Product: How the Internet affects product offerings and branding Building long-term customer relationships MARK 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

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? 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 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

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