Unit - I: Connecting With Customers and Brand Building: Building Customer Value,

Satisfaction, and Loyalty, Factor Influencing Consumer Behaviour, The Buying Decision
Process: The Five-Stage Model, Organizational Buying, Segmentation, Targeting &
Positioning (STP): Segmenting the market, Benefits of market segmentations, Market
segmentation procedure, Bases for Segmenting Consumer Markets, Market Targeting,
Branding, Building Brand Equity, Positioning - concept, bases and process; Product/Brand
Positioning strategies; Perceptual mapping.

Building Customer Value, Satisfaction, and Loyalty

Customer perceived value (CPV) is the difference between the prospective customer’s
evaluation of all the benefits and all the costs of an offering and the perceived alternatives.
Total customer value is the perceived monetary value of the bundle of economic, functional,
and psychological benefits customers expect from a given market offering. Total customer
cost is the bundle of costs customers expect to incur in evaluating, obtaining, using, and
disposing of the given market offering, including monetary, time, energy, and psychic costs.
The value proposition consists of the whole cluster of benefits the company promises to
deliver; it is more than the core positioning of the offering.
The value delivery system includes all the experiences the customer will have on the way to
obtaining and using the offering.

Determinants of Customer – Delivered Value

Customer value analysis
To conduct this analysis, companies identify and rate the major attributes and benefits which
customers look for. Companies then compare the customer perceived value of their product in
relation to their competitors’. Lastly, companies monitor customer values over time for
relevancy and attractiveness in changing market environments.
Customer Satisfaction
In general, satisfaction is a person’s feelings of pleasure or disappointment that result from
comparing a product’s perceived performance (or outcome) to expectations. If the
performance falls short of expectations, the customer is dissatisfied. If it matches
expectations, the customer is satisfied. If it exceeds expectations, the customer is highly
satisfied or delighted.

Importance of measuring customer satisfaction

Customers who are highly satisfied will buy from the same company in the future. With the
Internet being such a pervasive tool today, bad customer experiences can affect many more
potential and existing customers than ever before.
Measuring customer satisfaction
Companies can employ periodic surveys to track customer satisfaction directly. Companies
can use the customer loss rate as an indicator of customer satisfaction, and even contact
customers who have switched brands to discover the reasons behind this change.
Periodic surveys can track customer satisfaction directly and ask additional questions to
measure repurchase intention and the respondent’s likelihood or willingness to recommend
the company and brand to others. Companies need to monitor their competitors’ performance
too.

Product and Service Quality

Satisfaction will also depend on product and service quality. Various experts have defined it
as “fitness for use,” “conformance to requirements,” and “freedom from variation.” Quality
is the totality of features and characteristics of a product or service that bear on its ability to
satisfy stated or implied needs.
Product and service quality, customer satisfaction, and company profitability are intimately
connected. Higher levels of quality result in higher levels of customer satisfaction, which
support higher prices and often lower costs.
Maximizing Customer Lifetime Value
It is not always the company’s largest customers who yield the most profit. The largest
customers demand considerable service and receive the deepest discounts. The smallest
customers pay full price and receive minimal service, but the costs of transacting with small
customers reduce their profitability. The midsize customers receive good service and pay
nearly full price and are often the most profitable.

Customer Profitability
A profitable customer is a person, household, or company that over time yields a revenue
stream exceeding by an acceptable amount the company’s cost stream for attracting, selling,
and serving that customer.

Customer profitability analysis (CPA) is best conducted with the tools of an accounting
technique called activity-based costing (ABC). ABC accounting tries to identify the real
costs associated with serving each customer - the costs of products and services based on the
resources they consume. The company estimates all revenue coming from the customer, less
all costs.
Customer lifetime value (CLV) describes the net present value of the stream of future
profits expected over the customer’s lifetime purchases. The company must subtract from its
expected revenues the expected costs of attracting, selling, and servicing the account of that
customer, applying the appropriate discount rate.

Increasing the value of customer base

The company can increase the size of their customer base either by reducing the rate of
defection or increasing the duration of the customer relationship. It can enhance the growth
potential of each customer relationship by offering diverse products together with the original
product or service. It should focus greater efforts on satisfying and retaining higher-value
customers and terminating low-value customers or making them more profitable.
If the cost of retaining the customer is less than the customer’s lifetime lost profit, it is
worthwhile for the company to retain the customer.
The marketing funnel shows process of attracting and retaining customers. Satisfied
customers make up the customer relationship capital, which is a viable consumer base that
the company can rely on in the long run.
Acquiring new customers is many times more costly than merely retaining old customers.
The customer profit rate tends to increase over the lifetime of the retained customer.
The Marketing Funnel

The Marketing Funnel shows the main steps in the process of attracting and retaining
customers in terms of a funnel and some sample questions to measure customer progress
through the funnel. The marketing funnel identifies the percentage of the potential target
market at each stage in the decision process, from merely aware to highly loyal. Consumers
must move through each stage before becoming loyal customers.
Loyalty is defined as “a deeply held commitment to re-buy or re-patronize a preferred
product or service in the future despite situational influences and marketing efforts having the
potential to cause switching behaviour.”

Developing Loyalty Programs

Frequency programs (FPs) are designed to reward customers who buy frequently and in
substantial amounts.
Creating Institutional Ties
The company may supply customers with special equipment or computer links that help them
manage orders, payroll, and inventory.

Customer Relationship Management

Customer relationship management (CRM) is the process of handling detailed information
about individual customers and their “touch points,” that is, occasions where the customer
encounters the brand and product.
This enables companies to customize their market offerings to meet individual customers’
needs, and subsequently retain them in the long run.
Interacting With Customers
Listening to customers is crucial to customer relationship management. Some companies
have created an ongoing mechanism that keeps their marketers permanently plugged in to
frontline customer feedback.
Personalizing marketing
Personalizing marketing means ensuring that the brand and its marketing stay relevant to
customers. Technology such as the Internet allows for marketers to engage in personalizing
marketing.
The company has to identify a specific group of prospects and customers. It then segments
them into different tiers according to their value to the company Next, it develops personal
interactions with customers to build a good rapport and understand their needs better. Lastly,
it develops or modifies product offerings to suit the needs of each customer.
Consumer behavior - The aim of marketing is to meet & satisfy target customers’ needs &
wants better than competitors. The consumer behavior can be defined as the study of how
individuals, groups, & organizations select, buy, use & dispose of goods, services, ideas, or
experiences to satisfy their needs & wants.
Study of Consumer Behavior – 7 Os
Objective - Why do they buy?
Object - What do they buy?
Occupant - Who is the consumer?
Operation - How do they buy?
Occasion - When do they buy, & frequency of purchase?
Outlet - Where do they buy?
Organization - How many people are involved?

Factors influencing Consumer Behavior

1 Cultural 2 Social 3 Personal
1 Cultural – It mainly includes culture, subculture & social class.
Culture – is the fundamental determinant of a person’s wants & behavior. It determines the
set of values, perceptions & preferences of a person.
Subculture – It provides more specific identification for their members & includes
nationalities, & geographic regions.
Social Class – includes relatively homogenous & enduring divisions in a society, which are
hierarchically ordered & whose members share similar interests & behavior. It is normally
based on income level, education, occupation & power.
2 Social Factors – It includes the groups that influence the consumer behavior.
Reference groups – It consists of all the groups that have a influence on his/her attitudes or
behavior.
Primary groups – are those with whom the person interacts fairly continuously & informally
such as family, friends, neighbors & coworkers.
Secondary groups – which tend to be more formal & require less continuous interaction
such as religious, professional.
Family – is a group of two or more people related by blood, marriage or adoption. Family
members constitute most influential primary reference group.
3 Personal Factors – It includes buyer’s age & stage in life cycle; occupation & income;
personality, lifestyle.
Age & stage in life cycle – People buy different goods & services at different ages & stages
of life cycle.
Occupation – The consumption patterns are also determined by occupation.
Income – Product choice is greatly affected by spend able income & attitude towards
spending & saving.
Lifestyle – It is a person’s pattern of living as expressed in activities, interests & opinions.
Model of Consumer Behaviour

The starting point for understanding consumer behavior is the stimulus-response model.
Marketing and environmental stimuli enter the consumer’s consciousness, and a set of
psychological processes combine with certain consumer characteristics to result in decision
processes and purchase decisions. The marketer’s task is to understand what happens in the
consumer’s consciousness between the arrival of the outside marketing stimuli and the
ultimate
purchase decisions. Four key psychological processes - motivation, perception, learning, and
memory - fundamentally influence consumer responses.

Key Psychological Processes

Motivation - the driving force in an individual that impels him / her to action for satisfaction
of unfulfilled needs. Maslow arranged human needs in a hierarchy from the most pressing to
the least pressing.
Perception – the process by which an individual selects, organizes & interprets stimuli to
create a meaningful picture of the world.
Personality – a set of distinguishing human psychological traits that leads to relatively
consistent & enduring responses to environmental stimuli.
Learning – it involves changes in an individual’s behavior arising from experience.
Problem Recognition - The buying process starts when the buyer recognizes a problem or
need triggered by internal or external stimuli.
Information Search - Major information sources to which consumers will turn fall into four
groups:
• Personal. Family, friends, neighbors, acquaintances
• Commercial. Advertising, Web sites, salespersons, dealers, packaging, displays
• Public. Mass media, consumer-rating organizations
• Experiential. Handling, examining, using the product
The relative amount and influence of these sources vary with the product category and the
buyer’s characteristics. Generally speaking, although consumers receive the greatest amount
of information about a product from commercial - that is, marketer-dominated - sources, the
most effective information often comes from personal or experiential sources, or public
sources that are independent authorities.
Evaluation of Alternatives - There are several processes, and the most current models see
the consumer forming judgments largely on a conscious and rational basis.
Purchase Decision - In the evaluation stage, the consumer forms preferences among the
brands in the choice set and may also form an intention to buy the most preferred brand. In
executing a purchase intention, the consumer may make up to five sub decisions: brand
(brand A), dealer (dealer 2), quantity (one computer), timing (weekend), and payment method
(credit card).
Post purchase Behavior - After the purchase, the consumer might experience dissonance
from noticing certain disquieting features or hearing favorable things about other brands and
will be alert to information that supports his or her decision.
A satisfied consumer is more likely to purchase the product again and will also tend to say
good things about the brand to others. Dissatisfied consumers may abandon or return the
product. They may seek information that confirms its high value. They may take public
action by complaining to the company, going to a lawyer, or complaining to other groups
(such as business, private, or government agencies). Private actions include deciding to stop
buying the product (exit option) or warning friends (voice option).

Importance of studying Consumer Behavior

1 To identify various potential target groups and geographical markets for products offered.
2 Design the right marketing mix, i.e. the 4-P’s of marketing, to attract maximum target
customers.
3 Make your offer to the consumer that is more appealing than the competitor.
Organizational Buying - Frederick E. Webster Jr. and Yoram Wind define organizational
buying as the decision-making process by which formal organizations establish the need for
purchased products and services and identify, evaluate, and choose among alternative brands
and suppliers.
The business market consists of all the organizations that acquire goods and services used in
the production of other products or services that are sold, rented, or supplied to others. The
major industries making up the business market are agriculture, forestry, and fisheries;
mining; manufacturing; construction; transportation; communication; public utilities;
banking, finance, and insurance; distribution; and services.

Business marketers contrast sharply with consumer markets in some ways.

Fewer, larger buyers - The business marketer normally deals with far fewer, much larger
buyers than the consumer marketer does.
Close supplier - customer relationship - Because of the smaller customer base and the
importance and power of the larger customers, suppliers are frequently expected to customize
their offerings to individual business customer needs.
Professional purchasing - Business goods are often purchased by trained purchasing agents,
who must follow their organizations’ purchasing policies, constraints, and requirements.
Multiple buying influences - More people typically influence business buying decisions.
Buying committees consisting of technical experts and even senior management are common
in the purchase of major goods.
Geographically concentrated buyers
Stages in the Buying Process - Following are the general stages in the business buying-
decision process.
Problem Recognition - The buying process begins when someone in the company
recognizes a problem or need that can be met by acquiring a good or service. The recognition
can be triggered by internal or external stimuli.
General Need Description and Product Specification - Next, the buyer determines the
needed item’s general characteristics and required quantity.
Supplier Search - The buyer next tries to identify the most appropriate suppliers through
trade directories, contacts with other companies, trade advertisements, trade shows, and the
Internet.
Proposal Solicitation - The buyer next invites qualified suppliers to submit proposals. If the
item is complex or expensive, the proposal will be written and detailed. After evaluating the
proposals, the buyer will invite a few suppliers to make formal presentations.
Supplier Selection - Before selecting a supplier, the buying center will specify and rank
desired supplier attributes, often using a supplier-evaluation model.
Order-Routine Specification - After selecting suppliers, the buyer negotiates the final order,
listing the technical specifications, the quantity needed, the expected time of delivery, return
policies, warranties, and so on.
Performance Review - The buyer periodically reviews the performance of the chosen
supplier(s).
Segmentation - The process of dividing the total market into relatively distinct homogenous
sub groups of consumers with common needs & characteristics. A company cannot connect
with all customers due to diversity in market. Hence it needs to identify which market
segment it can serve effectively. A market segment consists of a group of customers who
share a similar set of needs & wants. The marketer does not create segment; the marketer’s
task is to identify the segments & decide which one(s) to target.
Benefits of segmentation
1. Offers different markets (opportunities)
2. Marketers can understand the specific needs of the consumer
3. Marketers can identify most appropriate marketing mix to match the needs of the segment
Segmentation Variables
1 Geographic
2 Demographic
3 Psychographic
4 Behavioral
Geographic - Geographic segmentation calls for dividing the market into different
geographical units such as nations, states and regions. The company can operate in one or a
few areas or operate in all but pay attention to local variations. It also includes segmentation
on the basis of rural and urban area.

Demographic - In demographic segmentation, the market is divided into groups on the basis
of variables such as age, family size, family life cycle, gender, income, occupation,
education, religion, generation and social class. There are two reasons for the popularity of
demographic variables to distinguish customer groups. First, consumer needs, wants, usage
rates, and product and brand preferences are often associated with demographic variables.
Second, demographic variables are easier to measure.

Psychographic - In psychographic segmentation buyers are divided into different groups on

the basis of psychological traits, lifestyle or values. The profile of the buyer is composite of
activities, interests & opinions.
One of the most popular classification systems based on psychographic measurements is
Strategic Business Insight’s VALS (VALS stands for Values, Attitudes and Lifestyles)
framework. The main dimensions of the VALS segmentation framework are consumer
motivation and resources. Consumers are inspired by one of three primary motivations -
ideals, achievement, and self-expression. Those primarily motivated by ideals are guided by
knowledge and principles. Those motivated by achievement look for products and services
that demonstrate success to their peers. Consumers whose motivation is self-expression desire
social or physical activity, variety, and risk.
Based on these dimensions, eight segments of consumers are identified.
Here are the four segments with more resources:
1. Innovators - These consumers are successful, sophisticated, and have high self-esteem.
They have cultivated tastes with preferences for upscale, niche products and services.
2. Thinkers - These consumers are motivated by ideals. They value order, knowledge, and
responsibility. Being mature and reflective, they look for durability, functionality, and value
in products.
3. Achievers - Looking for consensus and stability, these consumers are successful and are
work oriented. They like established and prestige brands that demonstrate their success to
their peers.
4. Experiencers - These consumers are young, enthusiastic, and impulsive. They seek variety
and excitement and spend much on fashion, entertainment, and socializing.
Here are the four segments with fewer resources:
1. Believers - These consumers are conservative, conventional, and traditional. They prefer
familiar, established brands and staying loyal to them.
2. Strivers - These consumers are trendy and fun-loving. They seek the approval of others.
However, because they have fewer resources, they emulate the purchases of those with more
wealth by buying stylish products.
3. Makers - Focusing on their work and home, these consumers are pragmatic, self-sufficient,
traditional, and family oriented. As such, they favor functional products.
4. Strugglers - Loyal to their favorite brands, these elderly consumers are passive and display
a sense of resignation. They are concerned about change.

Behavioral - In behavioral segmentation, buyers are divided into groups on the basis of their
knowledge of, attitude toward, use of, or response to a product.
Needs and Benefits
Not everyone who buys a product has the same needs or wants the same benefits from it.
Needs based or benefit-based segmentation is a widely used approach because it identifies
distinct market segments with clear marketing implications.
User and Usage-Related Variables
Many marketers believe that behavioral variables - occasions, benefits, user status, usage rate,
loyalty status, buyer-readiness stage - are the best starting points for constructing market
segments.

The criteria for effective segmentation:

To be useful, market segments must rate favorably on five key criteria:
1. Measurable - The size, purchasing power, and characteristics of the segments can be
measured.
2. Substantial - The segments are large and profitable enough to serve. A segment should be
the largest possible homogeneous group worth going after with a tailored marketing program.
3. Accessible - The segments can be effectively reached and served.
4. Differentiable - The segments are conceptually distinguishable and respond differently to
different marketing-mix elements and programs.
5. Actionable - Effective programs can be formulated for attracting and serving the segments.
Market targeting – deciding how many & which segment to target after evaluating the
segments.
Evaluating & selecting the market segments – factors influencing evaluation & selection of
segments are
1 Attractiveness of segment which includes size, growth, profitability, risk.
2 Company objectives, competencies & resources
3 Scoring of segment on four criteria.

Five patterns of target market selection

1 Full market coverage
The firm attempts to serve all customer groups with all the products they might need. Large
firms can cover a whole market in two broad ways: through differentiated or undifferentiated
marketing.
Undifferentiated marketing - In undifferentiated marketing or mass marketing, the firm
ignores segment differences and goes after the whole market with one offer. It designs a
product and a marketing program that will appeal to the broadest number of buyers. It relies
on mass distribution and advertising. It aims to endow the product with a superior image.
Differentiated marketing - In differentiated marketing, the firm operates in several market
segments and designs different products for each segment.
2 Multiple-Segment Specialization
With selective specialization, a firm selects a subset of all the possible segments, each
objectively attractive and appropriate. There may be little or no synergy among the segments,
but each promise to be a moneymaker.
Keeping synergies in mind, companies can try to operate in super segments rather than in
isolated segments.
A firm can also attempt to achieve some synergy with product or market specialization.
With product specialization, the firm sells a certain product to several different market
segments. The downside risk is that the product may be supplanted by an entirely new
technology.
With market specialization, the firm concentrates on serving many needs of a particular
customer group. The firm gains a strong reputation among this customer group and becomes
a channel for additional products its members can use.
3 Single-Segment Concentration
With single-segment concentration, the firm markets to only one particular segment. Through
concentrated marketing, the firm gains a strong knowledge of the segment’s needs and
achieves
a strong market presence. Further, the firm enjoys operating economies through specializing
its production, distribution, and promotion. If it captures segment leadership, the firm can
earn a high return on its investment.
4 Individual Marketing
The ultimate level of segmentation leads to “segments of one,” “customized marketing,” or
one to- one marketing. Services such as hotels routinely offer individualized experiences.
Brand - The American Marketing Association defines a brand as “a name, term, sign,
symbol, or design, or a combination of them, intended to identify the goods or services of one
seller or group of sellers and to differentiate them from those of competitors.” A brand is thus
a product or service that adds dimensions that differentiate it in some way from other
products or services designed to satisfy the same need.

The Role of Brands

Brands identify the source or maker of a product and allow consumers - either individuals or
organizations - to assign responsibility to a particular manufacturer or distributor. Brands
perform a number of functions for both consumers and firms.

Brands’ Role for Consumers

A brand is a promise between the firm and the consumer. It is a means to set consumers’
expectations and reduce their risk.
Consumers may evaluate the same product differently depending on how it is branded. They
learn about brands through past experiences with the product and its marketing program,
finding out which brands satisfy their needs, and which do not. As consumers’ lives become
more rushed and complicated, a brand’s ability to simplify decision-making and reduce risk
becomes invaluable. Brands can also take on personal meanings to consumers and become an
important part of their identity. They can express who consumers are or who they would like
to be. For some consumers, brands can even take on human-like characteristics.

Brands’ Role for Firms

Brands also perform valuable functions for firms. First, they simplify product handling or
tracing, and help to organize inventory and accounting records. A brand also offers the firm
legal protection for unique features or aspects of the product.9 The brand name can be
protected
through registered trademarks, manufacturing processes can be protected through patents;
and
packaging can be protected through copyrights and designs. These intellectual property rights
ensure that the firm can safely invest in the brand and reap the benefits of a valuable asset.
A credible brand signals a certain level of quality so that satisfied buyers can easily choose
the product again. Brand loyalty provides predictability and security of demand for the firm
and creates barriers to entry that make it difficult for other firms to enter the market. Loyalty
can also translate into a willingness to pay a higher price - often 20 to 25 percent more.

Branding - Branding is endowing products and services with the power of a brand. Branding
is all about creating differences. To brand a product, it is necessary to teach consumers “who”
the product is - by giving it a name and using other brand elements to help identify it - as well
as “what” the product does and “why” consumers should care. Branding involves creating
mental structures and helping consumers organize their knowledge about products and
services in a way that clarifies their decision making and, in the process, provides value to the
firm.
Brand Equity
Brand equity is the added value endowed to products and services. It may be reflected in how
consumers think, feel, and act with respect to the brand, as well as the prices, market share,
and
profitability that the brand commands.
Customer-based brand equity is defined as the differential effect that brand knowledge has
on consumer response to the marketing of that brand.19 A brand is said to have positive
customer-based brand equity when consumers react more favorably to a product and the way
it is marketed when the brand is identified than when it is not identified. There are three key
ingredients to customer-based brand equity:
1. Brand equity arises from differences in consumer response. If no differences occur, then
the brand name product can essentially be classified as a commodity or generic version of the
product. Competition would then probably be based on price.
2. Differences in response are a result of consumer’s brand knowledge, the thoughts, feelings,
images, experiences, and beliefs associated with the brand. Brands must create strong,
favorable, and unique brand associations with customers, as have Volvo (safety), Hyundai
(value), and Toyota (reliability).
3. Brand equity is reflected in perceptions, preferences, and behavior related to all aspects of
the marketing of a brand. Stronger brands lead to greater revenue.

Building Brand Equity

Marketers build brand equity by creating the right brand knowledge structures with the right
consumers. This process depends on all brand-related contacts - whether marketer-initiated or
not. From a marketing management perspective, however, there are three main sets of brand
equity drivers:
1. The initial choices for the brand elements or identities making up the brand. (e.g., brand
names, URLs, logos, symbols, characters, spokespeople, slogans, jingles, packages, and
signage)
2. The product and service and all accompanying marketing activities and supporting
marketing program.
3. Other associations indirectly transferred to the brand by linking it to some other entity
(e.g., a person, place, or thing).

Choosing Brand Elements

Brand elements are those trademarkable devices that serve to identify and differentiate the
brand. Most strong brands employ multiple brand elements. Nike has the distinctive Swoosh
logo, the empowering “Just Do It” slogan, and the mythological “Nike” name based on the
winged goddess of victory.
Brand Element Choice Criteria
The first three criteria in choosing brand elements (memorable, meaningful, and likeable) can
be characterized as “brand building” in terms of how brand equity can be built through the
judicious choice of a brand element.
Designing Holistic Marketing Activities
Brands are not built by advertising alone. Customers come to know a brand through a range
of contacts and touch points: personal observation and use, word of mouth, interactions with
company personnel, online or telephone experiences, and payment transactions. A brand
contact can be defined as any information-bearing experience a customer or prospect has with
the brand, the product category, or the market that relates to the marketer’s product or
service.
Marketers are creating brand contacts and building brand equity through new avenues such as
clubs and consumer communities, trade shows, even marketing, sponsorship, factory visits,
public relations and press releases, and social cause marketing.
They must adopt an internal perspective to consider what steps to take to be sure employees
and marketing partners appreciate and understand basic branding notions, and how they can
help or hurt brand equity.

Brand Communities
Because of the Internet, companies are interested in collaborating with consumers to create
value through communities built around brands. A brand community is a specialized
community of consumers and employees whose identification and activities focus around the
brand. Three characteristics identify brand communities:
1. A “consciousness of kind” or sense of felt connection to the brand, company, product, or
other community members
2. Shared rituals, stories, and traditions that help to convey the meaning of the community
3. A shared moral responsibility or duty to both the community as a whole and individual
community members

Leveraging Secondary Association

The third and final way to build brand equity is, in effect, to “borrow” it. That is, brand
associations may themselves be linked to other entities that have their own associations,
creating “secondary” brand associations. In other words, brand equity may be created by
linking the brand to other information in memory that conveys meaning to consumers.
The brand may be linked to certain source factors, such as the company (through branding
strategies), countries or other geographical regions (through identification of product origin),
and channels of distribution (through channel strategy); as well as to other brands (through
ingredient or co-branding), characters (through licensing), spokespeople (through
endorsements), sporting or cultural events (through sponsorship), or some other third-party
sources (through awards or reviews).
Positioning – It is the act of designing the company’s offering & image to occupy a
distinctive place in the mind of target market. Goal is to locate the brand in the mind of
consumers. Brand positioning helps guide marketing strategy by clarifying the brands
essence, what goals it helps the consumers achieve, & how it does so in unique way.
Positioning requires that similarities & differences between brands be defined &
communicated.

Positioning requires that marketers define and communicate similarities and differences
between their brand and its competitors. Specifically, deciding on a positioning requires:
1. Determining a frame of reference by identifying the target market and relevant competition
2. Identifying the optimal points of parity and points of differences brand associations given
that frame of reference
3. Creating a brand mantra to summarize the positioning and essence of the brand

Determining a Competitive Frame of Reference

The competitive frame of reference defines which other brands a brand competes with, and
therefore, which brands should be the focus of competitive analysis. Decisions about the
competitive frame of reference are closely linked to target market decisions. Deciding to
target
a certain type of consumer can define the nature of competition, because certain firms have
decided to target that segment in the past (or plan to do so in the future), or because
consumers in that segment may already look to certain products or brands in their purchase
decisions. Identifying Competitors
A good starting point in defining a competitive frame of reference for brand positioning is to
determine category membership - the products or sets of products with which a brand
competes and which function as close substitutes.
Analyzing Competitors
A company needs to gather information about each of its competitor’s real and perceived
strengths and weaknesses.
Identifying Optimal Points-of-Parity and Points-of- Difference
Once the competitive frame of reference for positioning has been fixed by defining the
customer target market and nature of competition, marketers can define the appropriate PODs
and POPs associations.
Points-of-Difference
Points-of-difference (PODs) are attributes or benefits consumers strongly associate with a
brand, positively evaluate, and believe that they could not find to the same extent with a
competitive brand. Strong, favorable, and unique brand associations that make up PODs may
be based on virtually any type of attribute or benefit. Examples are Apple (design and ease of
use), Nike (performance, innovative technology, and winning), and Lexus (quality, reliability,
and efficiency). Creating strong, favorable, and unique associations as PODs is a real
challenge, but essential in terms of competitive brand positioning.
Three criteria determine whether a brand association can truly function as a point-of
difference - desirability, deliverability, and differentiability.
Points-of-Parity
Points-of-parity (POPs), in contrast, are attribute or benefit associations that are not
necessarily
unique to the brand but may in fact be shared with other brands. These types of associations
come in two basic forms: category and competitive.
Category POPs are attributes or benefits that consumers view as essential to be a legitimate
and credible offering within a certain product or service category. In other words, they
represent necessary - but not necessarily sufficient - conditions for brand choice.
Competitive POPs are associations designed to overcome perceived weaknesses of the brand.
A competitive POP may be required to either negate competitors’ perceived PODs.
If a brand can “break even” in those areas where the competitors are trying to find an
advantage and can achieve advantages in other areas, the brand should be in a strong
competitive position.
PoP versus PoD – To achieve a POP on a particular attribute or benefit, a sufficient number
of consumers must believe that the brand is “good enough” on that dimension. The brand
does not literally have to be seen as equal to competitors, but consumers must feel that the
brand does well enough on that particular attribute or benefit.
With POD, however, the brand must demonstrate clear superiority.
■ While POPs may usually not be the reason to chose a brand, their absence can
certainly be a reason to drop a brand.
■ While it is important to establish a POD, it is equally important to nullify the
competition by matching them on the POP. As a late entrant into the market, many
brands look at making the competitors POD into a POP for the category and thereby
create a leadership position by introducing a new POD.

Choosing Specific POPs and PODs

To build a strong brand and avoid the commodity trap, marketers must start with the belief
that
you can differentiate anything.
Means of Differentiation
Any product or service benefit that is sufficiently desirable, deliverable, and differentiating
can
serve as a point-of-difference for a brand. The obvious and often the most compelling means
of differentiation for consumers are benefits related to performance.
To identify possible means of differentiation, marketers have to match the consumer’s desire
for a benefit with their company’s ability to deliver it.
Differentiation - Brands can be differentiated on the basis of many variables
1 Product Differentiation – on the basis of a number of product dimensions – product form,
features, packaging, benefits etc.
2 Service Differentiation – on the basis of a accompanying service dimensions like ordering
ease, delivery, installation, customer training, consulting.
3 Personnel Differentiation – on the basis of having better trained people. Better trained
personnel exhibit six characteristics – competence, courtesy, credibility, reliability,
responsiveness, communication
4 Channel Differentiation – on the basis of distribution channel’s coverage, expertise &
performance.
5 Image Differentiation – by creating identity through symbols, slogans & by creating image
through seller’s physical space and events & sponsorships.
Perceptual Maps
For choosing specific benefits as POPs and PODs to position a brand, perceptual maps may
be
useful. Perceptual maps are visual representations of consumer perceptions and preferences.
They provide quantitative portrayals of market situations and the way consumers view
different
products, services, and brands along various dimensions. By overlaying consumer
preferences
with brand perceptions, marketers can reveal “holes” or “openings” that suggest unmet
consumer needs and marketing opportunities.

Brand Mantras
To further focus the intent of the brand positioning and the way firms would like consumers
to think about the brand, it is often useful to define a brand mantra. A brand mantra is an
articulation of the heart and soul of the brand and is closely related to other branding concepts
like “brand essence” and “core brand promise.” Brand mantras are short, three- to five-word
phrases that capture the irrefutable essence or spirit of the brand positioning. Their purpose is
to ensure that all employees within the organization and all external marketing partners
understand what the brand has most fundamentally to represent with consumers so they can
adjust their actions accordingly.
Role of Brand Mantras
Brand mantras are powerful devices. They can provide guidance about what products to
introduce under the brand, what ad campaigns to run, and where and how to sell the brand.
Their influence, however, can extend beyond these tactical concerns. Brand mantras must
economically communicate what the brand is and what it is not. McDonald’s brand
philosophy of “Food, Folks, and Fun” captures its brand essence and core brand promise.

Positioning strategies
Marketers can follow several positioning strategies. These strategies use associations to
change
consumers’ perception of products.
i. Product attributes position many technical products.
ii. Benefits offered, or the needs they fill, position many products
iii. Usage occasions position many products.
iv. Users help position products.
v. Activities are often used to sell expensive products.
vi. Personalities often help positioning. Prestigious brands are often positioned using
successful personalities who can add to a product’s character.
vii. Origin positions product by association with its place of manufacture.
viii. Competitors provide two positioning alternatives. A product can be positioned
directly against a competitor. A product may also be positioned away from
competitors.