Marketing Exam 2

Strategic Brand Management

build, measure, and manage brands to maximize their value

Brand

a name, term, sign, symbol, design, or a combination that identifies the maker or seller of a product

Branding

creating meaningful differences between products

Brands role for a company

• Brand loyalty

• Create a competitive advantage

• Legal protection

• Simplify product handling

Brands role for consumers

• Ease of decision

• Trustworthiness

• Take on personal meaning

• Become part of identity

• Set and fulfill expectations

• Reduce risk

Brand equity

the positive differential effect thak knowing the brand name has on customer response to the product or its warketing

Brand value

the total financial value of a brand

Three Major Brand Strategy Decisions

1. Brand name selection

2. Brand sponsorship

3. Brand development

Brand sponsorship (4 options)

• Manufacturer’s brand

• Private (store) brand

• Licensed brand

• Co-brand

Licensed brand

one firm allows another to use its brand names/IP in exchange for a fee by contract (ex. BC and new balance)

Co-branding

when two established brand names of different companies are used on the same product to create superior market value (ex. coca cola crocs)

Brand development strategies (matrix)

Brand Extension (advantages/disadvantages)

Advantages

• Borrow existing brand equity

• faster consumer acceptance

Disadvantages

• Brand dilution/failure/poor fit weakness parent brand equity

• forgo chance to create new brand image

Multibrands (advantages/disadvantages)

Advantages

• Target different segments

• capture more shelf space

• You are your own competition

Disadvantages

• Each brand gets small market share

• none may be very profitable

New Brand (advantages/disadvantages)

Advantages

• Protects parent brand equity from failure

• tailored positioning for new segment

• new category where existing name doesn’t fit

Disadvantages

• More expensive

• building brand recognition takes longer

Premium brand experiment

willingness to pay for a brand premium is driven by an information barrier, not actual product quality

Why new products fail

• No clear new benefits

• Incongruent brand extension

• Product design problems

• Product incorrectly positioned, priced or advertised

• Overestimation of market size

• Costs of product development

• Competitive actions

New Product Development Process

1. Idea generation

2. Concept Testing

3. Product Development

4. Market testing

5. product launch

6. evaluation of result

Idea generation

development of viable new product ideas

Concept testing

process in which the product concept is presented to and evaluated by a group of target consumers (potential buyers or users)

(Product) concept

Brief written description of a product idea stated in meaningful consumer terms

Product development

development of prototypes and or the product

Alpha testing- evaluation of prototype within firm

Beta testing- testing the prototype with potential customers in real-use situations

Prototype

First physical form or service description of a new product, still in rough/tentative form

Market testing

Testing the actual products in a few test markets

Premarket tests- Predict adoption and determine potential demand before launch with a group of potential consumers

Test marketing- Evaluate actual sales, marketing effectiveness in a real market setting

Diffusion of Innovation

new products/innovations are adopted in stages by different customer segments

Product life cycle

Describes the stages that a new product/category goes through

Product life cycle/ 4Ps and marketing objective

Promotion

Communications- informs relevant marketing entities about the specifics of the offering

Incentives- Tools that enhance the value of the offering by reducing costs an/or increasing benefits

Integrated Marketing Communications (IMC)

Represents the promotion dimension of the four Ps; Encompasses a variety of communication disciplines (e.g., advertising, personal selling) in combination to provide clarity, consistency, and maximum communication impact

The communication process

Sender

Encoding

Message

Decoding

Receiver

Feedback

All with noise from the environment

Hierarchy model of responses (communication process)

AIDA

Awareness- gain attention

Interest- increase interest to further investigate the product; persuade that it is worth investigating

Desire- transition a like to a want; build emotional preference for the brand

Action- ultimate goal; purchase/download/subscribe

Role of marketing communications in decision making process

1. Need recognition- help identify new needs and remind existing needs

2. Information search- make consumers aware and educate them on features and benefits

3. Evaluation of alternatives- assist in making comparisons among options

4. purchase decision- prompt consumers into making the purchase

5. post-purchase behavior- encourage product usage and make consumers satisfied about their purchase decision

Communication channels used in IMC Strategy

• Advertising

• Sales promotion

• Personal selling

• Public relations

• Direct marketing

• Online marketing

Push pull communications

Push-market to wholesalers; give them deal on mass purchases

Pull- market to consumers who will put pressure on retailers

Above the line vs below the line

ATL-broad reach

BTL- targeted, personal communication

ATL

Broad reach

Build brand awareness & reputation

Difficult to measure the exact impact & ROI

Uses mass media channels (e.g., TV, billboards, print)

BTL

Targeted, personal communication

Response-driven & conversion focused

Easier to measure and test ROI & conversions

Uses direct channels (e.g., sales promotion)

Media types

• Paid

• Owned

• Earned

Marketing Metrics

Click through rate (CTR)- clicks/impressions

Conversion rate- conversions(took action)/clicks

Return on Marketing Investment (ROMI)- (gross margin - marketing expense)/marketing expense

Advertising

Paid form of communication from an identifiable source designed to inform, persuade, and remind

Sales promotion

provides incentives

Can target both end user consumers (pull strategy) or channel members (push strategy) - Used with other forms of IMC

Short-term: coupons (BOGO), deals, contests, sweepstakes, samples, POP displays,

Long-term: Loyalty programs, product placement

Short term incentives (sales promotion)

Encourages immediate purchases

Tradeoffs: may only attract price sensitive people, could weaken loyalty and encourage people to purchase on deals, stockpile

Long term incentives (sales promotion)

Build repeat purchases and retention

Loyalty programs: Offer ongoing incentives (e.g., points, rewards, status) to customers who make multiple purchases over time

Personal selling

Direct, personal interaction by a firm’s sales force to make sales and build customer relationships; one to one

Public relations (PR)

Earned, credibility-based communication

Maintain a positive brand image

Planning and executing an ad campaign

1. Identify target audience- who are we trying to reach; shape the message (how to reach them)

2. Set advertising objectives- derived from overall marketing strategy (ex. pull strategy); inform, persuade, or remind

3. Determine the advertising budget

4. Convey the message- Unique selling proposition (USP); informational and emotional appeal (emotional better)

5. Evaluate and select media - media mix and how often; reach the right audience efficiently; mass vs. niche

6. Create advertisements

7. Assess impact- metrics

Informative advertising

Build brand awareness

• Inform new product/feature

• explain how a product works

• Announce price change

Persuasive advertising

Motivate consumers to take action

• Encourage to purchase now or switch brands

• Build brand preference

Reminder Advertising

Remind consumers of a product or to prompt repurchases

• Encourage repeat purchases

• Maintain loyalty

• Keep at top of mind

Advertising across the product life cycle

• Introduction- informing is important

• Growth/Early maturity- persuading is important

• Maturity/Decline- Reminding

Search ads

Firms can pay to appear at the top of google pages either by a branded keyword (alo) or a generic keyword (yoga wear); lululemon could pay to appear at the top of “alo” search

Why bid on Branded keywords

Defense- maintain top visibility

Offense- increase visibility; increase total clicks

Why bid on generic keywords

Customer acquisition- attract new customers searching category terms

Increase awareness- expose brand to consumers early in search process; build recognition to people who dont know your brand

Price

The amount of money charged for a product/service

More broadly, the sum of all the values that customers exchange for the benefits of having or using the product/service

The only P that generates revenue

Price isn’t always what is most important, but rather how it is perceived

Right company brings both value to customer and profits to comapny

Reference prices

External- a visible comparison; one is on sale from 550 to 500, another from 1000 to 500

Internal- I remember the price being 500

5 Cs of Pricing

• Company objectives

• Customers

• Costs

• Competition

• Channel members

Company objectives

Profit oriented- maximize profits

Sales oriented- increase sales or market share

Competitor oriented- compare prices relatively to competition

Customer oriented- pricing strategy based on customer value

Customers

Elasticity is important

Inelastic- price doesn’t impact quantity demanded as much; it is a necesity

Elastic- price drives demand heavily; people will go to substitutes

Price elasticity of demand (PED)

𝜀 = %change in quantity / %change in price

If 𝜀 > 1, then the product’s demand is “elastic”

If 𝜀 = 1, then the product’s demand is “unit elastic”

If 𝜀 < 1, then the product’s demand is “inelastic”

Related goods

Substitute: any alternative product that can replace another (typically makes demand more elastic)

Complement: a product that is used together with another

Cross price elasticity of demand (XED)

% change in quantity of good A / % change in price of good B

XED signs

Costs

Fixed + variable = total

cost plus pricing (markup)= cost *1+ markup

Break even pricing

Setting price to break even on costs or to make a target return

Break even analysis

BEP

Contribution per unit

unit price-unit variable cost

Competition

Consider

• Competitions prices, costs, and reactions if we change prices

Channel members

Channel members may want different prices

• Manufacturers/suppliers: higher prices to protect margins

• Retailers: lower prices to drive sales and traffic

5 Cs shape price

Must be above costs

No one will demand it if the money is valued higher

Comp, channel members, and other market conditions determine the price in between

Value based pricing

starts with the consumer

Perceived value → willingness to pay → consumer choice

Perceived value shapes WTP

• Price < WTP; consumer is more likely to buy

• Price > WTP; consumer is less likely to buy

EDLP Vs High/Low

EDLP- always in between comps regular and comps sale price; constant; adds value by reducing search costs of finding lowest overall value (less useful today since you can search online)

High/Low- involves periods of sales where prices are reduced in order to encourage purchasing; fluctuating; attracts two distinct market segments; creates excitement of the hunt for the lowest price

New product pricing strategies

Penetrative- Initial price set relatively low to penetrate the market – to quickly and deeply build sales, market share, and profit and to deter competition entering (echo dot)

Skimming- Sell at high price that innovators/early adopters are willing to pay before aiming at more price sensitive market segments and reducing to next price level (vision pro)

Segmentation based pricing

Customers differ in their WTP

Observable segments- age (student/senior discounts), location (college), time(happy hour)

Self selection- product tiers, quantity pricing (single can vs packs), versioning (student vs. professional software)

Three product mix pricing strategies

Optional product pricing- optional/accessory to add on to the main product

Captive product pricing- required add-on used with the main product

Bundle pricing- several products sold together at a discount

Why new products may be introduced

• Changing customer needs

• Market saturation

• Short product cycles

• Managing risk through diversity