Brand equity

Used by marketers and financial analysts to describe the proportion of a company’s value due to its branding and other intangible assets.

During last year’s NBA finals, GM aired a commercial worth noting. Showing all their brands throughout the past they apologized for making their brand too confusing and plead with us to look into the future. Watch this commercial below to understand their struggle with brand equity.

GM trying to convince public

Brand Dilution

Brand dilution occurs when a brand’s equity declines from too much use or in the case of GM, too many cars are made from the same parts and the distinct feeling of a car is lost. For many reasons including the introduction of foreign competitors producing in the U.S. and labor management struggles, GM was forced to compete by cutting costs resulting in the overuse of similar car parts for their different brands.

To the public, GM was becoming an affordable brand to the everyday commuter so cheaper and identical inputs were needed. It’s kind of like me trying to cook a week’s worth of dinners but I only have three ingredients. I call them different plates, but I really just switched up the way I cooked my meals not giving anything substantially different. Oh yeah, and my time as a cook costs way too much so that is why I can only afford three ingredients.

Brand Endorsement

When seeing the power of a brand decline or dilute, one must also consider the consumer preferences changing in the market place and whether or not this is actually bad for the company. It raises an interesting consideration; are companies intentionally shifting their target market or just plain getting it wrong?

Gatorade launched an endorsement campaign with pop star Little Wayne leaving some confused what “That’s G” really meant. A rapper uses the word “G” to imply the adjective “gangsta” but the commercial features all kinds of monumental athletes so calling them G for Gatorade makes sense. Gatorade successfully shifted some of their brand equity to a mainstream drinker, much the same as other juice makers and cola companies do already. Their marketers may have identified that Gatorade is as common as juice so they must market it to common consumers (using pop artists).

Discussion

• Does anyone else believe GM can re-brand?
• Was GM’s commercial more targeted toward shareholders and taxpayers?
• Is Gatorade loosing its brand identity as a sports drink?

A cash cow is a business or a product that has a large market share in an industry with slow to little growth.  Cash cows usually require little reinvestment of their profits as they are not looking for growth and are only seeking to maintain profits.  The business is given the name cash cow because it is “milked” for its cash.

It is the goal of a business, and especially its marketing department, to transform their business or product into a star or a cash cow.

A cash cow will be found in the bottom left corner of a growth-share matrix where the growth rate is slow and the market share is large.

Market-skimming pricing is a pricing strategy used by companies to “skim” revenues layer by layer from the market.  This strategy is used by companies that have new and usually innovative products.  A company pursuing this strategy will set a high initial price for the product to maximize their revenues off of customers who are willing to pay a higher price for something new.

For example, think back to when DVD players were first introduced, or when new TVs come out.  At first they are priced very high, but over time their price comes down.  These companies are pursuing the market-skimming pricing strategy, they are maximizing their revenues from customers who are willing to pay more money to have it early and then lowering their price later to attract new customers.

A market-skimming pricing strategy is only effective if the product’s image and quality warrant the product to have that high of price.  There must also be enough consumers willing to pay that price.  The company must make sure that a competitor cannot easily enter the market and undercut the price of the product.  If the company will operate at a loss due to fixed costs and selling at a smaller volume a market-skimming pricing strategy is not the strategy the company should pursue.

The 4 Cs are another way for marketers to look at the marketing mix.  The  four Cs look at the marketing mix from the customer’s perspective.  The 4Cs are Customer solution, Customer cost, Convenience, and Communication.  Building the marketing strategy from the customer’s point of view is very beneficial.  Thinking like the customer helps you design your makreting mix not around the question, “How can I push this product?”, but instead “What makes people like this product?”

The four Ps of marketing, also known as the marketing mix, are the seller’s view of the market.  The fours Ps are Product, Price, Place, and Promotion.  The four Ps is a concept that helps marketers to develop their marketing mix that will give them strong positioning in their target market.  An effective mix blends all of the four Ps together to deliver value to the customer.  Another way that marketers can think about the marketing mix is from the customer’s point of view.  The concept which thinks from the customer’s point of view is the  four Cs.