From brand values to customer value
Recently there has been a growing tide of articles, papers and even conferences devoted to the question of the future of marketing (see, for example Brady and Davis, 1993; Coopers & Lybrand, 1993; Mitchell, 1994). Essentially, the point at issue is whether “traditional” marketing is appropriate for the conditions that now prevail in the late twentieth century. The basic principle of marketing still applies, that is the focus of the business on the satisfaction of customer needs, but, it is argued, the way in which marketing is practised may need to change fundamentally. It has to be recognized that there have been some radical changes in the marketing environment since marketing first came to prominence in the early 1960s. Organizations which had even the most rudimentary understanding of the marketing concept were able to reap the harvest of fast-growing markets comprising customers who had money to spend. In such conditions it was easy to believe that the company’s marketing effort was the main driver of this success. In reality that success was due as much to the fact that the business was being carried along with the tidal wave of market growth. The most significant change to impact western companies has been the maturing of the markets in which they compete. Mature markets have certain characteristics which mark them out as being significantly different from growth markets. Chief among the characteristics of mature markets are: • Customer sophistication. In the majority of western economies, today’s customer and consumer has seen it all, they have been there and “bought the T-shirt”. In industrial markets, as well as fast-moving consumer goods markets, the supplier is now faced with a buyer who is much more demanding and less easily persuaded by marketing “hype”. One consequence of this change is the gradual decline in brand loyalty in many markets (Industry Week, 1993). Decline in the impact of advertising. It has been suggested by some industry commentators (Maddox, 1995) that, with the decline of the mass market and the consequent fragmentation of markets into smaller segments, conventional media-based advertising, particularly TV, is costing more and more to deliver the requisite ratings. This is causing a rethink in many organizations as to how they allocate their marketing budget. For example, it is reported that in the UK, Heinz is planning to divert most of its marketing communications budget from TV and apply it instead to direct marketing.
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Journal of Marketing Practice: Applied Marketing Science, Vol. 2 No. 1, 1996, pp. 55-66. © MCB University Press, 1355-2538
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Perceived product equality. Mature markets exhibit similar characteristics to commodity markets in that customers perceive little difference between competing offers. In such conditions, while customers might have brand preferences they have less brand loyalty – meaning that if the preferred brand is not available, they will willingly accept a substitute. Even product/markets with high rates of innovation do not seem immune from this tendency to “commoditization”; take, for example, the personal computer market, where clones and “me-toos” now account for significant market shares. Price competition. Almost by definition the combined effect of the previous three factors is a downward pressure on price. As a result, there is a temptation to seek to achieve tactical gains in sales volume through discounting in one form or another which is compounded by the continuing demands for price reductions by powerful customers. Paradoxically, the more that organizations compete on price, the more they reinforce the customers’ view that they are indeed commodity suppliers.
Concentration of buying power A further significant difference in today’s marketing environment, compared to the past, is the continuing concentration of...
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