AS MARKETS across the globe become more saturated, the importance of marketing to companies in maintaining profit margins has undoubtedly become greater.
Lawrence Leow, president of the Association of Small and Medium Enterprises, said: 'In today's very competitive marketplace, companies that do well typically do not compete on price or distribution channels alone, but they put in a lot of effort on branding.
'Successful brands are able to command premium pricing because they have been able to position their products/services differently from their competitors, and they are able to continuously engage their customers and retain them.'
Likewise, Hooi Den Huan of Nanyang Business School (NBS) added that 'in this era of abundant choices, consumers have many alternatives and they can easily switch from one brand to another.
'A functional benefit is derived from a product attribute that provides functional utility to customers. Such a benefit usually relates directly to the functions performed by the product or service for customers. For a car, functional benefits might include durability, safety or driving comfort; for a food product, they may be taste, nutritional value or freshness.
'An emotional benefit is derived from a product attribute that provides emotional utility such as feeling safe and comfortable while flying Singapore Airlines, or feeling trendy when using the iPod. The monetary expense is the price paid by the customer to obtain the product and service while the non-monetary expense is other non-price costs to the customer when using and consuming a particular product or service.
'In most cases, the differences between brands in terms of functional benefit are not that significant. There is a lot more scope for companies to attract, retain and expand its customer base, by creating differentiation in terms of emotional benefit.'
Brand building
And this is especially critical for SMEs since it is hard for these companies to grow and expand regionally without a strong brand, according to brand consultant David Aaker.
Dr Aaker, who is an adviser to Dentsu, told BT earlier that 'getting brand strategy right starts with understanding your customers, competitor strengths, market trends, and your business strategy'.
And 'with that background you need to decide what your brand stands for, what associations you want it to have, your brand identity. This brand vision should be multi-dimensional, differentiating and compelling'.
As companies often have several different brands, he explained it is also important to create a brand portfolio strategy that has a defined role for each brand and ensures synergy, clarity and leverage among them.
Mr Leow felt that a clear business direction, a well-defined strategy, an integrated business system, and a holistic approach to delivering the brand promise and experience are the essential ingredients in building sustainable brands.
He explained: 'Doing this requires more than just a consistent approach to applying a brand's name and logo to the product/service. It is critical that the brand philosophy and brand values are conveyed and instilled in the company's employees who are ambassadors of the brand. Only then can the brand promise be experienced by the consumer, and in doing so, win their hearts and minds and gain their loyalty.'
Chio Kian Huat, chief executive officer of RSM Chio Lim, said that small firms 'can take many smaller steps that don't cost a lot of money to create a consistent brand image, versus spending on a big bang that people can easily forget because they do not know you in the first place'.
'To give two suggestions, you can collaborate with partners who believe in you, and reciprocate. Or share your knowledge or expertise by speaking or writing for the right platforms. Initially, you may even find yourself giving more than you receive. When you don't have big monies to spend, you just have to have big patience to keep at it.'
According to Prof Hooi, there are nine core elements in developing a successful marketing strategy.
'Firstly, given that not all consumers are similar in their needs and wants, we must explore the market to identify segments of the market - clusters of customers whose needs, wants and preferences are homogenous. Segmentation, which we call a mapping strategy, must be the starting point for all marketing - not the four Ps of product, price, place and promotion.
Furthermore, firms need to target certain segments - no company can effectively serve the whole market. We can target one, two, several, or all segments within the market, depending on our market size, growth, our competitive advantage and competitive situation.
'Then we must position our company in the customer's mind: Positioning is how you want your brand to be perceived, in the minds of the customers, in relation to their needs and the positions of competing products/services. Any positioning must be supported by strong differentiation. When positioning is not supported by differentiation, you may 'over-promise and under-deliver' to your customers.
'For example, Changi Airport has positioned itself as the 'most user-friendly airport in the world'. This is supported by strong differentiations such as ease of access to the airport, informative signage, comfortable lounges, convenient Internet access, and so on. With good quality products and affordable prices, Giordano has positioned itself as offering 'value-for-money' attire.
'Afterwards, differentiation can be 'translated' into our marketing mix (the 4Ps - product, price, place and promotion). And then we develop the selling tactic to 'capture the value' back from the market.
'The value of the brand should be enhanced continuously through the service strategy. Service is not just about after-sales service, before-sales service or during-sales service. It should be written with a capital 'S', meaning that every business is a service business, since every business must continually enhance the value offer, based on a particular value formula.
'And last, but not least, comes process. No matter how good you are in the other eight elements, they will be ineffectual unless you have a good process to enable you to deliver your product/service in the most cost-effective manner possible.'
According to Dr Aaker, a misconception is that brand building only involves advertising when, in fact, other vehicles such as sponsorship and the Internet, are increasingly important.
Of particular importance to the brand is ensuring that its values are displayed when service staff interact with the customers because every customer 'touch point' affects the brand, he says.
Besides providing good quality and prompt delivery, companies can also instil brand loyalty by connecting with their best customers through programmes that involve them with the brand. Some products such as motorcycles, beer and cars have brands that create intense loyalty through various programmes and functions.
With the great investment in formulating a marketing strategy, both in man-hours and capital, companies often wish to measure the effectiveness of their marketing strategies, for which various methods and tools exist.
Here, one of the most common approaches is by using a so-called 'Return on Marketing Investment' (ROMI) method.
This is computed by deducting the excess of gross margin over marketing investment divided as a percentage of marketing investment.
'If we know all the numbers, then we can measure whether our marketing programme is effective or not. A higher ROMI number means a higher return,' said Prof Hooi.
Often, repeat purchases by loyal customers would be the ultimate goal of companies' marketing strategies, but Prof Hooi cautioned that the lack of repeat purchases does not necessarily correlate with poor customer loyalty.
For example, a mother who buys diapers for her baby surely will not purchase the diapers again when the child grows up. Using the conventional definition of customer loyalty, one may mistakenly assume that the lack of repeat purchase indicates non-loyalty.
A better indicator would be the willingness to recommend or what marketers may call, word-of-mouth advertising.
This article was first published in The Business Times on Jun 17, 2008
