Proctor & Gamble: The Controls, Implementation, and Marketing Processes

Upon completion of this unit, students should be able to

1. Classify concepts related to price and its impact on business strategies.

6.1           Describe how controls affect marketing plan performance and plan implementation.

6.2           Describe the important roles other departments play in ensuring successful marketing plan implementation.

6.3           Organize the controls and marketing organization for a specific company’s marketing plan.

Reading Assignment

Chapter 8: Creating Valuable Customers

Chapter 9: Building and Managing Brand Equity

Unit Lesson

Brands are company assets just like the buildings and physical plants owned by firms. The value of a brand is determined by its brand equity. Brand equity is a combination of five elements: brand loyalty, brand awareness, perceived quality, brand associations, and other proprietary brand assets (Aaker & Moorman, 2018). Each one of the five brand equity elements listed below contributes to building a strong brand.

Perceived quality, brand awareness, and brand loyalty have been shown to be the most effective of these in maintaining a strong brand competitive presence (Aaker, 1992).

Brand equity

(Aaker & Moorman, 2018)

Companies know that brand equity is important, but they struggle with how to quantify it within their current financial reporting methods. Without their products having brand equity, companies are susceptible to creating marketing strategies that can only focus on price and specifications. Products with strong brand equity enable companies to create marketing strategies that compete on their products’ strengths and attributes other than price.

Therefore, companies should build strong brands as a bulwark against the competitive forces and price erosion in the industries in which they choose to compete. In their attempts to effectively compete, firms are always considering how to respond to their competitors without damaging their brand equity. Brands enable their firms to maintain competitive postures beyond the short-term shareholder quarterly reporting pressures. Strong brands provide ongoing opportunities for reinvestment regardless of short-term stock market swings. Just as a company would not neglect to keep a vital asset like a manufacturing facility running in top shape, brands require the same care and treatment to continue providing the company above-standard returns. Price competition can be tamed with a strong brand. The strength of the brand enables an alternative to competing on price and specifications. Through the building of these assets, the company leadership can plan and manage strategically for maintaining a delicate balance while continually driving to maximize share value.

Building strong brands can move a company away from competing on the pricing treadmill (Aaker, 1992).

Still, brand equity has been criticized by some for its alleged lack of managerial relevance (Faircloth, Capella, & Alford, 2001). In a study done by Aaker (1992), he poised a question among several hundred business managers to find out what was the biggest asset that gave them a competitive advantage. Aaker (1992) found that three dimensions of brand equity were given out of the 10 provided by managers completing the survey. Perceived quality was the top response, followed by brand awareness, but customer loyalty was at the bottom of the list. These business manager responses demonstrate the importance of brand equity being a part of a company's asset and strategy-building process (Aaker, 1992).

Remember, competitive advantage means a firm can successfully do things cheaper, faster, or better than the competition. Sometimes, it can perform more than one or all three in its competitive advantage creation. Also, a sustainable competitive advantage cannot be easily duplicated by the competition, nor does a sustainable competitive advantage last indefinitely. Competitors are always attempting to create their competitive advantages to blunt those of their competition. So, a sustainable competitive advantage is hard to copy, and it is not permanent.

Even though creating strategies that build or increase brand equity in a firm’s products is extremely important for sustained growth and competitiveness, it is not easily measured empirically. The success or failure can be recognized in the company’s financial statements’ bottom line, but there is no guarantee that the investment in the brand will generate a desired return. What is known is that if no investment in the brand is maintained, it can quickly begin to falter in its performance and its ability to generate above-standard returns (Faircloth et al., 2001).

The competitive marketplace is littered with brands that have not kept current with their target market needs and desires. Once-mighty brands (e.g., Sears, Blockbuster, Barnes and Noble, WordStar, JC Penney, Compaq Computers, Oldsmobile, Pontiac) that were once thought to be invincible are now shadows of their former selves, if they even exist at all. By not taking care to keep their brands current and relevant, these firms lived off their past accomplishments and innovations rather than conscientiously building on those accomplishments to serve their customers better. By not ensuring that perceived quality, brand awareness, and brand loyalty were properly and consistently supported, these companies let their marketing leadership positions fade, first slowly and then quickly. Some even faded into bankruptcy with the others’ futures remaining in doubt. Marketing managers are keenly aware of the value of a strong brand equity. The five elements that make up brand equity can all be manipulated in the marketing mix to help the firm achieve the desired financial and brand results it has set. Look at some companies today that have key associations with brands (e.g., Walmart [price and value], Lexus [design and quality]). What do you think makes a company brand favorable for its customers?

Brand equity is, in part, a result of consumer behavior (Faircloth et al., 2001). As such, the consumer plays a vital role in determining the strength of a brand. Since consumers are not a part of the company's payroll, they represent a large and important group necessary to the strength of the brand but are independent of the company. This is a challenging position companies find themselves in and must continue to create marketing strategies that include and engage this large, important, and uncontrollable population. More than ever, companies must use marketing research, competitive assessments, and other research strategies to stay in touch with their customers. Interestingly enough, strong brands enable companies to resist competitive pricing pressures, at least in the short-term, even though customers might find lower prices and features elsewhere.

If the value of brands are so important, then why do some brands lose their relevance? One of the goals of a firm’s marketing strategy is to make its competitors’ strategies and products irrelevant. Being irrelevant, according to Aaker (2010), means that a firm’s brand diminishes with loss of customers when their attention fades. This can happen gradually over time. An example of a market category that became redefined was video rentals. Blockbuster had a strong brand image and more store locations than its competitors. Its video rental prices were reasonable. In order for it to keep its video rental inventory of VHS tapes and DVDs available and efficiently move its customer rental base, Blockbuster followed the industry norm of levying late charges on overdue rentals. To keep customer satisfaction levels consistently high and profit margins on track, charging and collecting late fees were an industry norm and felt to be necessary.

Blockbuster’s customers benefitted from the many Blockbuster locations. Customers liked the well-stocked, available inventory of the latest and most popular releases. What they did not like was the idea of paying late fees on rentals they kept too long.

Blockbuster and all other video rental stores tended to discount this level of customer discontent toward paying levied late fees. Seeing no other way to resolve and motivate customers to return rented videos on time, the late fee structure was viewed as the most effective means and best industry practice.

It was not until streaming technology improved and more customer broadband penetration became available that customers began their migration away from Blockbuster and

Blockbuster

(Pendousmat, 2008)

video rentals. A new competitor, Netflix, emerged as the first mover and, eventually, the leader in the new video streaming competitive sector. At first, Blockbuster dismissed its new competitor because Netflix’s streaming service lacked the title selections compared to Blockbuster’s vast holdings. Then, suddenly, customers began leaving Blockbuster in droves, demonstrating their desire for the convenience, affordability, and no late fees from its streaming rival, Netflix. Almost overnight, the Blockbuster brand became irrelevant, synonymous with dated technology and an onerous policy of charging late fees. Blockbuster’s new and rising competitor, Netflix, became the new video rental source via its technologically superior streaming service.

Eventually, as the Netflix streaming user base grew, more and more first-run programming was added.

Today, Blockbuster, once a market leader with a seemingly invincible brand image, no longer exists. While it was at the peak of its strength, it failed to see how its brand was already, albeit slowly, on its path to irrelevancy due to subtle marketplace sector changes. In retrospect, the market had changed to enable video rental customers to avoid the two trips to the video store for every video rental (pick and return), thus countering the strength of Blockbuster’s many convenient locations. Also, the dreaded late fees that were the worry of almost every video renter now no longer existed. Netflix video streaming eliminated these two customer inconveniences and annoyances forever. As a result, the irrelevant Blockbuster was then eliminated.

References

Aaker, D. A. (1992). Managing the most important asset: Brand equity. Planning Review, 20(5), 56. Retrieved from https://search-proquest- com.libraryresources.columbiasouthern.edu/docview/194372622?accountid=33337

Aaker, D. A. (2010). Brand relevance: Making competitors irrelevant. Hoboken, NJ: Wiley.