Brand Building Notes PDF

BRAND BUILDING NOTES SESSION 1 – INTRODUCTION TO BRAND & BRAND EQUITY Reminder – Marketing Mix Brand meaning Target market’s perception of the brand in terms of brand image Emotions, beliefs, intentions associated with the brand, as well as purchase and usage behavior...

BRAND BUILDING NOTES SESSION 1 – INTRODUCTION TO BRAND & BRAND EQUITY Reminder – Marketing Mix Brand meaning Target market’s perception of the brand in terms of brand image Emotions, beliefs, intentions associated with the brand, as well as purchase and usage behaviors associated with the brand Keller’s CBBE pyramids Should be used in explaining how target markets perceive the chosen brand 1 Evolution of marketing 1930s – product orientation 1960s – consumer orientation 2010s – consumer as driver → We have quicker access to info, with increased competition, more targeted & personalization, experience takes greater importance over P&S, new channels, globalization Sales vs Marketing Sales: products → selling & promoting → profits through sales volume Marketing: customer needs → integrated MTKG → profits through loyalty & CS Product vs customer centric What customers value the most Efficiency Convenience Friendly service Knowledgeable service Easy payment Human interaction Personalization → Create value to capture value from a customer → Acquire, keep, and grow customers 2 WHAT IS A BRAND, WHAT IS BRANDING Branding origin from “Brandr”, means to burn oneself into or stigmatize. Branding initially was used on people, slaves captured by Vikings as a way of signally status and ownership over conquered peoples. Burn oneself into idea that is more than just a logo, it’s an essence. Founders, consumers, and employees put their heart and soul into brands and do see something of themselves in them. History of branding Ancient period: proto brands (marks of origin) Pre-20th century – Trademarks (legal protection of symbolic things) – Literal authenticity Pre-1950s – STP (Segmentation, Targeting, Positioning) by P&G – Brand management system (brands instead of products) Post 1950s – Symbols for Sale (advertisement) – Denotive-conative(from names, which denoted category to names, which connoted ideas) 1980s onward - understanding value & power of brands: – Brand Equity – Consumer approaches – Cultural approaches Brand management influences Economics – efficiency Law – trademarks Psychology – behaviors (individual) Anthropology & sociology – behavior (social) Business studies – firm brand issues Media studies – communication Creative practice – identity and experience “A Brand is a distinguishing name and / or symbol intended to identify the goods and services of one seller and to differentiate those goods and services from those of competitors.” – David Aaker, “Building Strong Brands” Marketing vs Branding Marketing: “I am a great lover” Branding: “I understand you’re a great lover” 3 Who shapes brand meaning Branding principles Brand meaning is co-created Brand marketers matter Context matters Branding is about identity Brands are assets Co-creating serves latent needs (often social) STRONG BRANDS What makes a brand strong Logo/color recognition Stability Relevance across different situations Brand that becomes a phenomenon (I’ll take an uber, instead of I’ll take a cab) Good brand names should Guarantee quality & consistency Help to choose & buy efficiently Signal that something is new Add fun & interest to consumption Brand is Relevant – relevance is about the brand’s present value Properly positioned – positioning is critical to branding Consistent - example of Dyson that is continuously up to date and offers products accordingly, and making its competitors look “lazy” Means to consumers 4 Brand equity The value added to the functional P or S by associating it with the brand name 3 approaches to brand equity Customer Based Brand Equity (CBBE) Company (financial) BE Employee BE → They are all connected (both in method and theory), they rely on customer-based BE, connect strong relationship to financial value, and connect the employees and target customers. The brand is the mind of the customer What do I know about it? What do I feel towards it? What was it like to use? CBBE – brand knowledge Buyers know brands from... brand elements like names, symbols, logos, and slogans. marketing programs such as product features, design, and benefits; prices; retail outlets; and communications. secondary elements like company name, country of origin, owner/user characteristics, and endorsers. personal consumption experiences. CBBE – brand associations Brand associations depend on brand awareness and memory. Brand associations should be strong, favorable, and unique. Brand associations come from marketing communications and from buyers’ direct experiences Keller’s – Brand Salience → The likelihood that consumers will think about your brand when making a purchase. 5 CBBE model – building strong brand involves 4 steps 1. Brand identity (who is it) - establishing brand awareness 2. Brand meaning – associations “what does it stand for” 3. Brand response - eliciting positive brand responses 4. Loyalty - forming sustainable brand relationships CBBE pyramid Brand resonance – the ultimate goal Most valuable (high loyalty and price premiums), occurs when all other brand building blocks are established 4 parts: Behavioral loyalty Attitudinal attachment Sense of community Active engagement Brand resonance – active engagement Consumers willing to invest time, energy, money, or other resources into brand beyond those expended during purchase or consumption of brand Examples: join club, receive updates, visit website, participate in chat rooms Consumers become brand ambassadors Requirement: strong attitudinal attachment and/or sense of community Brand resonance – behavioral loyalty Repeat purchases How much and how often do consumers buy your product In absolute terms and relative to product of competitor !\ be careful of inertia (most accessible, only affordable option…) Brand resonance – attitudinal attachment Strong positive attitude towards the brand ‘Love’ the brand Brand resonance – sense of community Identification with a brand community Feeling of belonging to other people associated with the brand 6 Company-based BE Differential effect of the brand on the balance sheet of owner Brand equity is the asset value of a brand. It is based on net present value (NPV) of cash flows associated with the brand: NPV = Σ Casht [1/(1+k)]t t = time period, Casht = net cash flow for time period t k = cost of capital (interest rate) Employee Brand – Rewards & benefits Fair Payment Fair Hours On site services and extras Employee care → ex: Zara, Levi’s, Cotton On Employee Brand – Culture & work environment Diversity and inclusion, Organizational culture, Using employee feedback to make improvements, Quality of physical work environment → ex: Loewe, Tommy Hilfiger, Berluti Employee Brand – Leadership & development Flexibility Tailored career paths Performance management Quality of leadership Talent management Teamwork → ex: H&M, Adidas, Galeries Lafayette Summary Brand Equity is a measure of whether the brand makes a difference to an audience. Strong brand relationships are predicted to result in higher brand value. Brand equity is built over time, via consistency and relevance. Different brand authors have different ways of judging brand equity. Firms that build brand equity ensure the brand drives all their activities. Benefits of brand equity Greater customer loyalty Less harmed by competitive actions Higher profit margins More inelastic buyer responses to price increases; more elastic buyer responses to price decreases Increased efficiency and effectiveness of marketing communications Higher possibility of successful brand extensions 7 Conclusion on Brand Equity and Business Performance Brand equity is a company-based and customer-based concept. Brand equity has a strong influence on business performance. Strong brands are exciting, motivate employees, and receive the consumers’ attention. Strong brands produce competitive advantage. Marketing/brand managers must build brand image and maintain brand image; the result is an “asset” called brand equity. SESSION 2 – BRAND IMAGE & POSITIONING Keller’s Criteria for choosing brand elements Brand identity prism Brand Identity was mentioned for the first time in Europe by Kapferer in 1986. It is the outward expression of the brand including its name, trademark, communications, and visual appearance. The brand’s identity is its fundamental means of consumer recognition and symbolizes the brand’s differentiation from competitors. 8 These six aspects are divided into two dimensions: The constructed source vs. the constructed receiver: a well-presented brand has to be seen as a person (constructed source: physique and personality) and also as the stereotypical user (constructed receiver: reflection and self-image). Externalization vs. internalization: a brand has social aspects that define its external expression (externalization: physique, relationship, and reflection) and aspects that are incorporated into the brand itself (internalization: personality, culture and self-image). Brand identity vs brand image Marketing drives the brand Identity Brand – identity, image, position (Aaker 1996) Brand identity: how the company wants the brand to be known by the customer Brand image: how the brand is known by the customer Brand position: the part of brand identity and value proposition that is communicated to a target audience 9 How to build a strong brand 1. At the birth of a new brand, state the brand’s core values or core identity. 2. Choose brand elements wisely. Name Logo and symbol Character Slogan Jingle Package 3. Plan and execute a strong marketing strategy for the brand. 4. Use consistent brand elements and value positions and marketing strategy over time. 5. Monitor results and understand the brand’s position on a value map relative to competitors. 6. Conduct an audit of all your brands, new and old. 1. Why have new brands succeeded? Failed? 2. What changes need to be made as the brand goes through its life cycle? 7. Make sure all brands in the company are consistent and synergistic. 8. Leverage strong brands with brand extensions if core brand values are reinforced. 9. Monitor brand strength over time. Measure awareness, value position, brand loyalty, and brand associations. Building a strong brand is difficult Pressure to compete on price Pressures for short-term results Buyer learning takes time How to signal brand images The company is the brand A character is the brand The product is the brand A person is the brand (ex: Elon Musk) COMPANY Creating company/brand associations Must pair the brand and company names. Develop a company image position from – Society and community orientation – Concern for customers – Perceived quality of products and services – Local vs. global orientation The company is the brand: A brand has image based on its company’s attributes. Consider service quality 10 Example 2 : Ben & Jerry’s Donates 7.5% profits to social causes. Markets products like “Rain Forest Crunch” using Brazilian nuts to promote environmental awareness and fund causes. Establishes a few franchises in low-income areas and employs some homeless workers. Registers voters at local stores with free ice cream as inducement. BRAND Creating company/brand associations Communicate the company´s image to managers and customer contact personnel. Train if necessary. Obtain acceptance/buy-in of the position. Take visible actions, consistent with the company´s image position. Reward actions. Use public relations tools. Monitor effectiveness of actions; Modify and improve actions. → a character is a brand: characters can be associated with a brand to give image and meaning. Ex: Pringles, Mr. Clean, Duracell, M&Ms PRODUCT Value positioning from product’s : Price, Quality, or Performance Product or service’s value to buyers depends on relative “quality”, relative “performance” or relative “price”. Value proposition strategy Value proposition is the full mix of benefits upon which a brand is positioned 11 More for more: Providing the most upscale product or service and charging a higher price to cover the higher costs and also gives prestige to the buyer. – Four Seasons hotels, Rolex watches, Mercedes automobiles, – When Apple premiered its iPhone, it offered higher-quality features than a traditional high priced mobile phone. Although more-for-more can be profitable, this strategy can also be vulnerable. It often invites imitators who claim the same quality but at a lower price. For example, more-for-more brand Starbucks now faces “gourmet” coffee competitors ranging from Dunkin’ Donuts to McDonald’s. → high expectations, which can be an issue → targeting less people → attracts counterfeit products More for the same: Companies can attack a competitor’s more-for-more positioning by introducing a brand offering comparable quality at a lower price. – Toyota introduced its Lexus line with a more-for-the-same value proposition versus Mercedes and BMW. Its first headline read: “Perhaps the first time in history that trading a $72,000 car for a $36,000 car could be considered trading up.” – It communicated the high quality of its new Lexus through rave reviews in car magazines and a widely distributed video showing side-by-side comparisons of Lexus and Mercedes automobiles. It published surveys showing that Lexus dealers were providing customers with better sales and service experiences than were Mercedes dealerships. – Many Mercedes owners switched to Lexus, and the Lexus repurchase rate has been 60 percent, twice the industry average. The same for less Offering the same for less can be a powerful value proposition—everyone likes a good deal. – Discount stores such as Walmart and “category killers” such as Best Buy, PetSmart, David’s Bridal, and DSW Shoes use this positioning. – They don’t claim to offer different or better products. Instead, they offer many of the same brands as department stores and specialty stores but at deep discounts based on superior purchasing power and lower-cost operations. – Other companies develop imitative but lower-priced brands in an effort to lure customers away from the market leader. – For example, Amazon.com offers the Kindle Fire tablet computer, which sells for less than 40 percent of the price of the Apple iPad or Samsung Galaxy 12 Less for much less A market almost always exists for products that offer less and therefore cost less. – Few people need, want, or can afford “the very best” in everything they buy. In many cases, consumers will gladly settle for less-than-optimal performance or give up some of the bells and whistles in exchange for a lower price. – For example, many travelers seeking lodgings prefer not to pay for what they consider unnecessary extras, such as a pool, an attached restaurant, or mints on the pillow. Hotel chains such as Ramada Limited, Holiday Inn Express, and Motel 6 suspend some of these amenities and charge less accordingly. Less-for-much-less positioning involves meeting consumers’ lower performance or quality requirements at a much lower price. More for less the winning value proposition. In short run some companies can do this. – Home Depot, when it first opened for business, had arguably the best product selection, the best service, and the lowest prices compared to local hardware stores and other home improvement chains. Yet in the long run, companies will find it very difficult to sustain such best-of-both positioning. And usually have to decide whether it wants to compete primarily on superior service or on lower prices. The product is the brand Consumers buy the ‘promise of value’, not products or services. Value proposition: a company statement that describes benefits received by the brand user. → It’s the full mix of benefits received by the user on which a product/brand is positioned Example of value proposition: Amazon “Offer a very large selection of merchandise at very low prices. Save shopping time. Provide convenience by selling products 24/7 and by shipping to office or home addresses.” = Products can also produce brand image based on a country where they are produced. Segmentation & targeting Customer-driven branding strategy: creating value for target customer 13 Different ways to identify profiles Market segmentation Requirements for effective segmentation To be useful, market segments must be: Measurable: The size, purchasing power, and profiles of the segments can be measured. Accessible: The market segments can be effectively reached and served. Substantial: The market segments are large or profitable enough to serve. Actionable: Effective programs can be designed for attracting and serving the segments. Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If men and women respond similarly to marketing efforts for soft drinks, they do not constitute separate segments. Targeting strategies The number of targets a company serves and the way it serves it/them identify the specific marketing strategy of the company. 14  1. Single-segment concentration: → LaDurée niche targeting strategy: this company is focused on one business and for high-end pastry consumers. Well-known world-wide for its macarons. 2. Selective specialization: → Fiat: produces different types (but not all types) of cars for different types (but not all types) of customers (from end-consumers to industrial buyers). 3. Product specialization: → Coca cola: the company is a specialist in the beverage market but serves different types of consumers. 4. Market specialization: → Bulgari: they target high spenders (one market) in the luxury industry but diversifies its business in jewelry, fragrances, hotels etc. 5. Full market coverage: → Amazon and Alibaba: these companies sell virtually an endless list of different products to an endless list of different customers. Differentiation & Positioning → choosing the right competitive advantage, difference to promote should be: Important: The difference delivers a highly valued benefit to target buyers. Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way. Superior: The difference is superior to other ways that customers might obtain the same benefit. Communicable: The difference is communicable and visible to buyers. Preemptive: Competitors cannot easily copy the difference. Affordable: Buyers can afford to pay for the difference. Profitable: The company can introduce the difference profitably. Identifying a set of possible competitive advantages to build a position by providing superior value from: - Product differentiation - Service differentiation - Channel differentiation - People differentiation - Image differentiation Choosing a differentiation & positioning strategy Product differentiation - brands can be differentiated on features, performance, or style and design. Subway differentiates itself as the healthy fast-food choice. Seventh Generation products are “Protecting Planet Home.” 15 Services differentiation through speedy, convenient, or careful delivery. First Convenience Bank of Texas offers “Real Hours for Real People”; it is open seven days a week, including evenings. Singapore Airlines sets itself apart through extraordinary customer care and the grace of its flight attendants. “Everyone expects excellence from us,” says the international airline. “[So even] in the smallest details of flight, we rise to each occasion and deliver the Singapore Airlines experience.” Channel differentiation gain competitive advantage through the way they design their channel’s coverage, expertise, and performance. Amazon.com set itself apart with its smooth-functioning direct channels. People differentiation—hiring and training better people than their competitors do. People differentiation requires that a company select its customer-contact people carefully and train them well. Disney World people are known to be friendly and joyful. Each employee is carefully trained to understand customers and to “make people happy.” Creativity & Big Ideas – a genuinely winning idea Is personally resonant/meaningful Is disruptive Is provocative and generates discussion.... Stretches the brand without breaking it Can work across borders, time, and channels Can be summed up in a single sentence... ✓ Big ideas need to be simple and speak for themselves! Generating the major selling idea Generating the major selling idea that will resonate, engage, and endear a brand to the customer This is the central underlying, unique creative idea. the thinking behind the communication campaign that distinguishes and differentiates a brand, communicates a message about a brand, brands it in the mind to the customer, and motivates the customer to purchase the product, try the service, talk about it (like, share) and recommend to others Some examples of big ideas OMO: Insight: Moms can be control freaks and not like or allow their kids to get dirty Message: Let your kids play and get dirty… it’s good for their development… and Omo will look after the cleaning Big Idea: “Dirt is good” 16 Guinness: Insight: There is a ritual involved in pouring an enjoying a perfect Guinness draught beer Message: A timeless ritual with a rich reward Big Idea: “Good things come to those who wait” Real-time marketing Ex: Shakira & Watches Product positioning Positioning is the act of designing a company’s product and product image to occupy a distinctive place in the target market’s mind. Main focus – creating customer value An offering’s value proposition reflects all benefits and costs of the offering to target customers. Positioning reflects the primary reason for choosing the offering. Value proposition & positioning Value positioning: BMW = performance Value proposition: Perceptual maps 17 Product positioning statement A product positioning statement is a strategic driver - a core item - not just a list of advantages. Can be stated as one or more features (what the new product is). Can be stated as a function (how it works). Can be stated as one or more benefits (how the user gains) = Value proposition Unique Selling Proposition Choosing one attribute and aggressively promoting the product or service as being the best on that benefit Developing a positioning statement Company and brand positioning should be summed up in a positioning statement (PS). The statement should follow the form: To (target segment and need) our (brand) is (concept) that (point of difference). – Evernote: “To busy multitaskers who need help remembering things, Evernote is digital content management application that makes it easy to capture and remember moments and ideas from your everyday life using your computer, phone, tablet, and the Web.” PS first states the product’s membership in a category (digital content management application) and then shows its point of difference from other members of the category (easily capture moments and ideas and remember them later). Writing a positioning statement Goal: Summarizes marketing strategy to guide tactical decisions Structure – Target customers – Reference point Customer needs (non-comparative positioning) Another offering (comparative positioning) – Primary reason for choosing the offering 18  SESSION 3 – BRAND & SENSORY MARKETING SENSORY MARKETING Sensory systems Vision – marketers rely heavily on visual elements in advertising, store design and packaging. Colours are rich in symbolic value and cultural meanings and can be critical keys to sales. Smell – odours can stir the emotions or have a calming effect; they can invoke memories or relieve stress. Sound – can affect people’s feelings and behaviours. Touch – tactile cues can have symbolic meaning. Taste – can contribute to our experiences of many products. Hierarchy of senses Vision (the most objective) Audition Touch Smell Taste (the least objective) Why use sensory marketing Generates more persuasive messages (i.e., subconscious messages) Allows products to be more appealing (e.g., bakery) Is an opportunity of charging more the target compared to other products in the same category (more desirable, e.g., Dippin’ Dots Ice-Cream) A three-dimensional marketing approach (engaging all the senses) will not only boost food and drink sales, but it could add $100m to a brand value Elements of perception Sensation Absolute threshold Differential threshold Perceptual map – useful instrument for marketers How consumers perceive your brand, who are the direct competitors – where the brand stands compared to those… Monitor communication campaign and make adjustments Identify opportunities, and competitive advantage Quantify information 19 Overview of the perception process SENSATION Sensation is the immediate and direct response of the sensory organs to stimuli – A stimulus is any unit of input to any of the senses. – Marketing stimuli: advertisements price promotions product change Stimuli in Marketing Marketing stimuli have important sensory qualities. We rely on colours, odours, sounds, tastes and even the ‘feel’ of products when forming evaluations of them. Not all sensations successfully make their way through the perceptual process. Many stimuli compete for our attention, and the majority are not noticed or comprehended. Absolut threshold Absolute threshold is the lowest level at which an individual can experience a sensation. – Lowest volume of sound to hear – Smallest font to read – Smallest size of the package or label to notice – Lowest pressure to the skin to feel Color and Brands → choice of color for brands is not random → green is associated with nature, blue is associated with trust, yellow is a color that can stimulate appetite, purple is about creativity, red can be related to anger/passion/love… → Warm colors attract people to a store → Cool colors encourage more contemplation and higher sales *Suggestion: Make brick exterior and cool blue interior 20 Smell/Olfactory “Of all the five senses, smell is the one that creates the most powerful impression in your brain. A particular scent can trigger memories from a long time ago. (…) Smells creates memories and appeal directly to feelings.” (Wenham 2010) Scent Marketing Numerous scientific studies have proven that adding scent to the store environment affects consumer behavior in a variety of ways that are good for the business: Increase sales Improve customer perceptions of your store & product quality Encourage customers to spend more time in your store Associate positive emotions with your store and products Increase customers’ intention to return to your store → Smell – odors can stir the emotions or have a calming effect. They can invoke memories or relieve stress Music and Brands Muzak (Elevator music) - music played through speakers at shopping malls, grocery stores, department stores, telephone systems (while the caller is on hold), cruise ships, airports, business offices, and elevators. → Sound evokes memory and emotions Music and shopping behavior Slow music makes people take their time and spend more money. Loud music makes them move through the store quickly without affecting sales. Classical music leads people to buy more expensive merchandise. Sound and Product Sound is not only music, can be the sound of the package/the product Kellogg's has invested in the power of auditory stimulus, testing the crunching of cereals in a sound lab Sense of taste Taste is dependent to other senses: “Every single taste (…) is a combination of all our five Senses” (Krishna 2012 p. 342) Using (Food & Beverage) Tasting is a very persuasive tool in Marketing Taste + Smell = Flavor! Sense of touch Touch is the first Sense to develop among all 5 Senses Hardness equals quality 21 Interaction of senses – the importance of congruence Scent & Music Matching Scent + Music = stay longer in the rooms and bars Rose scent for wedding/ Leather based scent for business meetings Colors & Smell Example: Abercrombie & Fitch Vision & Touch Tactile labels – authenticity, the product will taste good Vision, Smell & Sound Example: Dunkin’ Donuts – South Korean ad campaign release coffee aroma when a radio as was played. The ad is hitting three senses – visual, auditory, and olfactory, with the suggestion of coffee. Color, Touch, Smell, Taste Example: Orgasmic chocolates – Unlike any other chocolate, the bars include a subtle blend of Chinese herbs to produce a mellowing effect, promote a feeling of euphoria, and heighten the sensory experience of eating chocolate. → setting expectations too high can be disappointing for customers, initial expectations should not diverge from reality Thresholds Absolute threshold is the lowest level at which an individual can experience a sensation. Differential Threshold (Just Noticeable Difference – JND) - Minimal difference that can be detected between two similar stimuli – Between sizes of packages – Between weights, design, prices etc. of products Weber’s Law The Just Noticeable Difference between two stimuli is not an absolute amount but an amount relative to the intensity of the first stimulus The stronger the initial stimulus (e.g., size, weight, price, design), the greater the additional intensity needed for the second stimulus to be perceived as different. Marketing application of the JND Marketers need to determine the relevant JND for their products – so that negative changes are not readily apparent to the public – so that product improvements are very apparent to consumers → downsizing products: response of companies in times of crisis - easier than decreasing the price. The difference is often hardly spotted. 22 ATTENTION: Exposure is not enough Attention vs. Exposure Exposure Possibility of noticing the information Attention the information has been recorded in some way (it has been noticed) → we develop banner blindness Attention Attention is the extent to which processing activity is devoted to a particular stimulus Perceptual selection: – People attend to only a small portion of the stimuli to which they are exposed Attention economics: – management of information that treats human attention as a scarce commodity and applies economic theory to solve various information management problems. Perceptual selection Depends on: How does attention work There are 2 states of attention: Location State (Where?): 2 strategies in location state: – Saliency Map – Systematic Search Identification state (What?): Gather more information of selected object: e.g., reading, holding, etc. Which stimulus is salient Color is a powerful way to draw attention to a product The size of the stimulus itself in contrast to the competition helps to determine if it will command attention Novelty: Stimuli that appear in unexpected ways or places tend to grab our attention Stimuli with ecological properties: - stimuli related to health and survival, such as food, sex, and fear 23 Systematic search People’s goals/knowledge determine locations/objects voluntarily Research in applied settings and eye-movements, attention not only guided by features, but also more systematic depending on the organization of the scene (for example reading strategies. → How can we help systematic search: Position: Stimuli that are present in places we’re more likely to look stand a better chance of being noticed INTERPRETATION Interpretation refers to the meaning we assign to sensory stimuli, which is based on a schema How do consumers organize stimuli Consumers organize incoming stimuli into a meaningful unit What is most important aspect of an incoming stimulus? What is relevant and what is irrelevant information? Grouping/ Similarity principle: People group stimuli to form a unified impression or concept. Grouping helps memory and recall. Figure-ground Principle: One part of a stimulus will dominate (the figure) and other parts will recede into the background (the ground) Closure Principle: People tend to perceive an incomplete picture as a complete and meaningful whole 24  SESSION 4 – BRAND GROWTH & PERSONALITY BRAND GROWTH Stimulus generation Brands can use the benefit of their strong brand image for new lines and products due to stimulus generalization. Tendency of a stimulus similar to a conditioning stimulus to evoke similar, conditioned responses Ex: Duracell, Energizer – bunny Family branding Virgin (Megastore, Airline, Label, and so on) Licensing Ralph Lauren Paint Brand stretching Using established brand name to launch of a new product into a completely different and unrelated category to enter unrelated market. → Dior, extension to perfume and make up → Yamaha, piano & motorcycles → Walt Disney, theme parks, retail, games, shows, merchandise… Brand extension Using established brand name to launch a new/ modified product into the same (broad) market category in which the brand operates. → Colgate – toothpaste, toothbrushes, mouthwash… → Stella Artois – extending to cider → Tide – was extended from a washing powder brand to become a brand for dry cleaners (via franchising). Why extensions Necessary strategic move (cash flow) Essential way to sustain a brand’s growth Attract younger consumers Define/ Emphasize brand’s position Advantages of extension Quality indicator: customers associate the quality of the established brand name with the new product. More likely to trust the new product. Lower perceived risk Quicker customer awareness and willingness to trial or sample the product Lower promotional launch costs (particularly advertising) 25 Disadvantages of extension brand extensions and brand stretching may “exploit” the brand and produce a loss of brand meaning. Brand extensions into inappropriate product categories may damage brand image. Example Tide for dry cleaners: franchisees may not do it properly and as such damage the brand If something goes wrong with one part of the brand, it is contagious and affects all its products. Requirements for successful extension Logical fit/ congruence between existing brand’s meaning and extension Leverage for competitive advantage Opportunity to enhance the brand Co-branding Also called dual branding / brand building Combine two or more well-known brands into a joint market A single P or S is associated with more than one brand name Ex: LU & Cote d’Or BRAND PERSONALITY = when you perceive a brand through human personality traits = sets of human characteristics associated with a brand Human characteristics Directly – Directly from human traits – Through people associated with the brand (e.g., the characteristics of the typical user, employees, CEO, or product endorser) Indirectly – Through brand name, logo, advertising style, price, etc. – E.g., if Nike consistently advertises in this style, which is rather strong and masculine, those traits will be associated with Nikes brand personality. Products with recognized brand advantages They facilitate the identification of product items as belonging to a specific category with certain memorized attributes These features may be associated to expected levels of quality, in this case consumers are willing to pay more. Promotional costs are reduced shared for all products and product categories under the same brand, reducing the cost of increasing awareness. The company can more easily launch extensions (using the same brand name in a different product category) because the brand name carries high credibility. Offers the company defense against price competition. 26 Goals of brand personality Building long-term relationship with consumers, by creating unique, distinct brand Brand personality can differentiate brands even when brands are similar in product attributes Sustainable way of differentiation (difficult to copy) Ultimate goal: creating brand equity How to build brand personality Product characteristics Users Sponsorships Age Logo Colors User imagery Personality of users spills over to the brand Users: actual users or those portrayed in advertising Celebrity endorsement Use social media to turn regular consumers into brand endorsers Brand personality dimensions Measurement of brand personality Emotions and feelings play central role in brand personality, yet are difficult to measure with ´traditional methods´ like focus groups or scales. 27 Measurement of emotions However, what consumers do is to a large part determined by what they feel rather than say... Result: traditional methods do not provide optimal insight in brand personality and actual consumer behavior. Alternative: neuromarketing techniques Balance Theory Triad: An attitude structure consisting of three elements (1) A person (observer) and his/her perceptions of (2) an attitude object, and (3) another person using the attitude object Three relationships User relation: attitude of consumer towards product Unit relation: relation between product and model in ad Sentiment relation: attitude of consumer towards model Relations between elements should be consistent/balanced with each other If not, a state of tension will arise until balance will be restored Unbalanced state occurs when multiplication of 3 signs is negative Balanced state: multiplication of 3 signs should be positive Marketing applications of Balance Theory Celebrity endorsements Useful to predict outcomes depending on the different associations that people have with the brand Sponsorships Events sponsored by the brand will influence its personality Budweiser sponsoring American sporting events to reinforce personality of “American optimism and can-do spirit” Age How long a brand has been on the market can affect its personality Relatively new entrants like Apple tend to have younger brand personalities than IBM, etc. 28 Symbol Advantages of a logo to build brand personality: – Controllable – Strong associations with brand Brand equity Brand personality contributes to brand equity by: Reinforcing product attributes Inducing feelings and emotions Using self-expressive function of brand Reinforcing product attributes Marlboro’s personality of a macho, freedom-loving, adventurous person suggests that the product is strong, masculine, and liberating A country or region of origin can also reinforce product attributes. → BMW being German stands for quality and reliability Inducing emotions Feelings/emotions engendered by brand personality are powerful way to differentiate and as such build enduring relationship with consumers Feelings and emotions attached to a brand’s personality, just as there are to a person Creates brand loyalty Self-expressive function of brand Brands function as vehicles to express part of consumers’ self-identity Either actual identity or ideal self Whether these attitudes are positive or negative, they will help guide many purchases decisions Self-image congruence Self-image congruence models suggest that products will be chosen when their attributes match some aspect of the self. Symbolic self-completion Symbolic self-completion theory predicts that people who have an incomplete self- definition tend to complete this identity by acquiring and displaying symbols associated with it. Brand personality & the digital era Challenges related to creating brand personality in the digital era: Consistency: across ALL communications No generic or descriptive brand names – Even more important online than offline E.g. URLs, Twitter accounts, etc. should be available and not too long 29  SESSION 5 – BRANDING RESEARCH MARKETING RESEARCH Identify and define marketing opportunities and problems. Generate, refine, and evaluate marketing actions. Monitor marketing performance. Improve understanding of marketing as a process. Why is it important Stay in line with trends Differentiate from competitors The intuition trap We are all consumers and have our own experience and predictions... – But our individual theories are limited and often wrong – Even for experienced managers it is difficult to guess how “the client” thinks Research showed that marketers are not better in predicting interests and opinions than consumers themselves – We project our own personal attitudes on other consumers although these are not representative Result: failure rate for new products ranges from 40-80% → Example of bubble tea in Germany. Marketing Mix Product: Product testing: (is it the taste of this food appropriate?) Brand name evaluation (is it appropriate for the product?) Consumer’s satisfaction with the product Package testing (size, color, shape, ease of use) Price: What price will consumers pay? Will some segments be willing to pay more? What response should we make to a competitor’s price change? Place: Research on traffic flow patterns in stores and where to place products Feelings about suppliers, Satisfaction with ordering procedures? Which are the best locations for a shop? Promotion: How many consumers recall a brand slogan? Ad testing. Sales promotion effectiveness? 30 RESEARCH IDEA & PROPOSAL Research structure – (think thesis) Title Summary Problem statement Theoretical framework / conceptual model: Arguments Predictions: Hypotheses Methodology: – Sample, Design, Procedure, – Analytical method Result description Conclusion and Discussion: – Overall conclusion, Managerial implementations, theoretical contribution, limitations, Further research What it should reflect Domain of your research Main idea of your research Your main findings Try to find some catchy title that would reflect the content on your research Problem statement Practical (managerial) relevance: – Description of a problem in details – Importance for marketers/ consumers/ society Explicit statement of your problem and goal of your research → Here you should convince readers that your research is interesting and needed ! Theoretical framework Describe theories/ models/ previous findings relevant for your research and related them to your expectation Describe effect of what (which variables) on what (which variables) you expect and why. After reading this section it should be clear WHY you have those expectations → Here you build your arguments for each hypothesis and explain them Types of descriptive analytics 1. Exploratory research (ambiguous problem) → our sales are declining… Why? 2. Descriptive research (aware of problem) → what kind of people are buying our products? Who buys our competitors’ products? 3. Causal research (clearly defined problem) → Will buyers purchase more of our product with a change of our website? 31 In-depth interviews Advantages: depth of insight, detailed responses, no social pressure so it is convenient for sensitive or embarrassing topics (e.g. avoidance of the law), meetings are easy to arrange (just two people) Challenges: lack of structure, length of interview, combined with high costs, and the analysis and interpretation of data is difficult Focus groups Typically between 1-5 hours The participants stimulate each other to bring in new ideas. The moderators should enhance spontaneity and passion for the issues under discussion, but covering the question agenda. Projective techniques A) Association Techniques: they try to obtain mental associations between concepts, ideas or between attitudes. ▪ For example: word association test. The respondent is presented with a list of words, one at a time and asked to respond to each with the first word that comes to mind. ▪ The words of interest, called test words, are interspersed throughout the list which also contains some neutral, or filler words to disguise the purpose of the study. Common answer patterns reflects idea associations. ▪ Answering delay is due to some emotional involvement, and no answer is due to high emotional implication level. B) Completion Techniques: participants are shown some type of incomplete object or stimulus, and they are required to complete it freely but in a rational way. For example: “people who drink beer are…” → A variation of sentence completion is paragraph completion, in which the respondent completes a paragraph beginning with the stimulus phrase. Others are unfinished scenario, where respondents are provided with part of a story and required to give the conclusion in their own words, also cartoon completion test where the respondents complete a cartoon. EXPERIMENTS Why do experiments Understand consumer behavior: describe & predict behavior Determine the causes of behavior: understand situational factors & the role of dispositional characteristics Understand why consumers behave in certain ways Understand why consumers sometimes behave differently in the same situations Understand why we sometimes behave the same in different situations 32 Experiments in branding Studies various influences on behavior – Situational influences (external/contextual differences) – Chronic influences (individual differences) – Interactions between situational and chronic influences Descriptive vs Causal research Causal research → effect of design on attention (i.e. Eye tracking) Correlational relationships If variable A changes, variable B changes – but does not mean A is the cause of the change Even if two variables go in the same direction (there is a high correlation) – they is no causality. Causal relations Correlation is non-directional; we do not know which variable influences the other. Example: health – regular exercise leads to an improvement in physical health. 3 criteria to discover the cause-and-effect relationship 1. Relationship between X and Y: theory 2. Time order: The cause must precede the effect: first X, then Y 3. Elimination of other possible causal factors: marketing effects are caused by multiple variables Variables What are your variables? – Independent variables (effect OF WHAT): factors that cause the effect and manipulated. Those variables in whose effects the researcher is interested and (e.g., mood, task given) – Dependent variables (effect ON WHAT): response variables, those factors you measure (e.g., attitudes, intentions, responses) Types of variables: – Categorical/ nominal: represent whole units. E.g., sex, nationality, presence (yes/no), choice (yes/no). – Continuous: those you can range as lower-higher: age, income, favorability of attitudes, number of items chosen 33 Experimental research Designed to discover the effect of an independent variable (IV) on a dependent variable (DV) via controlled conditions Manipulate independent variable (often: nonmetric) Measure effects on dependent variable (often: metric) Types of IVs Presence vs. absence Amount of a variable Type of a variable IV MANIPULATION Presence vs. Absence One group receives the treatment condition, and the other group does not The two groups are then compared to see if the group that received the treatment differs (on the DV) from the group that did not Aim is to test whether a variable has an effect Amount of a variable Administer different amounts of the variable to each of several groups Aim is not only to tell if a variable has an effect but also to examine what influence varying amounts of the IV have Example Cognitive load (high vs. low) Price of a product ($5 vs. $7 vs. $9) Type of a variables Vary the type of variable under investigation Aim is to tell if different types of a variable cause variation on the DV Example Type of consumer (measured or manipulated): Holistic vs. analytical thinkers independent vs. interdependent consumers promotion vs. prevention-oriented consumers Mood (negative vs. positive) Experiment IV manipulation: Participants could eat from either a large or small package of chips DV measure: how many chips they ate Results: Participants who could eat from a large package actually ate less chips than those who could eat from a small package 34 When tempting products came in large package formats, people deliberated most before consumption, and consumed the least. Hence, small temptations can remain undetected (“flying under the radar”) and large package formats may reduce consumption due to self-control conflict Good control condition → A control condition is often regarded as a condition in which a treatment should not occur (absence of treatment) or in which participants are experiencing something neutral The goal gradient hypothesis The goal gradient hypothesis posits that our efforts increase as we get closer to achieving a goal: when the reward is in sight, we feel incentivised to reach the finish line. → Fidelity card (nail salon etc.) Ways to manipulate IVs 1 – Instructional manipulation Variation in the IV is caused by differences in instructions provided by the experimenter Example of mood induction - writing a report of a negative or positive personal event Important to be careful with manipulations - you have to make sure that everyone interprets the instructions in the same way - instructions should be clear and unambiguous 2 – Event manipulation Changes in the physical environment/context Environmental – exposing participants to a mirror (manipulation of self-awareness) – presence of business objects in the room (activation of a competitive orientation) – Clean versus littered environment Stimulus – effects of types of music on arousal – products touching each other food products next to “disgusting” products Social – presence versus absence of people – number of people around – behavior of other people are we influenced by others’ shopping behavior? DEPENDENT VARIABLES Scales to measure DV constructs Handbook of Marketing Scales Choose scales, adjust if needed 35 Types of scales Nominal – Use: identity (identical or distinct) – Examples: marital status, gender, occupation – Analysis: frequency, mode (=highest frequency) Ordinal – Use: rank order (higher or lower) – Examples: brand preferences, letter grades – Analysis: frequency, mode, median (=middle point) Interval – Use: distance between objects, zero point is arbitrary – Examples: temperature, brand attitude, satisfaction – Analysis: frequency, mode, median, mean, standard deviation Ratio – Use: absolute distances (meaningful zero) – Examples: units sold, weight, length price – Analysis: all Examples 1 – (nominal) What is your mobile provider? 1.Movistar 2. Vodafone 3. Orange 4. Jazztel 5. Other 2 – (ordinal) Which category best describes your knowledge about the assortment of services offered by Telecom? 1. complete knowledge of services 2. very basic knowledge of services 3. no knowledge of services 3 – (interval) I am satisfied with Telecom’s network 1=strongly disagree, 2= disagree, 3=neither agree nor disagree, 4= agree, 5 = strongly agree 4 – s (ratio) How long have you been subscribed to Telecom? …years NEUROMARKETING → Neuromarketing is the application of neuroscientific methods to analyze and understand human behavior in relation to markets and marketing exchanges. → Can be applied to brand personality (logo, packaging, prices) → Examine & improve current brand personality → Measure the unconsciousness → Time consuming & expensive + debate on ethical implications 36  SESSION 6 – BRANDING & ATTITUDES ATTITUDES Attitudes A lasting, general evaluation of people (including oneself), objects, advertisements, or issues. A predisposition to evaluate an object or product positively or negatively. 2 types of attitudes in Marketing Attitude toward objects (e.g. products, brands) Attitudes toward actions/behaviors Attitude functions Katz’s attitude function: Utilitarian function – attitude helps to decide whether a product provides positive/negative outcomes (pleasure and pain) Value-expressive function – attitude helps to decide whether a product expresses about the consumer’s self-concept and values Ego-defensive function – attitude helps to decide whether a product protects the consumer from external/internal threats Knowledge function – attitudes formed as the result of a need for order, structure or meaning. ATTITUDE CHANGE To create a favorable attitude towards your brand, you can do the following: Create positive associations with the brand Change the beliefs about attributes of the brand Compare your brand with other brands and show you superiority Change the importance of specific attribute Add a new and important attribute Three ways to influence attitudes 1. Attitude-based (directly) - Classical conditioning 2. Belief-based - Persuasion 3. Evaluation-based - Information, prime 37 1 – Changing attitudes directly via communication: Unconditioned stimulus (US) – Naturally capable of causing a response Conditioned stimulus (CS) – Does not initially cause a response Conditioned response (CR) – Response generated by repeated paired exposures to US and CS. Eventually, through learned association and repetition, the CS will cause the CR Classic conditioning in Marketing Brands (CS) should be paired with a strong US – emotional responses and positive feelings (UR) associated with the US should spill over to the brand – after repetition, brand should elicit the same emotional responses and positive feelings (CR) Important is finding a strong US to which a product can be paired – e.g. babies, sexy models, beautiful scenery Conditions for classical conditioning Forward conditioning: CS should be before US US and CS belong logically to each other Better to have a CS that is novel and unfamiliar Better to have a US that is biologically or symbolically salient Repetition : Repetition Conditioning effects are more likely to occur after the CS and the US have been paired a number of times → Contiguity: consistent pairing of product with UCS When the US is not paired with the CS → Extinction Example In the 1980’s, the Lacoste crocodile was an exclusive logo symbolizing casual elegance. When it was repeated on baby clothes and other items, it lost its cache and began to be replaced by contenders such as the Ralph Lauren Polo Player Optimal number of exposures to a marketing communication = 3 1st exposure = creating brand awareness 2nd exposure = demonstrate relevance to consumer 3rd exposure = remind the product's benefits “Wear-out” problem – people are tired to see the same repeated many times 38 Stimulus generalization Brands can use the benefit of their strong brand image for new lines and products do to stimulus generalization. Tendency of a stimulus similar to a conditioning stimulus to evoke similar, conditioned responses – e.g., Pavlov's dogs also started to salivate on the sound of key jangling (sound similar to the ringing of a bell) Stimulus discrimination Unique combination of CS and UCS: Ability to differentiate between a CS and other stimuli that have not been paired with an US. Stimulus discrimination occurs when an US does not follow a stimulus similar to a CS. When this happens, reactions weaken and will soon disappear. Example: Apple wants consumers to resist other lower priced smartphones that use a similar touch screen design but are not the genuine iPhone. 2 – Changing beliefs via communication: Persuasion Belief-based attitude change – Arguments = explicit reason-why – Cues / heuristics = implicit reason-why Beliefs are easier to change than evaluations!!! – Why? Evaluations are often linked to a person’s self-concept Belief change a. Frequent cues: Product: price, product design, country-of-origin Message: # of arguments, repetition Source: attractiveness, expertise, status, number of sources b. Eliminating the problem 39 c. Belief change – Arguments: Capitalize on relative advantage Influence competitors rating – indirect comparative advertising Influence competitors rating – direct comparative advertising 3 – changing evaluations of attributes via communication: Evaluation-based attitude change Information: More info on how important a product/attribute is Scarcity: Products become more attractive if they are less available Evaluation a. Change perception: change the perception of the “problem” b. Turn the negative into positive: ex – Guinness with time for foam to go down) c. Change importance of an attribute (Reebok) d. Adding: add positive association to the problem MODELS OF ATTITUDE The elaboration likelihood model (ELM) Levels of involvement High involvement (think before you act – left brain) Low involvement (act before you think – right brain) How to assess attitudes Simple: How do you feel about…? Multiple-item scales: Likert Scales (agree with a statement on a scale from 1-5) Using attitudes to predict behavior In many cases, knowledge of a person’s product attitude is not a very good predictor of behavior Questionable link between attitude and behavior – Consumers may love a product or commercial, but not always buy the product The Extended Fishbein Model – Called the Theory of Reasoned Action – Contains several important additions to the original, which improve its ability to predict behavior 40 Theory of Reasoned Action – TRA Intentions Versus Behaviour Attitude Toward Buying: - Attitude toward the act of buying (Aact): How someone feels about buying a product that has certain consequences Social Pressure: - Subjective Norm (SN) Normative Belief (NB): Belief that others believe an action should or should not be taken Motivation to Comply (MC): Degree to which consumers take into account anticipated reactions Theory of Planned Behavior – example 41  SESSION 7 – CSR Brands and ethics Macro factors – Postmodernity has resulted in brand becoming significant ‘institutions’ – Economic development and increased emphasis on values – Brand equity and the potential value at stake – Brands impact on resource use – Brands can provoke or heal social tensions Micro factors – Brands actively taking ethical stances – Consumers shopping their values – Brand leveraging consumer culture – Role of brands in self-authentication – Brands define social space What is CSR? Difficult to define: – Because it is still an evolving concept – Because there is disagreement amongst businesses, governments, NGOs. Addresses many and various topics, such as: – Human rights – Corporate governance – Health and safety – Environmental effects – Working conditions – Contribution to economic development. Overall purpose of CSR: drive change towards sustainability Corporate Social Responsibility “CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with stakeholders on a voluntary basis.” (European Commission) Social responsibility – a business’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. 42 Carroll Pyramid (1979) → economic = make the company sustainable economically → legal = mandatory → ethical = expected by the society → philanthropic = not expected but desirable for the society The CRS Equation Economic responsibilities + legal responsibilities + ethical responsibilities + philanthropic responsibilities = Total Corporate CRS Arguments For and Against CSR For Public expectations = Public opinion now supports businesses pursuing economic and social goals. Long-run profits = Socially responsible companies tend to have more secure long-run profits. Ethical obligation = Businesses should be socially responsible because responsible actions are the right thing to do. Public image = Businesses can create a favorable public image by pursuing social goals. Better environment = Business involvement can help solve difficult social problems. Discouragement of further governmental regulation = By becoming socially responsible, businesses can expect less government regulation Balance of responsibility and power = Businesses have a lot of power and an equally large amount of responsibility is needed to balance against that power. Stockholder interests = Social responsibility will improve a business's stock price in the long run. Possession of resources = Businesses have the resources to support public and charitable projects that need assistance. Superiority of prevention over cures = Businesses should address social problems before they become serious and costly to correct. Against Violation of profit maximization = Business is being socially responsible only when it pursues its economic interests. Dilution of purpose = Pursuing social goals dilutes business's primary purpose — economic productivity. Costs = Many socially responsible actions do not cover their costs and someone must pay those costs. Too much power = Businesses have a lot of power already; if they pursue social goals, they will have even more. 43  Lack of skills = Business leaders lack the necessary skills to address social issues. Lack of accountability = There are no direct lines of accountability for social actions. Benefits of CSR… Strengthened brand positioning. Enhanced corporate image. Increased ability to attract, motivate, and retain employees. Increased sales and market share. Increased appeal to investors and financial analysts. Provide a competitive advantage CSR Debate There is debate whether CSR is altruistic (philanthropy) or just a cunning business ploy to increase profits Greenwashing - When CSR is deceptively used to promote the perception that an organization's products, aims or policies are environmentally friendly – E.g., When more money is spent on advertising being ’green’ than on improving the environment Brand and sustainability Assessing corporate reputation A corporate reputation is valuable, but very fragile. It is important to assess a company’s reputation on a regular basis. It is the role of the public relations department to monitor the corporate reputation. Considering its importance, less than half of companies do this. CSR: Standards and Guidelines Standards to encourage good practice: Dow Jones Sustainability Index FTSE 4 Good Index Business in the Community’s CSR Index Global Reporting Initiative’s Reporting guidelines 44 Type of philanthropic CSR – Cause marketing SCR: Cause-Marketing (CM) Marketing activities that are characterized by an offer from the firm to contribute a specified amount to a designated philanthropic cause while customers engage in revenue- providing exchanges (Varadarajan & Menon, 1988) Cause-Related Marketing Partnership with charity Businesses invest $1.5 billion annually Brand parity Supporting cause can create bond In past, just gave money Companies need a benefit Benefit should relate to business Cause liked by one – disliked by another Cause-Related Marketing Benefits to company – Additional customers – Increased profits – Consumer goodwill for the future – Better relations with government agencies – Reduced negative public opinion Benefits to non-profit organizations – Provides funds – Positive publicity To benefit from cause-related marketing, the pubic needs to know. But, companies have to be careful. Too much publicity and the public thinks the company is using the charity for personal gain. Not enough publicity and no one knows about it so there are no tangible benefits. CM Effectiveness CM has a diverse set of potentially positive outcomes: – Improved image (e.g., Dean, 2003; Vanhamme, Lindgreen, & Reast, 2012) – Differentiation (Shell, 1989) – Increased sales, brand choice and purchase intentions (e.g., Andrews, Luo, Fang, & Aspara, 2014; Olsen, Pracejus, & Brown, 2003). The Goal of CM “The goal of a Corporate Social Responsibility (CSR) strategy is to influence consumers on an emotional or affective level” But: affect, cognition, behavior Research into affective response of consumers to CM campaigns has been lacking Research has mainly focused on perceptions and cognition 45  SESSION 8 – MARKETING STRATEGY & PERSONAL BRANDING MARKETING STRATEGY A statement of how a brand or product line will achieve its objectives. The strategy provides decisions and direction regarding variables such as the segmentation of the market, identification of the target market, positioning, marketing mix elements, and expenditures. A marketing strategy is usually an integral part of a business strategy that provides broad direction to all functions. Strategic goals and objectives Goals - statements of long-term ends (that are difficult to be truly achieved) Objectives - specific statements of accomplishments needed to reach a goal Good strategies Allow the firm to deliver superior value and keep its share of value created Position the firm in favorable environments, against competitors Prescribe actions that “improve” the game and the firm’s position in it. “Game- changing“ strategies based on creative ideas and new technologies. Marketing strategy is segmentation, targeting, positioning Ansoff’s Matrix of growth strategies Penetration - the main task of managing an established brand, deepening the brand allegiance among existing customers, upgrading, and extending the product line, and other actions to penetrate the market further. Product development - using the brand in new product categories, a brand extension strategy. Market development - introducing the brand into new markets, including international markets, and developing a global brand. Diversification - development brand portfolio by acquiring other brands and brand stretching. Targeting strategies – Reminder (page 14-15) 46 REINFORCING EXISTING BRANDS Increasing brand allegiance/loyalty Sustaining and deepening the allegiance of an established brand involves: – Maintaining the initial place in the minds of consumers (the brand position) – Keeping the brand up-to-date and relevant (usually by upgrades and improvements) – Fending off intruding brands from competitors and private labels. Loyalty programs Brand loyalty is not simply a customer’s commitment to a brand. The brand has to assume responsibility for creating products and experiences that will sustain customer satisfaction. Customer Relationship Management (CRM). CRM is the main way of maintaining and increasing loyalty. CRM involves the creation of special benefits for preferred customers. Reinforcement schedule → A set of rules by which appropriate reinforcements are given for a behaviour. Ratio (amount): Fixed-ratio reinforcement – reward after a fixed number of "correct" behaviors – emphasize repeated performance of behavior Variable-ratio reinforcement – reward after a variable number of "correct" behaviors – this schedule tends to build the strongest associations Interval (period): Fixed-interval reinforcement – wait a given period of time and then reward first behavior – people learn timing of schedule Variable-interval reinforcement – wait a variable period of time and then reward behavior – leads to a steadier performance of behavior Mobile apps → Shopkick Loyalty programs have been particularly active in mobile marketing. Third-party app makers such as Shopkick help companies create the mobile loyalty programs tailored to the individual consumer. When customers enter a participating store, they instantly receive points, called "kickbucks," for redemption at checkout. 47 The limits to loyalty programs “It costs 5 times more to acquire a new customer than to retaining an existing customer.” However, such a strategy is often too optimistic. As the empirical evidence shows, many brands exhibit rates of defection around 50% even for loyal customers. This means that about half of the current customers will next time by a competing brand. Reasons for loyalty defection Variety seeking. The brand is not available at the point of purchase. The purchase is for a special occasion. Social influence. Need for uniqueness. Thus, even though brand loyalty is the aim of a CRM strategy, it does not necessarily lead to a 100% share of the customer spending. The market share switching dynamics The loyalty rate of brand M: - % of buyers who having purchased brand M in the previous period (t-1) continue to buy brand M in the current period (t). The attraction rate of brand M: - % of buyers who having purchased a competing brand in period (t-1) purchase brand M in period (t). The churn or attrition rate of brand M: - % of buyers who having purchased the brand in period (t-1), stop buying in period (t). The transition matrix → The transition matrix is a matrix of positive elements, adding one by rows. The (i,j) element of this matrix is the probability that a customer having purchased brand i in the previous period, buys brand j in the current period of time. This is typically computed for all possible combinations of brands. 48 Main diagonal shows loyalty rates (α). Rows (all coefficients not in the main diagonal) show customers that the brand is losing to other competitors. Column (excluding the coefficients in the main diagonal) show customers that the column-brand is attracting from other brands, attraction rate (β) Definitions in the ATAR model Buying Unit: – Person, department, buying center. Aware: – Buying unit has heard about the new product and some attribute that differentiates it. Trial: – Purchase/consumption of the new product. Available: – If a buying unit wants to try the new product, effort to find it will be successful. Repeat: – Purchase/consumption of the new product at least once more. Note: Aware, trial, available, and repeat are all expressed as percentages. Business analysis and ATAR model → An ATAR model estimates unit sales and profits for frequently purchased new products. Profits = Units Sold x Profit per Unit Units Sold = Number of potential buyers Profit per Unit = Unit selling price - Unit cost PRODUCT STRATEGIES Upgrading Upgraded products. The most common way of maintaining the initial “buzz” used to establish the brand is to introduce product innovations: – Improvements – but “new and improved” should be meaningful. – New versions – Windows 10. – New models – the entirely new BlackBerry. – New features – Slow motion video-cam. The brand excitement aroused by product innovation can be further heightened by tactical moves: – Pre-announcement (when the new iPhone will be released?) – Limited quantities (Scarcity appeals). – Customer-generated innovations (the new VW Beetle’s design). 49 Line extension Line extension. Product line extension means the firm will develop and introduce new models and products that serve to fill out and expand the product line offering to existing and new customers. With product line extension the brand becomes relevant for a larger market. The famous slogan “A car for every purse and purpose” minted by Alfred P. Sloan in the 1920s explained the “ladder of success” branding strategy of General Motors, from Chevrolet to Cadillac. Versioning – reaching new customers Line extension leads to adaptation to different user requirements, which is why it draws in new customers. For example, Bayer’s successful One-a-Day vitamins have grown from simple multi-vitamins to versions for males and females, to versions for women’s prenatal, women’s skin support, women’s petites (smaller tablets), and so on. “Versioning” has become a popular term for this proliferation of the same branded product for a variety of uses and users. The same pattern can be observed in many product categories – shampoos, breakfast cereal, teas and so on. The brand is re-vitalized by a stream of new product line options. Basic strategic decisions in marketing Efficiency vs. Effectiveness Lead vs. Follow Attack vs. Defend Push vs. Pull Skim vs. Penetrate Differentiate vs. Low cost Mass market vs. Niche Stability vs. Growth vs. Harvest/divest Strategic thinking begins with… → Competitive analysis (should be competitor & customer centered) MARKETING STRATEGY IS MARKETING WARFARE Competitive strategy Increased brand penetration is basically a “Red ocean” strategy with competing brands fighting for market share in a given market. The optimal competitive strategy differs depending on the competitive power of the brand. Types of strategy: – Category Leader, – A major “Runner-up,” – Mid-level niche brand – New Players 50 1 – Market leader Satisfied with maintaining current position No further grow objectives to avoid monopoly accusations Attacking yourself with better products Image of superiority Product upgrading & line extension = natural strategies 2 – Runner Up Aim to steal market share from market leader Examples: Coca Cola is followed by Pepsi Cola, McDonald’s by Burger King and Wendy’s, iPhone by Samsung, BMW by Audi. Strategy: Using a purely functional claim that “our product is as good as the leader’s” is usually not very good strategy: Even if true, it lacks credibility and persuasive power. Often the leader wins by distribution coverage or better supply chain. Better strategy – improve brand strength, focusing on self-expressive needs, and introduce innovative new features. Increasing brand attractiveness to the target market involves focusing on the brand image and brand personality 3 – Survival Small, but flexible organization (lacks the bureaucracy of big firms) Too little resources for sustained attack Find segment large enough for the small company, but too small to be of interest for competitors Focus solely on small segment: geographically or demographically 4 – Mid level niche brands Mid-level brands. Most “average” brands have to rely on one of two alternative strategies: – Lower price (for mainstream brands). – Special features (for niche brands). For these brands the promotional effort naturally involves comparative advertising. The low-price strategy is very difficult to sustain over time – typically a low-price entrant needs to develop a stronger brand. Price discounts Price discounts. Strong brands usually avoid price competition. The strength of a brand usually translates into a price premium for the brand. Lowering price can make consumers suspect a weakness, leading to a dilution of brand equity. Private labels Private labels (store brands) are brands sold by supermarkets and other retail chains as their “own” brands. Store brands are typically not backed by promotional advertising. They cater to price sensitive consumers who tend to resist brand loyalty. 51 Guerilla marketing Creative, unconventional, unexpected: element of surprise Limited resources, maximum results by making big impression Targets small groups, local targets Temporary Purpose: create “buzz,” go “viral,” profit (not sales) Strategy for small firms but big firms started doing it as well Larger budgets and higher risk (failed guerilla = PR nightmare) SUMMARY The Leader - grow the market and extend product lines to build flanker brands. Runner-up - introduce new features and raise brand attractive. Mid-level brands - use comparative advertising to differentiate as a niche brand. Price discount - a short-term policy since longer-term price cuts will dilute the brand equity. Private labels - are not necessarily lower quality anymore. National brands need to make sure any price premium reflects true brand strength and not illusions of product superiority. Guerilla Marketing – is a very effective strategy for new players on the market. CONTEXT EFFECTS → Consumer’s choice is influenced by the composition of the choice set. 1 – Substitution effect Adding an item to a choice set will hurt similar items disproportionally more than dissimilar items Item hurts alternatives that are similar to that item more than dissimilar items !\ beware of cannibalization (the loss of sales revenue, market share, and sales volumes of a company's product when it introduces another line of products into the market) 2 – Attraction effect New item can increase the favourable perceptions of similar, but superior, items Asymmetric Dominance (aka. Decoy) effect - occurs when the preference for one of two options changes dramatically after a third similar but less attractive option is added. 3 – Compromise effect Items gain market share when they become the compromise or middle option in the choice set Add extreme item that enhances demand for focal item 4 – Range effect Range effect - the perceived difference between two stimulus values is smaller when they are evaluated in the context of a wide than a narrow range (Parducci 1965) Add item that stretches range, which enhances similarity between focal item and a competitor 52 5 – Categorization effect If a new brand is positioned close to an existing brand, the existing brand should be perceived as more similar to the new entrant and less similar to other existing brands in the set Add item from different category, which enhances similarity between focal item and a competitor 6 – Frequency effect The difference between two stimuli on a perceptual dimension increase when the frequency (i.e., the number of stimuli between that pair on that dimension) increases Add intermediate products to enhance distinctiveness of top product Summary of context effects Change the perception of the distance between products/brands but not the real distance Shape consumer preferences & affect whether and what they purchase Can be exploited for more favourable perceptions and purchase behaviour PERSONAL BRANDING What is it Personal branding is the strategic process of intentionally taking control of how others perceive YOU and managing those perceptions to help you achieve your goals Similarities with product branding Define Brand Identity – How you want to be perceived Position your brand – Communicate brand identity to (target) audience Assessing Brand Image – How you are perceived by the audience – Ideally matches your brand identity Requirements for strong personal branding Distinctive (communicate on what you do = remarkable & distinctive) Visible (WOM to market your brand) Consistent (to be perceived as authentic) Challenges Segmentation No full control Common personal names (might get mistaken with someone else) Uncommon personal names (everything about you is easy to find) Can’t be built or changed overnight – takes time 53  SESSION 9 – SIX WEAPONS OF MARKETING Social influence → the process through which individuals or groups change the thoughts, feelings, and behavior of others. Conformity Western culture stresses the importance of not conforming. A change in one’s belief or behavior due to the real or imagined influence of other people Reference groups An actual or imaginary individual/group conceived of having significant relevance upon an individual’s evaluations, aspirations, or behavior Influences consumers in various ways: Informational Utilitarian Normative Value-expressive 3 types of reference groups Aspirational Reference Group – The group we admire and desire to be like way in which orderly social life is maintained (Tag Heuer) Associative/ Membership Reference Group – Group to which we currently belong (United Colours of Benetton) Dissociative Reference Group – Group we do not want to belong to (Mac) Conformity People conform to the desires of others for two basic reasons: – Informational social influence – modelling behaviour on others as people perceive other peoples’ behaviour as evidence of the correct way to act. → The need to know what’s right – Normative social influence – conforming to satisfy the expectations of others and/or to be accepted by the group. Autokinetic study (Sherif, 1936) Alone in a dark room, participants estimated how much a light 5 m (15 ft) away moved. The light did not move, the autokinetic effect caused the illusion of motion. The light seem to move, usually about 2-4 inches but as much as 10 inches. Days later, the participants did it again but with other people who reached a common estimate. Participants’ estimates tended to converge. = These results indicate that people used each other as a source of information, coming to believe that the group estimate was correct. 54 Public Compliance: Conforming to other people’s behavior publicly without necessarily believing in what we are doing or saying. Private Acceptance (internalization): Conforming to other people’s behavior out of a genuine belief that what they are doing or saying is right. Normative social influence → The influence to conform in order to be liked and accepted by them Possible reactions: Conformity- do what others do Opportunism- do different than others do Compliance- do what others ask Reactance- do opposite of what they want/ask us to do Reasons for conforming (Asch’s Line Judgement studies) People are afraid to look stupid. People want to be accepted by others. Expectations of rewards and punishments. Normative pressures usually result in public compliance without private acceptance - people go along with the group even if they do not believe in what they are doing, or think it is wrong. Informational Social Influence Influence resulting from one’s willingness to accept others’ opinions about reality Outcomes: - Private acceptance - Internalization Normative Social Influence Influence resulting from a person’s desire to gain approval or avoid disappointment Outcomes: - Public compliance Six principles of influence 1 – Reciprocity: give what you want to receive → Rule: strong cultural obligation to repay when we are given something. Applications: Uninvited gifts e.g., Name tag in the envelope; candy with the bill Free samples, free trials That’s-Not-All e.g., Offering a discount and an extra 'gifts’ Make customers feel special Referral marketing 55 2 – Commitment & Consistency: it is easier to resists at the beginning than at the end → Rule: People have a desire to look consistent through their words, beliefs, and deeds. Applications: Examples: – Foot-in-the-door (small initial request) – Lowballing (you agree to initial offer) – Bait-and-Switch (lower quality replacement) Strengthen Commitment – Write it down – Make it public 3 – Authority: expose your expertise → Rule: People feel compelled to follow an authority. You can place the blame on an authority. - Trustworthy and expert - Appearance sufficient Milgram’s experiment (1963) The experimenter instructs you to deliver an electric shock to the learner whenever he makes a mistake because the purpose of the study is to examine the effects of punishment on learning. Most of Milgram’s participants obeyed to the pressure of an authority figure. Average maximum shock delivered: 360 volts 62.5% participants delivered 450-volt shock. 80% participants continued giving the shocks even after the learner cried out seemingly in pain. 4 – Liking: people who like them → Rule: People prefer to say YES to individuals they know and like. Liking has been associated with physical attractiveness, similarity, and praise – Similarities – Compliments – Familiarity – Same goals – Association. Physical attractiveness Similarity – subtle social mimicry Varieties of social mimicry Applications: Target campaigns to similar ones Use attractive figures Emphasize similarity Search or create connections with customers. 56 5 – Scarcity: use exclusive information to persuade → Rule: People assign more value to opportunities when they are less available. Applications: “Limited time offer” “We are running out of the item” Exclusivity of product and information about products Invite-only customers (e.g., Spotify, Gmail) SocialCam – Released app to a small group of people, and gained 1 million users in 4 months. 6 – Social proof → Rule: People look around to understand what is correct behavior in a given situation. The majority of the time it is safe to go with the crowd. “Operators are waiting, please call now!”  “If operators are busy, please call again”  Huge increase in purchases Can we resist these influences Authority: Is this person an expert, truthful? Consistency: Would I react same without initial commitment? Liking: Do I like this product, or the person selling it? Reciprocity: Do I feel a “need” to reciprocate, and why? Scarcity: Would I want this product if not scarce? Social Proof: Is what the others are doing right for me? 57 Social norms Informal socially shared and relatively stable guides of behavior or attitude, which are driven by social sanctions and rewards Types of social norms Descriptive norms: what most people do Injunctive norm: what one should do Implications – Descriptive norms Use descriptive norms with cognitive deliberation …AND support the idea of “right majority” Implications – Injunctive norms Use injunctive norms without cognitive deliberation …OR stimulate positive thoughts (e.g. via humor) WOM communication More reliable form of marketing Social pressure to conform Influences 2/3 of all sales Powerful when we are unfamiliar with product category Key takeaways We all conform without noticing it Two types of social influence (Informational & Normative) Outcomes of social influence Public compliance & Private acceptan