Understanding Vertical Brand Differentiation Strategy

Vertical Differentiation

In today’s fiercely competitive and noisy environment, the need for strategic brand differentiation is acute.

At the macro level, a brand can be differentiated vertically, horizontally, or pursue the cost strategy.

This article explores the vertical differentiation strategies. Horizontal differentiation and the cost strategy will be addressed in future blog posts.

What is Vertical Differentiation

Products in most categories can be differentiated by their perceived quality level. The primary indicator, and the most visible, consumers use to evaluate quality is price.

Vertical differentiation involves finding a quality/price mix that will differentiate the brand from its competitors, that appeals to enough consumers and can be profitably implemented.

A company can also use this strategy to differentiate between products in its portfolio designed to target multiple consumer segments.

With vertical differentiation consumers agree on which product is better, and choices are made based on individual needs.

A product’s points of differentiation should be easy to explain, at least in theory. Its price should be reflective of the features it provides, vis-à-vis its competitors.

If you are in a market for a digital camera for example, there are plenty of options to choose from.

You might want to get a camera with interchangeable lens, that takes amazing pictures in low light conditions, and has a high enough resolution that allows you to create large format prints from your shots.

Or, you might just want to save money and buy a lightweight camera that takes decent enough pictures for you to publish online and share with your friends on social media.

There is no right answer as to what camera you should go for. It all depends on what’s important to you: you might want to become a professional photographer, or just capture your life’s moments with ease.

Pursuing Vertical Differentiation

Vertical differentiation requires a brand to find that quality/price value proposition that (ideally) no other competitor claims, and own it. Here are a few things to consider:

Identify the features/quality levels that justify a price difference. That is, make sure you understand what’s important for your customer when deciding on a product in your category. In the digital camera example above, the weight of the camera is a sought-after feature that justifies a price difference, while the camera color might not.

Ensure there is enough demand for your new offering. The goal with this strategy is to design a product or service for which there is enough demand to justify launching it. Surveying your consumers might not offer you a complete picture, as many will tell you they want highest quality product at the lowest price.

Ensure the quality level you choose to offer can be profitably implemented. It’s great to offer a product for which there is enough demand, but what’s driving a business forward is profits, not the number of consumers who like its products.Too many features at an attractive price is sure to create enough demand, but your profitability will most certainly suffer.

Disadvantages of Vertical Differentiation

Companies pursuing vertical differentiation face two potential risks.

Vertical differentiation is impacted by sudden or unexpected changes in the marketplace that might make this strategy obsolete.

Consider the fast-changing technology market. When a new feature-packed product comes out, its price is usually appealing only to early adopters. Once the market catches up, the “advanced” features quickly become obsolete, and the price goes down accordingly.

The second danger is imitation. Most innovative products, when proven successful, are forced to compete with virtually identical products at much lower products.

The Onda tablet, an identical copy of Apple’s Ipad,  offers users a dual operating system (Windows and Android) at a third of the Ipad’s price.

Even reputable manufacturers such as Lenovo are capable of shamelessly copying successful products. Just take a look at their latest phone, S90 “Sisley”, an otherwise decent device, but an identical copy of Apple’s Iphone.

In conclusion, claiming a spot on the “quality” ladder is a viable way to differentiate. The higher the quality (and consequently the price), the more “niche” your brand will become.

But that doesn’t mean you should always aim to launch products in the more crowded low and medium price segments. Niche brands might not enjoy mass appeal but are usually much more profitable.

The 8 Crucial Laws of Rebranding [Infographic]

This is a guest post by Michael Yunat*.

A brand is much more than a name. It creates an identity that consumers can associate feelings with and give attributes to.

A brand can include anything from a choice of font in a logo to a flagship product to even a signature sound. Many companies that have been around for decades still maintain the same values as when they first began.

A brand tells a story. Ideally the story will be positive, and if it isn’t, a company will try to rebrand itself. A brand identifies a company’s ethics, whether it helps give away their products to charity or underpays its workers.

A brand tells the story of a company’s history, whether it was started in a garage or owned by a billionaire. A brand evokes emotion from an audience, which is why we feel connected to our favorite brands. Consumers connect the brand with the experience of using it.

Ultimately, a brand is determined not only by the company but by how the consumers interpret it. A brand meant for a mature audience, certain alcoholic beverages for example, can surprise everyone and be picked up by a hip niche audience.

The same comic book character can be dark and gritty for one audience, and colorful and hopeful for another. Many artists and television shows unintentionally create undertones that certain segments of the population pick up on and magnify.

Consistent branding leads to strong brand equity, but there is always a trade-off when a brand can be stale or even toxic, and it’s time to think about rebranding.

Your brand is precious. How do you determine what you can gain or what you risk losing by re-introducing yourself to consumers?

GetVoIP compiled a nifty infographic highlighting Eight Crucial Laws of Rebranding. Use these rules as a guide to predict whether you will strengthen or weaken your company by rebranding.

When It's Time To Rebrand

Michael Yunat heads content curation and topic development at GetVoIP. Currently residing in Queens, NY, Michael possesses a B.A. in business media backed by an extensive background in digital communications. While constantly at work on several projects by day, Michael is also an avid basketball player and a DJ by night. To contact Michael, you can email him at myunat@getvoip.com

Marketing Challenges: Breaking Though The Noise

Marketing Challenges- Breaking Through the Noise

What do you think is the biggest challenge Marketers face?

A good friend of mine who is also a Marketer asked me this question. It took me a while to come up with an answer.

My biggest marketing challenge is making the brand message heard in a noisy environment.

Let me explain.

There are many people with great business ideas. Only a few turn those ideas into successful businesses. Even fewer manage to build a strong brand for their business.

In theory brand building is a fairly straightforward process: a great product, a unique and differentiated message, and proper communication.

I’ve worked in marketing for over 15 years, and I think I became pretty good at developing the positioning strategy for a good product.

What I find increasingly challenging is breaking through the clutter and making the brand message heard. I often ask myself:

Why is it so hard to get the brand in front of customers?

Below are some thoughts.

Firstly, the business environment is more competitive than ever.  Globalization and technology allows almost anybody with a dream to start a business. There are many opportunities to find something to sell and suppliers willing to sell to you.

On the flip side, brands are fighting for something that is very limited: people’s attention.

With the level of noise that surrounds each of us increasing daily, many consumers have become immune to any form of communication that is perceived as advertising.

Many preach the need for brands to educate and engage, rather than advertise, and that’s OK. However, in real life, if you need to reach a certain sales target in a limited time frame you need to engage in some form of advertising.

Speaking of brand education, most brands turn to social media to share “engaging” content.  I will confess that I am becoming very doubtful of its effectiveness as an educational platform.

In fact I believe social media is a big contributor to the noise pollution we are currently experiencing.

I’ve seen great content being published on social media that got little to no attention. At the same time, a home-made video of a cat doing strange things around the house goes viral. This begs two questions:

How do we define “engaging” and “relevant” content from a business perspective?

and

Is there too much emphasis on social media as an effective marketing communication tool?

It’s not fair to blame social media exclusively for our inability to communicate with our target audience. There are internal factors that play and important role as well.

One is maintaining brand focus and message consistency.

In an era of multitasking, multi-devices and shorter attention spans, brands have to communicate quickly, simply and clearly. Given the multitude of communication platforms, brand managers have the huge task of maintaining brand consistency in terms of look and feel, as well as the message being communicated.

Many brands are responding to consumers’ need for instant gratification by communicating price discounts, latest items on sale, and other short term incentives.

This communication strategy leads to the creation of a category of consumers with no loyalty to the brand, who expects everything to be free, and are always willing to switch brands in the hunt for the latest deal.

Not the type the consumers you want to build your brand on.

The final point I want to make is that breaking through the noise require money, time and expertise. There is a common belief among many executives that the new communication platforms are free, so the company should just adopt them. This is a false perception.

With the same number of work hours in a day, marketers have to divide their time among many more initiatives, or request help from outside. In the end, the human and financial costs could be quite high.

So how do we tackle this marketing challenge? I think we just need to step back when we feel being pulled from different directions, and refocus our communication efforts.

I also think we need to avoid falling into the trap of adopting every communication platform without assessing its effectiveness as it relates to our individual business scenario.

Brought to you by: The “Brand Positioning 1 on 1” Workshop

How to Deliver on Your Brand Positioning

Image credit: underconsideration.com

In 1997 ING Direct disrupted the Canadian retail banking with a very narrow positioning: “the bank of choice for those who want to save money”.

The product offering was very simple: a savings account that paid significantly higher interest than all Canadian major banks, and no service charges.

How was ING Direct able to deliver on such an ambitious promise?

ING Direct pioneered the concept of online banking in North America. This strategy allowed the bank to achieve significantly lower operating costs versus its big competitors that service customers through a network of brick and mortar locations.

The savings were then passed on to customers.

Externally, the bank’s “actions” focused on communicating a single, very motivating message: save your money (with ING). The high interest rate and lack of transaction fees were very strong reasons to switch.

The banks’s bold strategy paid off: currently over 1.9 million Canadians save their money with ING.

To answer the question above, ING Direct’s success was possible because of strategic consistency.

Think of your business like a puzzle game: you can only get the beautiful picture if all the pieces fit nicely together.

Your brand’s positioning is the beautiful picture you are trying to paint to your customers. Delivering on it depends on what your company does internally, and how it acts externally.

Strategic Consistency Defined

A firm’s strategy is consistent when its internal and external resources support its positioning. That is, strategic consistencies are achieved when all the pieces of the business puzzle are properly in place to achieve the firm’ strategic goals.

Internal consistency is achieved when the firm’s internal resources (financial, technological, human) work together to support the overarching strategic goal.

In order to maintain its competitive advantage, your firm should invest in resources that are valuable, rare, and difficult for your competitors to imitate.

Internal Consistency at Apple

Let’s think for a moment at how Apple achieved internal strategic consistency to deliver on its “Think Different” brand positioning. A few key resources come to mind:

-a world class design team who is able to constantly deliver product innovation

-an almost complete vertical integration

-company-owned network of retail stores, offering the ability to control the customer experience

-a highly secretive company policy that makes it hard for competitors to anticipate its next moves

External consistency is achieved when the firm’s external behavior and strategic moves are in line with its overarching brand message.

Decisions such as moving the brand into a new segment, or up and down the price ladder, have to be analysed from a strategic consistency perspective.

In other words, the question should be asked “How will this decision reflect on my brand positioning?”

External Consistency at Amazon

The Amazon brand has become synonym to online shopping. Some of the external strategic consistencies Amazon has implemented to deliver on its brand positioning include:

-a vast product selection that cannot be matched by any retail chain

-a website that is easy to navigate

-a brand name known to everybody

-a reputation for doing things right

Amazon continues to be the e-commerce leader by implementing strategies that makes sense given its positioning.

ING Direct becomes Tangerine

In 2012 ING Direct Canada was acquired by one of Canada’s big players, Scotiabank. The new company’s first moves reflect poorly on its ability to maintain the strategic consistency that made the ING Direct brand successful in North America.

The first move was to change the company’s slogan from the very focused “Save Your Money” to the generic “Forward Banking”.

The second was to introduce a chequing account, at a time when the bank’s ATM network was non-existent. 

Is the ING Direct brand (now Tangerine) losing its focus? As an ING customer I believe so, but only time will tell.

Brand Promise and Strategic Trade-Offs

Image credit: Sean MacEntee on Flickr

In 2008, when asked if Apple plans to offer an entry-level notebook, Steve Jobs replied:

“There are some customers which we chose not to serve. We don’t know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that… We’ve seen great success by focusing on certain segments of the market and not trying to be everything to everybody.

Achieving success in business is all about uncovering opportunities and making the right choices.

A brand is a promise made to a specific consumer segment. Once the promise is made, internal and external consistencies have to be put in place to constantly deliver on it.

Delivering on your brand promise requires compromises. Regardless of your brand positioning, and how carefully it was selected, strategic trade offs are always required.

What Are Strategic Trade-offs?

The quote above from Steve Jobs perfectly summarizes the concept of strategic trade-offs.

Strategic trade-offs are the “sacrifices” a brand has to make in order to deliver on its positioning.

Trade-offs include consumer segments you will not be able to service, service levels you are not be able to achieve, and products that are not a good fit to your portfolio.

Competition would not exist without strategic trade-offs. A company’s inability to cover a need is an opportunity for a new player to establish itself in the category.

Some Practical Examples

Let’s take a look at some examples that will better illustrate this concept.

Dell Computers

Dell  disrupted the computer industry in the 1990 with their “sell direct to consumers” business model. This strategy offers Dell many advantages including the ability to customize each product, and offer it at a lower price to the end consumer.

Dell became the worldwide leader in PC sales in 2001.

Although successful, the sell-direct strategy also meant important trade-offs for the brand, including:

  • Irrelevance to consumers who prefer the retail experience of touching, and trying their products before the purchase
  • Inability to service a consumer segment that doesn’t feel comfortable shopping online for computers
  • Limited brand exposure versus competitors with strong retail presence
  • Inability to attract a customer base that prefer to service their computers at a physical location

Walmart

Walmart is known to adopt a cost differentiation strategy. In order to constantly deliver on its strategy, the retail chain focuses on offering a narrow assortment in each category, while the service levels are kept to a minimum.

Although immensely successful, the Walmart brand is only appealing to a specific consumer demographic. Some of the strategic trade-offs the brand embraces include:

  • Inability to service consumers who prefer a wider product assortment and a more premium shopping experience
  • Inability to service consumers who prefer to shop at the smaller, local retail store
  • Impossibility to replicate the service levels provided by smaller, independent retail stores who are able to better motivate their staff
  • Inability to expand the brand into the more profitable premium segment, due to Walmart’s “low cost” brand image

Automakers That Utilize Platform Sharing

Car companies such as Toyota, Honda and Nissan share the same manufacturing platform across multiple models. Platform sharing provide many benefits, including cost savings, and the ability to build vehicles for different market segments (Toyota and Lexus, Honda and Acura, Nissan and Infiniti).

Although great from an efficiency perspective, this strategy comes with compromises:

  • Inability to appeal to customers who prefer premium cars manufacturers only, such as Mercedes-Benz and BMW
  • Usually all vehicles sharing the same platform are affected in case of a recall
  • Inability to offer a truly unique model design
  • Higher risk of brand dilution and cannibalization

Strategic trade-offs are a necessity of doing business. Instead of trying broaden their appeal, brands should remain true their roots, and constantly deliver on their promise.

Lead Generation Strategies: B2B versus B2C

Lead Generation Strategies-B2B vs B2C

I am starting a series of articles on one of the most requested topics by my readers: lead generation strategies.

Providing your sales team with hot qualified leads will allow them to spend more time selling. Moreover, sales personnel hate prospecting and performing administrative tasks. They’d rather be on the road closing deals.

Anything you can do to ease their pain will boost your credibility as a marketer.

We will take a look at the process from a strategic perspective, and identify the tools that work best in each scenario.

Don’t Follow the Crowd

The herd mentality affects not only consumers, but marketers as well. We get bombarded with advice on the latest and coolest lead generation techiques every company should adopt.

You have to be on Facebook and Twitter.

You have to leverage the power of LinkedIn.

You should never buy or rent email lists.

You should automate your marketing.

Direct marketing and cold calling are dead.

The reality is we all have limited budgets, and face the ambitious task of helping our sales teams with as many new qualified leads as possible.

Embracing all this advice puts pressure not only on your budget, but on the human resources as well (we can’t be specialists in everything).

Who Are You Targeting?

The effectiveness of lead generation strategies vary depending on your business model. So the starting point should be to understand the environment you operate in: are your trying to sell to businesses, or individual consumers?

As we will discover later, the strategies for attracting new B2B customers are quite different from the ones employed by a B2C company. The corporate buyer uses a different set of criteria to analyse and commit an offer versus people who buy stuff for personal use.

The chart below is meant to give you a quick overview of the differences and similarities between B2B and B2C customers:

B2B Customer

B2C Customer

Target Audience

Narrow

Lead generation strategies should be highly targeted and the message customized to almost each individual lead

Broad

The goal of lead generation strategies is to reach as many people as possible within the target group with a specific message

 Main Challenge  Building trust  Getting customer attention in an supersaturated market
 Number of Competitors

Relatively Few

Barriers to entry are usually high in the B2B segment, depending on product complexity and cost of entry

Many

Globalization and technology has lower barriers to entry in many consumer categories

 How Products are Sold  Trust/Personal Relationship  Quality/price perception
 Sales cycle  Long  Short
Customized offering  Mandatory  Less Important (unless you market custom made products)
 Importance of Personal Selling  Vital

Most B2B companies employ own sales force

 Less important

A lot of automation possible

 Impulse purchase  Very unlikely  Likely
Tolerance to Unsolicited Calls

Medium to Low

Unsolicited calls are generally expected by professionals during business hours

Low

Consumers typically see unsolicited calls as an invasion of their privacy and huge annoyance

Time Constraints

High

Most professionals operate under tight deadlines. Making and keeping appointments is a challenge

Low

Consumers have usually more time to spare and flexible for setting appointments

Lowest Price Guarantee

Not Very Important

Price is not the most important factor int he purchase decision

Very Important

Since many categories are highly comoditized, price comparison is a given in most consumer purchases

Product Education

Very Important

Important

The chart above is by no means universally valid. At some point the separation line between B2B and B2C can  become very blurry, depending on the product being sold.

The target audience of a B2B company that sells common office supplies to business might share many of the characteristics in the B2C column.

As well, a B2C company that sells a highly complex product to consumers might be better off employing B2B lead generation strategies.

In the next post I will rank specific lead generation strategies based on their effectiveness given a particular business model.

OpenBrand Review-Easier Marketing Collaboration?

OpenBrand

The first thought that crossed my mind when asked to give OpenBrand a try was: “how is this file sharing platform different from Dropbox, Google Drive and the FTP sites I currently use?”

After two weeks of “exploration” I could clearly see the difference.

What is OpenBrand?

OpenBrand is an online platform specifically designed for sharing of rich creative content. The goal is to make collaboration between brand managers and advertising agencies easier and less stressful.

OpenBrand provides a neatly organized virtual work space in which brand assets can be stored and shared between individuals involved in the branding process.

Easier Marketing Collaboration

I have to admit I am not a very organized person. Working with multiple graphic designers, e-mail marketers and other providers I find it challenging and time consuming to:

  • keep track of where my files are located. Are they stored on my local drive, Drop Box account or elsewhere?
  • determine if I have the latest version of a specific file.
  • bring new suppliers up to date on the brand’s do’s and don’ts, and collecting all files needed to have them up and running.

I currently use Dropbox to synchronize and access files on multiple devices, and FTP sites to transfer large files.

How OpenBrand Works

When you first log in to OpenBrand you will have a chance to personalize the Home page with your logo.

At the top of the landing screen you will notice three tabs: World of Brands, Identity Standards and Brand Profile.

OpenBrand Home Screen

World of Brands stores your brand’s marketing communication files.There are five pre-defined folders for the most commonly used files (business cards, website, corporate publication, email signature and presentation template). You will also have the ability to create custom folders for other brand related materials (such as “Packaging Artwork” for example). OpenBrand displays the history of changes made to each file- no more searching through various emails and voice mail messages.

Identity Standards is the area dedicated to your brand standards. This is the place for your company logo, colors, primary and secondary typeface, etc. Here too you have the option of choosing from pre-defined or custom folders, depending on how complex your brand identity is to communicate.

Brand Profile contains the key strategic documents related to the brand: its vision, mission and positioning. Again, a very useful and time saving feature when you need to train new team members on the specifics of the brand.

OpenBrand for Creative People

From an agency perspective OpenBrand makes it really easy to share creative work with your clients.

The feature you will find most helpful is the Delivery Service & Open Comp. This service allows designers to send artwork with real context preview. This comes particularly handy when dealing with clients who have a hard time visualizing how a psd file will actually look like on a website or billboard sign.

Watch the video below for a quick demo:

OpenBrand Delivery Service & Live Comps from OpenBrand on Vimeo.

More Than a File Sharing Platform

To summarize, below are some key differences between OpenBrand and the other file sharing platforms:

  • specifically designed to handle reach creative content
  • provides guidance on how to define and manage brands through a set of pre-defined tabs
  • from an agency perspective, the Live Comp service allows the delivery of creative content in real life context previews
  • registered users are provided with the history of changes in the World of Brand tab
  • a more organized and user friendly interface

Free for Education

OpenBrand is free to universities, educational establishments and schools for their own internal need. The platform is also free to use for student projects.

If this review sparked your interest in OpenBrand, visit the official website for more info.

(More) Marketing Misconceptions That Can Hurt Your Business

Photo Credit: Alex Osterwalder on Flickr

This is part 2 of the article the lists common Marketing misconceptions and how they negatively impact a business.

Here are five more assumptions that are worth clarifying:

I can gain market share with a much smaller budget than competition

This statement implies two things: your competition is wasting a big portion of their marketing dollars on initiatives that don’t resonate with the customers. Or, your marketing service providers do great work for much less than the average market price.

And then there is also the inability to track how much money is actually spent on marketing.

In reality, if you are spending much less than the competition your are probably not making any market share gains. You might have one competitor that’s overspending, but in my experience you don’s pose a serious competitive threat unless your marketing budget is in same ballpark with your competition.

Sales are down so we have to cut the marketing budget

I am sure a lot of you marketers have faced this scenario during your career. When sales are bad the first instinct is to consider cutting the marketing budget.

The appropriate strategy is to first identify the reason why sales numbers are low, and look for ways to correct that trend.

In many cases Marketing is actually part of the solution, and therefore the department that needs a budget boost.

Let’s assume sales are down because of the overall economic downturn, which is affecting your competitors as well. Everybody is cutting their marketing budgets, and the level of “noise” in the category is reduced to a minimum.

A boost to your Marketing budget during this difficult times may result in great opportunities to make your brand more visible.

Another reason sales are down might be because your product line needs updating. Marketing can fix that as well.

Maybe consumer behavior is changing and your company is not taking advantage. Marketing can help.

To summarize, management should take a look at the big picture before cutting marketing costs. The remedy might actually have Marketing written all over it.

My product offering has become a commodity and therefore impossible to differentiate

Many executives I interact with understand the benefits of differentiating their brand from competition. However many believe that, since consumers perceive most products  as commodities, differentiation is impossible to achieve.

Marketing in well-established mature markets is facing the “differentiation” challenge: setting a brand apart in categories where good product quality is a must (not a competitive advantage), and innovation is hard to deliver and easy to imitate.

The solution is simple and starts with acknowledging a simple fact: it is the brand that needs differentiation, not the product. Therefore there are many other strategies that can be employed to differentiate even a commodity.

This brand positioning tutorial page lists and explains the most commonly used.

Doing everything in house is cheaper than hiring outside help

A recent survey conducted by American Express Canada shows that ” 84% of small business owners say branding is important to overall business success, and only 14% hire third-party experts to help with branding. 29% said they had developed their brands completely on their own.”

I am not surprised by the results, and I can only speculate on the reasons: ridiculously high agency rates, the desire to have full control over the creative process, and the ability to make changes faster.

Instead of looking for outside help many companies hire a “Marketing person” that wears many hats: graphic designer, social media specialist, e-mail marketer, etc.

While this strategy might work for some companies, doing everything in house might prove more costly in the long run. While the financial cost might be lower, the real drawbacks are (longer) execution time and the quality of work.

In a field where missing a deadline can ruin a year worth of work and where first impression counts, hiring independent help might be wiser.

Outside specialists bring focus to the project at hand (faster execution time), an original point of view (outside the company culture), more creativity and better work quality.

No marketer can be a specialist in everything, unless the company is willing to cut corners on how it presents itself to the world.

More frequent communication with customers leads to better engagement

Internal and external communication is a key Marketing function. Striking the right balance between quality and frequency of the message being communicated requires careful consideration.

There is a common belief that the more we communicate with our customers, the more “engaged” they will become.

When I started this blog 3 years ago I read a lot of expert opinions on how often I should post. The conclusion seemed to be that I should post as frequently as possible, ideally daily.

Besides the fact that I don’t have the time and creativity to write a daily post, the real question I have for the experts is: what if I don’t have anything to say that day?

This is the question I ask myself every time a send out a communication piece:  is this really beneficial to my audience? Will they learn something from it?

So my answer to the question “how often should I communicate with my customers?” is “Whenever you have something meaningful to say.”

Of course, the nature of your business plays a big role in communication frequency: an online store requires more frequent communication than a B2B company that sells diesel engines.

Increasing the frequency of communication should not be your marketing goal. Constantly improving content quality should.

5 Marketing Misconceptions That Lead to Lost Sales

Image Source: epSos.de on Flickr

Although companies have adopted modern Marketing concepts starting in the 1950′ there are still a lot of myths surrounding the discipline.

Below are five common marketing misconceptions I come across very frequently in discussions with people in leadership roles.

Great Products Don’t Require Marketing

During my marketing career I dealt with great manufacturing companies with very poor marketing. Their products are any marketer’s dream: great quality, innovative design, and clearly differentiated features.

These companies are usually run by people with engineering background who think that if you offer a great product people will just buy it. They invest all resources into product research and development and allocate no funds to communicating why their product is superior.

Unfortunately for these companies today’s consumer is overloaded with information, much of it being advertising. Many great product ideas die in their infancy because of failure to communicate properly. Even the greatest products have to break through the “noise” and be discovered, felt, tested and purchased.

The role of Marketing is to bring a particular product to the consumer’s attention. Having a great product makes Marketing’s job easier, but it doesn’t replace it.

 Lowering Price By a Certain Percentage Leads To Proportional Increase In Sales

When faced with a decline in sales, many are tempted to lower the prices in hope for a quick rebound.  The thinking is that this initiative will boost sales to a level that will make up for the loss in profits.

In real life sales decline can rarely be blamed solely on price (despite what your Sales team tell you). Price is just one component one’s purchase decision. Quality, availability, brand status, and warranty are also very important.

For these reasons, a 20% price reduction will not result in 20% more sales. Unless you compete in a price-driven category there is rarely a linear relationship between price and sales level.

So before you give up margin find out what’s really important to your customers: you might be surprised to find out that “lower prices” is not the most common answer.

Marketing is Advertising

This one is a classic. Many outsiders perceive marketing as being all about creating promo flyers, websites and other creative to promote a product and service. For some reason, the two terms have become synonyms.

It is true that advertising is the visible, palpable output of the marketing function. The creative work is something anybody can see, analyze, judge and comment on. Just look at the passionate discussions each logo redesign generates.

In reality Marketing is one of the most complex functions in any organization. Its impact on business is far reaching: developing new products, performing market research, selecting the appropriate distribution channel, and setting up pricing, to name just a few areas of involvement.

Companies that view Marketing’s role as simply advertising create a disconnect between customer expectations and what the company is actually delivering (the product). Successful marketing is a combination of a great product offering and simple and effective advertising.

Marketing’s Objective Is To Generate New Business

I read so many job ads for a Marketing position that were in fact Sales related. Yes, Marketing is supposed to generate new business, directly or indirectly (by providing the right tools to the Sales team).

But as importantly, Marketing’s role is to make existing customers coming back for more, that is making customers loyal to the brand. Brand loyalty is much more profitable in the long term as loyal customers are more cost effective to please and service.

Many businesses are so focused on attracting new customers that they tend to neglect (or even abandon) existing ones.

Phone and cable companies are the perfect example: they always offer huge discounts to new subscribers, while long term clients who already paid thousands of dollars in subscriptions are faced with price increases and poor customer service.

New business is always good but don’t forget who’s paying the bills.

Classic Marketing Communication Tools Are Dead

The internet is filled with advice on how companies should abandon traditional communication methods and make a total switch to digital. Apparently TV and print ads, billboards, trade shows are dying and not worth considering in the overall communication strategy.

In real life, the best marketing communication strategy uses a mix of offline and online tactics to reach the target audience. While it’s true that more money is shifting towards digital, printed catalogs and flyers are still required in many business environments.

A well-crafted and memorable TV ad is still a very effective tool to generate awareness. In 2013 the average cost of a 30-second Super Bowl ad was $4 million. No CEO would ever approve such a budget without taking ROI into account.

I think it is every marketer’s responsibility to educate non-specialists about what Marketing is really about. That will eliminate a lot of confusion, frustration and unrealistic expectations.

10 Reasons to Adopt Socially Responsible Marketing

corporate social responsibility

In April 2013 the garment factory collapse in Bangladesh caused international consumer outrage. Brands from around the world were in damage control mode after it has been revealed that many of their products were made at that factory where the working conditions could be labeled as “modern day slavery”.

A few weeks earlier Royal Bank of Canada, the country’s biggest bank, had to deal with consumer calls for a collective boycott over reports about its hiring practices. Some bank employees that were given termination notices unveiled the bank’s plan to replace them with temporary foreign workers as part of cost cutting efforts.

To make matters worse, the Canadian employees being let go were asked by the bank to train their replacements until fully capable to perform the job.

These two examples only reinforce an obvious consumer trend: the relationship with a particular brand doesn’t end with the purchase of a particular product or service.

The modern consumers have much higher expectations from brands that are part of their daily lives.

They demand to know how a particular product is made, where it is sourced from, and how corporations treat their employees, suppliers, local community and the environment.

Many companies, the big ones in particular, incorporate social responsibility into their business strategy. But only a few turned this concept into their main differentiating claim.

Socially responsible marketing is a great way to differentiate from competition. Here are 10 reasons why:

  • A meaningful differentiating claim. Successful differentiation starts with identifying a relevant consumer benefit that creates brand preference and (ideally) loyalty. This study by Cone Inc. shows that 89% of millennials (people born between 1982 and 2002) are likely or very likely to switch from one brand to another (price and quality being equal) if the second brand is associated with a good cause.
  • A sustainable strategy. Social-responsibility is a broad concept that includes both social (giving back to the society) and environmental (green) initiatives. This translates into a variety of options to reinforce the “social-responsibility” claim.
  • A superior alternative to the “green” positioning.  Positioning a brand as “green”, while desirable, is not enough to generate economic value. In other words most people will not buy a product just because it’s green. Corporate social responsibility has a more immediate and quantifiable impact on people’s lives.
  • A relevant “concept”.  Social-responsibility resonates with every member of our society, no matter the role in the economic chain. Socially responsible marketing builds positive perceptions with the company’s suppliers, distributors and final consumers.
  • Accessible to most brands, regardless of product offering. Brands that will benefit the most from pursuing socially responsible marketing are those who cannot easily implement product based-differentiation. The social benefit moves the focus away from the functional characteristics of the product being offered.
  • The chance to be the first in your category to make the claim. Many categories still lack a “socially-responsible” leader. Social-responsibility is mostly use to support the principal brand claim rather than as the core differentiating message. Most brands pursue “classic” strategies to differentiate from competition (product, quality, superior service, and price).
  • Justifies a price premium. This global study conducted by A.C.Nielsen shows that socio-conscious consumers are willing to pay more for socially-responsible products and services.
  • Cost effective to implement. It doesn’t take a lot of financial resources to create positive impact. A small donation to a local school, logistic and human support for a local cause will go a long way toward creating positive associations for your brand.
  • Great content generator. It’s been said that meaningful content is the new advertising. Since corporate social-responsibility is such as broad concept, the opportunities to generate unique content are endless.
  • Increased employee loyalty. HR professionals know how challenging it can be to attract and keep talented employees. According to this study by Cone Inc. 79% of millennials want to work for a company that contributes to society.

Brand managers who are looking for ways to differentiate the brand should consider social-responsibility marketing as a very viable option. All it takes is commitment, a review of the current business practices and involvement in the local community.