Brand Equity: Is It More Important in Services - Assignment Example

Page Chapter History and Introduction 1200 Chapter 2: Research Question Aims Objectives Goals Assumptions Chapter 3: Literature Review 2000 WDCT Chapter 4: Research Methodology Justification Objective Methodology Case Study Phenomenology Descriptive and Qualitative Survey Questionnaire Objective and Quantitative Chapter 5: Data Analysis Introduction Statements Secondary Research Analysis Marketing strategy SWOT analysis Product Life-Cycle Comparison The relationship between prestige, masstige and mass-market (generic) products. Market Brand Price Relationships found--Discussion and Conclusion Strategy Comparison Primary Research Analysis Statistical Analysis Analysis of Variance Common Statistical Inferences Brand Image Marketing Perceptions Price and value perceptions Statistical Analysis Comparison and Conclusions Chapter 6: Final Recommendations Relationship found---Discussion and Conclusion Sustainability as a market force prestige, masstige or mass-market Beneficial for masstige companies Investments Branding Marketing Price References Appendix A: Forwards Statement to customers about anonymity Appendix B: Disclosure Statement about company information and implications, validity Appendix C: Questionnaire Copy of questionnaire without responses Appendix D Responses Copy of questionnaire with responses Chapter 1: Introduction Brand marketing has become an increased concern of product oriented companies. Currently, three main branches of product orientation can be described as prestige (high-street), masstige (middle-level) and mass-market (generic). The product differentiation, pricing strategy, and consumer perception differentiate these products. A prestige product is one of high percieved value that is marketed based on its differentiation from other products. A masstige product is middle-level, generally marketed as best quality for the value. A mass-market product has little differentiation, and is often marketed as a generic, low cost alternative. Of course, no marketing would exist without two driving forces to sustain it. These forces are the consumer and the competition. The consumer can be generally placed into two categories, a hedonic or utilitarian purchaser. Competition is based solely on brand ownership and product differentiation as they are marketed towards the customer. Consumers Consumer’s can be identified as hedonic and utilitarian. This is an important concept of product and brand marketing, because consumers perceptions of a purchase based on their personal desire to fulfill a need or fulfill a self-indulgence has a strong bearing on why there are different types of products. To better understand the branding of products as prestige, masstige, or mass-market, a short background of the average customer is presented here. The traditional concepts of cost and benefit values are perceived as having characteristics of exclusively product and price, the standard economics of supply and demand where the consumers experience is exclusively based on the products quality and price evaluations to control consumption choices and demands, and yet this does not define the reasoning of consumers emotional connections, where "A fourth definition equates value with an overall assessment of subjective worth considering all relevant evaluative criteria" (Babin and Darden p 645 1994), in a sense the overall assessment is the consumers emotional constructs, the sociological and psychological desire to feel rewarded in more than the physical sense of achievement. Babin and Darden analyze that shopping has both utilitarian and hedonic traits, where a methodology only encompasses the consumable and its dimensional and monetary values lacks the ability to fully measure the shoppers experience, a concept expressed as having importance in other research, although "Far less research has been conducted to examine whether contrast effects occur among hedonic experiences (i.e., experiences of pleasure or pain)" (Novemsky and Rattner p 507 2003). Babin and Dardens research recognizes the empirical and "experiential perspective," with the value of the experience being the key outcome variable as described by Holbrook. The researchers reveal Holbrook statement on value as having "an interactive relativistic preference experience," meaning that the experience and value are relative to one another in the sense of importance the consumer places on those as well as on the actual purchase. The competitors market towards these utilitarian and hedonic behaviours, with the goal to move as much product as possible in the shortest amount of time, and remove the seller power from the other brands in the same or similar markets. Competition In highly competitive market situations, as is now the case in most business sectors, strong brands cannot be built if they are not supported by excellent services. Indeed, the market entry requirements of most sectors in terms of quality have witnessed upward adjustments in recent times. When the core attributes of a particular product or service category have been satisfied by most service providers, the differentiating yardstick then becomes the additional fringe benefits or value the customer can be provided with. This is where customers’ expectations can be exceeded. Companies or brands that focus on such areas can gain competitive advantage. The literature review focuses on what makes brand marketing viable, thus enabling a competitor to market their product against others. Brand competition has become a significant marketing force. This can be attributed to the growing role of product innovation, research and development, as well as consumer communication (Kotler pp 9 2003). The intervention of large distributors like Wal-Mart and Ikea have changed the manner in which consumer’s purchase their products. The dynamics of marketing have been moved from individual retailers to massive market chains, thus resulting in high distribution concentration (Kotler pp 10 2003). In the brand name market, competition is fierce because there are fewer distributors with multiple brand lines (Kotler pp 10 2003). For example, Johnson and Johnson products range from Tylenol to baby powder, all marketed under the singular brand name. Similarily, companies like Microsoft and Dell produce massively differentiated products that are inherently branded by a single and recognizeable name. Competition must continuously renovate their products because the length of time a product is viable has been reduced. This is because companies are introducing the new and innovative as a marketing tool, and absorb the research and devleopment costs in first year sales, rather than long term sustainability (Kotler 2003). Consumers are the largest reason for the short product lifespan. In general, consumers are willing and almost demanding that new products are available. They will drop an old product if something better comes along (Kotler 2003) and the old brand sales are impacted, so in turn the old brand builds a new and better product than the new brand, creating a competition cycle that is fierce and product-differentiation oriented (Kotler 2003). Summary So, what does this have to do with the prestige, masstige, and mass-market product branding? Customers purchase according to hedonic values, which prestige marketing is aimed towards. Mass-market is geared towards the utilitarian customer, based on the consumer’s perception of need and extrinsic value rather than intrinsic prestige. Relating this to the cycle of product differentiation Kotler (2003) comments on, where the first brand loses to the second brand, and then seeks to create a new and improved product and market more, taking sales away from the second brand. Enter the third brand, the newly formed masstige brand. Masstige exists somewhere in the middle, being not overly priced and overly innovative, but having enought differentiation that the consumer recognizes it as not being too generic. It appeals to the customer who wants better than the ‘old’ brand and doesn’t want to pay the high price of the innovative ‘new’ brand. The following research paper seeks to develop a stronger understanding of brand marketing as prestige, masstige and mass-market products. The research aims and objectives in Chapter 2 outline what is expected to be done in this paper, as well as what will be taken-away and how that can be applied to the marketing strategy of a masstige brand. To better understand brand definition and the types of brands, the literature review in Chapter 3 will explore branding and marketing strategy, as well as define prestige, masstige and mass-market brands. Chapter 4 shows the research methods. This paper will quantitatively and qualitatively explore the similarities and differences of major brands in the aforementioned market segments by exploring their strategies in marketing, branding, product and price. The research will quantify consumer perceptions of the brands using a distributed survey based on the five-point Likert Scale. Finally, the conclusions and recommendations in Chapter 6 will lean towards a viable marketing strategy for a masstige product based on the data analysis in Chapter 5. Chapter 3: Literature Review Introduction This literature review seeks to understand the buying intentions of customers towards brand marketing, based on the theories and principles that guide marketing practice and strategy. The desired goal is to develop an understanding of the relationships and difference in brand market strategies. Helliel et al. (2002) have enumerated factors that affect the buying intentions of customers as quality of services, equity, perceived value, satisfaction, past loyalty, perceived cost of changing supplier and brand perception. Most of them variables are inter-related and they impinge upon customer purchase behaviour cumulatively. High quality products can be created without input from marketing. However, in practice, it has been established that products that make market success received market or customer research support. There are several determinants that contribute to the success of a brand. Quality and quality perceptions in the mind of the customer are just but two of them. The importance of these factors has earlier been stressed. A brand can be successful in the short term with a quality that is not exceptionally high. However, continued market success requires continuous renewal to be able to meet customer expectations and values. Concerted efforts should also be made to influence customer perceptions towards the brand using appropriate marketing communication media and channels (Shimp, 1998). The following literature review focuses on these ‘concerned efforts’ as brand marketing theory and strategy. This is followed by a review of prestige, masstige and mass-market branding. The first chapters are general theories, these are used to develop the foundation of the more concentrated types of brands. Marketing Practice and Theory Clifton (2002) reported that three factors make brands marketable. These are (i) clarity of vision and values (ii) consistency in the manner in which the brand is applied and (iii) leadership in the way the brand renews itself and exceeds customer expectations. The clarity of what their brands stand for and their foci embodied in their visions, missions and goals constitute the first of the three-pronged brand building process. With this approach, employees and customers alike are adequately informed of what the brand is seeking to achieve and benefits that shall accrue to them if they are successfully accomplished. Such an approach garners employee commitment and also offer customers opportunity where to place their loyalty in the long term. A hallmark associated with all of these companies is their insistence on quality service. This standard is true of them irrespective of where their facility is located. The model of Helliel and co-workers (2003) throws more light on this fact. In their research, the stronger marketing of the brand, the more likely positive customers purchase intent. Using a general service model of repurchase intention, they established that the main factor influencing brand preference was perceived value. Customer satisfaction and expected switching costs were found to exert lesser influence. These authors further observed that even though perceived quality does not directly affect customer satisfaction, it does so indirectly through customer equity and value perceptions. This particular study informs us about the utmost importance of perceptions in any brand building endeavour. Brand and Marketing Strategy Shimp (1999) defined a brand as a label for describing any object of concerted marketing effort. In the context of services marketing therefore, this label can be a name, sign, term, symbol or a design (Krishnan and Hartline, 2001). Brands however can mean different things to different people. These differences largely stem from the way and manner brands can be perceived or understood. A cursory review of the history of brands informs us that customers’ perceptions of brands have not been static. It has evolved over the years as understanding of the concept deepened. Clifton (2000) recalled the days when brands were perceived as either bottles of coca cola or cans of Kellogg’s and compared it to modern times when the concept can be applied to anything and everybody. Amber (2000) has defined “branding” as an intangible asset built by marketing, and which exists largely in the heads of stakeholders, especially those of the end user. The author further pointed out that if a company got its brand equity right, profits should largely take care of it. The import of this statement can be understood from the components that make the equity of a brand. These are brand awareness and brand image. A brand that people have good knowledge about and can readily recall with favourable associations is an enduring asset to whoever owns it. Furthermore, it would have favourable image and therefore well perceived. Such a brand can be said to have a higher equity or value. It is not too difficult to sell products and services with this brand name tacked on it. Higher volumes of sales at minimal costs transcend into higher profits. Product Strategy Product success is highly based on the socio-economic factors in the surrounding environment. The environment can be local, national, and even global. Product strategy examines the success factors as being a differentiate product that offers unique value to the consumer (Cooper 1993). Global product orientation targets markets that are universal and innovative, such as computers and telecommunication devices (Cooper 1993). The stronger the market drive and customer focus, the more predevelopment work for the product strategy needs to be (Cooper 1993). This predevelopment work examines the customer orientation, the market sustainability, and defines the product accordingly. Product definition, according to Cooper, is the key difference between a failure or success (Cooper 1993). This definition from a marketing perspective should come early and be pointed towards the target market. Product variation is a very important portion of the product strategy. This is how the product characterises and defines its marketing mix variable (Steenkamp and Gielens 2003). The impact of the product variation is that new product success incorporates consumer variation and the marketing dimension. To this, the product is generally developed to fulfil a need, and marketed towards the consumer’s that need the product. Price Strategy The product differentiation combined with the brand marketing strategy often influence the pricing models of a product. A company chooses its price strategy based on the products innovation and consumer responses. This is combined with economic analysis of the product and product placement as a branded item. From a financial viewpoint, Aaker (1996) defined branding as a set of assets and liabilities linked to a brand, its name and symbol that add to or subtract from the value provided by a service to a firm’s customers. He further gave the main determinants of brand equity as name awareness, perceived quality, brand associations, brand loyalty and the intellectual properties such as patents, trademarks, etc it owns. Low and Lamb (2000) built upon this model and tested empirically three dimensions of brand associations. such as brand image, brand attitude and perceived quality. This study was important in that if one knew the extent to which each dimension contribute in building equity, greater resources shall be committed to that dimension which gives greater value. From this study also, the efficacy of brand image protocol was confirmed. However, the authors pointed out that brand associations were different for different product (service) categories, which require that specific studies be carried out for each category using different items. Prestige The prestige brand is one of high marketability, upper level pricing, and strong brand names. Prestige brands are generally identified as upscale extensions of a brand product that have a favourable impact on the consumer perception (Heath and McCarthy). The upscale view of a prestige product is highly evolved from the customer’s association with brand name reputation and pricing (Heath and McCarthy 2005). Brand equity increases as the products prestige increases (Randall, Ulrich and Reibstein 1999). The greater product diffusion and viability, the stronger the customer’s favourable perception and therefore the customer is willing to pay a higher price. The prestige brand is also ‘above’ the utilitarian (or functional) brand. This is because the prestige brand can be viewed as having a stronger price and quality level (Kim, Lavack and Smith 2001). The symbolism of the prestige brand as a hedonic (rather than utilitarian) purchase enables the customer to place a value on the purchase that develops a higher self-image, and, as the branding segment suggests, gives the customer a sense of prestige (Chaiken et. al. 1996). The prestige customer differentiates their personality from the utilitarian and necessity purchaser by buying brand items, which have some inherent value because of the brand name and consumer’s perception (Chaiken et al. 1996). Therefore, prestige brand marketing is generally one of upscale symbolism, pricing strategy is in the higher range, and product placement is on the ‘high street.’ Masstige Masstige brands exist between the prestigious, high cost brands and the mass-produced generic brands. Mary Ford (2004) explains that the masstige brand is geared towards meeting the prestigious and mass market, where the differences are between the high-end retail products and mass-market retail products is growing smaller. This is due to a higher educated consumer force as well as the influx of middle-income purchasers who have a desire for prestige brands, but at mass-market price settings (Ford 2004). The highest markets in the masstige brands are home furnishings and clothing lines (Ford 2004). Jordan (2001) examines that the masstige trend is the latest in marketing and packaging, and is especially noticeable as secondary lines by prestige manufacturers and by the marketing style of the packaging. This is because there is a narrower gap between mass-market and prestige market product lines, which forces brand marketing to focus on the value added for the price (Jordan 2001). Again, Jordan (2001) supports that masstige marketing is a newer force that arises because consumers are more educated about the products and prices for their purchases. Hudson Group (n.d. pp 49) panellists report that the European expansion have developed trend-wise changes in shopping centres, where “The changing nature of consumers themselves has also impacted on the sector in ways hitherto unanticipated. We are witnessing, for example, the rise of the ‘masstige’ shopper, as in mass-market prestige. The new breeds of shopper are increasingly critical and promiscuous.” Other researchers (Chou et. al. 2005) explored the impact of the new market as being middle class retailing that has evolved over the last half century, promoted by discount retailers of originally prestige products. This shows that retailers must acquire different skills and customer relationship strategies in the changing market environment where the customer’s experience and emotional engagement (such as self-esteem) play a larger role in the customer’s purchasing habits (Chou et al 2005). Mass-Market Prestige products are distinguished by their upscale perception, and middle class pricing distinguishes masstige products. Mass-market are the lower end products. Mass-market products are generally viewed as utilitarian, and lack product differentiation or innovation. Therefore, a mass-market product is highly available, generally without ‘frills’ and is not a product that the customer uses to distinguish personality. Price is probably the largest force in the mass-market branding. The mass-market product often has ‘generic’ features. These are features that do not distinguish it from any other similar product, perhaps other than the manufacturer. These features will generally meet the needs of the majority customer in product and price, but not the specific needs of an individual (Wells 1999). A mass market product is one that has lower brand marketability, so the consumer perception is one of utilitarian functionality rather than one of prestigious personality (Wells 1999). Conclusion A brand defines its market capabilities according to the consumer perceptions and product quality. This includes the value, price and satisfaction a customer gains from the purchase. The brand is marketable when it has a clear value, a consistent application, and signifies innovation in exceeding consumer expectations. The brand can mean different things to different consumers based on that consumer’s personality as a hedonic or utilitarian purchaser. A consumer’s value perception of a product can also be based on the product strategy, where the factor that creates a higher end product is the unique value the consumer is receiving. The price of a product also signifies its value, and therefore brand, both of which relate to what the customer is willing to pay. In short, a prestige product purchase will pay extra for the differentiation and self-concept. A masstige product purchaser is not willing to pay quite as much, but still wants enough innovation to set the brand name apart from something that can be purchased everywhere else. The mass-market purchaser has a utilitarian need, and is not looking for differentiation or self-esteem. REFERENCES Aaker, D.A. 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