and improve marketing efficiency. By also strengthening customer loyalty, the
Clubcard program has been estimated to generate cumulative savings to Tesco of over £350
million. The range of products, the nature of merchandising, and even the location of Tesco’s
convenience stores all benefit from the use of this customer data to develop tailored solutions.
Tesco has introduced a number of Clubcard program innovations through the years, including
key fobs and newly designed cards issued in 2008.20

Source: Sallie Burnett,“Tesco Revamps Loyalty Program,”www.customerinsightgroup.com, 20

September 2010; Mary-Louise Clews, “Tesco Unveils Plan for Next Generation of Loyalty
Card,” MarketingWeek, 22 April 2009; Zoe Wood and Teena Lyons, “Clubcard Couple Head
for Checkout at Tesco,” The Guardian, 29October 2010.

Collected From: “Strategic Brand Management: Building, Measuring, and Managing Brand
Equity”, Kevin Lane Keller, 4th Edition, PEARSON

Questions:
1. Give example of any local brand that has done a great job with relationship marketing,
permission marketing, experiential marketing, or one-to-one marketing? What did the
company do? Why was it effective? Could others learn from that?

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2. Which Technological company do you think are excellently practicing "aftermarketing"?
What is your experience with them? Is there any improvement needed?

3. Describe the price strategies and perceived value regarding the telecommunication
industry of Bangladesh. Have these brands set and adjusted prices properly? What
would you do differently?

4. Have you ever purchase any product from online? In case of online shopping how the
does the “Push” and “Pull” strategy works? Is there any difference between in-store and
online pricing?

Answers will vary.

5. Make a list of the private-label brands in Dhaka. In which categories do you think private
labels might be successful? Why?

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