MARKETING MATERIAL
9022 MARKETING MANAGER 2 - CUSTOMER AS HERO
We now move on to investigate the 'hero' of this book; the customer. As we have seen, in organisations which genuinely have adopted a marketing philosophy everything starts with the customer, and all the subsequent processes are, in one way or another, focused on that customer. So, marketers need to know as much as possible about their customers. Indeed, since we all have customers for our work - the other departments which take our services within the organisation say - we all need to understand our customers.
Traditionally, this 'understanding' has been achieved by sorting these customers into a series of pigeon-holes. In the consumer goods field, where this form of categorisation has reached its peak of perfection, they have traditionally been grouped in terms of age, gender and social class. All of these seem to make sense; it is not unreasonable to expect that a middle-aged, upper-class woman will have rather different tastes and - more important from the marketers point of view - buying habits from those of a teen-age, working-class male. For many years now this form of classification has been the simple basis for consumer goods marketing. In particular, it has been the approach offered by the owners of television stations and, in particular, of newspapers and magazines; as the basis for justifying their presence in the package of media which is supposed to offer the best coverage of the target audience )the people who you think are most likely to take your product or service).
More recently, however, the effectiveness of some of these have been questioned; not least by some of the researchers with whom I work. Even so, let us start with these categories, because they are simple to understand as well as simple to use.
AGE
The first of them is very easy to determine. Almost everyone, anywhere in the world, now knows how old they are; and are happy to allocate themselves to age categories. Most important of all, perhaps, the media track this as a prime factor in what they offer advertisers. And age does matter. As we have seen, teen-agers buy rather different things from the middle-aged; and they in turn have different needs to pensioners. If you want older people, you will select certain types of magazines. If you want teenagers you may choose cinema advertising.
More recently, though, the leading edge marketers have chosen to use lifestages rather than age alone; though they do parallel each other. Thus, lifestages also take account or the major events which change buying behaviour. Single people get married. They then, in particular, have babies - which can have the greatest impacts of all - a matter of a few months transforms the new parents way of life! Then they spend years bringing up their family, as young children grow into teenagers and eventually leave home. Which leaves the couple alone once more ('empty-nesters' in lifestage jargon), with relatively high incomes and only themselves to spend it on. Each of these stages results in quite different buying behaviours; and quite different opportunities for astute marketers! However, it is worth noting that most organisations - most notably the media - still use age rather than lifestage as the guide to their marketing activities.
ACTIVITY
How have your own buying habits changed over the years, as you have got older, and how have they changed as you have reached the various 'lifestage' watersheds?
GENDER
This is, again, easy to determine. But it has become very controversial - hence my careful use of the word gender (which is socially determined) rather than sex (which is biologically determined). Even so, there are very clear differences in behaviour and, though it is bad taste now to talk about it, the ubiquitous housewife still is the main buyer for the family; though she may now be in full-time employment like her male partners - and may even be earning more than him, and may even be the bread-winner.
It used to be much clearer cut. The woman - as housewife - was the only target for consumer goods companies, she bought everything for the family; apart from masculine things like cars. Now all is changed. Women aspire to very different things - there are even car advertisements aimed at women - and they are as likely to be 'breadwinners' as their men-folk; so that, not least, they have much less time to identify with the stereotypical housewife - obsessed with cleaning and baking. Even so, and here I may offend the feminists, gender still proves to be a very useful categorisation in many markets. And, of course, it is one which many suppliers use - especially in the fashion industries.
SOCIAL CLASS
The is used to be a mainstay of market categorisation, and still is the mainstay used by much of the media; the broadsheets, the quality press, are proud to be 'up-market' (with, literally, a higher class of readers). But there has been considerable debate recently about how relevant this form of classification is. It is claimed that the boundaries are blurring, and in particular we are all becoming middle-class. This is an exaggeration, in the UK nearly a third are still working class (D or E, according to the scales used by advertising agencies), and a sixth are upper class (A or B), but rather more than half are now middle-class (so much so that the classification has had to be split into C1 or C2). Where the advantage of classification is that it allows you to split the population into separate groups which are easier to handle, the fact that the middle-class now covers so many people undermines this.
In addition, class is quite difficult to determine. It is - as used by advertising agencies at least - and awkward mixture of income level - which is highly relevant as it shows how much you have to spend - and social status - which may suggest how you might spend it. In terms of its use in practice, it requires a subjective decision by the interviewer, not least on the social position (which may come from occupation or inheritance), and research shows that interviewers can be wrong in up to 20% of the cases! On the other hand, their mistakes seem to cancel out, and research has shown that social class still is a reasonable indicator of behavior; so you should not write off class just yet. It remains one of the most powerful, and - despite the difficulties - practical, ways of separating out groups with different patterns of behaviour.
ACTIVITY
What class are you? What class are your friends? Does this influence your, or their, buying habits?
LIFESTYLE
The major new dimension, which has emerged over recent decades, is that of lifestyle. This was initially driven by an approach called VALS (Value Added LifeStyles), developed by SRI International. This looked at how people now choose to live their lives; in different ways, different from the way the old categorisations would have predicted. It separated people into new categories; such as those who are 'outer-directed', that is influenced by the world outside of themselves, including sub-categories such as 'achievers', and those who are 'inner-directed', including those who are 'societally-conscious', but there are a whole range of other sub-categories - such as 'belongers' and 'survivors' - who are supposed to behave in very different ways.
This approach, and others like it which were developed, became very fashionable - not least with advertising agencies, who liked the freedom it gave to their creative work. It has now even extended to the social sciences; which have used it to bolster their ideas as to what 'post-modernism' means. It can, indeed, be a powerful device for looking at some groups of customers, especially in fashion markets; but research indicates that, even so, it is still not as powerful a differentiator of behaviour as social class. But, at the end of the day, any way that can help you focus on specific behaviours is helpful.
ACTIVITY
How would you describe your lifestyle(s)? Is it significantly different to that of the rest of the population? How? Why? Is it significantly different to what might have been assumed on the basis of your class? How has it changed over recent years?
OTHER PIGEON-HOLES
There are other ways of categorising individuals. Geography can be quite important in some cases. For instance, in the United States there are significant differences between purchasing patterns in New England (Boston) and the South-West (Dallas); if for no other reason than the weather! And then there are ethnic groups. In California the Hispanics have their own television stations, so they needn't even speak English let alone buy the same products as their WASP (White Anglo Saxon Protestant) neighbours!
Then there are the whole range of psychological factors which people have proposed. The most famous is probably the 'Hierarchy of Needs' proposed by Abraham Maslow. This starts at the bottom with 'Physiological' Needs - literally those needed to survive - and runs up to 'Esteem' - the conspicuous consumption which some 'Achievers' indulge in to impress their neighbours - and then to Self-actualization - the inner-directed self-fulfilment which the Societally-Conscious aim for. As there is little to distinguish between the these two upper levels, I tended to ignore this approach, until I taught in Ethiopia - where I found that the lower levels were significant; not least Physiological Needs really mean something for people who are starving!
ORGANISATIONAL PURCHASING
So far we have looked at how consumer goods companies see their individual customers - people like you and me. Now we will briefly look at the equivalent positions in the industrial goods and services markets, where we are selling to organisations not to individuals. In some of these markets the position may not be too different. If, for example, we are selling consumables to large numbers of small purchasers - copier paper to individual departments or light bulbs to building services - the end result might look much the same.
On the other hand, a significant part of these markets does operate very differently; in a way that is best described as being a complex sale. In the first instance, it may be more complex because the product or service is inherently more complex - the purchase of a complete new assembly line requires more thought than that of a can of baked beans. Then it is more complex in terms of the extended timescales - where you might buy the beans as an impulse purchase on the spur of the moment, the assembly line purchasing process will certainly extend over a number of months, and possibly over years. Finally, it is complex because there are a number of people involved in the buying decision - you may make your own decision on the beans, but the assembly line decision will involve a number of factory managers and engineers, people from development, from finance and admin, and - most important of all - the senior management budget holders. Decisions of this size will probably involve all members of the board, but they may include people from across the organisation, even including marketers (as a brand manager I even once bought an assembly line myself - over the heads of the production people!).
Accordingly, you can't view such industrial purchasing decisions as simple, with just one meeting between a buyer and a salesperson (as much of sales training assumes), but they fully justify the description 'complex'. They will typically involve a number of such meetings with a range of people. Some academics have tried to define the various groups involved. The common factor most of these frameworks seem to share is splitting people into groups who are 'decision-makers', the budget-holders say who have the authority to take the decision to buy, and the 'influencers', who have the right to sway which way the decision will go. Some add a further category, which is 'gate-keepers', those who - usually for technical reasons (including purchasing rules) - can veto the decision!
These distinctions are useful. Thus, recognition that the ultimate decision-maker is the budget-holder, usually a board member, is a salutary reminder to the sales-person who has spent the last few months calling on a junior buyer that he or she has a lot more work to do before making the sale! In fact most sales personnel never obtain access to the key decision-makers! But real life is even more complex than these splits would allow for. The most obvious example of this the fact that the 'influencers' normally include the 'users' - and, in most organisations, their views carry as much weight as those of formally appointed decision-makers - the board members for instance. After all, users are the people who will have to make the decision work in practice. In effect, in most situations they - whatever the rule-book says - are the de facto decision-makers; but many sales-personnel don't even call on these key 'customers'!
The importance, indeed, of recognising all these various participants is to remind the marketers (the sales personnel) that they must understand what is the role of each of these in the process. There is an easy solution, which few marketers follow though, and that is simply to cover all the bases; to talk to all of these people - or as many as possible. If in doubt, in marketing, always get the customer's view! In my experience most sales campaigns fail because the sales personnel haven't even talked to the real decision-maker; the real buyers are rarely to be found in the comfortable surroundings of the purchasing department!
ACTIVITY
In your own group, who are the overall decision-makers, and who are the key ones in the context of decisions on suppliers? Do your suppliers recognise this fact? Who are the decision-makers and influencers amongst your own (internal) customers? How do you take this into account in your dealings with them?
Who do you think are the key decisionmakers and influencers in your organisation's customers? Do you have any contact with these?
CONSUMERS AND END-USERS
As I have already hinted, however, there are layers of influence in all purchasing; including those in consumer markets. The most obvious of these is the consumer, in consumer goods, and the end-user, in industrial goods. These are people who may never be directly involved in the buying decision, but whose views represent a crucial indirect element. The mother buys the baby-food, but she knows which ones the baby spits out. The vending machine supplies buyer will not order drinks which the staff hate. So, marketers need to take into account the needs and wants of these consumers just as much as those of the direct customers; IBM's failure to do so in the PC market ultimately led to its downfall.
USAGE
But even the purchasers themselves buy very different amounts of the product or service. So, one of the most important characteristics of consumers and customers is the amount they buy. Consumer goods companies talk about heavy users versus light users, and industrial marketers about large (key) accounts versus small. The reason for this split is simple. The heavy users are worth more, typically much more, to the organisation than the small ones; so they are more important, and suppliers should put more effort into recruiting and holding such accounts. The two are, in industrial markets, typically treated in very different ways. The large accounts will be personally serviced by a team, often headed up by a manager (the account manager), where the small ones will be sub-contracted to outside agents or dealers or wholesalers.
This fact is recognised by what is probably the most important 'rule' in the whole of marketing theory; the 80:20 Rule. We will return to this idea a number of times throughout the book, but in the context of this section it quite simply says that 80% of your business will come from 20% of your customers; and these are the ones you must most carefully guard.
ACTIVITY
Who are the 20% of your organisation's most important customers? Does the organisation single them out for special treatment? If so, what? If not, why not?
How about your own group's 20% of key internal customers? Do they account for the largest part of your activity? How do you treat them?
PRODUCT (BRAND) SHARES
Sales levels are, of course, important. But they may not tell the whole story. Your sales may be going up, but those of others in the market may be growing even faster; so your share is falling. When a boom, say, comes to an end you may find your overall position has weakened.
Perhaps the most important measure of performance is, therefore, that of share of market, of the overall business. This is often referred to as brand share. We will look at brands (as opposed to raw products) later. At first sight this can be a confusing topic. For there can be a number of such measures, which look very similar. First of these may be penetration. This is easy to measure, but simply shows the (percentage) number of potential customers who use your own product or service. But this may be confusing, for - as we have seen above - they might be heavy or light users; unlike voters, not all customers are equal.
So more important is product share, the share of the overall market volume being purchased by these customers, the share of the overall total business taken by your organisation. Even the share of volume does not, however, tell all. One brand may be more expensive - the brand leader can usually justify a price premium over the other runners - so the value of its share may be higher than the volume would indicate. Accordingly, most marketers consider that most important measure of brand share is to be seen in terms of value. It is, though, more difficult to measure. Clearly you should know the value of your own sales, though what they fetch in a supermarket rather than at list prices is not always obvious. But to know the figure for the overall market, and for your competitors, you have find some way of recording everything customers across the market buy! In consumer goods markets you will usually take this data from market research companies, in industrial markets all you may have are government figures of dubious quality; at one time sales of typewriters were reported by the UK government in terms of total weight!
ACTIVITY
What share(s) does you organisation have? This may be a difficult question to answer (even for your senior management), so try a simpler one: is it a market leader or a small niche player?
GAP ANALYSIS
What the bare figures do not show is why differences exist. This is the subject of gap analysis; at is basic level this recognises that there is a gap between what you are achieving and what you (or your shareholders) might want to achieve. But this can have a number of components. At the top level, and ignored by most suppliers, there is a usage gap, between the level of sales actually being achieved across all brands in the market - market sales - and the potential level which might be achieved; if all the customers bought as much as they might ultimately want. The problem here is that, as we have seen, even the 'actual' sales levels are difficult to measure - the 'potential' sales can only be guessed at on the basis of suitable market research.
Below this, we arrive are some more meaningful gaps. The 'distribution' gap, for a product, reflects the shortfalls in its distribution - which means that not all potential customers even get access to buy it. This may be because the supermarkets will not stock it, or that it is limited to one geographical area. In the industrial markets, you may be limiting yourself to certain types of customer, makers of military aircraft but not airliners, say. The solution is to improve that distribution - though, if the supermarkets will only stock the brand leaders and you aren't one, tough luck!
The next gap is the 'product' gap, which represents how well your product or service measures up to the needs of the overall market. It may be - by design (as we will see later in this chapter) or by default - limited to certain groups of customers. Other groups will not even consider buying it.
The final gap is the 'competitive' gap. The represents how effectively you market - the same product to the same customers - your offering; as compared with your competitors. It is probably what you thought marketing was all about - but, as we have seen, it is usually only a small part of the overall picture.
Having said all of this, the end result is probably only of theoretical interest. Every marketer worth his or her salt struggles to maximise potential, distribution, product match and competitiveness!
ACTIVITY
Look at your organisation's activities, and see how might it close the gaps it faces. Try the same for the work of your own group. Are there other things you could do? Are your services available to the widest possible range of internal users? If you added to, or changed, your services would more of these internal users be helped?
DIFFUSION OF PRODUCT USAGE
One aspect of purchase behaviour which is often ignored by otherwise sophisticated marketers is the extent to which it is influenced by others, and in particular by other members of his or her 'peer group' (the people they see to be like themselves, whose views and advice they respect). Thus, research indicates that the buying decision is not as simple as advertisers would like to think. The customer does not just see the advert, and immediately rush out and buy the product. In fact, it seems likely that they often are more influenced - indirectly - by what their peers say; so the process is an indirect one, the peers see the advert, try the product and then recommend it to their friends.
Indeed, some groups of buyers are much more adventurous than others. They are the first people, for instance, to try a new product; and they relate their experience to others who also try it - and then, over time, more and more people are recruited to the brand. In academic circles the very first group of users, just a couple of per cent perhaps, is referred to as the 'Innovators'. Then the 'Early Adopters' follow them, and eventually the mass of the population comes too; with the 'Laggards' bringing up the rear. The point of this observation is that there can be a number of different processes at work at the same time. Indeed, in launching a new product you will probably have to invest a great deal of effort in recruiting the very small group of initial users (the Innovators), but the investment will - hopefully - be justified where these are the advance guard of the army they then go out and recruit. So the curve of new product sales starts gently but then accelerates as the Early Adopters arrive, and only plateaus when the Laggards are reached. This may not always be the case; where there is a fashion (or fad) involved the sales can rise almost immediately - but, beware, they are then likely to fall almost as fast! But, in the case of most products, it can take months, even years (research indicates it may be up to a decade), to really establish a new product.
ACTIVITY
Who are the 'Innovators' and 'Early Adopters' for your organisation's products or services; and who are the 'Laggards'? Who are they in terms of your own group's work? How do you take account of this?
LOYALTY
Once you have established a mature product, in a stable market, then another measure which is often used is loyalty. You are endeavouring to establish a customer base of loyal users; people who will buy your product or service, in preference to its competitors, time and time again. This clearly offers a major marketing advantage, and some significant marketing theory is built around this. In practice, as my fellow researchers have observed, it is - yet again - more complex. Customers, in some markets at least, do not just buy the same brand week after week. Instead, they tend to buy portfolios of brands (where they often get bored with the same brand each time); but in this context loyalty is simply redefined as a greater likelihood of choosing your brand - and the end result is much the same.
In industrial markets, where portfolio buying seems less prevalent, loyalty is even more important. Thus, it is always assumed, that when an industrial organisation wants to buy some more of something, it will go through the whole purchase process. This is true the first time a purchase is made - a new buy. But, for existing business, nothing could be further from the truth. The process is almost as painful for the buyers as for the sales personnel; so it is a last resort, if all else fails! Normally, if everything seems to be going well, and the suppliers have not blotted their copy-books, a repeat purchase - a rebuy - is made almost automatically! It is usually only if the supplier has failed in some way that others are invited to tender for the business - a modfied rebuy.
This has some important implications. Not least is that maintaining your existing customers, meeting their every need and want - with a consistently high level of service, has to be your highest priority. You should never allow the least excuse for a customer to go out to competitive tender. Opening that door may prove to be very expensive. At the other extreme, if you want to be a supplier, you have to judge very carefully the situations which seem to be open to you - too many of the buyers are merely going through the motions - so that you can focus on the real business, the sales which are achievable.
ACTIVITY
How loyal are your organisation's customers? How does it reward this loyalty? Hoe loyal are your own group's customers?
MODELS OF PURCHASE BEHAVIOUR
Marketing textbooks, my own included, are replete with all sorts of models of buyer behaviour; indeed some academics seem to think of nothing else! The reality is that, whilst they might sometimes help you understand buyer behaviour, they rarely are able to predict it. It is much easier, as we will see in the next chapter, simply to go out and conduct some suitable market research. I make no excuse for repeating 'if you don't know the answer, ask the customer'!
A very simple model of the purchase process, though, can help you understand some of the stages the buyer may go through before buying a product or service. I suppose the most often quoted one, not least by sales trainers, is AIDA (Attention, Interest, Desire, Action). Perhaps a more realistic model, albeit without the memorable acronym, is one which has rather better defined stages: Awareness, Interest, Understanding, Attitude and Buying Decision).
The first stage of awareness should be self-evident, since if the potential purchaser is not even aware of the need for your product or service there is no way that they will buy it! But beyond that, and this model is usually applied to advertising, the first need is to create interest in what the 'product' can do; before they will even consider it. And then, the next stage is understanding - what the 'product' is and why they should want it. The stage after that is where they should start to develop positive attitudes towards it, and that in turn should lead on to the buying decision.
This is a very simple model, but as such it applies quite generally; in industrial markets as well as consumer ones. But it misses one major point, which we explored in the first chapter, and that is the fact that most purchase decisions revolve around repeat purchases. It is the history, developed over the longer term, which really counts; and it certainly the progression of such sales that builds organisational performance levels. So we like to take the process further, beyond that first purchase.
Once the product or service has been tried, hopefully with more than satisfactory results, you then enter into the repeat purchase process - which follows a rather different set of rules. Not least of these is the one that says your first priority is maintaining the customer's loyalty; almost regardless of cost. This, then, imposes a contradictory set of conditions on many mass marketing campaigns. At the same time they must be designed to recruit new users, according to one set of rules, and to maintain existing users, according to another. It is no wonder that so few mass marketing campaigns are really successful; especially where most marketers do not even recognise the dilemma, and treat everyone as if they are first time buyers! The sales people who can concentrate on the specific needs of each prospect or customer have a much easier time.
But it is important to recognise the differences. Before the first purchase you need to persuade the prospect to try the product. After that you want to retain them with an on-going positive experience. Coca Cola famously fell into this trap when it abandoned the old product, because Pepsi was recruiting more new users (with a sweeter product that tasted, at first, more interesting). When it launched its new formulation, however, it found that it alienated its existing customers (who quickly became bored with the sickly sweet formulation); and Coca Cola management had a desperate recovery exercise on their hands - with which, to give them their due, they succeeded.
In fact, the two sets of rules need not be as far apart as they might seem, for the diffusion model we looked at earlier on means that most new purchasers do not come in directly - they are brought in indirectly by existing users. So, contrary to what most marketing textbooks would have you believe, you should - once you have recruited the 'Innovators' and 'Early Adopters' - focus above all on retaining your loyal customers; who will in turn bring in the new customers!
Our own model, which takes these wider elements into account is:
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This embodies most of the essentials of the wider process. Thus, the central pillar (the consumer's progress) highlights the tentative nature of the first stages as the consumer moves from 'susceptibility' to the actual 'purchase'; and then the no less important subsequent stages as confidence builds into loyalty.
The break point, at the time of the first (trial) purchase, is reflected in the vendor's pillar by the switch from promotion to support (though this aspect is rarely emphasised in theory). It is even more obvious in the 'peer' pillar in the switch from 'taker' (of advice) before first purchase to 'giver' (as a loyal referee) after purchase.
ACTIVITY
Who does your organisation aim its promotional or sales activities at; existing or new customers? How does it maintain existing customers? How effective is it in doing this? What changes would you suggest?
MARKETS
So far, in this chapter, I have been talking about individual customers. But there are very few organisations which can survive on the business of just one customer. Instead you need a number of customers and, together with the customers loyal to your competitors, these build up into what is called the market. Once again the definition is, though, more complex. It starts with the customers, but more practically it is based on the business coming from all of these. Such a market may be geographical (the North American market, say), after all the very name derives from the town market where the local peasants sold their goods. As favoured by suppliers it may be based on the products or services, the baked beans or banking markets, or on the industries they sell to, the health services market (which could, of course, include sales of baked beans to hospitals), or on the psychological measures they consider important, the luxury goods market (which is unlikely to include baked beans!).
For marketers, though, the best definition must be in terms of the customers buying in it; either as people, with recognisably similar requirements, or as the business they generate. Of course, this often turns out to be the same as that defined by the 'products', but the shifted focus is, as always in marketing, important. It also means that wider potential can be explored; the entertainment market is much wider than that for feature films - which is why Disney got into theme parks.
ACTIVITY
What market(s) is your organisation in? Which ones(s) is your group in?
SEGMENTS
Within each main market, though, there may be a number of sub-markets; sharing many common features within the overall market, as all cars do, but with some which distinguish them from other sub-markets, as luxury cars differ from compacts. At this point there can be problems with terminology, some academics tend to refer to these sub-markets as segments (of the main market), as I will do, but some reserve this term for only those parts differentiated by intangible factors (such as emotional feel). Whatever, segmentation (the splitting of markets into these segments) is a very powerful marketing device. As we will see later, there are many benefits coming from being the brand leader - and the minor brands are put at a disadvantage - but there can be only one market leader. Many of these benefits are also available, though, to the segment leaders - and there can be more of these.
So there are considerable benefits for some suppliers in focusing on individual segments. These are parts of the markets where groups of customers share similar characteristics, for the diet versions of baked beans say or the rigorous quality demanded of bolts for the aviation industry. The important aspect is that these characteristics allow you to group these customers together into a segment which you can sell to. They must be sufficiently different to other segments that you can separate them out, but sufficiently like each other that you can focus on them; and there must be enough of them to make their business worthwhile. At the extreme, usually in retail markets, a niche market is so small a segment that it can only support one supplier - which keeps all the others out (unless the market leader decides it is worthwhile paying some attention; as happened to Sock Shop in the UK, when Marks & Spencer virtually destroyed it!).
So the first question for you is 'what market am I in?' But the second one, and often the more important one, is ' what segments are there, and which of these can I profitably exploit by focusing my efforts on it - so that I can effectively become the segment leader?' This technique is usually exploited by larger organisations, but paradoxically it may be especially important for smaller companies; as it offers them their only opportunity to gain the benefits of segment domination!
ACTIVITY
Is the market in which your organisation operates segmented? If so, what account does it take of these segments, and which does it target? Which should it target?
POSITIONING
So, you've decide on a segment you want to target. How do you achieve that targeting? The answer is that you position your brand to do exactly that. You need to make the brand meet the specific needs of the segment, or more likely you need to tell the customers in that segment how it meets their wants.
This is classically represented as a positioning map:
This is, though, just a way of visualising what you need to do. In the very simplified picture above, the customers in segment 1 want reasonably high quality, but are willing to pay a reasonably high price for this. Thus, Brand A could reposition itself, by raising quality, so that it sits nicely in the centre of this segment; and very effectively target it. Brand C, though, can reduce its quality a lot (and price a bit) to achieve much the same result! In both cases, the map is a way of visualising what needs to be done.
Beware, however, the dimensions are not necessarily the ones you - as a supplier - imagine are important. They must be the ones that are important to the customers in that segment!
ACTIVITY
As a very crude approximation, try and draw a 'positioning' map of the various segments - along with the positions of your own organisation's brands and its competitors - in terms of the two main 'dimensions' which you think are important to the customers.
THE CUSTOMER FRANCHISE AND BRANDING
If you have been successful in doing all the things I have suggested in this chapter, your should have loyal customers; dedicated to your brand. You can put a notional value on this loyalty, and this is the customer franchise. It represents your investment in the customer, and - what is often forgotten - their investment in your brand. It represents the outcome of all the many things you have done, and all the experiences the customer has had, which persuade them to be loyal to you. In view of all the effort which has gone into it - and the comparable effort that a competitors will need to invest to dislodge this loyalty - it can be very valuable (worth literally billions of dollars for some brands).
The alter ego of this customer franchise is the brand (investment) value. Thus, after mentioning it a number of times, at long last I can introduce the brand. The first point to make is that people get confused about this. They assume it only applies to heavily advertised mass consumer goods. In fact, it applies to almost everything. Almost every organisation has a brand of some sort; even if, as is usually the case, it is the company name or, in the case of the government sector, a department name - indeed in recent history some such departments have been the most avid users of branding!
In terms of how you handle your brands, there are a number of possible policies;
COMPANY NAME - as we have seen, especially in the industrial sector, it is often just the company's name which is promoted.
FAMILY BRANDING - in this case a very strong brand name (or company name) is made the vehicle for a range of products.
INDIVIDUAL BRANDING - is where each brand has a separate name, which may even compete against other brands from the same company.
In terms of existing products, brands may be developed in a number of ways;
BRAND EXTENSION - the existing strong brand name can be used as a vehicle for new or modified products. This appears to be the most prevalent form of development, which is understandable since it maximises the use of the investment in the brand name.
MULTIBRANDS - alternatively, in a market that is fragmented amongst a number of brands a supplier can choose to deliberately launch totally new brands in apparent competition with its own existing strong brand(s).
The important point to note is that, even if you think you do not have a brand, your customers will apply one to you in one form or another; and you had better protect this investment.
We all recognise the Coca Cola brand, but my own organisation's name - The Open University - is one of the most powerful brands in the UK. It simply arose because it describes what we are (in much the same way that International Business Machines, IBM, did), but in the mind of the public it now goes way beyond that. In the first instance, it is highly recognisable - most people in the UK will spontaneously quote it (or the equally well know diminutive; OU) when asked for the name of a university - as a powerful; brand should be, but beyond that it exudes warm values - excellence, equality and everything you might ever want - and it is this wonderful image which makes the OU 'brand' even more powerful.
Thus, the brand is a peg on which you can hang all the positive things, especially the intangibles, you want to say about your product or service or organisation. It encompasses the actual physical products, plus the ephemeral services, together with all that you say about it and yourself; creating the psychological factors, the attitudes, which persuade customers to place their business with you. Indeed, the best way of thinking of a brand is as the personality of your product or service or organisation. In consumer goods it is quite often recommended that you try to imagine your brand as a family friend. That is not bad advice, because the customer would like to feel as comfortable with the brands they commit to as with the friends they choose!
The power of branding comes on a number of fronts. It means that you can lock your customers into something which is not just a physical product - which might rapidly become outdated. The classical example is, once more, Coca Cola. After all, it is just flavoured water - it long ago dropped the coca leaf (cocaine) ingredient which gave it its name. But, as Pepsi has found over the years, it is not easy to displace this brand leader - no matter how much you spend on new formulations. Above all, though, it means that you can roll together all the things, especially the intangibles, you want to associate with the brand; not least in your advertising.
In economic terms the 'brand' is, in effect, even more powerfully a device to create a 'monopoly'; or at least a form of 'imperfect competition' - so that the brand owner can obtain some of the benefits which accrue to a monopoly, particularly those benefits related to decreased price competition.
The final outcome of this process, if you are lucky (and invest very large sums of money), is simply that you achieve the benefits offered by brand leadership; encapsulated in the Rule of 123. This quite simply says that in a (mature) stable market, which most are, the brand leader can expect to hold twice the share of the second brand and three times the share of the third - and no other brand will make significant sales. You can see, therefore why brand leadership is so valuable. You gain all the benefits of scale in your production, and even so can actually sell at a higher price than anyone else; all of which means that the revenue streams give you a war chest sufficient to see off anyone who wants to displace your cash cow. The sheer power of the brand leader simply cannot be overestimated!
ACTIVITY
What is your organisation's brand(s)? Is it a specific name attached to its leading product(s) or service(s), or is it the company name? How does it use this brand name in its promotional activities? How does the brand leader in your market make use of its brand?
At a much lower level, what 'brand' might be applied to your own group - what do your internal customers call it (especially behind your back)?
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