Lecture 7-8

Strategic Brand Management

• Combines design and implementation of marketing activities to build, measure, and manage a brand to maximize brand value.
• Consists of:
  • Identifying and establishing brand positioning.
  • Planning and implementing brand marketing.
  • Measuring and interpreting brand performance.
  • Growing and sustaining brand value.

What is a Brand?

• A name, symbol, logo, design, or image that identifies a product or service and distinguishes it from competitors.
• Adds value beyond functional performance.
• Can evoke feelings of belonging, love, and affection.
• Related to products, services, shops, people, places, organizations, groups, and ideas.

Roles of a Brand

• Two main roles:
  • Functional: Focus on the tangible, rationally assessed performance and benefits that satisfy customers' practical needs.
  • Emotional: Ability to build emotional ties with customers, engaging them and creating a deep, lasting connection.

Brand Identity and Brand Image

• Brand Identity: The way a company aims to identify or position itself or its products/services in the minds of consumers.
• Brand Image: The way consumers perceive the visual or verbal expressions of a brand, reflected in psychological or emotional associations.

Brand Management Program

• Focuses on building the brand after positioning choices have been made.
• Consists of six focal activities:
  • Creating and managing brand identities.
  • Managing individual or house brand names.
  • Managing brand extensions.
  • Managing brand portfolios.
  • Brand reinforcing and revitalization.
  • Growing and sustaining brand equity.

Creating and Managing Brand Identities

• Three main challenges:
  • Making initial brand identity choices (e.g., selecting brand names, logos, symbols).
  • Aligning marketing mix activities to support the brand.
  • Creating secondary brand associations.

Brand Elements

• Devices that identify and differentiate a brand, which can be trademarked.
• Six key criteria for choosing brand elements:
  • Three brand-building criteria.
  • Three defensive criteria.

Brand Slogans and Brand Mantras

• Brand Slogans: Communicate what the brand is and what makes it special, enhancing customers' emotional attachment.
• Brand Mantras: Articulation of a brand's heart and soul, capturing its essence or spirit.

Managing Individual or House Brand Names

• Four options:
  • Individual brand names (House of brand).
  • Blanket family names (Branded house).
  • Separate family or house names.
  • Corporate name combined with individual product name.

Co-Branding

• Two or more well-known brands combined into a joint product or marketed together.
• Advantages:
  • Greater sales from existing markets.
  • Opportunities for new markets and channels.
  • Reduces costs and speeds adoption.
• Disadvantages:
  • Lack of control in aligning with another brand.
  • Unsatisfactory performance can have negative consequences.

Ingredient Branding

• Special case of co-branding, creating brand equity for materials, components, or parts within other branded products.

Brand Extensions

• Two categories:
  • Line extensions: Covering a new product/service within an existing product/service category.
  • Category extensions: Covering a new product/service from a different product/service category.
• Advantages and disadvantages of brand extensions.

Brand Portfolios

• The set of all brands in a particular category or market segment.
• Key principle: Maximize market coverage while minimizing brand overlap.
• Each brand should be clearly differentiated and appeal to a sizable enough market segment to justify marketing and production costs.

Brand Reinforcing and Brand Revitalization

• Brand Reinforcement: Marketing actions that consistently convey the brand meaning.
• Brand Revitalization: Old positioning of a brand is changed and reinvented, refreshing or identifying new sources of brand equity.

Brand Equity

• The added value endowed on products and services through the brand.
• Can be understood from the perspective of tangible financial assets or intellectual and emotional associations.

Brand Resonance Model

• The process by which a brand builds a strong, lasting relationship with customers.

Brand Associations

• Brands can be used to trigger associations in customers' minds.
• These associations can enable customers to construe a psychosocial meaning.

Brand Personality

• The set of human characteristics associated with a brand.
• Connects the brand to self-perception and self-identity.

Pricing Strategies

• An ideal price cannot be identified by only focusing on production costs or competitors' prices.
• Pricing should be based on the value of a company's offerings to customers.

Consumer Psychology and Pricing

• Reference prices: Consumers compare an observed price with an internal price or external cue.
• Price-quality inferences: Many customers use price as a mental shortcut to perceive quality.
• Price endings: Manipulating what counts as a reference price.
• Prospect theory: Losses loom larger than gains.

Value Function

• The original data.
• The "coronavirus" problem: Which program would you choose?

Pricing Cues

• Odd number pricing: Prices ending with a 9 are perceived as bargains.
• Scarcity effect: Products that are difficult to reach or exist in limited quantity are perceived as more valuable.

Pricing Objectives

• Survival: A short-term objective where prices are set just above company costs.
• Maximum Current Profit: Prices set to maximize current profits.
• Maximum Market Share: Prices set low to generate higher sales volumes and gain market share.
• Maximum Market Skimming: Prices start high and decline over time.
• Product-Quality Leadership: Prices set to reflect a leadership role in product quality.

Pricing Models

• Three major considerations: costs, competitors' prices, and customers' assessment of unique features.
• Six common price-setting methods:
  • Mark-up pricing.
  • Target-return pricing.
  • Perceived-value pricing.
  • Value pricing.
  • Going-rate pricing.
  • Auction-type pricing.

Price Discounts and Allowances

• Companies adjust their prices and give discounts and allowances for early payment, volume, and off-season buying.

Promotional Pricing

• Loss-leader pricing: Dropped prices on well-known brands to stimulate more store traffic.
• Special-event pricing: Special prices during certain seasons to draw customers.
• Cash rebates: Time-specific rebates to encourage purchases.
• Low-interest financing: Instead of lower prices, low-interest financing can be an option.

Differentiated Pricing

• Customer-segment pricing: Different customer groups pay different prices for the same product or service.
• Product-form pricing: Different versions of the product are priced differently.
• Image pricing: The same product is priced at two different levels based on image differences.
• Channel pricing: Price is channel-adjusted.
• Location pricing: Price is location-adjusted.
• Time pricing: Price is varied by season, day, or hour.

Initiating and Responding to Price Changes

• Initiating price increases: Often done due to cost inflation, sometimes through anticipatory pricing.
• Responding to competitors' price changes: Its complex and situation-specific, considering various aspects.

Behavioral Decision Theory and Behavioral Economics

• Emphasize that consumers' preferences are contextually sensitive and can be constructed on the spot.
• Heuristics: Availability, representativeness, and anchoring-and-adjustment.
• Framing: Presenting information in different but objectively identical ways can influence consumers' choice behavior.### Mark-Up Pricing
• A company can earn a 500% mark-up on sales by calculating the mark-up price using the formula: Mark-up Price = Unit cost / (1 – Desired Return on Sales)
• The mark-up price is 40$ if the unit cost is 20$ and the desired return on sales is 500%
• Standard mark-ups may lead to suboptimal prices if they ignore current demand, perceived value, and competition

Target-Return Pricing

• The target-return price is calculated using the formula: Target-Return Price = Unit Cost + (desired Return x Invested Capital) / Unit sales
• Example: If the unit cost is 30$, invested capital is 2 million$, and the desired return on investment is 30%, the target-return price is 36$

Perceived-Value Pricing

• Pricing is based on customer-perceived value, considering factors such as product performance, delivery time, warranty quality, customer support, and reputation
• Companies can set premium prices if customers perceive added value, but some customers prioritize low prices

Value Pricing

• Companies charge a relatively low price for a high-quality offering to win loyal customers
• Everyday Low Pricing (EDLP) involves constant low prices with few promotions, while High-Low Pricing involves higher everyday prices with frequent promotions

Going-Rate Pricing

• Pricing is based on competitors' prices, charging the same, slightly lower, or slightly higher
• Firms tend to follow the market leader's prices, especially in industries with a small number of sellers

Auction-Type Pricing

• English Auctions involve ascending bids, while Dutch Auctions involve descending bids
• Sealed-Bid Auctions involve one-time bids without knowledge of other bids

Pricing Structure

• Companies develop a pricing structure that reflects variations, including:
  • Geographical Pricing, which considers customer location and payment methods
  • Price Discounts and Allowances
  • Promotional pricing
  • Differentiated Pricing