Advanced Marketing Management (Mazzù) notes

Advanced marketing management

Marketing is a process by which companies create (in an ethical way) value for their customers, the communities where they operate and build strong customer relationships in order to capture value (this time is economic, social and reputational) from customers in return. Company equity = sum of customer’s equity (sum of customer life-time value CLV of all company’s clients). Customer’s profit: profit the firm makes from serving a customer over a certain period of time. Customer’s profitability = revenues – costs.

Market potential gap

• Consumers do not use: potential for additional customer base.
• Consumers do not use enough: more value from current customer base (more purchases, more purchase value…).
• Additional new customer base: derives from positive reputation, innovation and new portfolio extension.

Extracting more value from current customer base:

• More frequent purchase
• Up-selling (purchase of higher value products)
• Cross-selling (purchasing of other products related to the same brand)
• Introduction of new products
• Margin x Retention rate=CLV

Customer life time value: [ ] −Retention¹⁺ Discount rate^rate Retention rate (tracks the past activities) is the capability of the marketing director of keeping customers in the company’s product; it is linked to the loyalty of the customers Revenues or decreasing costs (revenues high, costs high)

• Strategic customers (revenues high, costs low)
• Disinvest or cost reduction (revenues low, costs high)
• Selective management (revenues low, costs low)

Customer life value over years: Value¹ Valuet( )+⋅ ⋅=CLTV probability of customer loyalty year¹ …+ prob of customer lo_{1 t}( ) ( )¹⁺discount rate^{1+ discount rate}

Prospect lifetime value: [ ]⋅=acquisition −PLV rate initial margin+CLV Acquisition spending Customer Equity depends on:

• Value equity: consumers evaluation on the product’s quality, price and convenience
• Brand Equity: a set of brand assets and liabilities linked to a brand (its name, symbol) that add or subtract from the value provided by a product to a firm or its customers. value that the brand name adds (formed by brand awareness, brand positioning and brand ethics)
• Relationship equity (subjective opinion of customers of the relationship with the brand (formed by: loyalty programs, special treatments, affinity and emotion programs, group program and informative group)

Behavioural loyalty: calculated through purchase frequency focuses on which, where and how. Attitudinal loyalty: calculated through customer’s preferences and purchase intentions Customer Based co (CBBE): the differential effect of Brand Knowledge on consumer response to the marketing of the brand. it is positive when consumers prefer the marketing mix of that Brand rather than the same marketing mix of an unnamed product. (same product, only the name changes)

Brand awareness and engagement

Brand Awareness: is the ability of a potential buyer to recognize or recall the category of products of a certain brand (ex: Pantene I know it’s something related to shampoos). A link between the brand and the product class. depends on: Brand Recall and Brand Recognition Brand Recognition: when the buyer feels a sense of familiarity (for low involvement products ex: salt, flour it is enough; but for all products the name must be recognized!). Building Awareness and Engagement: Conventional Traditional (tv, magazines, newspapers, radio, cinema, in-store presence…); Conventional Digital (websites, social, influencers, you tube); Unconventional (guerrilla marketing, ambush marketing, flash mob, viral marketing, temporary shops).

Product placement: a non-traditional advertising where a brand puts its product in a film, series or other kind of media and the media company receives an economic benefit. (ex: vans shoes in squid game). Guerrilla marketing: a non-conventional advertising that aims at surprising or using unconventional interactions to attract the attention of the viewer. (ex: zebra crossing with one line whiter maestro lindo cleaning product). Podcasts to create awareness: aims to entertain or inform, under the name of a Brand. Spotify exploited this trend create Anchor and Sound trap to facilitate podcasters. Listeners approve advertising in podcasts finding them motivating. (if well done).

Measures of brand equity

Brand Equity Ten (Aaker): a set of brand assets and liabilities linked to a brand (its name, symbol) that add or subtract from the value provided by a product to a firm or its customers. Attributes that according to Aaker have to be tracked separately, which brings value both to the customer (use satisfaction and confidence in the purchase) and the company (trade leverage, competitive advantage, prices, margins):

• Brand awareness (familiarity and liking, commitment to the brand, brand considered in the purchasing process)
• Brand loyalty (reduced marketing costs, attracting new customers, trade leverage)
• Perceived quality (it’s a reason to buy, price as a quality indicator, availability in different sales channels)
• Brand associations (the extent to which the brand creates a positive attitude/feeling, contribute to the brand differentiation)
• Other proprietary assets (competitive advantage)

⋅ ⋅Effective market share relative price durability Brand Equity Index (Moran) =Where: effective market share = market share of the brand x market share of the product Relative price = price of goods of the brand/ average price of that kind of goods Durability = percentage of people that will continue buying that product next year Brand Asset Valuator (Y&R):

• Brand strength: Differentiation (standing out form competitors margins) and Relevance (the connection of the brand to consumers market penetration)
• Brand stature: Esteem (respect and attraction to the brand) and Knowledge (consumer’s awareness of the brand and what represents costumer experience)

BrandZ (millward Brown): Big database. 3 pillars: meaningful (appealing, generating love), different (unique, sets the trend), salient (spontaneously coming to costumer’s mind). The valuation process: calculating financial value calculating brand contribution calculating brand value. Brand Valuation Model (Interbrand): Brand strength (ability to create loyalty) Financial Analysis (the financial performance and the economic profit) Role of brand index (brand influencing consumer choice) Brand experience: consists of sensory, affective, cognitive and behavioural stimuli the emotional element. Helps the Brand’s Equity.

Power brands

Power Brands (ex: acqua Fiji): recall premium prices (high prices), increase the sensitivity of customers with discounts and increase their sales in supermarkets when there are promotions. (even if the prices are higher than competitors) stealing market shares from weaker brands and low price brands. Generating higher volumes, higher unit price, building stronger relationships, a positive Wor-of-Mouth higher economical social and reputational value. A brand is the image of a product or a service anchored in the consumer’s mind and differentiated from competitors. the impact of a power brand (builds loyalty, higher cash flow and protects the brand from future potential failures).

The power brand generates value through: risk reduction (enhance confidence and no wrong decisions), imagery benefit (used to express positive characteristics, the brand helps me to decide) and information efficiency (facilitates info interpretation, knowing the brand you know what’s expecting you).

Brand value telling journey (BVTJ)

Identify the value

• Reference market: Identifying the study the market demand (study the market concentration with the HHI index: low if shares equally distributed so no market power, and vice versa. Market is the sum of different size: Potential; Available; Target; Penetrated Industry Convergence phenomenon: the market might be larger than expected as this phenomenon explains the process by which the boundaries between markets blur (ex: a company investing in innovation can offer different products than its originals) exploiting technology offering the same benefit with different technologies creating new products. The forces that lead to this: customer needs, advances in technology and increased competition and pressure to grow. Ex: wii fit convergence between video games and fitness.
• Segmentation and Targeting: identification of market segments that offer high profit and high fit for the brand’s value proposition (a market segment where the values of the brand can fit). Selecting a market segment based on: geographical, demographic (age, gender, income…), traditional behavioural (type of users, intensity of usage), socio-psychographic (social class, lifestyle, personality) and behavioural digital (fruition and click based) or combining all of them. Demo segmentation: evolution of multi cultural marketing Ethno marketing (addressing minorities or communities) and different countries reshaping the brand according to different cultures. Segmentation techniques in B2B: preference based segmentation (who is more price sensitive, delivery time sensitive, product variety sensitive…) Behavioural segmentation: depending on the loyalty of users, the intensity of usage, lifestyle segmentation. Advanced segmentation: using big data to explore new segments, this cuts marketing costs as we know which consumers reach and what they want. Targeting based on: market segment attractiveness (based on market factors) and feasibility and company’s competitive position (based on its strengths and weaknesses and the ability to capture targets).

Price Index: comparing the price to the average market price. Value share price index= se è >1 then the price is higher than the market volume share average, if <1 then it’s lower than the average. Personas: archetypes/models who represents the different customers of a company, to understand their needs, problems, behaviours and requests.

Brand image and brand identity

Brand Image: perceptions about a brand as reflected by the consumer’s memory. Consists in the associations of attributes, benefits and attitudes coming in the mind of the consumers thinking about the brand. “how the consumer perceives the brand”. Brand Identity: the expression of the brand through the name, logo, tone, symbols and visual appearance or packaging, website, advertising. “How the business wants to be perceived by the consumers”. Very important the visual identity as it is essential to differentiate the brand from its competition. Very important the brand name. The packaging requires two characteristics nowadays: easy to use, and sustainable. Also the sound can be an identity element (ex: barilla and the playlist). Payoff: the small sentence under the logo which represents the company and expresses its identity. (ex: nike and just do it or nespresso what else?).

Brand Value Identity and Emotion: must find and define the values of the brand – brand differentiation based on emotional characteristics rather than functional (these last longer). The corporate identity manual: a tool to ensure the implementation of the identity strategy over time. it has guidelines for visual identity management (ex: standards for logo or colours or fonts).

Create the value: purpose, positioning and identity (mind)

• Form selling products to selling brands values and emotions are two basic points of interest (values and emotional connection with the consumer) that’s the Axiological Level (core values and brand identity) then the Narrative Level (narrativization of the brand) then Surface Level (themes, actors, style…)
• Positioning: It is the consumer’s way to define the product (the place the product occupies in the minds of consumers according to competing products). It consists in a set of perceptions, feelings and evaluations relatively to a product. it is not based on objective data, but on perceptions. It aims at satisfying the consumer needs and tries to deliver competitive and clear benefits to the target (compared to competitors). The benefits can be: Emotional benefits (awareness and self-representation); Functional benefits (all measurable elements and tangible benefits, like comfort, feel…), Intangible associations (origins, innovative or good vibe of the brand), Presential benefits (social commitment, in store presence, attractive design…) when a brand chooses non-appropriate benefits Fail (ex: Colgate (has its own benefits) tried to enter the food industry not really same benefits for the two sectors).

Reason to Believe (RTB): aims at making credible the promise made to the consumer, explaining why that product will add value to the consumer (pay attention: not too technical). RTB given by:

• Ingredients (quality… ex: vitamin C)
• Performance (showing R&D results)
• External Endorser
• Internal Endorser (employees, ceo…)
• Endorsement can: personify a product, ceo or employees, celebrities or ordinary people.

Effective Endorsement: bringing Congruence (when the endorser represents the Brand’s values), Attractiveness (fundamental to increase awareness, Endorser’s similarity to the consumer, Familiarity and Effectiveness of the message depends on: likeableness and Credibility (expertise or trustworthiness)

Brand Character/Personality: it is the way the company wants to be perceived by the consumer; it is expressed like the character of a real person, but personified by the brand. need to legitimize the brand and anthropomorphize it to make it a partner of the consumer. the more the personality of the brand is consistent with the consumer’s, the more they will be willing to buy. Brand’s human characteristics: sincerity, excitement, competence and sophistication.

Two factors to take into account: The loss of consumer/brand connection (due to subjective changes in the consumer, changing the perception of themselves) and the Social Factor (it is an element of influence that comes into play when a consumer wants to associate themselves with a certain category or personality (ex: sportive people). Relational Intelligence: defines the relationships between the consumer and the brand. Relationships are ever evolving, reciprocating engagements defined by the actions of the two parties. It is a negotiation game, and it starts at the foundation of the relationship. Actions of the brand and the consumer, interacting define and redefine the relation. Events or bad experiences can lead to an immediate switch, a hot brand hate (active disagreement with the brand) or a cold brand hate (distance from the brand) people generally stop using the brand, only a 4% will openly complain.

Brand purpose

Brand Purpose: it is the ‘why’ of the brand and comes from its own history. It is the reason why the brand exists, beyond the profit-making process. It is independent from the customer, but it can gather communities around its ‘why’. The purpose of the brand helps building also the corporate culture and the type of product. Brands are social subjects that have an economic responsibility successful only the ones that can generate credible social value committing to sustainable development. A purpose-driven Brand puts its social values in the front. create emotional connection, loyalty and trust with the consumer. According to the Golden Circle Theory the why is at the centre and affects all the decision-making process and emotions.

Value and values: are the key to differentiate the brand from others and showing what the brand stands for (also seen as the solver of societal problems) brand have become an opportunity to change the world. Purpose Brands: brands that in their promise to the consumer have to get the job done (ex: FedEx transport fast). watch out! The consumers have become more and more sceptical as they see some brand purposes as pure image.

Woke Washing: is a phenomenon that occurs when a Brand acts with a set of behaviours that cause repercussions for the brand. For instance, if the brand is selling a product or an advertising that does not meet the brand purpose on the long term losing credibility and appearing false. Gives a sense that the brand is embracing certain causes solely for advertising, reputation and increase in sales.

Job to be done: observing customers you can identify the ‘jobs to be done’ (what do they need) and think about new offerings that can improve your product/service; You can use advertising to clarify the role of your product to get the job done (awareness of its function) and differentiate in your line the common products from new purpose brands for new related jobs. With the purpose brand you can extend the brand to new products (that do the same job), to change the job you also have to change the purpose brand (because by trying to adapt the previous brand it will lose its meaning expanding to another purpose. The sub brands (from a big brand) are healthy if they fulfil their own job. (ex: Apple using the brand to make the Apple Watch).

Brand/product architecture

The objectives of strategies based on brand architecture are:

• Leverage (best target markets and consumer coverage)
• Clarity (limitation of overlaps)
• Exploitation of possible synergies. Brand can cover different product categories (brand extension strategy) the Breadth of the portfolio (number of categories/products covered by the brand). Or vice versa, different brands of the same company can cover the same product category, for example covering different segments of the same category (no direct competition). the Depth of the Portfolio (number of brands of the same company).