1: Customers and Brands
The author reflects on previous approaches to marketing, particularly a quote from Peter Drucker that the primary purpose of a company was to "create a customer" who is willing to pay for the goods that the company provides. This reflects the old-school approach to marketing, in which a company decided what to produce and the marketing department merely drummed up demand for it, by attempting to convince the prospect that it had value.
There is also the notion of "brand" as a signifying mark of a manufacturer. Establishing such a mark enabled the business to avoid having to re-introduce the product at each sale, but to establish a brand that would hold a place in the customer's mind - to identify an unknown item as being the product of a certain manufacturer, as distinguished from others.
Differentiation is a key factor in creating sustained demand, and motivating a customer to seek a specific item among the various alternatives that are available. Over time, this is perceived as being a customer-brand relationship, and the customer relies upon and has expectations of the brand.
KEY CHALLENGES
The interest of the brand marketer is in maintaining an ongoing relationship with the customer. (EN: my sense is that this may overlook the need for "improvement," but I would accept that continuity is a prerequisite of improvement, and any attempt to effect a positive change should be viewed not merely as a potential for growth, but a potential threat to continuity.)
The author identifies four significant challenges for brand marketers - commoditization, communication, fragmentation, and reciprocity - and discusses each in detail.
Commoditization is the tendency of buyers in the market to view all products from all suppliers as being interchangeable. The notion that "salt is salt" and there is no reason to value one brand over another, and pick whichever is cheapest. In a commodity market, brand is of no value, and it is very difficult to create a sense of brand value. It is a serious and growing threat to the market.
Communication to the customer is critical to marketing. The traditional view of communication is a one-way channel from marketer to prospect, as if no other party was attempting to influence them as well. In the current age, we recognize that a consumer receives communication about products and brands from a variety of sources: the marketer, competitors, the media, even personal acquaintances. Also, the customer is not a passive recipient - he may seek information of his own accord, and will consider rather than accept what information he finds or receives. The challenge to marketers is not merely to be heard, as a voice in the increasingly crowded channel, but to be accepted.
Fragmentation pertains to the dissolution of markets into more and more narrowly-defined segments, down to the individual customer. Traditional marketing spoke to the "masses" with a single voice, the subdivided itself to speak to clusters or segments of the market. This was largely a matter of necessity, as traditional media enabled the marketer to focus on a limited number of audiences in a limited number of media. Especially with the Internet and mobile channels, there is now the potential to deal with very specific segments, down to the individual customer. And this "potential" may become a necessity.
Reciprocity is a shift in mind-set from the traditional views of marketing, which seemed to regard the customer as a prize to be won form competitors - the buyers merely being pawns in the game. The result is a focus on the actions of the suppliers in the marketplace and planning attack/defend tactics against other suppliers rather than considering the buyers as individuals with a desire to be served, or even acknowledged.
The author returns to the notion of continuity. A key problem of the short-term campaign is that marketers often failed to consider the long-term impact - assuming that a "customers have memories as short as the marketing campaigns thrown at them." Which led to clever or gimmicky campaigns designed to attract attention in the short run, but which had no long-term value. The companies that have the greatest brand equity consider their long-term strategy: messaging that is consistent across all communication media, and messaging that is consistent over long periods of time.
MOVING BEYOND CAMPAIGNS TO DEVELOPING RELATIONSHIPS
The nature of the market has changed, in ways that make traditional marketing (short-term promotional campaigns) less productive than in the past. Customers are bombarded with commercial messages and, as such, are less naive and susceptible to marketing tactics. Customers are also more guarded of their time and personal information and are less likely to devote time to listening to a pitch. Customers have access to a great deal more information than before, including access to the opinions of other customers, and as such are slower to make decisions and are more willing to research and consider alternatives.
As the market has changed, so much marketers change: what is presently retired is a more long-term view, that sees the customer not as a one-time sale, but as a series of interactions over a long period of time - and in that way, to seek to establish a relationship between he customer and the brand that will maximize this value and steel them against a "quick pitch" from a competitor.
(EN: It occurs to me that much of this can be borrowed from traditional approaches to marketing institutional customers, in which considerable investment was made in establishing a business relationship with a repeat buyer. In a sense, the "new" relationship with the individual customer seems to be patterned after that existing body of practice.)
CLARIFYING THE TERMS
Given that relationship marketing is both new and in vogue, there are a number of terms that are defined in an inconsistent manner, and the author seeks to disambiguate.
What Is a Customer?
Traditionally, a distinction is made between the individual who purchases a product (customer) and the person who uses it (consumer). The author also adds the notion that "customer" considers not only past and present purchases, but also those who are considered likely to purchase in future.
Various other roles are defined: buyers, influencers, references, and stakeholders. The product and its use also "touches" these individuals, and they should also be considered in the context of the relationship. One should also consider the interests of the distribution channel, and the use of a product as part of a "bundle" of goods used by the same consumers (and purchased by the same customers) within the context of their overall purpose.
What Is a Brand?
While the basic concept of branding is fairly well understood to mean the properties that associate a given good or service to a manufacturer or seller, this remains focused on the company rather than the consumer and its intent to establish, own, and control a brand.
From a consumer standpoint, brand includes any attribute, perception, or association made when considering, purchasing, or using the brand. This includes a number of factors that are beyond the control of the marketers, and which the marketer has a very limited capacity to affect or influence in their favor.
The author also considers the kinds of brands - namely, the company's brand, a brand for a given product line, the brand of a given product, and branding variations on products. Again, it is traditionally accepted that a company creates brands, but it is ultimately the consumer who accepts them. There are numerous examples of companies that have attempted to create brands that were not accepted by the customer (supermarket examples: customers may recognize "miracle whip" rather than "Kraft miracle whip", or "green giant" vegetables but not "Green giant summer harvest" vegetables).
What is Reputation?
The author also notes that "brand" and 'reputation" are often used interchangeably, but they are distinct concepts. Brand is a matter of identity of the manufacturer or seller of a good - the customer knows who they are. Reputation is a broader concept that relates to the opinions people have about a company - the author turns to the example of "Fortune" magazine, which publishes a ranking of the "most admired" companies, and suggests that those on this list have built a reputation not by establishing a unique identity, but by being recognized for their admirable qualities.
The company does not "own" reputation in the same way as it does its service marks. There is a note about legal protection of reputation being less rigid than that of brand. Once can prosecute another organization from copying a brand (on the basis that it is an attempt to deceive customers), but there is no such support for reputation, as it is a fundamental right of the consumer (or anyone) to say whatever they wish about a company - and unless there is proof of libel or slander, the company can do nothing to punish others for expressing negative opinions.
What Are Brand Relationships?
A "relationship" between brand and customer is said to exist when the customer forms a positive opinion of a company that leads them to do business with them repeatedly, over a long period of time. The value to the business is steady income, and the value to consumer is convenience in repeat purchases of the same product, as well as other products associated to the brand.
The key factor to the relationship is its ongoing nature. It may begin before the purchase (the customer's expectations of the brand), and be reinforced or damaged by the experience of the customer after the purchase. It is for this reason that there is some argument about the existence of a relationship: for some products, and some buyers, there may not be a relationship. The more often the product is purchased, and the greater its longevity of use, the more valid the suggestion that a relationship exists.
What Is Brand Equity?
The "equity" of a brand is the value inherent in the brand.
From the customer's perspective, the value of the brand is often derived from the value of the product - a branded product is "worth" more than another because it is perceived to be of greater quality (and the brand is a guarantee of this quality). In some instances, especially in fashion labels, there is a perceived value in consuming the brand - the consumer pays a premium to gain esteem from their association with the brands of the products they consume.
From an intermediary's perspective (wholesale/retail) the value in a brand is the demand it creates - they can earn a higher per-unit profit from the sale of a brand, they can attract and retain more customers who seek to obtain the brand, and their own brand (especially retail store) benefits from the esteem of association.
For the brand owner, the chief value is the economic benefit to the company: their ability to promote their product over their competitors, the preference of the consumer for their brand, and the effect it has on the sales/revenues/income of that precipitate.
The author notes that there are four components that must be considered in evaluating whether a brand has equity:
- Presence. This is the degree to which customers and prospects are aware of the brand. This can be achieved rather easily, through marketing communication.
- Perceived Quality. This is the way in which customers consider the branded product in comparison to other products of the same kind, largely in relationship to the benefit they derive from the product (its suitability to purpose)
- Identity/Image. This identifies the values, attributes, traits, and personalities that customers associate with the brand. Fundamentally, it is what consumers "think of" the brand, other than being merely aware of the brand and its qualities.
- Commitment. This reflects the behavior of customers in the marketplace. How often they repurchase, the effort they are willing to put into obtaining it, the amount of premium they are willing to pay, the share-of-wallet they give to the brand, whether they recommend the products to others.
The author suggests that brand equity is "often confused with" its financial value. He suggests that this is a separate consideration, which he terms "brand valuation," which arrives at a price that a company could reasonably expect to be paid in exchange for selling its brand to another supplier. This will be considered separately.
(EN: my sense is the two are not entirely separate concepts. Because of the brand equity, customers are willing to pay more for a brand, buy it more often, etc. and this can be used to measure the equity in terms of dollars and cents. While they are not entirely analogous, a factor that would be necessary to separate them would be a method of measuring equity other than the financial value of the brand.)
BRAND COMMUNICATION
The concept of brand communication likewise has a number of definitions and applications. The notion of communication involves transfer of information from one party to another (as opposed to any impression an individual may form on his own). Specifically, this is the transfer of information from the brand owner and the customer or prospect through multiple exchanges in multiple media (which are qualities that marketers have often neglected to consider).
The term "brand contact" refers to an instance in which the customer encounters the brand, whether by the intention of the owner or otherwise. The author mentions a number of examples, but the point seem to be that the consumer may have "contact" with a brand in situations that the owner did not initiate (someone else discussing the brand) or anticipate (seeing the brand in a pile of litter at a roadside).
The author discusses the notion of "equilibrium" in the perception of the brand by the owner and the customer - which seems to be an agreement, reached by communication over time, about what the brand "means." The impact of disagreement is clear when the owner of a brand feels it to be a prestigious label that merits a high mark-up, while the customer regards it as being an inferior brand - specifically, the product is not priced to sell, and buyers are not attracted to it. Marketers can attempt to influence the consumer, but the consumer is in a position of greater authority, so it is likely a company will need to give ground, and adjust its perception of the value of its brands to match the consumer's, in order to have a meaningful dialog and develop a sustainable relationship.
THE CHANGING WORLD OF COMMUNICATION AND MEDIA
The author notes that there have been significant changes in the nature of media in the past few decades, which will change the way that marketers can use media. He suggests that a fundamental change has taken place in the way in which people receive information: reading is characterized as an activity that takes complete focus, that a person cannot do other things while reading, and that reading takes place in a linear manner, from beginning to end. Later media, such as radio and television, adopted the linear communication of text
The author asserts that the main difference in these media are in the ability of the audience to do other things while they are watching or listening The author mentions the Internet, specifically the WWW, as introducing non-linear and non-sequential information. Of particular importance is the notion of multitasking - receiving information from multiple sources at the same time.
(EN: I'm unable to agree with the author's premises of multitasking. Other sources have demonstrated that a person does not pay attention to multiple simultaneous communications, but rather considers them intermittently, shifting focus from one to the other intermittently. While a person may sense multiple things, they can focus, and derive meaning, from one at a time. This is also not entirely new - the act of studying often involves having multiple references, switching among them. and skimming information in a non-sequential manner.)
(EN: The more significant phenomenon in modern media is the ability of the audience to choose among multiple sources of information and take greater control of their experience. In this way, the VCR is a more significant development in terms of media than the internet, in the ability to control the experience and to skip forward - most notably, past commercials - as well as backward, freeze-frame, and slow-motion, as well as to time-shift programming, preserve information from the past, and obtain programming from non-broadcast sources.)
The author notes that marketing communication depends heavily on the qualities of media, and communications strategies are designed to leverage certain capabilities in terms of the audience reached, the prominence of messaging, the timing and duration of a message, etc. As new media emerge - the Internet and mobile in particular - we find that many marketers still attempt to apply the familiar paradigms of old media. As such, they fail to use the capabilities of the media effectively, and fail to recognize the unique opportunities that are available.
From the perspective of the consumer, marketing communication consists of a number of "packets" of information about the company, the brand, and an offer. And while marketers traditionally considered these messages in isolation, the human brain attempts to aggregate and assemble these bits of intimation to create a conceptual whole. This means that the various messages sent via various media are not compartmentalized.
The author notes that the current marketing communications model is based on "behaviorist" psychology: the stimulus-response model that maintained that a response could be elicited by an immediate stimulus (a marketing message) and largely ignored any other stimuli to which the subject is immediately, or was previously, subjected. The notion of models like AIDA is that marketers have control over the customer and the ability to guide their behavior through providing stimulus to action. Even when an marketing initiative is considered in the context of previous messages (Lavidge's "hierarchy of effects" model), it remains based on the notion of stimulus-response.
This model underlies most traditional media and brand communication planning approaches: messaging content, messaging frequency, and other factors under the marketer's control are directed at the prospect to motivate him to action. Taking the notion further, Lavidge's model is based on the notion that repetition of a message overcomes resistance - that with tenacity, a marketer can wear down a customer to get them to accept their objectives. The author suggests that this notion was not challenged until the age of the Internet.
Primarily, the Internet meant that customers had ready access to information and were not limited to a small number of broadcasters who were largely under control of the marketing organizations. An individual could access information from a broad array of sources for use in decision-making, and the marketer was only a voice in the crowd, and often the least trusted among information sources.
The author also characterizes marketing's concern for customer focus as mere "lip service," and their primary goal has been to stimulate "quick and immediate" sales. While there is some acknowledgement of the customer relationship in B2B sales, most marketing models are based on consumer goods - and in particular, consumer goods that are purchased with little consideration, used up, and replaced regularly (namely, grocery and cosmetic items), and emphasis is placed on the primary sale because re-purchasing was assumed to be automatic unless the customer found something egregiously wrong with the product.
The agency model is also to blame for the myopic focus of marketing: as many companies assess agencies according to the sales they generate, a "quick win" is in the agency's primary interest. And because companies would readily switch agencies if they felt someone with "fresh ideas" could drum up more sales, short-term success was in the interest of agencies that sought to attract or retain clients.
(EN: This is less instructive for the future and more of a polemic against past practices, so I will skip forward.)
NEEDED: A CUSTOMER-CENTRIC, HOLISTIC VIEW
The author concedes that traditional approaches to marketing "made sense" in a system in which information was largely controlled by the marketer. (EN: though I'd wonder if that was ever strictly true - the internet did not invent information exchange between people, merely facilitates it, though I'll concede it "facilitates" on a much larger scale than ever before.)
In a consumer-driven marketplace, metrics such as the frequency of contact are not as meaningful as less quantifiable accomplishments: the nature of messages that the consumer receives, and the way in which they choose to respond.
It's also important to recognize that the traditional media-based communications (advertising, public relations, direct marketing, sales promotion, sponsorships, events, etc.) are only a fraction of the information available to the customer. To be effective, a communication plan has to consider every brand touch point, even (and perhaps "especially") those that are not under the direct control of the marketer
More trashing the conventional approach: it is a tactical plan, that seeks to penetrate the media, to count the reach and frequency of an advertisement, to count the number of press releases or positive exposures in the media. The problem is that these measure activity, not outcomes.
Another problem is that activity is in silos. There is little communication, and even less interaction, between the marketing department and other areas of the organization. Even within marketing, the advertising, promotion, PR, and sales functions are isolated into groups that each pursue independent goals. The notion of "integrated" marketing communications is fashionable, but integration has been shallow and superficial. What is needed to succeed is a "united front" across the organization.
The author describes brand communication as being based on four elements:
- The customers and other audiences with whom the brand will create and maintain a relationship
- The delivery systems through which communications will be received and responded to by the audiences
- The desired content of the messages
- "The brand that ties them all together" (EN: this seems a bit vague)
In the remainder of this book, the author proposes to guide readers away from the traditional methods of marketing - on the basis that they are not effective in the long run - and substitute a new approach that seeks to establish a positive relationship between the customer and a brand that is "attuned" to their needs and motivations.