Click Only Businesses

Without a website customers would not believe that we are a real company in international markets” (Mathews and Healy, 2008).

As Mathews and Healy (2008) observe, a web presence is fundamental to all companies operating in a modern business environment whether physical, online, or a combination of the two.

“Click only” refer to those businesses which do not have a physical presence, only an online presence (Kotler and Armstrong, 2014, pp.525). Examples of this type of company include Amazon and eBay on a large scale but there are also many small and medium enterprises (SMEs) operating in this competitive “click only” market.

Growth in this sector started in the mid-1990’s with the dot com boom and while growth has invariably slowed, the market has now matured leaving a range of SMEs operating in the fully online sector (Kroll, Lee and Shams, 2010). While the delivery methods vary and there are of course unique challenges of operating in an online-only environment, the competitive nature of business differs little from competitiveness in an offline environment.

Consider an individual starting a business to sell used textbooks through an online portal. Zhao, Sundaresan, Shen and Yu (2013) describe the sale of second hand goods as a secondary market and warn that while there are a large number of businesses in the secondary market, many only sell items in very low volumes, struggling to compete. By starting a new business in this sector, the individual is entering an already crowded market, so one of the major factors influencing success of the new startup will be differentiating themselves from the major challengers in the sector (Bockstedt and Goh, 2011).

Operating in an online environment gives book retailers the ability to operate outside fixed geographic boundaries and take advantage of being able to sell to a much wider audience which would not be accessible through a brick and mortar business. Coupled with the cost savings achieved by removing overheads such as shop rental and utility bills (Phan, 2003), the prospect of operating wholly online is certainly an appealing one. For example, an online book retailer could potentially have a large stock available in a low-rent location near a good distribution network resulting in the ability to quickly and easily fulfil orders with minimal overheads. One such example is Play.com who famously exploited a tax loophole by basing their premises in the channel islands of the United Kingdom, where they did not have to pay high taxes meaning enhanced profits (O’Hare, 2011).

There is a danger that an online retailer can be seen as a faceless corporation without a physical presence, so it is also important they build trust. As Hayes (2012) observes, reducing the risk for consumers can go a long way to building trust online as well as personalising the experience to reduce the faceless image.

However, the biggest challenge of entering this crowded sector is the challenge of creating value for the customer to make it distinct enough from the largest businesses. Just like a traditional business, an online business needs to create value for a customer and this is what will give it strategic advantage and ultimately make it a success (Amit and Zott, 2001).

 

References

Amit, R. & Zott, C. (2001) ‘Value creation in E-business’, Strategic Management Journal, 22(6-7), pp. 493–520, Wiley. [Online]. Available from: http://onlinelibrary.wiley.com.ezproxy.liv.ac.uk/doi/10.1002/smj.187/pdf (Accessed: 2 March 2014).

Bockstedt, J. &Goh, K. (2011) ‘Seller Strategies for Differentiation in Highly Competitive Online Auction Markets’,Journal of Management Information Systems, 28(3), pp.235-268, EbscoHost. [Online]. Available from: http://search.ebscohost.com.ezproxy.liv.ac.uk/login.aspx?direct=true&db=iih&AN=70989255&site=ehost-live&scope=site (Accessed: 2 March 2014).

Hayes, M. (2012) 5 Strategies to Get Customers to Trust Your Ecommerce Store. [Online]. Available from: http://www.shopify.co.uk/blog/6327946-5-strategies-to-get-customers-to-trust-your-ecommerce-store (Accessed: 2 March 2014).

Kotler, P. & Armstrong, G. (2014) Principles of Marketing, 15th Edition. London: Pearson Education Ltd.

Kroll, C., Lee, D. & Shams, N. (2010) ‘The Dot-Com Boom and Bust in the Context of Regional and Sectoral Changes’, Industry and Innovation, 17(1), pp. 49-69, Taylor and Francis. [Online]. Available from: http://www.tandfonline.com.ezproxy.liv.ac.uk/doi/full/10.1080/13662710903573836 (Accessed: 2 March 2014).

Mathews, S. & Healy, M. (2008) ‘’From garage to global’: the internet and international market growth, an SME perspective’, International Journal of Internet Marketing and Advertising, 4(2), pp. 179-196. [Online]. Available from: http://eprints.qut.edu.au/8823/1/8823a.pdf (Accessed: 1 March 2014).

O’Hare, S. (2011) Offshore internet retailer Play.com sold to Japanese. [Online]. Available from: http://www.telegraph.co.uk/finance/personalfinance/expat-money/8778918/Offshore-internet-retailer-Play.com-sold-to-Japanese.html (Accessed: 2 March 2014).

Phan, D. (2003) ‘E-business development for competitive advantages: a case study’, Information & Management, 40(6), pp.581–590, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/S0378-7206(02)00089-7 (Accessed: 2 March 2014).

Zhao, Y., Sundaresan, N., Shen, Z. & Yu, P. (2013) ‘Anatomy of a Web-Scale Resale Market: A Data Mining Approach’, Proceedings of the 22nd international conference on World Wide Web, pp.1533-1544, ACM. [Online]. Available from: http://dl.acm.org.ezproxy.liv.ac.uk/citation.cfm?id=2488522 (Accessed: 2 March 2014).

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Marketing and Supply Chain Management

The decisions made by marketers can have a significant impact on the effectiveness of the supply chain. Flynn, Huo and Zhao (2010) describe the supply chain as the mechanism for distributing components for delivery of a product to a customer. Indeed, the Apple supply chain reportedly has more than 700 suppliers for various components of the iPhone (Barreda and Wertime, 2013). Naturally, keeping this number of suppliers happy, ensuring they deliver on time and coordinating their activities involves forming relationships with key business supplies, forming a value delivery network (Srivastava and Singh, 2010).

However, a value delivery network has not always existed and as Flynn, Huo and Zhao (2010) note the evolution of the supply chain to the value chain was largely possible due to improved management by computers and the need for businesses to coordinate their activities and work together.

Efficiency and Cost Savings

The obvious benefit of the value chain approach is the improved efficiency of the supply chain resulting in cost savings for the business and an increase in the potential profits, some of which could be passed to consumers in a retail price reduction.

Hovarth (2011) examines these efficiency savings and their resulting impact on price suggesting that they must be applied to the whole supply chain to achieve the desired value chain. Hovarth states that “collaboration is key” as without each of the suppliers working together, it is unlikely that the values, efficiencies and cost savings will be achieved.

Reliability

Taghizadeh and Hafezi (2012) discuss the value of relationships between suppliers to ensure reliability of the supply chain and also to ensure coordination between suppliers to ensure items are delivered in a timely manner.

In the case of Apple with its 700 or more suppliers, reliability of the supply chain is essential, as if any one of those parts were failed to be delivered, the distribution of the Apple product would be delayed and the business would potentially lose valuable market share in the fast-paced mobile communications market.

Reputation and Ethics

A recent scandal hitting the supermarket shelves in the United Kingdom was the inclusion of horse meat not fit for human consumption into everyday food products such as food labelled as beef burgers and beef lasagne. Lawrence (2013) cites the overly-complex supply chain as one of the key reasons for the failure to control the illegal trade in horse meat and its subsequent entry into human food manufacturing.

In this example there was a breakdown in the value chain as the large manufacturers put profit before ethical considerations, forcing supermarkets to manage the negative publicity and reassure their customers that the situation would be resolved and not occur again. A study by Hoejmose, Brammer and Millington (2013) found that a socially responsible supply chain was not just beneficial for reputation but also indicates a positive relationship with suppliers, leading to improved supply values.

 

References

Barreda, D. & Wertime, D. (2013) Apple Suppliers. [Online]. Available from: https://www.chinafile.com/who-supplies-apple-it-s-not-just-china-interactive-map (Accessed: 1 March 2014).

Flynn, B., Huo, B. & Zhao, X. (2010) ‘The impact of supply chain integration on performance: A contingency and configuration approach’, Journal of Operations Management, 28(1), pp. 58-71, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/j.jom.2009.06.001 (Accessed: 1 March 2014).

Hoejmose, S., Brammer, S. & Millington, A. (2013) ‘An empirical examination of the relationship between business strategy and socially responsible supply chain management’, International Journal of Operations & Production Management, 33(5), pp.589-621, Emerald. [Online]. Available from: http://dx.doi.org.ezproxy.liv.ac.uk/10.1108/01443571311322733 (Accessed: 1 March 2014).

Horvath, L. (2001) ‘Collaboration: the key to value creation in supply chain management’, Supply Chain Management: An International Journal, 6(5), pp.205-207, Emerald. [Online]. Available from: http://dx.doi.org.ezproxy.liv.ac.uk/10.1108/EUM0000000006039 (Accessed: 1 March 2014).

Lawrence, F. (2013) Horsemeat scandal: where did the 29% horse in your Tesco burger come from? [Online]. Available from: http://www.theguardian.com/uk-news/2013/oct/22/horsemeat-scandal-guardian-investigation-public-secrecy (Accessed: 1 March 2014).

Srivastava, V. & Singh, T. (2010) ‘Value creation through relationship closeness’, Journal of Strategic Marketing, 18(1), pp. 3-17, Taylor and Francis. [Online]. Available from: http://www.tandfonline.com.ezproxy.liv.ac.uk/doi/abs/10.1080/09652540903511274 (Accessed: 1 March 2014).

Taghizadeh, H. & Hafezi, E. (2012) ‘The investigation of supply chain’s reliability measure: a case study’,Journal of Industrial Engineering International, 22(8), pp. 1-10, Springer. [Online]. Available from: http://link.springer.com.ezproxy.liv.ac.uk/article/10.1186%2F2251-712X-8-22 (Accessed: 1 March 2014).

Promotional Tools in the Marketing Mix

Most authors acknowledge five key promotion tools in the promotion mix, namely advertising, sales promotions, direct marketing, personal selling and public relations (Hsu, Tsai and Chiang, 2009).

Jancic and Zabkar (2002) further subdivide the five categories in to personal and impersonal forms of marketing, acknowledging that both have an important role to play in building relationships with customers. Typically, consumer sales rely on less personal forms of promotion such as advertising, while business sales generally being higher volume and higher value, rely on a more personalised form of promotion such as personal selling.

While the type of promotional tool may vary, the desired result is the same, ensuring value and building relationships with customers (Kotler and Armstrong, 2014, pp.501).

Consumer sales promotion

Advertising through a range of mass media such as television, radio, magazines and social media are all important tools when promoting sales to consumers. Similarly sales promotions such as vouchers and discounts are key to promote brand loyalty and entice new retail customers (Laroche, et al., 2003). While consumers may see a limited amount of direct marketing and personal selling, these are primarily the preserve of trade sales.

Consider the chocolate bar Kit Kat. Most consumers will recognise the brand and slogan “Have a Break” from mass advertising and impersonal sales such as billboards and on the shelves in shops. However, there is also a sales force at the parent company Nestle, who are responsible for sales to retailers and large grocery businesses (The Times, 2014).

Trade Sales Promotion

In the case of Nestle promoting to large traders, they are most likely to use direct marketing and personal sales, for example at trade shows and by forging personal relationships with buyers. For example, I am currently managing a tender for a server solution. Given the potential value, sales representatives have been keen to engage personally to ensure they receive my business.

However, there is not always a strict distinction between the types of promotional tools that can be used for consumer versus trade promotions as both have a place and as Blattberg and Neslin (1989) observe, it is the cumulative effect of various promotional tools which produce the maximum impact.

This week I came across an advert in an in-flight magazine promoting the ability to paint an aircraft with an advertisement. Clearly this advert, while in a consumer publication, was aimed at businesses and further blurs the lines.

Ryanair Advertisement

 

How can these tools be adapted for global sales promotion?

In a global market, it is important to consider the cultural context of a promotion as a tool which may work in one economy, may not work in another. Boykin (2014) describes this as “host market rules” and suggests that while a discount scheme may work in Europe, cultural differences mean that in Malaysia, consumers would be disengaged with this and actively avoid the brand to prevent embarrassment.

However, certain tools such as social media transcend geographical boundaries and can be effective tools for global sales if used appropriately (Kotler and Armstrong, 2014, pp.493). Therefore, a mixture of promotion techniques is required to ensure the success of a brand globally.

 

 

 

References

Blattberg, R. & Neslin, S. (1989) ‘Sales promotion: The long and the short of it’, Marketing Letters, 1(1), pp.81-97, Springer. [Online]. Available from: http://link.springer.com.ezproxy.liv.ac.uk/article/10.1007/BF00436151 (Accessed: 23 February 2014).

Boykin, G. (2014) What Is a Sales Promotion & How Is It Used in International Marketing? [Online]. Available from: http://smallbusiness.chron.com/sales-promotion-used-international-marketing-73976.html (Accessed: 23 February 2014).

Hsu, T., Tsai, T. & Chiang, P. (2009) ‘Selection of the optimum promotion mix by integrating a fuzzy linguistic decision model with genetic algorithms’, Information Sciences, 179(1-2), pp. 41-52, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/j.ins.2008.09.013 (Accessed: 23 February 2014).

Jancic, Z. & Zabkar, V. (2002) ‘Impersonal vs. Personal Exchanges in Marketing Relationships’, Journal of Marketing Management, 18(7-8), pp.657-671, Taylor and Francis. [Online]. Available from: http://dx.doi.org/10.1362/0267257022780705 (Accessed: 23 February 2014).

Kotler, P. & Armstrong, G. (2014) Principles of Marketing, 15th Edition. London: Pearson Education Ltd.

Laroche, M., Pons, F., Zgolli, N., Cervellon, M. & Kim, C. (2003) ‘A model of consumer response to two retail sales promotion techniques’, Journal of Business Research, 56(7), pp. 513–522, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/S0148-2963(01)00249-1 (Accessed: 23 February 2014).

The Times (2014) Long term maintenance of a classic brand name: A Nestlé case study. [Online]. Available from: http://businesscasestudies.co.uk/nestle/long-term-maintenance-of-a-classic-brand-name/the-marketing-mix.html (Accessed: 23 February 2014).

The Importance of Public Relations

The Daily Mail reported a horror story this week in which Ryanair passengers were allegedly forced to endure more than 10 hours locked in a plane on the tarmac without air conditioning or any refreshments and that passengers had to eventually call the Police to help them escape the aircraft (Stevens, 2014). Ryanair quickly refuted these claims, managing the negative press through their public relations team (Ryanair, 2014) but not without some damage to their reputation. This example demonstrates the importance of a good public relations team in ensuring the continued positive reputation of a brand.

Kotler and Armstrong (2014, pp.472-473) describe public relations in a broader sense as another channel of advertising, explaining that as well as damage limitation in the example above, it can be used to raise awareness of products and services through media channels without additional advertising costs and help to build a positive association and reputation with customers.

Indeed, many authors observe the longstanding similarities between the two paradigms and note the shift from public relations and advertising as distinct disciplines, to both being essential elements of the marketing mix (Davila, 2012). The use of public relations versus traditional forms of marketing appears to be on the rise with spending up by more than $3 billion US Dollars since 2010 (Torossian, 2011).

Technology companies such as Apple, Google and Microsoft frequently employ the use of their public relations teams to raise awareness of their brand and to promote their values and the value of their products to consumers. For example, when Google launched the ‘Google Plus’ social network, access was by invitation only and the product was surrounded in mystery following a series of planned information leaks aimed at generating excitement (Siegler, 2011). Although arguably, the site has not been as successful as Google would have hoped, the public relations teaser campaign certainly had the desired effect by creating speculation from the media about the latest offering from the technology giant.

However, use of public relations in technology businesses is certainly not universal and many organisations are only just starting to see the benefit of employing a public relations team and switching from traditional forms of advertising. Torrosian (2011) states that “image is everything” in business and that it is the role of public relation professionals to manage the perception of a business, particularly in the digital age where positive and negative messages can travel much faster.

Eyrich, Padman and Sweetser (2008) discuss the management of social media as a public relations tool for promoting a business and this is certainly something which many technology fims have been quick to adopt to benefit the reputation of their business. However, Kaplan and Haenlein (2010) caution against the over-use of one tool such as social media over another and advise that it should be considered one of a number of channels to use as part of a blended approach to public relations. Neglecting one channel at the expense of another could cause as much reputational damage as not using public relations at all.

 

References

Davila, R. (2012) ‘Can PR and advertising play nicely together? 5 tips for agency integration’, Public Relations Tactics, 19(7), pp. 17, Ebscohost. [Online]. Available from: http://search.ebscohost.com.ezproxy.liv.ac.uk/login.aspx?direct=true&db=bth&AN=88427131&site=eds-live&scope=site (Accessed: 23 February 2014).

Eyrich, N., Padman, M. & Sweetser, K. (2008) ‘PR practitioners’ use of social media tools and communication technology’, Public Relations Review, 34(4), pp. 412–414, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/j.pubrev.2008.09.010 (Accessed: 23 February 2014).

Kaplan, A. & Haenlein, M. (2010) ‘Users of the world, unite! The challenges and opportunities of Social Media’, Business Horizons, 53(1), pp.59–68, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/j.bushor.2009.09.003 (Accessed: 23 February 2014).

Kotler, P. & Armstrong, G. (2014) Principles of Marketing, 15th Edition. London: Pearson Education Ltd.

Ryanair (2014) Ryanair’s Statement on FR8347. [Online]. Available from: http://www.ryanair.com/en/news/ryanair-s-statement-on-fr-8347-14th-february-2014 (Accessed: 23 February 2014).

Seagler, M. (2011) Google+ Project: It’s Social, It’s Bold, It’s Fun, And It Looks Good — Now For The Hard Part. [Online]. Available from: http://techcrunch.com/2011/06/28/google-plus/ (Accessed: 23 February 2014).

Stevens, J. (2014) Mutiny on flight FR8347: Ryanair passengers call the police as they demand ‘food, water and the right to leave the plane’ during ELEVEN HOUR delay at Stansted. [Online]. Available from: http://www.dailymail.co.uk/news/article-2564683/Ryanair-passengers-Stansted-Airport-forced-call-police-refused-food-water-right-leave-aircraft-11-HOUR-delay.html (Accessed: 23 February 2014).

Torossian, R. (2011) Public Relations Advantage Over Marketing & Advertising: Image Is Everything! [Online]. Available from: http://www.businessinsider.com/public-relations-advantage-over-marketing-and-advertising-image-is-everything–2011-10 (Accessed: 23 February 2014).

Internet Effect on Price

For the first time in the history of marketing, the Internet provides consumers with an advantage over retailers. While prices for commodities and services have always fluctuated over time based on supply and demand (Dolan and Jeuland, 1981), the advent of Internet sales has meant much greater competition and the need to compete through multiple channels benefiting consumers identifying the best price for a product (Zettelmeyer, 2000).

Kotler and Armstrong (2014, pp.345) describe the fluctuation of prices as Dynamic pricing, adjusting prices in response to consumer demand.  When discussing dynamic pricing on the Internet, we must acknowledge the role technology contributes. Before computers, dynamic pricing was achievable only through manual updates to tariffs, but with the arrival of computers and the Internet, there was an increase in the complexity of rates to a flexible price policy where database technology had to be used to vary prices and match real-time demand (Odlyzko, 2001).

Airline Sales

This is particularly true of the airline industry which has seen profit margins squeezed as savvy consumers have the opportunity to compare tickets from a range of airlines and resellers, some cheaper than others (Buhalisa and Law, 2008). Kotler and Armstrong (2014, pp.316-317) use the example of low-cost European carrier Ryanair, who famously promote themselves as offering the lowest fares but charge for virtually every other amenity as an extra. This pricing model would not be possible without the use of computers as it would be too complex to operate, especially since prices can rise or fall dependant on demand.

Interestingly, since Kotler and Armstrong’s case study, Ryanair have been forced to change their ‘no frills’ pricing policy to make them more competitive with their industry rivals as they have seen profits fall dramatically (Topham, 2013). However, in this case, price was not the only factor as while Ryanair’s competitors are more expensive, they offer a better quality of service and Ryanair have had to respond to the changing market by offering an improved service while retaining competitive prices.

Hotel Reservations

Quality of service has been an important deciding factor determining the price of hotel rooms before and after the advent of Internet booking. Noone and Mattila (2009) note the importance of the price point in this sector similar to the airline industry but online reviews and rating sites such as Tripadvisor provide an additional level of complexity when determining an online price. The best rated hotels can command higher prices than their lower-rated rival, making quality and price both the deciding factors for a customer.

Book Sales

Unlike the airline and hotel industry, the book industry competes less on price and more on the delivery platform (e.g. Kindle, iPad, Kobo, etc.). While price is a determining factor in the purchase, consumers are most likely to purchase the book for their compatible device (Loebbecke, Soehnel, Weniger and Weiss, 2010).

Prices for eBooks remain relatively high online compared to physical books but the work of Steve Jobs with the publishing industry in the late 2000’s set a precedent for online book sales which other retailers have since followed. Online book sales overtook physical book sales for the first time in 2010, not because of price but because of convenience (Ulanoff, 2012).

 

References

Buhalisa, D. & Law, R. (2008) ‘Progress in information technology and tourism management: 20 years on and 10 years after the Internet—The state of eTourism research’, Tourism Management, 29(4), pp. 609–623, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/j.tourman.2008.01.005 (Accessed: 15 February 2014).

Dolan, R. & Jeuland, A. (1981) ‘Experience Curves and Dynamic Demand Models: Implications for optimal pricing strategies’, Journal of Marketing, 45(1), pp.52-62, Ebscohost. [Online]. Available from: http://search.ebscohost.com.ezproxy.liv.ac.uk/login.aspx?direct=true&db=bth&AN=4999390&site=eds-live&scope=site (Accessed: 15 February 2014).

Kotler, P. & Armstrong, G. (2014) Principles of Marketing, 15th Edition. London: Pearson Education Ltd.

Loebbecke, C., Soehnel, A., Weniger, S. & Weiss, T. (2010) ‘Innovating for the Mobile End-User Market: Amazon’s Kindle 2 Strategy as Emerging Business Model’, Mobile Business and 2010 Ninth Global Mobility Roundtable (ICMB-GMR), 2010 Ninth International Conference on, Issue Date: 13-15 June 2010, pp. 51-57, IEEEXplore. [Online]. Available from: http://ieeexplore.ieee.org.ezproxy.liv.ac.uk/xpls/icp.jsp?arnumber=5494789 (Accessed: 15 February 2014).

Noone, B. & Mattila, A. (2009) ‘Hotel revenue management and the Internet: The effect of price presentation strategies on customers’ willingness to book’, International Journal of Hospitality Management, 28(2), pp. 272–279, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/j.ijhm.2008.09.004 (Accessed: 15 February 2014).

Odlyzko, A. (2001) ‘Internet pricing and the history of communications’, Computer Networks, 36(5-6), pp. 493–517, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/S1389-1286(01)00188-8 (Accessed: 15 February 2014).

Topham, G. (2013) Ryanair’s new touchy-feely O’Leary hits turbulence but sees clearer air ahead. [Online]. Available from: http://www.theguardian.com/business/2013/nov/05/ryanair-michael-oleary-investors-future (Accessed: 15 February 2014).

Ulanoff, L. (2012) How Steve Jobs Got Apple Into Trouble Over Ebooks. [Online]. Available from: http://mashable.com/2012/04/11/apple-jobs-ebooks/ (Accessed: 15 February 2014).

Zettelmeyer, F. (2000) ‘Expanding to the Internet: Pricing and Communications Strategies When Firms Compete on Multiple Channels’, Journal of Marketing Research, 37(3), pp. 292-308, AMA. [Online]. Available from: http://journals.ama.org.ezproxy.liv.ac.uk/doi/abs/10.1509/jmkr.37.3.292.18777  (Accessed: 15 February 2014).

The Importance of Branding in Marketing

The value of branding to the buyer and the seller

In their simplest form, a brand is a name or a logo associated with a product, service or business (Kotler and Armstrong, 2014). However, most authors recognise that a successful brand constitutes far more than just these components and in many cases a brand is associated with a particular lifestyle or a mark of quality for the business.

Indeed, Orend and Gagné (2009) describe the practice of individuals adorning their skin with tattoos of corporate logos to associate themselves with a particular brand. In this case, the brand has value to both the buyer and the seller. Few things are more permanent than a tattoo, so the buyer is showing commitment and loyalty to the brand and their affiliation to the positive attributes of that brand, benefiting the individual’s image. The seller also benefits by demonstrating their experience in that sector and the long term reliability of their products, resulting in greater sales.

What are some ways of promoting brand loyalty?

Tattoos are perhaps the ultimate way of demonstrating brand loyalty but not all methods need to be so permanent! Speyer (2010) describes the pursuit of brand loyalty by marketers as the creation of value for a consumer by targeting the aspects of a brand or product that they think will appeal to their target market segment. This could be by providing exceptional customer service, associating their brand with a certain type of lifestyle or exploiting a price point.

Consider the Cola wars of the 1980’s. Campaigns by Coca Cola and Pepsi were designed to divide opinion on the respective beverages and increase brand loyalty of one over the other (Muniz and Hamer, 2001). In a crowded soft drink market, targeting sales on facets other than price was essential to maintain market share.

Why would customers prefer a no-brand-name PC? Is the price all that matters? Shouldn’t they also be concerned about quality?

Hall (2013) raises the importance of first describing a clear mission for the brand and then determining where the brand sits within the wider market so that it can be marketed correctly.

Ali (2007) describes how in general consumers prefer branded products even if they are more expensive as there is an element of trust associated with the quality of the brand. However, Tuttle (2012) observes that increasingly there is a trend towards non-branded products, with consumers looking to save money. With personal computers, price is obviously one of the deciding factors in determining whether a purchase is made but as Tuttle notes, quality is less of a factor as many manufacturers of branded computers already use non-branded components and there is less distinction between the quality of branded and non-branded products.

 

References

Ali, K. (2007) Why Do People Prefer Brand Name Products? [Online]. Available from: http://ezinearticles.com/?Why-Do-People-Prefer-Brand-Name-Products?&id=774044 (Accessed: 9 February 2013).

Hall, S. (2013) The Marketer’s Guide to Developing a Strong Brand Identity. [Online]. Available from: http://blog.hubspot.com/blog/tabid/6307/bid/34238/The-Marketer-s-Guide-to-Developing-a-Strong-Brand-Identity.aspx (Accessed: 9 February 2014).

Kotler, P. & Armstrong, G. (2014) Principles of Marketing, 15th Edition. London: Pearson Education Ltd.

Muniz, A. & Hamer, L. (2001) ‘Us Versus Them: Oppositional Brand Loyalty and the Cola Wars’, Advances in Consumer Research, 28, pp.355-361. [Online]. Available from: http://www.acrwebsite.org/search/view-conference-proceedings.aspx?Id=8512 (Accessed: 9 February 2014).

Orend, A. & Gagné, P. (2009) ‘Corporate Logo Tattoos and the Commodification of the Body’, Journal of Contemporary Ethnography, 38(4), pp.493-517, Sage. [Online]. Available from: http://jce.sagepub.com/content/38/4/493.short (Accessed: 9 February 2014).

Speyer, B. (2010) How to Establish Brand Loyalty and Increase Sales. [Online]. Available from: https://websuccessteam.com/WSTblog/2010/02/how-to-establish-brand-loyalty-and-increase-sales/ (Accessed: 9 February 2014).

Tuttle (2012) Brand Names Just Don’t Mean as Much Anymore. [Online]. Available from: http://business.time.com/2012/11/01/brand-names-just-dont-mean-as-much-anymore/ (Accessed: 9 February 2014).

Product Concept Testing

Failure rates for new products on the market are notoriously high but are an important aspect of sustaining a business’s innovation (Ernst, Hoyer, Krafft and Krieger, 2010). Following the idea generation stage for a new or enhanced product or service, a company may think they have a great idea, but do potential customers agree? In essence, this is the purpose of concept testing (or market testing), to ensure that a product concept is likely to be well-received by the market (Kotler and Armstrong, 2014).

Consider the rebranding of a clothing store. Before making the decision to change the logo, the layout of stores and other facets of the business, it is important that consumers buy in to the concept and are consulted to make sure that they are likely to accept the change. Unfortunately, for the clothing chain GAP, they were faced with an uncomfortable reality in the winter of 2010, when they decided to rebrand their stores with a new logo without proper concept testing. While the firm described the new brand as more contemporary and modern, within a week, the business was forced to revert back to its original logo following a consumer backlash (Sharma and Garikaparthi, 2013). It is estimated that this folly cost the business in excess of $100 million USD as well as the associated negative publicity (Hardy, 2013).

The purpose of concept testing is therefore to reveal flaws in a product or design concept and to identify consumer reactions to reduce the possibility of market failure. Peng and Finn (2008) recognise a number of key outcomes from the concept testing process including the idea being refined, developed further or abandoned altogether. However, they also recognise the importance of using concept testing as a tool to identify the value of the concept and generate estimates of potential sales.

Algers (2011) identifies a wide range of techniques which can be used to facilitate concept testing. These can range from simple telephone, email and web surveys to face-to-face focus groups. While there are numerous techniques, the important message is that the concept is formed in a way which is tangible to the individuals assessing the idea, so this may include a proposed name for the product, a detailed description, an artist’s impression of the product or concept and a list of all the potential benefits to a consumer.

A technique which is growing in popularity for concept testing is crowdsourcing. This technique employs the use of volunteers in online communities to assess and develop product concepts on behalf of business. But, as Hardy (2013) observes, the use of crowdsourcing was the downfall of the GAP rebranding as the ‘crowd’ got it wrong and didn’t necessarily reflect the views of the consumers it was actually targeting with the new brand.

While concept testing can be expensive, as demonstrated by GAP, effective testing can reduce product failure rates and save reputation and money, making it an important stage in the product development lifecycle.

References

Algers, A. (2011) Strategic new product development: Concept Testing. [Online]. Available from: http://qpc.adm.slu.se/SNPD_ver2/page_28.htm (Accessed: 9 February 2014).

Ernst, H., Hoyer, W., Krafft, M. & Krieger, K. (2010) ‘Customer relationship management and company performance – the mediating role of new product performance’, Journal of the Academy of Marketing Science, 39(2), pp. 290-306, Springer. [Online]. Available from: http://link.springer.com.ezproxy.liv.ac.uk/article/10.1007/s11747-010-0194-5 (Accessed: 9 February 2014).

Hardy, T. (2013) 10 Rebranding Failures and How Much They Cost. [Online]. Available from: http://www.canny-creative.com/2013/10/10-rebranding-failures-how-much-they-cost/ (Accessed: 9 February 2014).

Kotler, P. & Armstrong, G. (2014) Principles of Marketing, 15th Edition. London: Pearson Education Ltd.

Peng, L. & Finn, A. (2008) ‘Concept testing: the state of contemporary practice’, Marketing Intelligence & Planning, 26(6), pp. 649-674, Emerald. [Online]. Available from: http://dx.doi.org.ezproxy.liv.ac.uk/10.1108/02634500810902884 (Accessed: 9 February 2014).

Poetz, M. & Schreier, M. (2012) ‘The Value of Crowdsourcing: Can Users Really Compete with Professionals in Generating New Product Ideas?’, Journal of Product Innovation Management, 29(2), pp. 245-256, Wiley. [Online]. Available from: http://onlinelibrary.wiley.com.ezproxy.liv.ac.uk/doi/10.1111/j.1540-5885.2011.00893.x/full (Accessed: 9 February 2014).

Sharma, R. & Garikaparthi, M. (2013) ‘What’s In A Name – Logos That Express New Thinking’, International Journal of Management Research and Business Strategy, 2(3), pp.58-67. [Online]. Available from: http://ijmrbs.com/ijmrbsadmin/upload/IJMRBS_51d1b2d6e3f74.pdf (Accessed: 9 February 2014).