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Brand extensions are a good business growth strategy as it allows the company to organically grow revenue. However, extensions must be carefully evaluated and chosen to ensure that the related affect is what is expected. For example, the company needs to make sure that any extension to the brand supports those brand elements or attributes that customers associate with the brand. Any product extensions that conflict, deteriorate or dilute the brand. Brand extensions can be a profitable business growth strategy by associating the new product with the existing strong brand that the company has developed. For example, Nike started out as a running shoe manufacturer. They built their brand equity by developing the brand elements of being memorable by: Memorable & Meaningful - have a simple tag line of just do it was easy to remember and evoked an emotion of accomplishment/satisfaction, Likeable - their products were well made and designed, Protectable their innovated waffle pattern on the show sole as well as their name was patented and copy write protectable, and Adaptable they expanded their shoe product line to include hiking, walking and cross trainers.
The last criteria of the brand elements, transferable, is what made Nike more profitable and successful. Leveraging the strong market position and brand equity, Nike extended their brand out into active clothing wear. This extension decision was a great growth-strategy, as the product(s) complemented and enhanced their brand image. By offering active wear, then could create additional associations to affiliations to professional athletes (non-runners) as well as fashion conscious consumers.
Brand Equity Model: Brand Equity is measured based on how well the brand is recognised and favoured over its competitors. It is the added value endowed on products and services. The value-addition may be reflected in the way consumers think, feel, and act with respect to the brand as well as in the prices, market share and profitability the brand commands for the firm. If a brand has a positive perception in the consumers mind, we can say it has a positive brand equity. Brands with positive brand equity will consistently generate, maximize, and grow cash flows. They achieve this by commanding a price premium, allowing for brand extensions and licensing, attracting an retaining more valuable customers, and reducing the costs of customer acquisition. Coca-Cola is the brand with the highest brand-equity and a brand valued at $70 billion. As defined, the value-addition is not always tangible and measurable. There are several marketing organizations which came up with their own metrics, analytics, and models to measure and manage brand equity. Advertising agency Young and Rubicam (Y&R) developed a brand equity model called Brand Asset Valuator (BAV). Please referwww.thebrandbubble.com/explore. Young and Rubicam, based on its research with almost 500,000 consumers in 44 countries, has come up with five key components or pillars of brand equity. They are:
- Differentiation or Uniqueness measures the degree to which the brand is seen as different from others. - Energy measures the brands sense of momentum. - Relevance or Appropriateness measures the breadth of a brands appeal. - Esteem or Likeability measures how well the brand is measured and respected. - Knowledge or Awareness measures how familiar and intimate consumers are with the brand. The relationship among these factors form the Power Grid ( as shown inwww.thebrandbubble.com/explore ). Select brands like Coca-Cola, Google, etc, and you will quickly realize that they are shown on the top right corner of the grid. These are the leaders with high earning and high potential. Similarly, brands like Safeway will appear in the fourth quadrant, which is an indication of an aging brand and has some serious challenges. Virgin Atlantic appears in the New/Indifferent category of the PowerGrid. Other important Brand Equity models are: Milward Browns Brand Dynamics, Brand MetricsDNA, Brand Resonance Model, and Aaker model.
Chapter 9
To develop an effective positioning, a company must study competitors as well as actual and potential customers. Marketers need to identify competitors strategies, objectives, strengths and weaknesses. Developing a positioning requires the determination of a frame of referenceby identifying target market and the resulting nature of the competitionand the optimal point of parity and points of difference brand associations optimal point of parity and points of differentiation; that points of differences are associations and are strongly held and favorably evaluated by consumers; the key to competitive advantage is relevant brand differentiation; emotional branding is becoming a way to create product and brand differentiation: brand stories are growing in importance as are brand journalism, and cultural branding.
3 Cs of positioning:
Be Crystal clear: Be Consumer based: Be relevant and credible to the consumer Write in consumer language and from consumers view point Be Competitive: Be distinctive Focus on building brand elements into powerful discriminator Be persuasive Be sustainable
Fun to drive and good gas mileage: for cars, this is an ongoing challenge along with safe and good gas mileage and large and good gas mileage. Safe and scaryamusement rides, movies, television shows, books. Choices and convenience: variety in our shopping but sized for convenience (has the right mix of products but is not too bigconvenience stores). Close but not too closeshopping centers and large mega-stores close enough but not in my backyard. Simple to use yet not complicatedcomputer and game programs. A firm may use dual strategies to communicate these negatively correlated attributes and
benefits. Although more expensive to use dual marketing strategies, for a product or service consisting of negatively correlated attributes, such strategies will appeal to both sets of consumers for the product. Additionally, the marketer may anchor the PODs and POPs, with other brands or other associations that emulate the desired characteristics or communicate the desired emotional appeals.
Market Leader Strategies: The market leader generally leads the other firms in price changes, new-product introductions, distribution coverage, and promotional intensity. The market leader must maintain a constant vigilance as other firms keep challenging its strength or trying to take advantage of its weaknesses. To remain number one, dominant firms must find ways (1) to expand total market demand, (2) to protect its current market share through good defensive and offense actions, and/or (3) try to increase its market share further, even if market size remains constant.
Market Challenger Strategies: Challengers can attack the leader and other competitors in an aggressive bid for further market share. The strategic objective of most challengers is to increase their market shares. An aggressor can choose to attack the market leader, to attack firms of its own size that are not doing the job or are under-financed, or attack small local and regional firms that are not doing the job or are under-financed. The attack strategies include frontal attack, flank attack, encirclement attack, bypass attack, and guerilla attack. Market Follower Strategies: Followers tend not to want to steal others customers, but instead they present similar offers to buyers, usually by copying the leader. Follower market shares show a high stability. Each follower tries to bring distinctive advantages to its target market. The follower is a major target of attack by challengers. Therefore the follower must keep its manufacturing costs low and its product quality and service high. Following does not mean the firm is passive or a carbon copy of the leader. The specific strategies are: the cloner, which lives parasitically off the leader; the imitator, which copies some things from the leader but maintains differentiation in terms of packaging advertising, pricing, etc; and the adapter, which takes the leaders products and adapts and often improves them. Market Nicher Strategies: An alternative to being a follower in a large market is to be a leader in a small market or niche. Smaller firms normally avoid competing with larger firms by targeting small markets of little or no interest to the larger firms. Firms with low shares of the total market can be highly profitable through small niching. The nicher ends up knowing the target customer group so well that it can meet their needs better than other firms casually selling to this niche could. The nicher receives high margins in contrast to the high volume of the mass marketer. The key idea is specialization. Nichers need to create niches, expand niches, and protect niches.
Take a position: The best way to challenge a leader is to attack its strengths versus the best way to attack a leader is to avoid a head-on assault and to adopt a flanking strategy. Pro: What are some of the strengths of a market leader? A market leader as defined here, generally, has the largest market share in the relevant product, market, usually leads the other firms in price
changes, new-product introductions, distribution coverage, and promotional intensity. Market leaders may also have products that generally hold a distinctive position in consumers minds. These strengths and competitive advantages can be formable when used by a savvy and seasoned firm. Trying to attack the leader on its strengths requires point-of-differences in brands, sophisticated marketing positioning, and deep pockets for the challenger. The underling strategy for performing a head on attack to a market leader is: If the attacking firm sees that the market leader is not serving the market well; that the attacker has out-innovated the market leader through product innovations or other differentials; or if the market leader is conservatively spending or is milking the market. Con: A flanker attack can be directed along two strategic directionsgeographic and segmental. In a geographic attack, the challenger spots areas where the opponent is underperforming. In segmental, the challenger uncovers underserved market needs and attempts to penetrate these markets with its products. Flanking is in the best tradition of modern marketing that holds that the purpose of marketing is to discover needs and satisfy them. Flanking is particularly attractive to challengers with fewer resources. MARKETING DISCUSSION Pick an industry. Classify firms according to the four different roles they might play: leader, challenger, follower, or nicher. How would you characterize the nature of competition? Do the firms follow the principles described in the chapter? Suggested Response: Student answers will differ according to the industries picked and the role the firms play in that industry. All answers should contain some of the following: Leaders: largest market share, leads on price changes, new-product introductions, distribution coverage, and promotional intensity. Have products that generally hold a distinctive position in the minds of the consumers. Can use strategies that expand the total market demand: (new customersmarket-penetration strategies, new-market segment strategies, geographic-expansion strategies). More usage (level of quantity or frequency of consumption). Protect its current market share through good defensive (position defenses, flank defense, preemptive defense, counteroffensive defense, mobile defense, contraction defense). Challengers, followers: can attack the leader for increased market share, (challengers), or followers (not rock the boat), through:
Frontal attack. Encirclement attack. Flank attack. Bypass attack. Guerrilla warfare.
Price should reflect the value that consumers are willing to pay.
Consumer- orientation is the focal point of this age of marketing. Consumers think about the products they are purchasing, its attributes, prices, utilities according to their own way. Yes, they are influenced by a number of factors like, promotional activities, reference groups, and family members. But ultimately it is the consumer who makes the purchasing decision and sets the expectation level and according to it who sets the price range within which he/she can purchase the product. This is the fact behind reflecting the value when setting the price. Differentiating the products through different marketing mix strategies from competitors is the demand of time now-a-days. Even firms within a same industry are differentiating their products by adding more and more value-added services. So they can charge different prices for the same category of product. In these cases it is easier to the producer to set a price on the basis of the value. Consumers dont purchase the product rather they purchase benefits, prestige inherent in the products. So, it can be an opportunity to the firm to charge a higher price on the basis of perceived benefits and prestige of the consumer by consuming the product. Benefits and prestige can be enhanced through different promotional activities, branding and long-term relationship with consumer community. Here, cost-based pricing can be just a loss of opportunity to earn a good profit. For example,BMW, Mercedes Benz ,Rolex Watch are purchased with a premium price because of these attributed prestige. It is the perceived quality which motivates the customer to give a premium price, not the quality assured by the firms. Consumers set a price range in the mind to give in exchange for the value they get from the quality product
Instead, they will do smaller marketing campaigns, using Internet websites, blogs, social networking, and word-of-mouth advertising. While mass marketing may be on the wane, companies such as Coca-Cola and Nike use it extensively to retain their brand's appeal throughout the world. Here are some known benefits of mass marketing:
Uses mass media to build brands Reinforces a company's mission statement Creates an image, or lifestyle, associated with a brand name Gets attention from millions of people
Mass
marketing
also
has
it
drawbacks.
This
may
include:
Expenses - mass marketing costs a lot of money The money spent on ads may not be recouped through sales This marketing doesn't connect with niche audiences
Smaller marketing initiatives can be low-cost or free; often, creative or "guerilla" advertising is used to attract attention without access to radio, TV, etc. For those who believe that mass marketing is dead, finding a niche market and targeting that market segment in ads is preferred over spending a lot of money on a mass marketing campaign.
In addition to this, certain types of products and services only address minorities, being completely useless for other categories. In this case, target marketing represents the only marketing solution. Certain products have been particularly created or adapted to fit the needs of minorities. Therefore, target marketing begins with the development of the product, continues with its actual production, and is implemented by the marketing campaign. In other words, it is unfair to blame marketing for any negative aspects related to targeting minorities In fact, target marketing has become a necessity in the complex context of todays globalization. The reason behind this situation consists in the fact that minorities groups are reporting continuous growth and development. Their needs expand also, and so does their power