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Brand management strategy

To develop a brand management strategy, it is important to determine the right position of your brand. Position is about the place the brand has taken in the mind of the consumers. A strong position means that the brand is unique, reliable and consistent. It builds around a benefit that gives the product or service a unique, distinguishing factor that differentiates it from the competition. A good positioning directs the organization to achieve its goals and objectives as specified in the mission and vision statement. Brand positioning is all about the place in the market and in the minds of the consumers.

It is about what you...

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... want the consumers to think when they think of your brand. The following is very important for positioning to be successful: • It should be externally driven • It should be different from the competition • It should be valued Most companies have positioning that is clearly and easily understood by the customers. The following are some of the examples of successful positioning: • FedEx overnight delivery • Wal-Mart low prices and good values • Mercedes luxury and prestige • Nike performance The companies mentioned above have many advantages.

They are the leaders in their category and industry and they can easily extend the brand in other areas as they enjoy the strong reputation. ‘Positioning is a credible promise of value delivered in ways that distinguish the brand from others. It is a concise statement that summarizes the brand’s commitment or promise to customers. ’ (Davis M. 2002: 110) Brand positioning has the following three components: • Definition of the target market • Definition of the business, industry or category the company operates in • Point of differentiation Target market needs to be addressed to in the positioning statement.

The brand needs to decide on the target market by segmenting it geographically, demographically and psycho-graphically. Once the segmentation is done and customers identified, positioning sees to if these consumers are both reachable and identifiable and whether they are interested in the point of differentiation we are offering them. Positioning examines if the identified target market was ever served before and it also reasons out as to why it was not served earlier. The positioning should be such that it should motivate the consumers to buy the product and help the company win the loyalty of the customers.

Positioning also sees if the company can charge premium prices from the customers. To keep the brand the alive in the target market it should be updated in every few years. 1(b) A fresh look is taken at the brand’s positioning to ensure that it is still relevant to the company’s defined goals and objectives, target market, changing customer tastes and preferences, and market dynamics. The five principles of Effective Positioning states that by looking at the following five screens: value, uniqueness, credibility, sustainability and fit, you can determine if the positioning needs to be updated.

(Davis M. 2002: 116) In the given situation, the company is repositioning itself as premium quality brand which means that the company needs a drastic make-over to move from the current position of inexpensive, fairly good quality product. Once a brand has been repositioned, it should drive all strategies. The company should be internally directed to execute the strategies in the market place. The quality of the repositioned product and service should be decided along with the packaging and pricing strategy, and the communication medium.

The new position should be lead by the senior management whose behavior and actions would reflect the new position. They have to show the stakeholders including employees and customers that they fit the new premium pricing services. The position would be successful if the brand sells quality product and builds on the image as a premium priced brand. The management, employees, senior management would have to walk, talk and live the new positioning. There would be a need to raise the service level, product quality, after sales services, ambience, customer relationship and commitment.

The company would be required to delight the customers and not just satisfy them. The new positioning would also require a passionate and energetic approach towards the new changes. The internal team at work has to buy the new positioning as they are the ones who bring the positioning to life. The employees must play the role of brand ambassadors so that the positioning, image and contract of brand is brought to life. The internal team should be aware of the repositioning and clearly understand the new positioning. They must be willing to face and readily accept changes.

The new positioning should direct and motivate them in performing better and exceeding customer expectations. Criteria and benchmarking for monitoring purpose should be established and employees should be rewarded accordingly. Employees must be trained and educated to sell their business in a way that adds value to the brand and builds customer loyalty. The company should continuously collect and analyze data on customer wants and needs, strengths and weaknesses, competitor strategies, growth and competitive advantage.

Positioning is not always expensive but it definitely requires a lot of changes especially when moving from a fairly priced product to a premium priced product. 3(a) Penetration pricing is the setting of relatively low entry prices which is lower then the market price. The company believes that by setting low prices it will be able to break down the existing brand loyalties. Penetration pricing is implemented when the objective is to increase market share and sales volume rather than to maximize profit. Penetration pricing is appropriate in the following conditions: • Price elasticity

Price elasticity of a product is the responsive of consumers to changes in price. High elastic products would mean that the change in quantity demanded of a product would be greater than the change in price. This means that a slight change in price would result in consumers to switch from the current brand to the low priced, new product. The elasticity of the product depends on the nature of the product. Penetration strategy would be successful if the product is highly elastic that is: – Substitutes: the greater the number of substitutes the greater the elasticity and greater the chances of consumers switching to low priced product.

– Percentage of income: the higher the percentage of income spent on the product, the higher the elasticity as the consumers would be very careful in buying expensive products. They would thoroughly compare the prices and then make the buying decision. Therefore higher the price of the product, the more chances there are of making penetration pricing successful. – Luxurious: necessary products are less elastic as the consumers would buy the product irrespective of the price. On the other hand, luxurious products are highly elastic.

This implies that for penetration pricing to be appropriate the product should be a luxury product so that the consumers are sensitive to price changes. • Economies of scale As explained earlier, penetration pricing means that the initial, entry pricing are kept low. The development of any product is very expensive and this stage is very crucial in the product life cycle. Hence it is extremely important that there are economies of scale in production and other processes so that penetration pricing can be implemented without losses. Penetration pricing becomes even attractive when selling larger quantities lead to economies of scale.

This would result in greater efficiencies and effectiveness as costs will be controlled at every stage. • Mass market It is important that the there is sufficient demand in the market so that there is high sales volume. One of the objectives of penetration pricing is to capture market and increase sales volume. Mass marketing also leads to lower costs of marketing, production, selling and distribution making penetration pricing appropriate. • Standardization There are certain industries where standards are very important and good penetration pricing can become the industry standard. • Strong competition

Presence of strong competition makes penetration pricing an appropriate strategy. • Subsequent purchases Penetration pricing is appropriate when the first purchase is priced low followed by high prices of subsequent purchases. E. g. in the case of printers, the printer itself can be charged at a price lower than the competition but the subsequent purchases like cartridge refills can be charged high. 3(b) For the implementation of a marketing strategy it is important to identify how the marketplace will be addressed and how the strategy will be implemented to conduct the day to day operations.

In today’s fiercely competitive world a consistent strategy is needed that outsells the competition. The strategy must be based on the company’s mission and vision and abide by the values. Once a strategy is decided which in this case revolves around capturing market share and boosting sales, appropriate strategies must be designed. Strategies must be backed by actions that would enable the company to achieve the objectives. One of the generic strategies must be chosen. In this case it is that of cost leadership where you aim to reduce your cost to a large extent so that penetration pricing is possible.

For cost leadership it is critical for the company to ensure that operating capital is available, labor is trained and skilled so that there are no wastages, close supervision of the labor, monitoring of quality of product and ease of designing the product. Environmental factors should be studied and data must be gathered on the strategies of the competitors. Once through analysis is done, pricing, promotion and distribution decisions should be taken. Pricing should be set lower than that of the competitor’s. Adequate promotion including advertisement should be done to make the consumers aware of the product.

The price advantage to the consumers should be highlighted so that the consumers know about the new offering. Product comparison or benefit advertising should be used. The products should be distributed to all retail shops where the consumers are expected to come. It should be decided as to whom all to include in the distribution channel depending on the costs of each player including retailers, suppliers, wholesalers, agents etc. To implement the strategy government regulation as to the minimum rates established should be taken into account so as to avoid any legal issues.

Technological trends should be closely monitored and adopted by the company so that it keeps updating itself. Prospects like whether you are selling to a completely new market and the awareness level should be taken into account when implementing the penetration strategy. The prospects decision making pattern, the ability to pay, their characteristics should all be taken into account. Once the strategy is implemented, costs and profitability must be continuously monitored. Customer service and marketing/selling should be in line with the penetration strategy.

Market penetration is the least risky strategy however once the market has reached its saturation point other strategies should be used. Penetration pricing strategy would enable the company to take over the competition by surprise giving them little or no time to react. The rate of diffusion would be high leading to faster acceptability of the product by consumers. The idea of the new product would spread and consumers would switch to the new, cheaper product. This would result in others to adopt the product too as they would find out about it via word of mouth.

The segment targeted by the company would switch to the product. There would be greater efficiencies leading to higher productivity, better quality products, higher economies of scale, reduced costs of development, production, marketing, distribution and selling as the stress would always be reduce cost so that penetration pricing could be implemented. Also the product will have to meet the standards of quality so that the customers are not driven away by low quality product, continue to make repeated purchases and permanently switch from the other brands. Low prices will serve as a barrier to competition as stated by Porter.

Low prices would keep the competition to stay out of the market hence enabling the company to enjoy the huge market share. If successful, extreme penetration pricing could lead the company to become a monopoly. Extreme low prices along with consistent products could drive the existing competitors out of the market. However, this is very difficult to obtain. High stock turnover and sales through out the channel can lead to increased enthusiasm and motivation among the employees. This would lead to better attitude and behavior towards work and other related activities.

However, penetration pricing may lead to expectations on long term prices of the product and image of the brand. This will make it difficult for the company to charge high prices later. Also it may be possible that the consumers may continuously seek low prices and will switch to other cheaper substitutes when available. To avoid the pricing expectation problem, initial prices can be set at long term prices and initial discounts can be included. 5(a) The aim of companies is to have a competitive edge so that the company profit is higher than the industry’s profit.

The goal is to have a strategy that gives them a competitive advantage. The strategy creates value for the company. The firm delivers products with same benefits at a lower price or delivers product benefits that are superior from that of the competitor’s. A firm positions itself by using it’s strengths that can be based on cost advantage or differentiation. The internal strengths and weaknesses of the firm are analyzed, the environmental factors are monitored, the bargaining power of the customers and suppliers are assessed, the threat of new competition and entrants are considered and then the strategy is designed.

The strategy must be implemented by proper support from the decision makers and management teams and other employees. Chemical company A company with the capability of producing over 500 chemicals and selling to many industries may adopt a strategy focusing on certain industries and offering the product at low price. Focus strategy or niche strategy is typically used by small firms that can concentrate on a few industry or buyers and marketing to them. The market segment is narrowed leading to a tailored marketing mix.

This way the small companies can better meet the specialized market that is often not targeted by large competitors. The firm aims to seek competitive advantage by increasing effectiveness. The firm would be able to enjoy customer loyalty and high retention. However a few risks are involved as the firm will have less bargaining power. It would not be able to compete on differentiation because of the presence of large companies like Ciba Geigy, BASF, and Rohm & Haas that invest heavily on technology. 5(b) Multinational pharmaceutical The firm is a multi national that is already patent protected.

A revolutionary medicine has been introduced to lower blood pressure. This means that large investments were made on research and development, highly skilled labor was utilized, communication was through and a number of years were spent to introduce the breakthrough medicine. All this calls for the firm to implement a differentiation strategy. The medicine is unique in the industry and therefore calls for premium charges. Differentiation strategy is used because of a strong brand image, customer loyalty, technology, services, design etc.

In this the strategy is being used for technology and breakthrough product. The heavy cost of production may be passed on to the consumers as the consumer will not be sensitive to the price changes. Also the high prices would not be matched by the competitors like Sharp and Dohme, Roche, and Schering Plough as the medicine is patent protected. The choice of differentiated strategy would be backed by strong coordination between different functions such as research and development, product development, finance and marketing.

Quantitative and qualitative measurement would monitor the success of such a costly medicine. Also the company would provide amenities and incentives to attract highly skilled labor and scientist. The differentiated strategy would be possible as the company enjoys a good reputation for quality and technological advancements. It enjoys strong channel distribution, marketing abilities and research capabilities. 6(a) Market demand for a product is the total volume of product bought by the consumers in target market living in a geographical area in a given situation at a particular point in time.

Market demand for a product is a dependent variable as it is based on a number of environmental conditions that influence the demand for a product. The conditions prevalent in the market may be due to changes in income level, taste, fashion, needs etc. it is important that demand is accurately forecasted so that the production can be based on the findings. It is easy to forecast demand for some products and services while others may be very difficult. The more unstable the demand, the more fluctuations in the market, the more sophisticated techniques needed to forecast demand.

Before estimating the demand for a product it is important that the company collects data through secondary and primary research. After exhausting all secondary sources like newspaper, public database, case studies, census data and government records primary sources should be used. Questionnaire, interviews, focus group, projective technique should be conducted to record and analyze data thoroughly. Demand for chemical used in swimming pools The total market potential which is the maximum amount of sales possible in an industry over a given period of time should be estimated.

This can done by finding out the number of houses that has swimming pool in a given area (H), the average depth and width that is the area of swimming pool assuming that the usage of chemical depends on the measurement of the pool in meters (A), the frequency of usage that is how often the pool is cleaned with the chemical (F) within a month and the amount of chemical used per meter of the pool which will be constant (C). By multiplying the three components (H*A*F*C) the company will have an estimate the maximum amount of chemical sale possible by all firms within the industry.

To narrow the demand forecasting of a particular area can be done using Market-Buildup Method or Multiple-Factor Index. The former method is done by listing all the potential buyers and estimating their purchase. The latter method is used if the area being considered for the pool is too large. Either a single factor maybe used or a multiple factor index may be computed by giving weights to different variables. 6(b) For the second service the market research to forecast demand will be done on a wider scale as it is not restricted to a certain area.

Therefore industry sales and market share will have to be calculated. It is important to know the number of Porsches manufactured and sold within a given period of time that may be one year or so. This data can be found from public database or company records. The company will start with macro economic forecast followed by industry and company forecasts. The macroeconomic forecast would include income level, unemployment rate, consumer spending, exports, interest rates, consumer loans etc. Next the industry forecast is determined involving environmental factors affecting the demand for luxurious cars.

Then the company estimates its sales by assuming a certain share of the market. Forecasting can be done in a number of ways. Sales force opinions can be taken when the sales staff are interviewed to estimate the future sales. Sales force may be pessimistic or optimistic in their judgment. Expert opinion may be taken to find out if such a service would be used by the consumers. Opinion from experts can be taken by group discussion and individual estimates. Past sales analysis may not be very helpful as the machine is new and does not have any information on it.

However methods like exponential smoothing, moving averages and other statistical tools maybe used for forecasting. Econometrics and statistical demand analysis are thoroughly used. Market testing may be used to find out about the feasibility of the service. Computerized data has led to the ease of forecasting demand. Data mining including drilling and rollups are used to predict future demand. 8(a) The business market involves all the organizations that buy goods and services to be used in the production of goods and services that are sold or supplied to other consumers or business.

The consumer market involves consumers who buy products and services for final consumption. They themselves are the final consumers of the product or service. In the business market each player in the supply chain buys many other products to produce products for the next player in the chain. More money is involved in the business market than is in the consumer market. Business markets vary from consumer markets in many ways: (Kotler, Keller 2006: 196) • Fewer and larger buyers Business market compared to consumer market consists of a fewer number of buyers. But each buyer purchases in large quantities.

This is often because of bulk discounts, institutional trust, contracts and commitment, usage of products etc. • Close relationship Since the customer base is small in business markets, there are close ties between the supplier and customer in business markets compared to consumer markets. This is also because in business to business markets, products are often customized according to the given specifications. • Professional purchasing In business markets, buying is based on policies and procedures of the company. Special agents who have the knowledge of the product and raw materials are involved in buying the products.

Contracts, proposals and quotations are required before buying decision is made in business markets. Consumer markets do not have these requirements. Purchases are based on taste, changing trends, fashion, prices, advertisement etc. E. g. a chemical company would spend more time analyzing the raw material before placing an order compared to a house wife buying a shower gel. • Derived demand Demand for business goods are derived from the demand for consumer goods. Therefore the business consumers constantly monitor the demand of the consumers and base their production on that.

Accurate forecasting is needed to avoid surplus and shortages. • Fluctuating demand This is explained by the acceleration effect which states that business market fluctuates more than the consumer market as a 10% rise in the consumer demand may lead to a 200% rise in the business demand. • Inelastic demand Price elasticity of business goods and services are inelastic that is they are less sensitive to changes in price especially in the long run compared to the consumer market. This is because producers can not alter production methods quickly. • Various buying influences

Buying behavior is influenced more in business markets compared to the consumer markets as there are buying committees and agents involved in the purchasing behavior. • Geographically concentrated Producers compared to consumers are concentrated in few areas which drives the selling costs down. Consumers are more widely dispersed and now with technological advancements and the internet, consumers have stretched globally. • Direct purchasing The number of intermediaries involved in the business market is less than that in the consumer market. Purchases are directly made from the manufacturers.

8(b) Business buying pattern is based on both rational and emotional judgments as they serve the organization’s and individual’s needs. To market companies like Simpson, Fisher and Paykel, it is important to identify the major decision participants, the level of influence they enjoy and the factors they consider. These companies unlike consumers have proper buying centers consisting of initiators, users, influencers, deciders, approvers, buyers and gatekeepers who all make certain contribution in deciding what to buy at what price and from which supplier/manufacturer.

It is important to reach these influencers and communicate thoroughly with them the benefits of the offerings. Being a supplier of electric motors I will thoroughly review the assumptions of the participants. The customers will then be segmented. Such large, reputable companies fall under Gold-standard companies that is, they value quality over everything else. They would want electric motors to be reliable in terms of delivery, performance, quality and assistance. The above mentioned companies have special procurement and purchasing department with highly educated and trained employees.

This would mean that I would have to hire sales personnel that come to up their standards. Efforts would be made to form not only collaborative but strategic alliance built on institutional trust. Marketing to consumers mean that they will purchase only one time and not make repeated purchase. Business markets have a long process of buying decision that involves a number of stages. It is important for me as a supplier to identify each of these and implement appropriate strategy.

The company first recognizes the need to make a new refrigerator with added features that is triggered internally or externally by an opportunity or problem in the market. In such a case the supplier would send direct mails and tele-market its product. Here the benefits of the product would be highlighted. It would also state how the product meets and excel the expectations of the buyer. These companies often search for suppliers on the internet. The supplier would therefore have a website on which there will be information on the electric motors including their price, features and other details.

Participating in trade shows and trade advertisements and publishing in catalogs would help to inform the company of the offerings. With the advent of e-commerce it is important that the companies would be given the facility to purchase online. Close ties would be maintained by giving them excellent after sales services, delivering products on time and providing them high quality products. Proposal solicitation is one of the main activities that take place. The supplier would take special care in writing and presenting the proposals. Oral presentations would add value and win the confidence of the company.

It is important that the supplier identifies what the company value the most and the weights they attach to each factor. It is possible that some companies give more weighting to flexibility and others to supplier reputation. Prices are negotiated in different ways, total cost of ownership or life cycle cost can be shown to the companies. Even after the getting the order it is extremely important that the motors meet the specifications and quality level. After sales service would continue and effort would be taken to continuously improve the services.

9 New product development (NPD) is a process which includes a series of independent and overlapping activities to develop and idea, test the prototype and finally make it into a viable marketable product. It is essential to ensure firms’ survival and growth. Following five steps are carried out in the NPD process: • Idea generation It involves thinking about a new product or services, that is, the potential options. New product ideas can come from employees, competitors, government regulation, customers, surveys and so on.

This step is conducted to yield a great deal of ideas. Activities performed for idea generation can include brainstorming, to generate ideas from people inside and outside the company. • Screening It involves getting opinion from the users of the new product and service. They are even asked to critically evaluate it. Screening is done based on the number of ideas generated. Activities will include conducting initial round of screening, involving company’s executives, followed by successive rounds to evaluate the feasibility of the product or service.

For example employees can be asked whether the new product will sell or will they be able to sell it compared to the firms’ existing product. Consumers can be surveyed to determine their willingness to buy the product or service and the expected features. • Idea evaluation The marketer now has fewer ideas. Idea evaluation is done to check the feasibility and acceptability of the new product. Activities like focus groups can be conducted. For example customers could be part of these focus groups. Feedback can be obtained from them and then the idea can be evaluated.

Here information pertaining to customers, likes, wants, price expectations, frequency of purchase etc can be obtained. This would generally leave the marketer with one or two options. Further, market research activity is strongly done to determine product viability. Marketers aim at obtaining forecasts of sales, costs, profits and demand. The firm’s focuses on evaluating how the product will fit into the company’s goals and objectives. This makes use of internal research from purchasing personnel etc and external research from customers and distributors and secondary research and competitor analysis.

• Development of product Now the research and development team focuses on product design and developing a prototype. The product should look good, perform well and should be effectively produced at a cost, giving profits. Marketers make the marketing plan, such that as soon as the prototype is ready, they can gain customer input. Effort should be made so that the product has a unique selling point, which identifies its benefit that can be thoroughly promoted to the target customers. This is done to determine appeal of the product among the customers.

Customers are now exposed to the new product as well as its marketing mix. Based on activities like determining customer reactions, necessary adjustments are made. Here feasibility of the product is identified in terms of cost effective production, reliability, user friendliness, safety, convenience and other aspects of the product. • Market testing and Commercialization Market testing is conducted to gain opinion and input from a larger group of people, to test operational effectiveness, to identify likely problems and customer reactions, before commercializing.

This can be done by making the product available to a small geographical region, including full marketing effort to that segment. If the product is a consumer good, sold by retailers, firm has to make effort to get the product into the test market by convincing distributors to buy and display the product on appropriate shelves to grab customers’ attention. Also market testing can be done by customers being asked to shop at laboratory stores giving them instructions. Based on this, customer response and buying behavior is noted.

Virtual reality testing can be done where customers are asked to locate and choose products in a store in computer environment. It should be kept in mind that test marketing does not always reveal true results as over time environmental conditions may change or competitors may get more alert. However, based on market testing and acceptability the product can then be distributed to a large area, base production on demand forecasts and plan the marketing mix for effective commercialization. Timing is quite critical aspect here. At this point high promotional expenses will be incurred so accurate targeting and positioning is needed.

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