Product: How the Internet affects product offerings and

branding

Building long-term customer relationshipsMARK 430 - Week 12

Objectives for today....to understand:

How the Internet affects products and services

Mass customization Branding Building long term customer relationships

4 steps to successful marketing strategy

Understanding customer needs and online behaviour (market research, data mining, web analytics) (Weeks 1 - 4)

Formulate a strategy to fill needs (segmentation, targeting, positioning) (Weeks 4 - 5)

Implement effectively and efficiently (web usability, stickiness, advertising, search engine optimization, email marketing, pricing, distribution, product development) (Weeks 5-12)

Build trusting relationships with customers (Week 13)

What’s your product? A product is:

a bundle of benefits that satisfies the needs of consumers and for which they are willing to exchange money (or other items of value)

Product includes: Tangible goods Services Ideas People Places

Or combinations of the above

Online value creation

4 general product decisions that marketers make to but together a bundle of benefits that meet customer needs Product attributes Branding Support services Labeling and packaging

With the exception of labeling/packaging, all can be delivered digitally

Product Type Primary Purpose Internet Properties Examples

Digitized Good Provides core benefit in digitized form online

Is not used up in consumption; easily reproducible; transferable

Downloadable software, music, newspapers

Service Performs core service benefit online

Standardizes service; allows producer and consumer to be separated in space and time; adds vividness to intangibles

Schwab.com, eDiets.com, Yahoo Sports Fantasy Baseball Plus

Retail or Distribution Service

Sells, brokers, or distributes product delivered offline

Helps dispose of perishable inventory; aggregates demand

Amazon.com, priceline, MySimon.com

Product Augmentation

Adds extra services or benefits to a service or product

Differentiates at low incremental cost

FedEx, Fidelity

Internet Product Types

Source: Mohammed et al. Internet Marketing. McGraw Hill. 2004.

Product trends online

Digitization

Mass customization

Digitization: Music industry

Same product, just a different delivery format?

Or......does the delivery format make a fundamental difference to the product?

What difference does digitization make?

Online customer involvement in product design: Mass

customization Mass produced goods with customizable elements

Customers can select certain, predefined components to suit their own preferences

Often includes some personal identification mark

Made possible in the supply chain by speed of communications technology

Reflect.com

Is a mass customization part of a personalization strategy?

Only helps form customer relationships if combined with a personalized user experience Customer-centric process rather than product-centric

PrintingForLess.com missed opportunities No user account (customer history is “lost” to customer

Can’t check what was ordered last time – printing configurations, pricing, layout

Can’t just order “same again” Company can’t remind its customers – no ongoing personal

relationship

Brand as an aspect of product

Definition of brand

American Marketing Association definition: A brand is a name, term, sign, symbol, or design,

or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of the competition

Brand refers to all aspects of a product that relate to identity or personality

Consumer responses that make up brand equity

Brand awareness: the strength of the brand’s presence in the consumer’s mind. A strong brand will be recollected more easily, whether prompted by advertising or by a purchase occasion

Brand associations: the connections that consumers make to the brand Strength of association Valence - degree to which association is positive

or negative Uniqueness

Issues particular to executing online branding strategies

Online interactions bring added security and privacy concerns

Limited familiarity with online brands makes fostering trust more difficult

Customization means one customers image of the brand may be different from the next customers image

Building brand awareness requires significant investment - especially for “second movers”

Online brands have the potential to generate loyalty more quickly - especially if customers are targeted effectively

Do strong brands matter online?

Yes - Strong Brand is Essential

Strong brands attract customers

Positive associations for consumers

Builds trust and loyalty Clear brands are

associated with higher conversion rates

The network effect

No – brands are less important online

Alliances — not strong brands — are most important

Third-party evaluators (such as BizRate) will increasingly influence online purchases

Speed to market is more important than branding

Trend toward customization means the “mega-brand” is no longer relevant

Examples of Internet brands with strong equity?

Write down the first 3 Internet brands you can think of

Internet brands at home and at work (USA)

AOL

The Weather Network

Source: Nielsen//NetRatings

Should Offline Firms Create New Online Brands?

No – keep same brand It takes an enormous amount of

time and money to build a strong brand name

Customers who purchase online are assured that services are available offline (returns etc)

It is difficult to uncover interesting new brand names

The online brand and the offline brand can have a synergistic effect

Target customers will not be confused by brand offerings appearing online under a different name

Yes – build a new brand Using an existing brand limits

the growth of the user base – eg. Travelocity is disassociated from its owner Sabre and partner American Airlines

Existing offline brands may not “get the Net”

It is possible to sign up more partners and form new alliances when a third-party name is used that is not associated with any of the players

Quotes on Online Branding

“Brands stand as comfort anchors in the sea of confusion, fear, and doubt. In dynamic markets, strong brands have more value than ever, precisely because of the speed with which these markets move.” – Chuck Pettis, Technobranding

“It took more than 50 years for Coca-Cola to become a worldwide market leader, but only five years for online search engine Yahoo to gain market dominance. The role of the brand has changed dramatically and has created a vacuum between offline and online brands.” – Mark Lindstrom, Executive Director, ZIVO

“A company’s website is the brand. It’s the hub of consumer experience, the place where all aspects of a company, from its annual report to its products to its support, intersect. It’s the company in a nutshell, all there in a way that just is not possible in the analog world.” – Sean Carton, Carton Donofrio Interactive

Design Compelling Brand Intent

Brand intent brings alive the value proposition ie. focus on customer benefits

Brand intent should be clear - easy to understand compelling - provide positive brand associations

Google is a good example: benefits are very clear “Google helps users find

the information they’re looking for quickly and effectively”

compelling because these benefits are essential to the search engine category

Executing a branding strategy

Execute with integrity provide a clear, trustworthy message the firm must be able to deliver on the promise made by the

brand this is especially important if the brand is also offline

Execute consistently reinforce the branding strategy across all the elements of the

marketing program - you are teaching consumers the distinct and memorable personality of your brand

Focus on the long term - most strong brands take time to develop

Be innovative and opportunistic - be ready to try new techniques – Mercedes-Benz USA Owners Online: “Rewards that extend past your car”

Sustainability: building a relationship of trust with

customers 2 phases of the relationship between

customer and firm Acquisition Retention

Different marketing strategies needed for each phase

Customer acquisition: what is important?

Creating trust by: Trust-based marketing (rather than push) Permission marketing Branding (they know what to expect) Trusted advisor (eg. GM Motor Choice) “Independent” third party and customer reviews Product guarantees, return policies, privacy

policies Other web site trust cues

Customer retention: what is important?

Loyalty on the web is hard to achieve (low switching costs)

Trusted brands – good at following through Stickiness

Online tools, customization, order tracking Product add-ons and customer service

CRM and data mining Loyalty programs Innovation

Travelocity case study

Created a loyalty program for frequent buyers of travel services

To create customer loyalty To differentiate itself from the competition To provide it with data that would help the

company continue to innovate