An Analysis of the Fundamentals of Marketing (part 43)

Marketing, Planning and Implementation 

(part A)

by

Charles Lamson

Introduction

Marketing does not just happen. Products and services have to be developed in the most efficient manner to ensure that the goods or services reach the consumer in the right manner at the right place, time and price to create customer satisfaction and appropriate profit to the supplier. It is the planning required throughout the marketing process that will be discussed in the next few posts.

The Nature of Planning

While it may be tempting for a young entrepreneur to rush off to market his/her new product or service, very soon hurdles will be encountered for which he/she is not prepared. The good idea will be unlikely to be successfully implemented, causing considerable loss of face, time and money through the venture. Although frustrating, it is better to sit down and plan out the process of getting the offering to market. However, good planning takes time and careful consideration to implement. Even established marketers who have products at various stages of the  product life cycle (PLC) find marketing planning challenging. Various academics have written useful texts which will provide further guidance to the process of developing and implementing effective marketing plans. The reader is referred to the work of McDonald (2002) and Cooper and Payne (1996) who extend the coverage to services marketing.

Business Plan

The business plan is central to the planning process, often being the critical document that is needed to persuade others to support the venture. Business plans form a framework which outline the route to reach the business goals. Usually business plans are made to cover a period of up to three, maybe even five years. Generally the detail is provided for year 1 of the operation, with more indicative expectations thereafter for years 2 and 3. Many business plans are prepared as part of the process of getting financing in the form of venture capital or loans from a bank or equivalent institution. The firm's management will require the plan to ascertain that the proposals have been well considered and that projections of likely performance match expectations. The business plan will incorporate details of the proposed marketing plan (see Box 1) showing the direction that the marketing mix is expected to take. It will give estimates of customer demand in terms of market size, competitor activity, projected profit and loss together with the time scale, human resource and financial implications estimates. Supporting evidence in the form of test marketing findings may also be provided in the plan.

Generally, while the business plan is taken as the 'blueprint' for the venture to follow, it should not be a document that is written on tablets of stone. Time spent at this early stage can avoid costly mistakes as the plan is put into practice. However, ultimately, the plan acts as a guide which may have to be adjusted and revised over time to match the market conditions faced in its implementation. The business plan is a tool to help manage the venture through the various stages of its development.

BOX 1

STRUCTURE AND CONTENTS OF A TYPICAL BUSINESS MARKETING PLAN Business Mission Mission statement encompassing the whole operation, often following a general goal, e.g. to be ‘market leader’, ‘the most ethically aware’ or ‘the most innovative supplier of goods and services’ within a selected industry Corporate Objective Covers the specifics of the business mission statement. Usually objectives are given in quantifiable terms, e.g. to achieve a given turnover, profit, market share or to increase on the previous year’s performance; supporting qualitative objectives may be used, e.g. to raise product quality awareness among customers Environmental Audit Market environment in which the firm operates in terms of Political (including legal), Economic, Social and Technological (PEST) issues Marketing Audit Analysis of competitor activity, providing relative position of the organization within the market. It involves undertaking a SWOT analysis covering:    Firm’s internal strengths and weaknesses;    Firm’s external opportunities and threats. Market Analysis Involves assessment of market size, trends and segments; regional and local market characteristics, seasonal variation in sales, etc. Marketing Objective and Major Strategies Defines objectives in terms of forecasts of increased sales, customer awareness, channel coverage for  the product or service, etc. Corporate strategies relate to the analyses of environmental and marketing audits discussed above Marketing Programs and Tactics Implementation of marketing tactics to achieve the strategic objectives through the marketing mix, balancing product development, pricing, promotion and channels of distribution (place) decisions Market Information Analysis Discovery of market gaps, new markets/segments, customer characteristics, product life-cycle positioning and targeting, etc. It incorporates developing the Marketing Information System (MIS), marketing research methodology and marketing research implementation including selection of marketing research agency, if appropriate. Marketing Mix Favored combination of product, price, promotion and channels of distribution (place) approaches Product Assessment of product characteristics, range, features; sales trends, performance history and planned developments. Ascertaining competitive analysis and advantage Pricing Assessment of positioning strategy, customer-perceived values. Ascertaining competitive analysis and advantage Promotion Assessment of media advertising, direct mail, sales promotions, sponsorship, exhibitions, public relations, selling activity and measurement of communication effectiveness. Ascertaining competitive analysis and advantage Place - Channels of Distribution Assessment of channel strategy, channel selection, selling strategy, sales plan and sales force organization. Ascertaining competitive analysis and advantage   Resources Constraints within which plan has to operate Finance Marketing budget, revenue and gross margin forecast, target marketing ratios and cash flow projection Time Scheduling of proposed marketing activities within the plan (often portrayed using a Gantt Chart - see Figure 1) Human Resource Management Personnel requirements for implementing the plan, including appropriate recruitment and training

Figure 1 An example of a Gantt chart used in marketing planning

*SOURCE: FUNDAMENTALS OF MARKETING, 2007, MARILYN A. STONE AND JOHN DRESMOND, PGS. 395-399*

END

STRUCTURE AND CONTENTS OF A TYPICAL BUSINESS MARKETING PLAN

Business Mission

Mission statement encompassing the whole operation, often following a general goal, e.g. to be ‘market leader’, ‘the most ethically aware’ or ‘the most innovative supplier of goods and services’ within a selected industry

Corporate Objective

Covers the specifics of the business mission statement. Usually objectives are given in quantifiable terms, e.g. to achieve a given turnover, profit, market share or to increase on the previous year’s performance; supporting qualitative objectives may be used, e.g. to raise product quality awareness among customers

Environmental Audit

Market environment in which the firm operates in terms of Political (including legal), Economic, Social and Technological (PEST) issues

Marketing Audit

Analysis of competitor activity, providing relative position of the organization within the market. It involves undertaking a SWOT analysis covering:

•    Firm’s internal strengths and weaknesses;
•    Firm’s external opportunities and threats.

Market Analysis

Involves assessment of market size, trends and segments; regional and local market characteristics, seasonal variation in sales, etc.

Marketing Objective and Major Strategies

Defines objectives in terms of forecasts of increased sales, customer awareness, channel coverage for  the product or service, etc. Corporate strategies relate to the analyses of environmental and marketing audits discussed above

Marketing Programs and Tactics

Implementation of marketing tactics to achieve the strategic objectives through the marketing mix, balancing product development, pricing, promotion and channels of distribution (place) decisions

Market Information Analysis

Discovery of market gaps, new markets/segments, customer characteristics, product life-cycle positioning and targeting, etc. It incorporates developing the Marketing Information System (MIS), marketing research methodology and marketing research implementation including selection of marketing research agency, if appropriate.

Marketing Mix

Favored combination of product, price, promotion and channels of distribution (place) approaches

Product

Assessment of product characteristics, range, features; sales trends, performance history and planned developments. Ascertaining competitive analysis and advantage

Pricing

Assessment of positioning strategy, customer-perceived values. Ascertaining competitive analysis and advantage

Promotion

Assessment of media advertising, direct mail, sales promotions, sponsorship, exhibitions, public relations, selling activity and measurement of communication effectiveness. Ascertaining competitive analysis and advantage

Place - Channels of Distribution

Assessment of channel strategy, channel selection, selling strategy, sales plan and sales force organization. Ascertaining competitive analysis and advantage  

Resources

Constraints within which plan has to operate

Finance

Marketing budget, revenue and gross margin forecast, target marketing ratios and cash flow projection

Time

Scheduling of proposed marketing activities within the plan (often portrayed using a Gantt Chart - see Figure 1)

Human Resource Management

Personnel requirements for implementing the plan, including appropriate recruitment and training                                                                          

An Analysis of the Fundamentals of Marketing (part 42)

Pricing Objectives

by

Charles Lamson

Prices should relate to the objectives of the firm. The price needs to be weighed against the impact on the firm's other products, the need for short-term profits against longer-term market position, and 'skimming' as opposed to 'penetration' objectives. For example, in launching a new product, a company may decide that, as it is the first to market, there will be little competition and so it will be able to 'skim' the market at a relatively high price. Alternatively, it may decide to enter the market at a relatively low price so as to gain a high market share before competitors enter. This, in turn, will allow the firm to benefit from experience curve effects. Each decision rests on different sets of assumptions made by planners. On the other hand, pricing may be geared towards earning a particular rate of return on funds invested or, indeed, on making a profit on the product range as a whole. In the latter case, a strategy involving 'loss leaders' may be used whereby products are sold below their cost of production to encourage purchases of other more profitable products.

Setting Pricing Objectives

As with objectives in any area of management, pricing objectives must be clearly defined, time-specific and consistent with each other. The four types of objectives that pricing decisions can help achieve are:

• Income-related. How much money can be made?
• Volume-related. How many units can be sold?
• Competition-related. What share of the available business is wanted?
• Societal. What are the responsibilities to customers and society as a whole?

Income Related Objectives

Price adjustments are an obvious way of increasing the flow of money coming into an organization. This method of income generation depends on the resilience of consumer demand to an increase in price. In other words, how many customers will go elsewhere or stop buying altogether if the price increases beyond a certain point? The question is what economists call price price elasticity.

Some firms have calculated that they can afford to lose some customers because those customers who remain loyal are willing to pay the higher prices. Japanese car manufacturers took this decision in the 1980s when they increased the price of cars in their European markets. While this resulted in fewer customers overall, those who remained generated higher income for the companies concerned.

Another reason why companies decide to focus on income rather than volume is when they are the first into the market with an innovation and want to recoup their research and development costs before competitors enter the market with similar products. This is known as price 'skimming' because the firm is aiming high at a limited number of customers whose need for the product is high enough to justify a high price. The practice is common among high-tech and pharmaceutical companies. Additional examples of price skimming can be found among high-priced products such as color televisions, pocket calculators, digital watches and cameras, all of which have been characterized by skimming prices when they were introduced.

Firms may decide to concentrate on the short-term money gains from price skimming when the company finds it is threatened by acquisition. In order to convince shareholders of the financial health of the organization, managers may increase prices to bolster profits. Prices often return to their former level once the threat of takeover has receded.

Volume-Related Objectives

Volume-related objectives are approached by what is known as penetration pricing. As the name implies, this pricing policy aims at penetrating the market as extensively as possible with the aim of recruiting the maximum number of customers. Often penetration pricing is found in manufacturing industries when production capacity needs to be fully utilized. Unless the firm has a large enough production capacity to cope with anticipated demand and can reduce costs, penetration is unlikely to succeed.

The success of penetration will vary according to market conditions. In a mature market where expansion has slowed, there may be little point in buying market share. A penetration policy is more suitable in a growing market such as health drinks.

Societal Objectives

Competition between firms battling for market share has the effect of driving prices down. But in some markets competition is limited by the sheer size of the enterprises concerned and it can be seen to be against the public interest. Statutory controls are brought to bear to prevent such situations from developing - such as antitrust law in the U.S. or the activities of the Monopolies and Mergers Commission in the UK. Certain industries such as broadcasting, transport and public utilities are subject to watchdog bodies with advisory or regulatory powers. For example, companies within the privatized UK power industry are required to keep the prices agreed with the independent regulator.

*SOURCE: FUNDAMENTALS OF MARKETING, 2007, MARILYN A. JONES AND JOHN DRESMOND, PGS. 268-269*

END

An Analysis of the Fundamentals of Marketing (part 41)

Key Stages in the Process of Innovation 

(part A)

by

Charles Lamson

Most successful new products result from a conscious search for opportunities and a systematic attempt to remove the uncertainty surrounding them. This process needs to pass through eight stages if mistakes are to be avoided. These stages are illustrated in Figure 1.

Figure 1 Stages in New Product Development

Stage 1: Idea Generation

A company typically has to generate many ideas to find a few good ones. Sources that can supply the flow of ideas include employees, customers, competitors, distributors, suppliers and others.

Many new ideas originate from employees. While ideas can come from all parts of the firm, those employees who are involved in making the products and selling them to customers, such as Research & Development (R&D), production and marketing staff are particularly valuable, as they are knowledgeable about the technology and the needs of the market. Some large companies such as 3M, M&S and Toyota have tapped this potential to great effect. For example, Toyota receives over 2 million ideas a year from employees and claims to implement about 85 percent of them.

In order to use this source of information to full potential, senior management should create a culture in which employees are encouraged to put forward ideas. Many cimpanies do this by setting targets for each department, e.g. five ideas per employee, and provide rewards for ideas that are implemented.

There are several creativity techniques that have been developed by psychologists and marketing researchers to help individuals and groups generate creative ideas. Among the more popular techniques are brainstorming, morphological analysis and forced relationships.

• Brainstorming involves a group of six to ten people in an intensive session focusing on a specific problem. The purpose is to generate as many ideas as possible no matter how wild they are. An important requirement of brainstorming is that no negative comments should be made about the suggestions during the idea generation stage in order to maximize the number of ideas.
• Morphological analysis means looking at a problem and its components and then finding connections and solutions. For, example, a firm researching the construction of an electronic car would consider aspectsrelating to fuel source, power transmission, body shape and surface contact.

Customers

Almost 28 percent of new product ideas come from watching and listening to customers. These ideas can be obtained from analyzing customer surveys, complaints or simply observing customers. General Electric's Video Products Division, Sony, Toyota and many other effective innovators are known to have their design engineers talk to final consumers to get ideas for new products.

One company to benefit greatly from customer observation was Boeing, that sent a team of engineers to study the problems facing pilots in Third World countries. When the engineers discovered that runways are too short for planes they redesigned the engine for quicker take-off. As a result, Boeing became the best-selling commercial jet in history (Czinkota and Kotabe, 1990; Rees, 1992).


Competitors

Companies such as Canon, Xerox, Hewlit-Packard and Ford use competitor benchmarking whereby they systematically compare their products with the best competitor to look for potential advances.


Distributors, Suppliers and Others

Resellers and suppliers are close to the market and can pass along information about consumer problems and new product ideas. Other idea sources include trade magazines, seminars, government agencies, advertising agencies, university research laboratories and science parks.



Stage 2: Screening Ideas

The second stage involves scanning ideas to eliminate those that are unlikely to prove appropriate or successful. Potential success depends upon three factors: namely, the idea's compatibility with the firm's corporate strategy, the potential demand for the product and the firm's capability to exploit the product opportunity.

Many organizations use a semi-formal weighting procedure to establish the relative importance of screening criteria. This produces a score for each idea, allowing them to be compared with one another.

Given that numerical scores are based on management judgement, a great deal of care is required when assessing ideas, particularly those ideas that lie on the borderline between accept and reject.

Stage 3: Concept Testing

Ideas that make it past the screening stage need to be tested out on their potential market. This can be achieved only if the product features and benefits can be explained to potential customers. It is important to distinguish between a product idea and its positioning concept. The product idea is the new physical good or functional service that is being considered by the company. The positioning concept is the choice of target market segment and benefit proposition. The distinction is crucial because most new products can have very different positioning strategies. For example, when lasers were invented they were positioned for military use. However, far greater opportunities lay in positioning the laser as a key component in technologies as diverse as compact disc players, communication and medical surgery. Even a simple product idea such as a new brand of aspirin could have multiple positioning concepts, e.g. adults or children, cold or headache sufferers. The reason to buy might be that, compared with competitors, it is more efficient, faster, longer acting, easier to swallow or has fewer side effects (Doyle, 1994).

Testing alternative positioning concepts for the product is essential in the new product development (NPD) process. It involves presenting alternative benefit propositions to different potential target markets. Managers then research the following:

• Communicability. Do consumers understand the benefit being offered?
• Believability. Do they believe that the product has the benefits claimed?
• Need. Do they need the benefit being offered?
• Need gap. If a need exists, is it perceived as being satisfied by existing providers?
• Perceived value. Do customers perceive the new product as offering value for money?
• Usage. How would the customers use the product and how often? (Doyle, 1994)
• 
  

Stage 4: Business Analysis

The fourth stage of new product development (NPD) requires the product concept to be specified in greater detail so that production, marketing and finance projections can be made. A marketing assessment will be the starting point. This will include:

• Description of target markets.
• Forecast of sales volume.
• Indication of product positioning.
• Judgement of likely competitor reactions.
• Calculation of potential sales losses from existing products as customers switch to the new product (known as cannibalization).
• Specification of the new product features, including quality levels.
• Assessment of achievable price levels.
• The distribution strategy.
• Statement of promotional requirements.

A financial statement will follow. Based on the marketing assessment, calculations can be made to project:

• Sales value.
• Variable costs of production.
• Incremental fixed costs.
• The contribution and profitability of the new product.

Stage 5: Product Development

At this stage the R&D and/or engineering department develops the product concept into a physical product. So far the product has existed only as a word description, a drawing or a crude mock-up. A large sum of investment is required to ascertain whether the idea can be turned into a workable product.

The length of this stage varies according to the degree of innovation required and the complexity of the product. The process will be more straightforward if the product uses known technology. For example, a firm launching a new shape of potato crisp will face greater problems in creating a successful brand image and maintaining consistent quality than in developing the production process.

This stage requires close co-operation between the different functional areas of the firm. The development experts will be leading the design of the product; manufacturing will be seeking to achieve low-cost production; marketing and distribution will be aiming to achieve the correct marketing mix, sales and logistics. Tests with potential consumers should evaluate functional performance, and product image. Research can be conducted to test advertising effectiveness and consumer attitudes towards projected pricing levels.

Stage 6: Test Marketing

This marketing stage provides information on the likelihood of the target market buying the product, trade response to the product and product performance compared with competition. Such information enables the firm to modify the product where necessary.

A standard test market is commonly used for testing FMCGs. It should correspond, as far as possible, to a scaled-down version of an intended national market, in terms of distribution structure, media availability, competitor activity and the target market profile.

However, there are a number of disadvantages with test markets. They can take up to three years to complete, at the end of which the firm may lose substantial sums of money if it is unsuccessful. Test markets provide competitors with a chance to study the new product and, perhaps, even to launch a retaliatory product before the new product is launched nationally. For example, prior to its launch in the UK, Carnation Coffee-Mate was test-marketed over a period of six months. This gave a rival firm, Cadbury, ample warning and the opportunity to develop and introduce its own product, Marvel, to compete head-on with Coffee-Mate.

Competitors can cause further disruptions in the test market by cutting their prices in test cities, increasing their promotion and buying the product being tested. They are likely to use their best sales forces, which may bias sales results, making them poor predictors of likely total market sales.

Test-Marketing Industrial Goods

Test marketing may be inappropriate for industrial products owing to the following characteristics:

• Market structure. As the total number of potential customers may be small, a test market may be tantamount to a full launch.
• Buyer-Seller Relationships and Customization. Product development in organizational markets is often the result of close collaboration between the buyer and seller. The buyer's involvement at the prototype stage and his or her agreement in discussions about price and availability during the development stage mean that test marketing is unnecessary.
• The product's life-span and purchase frequency may be long for many industrial products, such as capital equipment, so that purchases are made infrequently. Consequently, many of the potential purchasers are unwilling to test the new product, as their existing products may have several years before a replacement is required.

Stage 7: Commercialization

Assuming that no significant changes are required to the product, once the test-market results have been analyzed, the product is ready to be launched into the market. There are two alternatives:

• An immediate national launch can be used if the company has sufficient resources. This allows the advertising campaign to achieve maximum impact and can prevent competitors from disrupting the launch with rival products or publicity campaigns. The risk of a national campaign is that some organizations experience teething problems, especially if they have failed to invest sufficient time and resources in ensuring that their production, quality and supply systems are operating at maximum efficiency.
• A rolling launch is the other alternative to the national launch. Few companies have the confidence, capital and capacity to launch new products into full national or international distribution. This method is popular among firms which prefer to select an attractive city and conduct a campaign to enter the market. They may then enter other cities one at a time.

Stage 8: Monitoring and Evaluation

After a product is launched, it is important to evaluate the process of the launch and the product performance after the launch. When reviewing the process the firm will have to address questions such as:

• Were the correct people involved in the launch?
• Was sufficient time and resources allocated to the launch?
• Was the marketing research information adequate for the launch?

The answer to these questions will help the firm improve future NPD initiatives.

Before the product launch takes place the firm will set performance criteria such as sales targets, market share relative to competition and promotion objectives. By setting such criteria, the firm can measure the actual product performance. Any mismatch between the two needs to be analyzed to determine whether it was caused by poor decision making, lack of information or unforeseen market conditions.

*SOURCE: FUNDAMENTALS OF MARKETING, 2007, MARILYN A. STONE AND JOHN DRESMOND, PGS. 240-246*

END

An Analysis of the Fundamentals of Marketing (part 40)

Brands (part D)

by

Charles Lamson

Brand Groupings: Subcultures, Communities and Tribes

Reference groups form an important context for the understanding of brand consumption. We now consider how different descriptions of brand-user groups can allow new understandings of experience of brands.

Brand Subcultures

The notion of a 'subculture' of consumption moves beyond cognitive psychology and into the realms of social psychology and sociology. On this view, while the brand is central, it comprises one aspect of an entire subculture of consumption. The 'sub-culture' is marked off from the mainstream through key elements in style, or the way in which a person comports himself. Dick Hebdige describes the emergence of 'Mod' and 'Rocker' subcultures in England in the 1950s and 1960s. Each group differentiated itself from the other primarily in terms of the bike they rode: Rockers straddled heavy British Triumph or BSA motor bikes; Mods sleek, streamlined Italian Vespa scooters. The groups also differentiated themselves from each other in terms of the clothing they wore, where they liked to hang out and their choice of music and recreational drugs.

Hebdige also noticed that within each group a pecking order was established according to how well one could handle the machine, distinguishing oneself from 'inauthentic' riders. A more recent study by Schouten and McAlexander (1995) which focuses on the Harley-Davidson user illustrates how the organization of this subculture is layered like an onion, with the 'Easy Rider' or 'Electra glide on Blue' leather-clad, tattooed aesthete forming the center and day trippers acting as outriders to the culture. The brand positively plays a role in establishing and maintaining a sense of separation, cohesiveness and solidarity necessary for the formation of the subculture, in addition to providing resources for the identity work of members.

Brand Community

McAlexander and Schouten (2002) have since revised their terms, arguing that the term 'community' is more appropriate than that of 'subculture'. Their subsequent research indicated that, in particular, the notion of subculture overplayed the role of the white male leather-clad biker and underplayed that played by others such as women and minorities who also owned and rode Harleys. Muniz and O'Grinn (2001) define community in terms of the following:

• Consciousness of kind, refers to a shared consciousness.
• Shared rituals and traditions.
• Sense of moral reponsibility or duty to the community as a whole.

Consciousness of kind means that, although brand users feel a strong attachment to the brand, they feel an even stronger attachment to each other. They refer to a sense of 'we-ness', whereby owners of Saabs or Apple Macs refer to themselves as 'Saabers' or 'Mac' people. Muniz and O'Guinn (2001) found that each community formed a kind of hierarchy based on the extent to which the brand was used authentically and legitimately. For example, many Saab owners disparaged 'yuppies' who bought Saabs because they were rich but who were not really committed to them. A sense of community was sustained through oppositional brand loyalty; Saab owners defined themselves as not-Volvo owners (which they associated with tractors); Mac users were definitely not PC users. The authors found evidence of the exercise of rituals and traditions in the groups which they studied, including Saab drivers. While these rituals may at first glance seem to be insignificant, they function to create consciousness of kind. It was considered important to know the history of the brand, which often distinguished the 'true believer' from the acolyte, and to circulate stories or myths. Finally, these groups were infused with a sense of moral responsibility to the community as a whole. The obverse of this was indicated, e.g. when a Mac user who switched to using PCs was regarded as being 'morally reprehesible', 'Mac turncoat'. owners helped each other by providing assistance and advice on how to use the brand. The notion of community enables one to think of a brand as being the common property of those who work for the company and those who form the 'community'.

The idea of brand community may convey a sense of warmth but also carries the whiff of saccharin to some. For example, one blogger asked, in noting Schouten's 'handsome sum' for his work on brand community, and how film maker Adam Berman had won an award for his film 'Biker Dreams', what did the bikers get out of it? She answers her own question; 'they are robbed of their bad-boy/tough-chick/Hell's-Angel image by a homogeneous, warm-and-fuzzy portrayal' (Melander, 2005). In any event some might take the ascription of the word 'community' in relation to brands to be a step too far. The traditional word 'community' can be taken to represent something much deeper by referring to those who share not only their daily food in common (communion) (Falk, 1994).

Brand Tribes

The idea of a brand tribe is looser and has a more dangerous feel to it than that of the brand community described above; there is something here that is beyond the influence of brand managers. A tribe does not necessarily refer to a bounded group. For example, a large enough proportion of the Coca-Cola 'tribe' were outraged when managers changed the Coke formula some years back, before telling them that they done so, that they forced the company to retract. The entire story is interesting. It is suggested that you follow it up on the Internet if you can. As described by Mafesso (1996), the neo-tribes consist of configurations of members who are connected by loose bonds of 'common affect'. The idea of a tribe enables us to think beyond the idea of those who support the brand to those who actively identify against it. There is the possibility that for every brand community out there, there is also likely to be an anti-community, anti-McDonald's, anti-Nike, anti-Harley group. The idea of tribal identities accords with the romantic vision which many anti-consumers have of themselves, as guerillas who hollow out 'temporary autonomous zones' or crevices in the monolithic space of commodity consumption, which become the sites of a never-ending guerilla war. George McKay's work (1998) provides an excellent summary. One might argue that it makes more sense to view those excluded from consumption as constituting a number of different marginalized groupings: the aged poor, immigrants and vagrants.   

*SOURCE: FUNDAMENTALS OF MARKETING, 2007, MARILYN A. STONE AND JOHN DRSMOND, PGS 215-219*

                                                                              END

An Analysis of the Fundamentals of Marketing (part 39)

Brands (part C)

by

Charles Lamson

Brands, Meaning and Identity

The discussion about brand congruity and brand personality raised the question of how brands attain their meaning and how this in turn transferred to consumers? Allen and Olson (1995) suggest that consumers attribute meaning as well as action and purpose to brands. But what are the mechanics of how this works? In marketing the focus on meaning can be traced to Levy (1959), who argued that people do not buy products for what they do but for what they mean. While these are inseparable in practice, it makes sense analytically to divide the discussion about brand meaning identity into two sections, one dealing with the role played by brands in our lives, the other which focuses on how brand meaning is mediated through advertising (Elliot and Wattanasuwan, 2001).

In this respect brands are symbols whose meaning is used to create and define a consumer's self-concept. In earlier posts, the Freudian view was discussed showing that possessions can come to be regarded as being part of the extended self (Csikszentmihalyi and Rochberg-Halton, 1991; Belk, 1988). Elliot and Watanasuan, (2001) follow this line of thinking, arguing that consumers invest psychic energy into people and objects. In this view, the self concept is complex as energy may be invested in a number of people and things. Consequently a person possesses a multiplicity of identities. This account highlights the role played by narratives or stories in the formation of identity. Much of the knowledge that is gained about ourselves and our culture comes to us from the commercial process of story-telling called branding. In building up these stories meaning is constructed from two sources; our lived experience and the mass media.

Lived Experience of Brands

Freudian theory suggests that at a certain point in our life the issue of identity becomes important to us. In this respect Erikson (1968) argues that identity confusion is experienced by most adolescents. This is because by that stage of development the individual feels independent of the family and ventures beyond the safe confines of the family to sample other social contexts. New social contexts can be frightening and challenging to the adolescent's sense of self, particularly if they have not previously mastered the ability to take different roles. Consequently a person may react to this sense of confusion by clinging to the security provided by the peer group and may overidentify with the heroes of that group to the extent that they seem to lose their individuality. Where the adolescent fails in positively responding to the identity crisis they may attempt to create a negative identity by seeking to become everything that they have learned ought to be avoided. From the above, it is important to consider the context in which interaction takes place with products in order to gain meaning from them. As children we consume many food and beverage brands in the family and often secure context of the family home. This is why such brands attain such a nostalgic appeal later in life. Life in the school context brings us into contact with others, and here brands may become implicated in the struggle for esteem and status, signifying who is 'in' and who is 'out' of the group. Most children who must negotiate the changed balance between home, school and a widening circle of social contexts feel confused and some will be disaffected. This latter group are the targets for a host of branded identities, many of which are to be found on MTV or something similar, from Marilyn Manson to the 'stars' of death metal, or more extremely Insane Clown Posse. Given Erikson's comments then as children grow into adolescence a range of brands targeted at the 'anti-hero' image should become salient. Identity is lucrative for marketers.

The idea of a reference group (Newcomb, 1948) plays a key role in the construction of identity as one moves from the family context to the school and the ever widening social context. This divides the 'in-group' that we feel comfortable with, from 'out-groups', those we tend to avoid and in turn the aspirational group to which we seek to belong. In consumer societies brands can play a key role in differentiating 'in' groups from 'out' groups. For example, in the UK, the luxury Burberry brand has been identified with 'chav' culture:

Chav is a slang term which has been in wide use throughout the United Kingdom since 2004. It refers to a subcultural stereotype of a person with fashions such as flashy 'bling' jewelry and counterfeit designer clothes or sportswear, an uneducated, uncultured, impoverished background, a tendency to congregate around places such as fast-food outlets, bus stops or other shopping areas, and a culture of antisocial behavior.        (Wikipedia online)

When chavs begin to wear Burberry other groups stop wearing the brand. On the other hand, those who are proud to be chavs may react strongly against brands such as Polo, which may be perceived as being associated with 'upper-class twits'. 

 *SOURCE: FUNDAMENTALS OF MARKETING, 2007, MARILYN A. STONE,  PGS. 211-212*

END

An Analysis of the Fundamentals of Marketing (part 38)

Branding (part B)

by

Charles Lamson

Brand Decisions

Companies must make a number of decisions with respect to their brand strategy.

Choice of Presentation Format

The presentation format to be used is important. The following constitutes a simple menu.

• Company brand. In this case the company uses the corporate name as the focus for all external communications, through advertising, products and letterheads, e.g. companies such as Coca-Cola, Heinz and ICI.
• Individual brand. Here the company behind the brand maintains a low corporate profile with respect to customers and focuses on the creation of strong brand identities. A prime example in the market for detergents, where P&G and Unilever dominate the UK market, although this is disguised by the focus on competing brands.
• Mixed format. Sometimes referred to as an endorsed brand. This is where the brand identity is displayed prominently but the corporate identity also features, e.g. Kellogg's with Kellogg's Cornflakes, Kellogg's Rice Krispies, etc.

The presentation formats mentioned above may be made more complex by building in other elements. Through the cowboy, Phillip Morris uses a brand user strategy to promote Marlboro. Another format is the product class or brand family, e.g. Matsushita markets its electronic products under four brand families: National, Panasonic, Technics and Star.

Companies have made use of nationality and building corporate and brand identity. For example, it is reputed that 'Sony' was developed as a name not because of what it meant (it did not mean anything), but because it was thought to be a name that might appeal in the West. Using the same logic in a reverse direction, the British chain of electronic retailers, Curys, chose the Matsui brand name, as it was felt that British consumers would identify it as being of Japanese origin (it was not).

Eight Steps to Building a Brand

The following describes an idealized notion of what ought to be done in building a brand.

• Identify the brand position. What are the brand's values? Where does it stand in the mind of the customer? What differentiates it from others?
• Gap analysis. Following a SWOT analysis (a study undertaken by an organization to identify its internal strengths and weaknesses, as well as its external opportunities and threats) - are there opportunities for brand extensions, i.e. by adding in additional products under the brand umbrella, or might these act to dilute the brand?
• Develop the brand property. The brand property is that element that is 'unique, memorable and indissolubly linked to that brand and no other' (Barry Day, vice-chairman, McCann-Erickson, in Clark, 1988). The brand property does not lie in the intrinsic nature of the product, e.g. a sweet fizzy drink. Through such a process, the fizzy drink becomes 'the real thing', Coke.
• Test alternative propositions. Once developed, brand propositions may be tested with small groups of customers from the target segment, their reactions noted and changes suggested and implemented.
• Make the 'go/no-go' decision.
• Construct the implementation plan. This involves a consideration of the 4 Ps (price, product, promotion and place) in relation to the brand. All these decisions will defer to the notion of 'brand property' and the target market segment which has been identified for the brand.
• Implement the plan.
• Monitor the plan. Go back to the beginning - identify the brand position.

In the next post recent ideas about brands are discussed, including brand congruity, personality and community. This view is compared with a behaviorist explanation of brands and brand loyalty.

*SOURCE: FUNDAMENTALS OF MARKETING, 2007, MARILYN A. STONE AND JOHN DRESMOND,  PGS. 205-206*

END

An Analysis of the Fundamentals of Marketing (part 37)

Branding (part A)

by

Charles Lamson

Introduction

Perhaps the earliest instance of branding was in the branding of slaves and criminals for purposes of identification. Branding has been associated with property in its widest sense. Although a slave is undoubtedly a person, in ancient  times, slaves were treated as if they were socially dead. To mark this event slave owners habitually renamed their slaves with contemptuous titles such as 'irritation'. Within this context branding is associated with power, control, a sign of ownership indicated through marking a brand physically on the body and property.

In modern times, the concept of branding has taken on a more positive inflection with the development of commodity brands in the early twentieth century that offer to protect the self. Individuals now mark themselves with brands as a means of self-affirmation rather than negation. In Western culture the discourse about brands has traveled beyond the marketing of traditional products and services to swamp every aspect of life. From an earlier post, it can be recalled that this was what Kotler called for back in 1972, when he asked that the marketing concept be applied to all institutions. Someone must have been listening because from birth the infant is wrapped in a branded cocoon of 'absorbent' diapers, 'trustworthy' bottle-feeds and medications, and 'cute' clothes. From about that age the infant begins to learn the language of the brands from the mass media and by observation of the actions of those around IT.

In the next couple of posts the traditional world of goods and services is considered. I will start by outlining the conventional wisdom that argues why branding is important. Then themes will be discussed under what is loosely referred to as the conventional wisdom about branding, i.e. brand congruity, personality, subculture and community. Consideration is given to discussion of a way by which brands gain their meaning and by which they may recirculate this back to consumers as symbolic resources for the construction of identity. Then branding is assessed from a radical behaviorist point of view and different accounts of brand loyalty are explained.

Brief Modern History of Branding

In an earlier post, the work of the behaviorist J.B. Watson was examined as being one of the first who used the fear-sex-emulation model in advertising during the 1920s. The strategy appeared to be simple. Basically, the advertisement had to first identify some problem, deficit or lack in the consumer. This was achieved by inducing feelings of anxiousness or lack of confidence, e.g. with respect to the fear of underarm sweat. Early brand advertising clearly identified the deficit and the benefit in the shape of the product that could cure it (Falk, 1997). Familiar brands started life as patent medicines, e.g. Coca-Cola and Heinz Ketchup; as part of a controlled 'healthy' diet, e.g. Kellog's Cornflakes; as an aid to the creation of a more 'hygenic' domestic environment through banishing 'invisible' germs and dirt, e.g. Sunlight soap; or in focusing on the development of 'personal hygiene', e.g. Zam-buk, Lifebuoy carbolic soap and Odorono. The brand is offered as the means to resolve the anxiety, redress the deficit and fill the lack. this meets with Levitt's (1986) advice to marketers when seeking to define consumer's needs; that it is better to start with the deficit. For example, the market for 'six inch holes' rather than the benefit of the market for drills; a hospital may produce surgery; customers seek 'relief of pain'; and purchasers of perfume may be purchasing 'dreams', those of cosmetics 'confidence'.

Why Brand?

Authors cite a plethora of benefits that arise from branding. Most of these are from the producers' perspective:

• Protection. The brand mark and other aspects of the brand constitute a legal sign. Anyone who uses 'Coca-Cola' in the particular font prescribed without permission is likely to end up in court. Brands are protected by copyright, trademarks and patents that are underpinned by the notion of intellectual property rights, as written into WTO standards. Such devices have been used to attack brand piracy, where, for instance, Napster featured as a high profile case. Klein (2000)  notes that there are two sides to this. Protection of the brand mark has reached the extent that bloggers such as myself in writing this blog, can be accused of 'stealing' the brand mark. Klein argues this has become a powerful new form of censorship as global brands dominate huge swathes of social and cultural space.

• Property. The brand mark is a shorthand device in that it readily identifies what belongs to one person, what that person has a right to which is different from what belongs to other people. The brand mark needs to be distinctive and easily recognizable if it is to fulfill its function.
• Differentiation. The provenance of this idea tracks back to the days of the Unique Selling Proposition (USP) developed in the US in the 1940s. The brand should offer a proposition that is unique and which signifies a benefit that will pull the customer to the brand. Put in behaviorist terms, the various stimuli associated with the brand, e.g. the brand logo and packaging, should act as a discriminative stimulus that prompts the person to associate this with some unique aspect that has provided reinforcement. in cognitive terms the idea is to create a favorable attitude about the brand based on a key set of attributes. Levitt (1968) supports this idea in arguing that the core brand should respect the specific quality which makes the brand different from others. This is known as the 'brand property'. Once this aspect of the 'core' brand has been identified, the marketer has a basis to define the need and the plenitude or wholeness that consumption of the brand will bring. The brand itself is a positive creation which offers the promise of negating the evil of the need.

• Added value. The argument for differentiation would make little sense if this did not lead to the creation of added value. The thinking is that if the marketer can make an addict of the consumer, by inducing him or her to rely upon the brand and to consistently demand it, the brand may command a price premium over those which purport to service the same core need. One way of creating added value is by ensuring that the brand consistently delivers a quality offering. There is a strong positive relationship between perceived quality and profitability, which occurs as the result of customer loyalty, more repeat purchases and less vulnerability to price wars.
• Brand equity. In some instances the value of a brand (not to be confused with brand values, which will be discussed in a later post) has been listed on a company's balance sheet, which is a controversial move.
• Market share. When a company buys a brand it is buying market share. Data suggest that there is a strong positive relationship between high profitability and market share. More important, brands promise the purchaser consistent profitability. Doyle (1998) argues that strong bands generate exceptional levels of credit through a triple leverage effect. The most obvious effect is through the higher volume which provides 'experience curve effects, involving higher asset utilization and scale economies. the second source of advantage is through the higher price that the brand commands. Sometimes this price premium holds at the final consumer level, although it is usually at the retailer or distributor level that it is most apparent. Successful brands build such loyalty that they are able to generate superior earnings. A premium brand can earn 20 percent higher returns than discounted products. Brand leaders also have lower unit costs as long as they can take advantage of experience effects which may occur in the development, production, or marketing, depending on the industry's value chain.

• Functional device. Although this is the shortest section it is also probably the most important. Brands enable consumers to identify high-quality products and services and save on search costs.

*SOURCE: FUNDAMENTALS OF MARKETING, 2007, MARILYN A. STONE AND JOHN DRESMOND, PGS. 202-204*

END