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Brand Dynamics: Measuring Customer Loyalty, Price Premium, and Positioning, Exercises of Brand Management

Various measures to assess the performance of a brand on the dimensions of esteem and knowledge. It covers customer loyalty, price premium, positioning understanding, and referral index. These measures help brands maintain their position, preempt damages, and consolidate their strategies.

Typology: Exercises

2011/2012

Uploaded on 08/07/2012

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Brand Management (MKT624) VU
Lesson 40
BRAND DYNAMICS
Introduction
With the understanding of measures on the first two dimensions, that is, differentiation and
relevance, this lecture continues with the discussion on measures of variants of the remaining
two dimensions, esteem and knowledge1.
On the dimension of esteem
Customer loyalty: This shows how consistent customers are in buying your brand, how long
they have been buying and how long they may buy? This measure should tell you the number
of customers that you would have lost had you not had the branding strategies. This also tells
you that the customers who did not leave your brand are loyal customers.
You ask your customers what other brands they considered before finally deciding to stick to
your brand. You can find out the competitive brands that entered your customers’ decision-set.
The next question should clarify why they stuck to your brand after considering competition
and then discarding it.
You will get yet another testimony to your product’s quality and branding strategies.
Price premium/Financial brand value: This shows you why your customers are willing to pay
you a premium over your competitors or a price that offers you good, attractive margin. This
also is an important measure in determining the right price premium for your brand.
You compare the price of your brand with your immediate competition and determine to what
extent you can further go up in price, thus following the market-based pricing mechanism.
The measure gives you insights into
Going for the right premium
Adjusting your pricing upwards, even if you do not charge a premium, to ensure you
have the right margins.
Cutting your costs wherever you can to improve your margins
Lifetime value of a customer: It lets you have your loyal customer’s lifetime worth in terms of
your brand’s purchasing.
On the dimension of knowledge
Positioning understanding: This measure tells you to what extent customers understand the
way you have positioned your brand. Any gaps between your message and understanding of the
target market will raise questions for correction.
A similarity of message and reception of it by the market is a testimony to the right positioning
and, hence, leveraging of the brand.
It is one of the most important measures for the simple reason that differentiation and
segmentation come to life if a position is rightly occupied in the minds of your consumers. To
what extent customers understand your positioning and own it tells you the level of success that
you have achieved from your branding effort.
If you positioned your brand from the taste and quality platform, then it has to be perceived so
in the market.
Conversely, if it is perceived more as a price-friendly brand, then the perception needs to be
changed. This perception may hinder your efforts to go for a price increase; for customers may
take it for granted that your price will never be out of their perception range. That will be a big
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Lesson 40 BRAND DYNAMICS Introduction With the understanding of measures on the first two dimensions, that is, differentiation and relevance, this lecture continues with the discussion on measures of variants of the remaining two dimensions, esteem and knowledge^1. On the dimension of esteem Customer loyalty: This shows how consistent customers are in buying your brand, how long they have been buying and how long they may buy? This measure should tell you the number of customers that you would have lost had you not had the branding strategies. This also tells you that the customers who did not leave your brand are loyal customers. You ask your customers what other brands they considered before finally deciding to stick to your brand. You can find out the competitive brands that entered your customers’ decision-set. The next question should clarify why they stuck to your brand after considering competition and then discarding it. You will get yet another testimony to your product’s quality and branding strategies. Price premium/Financial brand value: This shows you why your customers are willing to pay you a premium over your competitors or a price that offers you good, attractive margin. This also is an important measure in determining the right price premium for your brand. You compare the price of your brand with your immediate competition and determine to what extent you can further go up in price, thus following the market-based pricing mechanism. The measure gives you insights into

  • Going for the right premium
  • Adjusting your pricing upwards, even if you do not charge a premium, to ensure you have the right margins.
  • Cutting your costs wherever you can to improve your margins Lifetime value of a customer: It lets you have your loyal customer’s lifetime worth in terms of your brand’s purchasing. On the dimension of knowledge Positioning understanding: This measure tells you to what extent customers understand the way you have positioned your brand. Any gaps between your message and understanding of the target market will raise questions for correction. A similarity of message and reception of it by the market is a testimony to the right positioning and, hence, leveraging of the brand. It is one of the most important measures for the simple reason that differentiation and segmentation come to life if a position is rightly occupied in the minds of your consumers. To what extent customers understand your positioning and own it tells you the level of success that you have achieved from your branding effort. If you positioned your brand from the taste and quality platform, then it has to be perceived so in the market. Conversely, if it is perceived more as a price-friendly brand, then the perception needs to be changed. This perception may hinder your efforts to go for a price increase; for customers may take it for granted that your price will never be out of their perception range. That will be a big

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constraint for you. If, however, the right positioning is taking hold, then you will be free of that constraint and can charge a premium or a price that offers a high level of margin. There is a straight line relationship between quality perception and premium pricing. Perception of high quality and taste will also enable you to make your customers stick to your brand and attract new customers through referrals. In short, a complete understanding on part of the customers about your brand’s inner core and character testifies that your position is well understood by them. Referral index: It pinpoints the potential to create new business/customers owing to referrals by satisfied and loyal customers on the basis of their knowledge of the brand. The importance of measures The importance of such measures comes to the surface under two sets of circumstances:

  • In adversity, when sales start slipping, market share eroding and management having no choice but making desperate decisions as quick fixes.
  • In less difficult conditions, where brand’s potential is not being fully harnessed, leaving much to be desired. You realize this mostly in hindsight. According to experts, these measures along with financial measures create a balanced method of measuring a brand’s performance. The challenge therefore is to use these measures to supplement the financial measures. However, it is not important to go for all the measures that are discussed. You can pick a few that are relevant to your strategic situation and then see with confidence that your brand is moving the way it was planned. If not, then make relevant changes before damage is done. Such an approach ensures that brand building efforts are not compromised and you can:
  1. Maintain your brand position – an extremely important dimension that drives all marketing strategies.
  2. Preempt most of the damages that could be caused by not addressing the strategic factors.
  3. Further consolidate your brand position by ensuring that all brand strategies are taking hold.
  4. Stay focused in maintaining your brand picture. It helps you eliminate any gaps between the picture you have created and the actual image.
  5. Determine the impact of your strategies on retaining loyal customers. Loyal customers give referrals of your brand to others and create more customers.
  6. Use the result of your branding efforts toward creating new customers, creating new extensions.
  7. Achieve an overall picture of the qualitative returns you are getting on the money you are investing into brand-building. Summary Measuring performance of your brand means you are managing your brand right. Measurement comes in the form of your monthly, quarterly, and annual returns on investments and revenues, but it has to be supplemented with measurements of your strategies. Strategies cause financial results and therefore must be measured to see if there are any changes required toward tactical adjustments. The need for tactical adjustments keeps you alert and timely action ensures that the financial results that you are posting continue improving. A time may come when financial results take a turn for the negative if strategies are left to chance and you lose control of their implications. The strategic implications are demonstrated

in four different macro dimensions, that is, differentiation, relevance, esteem, and knowledge.docsity.com