Marketing Concept and Branding Strategy Essay

Introduction

Most organizations are involved in the production of goods or services, with the main aim being to reach the targeted market and increase market share. Therefore, in order to improve the demand of the product, the organization must take appropriate measures to ensure that the product effectively satisfies the needs of the consumers.

To achieve this, the organization employs marketing as a tool to aid in the achievement of the goal. Marketing can therefore be explained simply as the measures and activities that an organization must make in order to exchange and create value with its customers.¹ The exchanges usually lead to economic prosperity.²

Development of the marketing concept

Organizations usually engage in marketing in order to create demand for their products, since in most of the situations, the production of products in the organizations is usually higher than the demand for the products.

However, during the start of the industrial revolution until the early twentieth century, the manufacturing level was usually lower than the demand for the products; therefore, the companies were assured that all of their products would be sold due to the higher demand.

The organizations therefore had a high production orientation and marketing was limited to just taking orders from customers and then distributing the products.³

However, production soon caught up with the demand, necessitating the organizations to devise methods of increasing the demand for their products. To achieve this, the organizations employed vigorous marketing methods, which mainly entailed personal selling and advertising.⁴

The organizations later realized that the effective method of reaching the customers was through the implementation of methods that try to ensure that the customers’ needs are satisfied.

The organizations therefore came up with methods of determining the needs of the customers before engaging in marketing, as this ensured that the marketing concepts led to the eventual satisfaction of the customers’ needs.⁵ Nevertheless, the organizations that were unable to develop effective marketing concepts soon exited from production.

Transactional and relationship marketing

Business organizations can undertake their marketing strategies through various methods. However, the marketing strategies can mainly be classified into two groups: relationship marketing and transactional marketing.

Transactional marketing

Conventional marketing strategies are usually transactional oriented, and are therefore known as transactional marketing. In this method, the marketing programs are mainly targeted towards making the customer to buy the product that is produced by the company. This is regardless of whether the purchase will be by a new customer or an existing one.⁶

This type of marketing does not usually forecast the probability of an existing customer making a new purchase, even if the customer has made a series of purchases. The marketing concept therefore allocates a small marketing budget to the existing customer and makes no effort in making the customer be loyal to the organization and climb up the loyalty ladder.⁷

This marketing concept has been questioned by many people due to its inability to retain customers. However, a better marketing concept, which tries to counter the limitations of the transactional marketing, is the relationship marketing.

Relationship marketing

In a business context, the customer’s needs are the most important. The organization should therefore form a close relationship with the customers and continually satisfy their needs as they keep on evolving – relationship marketing tries to effectively cater for this.

In relationship marketing, the organization creates marketing concepts that are mainly aimed at identifying, maintaining, and terminating, when necessary, its relationship with the customers and other relevant stakeholders at a profit in such a way that the individual objectives of all the parties involved are met. ⁸

Effective marketing and strategy usually involve several methods, which include branding, product strategy and pricing strategy.

Q2. Branding

Branding is one of the most essential marketing strategies of different companies. It hugely determines the success of a product or the whole business organization. Brand is one of the major factors that influence the customers towards making a purchase of a certain product.⁹ All modern organizations are vigorously involved in branding to promote either the image of the organization or a specific product of the company.

A brand is a combination of name, symbol, term or design that is used to identify a specific product or sometimes an organization.¹⁰ The brand mainly improves the image of the company to the customers and the general members of the public.

In addition, the brand name entails the words that can be spoken to relate to the product e.g. Toyota, Sony etc. The brand mark relates to symbols, designs, or marks that effectively communicate about the brand without the use of spoken words¹¹ for example, the Nike swoosh.

Branding strategy

The brand strategy usually entails more that the development of a clever name or symbol that many people will relate the company with. The strategy mainly ensures that the brand is able to answer the questions that many consumers can relate with when faced with different problems.

Google has developed an effective brand, such that, when many people are faced with the question as to where they can quickly find relevant information regarding whatever they would like to know, their immediate answer would be Google.¹²

Strategic issues in branding strategy

In order for an organization to clearly benefit from branding strategy, the organization must examine some vital strategic issues in order to reap maximum benefits from branding. These issues include: first, manufacturer versus private label brands where most organization have branding strategies to promote the image of the company and the image of the individual products that the company produces.

The manufacturer brand enables the customers to by the products from a specific company due to the improved image of the company whereas the brand name increases the sales for a particular product of the company.

Most organizations usually concentrate largely on promoting the private brands as they offer higher profits.¹³ Second, there is brand loyalty, referring to the positive attitude of the customers towards a specific brand that makes the customers to prefer use of the product to other products that are in the same product category. ¹⁴

Advantages of branding

Effective branding enhances the reputation and image of the company or the product in the public mind.¹⁵ Branding also enables the customers to easily identify the product. The brand name therefore makes advertising by the company to be far much easier as people will identify with the name being advertised. Branding also increases the loyalty of the customers towards a specific product.

Effective branding strategy enables the company to easily introduce new products into the market, if the name of the brand is popular among the members of the public. The manufacturer can introduce new product through addition of new product lines to the existing products.¹⁶

Improved brand image of the company may also enable the company to easily eliminate the middlemen, and thus have personal contact with the customers.¹⁷

Differentiation and positioning strategies

Differentiation strategies

Product differentiation is defined as methods that the organization uses to create differences in the product that it produces compared to other competing products in the market.¹⁸ Differentiation strategies mainly involve:

• Product descriptors – an organization must formulate methods that clearly describe and depict the products that it offers as being better than the other product, which are offered in the market. The organization must describe the product in such a way that it explains the features of the product while stressing on the advantages and improved quality of the product. ¹⁹
• Customer support services – this is the most effective method of differentiating products that have the same quality, features, and benefits. The customer support services may be offered before or after the sale of the product. The customer support services refer to anything that the organization may do to add value to the product. These include transportation, installation, and provision of financing training, or even extended warranties and guarantees.²⁰
• Image – this refers to the overall impression of a company or its products by the members of the public whether positive or negative. The impression relates to what the past company deeds, what it is doing presently and what it intends to do in the future. ²¹

Positioning strategy

Product positioning refers to the measures that a company may take to create a mental image of the product offering and differentiating features, which the targeted markets are able to form in their minds with relation to the product.²² Position strategy is usually done for the following main reasons:

• Strengthening the current position ²³
• Repositioning itself ²⁴
• Reposition the competition.²⁵

Product strategy

Product portfolio

This refers to the sum total of the entire product that the company produces. The product portfolio may be a small product line or several product categories that transverse the whole firm.²⁶ Most of companies have a large product portfolio which ensures that the company get high revenues and does not over rely on generating of revenue from only product hence if the product is affected the company ill in turn be affected.

Benefits of a large product portfolio

• Economies of scale – companies that have a large product portfolio benefit greatly from the economies of scale in the production, buying, and promotion of the product. The company can undertake advertising of the products under one umbrella name, which will lead to the improvement of the image of the company and hence lead to increased sales.²⁷ An example is Samsung, which may undertake its advertising under one name to cater for a wide range of products that it produces.
• Package uniformity – companies that have a large product portfolio usually package their products in a similar way, and thus enable the customers to locate the products easily.²⁸
• Standardization – companies that have a product line usually ensure that the products in the product line have the same component²⁹ and thus help in the reduction of the manufacturing and inventory handling costs.³⁰
• Equivalent quality beliefs – customers generally believe that all the products in a certain product line of the company are of the same quality. This is usually advantageous to the company if it offers a well-known product line.

Challenges of service products

Organizations involved in the provision of service products usually face diverse challenges due to the nature of the service products. The major challenges faced by the service products include:

• Lack of storage methods: service products are intangible and can therefore not be stored so as to cater for future increase in the demand.³¹
• The services are also susceptible to changes in the quality since they are dependent on people for the delivery of the service. The variation of the service may be time dependent or customer dependent.
• The fact that the services are intangible also makes it difficult for customers to evaluate them before purchasing them.³²

Unique characteristics of services

• They are intangible: – The services cannot be transported, stored, or felt.³³
• They are inseparable: – The production and consumption of the service usually take place at the same time and can none of them can be isolated.³⁴
• They are human intensive: – The provision of the service usually requires people to provide them.
• Perishability: – If the service is not consumed at the exact time that it is offered, it may be lost.³⁵
• Homogeneity: – There is usually no uniformity in the provision of the service. The quality of the service may vary from time to time.³⁶

New product development process

For a firm to sustain and increase its profits, it must launch new products from time to time. The new product development process is therefore a process that every firm must know for its ultimate survival. Most of the firms put more emphasis on the advanced technological innovation of their new product.³⁷

The successful development of the new product is not solely dependent on the internal factors but is also dependent on the external factors. The firms mainly aim of creating the new product is to differentiate its products and therefore must try to ensure that the customers get a clear perspective of the differentiation.³⁸

Stages of product development cycle

The development of a new product generally involves the following stages:

Idea generation: This stage involves the acquiring of new ideas that may aid in the development of the new product.

• Screening and evaluation: This process involves the screening of the idea with the capabilities of the firm and the ability of the new product to meet the needs of the customers.³⁹
• Development: this is the process, which involves designing, finalizing, and finally producing the product.
• Test marketing: this is usually done to determine the response of the customers or the public to the product.⁴⁰
• Commercialization: this is the final stage of the development of the new product. The product is launched to the public and measures are taken to create awareness of the public to the existence of the product. ⁴¹

Pricing strategy

Pricing of the products is a factor that is usually considered by many companies. It directly affects the ability of customers to buy the product and it is therefore regarded highly by different companies.

Relationship between price and revenue

There are generally two myths that are used by companies to show the relationship between price and revenue:

• A reduction in the price leads to an increase in the market share if it is made when the business of the company is good.
• If a reduction in the price is made when the business of the company is bad, it will lead to an increase in the sales.⁴²

However, these myths do not hold, as a reduction in the price may increase the sales but make the company get the same revenue. Firms should therefore not blindly cut the prices of their products; instead, they should find means of justifying the current price of their products and increase the value of their products.⁴³

Key issues in pricing strategy

The key issues that organizations must consider when implementing a pricing strategy are:

• Pricing objectives: organizations usually have a pricing objective which ensures that they make money due to the profit margin of the product or increase in the volume of the sales. Pricing objectives are not necessarily formulated to ensure that the company increases its profits; they can also be formulated to ensure that company maintains its prices so that it maintains its market position.⁴⁴
• Supply and demand: supply and demand have an influence in the pricing of different products. When price of a product increases, the demand of the product decreases; however, this theory does not hold for the reverse situation. Increase in the demand doe not necessarily lead to a decrease in the price of the product.⁴⁵
• Firm’s cost structure: organizations usually consider the revenue from the products and the profits that are derived from the revenue to enable the ultimate survival of the firm in setting the prices of the products. The most common formula, known as break-even pricing used is shown below

Break-even in units = total fixed costs

Unit price – unit variable cost

Companies therefore come up with strategies to ensure that they sell the products at a price higher than the break-even price to ensure that they make a profit. Another formula is used in the cost plus pricing strategy which is mainly used by retailers.

Selling price = Average unit costs

1 – Markup percentage (decimal)

The above formulas are not necessarily the main factors considered in the setting of a pricing strategy since different firms have different cost structures.⁴⁶

Service pricing and yield management

Setting the price of services is usually a very delicate affair. The firm must ensure that the price is not too low such that the customers will perceive it to be of low quality and hence not use the service, or too high to make the service unaffordable to the customers. Yield management ensures that the company is able to get maximum profits through the sale of the service.

Price elasticity of demand

The price of a product is usually affected by the demand. However, different products are affected differently by the changes in the demand. The demand is said to be elastic the quantity demanded changes considerably as a response to the change in the price.

The demand is on the other hand termed to be inelastic if it does not respond to the change in the price.⁴⁷ The price elasticity of demand is best explained using the formula below

Price elasticity of demand = percentage change in quantity demanded

Percentage change in the price

Pricing strategies in consumer markets

The pricing strategies in consumer markets mainly involve:

• Promotional discounting: this refers to the programs and activities that a company may run in order to attract customers through the creation of special discounts. Most retailers use the high-low promotional discounting which involves charging high prices for the products and then occasionally lowering the prices to increase the sale of the product. The main limitation of this method is that customers tend to postpone the sale until the time when the company runs the promotional discounting.⁴⁸
• Reference pricing: this is method of pricing where the company compares the pricing of the product to an internal or external price. The pricing of the product is usually lower than the one that it is compared with. An example is a case where a company runs a campaign that shows that it is offering a product at a lower price compared to the actual price of the product.⁴⁹
• Odd-even pricing: companies tend to fix the prices of their products in such a way that they do not seem expensive. A company may put the price of a shoe at $ 8.99 or $ 9.99 instead of $9.00 or $10.00. This makes the customers to perceive the product to be cheaper even though they are actually expensive.⁵⁰
• Price bundling: this refers to the integration of two the prices f two products, sometimes related and offering them at a single price that is lower than the sum of the price of the individual products.⁵¹

Legal and ethical issues in pricing

Pricing is one of the most closely watched features of an organization, as it can greatly determine the competitive advantage of the company. The most common legal and ethical issues involved in pricing are:

• Price discrimination: this refers to the charging of different prices to different customers. Price discrimination is termed as illegal if there is no basis in the cost of selling the product to one customer compared to the other. However there are situation that warrant price discrimination.⁵²
• Price fixing: this refers to the secret collaborations between different companies that provide similar products in fixing the prices at a certain value. This practice is usually illegal as it makes the consumer not to enjoy the benefits of reduced prices due to competition.⁵³
• Predatory pricing: this refers to a method where a company charges very low prices for its products with the intent of pushing its competitors out of the market. Once the competitor has been pushed out of the market the company then reverts to the old prices.⁵⁴
• Deceptive pricing: this involves the running of promotions by a company to intentionally mislead the customers. This is most common in reference pricing where the company may claim to be offering the product at a lower price whereas that is not the case.⁵⁵

Bibliography

Berndt, A & A Brink, Customer Relationship Management and Customer Service, Juta and Company Ltd, Lansdowne, 2004.

Czinkota, M R & I A Ronkainen, International marketing, Cengage Learning, OH, 2007.

Drummond, G & J Ensor, Introduction to marketing concepts, Butterworth-Heinemann, oxford, 2005.

Ferrell, O C and M D Hartline, Marketing strategy, 4^th ed. Cengage Learning, OH, 2006.

Haines, S, The product manager’s desk reference, McGraw-Hill Professional, NY, 2008.

Jain, A, Principles of Marketing, FK Publications, New Delhi, 2010.

Mankiw, N G, Principles of Economics, Cengage Learning, OH, 2008.

Pride, W M, R J Hughes & JR. Kapoor, Business, 10^th ed. Cengage Learning, OH, 2009.

Reif, J, et al., Services–the export of the 21st century: a guidebook for US service exporters, World Trade Press, CA, 1997.

Silk, A J & Harvard Business School Press, What is marketing? Harvard Business Press, Massachusetts, 2006.

Footnotes

¹ A J Silk & Harvard Business School. Press, What is marketing?, Harvard Business Press Massachusetts, 2006, p. vi

² G Drummond & J Ensor, Introduction to marketing concepts, Butterworth-Heinemann, oxford, 2005, p 2

³ W M Pride, R J Hughes & R J Kapoor, Business, 10^th ed. Cengage Learning, OH, 2009, p. 343

⁴ W M Pride, R J Hughes & Kapoor, ibid p. 343

⁵ W M Pride, R J Hughes & Kapoor, ibid p. 343

⁶ A Berndt & A Brink, Customer Relationship Management and Customer Service, Juta and Company Ltd, Lansdowne, 2004, p.4

⁷A Berndt & A Brink, ibid, p. 4

⁸ Berndt & Brink p. 6

⁹ M R Czinkota & I A Ronkainen, International marketing, Cengage Learning, OH, 2007, p 489

¹⁰ O C Ferrell & M D. Hartline, Marketing Strategy 4^th ed. Cengage Learning, OH, 2008 p 196

¹¹ O C Ferrell & M D. Hartline, ibid., p. 196

¹²O C Ferrell & M D. Hartline, ibid., p. 196

¹³ O C Ferrell & M D. Hartline, ibid., p. 197

¹⁴ O C Ferrell & M D. Hartline, ibid., p. 198

¹⁵A Jain, Principles of Marketing, FK Publications, New Delhi, 2010, p. 233

¹⁶ A Jain, ibid, p. 234

¹⁷ A Jain, ibid, p. 234

¹⁸ O C Ferrell & M D. Hartline 2008, p. 202

¹⁹ O C Ferrell & M D. Hartline, ibid., p 205

²⁰ O C Ferrell & M D. Hartline, ibid., p 205

²¹ O C Ferrell & M D. Hartline, ibid., p 205

²² O C Ferrell & M D. Hartline, ibid., p 202

²³ O C Ferrell & M D. Hartline, ibid., p 202

²⁴ O C Ferrell & M D. Hartline, ibid., p 202

²⁵ O C Ferrell & M D. Hartline, ibid., p 202

²⁶ S Haines, The product manager’s desk reference, McGraw-Hill Professional, CA, 2008, p 552

²⁷ O C Ferrell & M D Hartline 2008 p. 190

²⁸ O C Ferrell & M D. Hartline, ibid., 190

²⁹ O C Ferrell & M D. Hartline, ibid., p. 193

³⁰ O C Ferrell & M D. Hartline, ibid., p. 190

³¹ O C Ferrell & M D. Hartline, ibid., p 191

³² O C Ferrell & M D. Hartline, ibid., p. 192

³³ J Reif, et al., Services–the export of the 21st century: a guidebook for US service exporters, World Trade Press, CA, 1997, p. 19

³⁴ Reif, et al., ibid, p. 20

³⁵ Reif, et al., ibid, p. 20

³⁶ Reif, et al., ibid, p. 20

³⁷ O C Ferrell & M D Hartline 2008 p. 193

³⁸ O C Ferrell & M D. Hartline, ibid., p. 195

³⁹ O C Ferrell & M D. Hartline, ibid., p. 195

⁴⁰ O C Ferrell & M D. Hartline, ibid., p. 195

⁴¹ O C Ferrell & M D. Hartline, ibid., p. 195

⁴² O C Ferrell & M D. Hartline, ibid., p. 226

⁴³ O C Ferrell & M D. Hartline, ibid., p 227

⁴⁴ O C Ferrell & M D. Hartline, ibid., p. 228

⁴⁵ O C Ferrell & M D. Hartline, ibid., p. 228

⁴⁶ O C Ferrell & M D. Hartline, ibid., p. 230

⁴⁷N G Mankiw, Principles of Economics, Cengage Learning, OH, 2008. p. 90

⁴⁸ O C Ferrell & M D. Hartline 2008 p. 242

⁴⁹ O C Ferrell & M D. Hartline, ibid., 243

⁵⁰ O C Ferrell & M D. Hartline, ibid., p.243

⁵¹ O C Ferrell & M D. Hartline, ibid., p. 243

⁵² O C Ferrell & M D. Hartline, ibid., p. 247

⁵³ O C Ferrell & M D. Hartline Ibid. p 248

⁵⁴ O C Ferrell & M D. Hartline Ibid.

⁵⁵ O C Ferrell & M D. Hartline Ibid.