Lesson 27 market positioning

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Marketing Management

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IntroductionNow that you have seen the positioning and differentiation concept and also discussed positioninggiven by Ries & Trout, let us see the different tools of differentiation used in positioning by themarketers.

Undifferentiated marketing:In this strategy the marketer is basically using Single Marketing Mix for the entire market. This isbasically done as all of us have similar needs for a specific kind of product. When we are discussingabout undifferentiated market it is a homogeneous market where the demand is so diffused that it isnot at all worthwhile for the marketer to differentiate and this he/she is trying to make the demandmore homogeneous.

Single Marketing Mix consists of:One Pricing strategyOne Promotional program aimed at everybodyOne Type of product with little/no variationOne Distribution system aimed at entire market

The elements of the marketing mix do not change for different consumers, all elements are devel-oped for all consumers. A very good example of it would be in Staple foods category like sugar andsalt and farm produce.

This strategy is basically popular when large-scale production takes place but this strategy is not sopopular now a day because of competition, improvement in marketing research capabilities, and asthe total production and marketing costs can be controlled basically by segmentation.

Organization must be able to develop and maintain a single marketing mix.

Undifferentiated Marketing

Differentiated marketing:In this we are focusing on two or more segments and we are formulating different marketing mix foreach segment and accordingly different marketing plan for each segment are also made. This ap-proach is a combination of the best attributes of undifferentiated marketing and concentrated mar-keting.

Unit 3Developing Market Strategies & the Offerings

Chapter 9 - Market PositioningLesson 27 - Various tools of Differentiation

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Market

MM——————————>|A Market Segment

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|_______________________ MM——————————>|A Market Segment |_______________________


Example: Marriott International has differentiated its offering according to the needs of the people/customer.1. Marriott Suites...Permanent vacationers2. Fairfield Inn...Economy Lodging3. Residence Inn...Extended Stay4. Courtyard By Marriott...Business Travellers

The positive side of this type of marketing is that:It helps in shifting of excess production capacity.It can also achieve same market coverage as with mass marketing.By this the marketer can create differentials price among different brands.Another best part of this strategy is that it can make the consumers in each segment to pay apremium for the tailor-made product on willingness basis.The amount of risk is comparatively less, as the marketer is not relying on one market.

The negative aspects of differentiation marketing are:It demands for a greater number of production processes as you are targeting at different seg-ment with different marketing mix.This marketing actually leads to increase in marketing costs as you are selling through differentchannels and you are also promoting more brands and using different packaging etc.One of the biggest challenges that the marketer has to face is basically to maintain the productdistinctiveness in each consumer group and guard its overall image.

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Concentrated marketing

In this case you have a single market segment with one marketing mix.

Market | |A Market Segment |—————————One MM—————————>A Market Segment |————————— |A Market Segment |

Concentrated type of strategy helps the organization toSpecialize into particular area,The marketer can very well focus all his energy on one group’s needsFinally help the small organization to compete with larger organizations.

But the challenges or the problems with this strategy are:That you are actually putting all your eggs in one basket.Then any kind of shift in the population or consumer tastes can greatly affect the firm.As the organization has created some image in that segment so if they want to enter or expandinto new markets (especially up-market) it will be a problem.

The basis objective of concentrated marketing is not to maximize sales but it is to work withefficiency and to attract a large portion of one section while controlling costs.

Differentiation:As we already discussed this topic quiet a number of times lets now briefly summaries it with ex-ample and move on to the types of differentiation. Companies like Hewlett- Packard and priceline.comhas invested their precious resources to develop and then shepherd their new products throughlifecycle. Yet in today’s highly competitive global marketplace, a product will not survive-let alonethrive- without some distinct competitive difference that sets it apart from every rivals products. Thisis why smart companies rely on differentiation, by this you are designing a set of meaningful differ-ence to basically to distinguish the company’s offering from competitors offering. Companies candifferentiate its market offering along five dimensions: product, service, personnel, channel andimage.

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Product differentiationIn this we are using the marketing mix variable to make unique product offer that stands out from thecompetitors. This strategy is aggressive; in this the company is focusing on besting the competitionand at the same time they are satisfying the consumers and gaining higher profits. The tools that areused to differentiate products include branding, quality, image, product features, packaging, location,promotion, innovation and different service levels. Consumers who perceive that a product is uniquein servicing their needs often become brand loyal and are more willing to pay a premium price inorder to gain the product benefits. Marketers have identified that the products are capable of higherdifferentiation than services such as automobile and furniture.

Form: we can differentiate products on the basis of form- that is the physical structure, the size, andthe shape of the product. Lets take an example of any product, which can be in many forms likeDisprin. As Disprin is essentially a commodity, it can be differentiated by the dosage size, shape,coating and action time.

Features: they are the characteristics, which are very important they are basically there to supportthe basic functions of the product. Marketers starts by asking recent buyers about additional featuresthat would improve satisfaction, then determining which would be profitable to add, given the poten-tial market, cost and price.

Performance quality: is the level, which the product’s primary characteristics operate. The strate-gic planning institute found a significantly positive correlation between relative product quality andreturn on investment. Yet there are diminishing return to higher performance quality so marketersmust choose a level suited to the target market and rival performance levels.

Conformance quality: if you are a buyer you will expect the product to have conformance forquality, which is in terms of degree to which all of the produced units are identical and are able tomeet the promised specification. The problem with low conformance quality is that the product willdisappoint some buyers.

Durability: If I say that I want durability in the product then I am expecting the product to beoperating under natural or stressful conditions. It is important for products such as vehicles andkitchen appliances to be durable. However the extra price must not be excessive and the productmust not be subjected to rapid technological obsolescence.

Reliability: on reliability basis you are normally ready to pay a premium, it is basically a measure ofthe probability that a product will not malfunction or fail within a specified time period. May tag,which manufacturers major home appliances, have an outstanding reputation for creating reliableappliances?

Reparability: buyers prefer products that are easy to repair. Reparability is a measure of the ease offixing a product when it malfunctions or fails. An automobile made with standard parts that are easilyreplaced has highly reparability. Ideal reparability would exist if users could fix the product them-selves with little cost or time.

Style: if I say style it is look and feel of the product to you. Most of us are normally willing to pay apremium for products that are attractively styled. Aesthetics have played a key role in such brands asAbsolute vodka, Apple computers, Godiva chocolate and Harley- Davidson motorcycle. Style hasthe advantage of creating distinctiveness that is difficult to copy. However, strong style does notalways means high performance.

Design: as competition intensifies, design offers a potent way to differentiate and position a company’sproducts and services. Design is the integrating force that incorporates all of the qualities; this meansthe designer has to figure out how much to invest in form, feature development, performance, con-

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formance, durability, reliability, reparability and style. For a company a well-designed product is onethat is easy to manufacture and distribute. To the company, a well-designed product is one that ispleasant to look at and easy to open, install, use, repair and dispose of. The designer has to take all ofthese factors into account.

Activity –In today’s competitive era, do you think a company can differentiate itself on the basis of its product?Critically evaluate this statement.

Service differentiation:When the physical product cannot be differentiated easily, the key to competitive success may lie inadding valued services and improving their quality.

The main service differentiators are:Ordering ease: refers to how easy it is for you to place an order with the company. BaxterHealthcare has eased the ordering process by supplying hospitals with computer through whichthey send orders directly to Baxter; consumers can now order and receive groceries withoutgoing to the supermarket business web-based service such as peapod and net grocer.Delivery: it is related to how well the product or service is delivered to the customer, coveringspeed, accuracy and customer care. Deluxe check printer, inc., has built an impressive reputa-tion for shipping out its checks one day after receiving an order- without being late once in 18years.Installation: refers to the work done to make a product operational in its planned location.Buyers of heavy equipment expect good installation service. Differentiation by installation isparticularly important for companies that offer complex products such as computers.Customer training refers to how the customer’s employees are trained to use the vendor’sequipment properly and efficiently. General Electric not only sells installs expensive X-rays equip-ment in hospitals, but also gives extensive training to users of this equipment.Customer consulting refers to data, information system and advising services that the selleroffers to buyers. For example, the Rite aid drugstore chain’s communications program, called theVitamin Institute, provide customers with research so they can make more educated judgmentsand fell comfortable asking for help. On the Web, Rite Aid has teamed with drugstore.com tooffer even more health-related information.Maintenance and repair: describes the service program for helping customers keep purchas-ing products in good working order, an important consideration for many products.

Personnel differentiationCompanies can gain a strong competitive advantage through having better-trained people. SingaporeAirlines enjoys an excellent reputation in large part because of its fight attendants. The McDonald’speople are courteous, the IBM people are professional and the Disney people are upbeat. The salesforces of such companies as General Electric, Cisco, Frito-Lay, and Northwestern Mutual life enjoyan excellent reputation. Well- trained personnel exhibit six characteristics: competence, courtesy,credibility, reliability, responsiveness and communication.

Channel differentiationCompanies can achieve competitive advantage through the way they design their distribution chan-nels’ coverage, expertise and performance. Caterpillar’s success in the construction –equipmentindustry is based partly on superior channel development. Its dealers are found in more locations, arebetter trained and performance more reliability than competitors dealers. Dell computers has alsodistinguished itself by developing and managing superior direct-marketing channels using telephoneand internet sales.

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Image differentiationYou will response differently to company and brand image. Identity comprises the ways that a com-pany aims to identify or position itself or its product, whereas image is the way the public perceivesthe company or its products. Image is affected by many factors beyond the company’s control. Forexample, Nike mainstream popularity turns off 12-to-24-years-olds, who prefers Airwalk and otheralternative brands that convey amore extreme sports image. An effective image establishes theproduct’s character and value proposition, it conveys this character in a distinctive way and it deliversemotional power beyond a mental image. For the image to work, it must be conveyed through everyavailable communication vehicle and brand contact, including logos, media and special events.

Important Points which you should know.Great companies are significantly better, not just a little better“Differentiate products, not devices”The most dangerous and quickest evaporating differentiation is lower price unsupported by lowercostsHigh tech buying decisions are based on cold hard logic and rational analysis – except whereinformation overloaded buyers are concernedReal product differentials plus good promotion is a powerful influenceComplexities make it easier for products to be different, but harder for customers to know thedifferencesComplexity plus standardization tends to make high tech products seem similar to most buyersIt takes time to learn the subtle distinctions between complex products, sometime on minortechnical details And, if the differences don’t exist in the customer’s mind, they do not existThe “differences must make a difference”

ActivityWhat is the differention strategy adopted by Maruti India Ltd ? Especially with regard to Alto, Zen &Wagon R ? .

How salespeople makes a differenceGood salespeople, properly trained, tailor the product to the customer requirement.Most marketing departments don’t do enough to educate their salespeople so they should betrained well, so that, they are at least aware about the functional aspect of the product.

Distribution differentiates:Customers are frequently more wedded to their distributors than their suppliers … distributorssometimes “own” the customer.A positively inclined distributor canSteer an orderQuote better deliveryOffer better pricesProvide better feedback

Do you know being Different Involves SacrificeThe very barriers that keep competitors out of a market, confine the victorious firm to thatmarketThe differences that one company promotes are precisely the ones a competitor will frequentlyhighlight to preclude from other marketsExample: Apples “rest of us” positioning reduced its legitimacy in the corporate market

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Points to ponder

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Case Study

ACER – The story of a successful brandStan Shih is a national hero in Taiwan; Acer is a successful international brand.The computer industry is one of the most competitive in the world, having always been dominatedby the giants such as IBM. So, how has a Taiwanese company become the third largest manufacturerof personal computers (PCs) in the world, creating a respected, and sometimes feared, brand?How has the company managed to break away from the “Made in Taiwan” image, which likemany countries in Asia has been associated with sub-standard products?

The answer is, of course, the careful construction of a strong brand image. From the very beginning,Shih realized that this was the great challenge, and he positioned his products more at the higher endof the market than any other Taiwanese products had been previously. For example, when enteringthe Japanese market, he priced his products the same as theirs to avoid the poor-quality imageassociated with lower-priced products. This was an important signal emitted by the brand-that Acer-branded products were not to be classified as commodities.

Acer Computer has always spent huge sums of money on research and development, and in thisrespect, tends to follow the Japanese technology companies. Shih believes in “innovalue”-using inno-vation to create value in the design and production of cutting-edge products-and leading the industry.It is Shih’s company that has actually positioned the PC as an aesthetically pleasing home appliance,and this philosophy is summed up in the new corporate mission statement: “Fresh TechnologyEnjoyed by Everyone, Everywhere.” Fresh does not imply new but the best, namely, proven high-value, low-risk technology that is affordable to everyone, and has a long lifespan. Fresh also refers toinnovation based on mature technology that is user-friendly, reasonably priced, and enjoyed by every-one, everywhere. Acer Computer has a long history of innovation, and continues to add to this brandstrength at every opportunity.

Acer Computer’s aim is to become more consumer-oriented, as it believes that PCs will becomeconsumer-electronic products with a wider range of uses and applications in the areas of communi-cations, entertainment, and education. Acer Computer, therefore, has to become an expert in con-sumer electronics as well as personal computing. Shih refers to this as a shift from being ‘technol-ogy-centric” to “consumer-centric.” The computer industry has always been the former-emphasiz-ing products more than people. Acer Computer is, thus, repositioning itself to become a customer-centric intellectual-property and service company, as signified by its new slogan: “Acer, BringingPeople and Technology Together.” To Shih, intellectual property is the value added to the product.Acer adds value by enhancing consumer perceptions of the benefit or value of a product, based onknow-how, packaging, design, accessibility, comfort, user-friendliness, niche solutions-the tangiblequalities of its products. This is how Acer Computer is building on its already strong internationalbrand, into a global brand. It wants to help people to enjoy their work and their lives.

One way in which Acer Computer is trying to manage the perceptions of its audience and gettingthem to think of the company as a major player is through more international exposure, such as itsUS$10-million sponsorship of the 1998 Asian Games. It succeeded in bringing the company greaterinternational exposure. Another way Acer Computer is managing customers’ perception of thecompany is by partnering overseas companies. By doing this, Acer Computer achieves its overallphilosophy of “global brand, local touch,” and also hopes to further the perception of being a globalbrand.

However, Acer still has to make the leap from being a regional brand to a global one. Although thecompany manufactures computers for IBM and other major companies, it does not get due credit. In1998, it was ranked third in the world as a PC manufacturer, but occupied only eighth spot in brand

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sales. Since then it has moved to seventh place, according to the company. In the largest singlemarket in the world-the United States-Acer’s market share in 1998 was less than 5%.

Acer has to cross the bridge, from world-class manufacturer and regional-market leader to globalplayer. If the result depends solely on Stan Shih’s enthusiasm, energy, and ambition, then there willbe no doubt about the outcome. But consumers, both corporate and individual, make global brandshappen, and therein lies the challenge of changing and managing their perceptions.

The Product PortfolioTo be successful, a company should have a portfolio of products with different growth rates anddifferent market shares. The portfolio composition is a function of the balance between cash flows.High growth products require cash inputs to grow. Low growth products should generate excesscash. Both kinds are needed simultaneously. Four rules determine the cash flow of a product. Mar-gins and cash generated are a function of market share. High margins and high market share gotogether. This is a matter of common observation, explained by the experience curve effect. Growthrequires cash input to finance added assets. The added cash required to hold share is a function ofgrowth rates. High market share must be earned or bought. Buying market share requires an addi-tional increment of investment.

No product market can grow indefinitely. The payoff from growth must come when the growthslows, or it never will. The payoff is cash that cannot be reinvested in that product. Products withhigh market share and slow growth are “cash cows.” Characteristically, they generate large amountsof cash, in excess of the reinvestment required to maintain share. This excess need not, and shouldnot, be reinvested in those products. In fact, if the rate of return exceeds the growth rate, the cashcannot be reinvested indefinitely, except by depressing returns.

Products with low market share and slow growth are “pets.” They may show an accounting profit,but the profit must be reinvested to maintain share, leaving no cash throw off. The product is essen-tially worthless, except in liquidation. All products eventually become either cash cows or pets. Thevalue of a product is completely dependent upon obtaining a leading share of its market before thegrowth slows. Low market share, high growth products are the “question marks.” They almostalways require far more cash than they can generate. If cash is not supplied, they fall behind and die.Even when the cash is supplied, if they only hold their share, they are still pets when the growth stops.

The question marks require large added cash investment for market share to be purchased. The lowmarket share, high growth product is a liability unless it becomes a leader. It requires very large cashinputs that it cannot generate itself. The high share, high growth product is the “star.” It nearlyalways shows reported profits, but it may or may not generate all of its own cash. If it stays a leader,however, it will become a large cash generator when growth slows and its reinvestment require-ments diminish. The star eventually becomes the cash cow, providing high volume, high margin, highstability, security and cash throw off for reinvestment elsewhere.

The payoff for leadership is very high indeed, if it is achieved early and maintained until growthslows. Investment in market share during the growth phase can be very attractive, if you have thecash. Growth in market is compounded by growth in share. Increases in share increase the margin.High margin permits higher leverage with equal safety. The resulting profitability permits higherpayment of earnings after financing normal growth. The return on investment is enormous.

The need for a portfolio of businesses becomes obvious. Every company needs products in which toinvest cash. Every company needs products that generate cash. And every product should eventu-ally be a cash generator; otherwise it is worthless. Only a diversified company with a balancedportfolio can use its strengths to truly capitalize on its growth opportunities. The balanced portfoliohas:

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Stars whose high share and high growth assure the future; Cash cows that supply funds for thatfuture growth; and Question marks to be converted into stars with the added funds. Pets are notnecessary. They are evidence of failure either to obtain a leadership position during the growthphase, or to get out and cut the losses.

Branding EnergyDeregulation of the energy industry in some states during the mid-1990s enabled energy companiesto compete for retail customers. The competition led many companies to step up their marketingprograms in efforts to reach consumers recently empowered with the right to choose their energyprovider. Spending on advertising in the energy industry rose from $80 million in 1996 to $180 millionin 1997. Several companies also changed their names to make them more consumer-friendly, aswhen Panhandle Eastern became PanEnergy and Natural Gas Clearinghouse changed its name toNGC and later became Dynegy (for “Dynamic Energy”). Some power companies began offeringloyalty programs while others appealed to consumers with cross-promotions with other utilities suchas telephone and plumbing.

One of the first companies to make a significant investment in raising its public profile was CinergyCorporation. In 1995, the company signed a $6 million, five-year deal to rename Cincinnati’s RiverfrontStadium as Cinergy Field. Right before the deal was made, name recognition of the company stoodat 50 percent in the greater Cincinnati area. Nine months after the renaming, name recognition inCincinnati rose to 94 percent. Because of national television coverage for football and baseball, theCinergy name became known all over the nation. Another energy company, Edison International,signed a $30 million, 20-year deal with the Walt Disney to rename the Anaheim Angels “Big A”stadium Edison International Field.

Energy companies also used traditional advertising methods to build brand awareness. Following its1998 name change, Dynegy was still relatively unknown amongst financial analysts and wholesaleenergy buyers according to a 2000 brand awareness study conducted by the company. The companysuffered from a low-profile image despite the fact that it was one of the top three transporters ineach interstate gas pipeline in North America and had annual revenues of $29.4 billion in 2000. Toraise awareness, Dynegy debuted its first national television advertising campaign in 2001, comprisedof several 30-second spots that used humor to illustrate the company’s services. In one ad, an actressplaying a Dynegy employee arranges food on the dinner table so it resembles a power grid. Subse-quent surveys revealed that recognition of the Dynegy brand increased significantly.

Power companies’ emphasis on marketing did not necessarily lead to a change in consumer behav-ior. In the two largest deregulated states, California and New York, only two percent of consumersswitched utility companies. Allan Adamson, the managing director of brand expert Landor Associ-ates, said of the energy industry, “This is a very difficult category to brand. Coming up with anythingthat’s differentiating to customers beyond consistent power delivery is hard.” This may help explainwhy spending on advertising in the category peaked at $180 million in 1997. In 2000, only three powercompanies (Enron, Southern, Pacific Gas & Electric) had ad budgets that exceeded $10 million.

Further troubles for the energy industry occurred when energy giant Enron, the leading energy mar-keter in the world and the seventh largest company in the U.S., declared bankruptcy in December2001. Enron had been a major advertiser, boasting the largest ad budget of all the national utilitycompanies at $18 million in 2000. Enron also sponsored a stadium called Enron Field in Houston,where baseball’s Astros play. After investors and analysts raised questions about Enron’s businessmodel, however, it was revealed that Enron had employed unorthodox accounting principles to mis-state earnings. The company could not recover when credit rating companies downgraded Enron’sdebt to junk status in November 2001.

Enron’s woes caused concern for the fate of the energy trading industry. Dynegy’s stock fell 37

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percent in the three weeks after it abandoned a rescue acquisition of Enron. Share prices for energyfirms slumped in the wake of Enron’s collapse. One energy consultant asserted, “Without a doubt,Enron’s collapse has given the energy trading industry a black eye.” Other energy companies tried toshake the stigma. Dynegy CEO Chuck Watson predicted that the intense focus on the energy indus-try would help the major players by forcing weaker competitors to exit the business, and insisted thatthe “Enron failure [wasn’t] the failure of the energy merchant business.” Other energy tradingcompanies lined up to assure consumers that Enron’s troubles were not indicative of an industry-wide problem. A spokesperson for California-based Calpine said, “Calpine is not another Enron.”

(Sources: Neil Weinberg and Daniel Fisher. “Power Player.” Forbes, December 24, 2001, p. 53-58;Bethany McLean. “Why Enron Went Bust.” Fortune, December 24, 2001, p. 58-72; Charlene Oldham.“Energy Traders Tidy Up.” Dallas Morning News, December 18, 2001, p. 1D; Todd Wasserman. J.Dee Hill. “Feller Creates Dynegy’s Premiere TV Campaign.” Adweek, September 24, 2001, p. 4;Greg Hassell. “‘Screaming People’ Create Awareness.” Houston Chronicle, September 19, 2001, p.1; “Where’s the Power Surge?” Brandweek, August 13, 2001, p. 31; Leonard S. Greenburger. “TheName in the Game.” Electric Perspectives, July 1, 1999, p. 52; Peter Fritsch and Lisa Brownlee.“Energy Firms Try To Create Image for the Invisible.” Wall Street Journal, August 28, 1996, p. B6.)

Can branding overcome the consumer tendency not to identify with innocuous or nondifferentiatedproducts / services? Using Enron as an example, what evidence is there of long-term value in thebranding process, especially for commodity-type products? There is considerable research that indi-cates that for products / services that are less “visible” to the average consumer, the less likely it isthat a firm or organization in that product / service category will be able to achieve a lasting brandrecall impact. In the case of energy products and services the general rule should apply. However,there is some contradiction of the point with the major oil retail firms (Exxon, Shell, etc.), but sincethese firms have many retail locations that are often closely involved with the community, and havebeen there for decades, the recall can be high. It is likely that Enron attempted to achieve a similarposition in the marketplace.

However, Enron’s primary target market in their branding effort was not the general public. Enron’semphasis was on creation of a positive image with key organizations and decision-makers,including:potential investors who could add to Enron’s equity capital base, major wholesale distribution firmsthat use Enron’s energy trading services, banks and investment banking houses that would provideongoing loan facilities, various officials in government who would provide input to achieve favorablelegislation. As a number of analysts and articles have noted, Enron wanted these key individuals andorganizations to know that they were dealing with a major player in the energy and energy tradingbusiness. Enron management intended to provide the company and its officers with a basis forpolitical and economic influence on a rather broad scale. Retail energy consumers and the generalpublic were secondary recipients of the branding effort and heard about Enron only through variouscontributions, sponsorships and secondary reminder efforts such as the former Enron Stadium (homeof the Astros) in Houston.

Discussions:1. Evaluate the positive side of energy branding and the inherent advantages? Do likewise with the

disadvantages. Can branding recognition create negative as well as positive images? Discuss2. For Dynegy, Calpine and others in the energy marketing business, what marketing strategies and / or tactics would you suggest that they do to reacquire the confidence that might have been lost in the Enron matter?

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Changing Brand Image: Merryl Lynch goes Hi TechIn an effort to address its rather unexciting corporate brand image and show people that it is really apart of the modern hi-tech world, Merryl Lynch has re-engineered its icon - the bull - and embarkedon a major advertising campaign that coincides with its entry into online trading.

The company has introduced low-cost online investing for customers, and has had to break awayfrom its traditional brokerage image, especially as it has lost out to the successful online brokeragessuch as Charles Schwab Corp. and E*Trade Group Inc. Some of the new commercials showreal life customers telling how profitable their relationship with the company has been, and otheradvertisements show the Merryl Lynch bull icon in a digitalized wired-up format. Whilst the bullremains as a symbol of the power and durability of the Merryl Lynch brand, the new hi-tech bullsignifies readiness to fight in the e-commerce market place. One two-page newspaper advertise-ment in the early stages of the campaign showed the new bull with copy beside it that read...

Be quick Be smart

Be ready Be prudent

Be daring Be conventional

Be contrarian Be global

Be local Be backward-looking

Be forward-looking Be strategic

Be wired Be unwired

Be thoughtful Be spontaneous

Be wise Be bullish

The contradictions give the impression of a very schizophrenic brand personality, and the ‘everythingto everyone’ nature of this copy may well suggest that the company does not know what it reallywants to be seen as. Reported reaction to the campaigns has tended to polarize like the copy, withdissenters and enthusiasts. The commercials have also been subject to criticism, some saying that thecustomers profiled do not look confident about the firm’s new offerings, with some clearly not under-standing and others confused. As usual time will tell whether perceptions have changed regardingthe brand image, but it does appear that Merryl Lynch may not have done enough to convince thepublic that it has what it takes to be a major player in the digital world.

By contrast, advertisements run a few months earlier were much stronger and more focused, andcarried much clearer emotional messages, for example:

IF YOU WANT TO SEE SOMETHING Done, just tell some human beings It can’t be done.Make it known that It’s impossible to fly to the moon, Or run a hundred metres in nine- Pointnine seconds, or solve Fermat’s Last Theorem. Remind the world that No one has ever hit sixty-two home Runs in a season. Stuffed eighteen People into a Volkswagen Bug. Set half the worldfree. Or cloned a sheep. Dangle the undoable in front of the world. Then, consider it done

The tag line was “HUMAN ACHIEVEMENT” with the Merryl Lynch name and the original bullicon. Whether agencies are changed or not, companies should really think very hard before makingradical changes to their presentation of the brand. As a case study, ask yourself what you would havedone to give the brand a new look without losing the equity from the past.

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Identifying Market Segments and Selecting Target Markets

Marriott InternationalMarriott International grew to an international hospitality giant from humble beginnings, as a singleroot beer stand started by John and Alice Marriott in Washington, D.C. during the 1920s. The Marriott’sadded hot food to their root beer stand, renamed their business the Hot Shoppe, which they incorpo-rated in 1929. They began building a regional chain of restaurants. As the number of Hot Shoppes inthe Southeast grew, Marriott expanded into in-flight catering by serving food on Eastern, American,and Capital Airlines beginning in 1937. In 1939, Hot Shoppes began its food service managementbusiness when it opened a cafeteria in the U.S. Treasury building. The company expanded intoanother hospitality sector in 1957, when Hot Shoppes opened its first hotel in Arlington, Virginia. HotShoppes, which was renamed Marriott Corporation in 1967, grew nationally and internationally byway of strategic acquisitions and entering new service categories, and by 1977 sales topped $1billion.

In the pursuit of continued growth, Marriott continued to diversify its business. The 1982 acquisitionof Host International made it America’s top operator of airport food and beverage facilities. Over thecourse of the following three years, Marriott added 1,000 food service accounts by purchasing threefood service companies, Gladieux, Service Systems, and Saga Corp. Determining that its high pen-etration in the traditional hotel market did not offer many opportunities for growth, the companyinitiated a segmented marketing strategy by introducing the moderately priced Courtyard by Marriotthotels in 1983. Moderately priced hotels comprised the largest segment of the U.S. lodging industry,a segment filled with established competitors such as Holiday Inn, Ramada, and Quality Inn. Re-search conducted by Marriott registered the greatest consumer dissatisfaction in the moderatelypriced hotels, and Courtyard hotels were designed to offer travelers greater convenience and ameni-ties, such as balconies and patios, large desks and sofas, and pools and spas.

Early success with Courtyard prompted Marriott to expand further. In 1994, Marriott entered thevacation timesharing business by acquiring American Resorts Group. The following year, the com-pany purchased Howard Johnson Company, selling the hotels and retaining the restaurants and reststops. In 1987, Marriott added three new market segments: Marriott Suites, full service suite accom-modations; Residence Inn, extended-stay rooms for business travelers; and Fairfield Inn, an economyhotel brand. A company spokesman explained this rapid expansion: “There is a lot of segmentationthat’s going on in the hotel business. Travelers are sophisticated and have many wants and needs. Inaddition to that, we saw there would be a finite . . . ability to grow the traditional business.”

Marriott Corp. split into two in 1993, forming Host Marriott to own the hotel properties and MarriottInternational primarily to engage in the more lucrative practice of governing them. In 1995, MarriottInternational bought a minority stake in the Ritz-Carlton luxury hotel group (Marriott purchased theremaining share in 1998). In 1996, the company acquired the Forum Group, an assisted living andhealth care services franchise, and merged it with Marriott Senior Living services. Marriott added anew hotel brand in 1998 with the introduction of SpringHill Suites, which provide moderate pricedsuites that are 25 percent larger than standard hotel rooms. The following year, the company ac-quired corporate housing specialist ExecuStay Corp. and formed ExecuStay by Marriott. To capital-ize on the on-line travel and accommodations boom, the company developed Marriott.com, whichoffers customized content to registered visitors such as a vacation planner, golf course information,express reservations, and business content. In 2000, the company announced plans to join with rivalHyatt Corporation to launch a joint B2B e-commerce venture that will provide procurement servicesfor the hospitality industry.

The last Hot Shoppe restaurant, located in a shopping mall in Washington D.C., closed on December2, 1999. This closing was fitting, since the tiny restaurant in no way resembled the multinational

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hospitality leader it spawned. Today, Marriott International is the largest hotel and resort company inAmerica and one of the leading hospitality companies in the world, maintaining over 2,200 operatingunits in 59 countries that brought $20 billion in global revenues in 2000.

What target marketing and marketing segmentation concepts discussed in the text did Marriott applyto get to where it is today?

Marriott appears to be successful in developing a clear understanding of where and how it can createbusiness value and opportunity, with a profit, based on existing corporate capabilities. As a leader inthe hospitality business, the firm has made a conscious and consistent effort to avoid mass marketing,attempting to serve only distinct groups of customers with different needs. In addition, Marriott hasconducted effective marketing research over the years to determine which segments are measur-able, substantial, accessible and actionable. It has gradually widened the list of target markets, con-stantly evaluating the ongoing potential of each target in terms of attractiveness and fit with thecompany objectives and resources. Lastly, it has developed different market offers for each seg-ment, capitalizing on segment interrelationships that could lead in the future toward possible supersegments.

Questions for discussions:1. Has it picked its market segments and target markets effectively? Discuss the bases of Marriott’s segment interrelationships.2. Does the evolution of Marriott’s “businesses” indicate that the firm is well positioned for the coming decades of the 21st century? What opportunities and problems will Marriott encounter as it pursues their marketing strategy in planning toward the year 2010?

Intel: A case study in Corporate BrandingPerhaps the most successful technology company to balance the dual requirements of innovation andreliability in its branding is Intel.

Because of the fears consumers have, when things go wrong with technology products they reactdisproportionately. Take the well documented example of Intel, when initial faults discovered bycustomers after the launch of the Pentium chip by Intel were potentially devastating and the com-pany was receiving up to 10,000 calls a day from dissatisfied or unhappy customers. Good crisismanagement saved the day, and Intel regained their position of trust and high quality performance inthe minds of consumers.

Intel is a model of good technology branding and positioning, and had it not already had a strongposition crisis management may not have been enough to save the day. The company really survivedand prospered because of this, and has shown how a power positioning approach can solve theproblems of consumer technophobia, with its now famous Intel Inside campaign. As a componentthat is not visible to consumers who buy personal computers, and OEM producers offering priceadvantages to manufacturers, this was no easy task.

The Intel position has always been based on authenticity, quality and performance, supported stronglyby consistent global campaigns. The Intel Inside logo is placed on all print advertising, print and point-of-sale merchandising, shipping cartons, packaging, and is used by world brand and OEM computermanufacturers. Supported by explanatory communication material, it has to a large extent succeededin calming the fears of consumers who are doubtful of the performance of critical and complicatedproduct elements they do not understand. The introduction of the Intel ‘Bunny people’ in astronaut-type attire in an attempt to humanise and add personality to product has not been so successful, being

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perceived by many as cold and impersonal.

Interestingly, Intel has now developed individual product brands, as is the case with the Pentium andPentium II range. The rationale for this is that a name like Pentium ( derived from the Greek wordpent meaning five and alluding to the fifth generation of X86 computer chips ) provides a kind ofshorthand which is more meaningful to the consumer, summarising the benefits more easily. PentiumII is positioned as a high performance product aimed at business and consumer users. More recentlythe Intel equivalent of a ‘no frills’ product range called Celeron has been introduced, still endorsedby the parental name, but meant for a different target audience. This is positioned around value,compatibility and quality, but the Celeron initial offering has not had a brilliant start.

It remains to be seen whether Intel has really understood the needs of different market segments,and whether or not the cheaper product can hold true to the position and associations that Intel hasso single-mindedly projected over the last several years. Also, if consumers will perceive the moveas a more risky alternative, and even if it will devalue the position of the higher price existing prod-ucts. In the worst scenario, the different products might cannibalise each other’s sales, and generatecustomer confusion. Intel intends to introduce more branded chips, and careful education of theconsumer in this highly complex market will be essential to negate customer confusion and achievesuccessful brand positioning.

its4me PLC - Hi-tech Hi-touch branding on the Internet

IntroductionIn late 1999, two senior figures from the U.K. insurance industry - Patrick Smith and Paul Cheall -got together to launch a new company and a new brand into the marketplace. Their ambition was tolaunch an online insurance intermediary to sell motor, home, and other general insurance productsover the Internet.

Smith has a strong track record in building financial services companies, having launched privatehealth insurance companies and direct motor and home insurers in the UK as well as developed highstreet insurance brokerages. He has a habit of challenging the conventional thinking of the market-place while never losing sight of the bottom line. Smith saw the opportunity the Internet provided torevolutionize the insurance sector by stripping out the cost from the traditional distribution process,while at the same time seizing the opportunity to tailor the product and the service as closely aspossible to the needs of individual customers. The opportunity was to offer better value in terms ofproducts and service directly to the customer, while reducing costs for the company and the cus-tomer.

The Brand NameThe brandname created was “its4me”. “The thinking behind this was to take a basic productand give consumers the maximum opportunity to personalize it,” Smith explained. “its4me con-veys one of the most important aspects of our business philosophy-personal attention and personal-ized products. We agree it’s not the normal type of insurance company, and it reflects our innovativeapproach to business. We are new and we are different, and we aim to break the mould”.

So, how was the company created, and how did it aim to gain credibility in the eyes of consumers?The launch project began in February 2000, having secured venture capital backing from a majorinternational financial services company. its4me is fully funded for at least the first five years ofoperation, which puts it in a strong position to be able to build the business without concerns aboutfinding more funding. Many major Internet brands struggled to secure second-round funding, espe-cially in 2000.

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The Business ModelThe starting point for the its4me plc business model was the creation of a panel of insurance compa-nies who could supply motor and home insurance products electronically to its4me. Their productsare offered for sale on the its4me.co.uk. website. Consumers enter their details and obtain a quota-tion instantly online, pay for it online, and view and print their policy doumentation online. The systemwill then send an electronic data interchange (EDI) message to the relevant insurer, giving details ofthe policy sold. In the event that the customer wants to change their policy, they simply log on to thesystem and make the changes themselves.

There is no need for any human intervention from the first point of contact to conclusion - there is justthe system and the customer. This results in minimal cost and maximum efficiency. Where insuranceis sold through a traditional insurance intermediary, there is a lot of delay and duplication. This allmeans cost, the potential for errors, and a slow service for the customer. And the best part is that,being Internet-based, the system is available 24/7, 365 days a year. Try finding a regular broker in thephysical world who will sell you a policy at 2 a.m.!

So, that is its4me’s recipe for happy insurance customers. Or is it? Well, not really. You see, a big partof the model is missing, and that is the reality check. There are people, who want the clinical effi-ciency of a system, but there are just as many, if not more, who want the warmth of a relationship.its4me recognized this from the outset and believes that what it has put together will set it apart fromother emerging e-insurance companies.

Let’s go back a bit. In 2000, only about one-third of the U.K’s 60 million population were regularlyaccessing the Internet, either at home, work, or college, and probably no more than 10% wereregularly buying goods and services over the Web. This meant that the vast majority of people stillweren’t using the Web; in particular, they still weren’t buying over the Net. In insurance terms,according to Fletcher Research, only around 400,000 of the U.K.’s 25 million or so vehicles wouldbe insured over the Web in 2000.

It seemed that people were using the Web as a source of information, but when it came to the pointof purchase, they used more traditional methods. Why? Trust. People trust brands. But its4me wasa new brand. Back to the same question: how could it gain the consumer’s trust? It is one thinggetting brand awareness, but it is another matter entirely to get consumer trust. Lastminute.com inthe U.K., actually reached an 84% brand awareness level but only a 17% trust figure.

In finalizing its business model, its4me realized that: For the foreseeable future, the majority of theinsurance business was offline, moving online. It needed to establish itself as providing not only greatproducts,but also great service. The key to gaining the trust of the customer was by making itselfavailable to the customer in as many different ways as possible. It needed to create a human face tothe company, which allowed customers to build a relationship with the brand. So, when the finalmodel was put together, it looked something like this: The customer, if he or she so wishes, has theability to buy customized insurance on a fully self-service basis. They enter their personal details, thesystem calculates the relevant premium, they pay online by credit or debit card, or they set up a directdebit online. Once the payment is accepted, they can browse their policy documentation online andprint it on their own printer in the comfort of their home. There is no need to talk to anyone, so thereis no pressure selling.

They simply get what they need delivered efficiently. However, at any point in the process, if assis-tance is required, its4me has, waiting in the wings, a team of insurance professionals ready to help.The means of contacting them is up to the personal preference of the individual customer: Thesystem includes a searchable help facility and glossary of insurance terms, which works in a similarway to what you might find within the Microsoft Office products. The customer can click on an iconto send an email to the team with a query.

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its4me publishes a service level on its site saying that all emails will be responded to within onehour, and it consistently beats that target a significant margin.

Customers can open up an interactive text chat session. This is a very direct means of having realtime dialogue with the team across the Internet. This facility allows questions to be answeredimmediately. its4me’s staff can help the customer complete the on-screen forms remotely via acollaborative viewing facility, and they can even “push” help pages through to the customer’sscreen using the software. They can also “push” through an image of the team member the customeris having an online dialogue with. This helps to personalize the service even more.

The customer can elect to ring the team, or request the team to call them back at an allotted time.

its4me is also able to complete the entire process for the customer over the phone if they so wish.

Customer Intimacy and Empowerment

Empowering the customer to customize the product, and the way the service is delivered to them,has given its4me a real means of differentiating itself, as well as the ability to gain customer confidencein a marketplace where customers are still more than a little nervous of e-commerce companiesand still believe that the Internet means low cost but zero service. It recognizes that other companieswill be able to obtain similar products from their insures, that other companies can probably builda similar processing system, but that what will make a difference over the long term is servicequality-and that means people.

The Internet doesn’t have to mean remoteness of contact. There are many ways to build a bondwith customers if you just think differently. As we write this case study, its4me is in the process ofinstalling a webcam in its offices so that customers can see the team at work-ready to leap to theirassistance. Its4me is a great example of hi-tech hi-touch branding using CRM techniques. You canvisit the site at http://its4me.co.uk/

Mercedes Benz USA - Design and Launch of the new ‘M’ Class Off-roaderWhen Mercedes Benz decided to build its new M Class off-road vehicle, it decided to build it andlaunch it in the USA. The head of Mercedes USA knew that at its launch, it would be entering acrowded market, and that the mere fact that it was a Mercedes would not guarantee sales. Theyhad to try something different.

In the USA it is still possible to obtain free access to data and they obtained details of all currentowners of off-road vehicles and Mercedes cars. Mercedes then undertook a series of mail-outs tothe names on the database.

It began with a personally addressed letter from the head of Mercedes USA. It said somethingalong the lines of - “...we at Mercedes are in the process of designing a brand new off-road car andI would like to know if you would be prepared to help us...”

Now America is the land in which you receive probably more direct mail than any other country in

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the world, but it is not every day that the head of Mercedes writes and asks for your help. There wasa significant, positive response. Those people who responded received a series of questionnaires thatasked for guidance on design issues such as whether the spare wheel should be outside or inside thevehicle, desired engine sizes, exterior colours and interior designs.

What is interesting is that, along with the questionnaires, Mercedes began to also receive advanceorders. What these customers were feeling was that Mercedes was custom building a car just forthem. No other manufacturer had ever involved them in the design and build process in quite thesame way.

As a result, Mercedes pre-sold its first year sales target of 35,000 vehicles. It was expecting to spendsome $70 million US marketing the car, but by using this CRM one to one approach, it only needed tospend $48 million saving $22 million. We have heard that this program was so successful that Mercedesis looking to use the same approach in the future with other model launches.

This case is taken from Romancing the Customer: maximizing brand value through powerful relation-ship management by Paul Temporal and Martin Trott (Wiley, 2001). The book contains many morecases of how CRM programs can help build brands fast

Analysing Consumer Markets and Buyer:

The Nike WayThe Nike story begins with its founder, running enthusiast Phil Knight. In 1962, Knight started BlueRibbon Sports, the precursor to Nike. At the time, the athletic shoe industry was dominated by twoGerman companies, Adidas and Puma. Knight recognized a neglected segment of serious athleteswhose specialized needs were not being addressed. The concept was simple: Provide high-qualityrunning shoes designed especially for athletes by athletes. Knight believed that “high-tech” shoes forrunners could be manufactured at competitive prices if imported from abroad. Without much cash todo any advertising for his products, Knight crafted his “grass roots” philosophy of selling athleticshoes: Speaking to athletes in their language and on their level; sharing their true passion for running;and listening to their feedback about his products and the sport. Each weekend Knight would travelfrom track meet to track meet – both high school and collegiate competitions—talking with athletesand selling Tiger shoes from the trunk of his green Plymouth Valiant

The company’s commitment to designing innovative footwear for serious athletes helped it build acult following that rapidly reached the American consumer. By 1980, after just under two decades inthe business, Nike had become the number one athletic shoe company in the United States. Unfortu-nately for the company, this wave of success was soon to crest as rival companies positioned them-selves to take advantage of the aerobics craze, which Nike largely ignored. Companies like Reebokand L.A. Gear developed fashionable and comfortable products aimed at women fitness enthusiaststhat sold remarkably well.

Nike refused to join a market it saw as low in quality and heavy on cosmetic properties and continuedmaking durable, performance-oriented products. The company lost millions in sales and allowedReebok to gain basically uncontested market share points. By 1987, Reebok had nearly doubledNike’s market share, with 30 percentage points compared to Nike’s 18. Fortunately for Nike, thecompany chose to fight back with product innovations and persuasive marketing. The company’s“Air” technology revitalized the company with the additional aid of successful advertising campaignssuch as the 1987 “Revolution in Motion” spot for the new Air Max shoes and the “Air Jordan”commercials. When Nike unveiled its now-famous “Just Do It” campaign in 1988, just as Reebokdeveloped the “Reeboks Let U.B.U” slogan, the company was on its way to a full recovery. By

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1989, Nike had regained the market leader position in America as market share rose three pointsabove Reebok to 25 percent that year.

In the 1990s, Nike continued its consumer focus. Nike kept its “finger on the pulse” of the shoe-buying public in part through the use of “EKINs” (Nike spelled backwards) – sports-loving employ-ees whose job was to hit the streets to disseminate information about Nike and find out what was onthe minds of retailers and consumers. Nike’s “Brand Strength Monitor” formally tracked consumerperceptions three times a year to identify marketplace trends. In areas where it felt less knowledge-able, e.g., outside of track and basketball, Nike was more likely to commission customized researchstudies. Nike’s inventory control system, called “Futures,” also helped it better gauge consumerresponse and plan production accordingly.

Innovative product development had always been a cornerstone of the company. By 1998, Nike wasunveiling a new shoe style, on average, every day. In 1999, the company put the power to designshoes in the hands of its customers with the NIKEiD project. NIKEiD enabled customers to person-alize a pair of selected shoe models using online customization software. The software led consum-ers through a step-by-step process: customers could choose the size and width of the shoes, pick thecolor scheme, and affix their own 8-character personal ID to the product. Early reviews of theNIKEiD project were full of criticism of the limited selection and availability, so less than a year afterits debut, Nike added additional shoe models and more customization options while increasing sitecapacity.

Though the company had become a household name throughout the world and, more important,achieved the position of global sportswear leader, Nike was still $3 billion shy of reaching the goal of$12 billion that Phil Knight initially intended the company to reach by 2000. In a letter in Nike’s 2000annual report, Knight addressed the issue of how to jumpstart his company’s slowed growth andoffered the following formula: “We need to expand our connection to new categories and towardnew consumers.” This quotation is indicative of Nike’s relentless drive to build its brand with a strongconsumer focus

Questions:

1. While Nike made significant changes to maintain its global leadership position, there appear to besome problems in maintaining and growing that position. Is Knight correct in his formula for jumpstartingNike’s growth (last paragraph), or is the matter more complicated?

2. Develop and evaluate the types of pro and con marketing environmental changes that you see forNike. Given the options and challenges that Nike faces, how would you proceed with a strategicmarketing plan for the firm?

Nokia - Building A Powerful Technology BrandThe world of parity has hit the mobile phone market just as it has many other technology productcategories. The products range from the simple to the complex, but every manufacturer offers, ofcourse, the latest features. Leapfrogging in sales between brands frequently occurs based on design.But overall the market is predictable, with Nokia, Motorola, and Ericsson fighting it out at the topand several less successful brands like Samsung, Philips, Siemens and Panasonic trying hard tomake inroads into their top competitors’ market share. So what makes the difference between themost successful and less successful brands? It certainly is not what product features are offered.How, then, do consumers choose? The answer seems to be what the brand names mean to them.

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Nokia Group the Finland-based manufacturer of mobile phones has been steadily working on itscorporate brand name and the management of consumer perceptions over the last few years. Itsefforts have paid off, because it is now the number one brand in many markets around the world,effectively dislodging Motorola from that position. The brand has been built using the principlesdescribed above, and has been consistently well managed across all markets. Nokia has succeededin lending personality to its products, without even giving them names. In other words, it has notcreated any sub-brands but has concentrated on the corporate brand, giving individual products ageneric brand personality. Only numeric descriptors are used for the products, which do not evenappear on the product themselves. Such is the strength of the corporate brand.

Nokia has succeeded where other big brand names have so far failed, chiefly by putting across thehuman face technology-taking and dominating the emotional high ground. It has done so in the fol-lowing way.

Nokia Brand PersonalityNokia has detailed many personality characteristics for its brand, but employees do not have toremember every characteristic. They do, however, have to remember the overall impression of thelist of attributes, as you would when thinking about someone you have met. As the focus is oncustomer relationships, the Nokia personality is like a trusted friend. Building friendship and trust isat the heart of the Nokia brand. And the human dimension created by the brand personality carriesover into the positioning strategy for the brand.

Nokia PositioningWhen Nokia positions its brand in the crowded mobile phone marketplace, its message must clearlybring together the technology and human side of its offer in a powerful way. The specific messagethat is conveyed to consumers in every advertisement and market communication (though not neces-sarily in these words) is “Only Nokia Human Technology enables you to get more out of life”

In many cases, this is represented by the tag line, “We call this human technology”. This givesconsumers a sense of trust and consideration by the company, as though to say that Nokia under-stand what they want in life, and how it can help. And it knows that technology is really only anenabler so that you-the customer-can enjoy a better life. Nokia thus uses a combination of aspirational,benefit-based, emotional features, and competition-driven positioning strategies. It owns the “hu-man” dimension of mobile communications, leaving its competitors wondering what to own (or howto position themselves), having taken the best position for itself.

Nokia Product DesignNokia is a great brand because it knows that the essence of the brand needs to be reflected ineverything the company does, especially those that impact the consumer. Product design is clearlycritical to the success of the brand, but how does Nokia manage to inject personality into productdesign? The answer is that it gives a great deal of thought to how the user of its phones will experi-ence the brand, and how it can make that experience reflect its brand character. The large displayscreen, for example, is the “face” of the phone. Nokia designers describe it as the “eye into thesoul of the product”. The shape of phones is curvy and easy to hold. The faceplates and theirdifferent colors can be changed to fit the personality, lifestyle, and mood of the user. The soft keytouch pads also add to the feeling of friendliness, expressing the brand personality. Product designfocuses on the consumer and his needs, and is summed up in the slogan, “human technology.”

Nokia now accounts for over half of the value of the Finland stock market, and has taken hugemarket share from its competitiors. According to one brand valuation study carried out in mid-1999,it ranked 11th on the world’s most valuable brand list, making it the highest-ranking non-U.S. brand.As has been pointed out, it has unseated Motorola. Nokia achieved its brilliant feat through consis-

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tent branding, backed by first-class logistics and manufacturing, all of which revolve around whatconsumers what.

Philips - Strengthening a Global BrandPhilips is a hi-tech global company with a traditionally low profile. Until recently, if you asked anyoneif he knew the Philips brand name, the likehood was that he would say yes. However, he might nothave know what Philips provides in the way of its total product range, and might have associated thebrand name and company with traditional technology. The “Let’s Make Things Better” global brandcampaign has raised the Philips profile, and provided it with a more focused and distinctive person-ality.

Royal Philips Electronics - its proper name - is a giant company. Established in 1891 is a lampfactory, it now has over 100 different business, over 200 production sites, and carries out researchand development in more than 40 countries. Its sales and service outlets cover 150 countries, and ithas a total workforce upwards of 230,000 employees. It has a strong technology base, spending over5% of sales on research and development, and owning some 10,000 patents. Its portfolio covers awide variety of product categories, including:

SemiconductorsTVVideoAudioPC peripheralsDigital networksLightingMedical systemsDomestic appliancesPersonal care products

The “Lets Make Things Better” campaign is still part of a global corporate branding initiative aimedat motivating both consumers and employees. It was, to use Intel’s own words, a brand “renais-sance.”

The company’s slogan is all about emphasizing what technology, Philips products in particular, cando for people - it is essentially about the benefits they can bring to people and the world in general. Akeystone of the campaign was the premise that, if you can convince people that you can help improvetheir lives, they will more likely believe that you can help improve the world. The campaign thus hadto appear credible, real, and experiential. It had to be human as opposed to philosophical and philan-thropic, and not just another typical corporate overclaim.

Positioning and Differentiating

Monsanto -In the 1980s, St. Louis-based Monsanto Company repositioned itself as a cutting-edge biotech firmwith a concentration on food and nutrition. During the next two decades, the company dedicatedmillions of dollars to scientific research in biology and life sciences for the purpose of developinggenetically modified (GM) agricultural and food products. In 1996, then-CEO Robert Shapiro spunoff Monsanto’s $3 billion chemicals business, the old core of the company. Three divisions remained:a pharmaceuticals division, a food ingredients division, and an agricultural products division that pro-duced GM foods. Such foods included a potato designed to fight potato beetles without pesticides andcorn that is resistant to herbicides.

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The new Monsanto, bearing little resemblance to the small pharmaceuticals company founded in1901, became a leader in the biotech revolution. The company felt that biotechnology would be thekey to feeding the world’s rising population – currently growing at a rate of 800 million per decade –and improving global nutrition standards. Monsanto claimed that genetically superior crops of corn,wheat, tomatoes, and soybeans will yield larger harvests, while biotech improvements in the foodsupply will help prevent illness and boost human productivity. In the company’s view, the next twodecades would bring a biotechnology revolution that would blend the pharmaceutical, agricultural,and food and nutrition businesses into a single “life science” industry. To improve the company’sreach in this industry, Monsanto spent millions amassing biotech patents by acquiring smaller compa-nies and making deals with agribusiness firms. Such moves included the 1995 acquisition of Merck’sspecialty chemicals unit and the purchase of Unilever’s wheat-breeding business in 1998.

Monsanto’s aggressive move into the biotech industry met with approval on Wall Street. In 1997,Monsanto stock sold for close to 23 times earnings, compared with pure chemical company Dow’sstock, which sold for 10.5 times earnings. In addition to being a favorite of investors, however,Monsanto became a target for environmentalists and consumers opposed to GM products. Backlashwas particularly harsh in Europe, where the mad-cow scare made food products an especially sen-sitive consumer issue. British newspapers repeatedly referred to the company as a “Frankensteinfood giant” and “biotech bully boy,” while Prince Charles vowed never to eat food containing Monsantoproducts. Monsanto’s attempt to win over U.K. citizens with an expensive public relations campaignfailed: following the campaign, 51 percent of British consumers expressed negative feelings aboutGM foods, compared with only 44 percent beforehand. This sentiment was shared throughout muchof Europe. In 1998, the European Union declared a moratorium on the approval of new GM seeds forplanting. Several European countries, such as Austria and Luxembourg, banned GM foods alto-gether. Other hotspots for public criticism of the company included Japan, Australia, and India.

Monsanto’s financial fortunes turned as hostile public receptions throughout the world left it unable toeither sell expected volumes existing products or introduce new products. Following a merger withdrug company Pharmacia & Upjohn, the pharmaceuticals division of Monsanto became part of thenew Pharmacia Corporation in 2000. The remainder of the Monsanto Company is now a subsidiaryof Pharmacia and strictly a biotechnology corporation. Pharmacia spun off part of Monsanto into apublic company while retaining majority ownership. In 2000, Monsanto issued a statement apologiz-ing for its insensitivity and arrogance and formally pledged to be “honorable, ethical, and open” in allits future actions. New CEO Hendrik Verfaille admitted that the company “missed the fact that thistechnology raises major issues for people of ethics, of choice, of trust, even of democracy andglobalization. When we tried to explain the benefits, the science and the safety, we did not understandthat our tone, our very approach, was arrogant.”

Amid mounting consumer concerns about GM crops, in November 2000 Monsanto adopted a re-stricted planting schedule for a GM corn product and delayed introduction of another variety until2002. The growth potential for the company is huge: Monsanto estimates that more than 70 percentof the world’s insect- and herbicide- resistant crops come from the company. Anywhere publiccontempt for GM products lessens, Monsanto’s opportunities improve dramatically. The companyhas undertaken various advertising, public relations, and education campaigns to improve public per-ception of its products. The prevailing attitude at the company is now much humbler than it wasduring the mid-1990s, when then CEO Robert Shapiro declared that “worrying about starving futuregenerations won’t feed them. Biotechnology will.”

Questions for discussions:1. What marketing mistakes did Monsanto make to cause the firm to receive such bad press in

Europe and elsewhere?2. What lessons concerning public relations marketing does the Monsanto spotlight case

indicate? Are there additional issues that Monsanto should consider for the future?

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Setting the Product and Branding Strategy

Anheuser-Busch

Budweiser Lager was first brewed in 1876 by E. Anheuser & Co., St. Louis. Today, Anheuser-Busch is the largest brewer in the world in terms of volume, and it competes across a diverse rangeof markets. The company oversees more than 30 different beer brands, including the domestic mar-ket leader Budweiser, a number of other beverages, a group of theme parks, and a real estateenterprise. A broad brand portfolio has been a boon to Anheuser-Busch in the past. During theProhibition era (1920-1933), the company maintained revenue flow by selling products as diverse asyeast, refrigeration units, truck bodies, soft drinks, and chocolate syrup. After Prohibition, Anheuser-Busch continued to grow with its core malt beverages. In 1957, Budweiser surpassed Schlitz tobecome the leading beer in the U.S. In 1980, the company had a 28 percent share of the domesticbeer market, a figure that would rise steadily over the next two decades to 47 percent in 1995.Anheuser’s market share climbed to 50 percent by 2000, leaving competitors Coors and Miller farbehind with 21 percent and 12 percent, respectively.

The table displays Anheuser-Busch’s brand portfolio:

BeersBudweiser – the company’s original beerBud – Dry, Ice, Ice Light, LightBusch – introduced 1955: Ice, Light, and regularMichelob – first introduced in 1896: Light, Amber Bock, Honey Lager, Black & Tan,Hefe-WeizenNatural – a discount beer, available in Ice and LightThe company also brews several specialty and microbrews, including Pacific Ridge Ale,Red Wolf Lager, and Safari Amber Lager. Anheuser-Busch also brews twonon-alcoholic beers, Busch NA and O’Doul’s.

Other Alcoholic Beverages:Doc Otis Hard Lemon – a lemon-flavored malt beverageDevon’s Shandy – a beer-lemonade mixKing Cobra – malt liquorHurricane – malt liquorTequiza – beer with the flavor of tequilaNon-Alcoholic Non-Beer Drinks180 – a caffeinated, carbonated energy drink

Theme ParksBusch Gardens –amusement park opened in Tampa, Florida, in 1959.Adventure Island – a water park in TampaDiscovery Cove – animal park in OrlandoSea World – “marine adventure parks” located in Orlando, San Antonio and San DiegoSesame Place – a Sesame Street theme park in Langhorne, Pennsylvania

Marketing the Flagship Beer

Anheuser-Busch has earned a reputation as an expert marketer, due in large part to its success withthe flagship Budweiser brand. Budweiser receives much of the marketing support and attention ofthe company. Of the $396 million Anheuser-Busch spent on measured media in 2000, $146 million

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was spent on Budweiser, compared with $107 million for Bud Light. Advertising for Budweiser takesa three-pronged approach: ads emphasizing product quality, ads focusing on values and social re-sponsibility, and ads with contemporary appeal designed to humor and entertain the audience. Withthis multi-pronged approach, Budweiser is able to create a rich brand image that resonates with abroad audience base. One marketing analyst recently proclaimed Budweiser, originally the beer ofchoice for blue-collar workers, is now beer for all demographics.” Anheuser-Busch conducts exten-sive and sophisticated market research in order to develop engaging ad campaigns. It is no surprise,then, that advertising for Budweiser routinely garners both critical and audience acclaim, and iscredited for much of the brand’s success. One of Budweiser’s most popular campaigns in recentyears – the “Whassup?!” series – earned the company top honors during the Super Bowl ad frenzy,and spawned a host of Internet parodies and television spoofs.

Anheuser-Busch moved to the Internet and launched Budweiser.com in 1996. The site offers infor-mation about the brand, company history, information about sporting events sponsored by Budweiser,downloads such as screensavers and television ads, and free e-mail addresses ending inBudweiser.com. During the first two months of 2001, Budweiser.com received almost 2 million moreaverage monthly page visits than similar sites from Miller, Heineken, and Coors. In addition to theseeffective pull strategies, Anheuser-Busch uses various push strategies in retail outlets to help sellbeer, from price cuts to instant-win packaging to in-store promotions. Since summer is the peakseason for Budweiser, Anheuser Busch steps up its in store push strategies with its annual BudSummer promotions.

Anheuser-Busch Looks AheadAs Anheuser-Busch continues to expand, it will need new products to attract new drinkers. Thecompany is planning to introduce a new super-premium beer using its flagship Budweiser brand as alaunch pad. The company will test the new product, called Budweiser Red Label, in certain marketsbefore launching it nationally. The company hopes the extension will attract import drinkers withoutalienating Budweiser purists. Other recent new products, including 180 energy drink and Tequizabeer, have not been successful. Still, Anheuser-Busch continued to set earnings records in fiscal2001, and the strength of its brand portfolio continued to prove itself as the company gained marketshare at the expense of its competitors

Questions for discussions:1. Provide a concise analysis of the basis for the Anheuser-Busch marketing strategy that has

worked so well for so long.2. If we can assume that great brand and product management is one of Anheuser- Busch’s primary strengths, what are some of the contributing factors in that process, and who is affected, primarily?

Volkswagen: Changing perceptions and positioning - Stretching abrandVolkswagen (VW) is a famous international brand name that has traditionally been associated withthe mass market, its most famous model being the Beetle. Indeed, it is currently exploiting nostalgiawith the new Beetle retro-model.

However, not content with sticking to the categories where it enjoys success, the company is alsoattempting to move into the prestige- and luxury-car segments dominated by established brands likeMercedes and BMW.

Its first venture into this market segment is with the new Passat V6 Syncro, which is out of the pricerange of the typical VW buyer. Evidently, other models are planned at higher-level segments and

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prices. Even though VW owns Audi, Bentley, and Lamborghini, amongst other brands, many peopleare skeptical that it can stretch its own brand upwards, when consumer perceptions still associate theVW-branded cars with smaller and less prestigious vehicles. Its “badge value” (brand associations)would not appeal to customers of BMW, Mercedes, or even Audi. Additional problems arise whenconsideration is given to the fact that other brands such as Volvo and Toyota’s Lexus are also shiftingtheir position to target the prestige market that demands performance, luxury, and marque. VWacknowledges the issues but says it will give customers more product. But is product what the luxurycar owners are really buying? More likely, according to research, it is status, prestige and self-expression that determines their decision, and VW will need to do a considerable amount of con-sumer perception management and distributor education to successfully bring any of its VW brandedmodels into that league.

What is a brand?Brand is the proprietary visual, emotional, rational, and cultural image that you associate with acompany or a product. When you think Volvo, you might think safety. When you think Nike, youmight think of Michael Jordan or “Just Do It.” When you think IBM, you might think “Big Blue.” Thefact that you remember the brand name and have positive associations with that brand makes yourproduct selection easier and enhances the value and satisfaction you get from the product.

While Brand X cola or even Pepsi-Cola may win blind taste tests over Coca Cola, the fact is thatmore people buy Coke than any other cola and, most importantly, they enjoy the experience of buyingand drinking Coca Cola. The fond memories of childhood and refreshment that people have whenthey drink Coke is often more important than a little bit better cola taste. It is this emotional relation-ship with brands that make them so powerful.

What makes up a brand identity?Brand identity includes brand names, logos, positioning, brand associations, and brand personality. Agood brand name gives a good first impression and evokes positive associations with the brand. Apositioning statement tells, in one sentence, what business the company is in, what benefits it providesand why it is better than the competition. Imagine you’re in an elevator and you have 30 seconds toanswer the question, “What business are you in?” Brand personality adds emotion, culture and mythto the brand identity by the use of a famous spokesperson (Bill Cosby - Jello), a character (the PinkPanther), an animal (the Merrill Lynch bull) or an image (You’re in good hands with Allstate).

Brand associations are the attributes that customers think of when they hear or see the brand name.McDonalds television commercials are a series of one brand association after another, starting withthe yellow arches in the lower right corner of the screen and following with associations of Big Mac,Ronald McDonald, kids, Happy Meal, consistent food quality, etc.

The first step in creating a brand for your company or organization is a branding workshop.

Is Branding just for large companies?No, our process can be applied to any business, organization or product. The techniques of brandinghave been kept secret for many years because they provided a competitive advantage to thosecompanies that used them. Our process takes the proven principles of branding used by companieslike P&G, Disney, and Coca Cola and puts them into a simple, understandable and easy to useprocess. This process can be used by retailers, service businesses, manufacturers and businesses ofall types and sizes.

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How do we determine our brand identity?Brand has been called the most powerful idea in the commercial world, yet few companies con-sciously create a brand identity. Do you want your company’s brand identity created for you bycompetitors and unhappy customers? Of course not. Our advice to executives is to research theircustomers and find the top ranked reasons that customers buy their products rather than their com-petitors. Then, pound that message home in every ad, in every news release, in communications withemployees and in every sales call and media interview. By consistent repetition of the most persua-sive selling messages, customers will think of you and buy from you when they are deciding onwhether to buy from you or your competitor.

Lesson 27 market positioning

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