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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WILLIAMS, Kaylene and PAGE, Robert (2009). Marketing to the Generations. Journal of Behavioral Studies in Business
I hope you enjoyed reading this post on the brand advertising campaign of P&G. There are many other titles available in the marketing dissertation collection that should be of interest to marketing students and practitioners. There are many dissertation titles that relate to other aspects of marketing such as branding, corporate advertising, marketing strategy and consumerism to name a few. I would be grateful if you could share this post via Facebook and Twitter. Feel free to add your thoughts in the comments section. Thank you.
Marketing Banking: Identifying the Insightful Marketing Mix in Banking
Marketing banking services has assumed a new dimension as new ideas and innovations continues to drive the competition. Today, marketing has occupied a prime place in the business of banks and different services and products are being created and directed towards meeting the needs of the customer. While the traditional methods of marketing banking remain effective, there is the need for banks to apply more insightful marketing mix in marketing financial products and services. This paper identifies email marketing, rather than social media networking, as a very effective means of marketing to the Gen Y among other insightful approaches to marketing banking nowadays.
The evolution of marketing banking started in the West in the late 1950’s (Muraleedharan, 14). Prior to this period, marketing was alien to banks. At the early stage of its emergence in the banking industry, marketing banking was mainly practiced in the form of advertising and promotional strategies. It was not until the 1970’s before marketing was fully grafted into the banking industry as an integral part of managing banking business.
Effective marketing of banking services is important particularly during a period when banks are confronted with tough competition from other local and foreign banking and non-banking financial agencies that offer value added services to their customers. Competition in the financial service industry is not limited to resource mobilization and lending to customers; it extends to the core areas of revenue generation services offered by banks and which also form the core aspect of banking. The cumulative effects of stiff competition in business and the continual change in the banking operational environment, engendered by the process of economic reforms, has made marketing of banking services imperative for all categories of banks in the private and public sectors of the economy.
Marketing banking services has assumed a new dimension as new ideas and innovations continues to drive the competition. Today, marketing has occupied a prime place in the business of banks as different services and products are being created and directed towards meeting the needs of the customer.
What is Marketing Banking?
Hartley (Jha, 49) referred to marketing banking simply as ‘’responsive marketing’’ suggesting that it is an attempt at responding to the changing needs of the customer, the society and the environment. Kuppuswami defined marketing banking as ‘’the creation and delivery of financial services suitable to meet the needs of the customer at a profit to the bank’’(Kuppuswami, 20). Kuppuswami’s definition shows that marketing banking aims at satisfying the need of the customer with an underlying intention for making profit. Deryk Meyer, a former United Kingdom Chairman of the Barclays Bank, defined Marketing banking as ‘’consisting of the process of identifying the most profitable markets now and in future, setting business development goals, making plans to meet the goals and managing or promoting the various services to achieve the set plans in a rapidly changing market environment’’ (Muraleedharan, 27).
Deryk Meyer’s definition has been considered as comprehensive because it highlights a process of marketing bank services consisting of the following three layers:
Identifying the present and future markets that offer the most profit margins.
Assessing the present and the future needs of the customers.
Setting aims and objectives, managing and developing banking products and services that satisfies and meets the needs of customers in a changing market environment.
Brent (1995, 45-54) and Holmlund & Kock (1996, 287-297) identified the ability of banks to implement marketing strategies based on the needs and preferences of customers as a key factor for successful marketing banking.
Marketing banking goes beyond selling bank products and services to existing and prospective bank customers. Effective marketing of banking products and services includes creating a strong and worthy brand image of a bank on the mind of its customers. The present day bank customers are looking for a bank which can meet all their present and future needs, therefore, understanding the key elements that makes marketing banking effective is crucial to the successful implementation of marketing orientation in banking because banks now operate in a buyer’s market.
How to Identify the Needs of Bank Customers
Market Segmentation and its Importance
Marketing banking has two key elements which are: an understanding of the needs of the customer and the willingness to satisfy the identified needs. It involves learning what a customer takes into consideration when making choices from specific banking products and services. Existing and potential bank customers are increasingly becoming quality conscious clients and since no two groups of customers are the same, there is the need to do market segmentation of bank customers within each branch or geographical area in a bid to identify the needs of each group of customers.
Meaning of Market Segmentation in Banking
Market segmentation is a common marketing practice where a larger target market is broken down into smaller market segments for efficient and effective marketing. Alan Roberts refers to marketing segmentation as a means of conquering a larger market by dividing it into smaller segments. The classification of banking products and benefits is often the best way of defining bank market segments where many products are available on offer to customers.
The parameters for the segmentation of bank customers include the use of one or a combination of two or more of the following: geographical location, demographics, volume of transactions, psychographic or personality traits, and benefits (Rajeev, 119).
Geographic Market Segmentation
In the context of banking, geographic segmentation may be done on the basis of different variations like north, south, east and west or on the basis of population like town, small city and large city or it could be done simply by classifying the market into rural, urban and metropolitan. Geographic segmentation appears to be the easiest form of market segmentation as each segment has a well-defined demarcation.
Demographic Market Segmentation
Usually, demographic parameters include sex, age, income, occupation, education and social class among others. Literature is replete with the suggestion that extending geographic segmentation to include demographics may produce banking market segments with more homogenous characteristics than either of the two taken on individual basis (Muraleedharan, 31).
Psychographic Benefit Segmentation
Psychographic benefits such as parameters that portray personality traits are another set of useful criteria for segmenting banking market. However, psychographic benefit parameters are rather sophisticated and their effective use for market segmentation requires a deep understanding of the psychology of the customer. Examples of psychographic benefit traits are leader-follower traits, conservative-liberal traits, and introvert-extrovert traits. However, the extent to which psychographic traits could help in segmenting bank customers based on needs and behavior remain rather uncertain and it is, therefore, difficult to implement in bank market segmentation.
Product Benefit Segmentation
Product benefits as a tool for segmenting bank customers refer to the use of parameters like status, economy and convenience. A bank customer who longs for a bank loan is looking to enjoy the benefit of better economy and another customer who craves for prompt and efficient bank service is looking to enjoy the benefit of convenience and would be willing to pay a price for convenience. The most common banking benefit segments are categorized as follows:
Standard Banking Benefits
Standard checking and savings banking products form one of the largest segments of banking benefits commonly offered by banks. Though banks usually market checking and savings accounts separately, yet many banks now attempt to create a bonding relationship with their regular customers by introducing banking packages that gives additional value to customers when they add savings accounts to their checking accounts. Often, the incentives used by banks include offering higher interest rates on savings deposits and seamless transfer of funds from checking to savings accounts and vice-versa. Marketing of this category of banking benefits to target customers could be done through electronic and print media like television, radio, newspapers and magazines.
High-end Special Savings Benefit
The special savings benefit segment is a step ahead of the standard banking benefit for checking and savings customers. High-end special bank savings may include high interest rate savings accounts, money market, certificates of deposits and other packages that give great dollar value to customers. It is easy to market this category of benefit segment to existing customers already running standard checking and savings accounts but the product can be marketed through the media.
Bank loans form a huge segment of banking benefits which most banks offer their customers as part of banking operations and a strategy for marketing banking. Typical examples of bank loans include home and auto loans which often form a significant part of bank loan portfolio. Other available banking loans are student loans, equity loans and personal loans. Marketing bank loans are usually done separately from marketing of other banking products. Home loans are better marketed through real estate resources or media-like publications and auto loans would reach the right target customers if marketed in auto publications. Banks can also cross promote consumer banking loans by marketing to existing customers at attractive rates or as part of a package with other products.
The investment benefit segment of banking operation is fast becoming popular among traditional banks. Bank customers who have been managing their stock, bond and other niche investments on their own through separate bank accounts could be targeted for this product. Banks can also market investment benefits to existing customers together with attractive benefits. Banks could also market investment solutions through investment related media and investment publications.
It is expected that customers within the same classification or segment would show similarity or homogeneity in their banking needs. However, each segment should be tested for validity using measurability, accessibility and profitability as measuring tools before any group is accepted as a segment.
The factors that influence a customer’s choice of bank products are both internal and external factors. The internal factors include needs, attitudes, motives and perceptions while the external factors include influence of culture, economics, business, family and the influence of social group.
Household Segment versus Corporate Segment
In most markets, market segments within the banking industry could be classified as either household or corporate segments. The degree of bank marketing efforts required in each case differ because the two major segments have characteristics which are distinct and opposite to each other. Marketing banking to the household segment requires the application of consumer marketing principles while the principles of industrial marketing has been considered by experts as the most appropriate technique for marketing banking to the corporate market segment. Some of the recognized and leading household marketing banking segments are students, senior citizens, housewives, working women, young working men, working women and defence personnel among others.
Benefits of Market Segmentation to the Banking Industry
Market segmentation of bank customers has its distinctive advantages. It helps a bank to differentiate customers with dissimilar needs from those with similar needs. Market segmentation of bank customers provides a solid foundation for building enduring bank marketing strategies. Market segmentation also helps banks to create special marketing packages for each group of customers based on their distinctive needs. In turn, bank customers could easily create the mental feelings that specific bank products have been specially designed for them. Such psychological feelings will improve customer satisfaction and also make the work of the bank marketer easier. The overall positive effect of proper segmentation of bank customers is bound to gain a higher return for every dollar spent on marketing banking services.
The Importance of Marketing Banking
Banking is a service industry and bank customers have become sophisticated. Technological advancement has produced more sophisticated consumer tastes. Bank customers now expect that their bank will offer them quality services and products tailored to meet their specific needs. Financial needs of bank customers have become rather complex because of the global modern trend. Bank customers now compare products and services offered by both local and foreign financial agencies and demand improved quality services with variety or a range of choices. Nowadays, customers of banks want access to instant cash, appropriate financial advice; Internet based banking services, deferred payments, asset security, reduced interest rates, personalized services and financial products with flexible terms among others. Identifying the needs of the existing and potential bank customers and providing quality financial products and services that match their demands is the key strategy of marketing banking. Marketing banking creates awareness of banking products and services among customers and it helps banks to focus on offering quality products and services as a key factor towards running a successful banking venture in a competitive world.
The stiff competition the banking industry face nowadays cannot be overemphasized. In a recent report published on May 7, 2012, Grind Kirsten analysed the new banking services which brokerage and mutual-fund firms have been rolling out to excite existing customers and also grab a lot of the new customers who are already getting frustrated with the sloppy services of the big banks. Experts suggest that some of the new incentives might worth a look because the new offerings seem to be paying off for the firms. The brokerage and mutual-funds firms have started to record increases in the number of accounts opened and the deposits made by their customers ostensibly influenced by the thoughtful offerings and incentives offered.
TD Ameritrade, a brokerage firm is now offering online bill pay, ATM rebates, free checking accounts and increased return on savings accounts which now pays 1.25 percent per annum to their brokerage customers. Also, Charles Schwab Corporation is offering all their existing brokerage and prospective customers free checking accounts and a lot more incentives like reimbursed ATM fees.
In Fidelity Investments, the new offerings being made to their customers seems to be yielding good results as the brokerage firm saw an increase of 40 percent in their Fidelity Cash Management Accounts in 2011. The Fidelity Cash Management Accounts don’t pay a fee on checking and there is no minimum balance restriction. Fidelity Investments rewards customers for higher deposit levels with such incentives as free trades, Apple gift cards and airline tickets. Charles Schwab recorded a $61 billion increase in bank deposits last year which translates to a 20 percent increase in deposits according to the report. Overall, the report says the deposits of 10 US banks run by brokerage firms increased by 16 percent in 2011 to $263 billion.
In comparison to traditional banks, financial advisers say that some offerings by brokerage firms stack up well which is why marketing banking is a very important concept to the present day banking industry.
Approaches to Marketing Banking
The banking industry has approached marketing banking in various ways over the decades using a combination of such methods as:
Identifying and analyzing the needs and wants of existing and potential customers.
Crafting banking products and services to match the needs and wants of customers
Setting appropriate pricing for banking products and services
Using appropriate advertising channels to promote products and services to the existing and prospective customers
‘’Top to Bottom’’ Approach to Marketing Banking
There have been many traditional approaches to marketing banking products or services over the decades. One of the traditional methods is the ‘’top to bottom’’ technique. Banks have generally been occupied with the development and release of various banking products and services on the basis of ‘’top to bottom’’ approach. The ‘’top to bottom’’ approach of marketing banking is a scenario where the headquarters of a bank designs and develop banking products and services solely and then trade these products through their retail outlets, which are often called branches, to the different segments of their teeming customers.
While this approach could have been effective at some points, the present challenges of bank management requires a shift from this traditional approach and focus on developing banking products from the grassroots level up to the top. The ‘’bottom to top’’ approach promises to help banks design and develop products and services that suits the needs of the different homogenous segments of bank customers.
Besides the traditional approaches to marketing banking, experts have proffered new strategies and ideas to facilitate marketing success in the banking industry. Jim Marous, a marketing services expert recently tweeted ‘’50%+ of bank customers aren’t on banks email lists. Need multi-channel integration.’’ In response to Jim Marous, Bob William, a Director of Marketing Technologies at Harland Clark and author of the blog ‘’The Merchant Stand’’ wrote a guest article on Jim’s blog, ‘’Bank Marketing Strategy,’’ and suggests the need for banks to collect more insights and use mobile device applications to improve proactive multi-channel communications and integration with their customers. Banks are simply not using the mobile channel for effective communication with their clients according to Bob’s article ‘’Banks Need to Collect Insights to Communicate Effectively.’’
Neal Reynolds, a bank marketing and advertising strategist, suggests that banks should offer more than the traditional banking services if they elect to succeed in banking. Neal says banks need to ‘’become the go-to place before anyone invests in anything.’’ Maybe banks need to offer their customers insights on how to invest in stocks, real estate and even how to choose insurance packages and retirement plans. In addition, Neal suggests that banks should embrace the Internet more and offer internet related banking services; remote capture and online bill pay services as creative means of attracting new prospects and keeping their existing customers.
In analysing the strategy for marketing banking to the Millennials, that is, the Gen Y population group or the Internet Generation in the USA, Damian Davila, in his article ‘’How to Market Banking to Gen Y’’ published in July 2010, says that email is the one and only effective means of marketing banking to the Gen Y in this contemporary times rather than online social networking sites – Davila reached this conclusion after analyzing a series of data on Gen Y. People within the Gen Y led the pack of online banking customers with 80 percent and it is reported that they are comfortable performing financial transactions of various types on the Internet.
Martha Bush, the SVP of Strategy & Solutions at SIGMA Marketing Group, suggested the following key strategies bank marketers can use to improve bank marketing experience:
Identify the behavior triggers of your customers that show their readiness to buy new banking products by setting powerful predictive software models to run against your customers’ database or files. This is a good strategy for monitoring customer growth initiatives and it is a novel approach for cross-sell and up-sell bank marketing techniques. Bank marketers can identify the real time to sell specific products or simply suggest the use of new banking services to the customer through this marketing strategy.
Use hunt-and-peck method of marketing to consistently find high net worth persons looking for new banking experience.
Reduce the rate of customer attrition while working to build stronger relationships by spotting the early warning signs of customer dissatisfaction. The point at which each customer becomes dissatisfied can be known early and you will have the best chances to apply retention strategies if powerful predictive models and automated messaging techniques are used.
Use timely and relevant communications to improve customer satisfaction. Bank customers now expect real-time exciting relationships with their bank everyday.
Effective communications requires that the bank marketer has in-depth insights of the customer each moment of interaction. Customer insights should include banking behaviour and lifestyle so that the bank marketer will be able to deliberately create smart interactions with the customer while adding value at the same time.
Effective marketing of bank services and products increasingly requires creative strategies if banks hopes to continue to successfully compete with other financial agencies in the market place. Though marketing banking has now occupied a prime place in the business of banks yet banks need to continue to develop different services and products and direct the variety towards meeting the needs of the customer. Considering that there is a great shift in the way banks succeeded in the past compared to the prevailing new competition, banks will have to continue to develop insightful ideas and strategies to retain existing customers and attract new clients.
Banks needs to lay less emphasize on location but concentrate more on delivering quality services through the Internet and endeavor to create a bond with their valued customers by using varied and proven marketing strategies together with mobile device applications more proactively. Also, it is imperative that bank marketers will have to incorporate powerful models and analytics into managing their customers’ database to improve predictions of customer behavior.
Brent, K (1995). Relationship Banking and Competitive Advantage: Evidence from U.S. and Germany. California Management Review 37, 45-64.
Bush, Martha. Five Engagement Strategies for Bank Marketers in 2015
Davila, Damian. How to Market Banking to Gen Y, 2012
Grind, Kirsten. Funds Firms Challenge Banks, 2012
Holmlund, M and Kock. S (1996). Relationship Marketing: The Importance of Customer-Perceived Quality in Retail Banking. The Service Industries Journal 16, 287-297.
Jha, S.M. Service hdarketing, Himalaya Publishing House, Mumbai, 2000. p.49.
Ksajitha. Marketing of Banking Services.
Kuppuaswami, S. The Banker November 1986, p. 22.
Marous, Jim. Bank Marketing Strategy, 2012. Web
Muraleedharan, K.K. Marketing Strategies of the Banking Industry, 2010.
Rajeev K. Seth. Marketing of Banking Services, Macmillan India Ltd. Neu Delhi, 1997. p.119.
Reynolds, Neal. Sticks and Bricks or in the Clouds: Bank Marketing Strategies + Ideas, 2012
William, Bob. Banks Needs to Collect Insights to Communicate Effectively. Bank Marketing Strategy, 2012
I hope you enjoyed reading this post on Marketing Banking.. There are many other titles available in the Marketing Dissertation Collectionthat should be of interest to marketing students and practitioners. There are many dissertation titles that relate to other aspects of marketing such as branding, corporate advertising, marketing strategy and consumerism to name a few. I would be grateful if you could share this post via Facebook and Twitter. Feel free to add your thoughts in the comments section. Thank you.
The term ‘shared value’ was first introduced by Michael Porter and Mark Kramer in an article for the Harvard Business Review (HBR). The aforesaid term essentially means creating value for the business in a way that also creates value for the society by addressing its requirement and challenges to the business entities (Kashani and Miller, 2000). Many business entities including Nespresso have adopted the approach of shared value. Various objectives of adopting the approach of shared value are described below:
This approach is helpful in preventing the potential business risk and ensures that the business is not contributing to unacceptable level of harm to the society and environment. Thus, adopting the approach of shared value is helpful for companies to prevent risk to the external environment (Sirianni, Bitner and Mandel, 2013).
Nespresso Corporate Reputation Management
Developing an image of responsible corporate citizen has become prime objective of the contemporary organization to achieve long term sustainability. A positive corporate image appeals to regulators, investors, customers that is helpful in maintaining dignity of the entity in the market. Thus, shared value approach enables company to develop a positive image in the eyes of its stakeholders.
Another important objective of creating shared value by the businesses is to reduce the consumption of scare resources such as energy, water and other materials. This will not only help company to become responsible citizen but it will also be helpful in reducing cost to the company (Klepper, 1996).
Nespresso has also adopted shared value approach to achieve above described objectives. It is the brand name of Nestle Nespresso S.A. which is an operating unit of Nestle group. At the heart of Nespresso’s success as a brand lay its commitment to exceptional cup quality. Chief Executive Officer (CEO) of Nespresso has already committed the organization with the concept of shared value as an operating principle. Share value approach recognizes societal needs in addition to the conventional economic needs (Nespresso and Alliance, 2003). Furthermore, it also recognizes social harms and weaknesses that frequently create additional internal cost to the company in terms of energy waste, costly accidents and the need for remedial training. It is evident that coffee industry is facing significant social and environmental challenges therefore; companies like Nestle have adopted the shared value approach. The principle of shared value was developed by Harvard professors Michael Porter and Mark Kramer in year 2006. According to this principle, companies do not only have responsibility towards shareholders but for communities also in which they operated from farmers to customers and ultimate consumers.
Nespresso concept was developed on the basis of an espresso extraction system that enables discerning espresso coffee consumers for preparing excellent quality espresso coffee at home. The Nespresso business model is based on a threefold commitment to the unique extraction system that is an innovative and efficient direct to consumer club membership model (Markides and Charitou, 2004). Thus, Nespresso brand has created iconic luxury brand image along with exceptional quality and use of advanced technology. The shared value approach is strategically relevant to the brand because customers were found motivated with the different aspects of brand and product that also includes a group of 16% consumers who define the brand as ‘eco committed’. Customers of this brand believe in liking good things but in a responsible way. Thus, shared value approach has helped company to reel in greater number of customers because they are significantly interested in sustainability program of Nespresso.
Figure 1: Perspectives of value (Source: Porter and Kramer, 2011)
There are various perspectives of shared value which can be discussed in context to Nespresso. The company has its own key drivers of Free Cash Flow and Weighted Average Cost of Capital that can be placed by strategies intended to create shared value. Nespresso offers eco-friendly coffee products in form of outputs which creates societal value. The assessment of the case of Nespresso reveals that the unique features of the Nespresso business model has led exponential growth rate i.e. 30% per annum in recent few couple of years (Lovell, 2014). As a result of this, Nespresso has become Nestlé’s fastest growing businesses as the company has managed to grow at a faster pace. One of the major strategic challenges which are faced by Nespresso is to manage the growth in all areas of its business including human resource, supply chain management and marketing.
Michael Porter and Mark Kramer have addressed the reasons for carrying out sustainability programs by the company. The shared value approach provides that companies are required to identify the connection between activities of a company and activities and needs of the society. This will help company to attract new customers and secure higher level of brand loyalty as customers are inclined towards eco-friendly products and services. Thus, the creating shared value has been adopted by Nestle that uses the framework for creating value for different stakeholder groups including society (Porter and Kramer, 2011). Hence, Nespresso has identified water, rural development and nutrition as main strategic shared values by using the model of Porter and Kramer for shared value. Thus, this coffee brand has identified its own social opportunities with wider society. Nespresso has launched an integrated shared value framework, “Ecolaboration” in order to group together its sustainability efforts in varied areas such as carbon footprint reduction, sustainable coffee farming and spent capsule recycling (Alvarez, Pilbeam and Wilding, 2010). Thus, this business unit of Nestle has used this framework to successfully implement its business strategies and achieve its mission and vision. From the above discussion, it can be said that Porter’s and Kramer’s shared value model has significant strategic relevance to the case of Nespresso.
Critically Evaluating Nespresso’s Positioning
Nespresso’s marketing campaigns seek to convey a brand story that positions Nespresso as ultra-premium coffee brand. The positioning strategy of this coffee brand of Nestle has been discussed in relation to its Product Life Cycle (PLC). In marketing management, Product Life Cycle is an important concept which is used in the development of appropriate strategy. It is essential to have clear understanding of PLC and its stages for discussing positioning strategy of a company in relation to its PLC for achieving sustainability (Matzler, Bailom and Kohler, 2013). Every product goes through four stages in its life including introduction, growth, maturity and decline. The sequence of these stages is known as Product Life Cycle which is used for developing strategy in order to achieve mission and vision by the company. The four stages of Product Life Cycle are explained in brief under the following heads:
This is the most expensive stage in the life cycle of a product because it is launched with heady expenses on advertisement. In addition to this, company is required to spend higher amount for customer testing and research & development activities. Nespresso is a globally managed business which was established in 1986. The product consisted of high quality coffee packed in aluminium capsule in specially designed machines for exclusive use (Staff, 2009). Thus, initial stage of this product demanded higher expenses on research.
It is the second stage which is generally known by a strong growth in sales and profitability of the company. This is because company gets benefit from economies of scale in production. It is helpful for the company to invest more money in various activities related to marketing and product promotion (Anderson and Zeithaml, 1984). Nespresso is one of the fastest growing businesses of Nestle and its many products have passed from this stage.
It is a stage in which product is well established in the market and the aim of the owner of the company becomes to maintain the same market share as in growth stage. Thus, it becomes a competitive time for the company as wise decisions regarding investment in product are required to be taken (Achabou, 2014). In addition to this, significant changes in the products are also made in order to maintain the market share.
This is the last stage of a product’s life cycle as market starts shrinking in this stage. There can be various reasons of shrinkage of market such as entrance of new brand, consumer switching or saturation. In this stage, rather than expending on marketing, companies are recommended to adopt less expensive production methods to make some profit (Matzler, Bailom and Kohler, 2013).
The above discussion on stages of product life cycle provides insightful information regarding strategic relevance of assessment of PLC of a company. Nespresso can also analyze its product life cycle in order to make strategic decisions. The positioning strategy can also be discussed in relation to PLC for sustainability of the brand. This coffee brand has positioned itself as a premium brand which creates high quality coffee products. Furthermore, it has adopted differentiating positioning strategy with an image of exclusivity due to high quality service and extensive customer service. Thus, the company has positioned itself as a high quality luxury brand and created a sense of belongingness to an elite group of customers which justifies the price (Day and Payne, 2014). This positioning strategy may not be appropriate in the introduction stage of its PLC because it requires huge investment on advertising and marketing activities.
The products and services offered by Nespresso are costly as the company targets elite group and additional expenses on marketing will increase overall cost to the company. For any business entity, profitability is the prime concern for achieving sustainability but in introduction stage, this positioning strategy may not be appropriate. Nonetheless, complete cost of marketing is charged by ultimate consumer therefore, it may not be appropriate to associate cost with the sustainability of the company. In the similar fashion, the positioning strategy of the company can also be discussed in context to growth stage (Sheinin, 1998).
Most of the Nespresso’s products are in the growth stage where company earns profit with considerable market share growth. As described above, growth stage in PLC assists company to invest more money in advertisement as company witness strong growth. Positioning of Nespresso as luxury brand can offer even stronger growth and prosperity to the company. In this stage, this positioning strategy can said to be appropriate from the perspective of sustainability of the brand in long run. In this stage of Product Life Cycle, benefits of economies of scale can be achieved by the company therefore; more investment can be made in marketing and advertising activities (Staff, 2009). This would help company to establish itself as a strong and premium brand by investing in campaigns based on the approach of shared value and Corporate Social Responsibility (CSR).
In the similar fashion, positioning strategy has also been critically examined for other stages including maturity and decline. In these two stages, the discussed positioning strategy of the company may not be appropriate because in this stage, customers start switching over other brands and find alternatives. Thus, investment in marketing does not remain workable and therefore, companies need to cut the cost and find the cheaper ways to make some profit (Achabou, 2014). In such a case, Nespresso may not sustain if it continuous to offer those products with premium brand appeal. Nonetheless, new products can be introduced or modifications can be made to retain customers. Thus, from the above discussion, it can be said that positioning strategy is effective and correct from the perspective of sustainability.
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Alvarez, G., Pilbeam, C. and Wilding, R., 2010. Nestlé Nespresso AAA sustainable quality program: an investigation into the governance dynamics in a multi-stakeholder supply chain network. Supply Chain Management: An International Journal. 15(2). pp. 165-182.
Anderson, C. R. and Zeithaml, C. P., 1984. Stage of the product life cycle, business strategy, and business performance. Academy of Management journal. 27(1). pp. 5-24.
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