5.1CHAPTER 5:CHAPTER 5:DESIGNING MARKETING PROGRAMS TODESIGNING MARKETING PROGRAMS TOBUILD BRAND EQUITYBUILD BRAND EQUITYKevin Lane KellerKevin Lane KellerTuck School of BusinessTuck School of BusinessDartmouth CollegeDartmouth College
5.2OverviewOverview How do marketing activities in generalHow do marketing activities in general——andandproduct, pricing, and distribution strategies inproduct, pricing, and distribution strategies inparticularparticular——build brand equity?build brand equity? How can marketers integrate these activities toHow can marketers integrate these activities toenhance brand awareness, improve the brandenhance brand awareness, improve the brandimage, elicit positive brand responses, andimage, elicit positive brand responses, andincrease brand resonance?increase brand resonance?
5.3New Perspectives on MarketingNew Perspectives on Marketing The strategy and tactics behind marketing programsThe strategy and tactics behind marketing programshave changed dramatically in recent years as firms havehave changed dramatically in recent years as firms havedealt with enormous shifts in their external marketingdealt with enormous shifts in their external marketingenvironments:environments: Digitalization and connectivity (through Internet, intranet,Digitalization and connectivity (through Internet, intranet,and mobile devices)and mobile devices) Disintermediation and reintermediation (via new middlemenDisintermediation and reintermediation (via new middlemenof various sorts)of various sorts) Customization and customerization (through tailoredCustomization and customerization (through tailoredproducts and ingredients provided to customers to makeproducts and ingredients provided to customers to makeproducts themselves)products themselves) Industry convergence (through the blurring of industryIndustry convergence (through the blurring of industryboundaries)boundaries)
5.4Implications for the Practice ofImplications for the Practice ofBrand ManagementBrand Management They have a number of implications for theThey have a number of implications for thepractice of brand management. Marketers arepractice of brand management. Marketers areincreasingly abandoning the mass-marketincreasingly abandoning the mass-marketstrategies that built brand powerhouses in thestrategies that built brand powerhouses in the1950s, 1960s, and 1970s to implement new1950s, 1960s, and 1970s to implement newapproaches.approaches. Even marketers in staid, traditional industries areEven marketers in staid, traditional industries arerethinking their practices and not doing businessrethinking their practices and not doing businessas usual.as usual.
5.5Integrating Marketing Programs andIntegrating Marketing Programs andActivitiesActivities Creative and original thinking is necessary toCreative and original thinking is necessary tocreate fresh new marketing programs that breakcreate fresh new marketing programs that breakthrough the noise in the marketplace to connectthrough the noise in the marketplace to connectwith customers.with customers. Marketers are increasingly trying a host ofMarketers are increasingly trying a host ofunconventional means of building brand equity.unconventional means of building brand equity.
5.6Personalizing MarketingPersonalizing Marketing All of these approaches are a means to create deeper, richer, andAll of these approaches are a means to create deeper, richer, andmore favorable brand associations.more favorable brand associations. Relationship marketing has become a powerful brand-buildingRelationship marketing has become a powerful brand-buildingforce.force. Can slip through consumer radarCan slip through consumer radar May creatively create unique associationsMay creatively create unique associations May reinforce brand imagery and feelingsMay reinforce brand imagery and feelings Nevertheless, there is still a need for the control andNevertheless, there is still a need for the control andpredictability of traditional marketing activities.predictability of traditional marketing activities. Models of brand equity can help to provide direction and focusModels of brand equity can help to provide direction and focusto the marketing programs.to the marketing programs.
5.8Reconciling the New MarketingReconciling the New MarketingApproachesApproaches One-to-one, permission, and experientialOne-to-one, permission, and experientialmarketing are all potentially effective meansmarketing are all potentially effective meansof getting consumers more actively involvedof getting consumers more actively involvedwith a brand.with a brand.
5.9Experiential MarketingExperiential Marketing Focuses on customer experienceFocuses on customer experience Focuses on the consumption situationFocuses on the consumption situation Views customers as rational and emotionalViews customers as rational and emotionalelementselements Uses electric methods and toolsUses electric methods and tools
5.10One-to-One Marketing:One-to-One Marketing:Competitive RationaleCompetitive Rationale Consumers help to add value by providingConsumers help to add value by providinginformation.information. Firm adds value by generating rewardingFirm adds value by generating rewardingexperiences with consumers.experiences with consumers. Creates switching costs for consumersCreates switching costs for consumers Reduces transaction costs for consumersReduces transaction costs for consumers Maximizes utility for consumersMaximizes utility for consumers
5.11One-to-One Marketing:One-to-One Marketing:Consumer DifferentiationConsumer Differentiation Treat different consumers differentlyTreat different consumers differently Different needsDifferent needs Different values to firmDifferent values to firm CurrentCurrent Future (lifetime value)Future (lifetime value) Devote more marketing effort on most valuableDevote more marketing effort on most valuableconsumers (and customers)consumers (and customers)
5.12One-to-One Marketing: Five Key StepsOne-to-One Marketing: Five Key Steps IdentifyIdentify consumers, individually and addressablyconsumers, individually and addressably DifferentiateDifferentiate them by value and needsthem by value and needs InteractInteract with them more cost-efficiently andwith them more cost-efficiently andeffectivelyeffectively CustomizeCustomize some aspect of the firm’s behaviorsome aspect of the firm’s behavior BrandBrand the relationshipthe relationship
5.13Permission Marketing (Seth Godin)Permission Marketing (Seth Godin) ““Encourages consumers to participate in a long-Encourages consumers to participate in a long-term interactive marketing campaign in whichterm interactive marketing campaign in whichthey are rewarded in some way for payingthey are rewarded in some way for payingattention to increasingly relevant messages.”attention to increasingly relevant messages.” AnticipatedAnticipated PersonalPersonal RelevantRelevant Permission marketing can be contrasted toPermission marketing can be contrasted tointerruption marketing.interruption marketing.
5.14Five Steps in Permission MarketingFive Steps in Permission Marketing1.1. Offer the prospect an incentive to volunteer.Offer the prospect an incentive to volunteer.2.2. Offer the interested prospect a curriculum over time,Offer the interested prospect a curriculum over time,teaching consumers about the product.teaching consumers about the product.3.3. Reinforce the incentive to guarantee that prospectReinforce the incentive to guarantee that prospectmaintains the permission.maintains the permission.4.4. Offer additional incentives to get more permissionOffer additional incentives to get more permissionfrom the consumer.from the consumer.5.5. Over time, leverage the permission to changeOver time, leverage the permission to changeconsumer behavior toward profits.consumer behavior toward profits.
5.15Integrating the BrandIntegrating the BrandInto Supporting Marketing ProgramsInto Supporting Marketing Programs Product strategyProduct strategy Pricing strategyPricing strategy Channel strategySupporting marketing mix should be designed to enhanceawareness and establish desired brand image.
5.16Product StrategyProduct Strategy Perceived quality and valuePerceived quality and value Brand intangiblesBrand intangibles Total quality management and return on qualityTotal quality management and return on quality Value chainValue chain Relationship marketingRelationship marketing Mass customizationMass customization AftermarketingAftermarketing Loyalty programsLoyalty programs
5.17Pricing StrategyPricing Strategy Price premiums are among the most important brandPrice premiums are among the most important brandequity benefits of building a strong brand.equity benefits of building a strong brand. Consumer price perceptionsConsumer price perceptions Consumers often rank brands according to price tiers in aConsumers often rank brands according to price tiers in acategory.category. Setting prices to build brand equitySetting prices to build brand equity Value pricingValue pricing Everyday low pricingEveryday low pricing
5.18Channel StrategyChannel Strategy The manner by which a product is sold ordistributed can have a profound impact on theresulting equity and ultimate sales success of abrand. Channel strategy includes the design andmanagement of intermediaries such aswholesalers, distributors, brokers, and retailers.
5.19Channel DesignChannel Design Direct channels Selling through personal contacts from the company toprospective customers by mail, phone, electronic means,in-person visits, and so forth Indirect channels Selling through third-party intermediaries such as agentsor broker representatives, wholesalers or distributors, andretailers or dealers Push and pull strategies Web strategies
5.20Push and Pull Strategies By devoting marketing efforts to the endBy devoting marketing efforts to the endconsumer, a manufacturer is said to employ aconsumer, a manufacturer is said to employ apull strategy.pull strategy. Alternatively, marketers can devote their sellingAlternatively, marketers can devote their sellingefforts to the channel members themselves,efforts to the channel members themselves,providing direct incentives for them to stockproviding direct incentives for them to stockand sell products to the end consumer. Thisand sell products to the end consumer. Thisapproach is called aapproach is called a push strategy.push strategy.
5.21Channel SupportChannel Support Two such partnership strategies areTwo such partnership strategies are retail segmentationretail segmentationactivitiesactivities andand cooperative advertising programs.cooperative advertising programs. Retail segmentationRetail segmentation Retailers are “customers” tooRetailers are “customers” too Cooperative advertisingCooperative advertising A manufacturer pays for a portion of the advertising that aA manufacturer pays for a portion of the advertising that aretailer runs to promote the manufacturer’s product and itsretailer runs to promote the manufacturer’s product and itsavailability in the retailer’s place of business.availability in the retailer’s place of business.
5.22Web StrategiesWeb Strategies Advantage of having both a physical “brick andAdvantage of having both a physical “brick andmortar” channel and a virtual, online retailmortar” channel and a virtual, online retailchannelchannel The Boston Consulting Group concluded thatThe Boston Consulting Group concluded thatmultichannel retailers were able to acquiremultichannel retailers were able to acquirecustomers at half the cost of Internet-onlycustomers at half the cost of Internet-onlyretailers, citing a number of advantages for theretailers, citing a number of advantages for themultichannel retailers.multichannel retailers.