308 The Marketing Book
competitors. These include: the provision of
specialized equipment or finance; training on
the company’s products and systems; loyalty
programmes and long-term development
partnerships. Delivering greater value. In the long run, offering
customers added value is the only way to
obtain consistently higher prices than
competitors. All the other routes are one-off
or limited opportunities that eventually erode
market share and shareholder value. Without
innovation, competitors and new formats
inevitably commoditize a company’s products
and services. Added value strategies can be
grouped into five types:
- Operational excellence. Serving the customer
more efficiently by cutting costs, increasing
reliability, reducing hassle, inconvenience or
the need to carry safety stocks (e.g.
Wal-Mart, Federal Express). - Customer intimacy. Designing solutions for
customers on a one-to-one basis.
Customers will perceive added value when
suppliers communicate directly with them
and offer solutions tailored precisely to their
individual needs rather than being
communicated and produced for a mass
market (e.g. Dell, American Express). - New products and services. The most obvious
way of obtaining a premium is developing
innovative products that meet unmet
customer needs, so offering them superior
economic, functional or psychological value
(e.g. Sony, Merck). - New marketing concepts. While new products
require new technology, new marketing
concepts add value by changing the way
existing products are presented and
marketed. This means finding new markets
or new market segments (e.g. Diet Pepsi,
Lastminute.com). - New distribution channels. The Internet, in
particular, has stimulated new ways of
delivering existing products that offer
superior convenience or service to
customers (e.g. Amazon, Tesco.com).
Optimizing promotional spending
Promotions – perhaps more effectively termed
marketing communications – cover a large and
growing array of tools, including direct selling,
advertising, sales promotion, public relations
and direct response. One of the problems is ach-
ievingintegrated communications– deciding how
the communications budget should be opti-
mally divided amongst these alternatives and
integrating their messages to achieve a syner-
gistic approach overall. This is made particu-
larly difficult because most companies use
different outside specialist agencies to cham-
pion and design the individual components.Developing a communications
strategy
Developing a strategy requires five steps:1 Understanding the market. As always, the
process starts with understanding the market.
This involves assessing the economic potential
of the brand, the strength and weaknesses of
its current communications profile, and
researching customers’ needs and buying
processes with the objective of learning what
messages and media are likely to be most
effective.
2 Setting communications objectives. Objectives are
necessary to align the different
communications techniques to a common goal
and to judge the effectiveness of the campaign.
Ultimately, the primary goalof a campaign is to
increase, or at least maintain, long-term sales
and operating margins. Unfortunately, it is
normally difficult to disentangle the effects of a
communications vehicle from the array of
other factors affecting current sales and
margins. As a result, communications
objectives are usually specified in terms of
intermediate goalssuch as awareness and
attitudes to the brand. Considerable
judgement is required to determine which are
the most relevant measures and what are
reasonable targets.