Strategic Marketing Analysis Essay Example

enhance long term customer relationships at a profit, so that the objectives of the parties involved are met. This is done by mutual exchange and fulfilment of promises.

(Gronroos 1990 in Brassington and Pettitt 2000: 10)

The main difference between these three definitions is that the last one puts more emphasis on relationship between customers and organisations, i.e. emphasise the mutually active role between sellers and buyers.

2.2 The changing role of marketing

The market situation is changing from industrial society to postindustrial society. From customers' perspective, they expect higher quality goods and services with reasonable price and at the same time most of them no longer want to be anonymous and want individual treatment and they are becoming more sophisticated. Dell computer, which provides platforms on which each customer can customises the features he or she desires in the computer, is a successful example (Kotler 2000). From organisations' perspective, with the globalisation and technological advances organisations are facing more intense competition from both domestic and foreign competitors.

In response to the changes, organisations are rethinking their marketing philosophies. There are two outstanding characteristics in today's marketers' responses and adjustments: first, customer relationship management; second, every employee is a marketer. To illustrate, "it has long been claimed that it is between five and ten times as expensive to win a new customer than it is to retain an existing one (Rosenberg and Czepiel 1984 in Buttle 1996: 5)." Loyal customers are normally profitable to organisations.

In order to retain and satisfy customers, organisations need to not only listen to customers but also respond quickly and constructively to customers. In other words, organisations need to be interactive with customers i.e. establish positive

relationships with customers. Meanwhile, "today's customers are becoming harder to please (Kotler 2000: 72)." In order to maintain and enhance relationships with existing customers, every employee not just marketing, sales and customer support personnel must be customer-focused.

On the one hand, globalisation and technological advancement bring about intense competition and threats; on the other hand, they also make customisation and even personalisation possible and bring opportunities to organisations.

3 Develop consumer relationships through building sustainable brand equity

In the previous section it is suggested that today's marketing is changing from transactional approach to relationship approach. The following will discuss one of the important relationships in marketing - brand relationship.

3.3 What is brand?

"According to the American Marketing Association, a brand is a 'name, term, sign, symbol, or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition.' (Keller 1998: 2)"

Actually brands provide valuable functions to both consumers and organisations. By branding organisations differentiate their goods or services from competitors and help consumers to identify. More importantly, through the offer of value to consumers brands play a role of bridge between consumers and organizations. In order to consolidate this bridge, organisations try to create a positive and favourable brand image in consumers' mind.

3.4 What is brand equity?

When a consumer has a high level of awareness and familiarity with the brand and holds some strong, favourable, and unique brand associations in memory brand equity occurs (Keller 1998).

The definition of brand equity, given by Aaker (1991: 15), is:

...a set of brand assets and liabilities linked to a brand, its name and symbol, that add

to or subtract from the value provided by a product or service to a firm and/or that firm's customers.

According to Aaker (1991), the assets and liabilities on which brand equity is based can be grouped into five categories:

1. Brand loyalty

2. Name awareness

3. Perceived quality

4. Brand association in addition to perceived quality

5. Other proprietary brand assets - patents, trademarks, channel relationships, etc.

"Although a number of different views of brand equity have been expressed, they all are generally consistent with the basic notion that brand equity represents the 'added value' endowed to a product as a result of past investments in the marketing for the brand (Keller 1998: 44)." Blackston (2000) argues that another key characteristic of brand equity is that it is different from a product or the service itself; it is the customer's awareness and image that constitute brand equity. In other words, it is invested by customers. This is increasingly salient in today's dynamic market. Thus, it can be argued that a brand consists of two different sorts "equity". The first is tangible (e.g. symbol, name, product itself, and packaging, etc.) and the second is intangible, which is much more elusive to define (e.g. patent, trademark, perceived quality and associations, etc).

3.5 How to build and manage brand equity?

? Building brand equity

Keller (1998) suggested that in general building brand equity would depend on three factors:

1. The initial choices for the brand elements or identities making up the brand

2. The supporting marketing program and the manner by which the brand is integrated into it

3. Other associations indirectly transferred to the brand by linking it to some other entity (e.g., the company, country of origin, channel of

distribution, or another brand)

(Keller 1998: 68)

As defined earlier, it is important that, in building brand equity, both the fundamental equity, i.e. the tangible part and the "added value" equity, i.e. the intangible part should be established. Therefore, several points should be emphasized. Consumers' ideas should be focused and then the symbol, name of brand, product, price, packaging, etc. are developed, which in turn add value to both consumers and the firm. In such a process, the brand equity is being built.

? Managing brand equity

In managing brand equity, Keller (1998: 78) suggested that "effectively managing brand equity includes defining the branding strategy by defining the brand hierarchy and brand-product matrix and devising policy for brand fortification and leverage over time and geographical boundaries." However, it can be argued that it is even more difficult to manage brand equity than to build brand equity, especially in the modern uncertain and changing economy.

For example, during 1980s many companies restructured themselves, largely through acquisitions and divestments seeking to become global leaders in their selected line(s) of business. It was perceived that buying established brands was the quickest and lowest risk route to a position of global leadership. Given that brands commanded a premium price and customer loyalty, it was also regarded as the key to profitability. However, as expected, post-acquisition integration has proven a difficult challenge for many acquiring companies.

Moreover, contrary to popular belief in the 1980s even global brands are not immune to competitive pressures. "In 1993 Philip Morris reduced the price in the USA of Marlboro, the world's best selling cigarette, because it was losing market share to lower cost rival products. In 1994 Kodak has also

had to alter radically its pricing policy to compete against low-cost, non-differentiated products (Chan and McDermott 1995: 390)." Companies have to face the reality that consumers throughout the industrialized world are far less loyal to brands than all of these companies believed, as consumers became more cost-conscious to certain products.

3.6 The importance of brand equity

The long-term objective of organisations is no other than to pursue sustainable competitive advantage in order to survive and maximise profit. Brand equity is such an asset that will help organisations to maintain competitive advantage, especially in today's intensely competitive environment.

Porter's five-forces model can be used to analyse the importance of brand equity:

1. Rivalry among competing sellers in the industry. Brand is very hard to be imitated by competitors and help the organisation to maintain competitive advantage to competitors in the industry.

2. The potential entry of new competitors. Due to the effect of brand equity, the potential new competitors have to afford high cost to offset the effect and this gives the organisation first mover advantage.

3. The market attempts of companies in other industries to win customers over to their own substitute products. Likewise, because of the effect of brand equity, customers' loyalty to the brand will set barriers for the success of substitute products.

4. The competitive pressures stemming from supplier-seller collaboration and bargaining. Brand equity will offer a favourable position to the organisation in the bargaining with supplier.

5. The competitive pressures stemming from seller-buyer collaboration and bargaining. Positive brand equity is able to command a price premium and strengthen the organisation's bargaining power with buyers.

In addition, other benefits can result from brand equity, e.g. increased marketing communication effectiveness, possible licensing

opportunities and additional brand extension opportunities, etc. Moreover, all products have a limited life, however, through new product development based on the existing brand the organisation will be able to continue its competitive advantage. At the same time, strong brands will attract different stakeholders, such as employees, investors, and so on.

3.7 Brand equity - the bridge to connect consumers and organisations

It can be argued that there are two key features in building and managing brand equity:

1. The creation of brand equity is a match between consumers' brand awareness and image and organisations' performance.

2. It is a value-generating process for organisations to build and manage brand equity, in which consumers play as a co-creator.

These two features coincide with the changes of the present marketing, i.e. customer-focused and customer relationship marketing.

At the outset of the process consumers purchase the goods or services offered by suppliers and a relationship may be established. If consumers feel that the value of the goods or services meets their perceived expectation, a match occurs and the relationship may develop. The stronger the relationship is, the more positive the brand equity is, and vice versa.

Brands are like a bridge between consumers and organisations. At the fundamental level, brands help organisations to identify their goods and services and differentiate them from competitors. At an upper level, once the consumer is aware of the brand and holds a strong, favourable, and unique brand associations in memory of the brand, he/she tends to repeat purchasing the goods or services. The relationship is strengthened. Furthermore, the attribute of brand equity that is hard for competitors to imitate protects against competition and results in sustainable competitive advantage.

However, "brand

equity is a perishable resource. Brands left untended wither and die, their equity eroded by market forces (cf. Dickson, 1992). Thus brand value needs ongoing management (Capon et al 2001: 216)." Once the brand image has been successfully created, it is like a promise to consumers or a pact between the organisation and consumers. For example, "Let's make things better" by Philips and "The best man can get" by Gillete are well known to consumers. In case like this, if the firm cannot fulfil its promise to consumers, the consequence will be diminishing positive brand equity. More seriously, it will give negative brand equity to the firm.

A real example to demonstrate this is the Chinese famous brand "Guanshengyuan", which is a food company in China. In the fall of 2001, it was reported that Nanjing Guanshengyuan Food Corporation used overdue stuffing to make moon cakes. After the report, consumers no longer bought the moon cakes labelled with "Guangshengyuan". The consequence was a disaster - investors disinvest, market share diminished and then the company went bankrupt (Wu Zhixiong 2002). In this case, the brand still plays a role of bridge to connect the company and consumers. However, this bridge does not strengthen the relationship but destroy it.

4 Is today's global marketing being reduced to clever interactive marketing communications?

As illustrated previously, the role of today's marketing is changing and organisations put much emphasis on developing consumers relationships through building sustainable brand equity, so someone fears that global marketing is being reduced to clever interactive marketing communication.

It cannot be denied that marketing communication plays a very important role in building brand equity. "Marketing communication are the means by

which firms attempt to inform, persuade, and remind consumers, directly or indirectly, about the brands that they sell. In a sense, marketing communications represent the 'voice' of the brand and are a means by which it can establish a dialogue and build relationships with consumers (Keller 1998: 218)." In today's marketing consumers are involved from the very beginning. Products are no longer just produced and ready for sale and marketers use marketing tools to promote sales.

Products are customised according to consumers' requirements and even personalised. Under such circumstances, interactive marketing communications are increasingly important. For example, Ben ; Jerry and Hagen Daz may be celebrated all over the ice-cream-eating world but Texans do not want to even try them because they are not from Texas. Texans are loyal to their oversized tubs of Blue Bell. Pride in homemade products is big in Texas. However, "the brewer of Budweiser may not be based in Texas but its identification with the state in its advertising has proved successful (McNulty 2002: 17)."

However, the relationship and brand equity cannot be created just through marketing communications. "If service processes do not function in a way that customers want to relate to, planned marketing communication cannot compensate for this (Gronroos 2000: 297)." It also applies to physical products. The sustainable brand equity is derived from many assets such as quality, price, culture, and geographic boundaries, etc. For example, consider the growth of hotel franchising in UK. Franchising is becoming increasing appealing option for British hoteliers given that recognised brands are a guaranteed promise of quality and provide wider distribution system and large IT system (Murray 2002).

Meanwhile, as discussed, once the relationship

and the brand image have been successfully created, it is like a promise to consumers or a pact between the organisation and consumers. This is why today's marketing requires that every employee must be customer-focused. Marketing must transform from tricking the consumer to satisfying the consumer. For example, General Motors Corp. on 14 November recalled 1.5 million model year 1996 to 1998 cars and minivans in the United States and Canada to repair the steering unit, which in some instances could lose power (Reuters 2002). Previous example "Guanshengyuan" illustrates this point as well.

There is no doubt that marketing communications serve as catalysts in satisfying consumers, i.e. developing consumers relationships and building brand equity. Nevertheless, improvement of organisations' performances in all aspects, which ultimately satisfies consumers, enables organisations to maintain favourable brand equity, which in turn leads to sustainable competitive advantage.

5 Conclusion

In conclusion, the current trend within marketing tends to focus on developing consumer relationships through building sustainable brand equity. However, clever interactive marketing communications cannot dominate this trend.

From a strategic view, the competitive advantage of an organisation resides in uniqueness and sustainability. However, today's market is changing at an incredible speed. Thus, uniqueness and sustainability are becoming harder to pursue. Brand equity, which is hard for competitors to copy and serves as one of the main sources of competitive advantage, may provide a more stable, long-term focus. Conversely, it should be noted that 1) brand equity is invested by consumers; 2) brand equity is a perishable resource and needs ongoing management; 3) brand equity is derive from many assets. Prahalad (in London 2002: 14) suggests, "The consumer goes from being a very passive person to

being a very active co-creator of products, services and value."

And "we have to move to a consumer-centric view in which value is created through dialogue, collaboration and partnership [with customers]" Therefore, "Interaction between producer and consumer is not restricted to the point at which money changes hands. There are opportunities to exchange ideas when products are being designed, manufactured, or used long after the company ceases to have any warrantied responsibility (London 2002)." Possible pay-offs lie in deeper understanding of customers, increased loyalty and the potential to develop whole new lines of business. Only a constant and genuine value-creation process can brand equity be sustained, which in turn leads to sustainable competitive advantage.