Title: Audi Global Marketing and Communication Strategy. Audi is an automobile manufacturer based in Germany that distributes, markets, produces, engineers, and designs luxurious vehicles. The manufacturer was founded in Ingolstadt, Bavaria, Germany and is part of the Volkswagen Group. Throughout the globe, vehicles that are Audi-branded are manufactured in nine production facilities. The organisation’s origin dates back to the early 20th-century when engineer August Horch teamed with two other manufacturers in 1932 to form Auto Union. The mid-20th century (the 1960s) saw the commencement of the modern day Audi when Volkswagen acquired Auto Union from Daimler-Benz (Audi, 2019). The Audi brand was relaunched in 1965 by introducing the Audi F103 series to the market. After the relaunch, Volkswagen decided to merge NSU Motorenwerke with Auto Union in 1969 to form the modern day structure of the organisation.
The organisation’s name is a German translation of founder’s surname – Horch. The Audi logo has four rings that signify each of the four automobile manufacturers who merged to establish the organisation’s predecessor, Auto Union. The company’s slogan “Advancement through Technology” implies that the organisation uses the latest technology to manufacture its car (Audi, 2019). In the United States, the organisation’s slogan was “Truth in Engineering” up to the year 2016 from the year 2007. Together with the Mercedes-Benz and the BMW, Audi is among the world’s most sold luxurious automobile brand. The key intent of this report is to look into the global, local and glocal strategies of Audi with regard to price and distribution; additionally, the report will select and discuss the primary target market of the organisation.
Audi marketing mix
to the element of globalisation, the
concept of marketing has evolved immensely over
time, and if companies are not able to
keep up with the dynamism, they risk being
overtaken by their competitors. One of the major dynamics in the
marketing concept evolution is the Marketing Mix strategy that an organisation
chooses to adopt (Svend, 2017). Audi being a major player in the automobile
industry has managed to keep up with the dynamics in marketing by adopting
different strategies in the local, international, and glocal market. It is
vital to note that as Audi customers look for relevant and consistent
experiences in the organisation’s
products whenever and wherever they interact with them, the company is under pressure to find creative and innovative
methods of marketing. Additionally, these marketing strategies are supposed to
remain relevant locally while they maintain a sense of consistency in owning a
Glocal pricing and distribution at Audi
recognises the fact that the digital marketing landscape is being taken over by
glocalisation. As a result, the organisation has undertaken the initiative of strengthening
the global brand of its products with a customised approach and flavour for the
global market. However, the organisation faces a major challenge of ensuring
that the global marketing campaigns of the organisation are in sync with the tastes and preferences of the
local audience (Awan, 2014). In setting the prices for its products and
choosing the distribution strategies as relates to glocalisation, the
organisation acknowledges the fact that the major customer priorities with
regards to these aspects differ from one market to another. Therefore, it is
critical that these priorities are taken into consideration to establish an effective pricing and
distribution strategy in the glocal market. To effectively penetrate the glocal
market, Audi has incorporated hyperlocal and social geo-targeting in its
overall marketing strategy.
employing social geo-targeting in its pricing and distribution strategy, Audi can develop a deeper engagement with its
customers, and it can get speedy feedback on its services, releases, and ideas. Through
hyperlocal geo-targeting, the organisation can
use the most recent mapping and communication technology to deliver the
relevant content to their clients across the world. Therefore, this form of
geo-targeting has opened up a new world for the organisation’s product pricing
and distribution strategies. To ensure that the
company’s brand identity is relevant while making certain of the effectiveness
and relevance of the local campaigns, the organisation assesses its brand from the customer’s
viewpoint, (Feurer, Schuhmacher & Kuester, 2018). This helps in ascertaining whether the company cars and other
automobiles are in sync with the local demands. When the brand identity does
not resonate with the local demands, the organisation takes the initiative to
incorporate these demands in the local brand identity.
ensuring that the glocal pricing distribution strategy of the organisation is
successful, their staffs, working in both the local and the international
sphere, has created a close association with the customers and the vision of
the brand (Hinterhuber, 2017). The senior leadership of Audi is elevated within the automobile industry, and they are
recognised as the face of the brand. Additionally, the staff of the
organisation ensures that the local communities get the global concept of the
demand, hence, making sure that they recognise with it. This way, Audi creates
essential relationships with major local markets in the industry. The Audi
brand has done a tremendous job in synching its global brand with local demands
by using local ambassadors, sponsorships, and local partners.
Global pricing and distribution
In the global market, Audi cars are considered luxurious by all of its clients. Hence, in cashing its brand in the international market, the organisation uses the premium price strategy. Note that the automobile industry is quite competitive with Audi getting major competition from brands such as BMW and Mercedes-Benz (Sonderegger, 2011). Therefore, the pricing in the company’s marketing mix strategy is majorly founded on the competitive pricing of other manufacturers of premium cars. The company has high brand equity, and all its showrooms are filled with a variety of high-quality automobiles.
To enable customers to buy their products with ease, the organisation has a global and innovative financing option referred to as Audi Finance. Here, the clients pay for the cars using debt financing but at a cheaper rate. Additionally, the organisation has optional pricing strategies whereby its existing clients in the international market can purchase car accessories such as navigation and sound systems, and Audi Bang separately. Note that, the global prices of the organisation are also depended on the economic conditions of a particular country and geographic locations of certain markets.
In understanding the distribution and placement strategy of the organisation, it is vital to note that Audi is one of the largest automobile brands that provide luxurious cars in the world. Although the headquarters of the organisation are in Germany, its production facilities are situated in nine places across the globe. In distributing its products, the organisation explores other markets that have not been discovered by other major players to increase its customer base. As a result, the organisation has made major investments in countries such as India and its market presence in Asia has grown exponentially over time.
The brand’s presence has been established and maintained by putting up an exclusive dealership network and centres that provide after sale services (Steenkamp, 2017). The distribution channel used by Audi in the international market involves producers who supply to distributors who sell to wholesalers than to dealers and finally to the customer. Since the organisation is driven by the urge to satisfy the requirements of the customers, its production proves uses the latest forms of technology. The global vision of the organisation is to become the most successful premium brand.
Local pricing and distribution
In the UK a new Audi A1 costs roughly 14,000 GBP whereas the same car costs 19lac rupees in India; this indicates that the local pricing strategy employed by Audi is the skimming price strategy. Although the price is high, it is justified by the quality of the cars manufactured and the organisation’s brand image. This pricing strategy in local markets is particularly important for effective brand positioning of Audi (Svend, 2017). The reputation of the organisation is good in the international market, and it is reflected on by the number of cars that are produced annually. However, in recent years, the company has experienced poor performance in some local markets, and this is majorly attributed to the increase in rates of foreign exchange.
local distribution strategy of the organisation is to establish dealerships in
various locations. Taking the case of India, Audi has twenty-eight dealerships in eleven states, and this has increased its sales exponentially over the years (Talke, Müller, & Wieringa, 2017).
For instance, there was an increase in sales by 81% in 2014 in comparison to
2013. By establishing connections with local dealers, the organisation can push its
brand to local customers, and this has enabled it to achieve some of the set
Audi Target Market
the four common bases of market segmentation, Audi utilises three of them, and they include psychographic, demographic,
and geographic segmentation. In geographic segmentation, the organisation’s decisions
are based on which cars to sell and in which location (Xia, Xiao &
Zhang, 2012). For instance, the organisation’s market research shows that
Canadians drive larger cars as compared to Europeans. Thus, the cars sold in Europe are smaller in size as compared to
those sold in Canada. With regards to countries like India, the organisation
geographically segments the market into urban and rural areas. People in rural
areas are more likely to purchase the Audi A3 model more than the new Audi A8.
regards to demographics, the organisation segments its market into age, gender
and income. With regards to age, the younger generation is more likely to buy
the Audi A8 because it is flashy while the older generation gives little
concern to the make or level of technology used in manufacturing the car.
gender, some Audi models are more
preferred by either gender because of their make or design. Income is a major
determinant of whether one can afford an Audi car or not due to its prices that
are considered to be high; therefore, the organisation has taken the initiative
to produce cars for various individuals of different income classes (Xia, Xiao
& Zhang, 2012). Finally, psychographic segmentation groups buyers according
to personality traits, lifestyle and social status. As an organisation, Audi
acknowledges the impact of these aspects on the purchasing decisions that are
made by individuals. Since the organisation is famed for making luxurious cars,
the major target market based on psychographic segmentation is the upper middle
class to high-class individuals.
This report aimed to look into the global, local and glocal strategies of Audi with regard to price and distribution. Also, the report intended to select and discuss the primary target market of the organisation. From the essay, it has been established that Audi was founded in Ingolstadt, Bavaria, Germany and is part of the Volkswagen Group and its slogan is “Advancement through Technology.” Being a major player in the automobile industry, Audi has managed to keep up with the dynamics in marketing by adopting different strategies in the local, international, and glocal market. To effectively penetrate the glocal market, Audi has incorporated hyperlocal and social geo-targeting in its overall marketing strategy.
In the global market, the organisation uses the premium price strategy to keep up to speed with the competitive pricing set by its key competitors. The distribution strategy of the organisation in the global market involves producers who supply to distributors who sell to wholesalers than to dealers and finally to the customer. In the local markets, the organisation uses the price skimming strategy. This strategy helps the organisation in growing and establishing its brand in the market. Locally, the organisation distributes its cars by establishing dealerships in various locations. Finally, with regards to target marketing, the organisation segments its market into psychographic, demographic, and geographic groups.
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This report has completed a situation analysis on Video on Demand provider Netflix. Through doing so, digital marketing objectives have been constructed. To perform the situation analysis, four primary areas have been explored; the overview of business, the industry, competitors and the target market. Findings suggest that Netflix is a highly successful company based upon both financial success and brand recognition.
With few competitors, Netflix has established a business model which allows them to offer a high quality product at a competitive price. With various revenue streams, the business is profitable and has displayed abilities to adapt to technological change. However, a lingering threat of piracy persists with the potential to adversely affect profitability. This is particularly prevalent as Netflix’s target market has been identified to primarily consist of students, of whom have lower levels of disposable income.
Despite this, Netflix has grown in popularity across both males and females, with users across age ranges. The popularity can be attributed to the variety of content, but also the user’s ability to access it from almost any internet enabled device. Research further highlighted that almost all those living in the UK have a form of internet access. This emphasised the potential Netflix has to grow their brand and product.
Based upon the analysis, the following five objectives have been constructed:
Increase revenue within the UK by 15%, by March 2017 (12 Months)
To Increase Facebook engagement by 20%, by September 2016 (6 Months)
Increase use of Netflix on mobile platforms (smart phones and tablets) by 35% amongst existing users, by September 2016 (6 Months)
Increase traffic to the website by 25%, by March 2017, through paid for and organic means (12 Months)
Increase market share within the UK by 10%, by March 2017 (12 Months)
Marketing Assignment Contents
Overview of Business
Brand, Domain Name and URL
Product and Services
Unique Value Proposition (UVP)
Opportunities & Threats
Key Success Factors
Income & Social Grade
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Strategic management is a technique used by managers to give a firm a long-term direction and involves a systematic analysis of decisions, actions that create a competitive advantage. It involves the analysis of strategic goals, vision, and mission and the internal and external environmental factors in a firm. SWOT is an acronym standing for strengths, weaknesses, opportunities, and threats. SWOT analysis involves the assessment of a firm’s internal strengths, weaknesses and the external opportunities and threats (Henry, 2008). This analysis helps to identify the strengths and capabilities to minimize weaknesses, along with identifying opportunities to overcome threats. In reference to Toyota Company, leading automobile firm, a SWOT analysis on the company’s Strengths, weaknesses, threats and opportunities are as follows.
The Toyota Corporation is a leading automobile manufacturing in the world among other companies such as Ford. It has a strong production process that is effective and efficient in saving costs, this creates a competitive advantage. Cost savings helps to set affordable prices of their products to end users, over the competitors. The firm utilizes resources and eliminates unwanted costs in the production process. This strategy creates a competitive edge for Toyota, by reducing costs and increasing the production capabilities and efficiency
Toyota has strong horizontal integration merge verses the competitors who have vertical integration relationships. Strong relationship with supplier creates a competitive advantage, and it informs of updates or any developing changes (Henry, 2008) Horizontal merge proves to be cost effective, reduce risks and increase benefits. Merging helps to pool together resources of the combining companies, creating a favorable business environment. Synergy is one of the benefits of combining companies, and sharing of resources e.g. distribution channels. Toyota opts for best suppliers in Japan.
Toyota has a strong culture advantage, employees’ devotion in their jobs, performance and desire to improvement. It treats it employees with legitimate sense of respect and loyalty. The Japanese value work differently from competitors for instance the Americans this is reflected in their quality products they offer to the market. Toyota in invests more its employees empowers them to be creative and innovative (Hino, 2012). A strong sense of respect of hierarchal authority enables fast decision-making and implementing Strategic plan.
A weakness is something or a condition that hinders a firm from achieving it objectives. It is a competitive deficiency (Henry, 2008) Toyota offers financial services such as insurance, credit cards. These services report low profits to the firm than other segments. Such financial services can render a competitive edge as well as a deficiency in for firms the financial strength.
Toyota use the just in time system which gives Toyota a competitive advantage, but too much dependency of this system can lead to malfunction if the supplier provision does not meet the requirements of the firm. Failure to meet these requirements affects the products quality in addition, to the manufacturing system.
Toyota capitalizes on the strengths to meet its threat and take advantage of the external opportunities. Toyota has a strong cultural advantage that enhances the organization structure, focuses on teamwork rather than individual efforts. It inspires creativity and innovativeness to employees to improve the quality of its products. Loyalty when dealing with employees and a unfailing sense of respect of the authority. Top managers make decisions, the employees respect their high figures, and this enables quick decision-making. It internal leadership and management helps Toyota to dominate the automobile industry. Toyota depends too much on its suppliers, this leads to a strong reliable relationship with it suppliers (Hino, (2012). Although this could be a weakness but it gives Toyota a competitive advantage over the competitors such as General Motors.
Toyota is a dominating automobile firm, its produces affordable cars and other automobile related products. A SWOT analysis identifies Toyotas strengths, weaknesses, threats and opportunities. Internal analysis involves the assessment of the firm’s internal environment factors such as the organization structure, leadership and management among others. Toyota has a stable structure and principled leadership design (Hino, 2012). The quality of the products and employees loyalty dictates the strengths of the firm. Toyota is loyal to employees and produces quality products.
However, Toyota faces threats such as competition from existing and emerging firm in the automobile industry. It takes advantage of the internal strengths to take advantage of opportunities and minimize threats. Toyota Company has a strong relationship with its suppliers. This helps to fight the upcoming firms and the existing firms in the industry. A complex distribution channel discourages competitor’s efforts. Toyota uses it strengths to take advantage of opportunities, it has high producing capacity at minimum costs. They produce quality and affordable cars in the market (Hino, 2012). They differentiate their products to meet the consumers emerging desires. Toyota has incentives and discount programs that help improve the profitability of its financial services segment.
In Strategic, management SWOT analysis is a continuous process since the environment is changing. Toyota needs inspires its employees to continuously think of strategic changes that enhance improvement in quality of products in the future. It requires strong strategic plans difficult to duplicate, corrective actions to maintainable a competitive position of a leading automobile in the world.
Henry, A. (2008). Understanding strategic management. Oxford: Oxford University Press.
Hino, S. (2012). Inside the mind of Toyota: Management principles for enduring growth. New York, N.Y: Productivity Press.
Pearce, J. A., & Robinson, R. B. (2004). Strategic management: Formulation, implementation, and control. Boston, Mass: McGraw-Hill.
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By definition, digital media refers to digitally compressed content that includes photos, audios and even videos, which are then encoded and shared via computer networks. The past decade has experienced a surge in new technology that affects digital media, including the continued release of new and better computers, phones and the tossing of old models. Digital media has affected how a majority of the activities in the world take place; the quality of normal day to day activities has also been highly affected by different digital media works. Learning about the different digital media works and the devices that aid them makes it easy to know how to live within the new standards that continue to be set through this platform.
The focus of this paper is the smartphone. This device was created in the year 1994 where it was only able to work in fifteen states in America. Around twenty years down the line, the smartphone has developed in ways that its inventors never thought was possible. With the numerous apps that it contains and the hundreds of functions that every basic smartphone can perform, digital media continues to thrive. Movies are a type of digital media that have had a lot of resources poured into their development and creation. In the past, it was only possible to access movies at the theater whereas today, people have all the movies that they can watch on their smartphones. The devices have affected the profits that theaters made in the past since people are capable of accessing them even before they reach the theaters. This has affected some human activities by rendering some people jobless, such as people who were previously employed in theaters (Dewdney and Ride).
The kind of advancement that is used in the creation and functioning of the smartphone has led to the users of the phone having open access to all sorts of programs and information found on the internet. People can share information, pictures, and videos with very little restrictions. This has resulted in people making all their decisions based on what the trends state, thus showing the extended influence that smartphones and the digital media accessed through them has on its users. Apps such as Snapchat, have their subscribers taking videos and sharing them with anybody willing to see them on the internet. This has led to human interactions being reduced to interactions through the internet. Smartphone users have very limited face to face interaction with others since they are constantly found on their mobile phones.
Another function of the smartphone is that it makes it easy for gamers to access their games even when they are away from their consoles. The gaming industry is a part of the digital media world that has greatly grown in the past decade. Day after day, new and more improved games come up, most having more and more realistic formats that enable the users to feel like they are in the actual game.
The game developers have gone an extra mile and ensured that a majority of the games have a version that is accessible on smartphones, such as the famous “Call of Duty.” These games have made it increasingly difficult for the gamers to leave their homes and do things that are a lot more productive. Some extreme gamers go to the extent of not leaving their houses for long periods of time simply because they cannot stand being away from their games; and when they do leave the comfort of their homes, they play on their phones. Though they are helping in the growth of the video game industry, some of their activities are affected, such as their health, their social relationships and in general their social skills.
Some smartphone companies have even decided to go into business with owners of video games, where they have the video games featured as part of the apps that are provided on the phone. This has become very advantageous to all the parties involved, and the smartphone companies make more money, the video game owners make money since people play their games and the gamers have something to do with their phones. However, it is important to note that having the games on the smartphones further promotes the anti-social behavior that is exhibited by most gamers. Another effect seen on the human activities is that most smartphone users are not able to cope with a situation in their real lives as they are used to the gaming reality (Healey).
The smartphones are the greatest aids of social media. Numerous social network forums have been created over the past few years, and they are all accessible through the mobile phones. An example of such social media is Facebook. This is a social network that has millions of subscribers who use it to voice their opinions and share parts of their everyday lives with other all over the world.
Such platforms have taken over how people work their life choices and everything that impacts their lives. Social media has transformed the world from a place where people had very high levels of privacy to a place where nothing is private. One can access information about a person by simply using their phone to go through their different social media accounts. Further proving how nothing is private any longer (Matheson). When watching the news, there is always some form of news that is related to social media, showing how much it affects our lives (Healey).
Social media has also made it possible for people to voice their opinions on the issues that affect them. Unlike the past where people could only voice their frustrations about the decisions taken by companies and governments through strikes and other forms of industrial action, today people take their opinions to social media. The most recent example of using social media as an outlet is the “black lives matter movement.” People used social media to show that they were not impressed with the number of African Americans lives that were lost in the United States in a very short span of time. This is a very good example of how social media, has been used to affect human activities (Demers).
People used their mobile phones to spread the message on the importance of black lives. Smartphones have also aided in the increase in negative activities. Schools allow students to have their smartphone even in school, and this has led to the increased cases of bullying. Some students use their phones to access very private information about their “enemies” and then spread it to the rest of the school. This leads to extreme cases of bullying being witnessed in learning institutions.
Smartphones allow people to have access to very many forms of digital media, be it games, movies and or social networks. The forms of digital media that are accessed on smartphones are very similar to those accessed using tablets. Smartphones have taken over what most people do with their time. Though governments have tried to restrict the kind of information that people can access through their smartphones, a lot of it is still accessible to them. The smartphones have a lot of influence on the direction that people take. Numerous human activities continue to be influenced by the different digital media works that are accessible on smartphones. The rate of productivity in teenagers has also reduced when compared to a decade back because the teenagers are constantly on their phones. Some parents go to the extent of buying smartphones for children as young as seven years old, thus exposing them to the many dangers that lurk on the internet. When exposed at such an age, the children have to learn how to live with the social expectations that the society imposes on them through the internet (Perse).
That aside, the digital format in smartphones has made them the most recent form of media use. Using an example of Samsung and the iPhone series, one can see the influence that the two brands have on human activities. The two companies are constantly trying to outdo each other by coming up with new phones, one after the other. Therefore, people work to obtain the latest models of the smartphones. This means that people have become more focused on working to buy the smartphones than working to achieve other goals.
Digital media is the world that is yet to be fully understood and developed. Those people that have managed to break into the digital market have reaped a lot of profits from their ventures. Digital media works have had a lot of influence on human beings for over a decade. People have changed how they view matters depending on how social media reacts to what they have done. Human activities have changed since they have had to evolve so as to reap the many benefits that digital media has to offer. There have been some very notable forms of digital media that have affected how people view things.
A good example is a movie, 12 years a slave that got a lot of media attention by showcasing the plight of a black slave. The movie got people talking and brought up a new form of respect for African Americans whose ancestors were slaves. All in all, people should not let digital media affect their behavior and lives in negative ways. They should make sure that they follow only the positive works that promote and improve the quality of their lives. Parents should also take it upon themselves to ensure that the digital media works that their children are exposed to are closely monitored. This will help curb bad behavior such as bullying, which may develop at an early stage. Digital media works have been thoroughly promoted through smartphones; therefore it is important to make sure that whatever one does with their smartphone does not negatively affect them in their present or future life.
Demers, Joanna. “Discursive Accents in Some Recent Digital Media Works.” Oxford Handbooks Online, 2013.
Dewdney, Andrew, and Peter Ride. The Digital Media Handbook. Routledge, 2014.
Healey, Justin. Social Impacts of Digital Media. Spinney P, 2011.
Matheson, Donald. Media Discourses: Analysing Media Texts. Open UP, 2005.
Perse, Elizabeth M. Media Effects and Society. L. Erlbaum Associates, 2000.
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Different Brand Advertising Campaign: Case Study of P&G
P&G Brand Advertising Campaign: As prescribed by different researchers and organizations, the cost of doing business is in the recent years is increasing (Amyx 2005; Williams and Page 2009). This is as a result of increasing competition within the market environment, where different businesses are doing everything possible to woo as many customers as possible. As a result of this, consumers of different products are the beneficially since all the extensive researches conducted are geared toward improving the quality of different products; hence, enhance consumer satisfaction. To achieve such objective, while still remaining relevant and competitive, the organizations need to formulate resilient strategies that build on distinctive competencies and provide a lasting competitive advantage.
On the same right, the said strategies ought to be sensitive and dynamic so as to encompass any eminent changes that are inevitable in any competitive market. Among the market strategies that different organizations are engaging in is the different brand advertising campaign. Advertising, as different researchers have claimed plays a key role in determining the success of a given product in the market. In regard to a different brand advertising campaign, the emphasis is on product differentiation, where the company tries to convince their customers, and other potential ones that their products are superior to similar products offered by their competitors. This is specifically done, in a bid to increase sales, command the market share and win new customers for increased profitability. Nevertheless, adopting a different brand advertising campaign is not a smooth ride but there a variety of handles that the marketers need to contend with at different levels. This is even true when a firm is facing competing rivals who also keep strengthening their advertising and product strategies with an aim of dominating the market (Brewster and Palmer 2001).
The study work at hand intends to explore some of the potential problems that a marketer may experience in his/her bid of using a different brand advertising campaign as his/her ultimate marketing strategy. To achieve the intended objective, the study will use P&G as its case study and will explore some of the challenges, and benefits it has achieved by employing the said marketing strategy instead of using the conventional advertising strategy. In addition, the research will propose some of the methods that can be employed to override those problems.
Brief description of P&G
William Procter and James Gamble are credited as the founders of Procter and Gamble (P&G) business that has in the recent past expanded to the international market; both in developed and developing countries. It has been regarded as one of the Fortune 500 American multinational corporations that have established its roots far and beyond its boundaries of Cincinnati where it was first established. The industry is supposedly the American biggest producer of household products and pharmaceutical goods. In particular, company is credited for providing over 250 brands that are grouped into six distinct categories. These groups include laundry and detergents, paper products like toilet papers, beauty care, food and beverages, sanitary towels and health care products.
In addition, the company also makes other products like pet food and PUR water filters and chemicals that are used internally and also by other chemical processing companies. As a way of attracting and retaining new clients, especially female consumers, the P&G also engages in production and sponsoring of Soap Operas that serves to distinguish its brand advertising strategies (A Company History: 1837- Today 2006). In fact, P&G is among business that have been credit with successful business innovations especially on brand management such as Connect and Develop innovation. According to Nielsen Company, P&G business is also among those companies that spend a fortune in advertisements alone. It is said to have had the highest advertising budget of all companies listed in United States by 2007 (Johnson 2012).
Despite all these positive aspects, the company also faces some challenges that demand prompt actions. Among such challenges is the continuous demand for new innovative and brands differentiation. The pressure originates from stiff competition that is posed by other small and larger competing companies. In addition, advancement in technology and new demands for new brands, the company is in a dilemma in deciding which brands to retain and those to discard. For instance, though soap and candle were the main products that the company produced in its initiation stages, candles have become obsolete due to the invention of electric lights among other products that rendered it irrelevant. Attracting, retaining and satisfying the clients are the main challenge that the company contend with all the time.
To handle this challenge effectively, the company has come up with different strategies that are also sensitive to the increasing cost of production in the company. In regard to this fact, as was observed by Jeff Neff of Ad Age, the company had even lost its usual top post in shopper magazine ranking. The failure to retain the top slot went on for three years making shareholders wary. The challenge is thought to have been as a result of effective advertising by its competitors like Unilever (Neff 2013).
In regard to its budget, as per its 2010 annual report indication, P&G is said to be spending cash amounting to over $10 billion in advertisements alone. According to the report, the percentage of Ads as a portion of sales for the said years was approximately 11.3%. This is an increase from the previous years’ where the same ratio was 10.9% and 9.8% in 2010 and 2009 respectively (Johnson 2012). Such increasing figures in advertising is said to have its toll on company’s inability to reward its faithful shareholders effectively (Edwards 2011).
Psychology of advertising
Advertising, since time in memorial, has been used in different circumstances by business to build powerful business force. In definition, as proposed by Brewster & Palmer, 2001, advertising may be referred to the purchased publicity conducted in a pre-planned way to seduce potential clients to act, think or behave as per the advertisers’ desires. According to Robert Hearth, advertisement is a tool that is most effective in persuading any potential and existing consumers to consumer certain products. According to him, companies that use advertising are amongst the most successful ones in the world (Heath 2012).
The same claim is echoed by Krugman’s idea who asserted that TV advertising has a direct influence on individuals even when processed inattentively. This is what is supposedly referred to by a number of individuals as subconscious seduction. Advertisers take advantage of this fact, first, to influence individuals’ mind and secondly, to influence their decision making in regard to certain products. Some psychologist believes that advertisements have both negative effects and positive effect on different individuals of a society. They also believe that the presence of advertisements on available media; whether television, newspapers, magazines, journals, radio and internet among others make all individuals target. They thus believe that advertisements have subliminally stimulated the way different individuals react in different situations (Amoto and Laudati 2001).
Richard Pollay, in his book, The Distorted Mirror: Reflection on the Unintended Consequences of Advertising claim that advertising seem to pop up in every part of the society, include the intimate space of customers’ homes. According to him, advertisements are created to attract attention, cause a change of attitude and influence consumer behavior toward certain ways (Pollay 1986). Nevertheless, some researchers still hold the idea that, though, advertisements has almost direct influence on individuals viewing them, businesses and individual marketers need to formulate their advertisement perfectly so as to inform customers of their products; hence, woo them toward buying (Hansotia and Wang 1997).
According to researchers, customers are highly responsive to advertisements, especially those that are aimed at informing them of new products in the market. Such advertisements are said to carry information persuading the customers to purchase a certain brand of products due to their superiority in quality and customer friendly prices. Depending on the response of the customers on product differentiation message contained in the adverts, firms are said to take appropriate actions; whether to increase or decrease their sizes. In cases where the customers’ responses are deemed positive, firms are said to increase their market size appropriately as they also adjust the prices of their products accordingly (Ferguson 20012).
Possible problems associated with advertising
As describe above, advertising is one of the strongest and most effective tool that businesses can adopt to reach their targeted customers. Nevertheless, in the process of designing, formulating, implementation and monitoring a myriad of potential problems may haunt the business. Such challenges are the center of interest in the succeeding discussion. The problems may include, but not limited to cost implication, consumer attitude, stiff competition from competing businesses, and product differentiation among others.
According to a discussion paper prepared by Kyle Bagwell of University of Columbia, Department of Economics on The Economic Analysis of Advertising, advertising is a sizeable business. According to him, in the year 2003, major companies like General Motors $3.43 billion, Procter and Gamble $3.32 billion and Pfizer $2.84 billion among other companies experienced such greater advertising expenses (Bagwell 2005). The high costs of advertising are to some extent influenced by the stiff competitions that exist in the market. In the case of P&G, though the company was the pioneer of so many products like cleaning detergents, health care products like shampoos and chemicals, a large number of potential competitors like Unilever have come up with similar products. In some instances, such competitors are said to outdo P&G Company in terms of quality of some products. They also do well in reaching out for consumers through their effective advertising and rebranding strategies.
In regard to adopting a different brand advertising campaign like it has been done by P&G, the cost of selling the idea would mean adjusting the advertisement budget upward. In a conventional advertising budget, the cost would be influenced by a number of factors such as the frequency of advertising, competition and clutter, market share of the brand being advertised and the product life cycle stage. In regard to frequency of advertisement, advocating for a different brand would mean that the cost would be relatively higher than that of already established products. The need for increasing the frequency of advertising is to try and ensure that the target consumers are convinced that the target product is superior to the ones being offered in the market (Brewster and Palmer 2001).
A company using a different brand advertising campaign is also expected to bear more financial burden in regard to competition and clutter. Clutter in this case refers to number advertisements that are run in a given media. P&G is expected to incur extra cost since it requires having more clutter than its competitors. In addition, the cost of designing such advertisement would cost them more than that of an already established product that have already been accepted widely and can still dominate the market even without the need for an advert.
Selling a different brand will also require the company to emphasis on the quality of the product it is selling. According to psychologists, consumers are always looking for a product that would not only satisfy them in terms of financial implication, but also one that meet their quality expectation. This will auger well with how well the product has gained ground in terms of market share. In addition, a new brand will demand that the advertisement be of high quality and eye catching and unique. To achieve all these, the company will require engaging experts in its production lines who will ensure that the quality of the product is not compromised. They should also ensure that their packaging line is managed by individuals who are experienced and understand how the markets work. The packaging material should also be appealing and unique so that it can stand-out amid competition. All the above objectives are only achieved if the company’s advertising budget is relative higher than that of the competitor.
In some instances, companies, including P&G are bound to rebrand their products in the form of product differentiation. This will mean that even an existing product, which has undergone such changes, would look as new product. To convince the existing consumers and also the potential consumers that the products are the same or relatively better will call for serious and extensive campaign. In order to reach all the clients, the company would not trust only one form of media, but would opt for a number of them that would be accessible by the target clients. For instance, in a bid to remain relevant and competitive in the sale of women product, P&G is said to be producing and supporting some soap operas both in TV and Radio. This means that its advertisement budget is higher than that of its competitors. With increased advertising budget together with other running expenses that companies incur in their bid remain competitive and attract to both customers and potential and existing investors, the company may fail to meet its long-term objectives.
For instance, it is said that P&G had in some years failed to provide substantial returns to its shareholders due to increasing cost of production and running costs. Here, with a quick glance at the 2012 P&G annual report, the company’s net earnings reduced from $ 15,495 to $13, 292 despite an increase in net sale to $83, 680 from $81,104 in the year 2011 and 2012 respectively. This led to a decrease of $ 0.73 in net earnings per common share from continuing operations (P&G 2012; Johnson 2012). The increase in sales may be attributed to the progressive and active advertisement, but this lead to increased operation costs that have lead to reduction in net earnings. With the company failing to satisfy its shareholders, some are bound to withdraw their support while others may invest in competing companies. Such a move would be detrimental to the company and its products.
Consumer attitude and perception
Psychologically, individuals are said to react with a lag of diverse period in terms of changing their decision due to changes in certain issues (Gujarati 2007). In regard to the question at hand, individuals would also be cautious to jumping into buying new or rebranded products due to the natural nature of human being of the fear of unknown. In addition, as expressed in the previous section, customers are subjective to seduction borne in different advertisements. In cheer realization that other competing companies are as well striving toward winning more consumers, such companies are bound to benefit more when a company decide to go beyond the usual products. In addition, some researchers have argued that, the relevance and importance of a certain ad would be determined highly with how the consumer has interacted with ads In cases where the consumer do not have access to the ad, it would mean that they would be blind to the product being targeted (Rubin 1981). On the same note, the different brand advertising campaign may not encompass enough information to change the decision of the clients as Fernandez and Rosen (2000) found out in his research on goal-oriented consumer’s response.
Effect of competition on advertisement
According to economists, companies come up with advertisements for various reasons that are all directed to customers. On the same note, economists believe that marketers and advertisers retain ultimate right to decide on the content of advertisements, and customers have no option but to take the information carried by the ads. For this reason, consumers do not all the time openly accept the information. Instead, they are said to interpret advertisements differently. Therefore, adopting a different brand advertising campaign is bound to experience more challenges than the conventional way. In addition, since advertisements are bound to affect pricing of different products before consumers are fully persuaded that the different products are superior and selling at fair prices, the company may experience low growth as consumers opt to buy from their competitors (Kirmani 1990). Similar assertion are echoed by Sutton (1991) who said that though advertising is bound to improve customer perception toward a certain brand; hence, creating some barrier to entry, it is bound to increase competition; thus, forcing some firms to reduce their expenditure to avoid the ultimate effects of fierce price competition.
Economists, to some extent, agree that advertising is majorly adopted by monopolistic firms, to gain product differentiation and achieve market control. With product differentiation objective achieved, the firm is as well said to have gained some ground in controlling the market. In the study’s case scenario, P&G Company is not a monopolistic but is surrounded by able rivals and even potential entrant. For this reason, convincing the customers that their products are superior would mean increasing its advertisement clutters; adopt alternative campaign strategies among other ways. Different brand advertising campaign may also, instead of increasing awareness of the product increase the demand for a rival company’s product at the expense of the marketer.
On the same right, such advertising strategy would reversely lead to a decline in consumer value especially in developed market due to increased commodity prices to counter the extra financial experiences trigger by the ads. For instance, P&G sponsored the US Olympic Team and had an advert dubbed ‘Thank you Mom’. Inasmuch as the ad had gained popularity in the US, P&G Company may have not scored properly due to the high cost of running the advert. According to a report released by the company in 2012, the ‘Thank you Mom’ advertisement required the company to think globally. This would involve formulating a communication objective that would cut across board; hence, requiring an expansive and expensive plan to articulate (P&G 2012).
One of the key pillars toward a successful advertisement campaign is price differentiation. Firms and companies that have successfully managed to persuade their customers that their products are overly different from others in terms of quality, outcomes and costs are said to have been rewarded with unequivocal market share and dominance. In regard to product differentiation, a firm opting to conduct a different brand advertisement campaign is bound to employ either the horizontal or vertical differentiation. In definition, horizontal differentiation consumers are said to differ in what they prefer in a product. That is; the characteristics like color, taste, and sources bestowed on a given product. On the other hand, in regard to vertical differentiation, the emphasis is on product characteristics that make consumer go for quality. Therefore, a problem of ensuring that the products under scrutiny in different brand advertising campaign are purely different from other may arise.
In regard to P&G, as documented in its 2012 annual report, its main objectives is to have brands with strong equities in the minds of consumers, those that retailers are demanding and those that are platforms for innovation. Achieving such objectives is not a significant challenge to P&G since it has financial, technological and manpower strength. Nevertheless, the same notion is sure in its rival competitors’ agenda. The only sure way to ensure that its product retain their reputation is to ensure total differentiation, which in part is supported by effective and extensive advertisement (Barroso and Llobet 2011).
In this right, Roberts and Lattin (1991) found out consumers reaction toward consuming a certain brand is more influenced by their choice sets later than their awareness sets. According to them, the consumers’ awareness is highly influenced by such things like advertisements while the choice set is determined by the consumers purchasing decisions. Therefore, a firm that is determined to employ a different brand advertisement strategy should emphasis on influencing both awareness and choice set factors, something that may be problematic to balance and achieve as (Goeree 2008) found out.
Shon Ferguson (2012), in his study on Endogenous product differentiation, market size and price stated that consumer love for diversified brands leads them to becoming more sensitive to product differentiation efforts by different firms; hence, uncontrollable increase of differentiated products in the larger market. In respect to this, he argued that expansion of market base by firms through product differentiation and advertisement may eventually lead to higher prices of such products. If this does happen, consumers are then said to divert their attentions to other similar commodities that are offered at lower prices. This is because, with polarized market, consumers have a wide variety of commodities that they can choose from; hence, the notion of consumer loyalty does not hold (Ferguson 20012).
This is true even to the case of P&G Company that, though having been among the market pioneer is competing with so many other late entrants. In addition, as some researchers have argued, so much concentration on the need for price differentiation would eventually lead to a compromise in terms of prices or quality (P&G 2012). Therefore, the most appropriate advice that researchers have offered is for firms to remain cognizant of the consumers’ need and marshal toward satisfying them by and large.
Grossman and Shapiro while investigating the effect of informative advertising realized that advertising help the elasticity of demand faced by each participating firm. According to them, the lower the cost of advertising, the more the advertisement clutter will increase and the better informed the consumer will become (Amoto and Laudati 2001). In such instances, where the customers are well informed, and more firms are engaged in advertisements, a firm that spend more money in advertisements is bound to suffer since advertising in a market where consumers have full knowledge of the market does not necessary mean increasing your customers.
To avoid the potential problems that are associated with different brand advertising campaign effectively, marketers would need to take a number strategic measure. First, as it has extensively been discussed in the previous section, the marketers should constrain their budgets in such a way that they adhere to the company’s objective. This can be done by ensuring that the advertisements are perfectly formulated to reach the target group effectively while at the same time, minimizing the cost of running those adverts in different media.
In regard to consumer perception and attitude, the adverts should carry exceptionally, convincing and persuasive messages that reflect, if possible, the actual reality of the brand being advertised. This would auger well since customers who have had the potential to purchase the product can pass the same information to them that are aware of the brand but have not made a positive choice of purchasing them. In addition, this would give the company a competing edge against its potential rivals and potential entrants.
The company should also formulate its advertisement with cheer realization that the advert can have an anti-competing outcome, where it promotes the products of the competing firms. The company should also have its shareholders and investors in mind; hence, it would continually receive financial and other forms of supports even in times of turmoil.
P&G Company, like many other large and small companies, engages in intensive advertisement in a bid to weather down any potential competition. In fact, Procter and Gamble is said to be the leading company in terms of advertisement. This is true even with the fact that it is always in the top three of the most profitable multinational company. The need for regular advertising, where it is reported to collaborate with other firms and sponsor is said to emanate from the need to inform its customers regularly of its superior brands that have dominated the market. In a bid to advertise, like any other companies, it faces challenges that drag down its objectives.
Among the advertising strategies that a company adopts, different brand advertising campaign is one that can lead to greater success in reaching customers. Nevertheless, there are a myriad of challenges that are attached to the strategy as discussed in the previous section. In particular, the campaign would be more expensive than the conventional methods employed by many companies. It requires maximum time to convince the customers that truly, the brand the company is selling is superior and better than the similar ones in the market. Again, the customers may not be fully convinced; hence, though having the awareness of the product may opt to consume those offered by competitors. The strategy is also said, sometime, to work against the company where it indirectly promotes the products of its competitors. Therefore, as much as the company would love to use this strategy, it should be wary of the challenges; hence, plan appropriately. The advert should be formulated in such a way that all the unnecessary costs are avoided while at the same time, targeting to reach all the potential customers.
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