Nawailah Tarmohamed

Chapter 8 – Identifying a sustainable competitive advantage

Learning outcomes:
- Debate why an organisation needs a market strategy.
- Demonstrate the functioning of a market strategy.
- Explain the characteristics of a sustainable competitive advantage.
- Analyse how the six elements of the SELECT framework can be used to determine
the sustainable competitive advantage of an organisation.
- Distinguish the places inside and outside the organisation where competitive
advantages can be realised.
- Evaluate the alternative sources of competitive advantage available to the
organisation.

The need for a marketing strategy:

To prosper in a fluid and dynamic environment, organisations constantly need to adapt to
changes in the environment. To achieve this, they need to take the following actions:

- Manage for competitive advantage: Organisations must provide value to customers

and be profitable. The key is to achieve a sustainable competitive advantage to
outperform the competition.
- View change as an opportunity: Top management must realise that the fluidity of
the market constitutes an opportunity and not a threat.
- Manage through people: Top management must analyse the organisation’s strengths
and weaknesses and develop a vision, the markets it should compete in, and how it
will compete.
- Develop a strategically managed organisation: Top management must work to
develop an innovative, self-regenerating organisation based on sound structures,
effective systems, excellent staff and shared value.

Core components of a marketing strategy:

The core components of market strategy are:
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Competitive strategy – the plan that the business is going to follow to obtain a competitive
advantage over its competitors.

The six basic competitive strategies are:

1. Differentiation: Adding value to the product or service by making it different from

others through its image, customer service, advertising, promotion, distribution, and
other market-related strategies. (Tesla’s pure battery-driven car)
2. Cost-effectiveness: Supplying the product or service more cost-effectively than
competitors. (Some estate agents asking a flat 2% commission fee)
3. Focus: Selecting a specialised product or market in a niche position focused on only
one market segment. (Porsche sports cars)
4. Pre-emptiveness: Used by the market leader when the organisation is the first to
enter a new field, it is done before other people can act. (Kulula which was SA first
low-cost airline)
5. Synergy: When two or more businesses join forces in such an optimal way that the
result, be it a product or service, is far greater or better than what their individual
effort would have realised.
6. Innovation: The process whereby an idea or invention can be transformed into a
product or service that creates value for the customer to such an extent that the
customer will be eager to buy it.

The competitive strategies are not mutually exclusive and can be used in combination.

Life-cycle strategy – how a company positions itself to survive and grow in the market.

The four alternatives for this strategy are:

1. Growth and diversification: Most viable investment decision, it involves increasing

turnover, boosting product or service value, raising profit or multiplying resources.
(Apple)
2. Maintaining the existing position: Allows enough investment to hold or maintain
the existing position.
3. Harvesting: Often used in a declining and mature market, where the investment and
operating expenses are decreased to enhance cash flow, allowing market share and
turnover to decrease. This is usually to invest the money elsewhere.
4. Divestment: In a declining industry, the organisation usually sells off the assets or
SBUs in its portfolio that are losing money and uses this capital to invest or re-invest
in other SBUs or businesses that are still growing. Selling off a business is therefore
not always a sign of weakness or failure, but rather of good management.

Sustainable competitive advantage – occurs when an organisation develops or attains some

advantage, be it physical or intangible, that allows it to outperform the competitors in the
market.
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There are 2 dominant views on sustainable competitive advantage.

1. The resource-based view (RBV): it focuses on the physical and intangible resources
of the organisation and how to use them to the best advantage. (For example, the
brand and reputation of the organisation)
2. Market-based view (MBV): it says that the resources of the organisation must be
adapted to the needs of the market. (For example, customer orientation)

Customer benefits and customer costs that create value for the consumer:

Anatomy of competitive advantage (The SELECT Framework):

A sustainable advantage creates a basis for superior performance and long-term survival of
the organisation in the marketplace, as well as value to the consumer. It is therefore important
that the marketing manager understands the ways in which a competitive advantage can be
structured. To explain this the SELECT Framework is used.
SELECT Framework – a model that has been developed to provide a systematic approach
to analyse and understand the composition of a sustainable competitive advantage.
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The SELECT Framework is an acronym for the six dimensions of a competitive advantage:

- Substance
- Expression
- Locality
- Effect
- Cause
- Time span

1. Substance:
The inherent aspects of the business that create the competitive advantage, such as the
location.

Organisational competitive advantage can be categorised into the following 2 categories:

- Positional versus Kinetic Advantages:

- Positional advantages come from the unique attributes and assets the
organisation has available (for example, the location of the convenience food
stores at petrol stations, which brings in more income for the petrol stations
and additional turnover for the retail chains that occupy these stores).
- Kinetic advantages are found in the organisation and include the special
knowledge and capabilities among its staff. They are dynamic, since they
change over time due to special knowledge and skills of the owners of the
knowledge.

- Homogeneous versus Heterogeneous Advantages:

- Homogeneous advantages implies that the organisation and its competitors are
competing in the same manner using similar products, services, strengths and
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skills. The only way that the organisation can obtain an advantage is by doing
the same things better than the competition does.
- Heterogeneous advantages are created when the organisation plays the game
differently to its competitors.

2. Expression:
How a competitive advantage is expressed in the organisation, that is, in what form is the
competitive advantage visible?

There are two categories:

- Tangible versus Intangible Advantages:

- Tangible advantages are easy to distinguish and are visible to the organisation
and its competitors (for example, the locational advantage of South African
hypermarkets – near to highways with ample parking – is a visible or tangible
advantage).
- Intangible advantages, however, are not always visible, or are hidden from the
naked eye (for example, Coca-Cola’s secret recipe, which forms the heart of
the soda drink). Intangible advantages are often more difficult to duplicate and
therefore more sustainable over time.

- Discrete versus Compound Advantages:

- A discrete advantage is one that can stand alone and is most frequently used in
combination with the positional advantage.
- A compound advantage consists of a multitude of individual advantages that
on their own would not be enough to constitute a competitive advantage (for
example, the lack of a compound advantage would be to introduce a new
version of a cellular phone with only one advantage, such as an advanced
camera. This one feature will not be sufficient to convince customers to buy a
new phone at a higher price).
- A compound advantage is a more immediate advantage, and thus of a higher
order in the short-term than a discrete advantage. However, organisations with
a discrete advantage usually have had a longer period of sustainable
advantage.

3. Locality:
The precise place where the advantage is located. Is it inside the organisation, located in
the skill set of the employees or outside?

- Individual-Bound Advantages:
- This refers to the skills and networks of individuals within the organisation,
which are easily transportable.
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- Organisation-Based Advantages:
- Here the synergy among all the people working for the organisation
contributes to the competitive advantage.
- Such an advantage is by nature more stable, more socially complex and more
difficult to duplicate.

- Virtual-Bound Advantages:
- The advantages reside outside the organisation.
- Includes access to a well-established distribution channel or a special
relationship with persons outside the organisation.

4. Effect:
The effect of the competitive advantage should be determined. The effect can either be
absolute or relative, as well as direct or indirect.

- Absolute versus Relative Advantages:

- An absolute advantage is when an organisation has an overwhelming
advantage over its rivals. (For example, when an organisation has created high
barriers for entry, making it difficult for a competitor to challenge its position.)

- Direct versus Indirect Advantages:

- A direct advantage is directly traceable to an organisation and usually tangible.
- An indirect advantage is not directly traceable to an organisation but can still
also be very effective.

5. Cause:
From where does the competitive advantage originate? The cause can either be
spontaneous or strategic, as well as competitive versus cooperative.

- Spontaneous versus Strategic Advantages:

- A spontaneous advantage is when an organisation cannot determine precisely
why it attained a competitive advantage. (Lucky or in the right place at the
right time)

- Competitive versus Cooperative Advantages:

- A cooperative advantage is when an organisation realises it cannot survive
alone and decides to cooperate with competitors.

6. Time Span:
Two perspectives of the time span are whether the advantage is potential or actual, and
whether it is temporal or a sustained advantage.
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- Potential versus Actual Advantage:

- A potential advantage is an under-utilised or untapped advantage which can be
used in the future but is of no current advantage to the organisation.
- An actual advantage is one that is already in the marketplace and is providing
the business with the income that is expected. (It is therefore the sustainable
competitive advantage that all businesses strive to attain)

- Temporal versus Sustained Advantages:

- Temporal advantages are of short duration and do not contribute to long-term
sustainability.
- A sustained advantage can be achieved if the organisation has resources which
are valuable, rare, inimitable, and non-substitutable. On the other hand, a
temporal advantage occurs when an organisation only has valuable and rare
resources.
- A sustained advantage can occur when a series of temporal advantages are
linked together over time.
- Coca-Cola is an example of a sustained competitive advantage.

Sources of global competitive advantage:

There are 4 sources of global competitive advantage for a global organisation:

1. Competition:
Competition can be described as competitive action against a rival or rivals in the global
market.
- Can be based on the organisation’s own strength or special access to the market. (For
example, Volkswagen having the major market share)

2. Creation and Innovation:

Innovation is one of the best ways to create a competitive advantage, and creation ties in
with it.
Innovation can be used to develop a competitive advantage in various ways, like:
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- Creating new products or new markets: The development of new capabilities,

resources, products and markets can set an organisation apart from its competitors,
which is an excellent way to avoid direct competition.
- Innovative organisational structure: Organisational structure forms the backbone of a
business and indicates how work and communication flow.
- Organisational learning: The collective process of sharing knowledge can be used to
improve an organisation’s performance.
- Superior corporate culture: A strong joint belief in value systems that are instilled in
an organisation and guide employees in their actions.

3. Cooperation:
Initiating or participating in collaborative agreements with other businesses and forming
alliances in other countries in order to overcome a common competitor.

The following forms of cooperation can help a global organisation obtain an advantage:

- Obtaining a foothold: One of the most reliable ways a global enterprise can enter a
market is by co-opting local partners that have access to that market.
- Pooling resources and sharing risks
- Sharing complementary resources and skills
- Learning from partners
- Building alliances
- Multiple alliances: Having multiple partners in different parts of the world.

4. Cooption:
Cooption involves collaboration between different parties or organisations to create a
competitive advantage by eliminating threats or seizing opportunities. It can also occur
when two global rivals collude to share a market or deter another competitor.

Some of the best competitive advantages in the past decade:

- A superior product benefit

- A perceived advantage or superiority
- Low-cost operations
- Legal advantage
- Global experience, skills and coverage
- Superior contacts and relationships
- Superior competencies
- Scale advantages
- Offensive attitudes
- Superior assets
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Chapter 9 – Competitive Strategies

Learning outcomes:

- Explain how a competitive strategy can be used by the organisation.

- Understand what a differentiation strategy entails and be able to assess under which
circumstances the different forms of differentiation can be used by the organisation.
- Explain the principles of the low-cost strategy and the cost drivers that can be used by
the organisation.
- Identify a focus strategy and the ways to use it.
- Explain the use of the first-mover advantage as well as the follower strategy.
- Evaluate the effect of synergy within an organisation, as well as the different forms of
synergy that are encountered in organisations.
- Appraise how innovation can be used as a strategy to obtain a SCA for the business.

Introduction:
Competitive Strategy – the organisational strategy that is centred around the sustainable
competitive advantage of the business that assists it to outperform competitors.

The competitive strategies available to obtain and maintain a sustainable competitive

advantage are:

1. The differentiation strategy: This strategy adds value to the products or services to
make them different from the products and services of competitors.

2. Low-cost strategy: It achieves overall cost leadership by supplying the product or

service more cost-effectively than competitors.

3. Focus strategy: This strategy is a very narrow pin-point strategy for a special product
or market niche that the organisation can monopolise.

4. Pre-emptive move: Gaining first-mover advantage, which is when you are the first to
enter a market with a new product or service.

5. Synergy: Involves all components of the organisation working together to create a

sustainable competitive advantage.

6. Innovation: It works together with the other strategies mentioned above.

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Differentiation:

An organisation’s ability to sustain differentiation depends on two aspects:

1. Continuance of the perceived value to consumers.

2. Speed of imitation by competitors.

The following conditions make it easier for an organisation to sustain its differentiation:

- Uniqueness as a barrier to competitors.

- A cost advantage.
- Multiple sources of differentiation.
- A switching cost to consumers, this is a fixed cost the consumer must pay to change
suppliers.

The common pitfalls of a differentiation strategy:

- Developing a uniqueness that is only valuable to the organisation.

- Over-elaborating, care must be taken not to be too different. (Like Mercedes
commonly over-engineering their cars)
- Too big a price difference.
- Failing to signal value to the consumer.
- Not knowing the cost of differentiation.
- Focus on product instead of the value chain, organisations often overlook the
opportunities provided by the value chain for differentiation.
- Failure to recognise the existence of different customer segments in the market.
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Low-cost strategy:
The cost drivers include:

- Economies of scale: An organisation’s ability to perform activities or purchase raw

materials more efficiently in large volumes that result in savings.

- No-frills products/services: Remove all frills and extras from the product or service.

- Low-cost distribution: Selecting a cheaper distribution channel.

- Location cost advantage: The geographical location can affect costs such as labour,
expertise, customers and raw materials.

- Institutional factors: Government legislation, unionisation, sales subsidies, tariffs

and levies are also important cost drivers.

Examples of cost drivers in South Africa:

The pitfalls of a low-cost strategy:

- Concentrating only on manufacturing costs

- Ignoring the purchasing function
- Overlooking smaller activities, like maintenance
- False perception of cost drivers
- Failure to exploit linkages
- Contradictory cost reduction exercises
- Entry of lower-cost competitors
- Reduced flexibility
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Focus strategy:
The aim of a focus strategy is to create a sustainable advantage by opting to occupy only one
specific niche in the market with a limited product range.

There are two basic options to obtain a sustainable competitive advantage using a focus
strategy:
1. Differentiation strategy
2. Low-cost focus

Creating a sustainable competitive advantage is of utmost importance when using a focus

strategy. There are many ways to achieve a focus strategy, namely:

- Focusing on the product line

- Targeting a specific market segment
- Choosing a limited geographical area
- Targeting low-share competitors

The following indicators in the business usually would indicate that a focus strategy could be
an attractive strategy choice for the organisation:

- Profitability: The segment the organisation wants to focus on is big enough to be

profitable.

- Growth potential: The segment has good growth potential. (For example, the
training needs of athletes led to the development of devices like Fitbit and Apple
Watches.)

- Size: The potential segment is not crucial to the success of major competitors but
sizeable enough for the smaller competitor to concentrate on, i.e., the segment is not
targeted by competitors.

- Resources: The organisation has the skills and resources to serve this segment
effectively.

- Defendable: The organisation can defend itself against challengers.

The pre-emptive move:

The pre-emptive move, also called the first-mover advantage, can be defined as the actions of
an innovative organisation which, by being ahead of the curve and by acting earlier than other
competitors, establishes a sustainable competitive advantage.
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A pre-emptive move with a sustainable competitive advantage can arise from the following
sources:

- Supply systems: The organisation may gain access to the sole, best or least costly
source of supply.

- Product opportunities: Being the first to introduce a product can help set industry
standards and make it harder for competitors to keep up.

- Operations systems: Developing a new operation system that reduces cost and/or
enhances quality can give a sustainable competitive advantage.

- Customer opportunities: Creating high switching costs makes it hard for customers
to switch to competitors.

- Distribution and service systems: Securing a key retail chain/location can prevent
others from competing effectively.

The following are advantages and disadvantages when considering the pre-emptive move,

Advantages:
- Improves the image and reputation of the organisation.
- Early entry builds experience by kick-starting the learning process.
- Customer loyalty is usually greater.
- Absolute cost advantage can be gained by early commitment to suppliers of raw
materials and distribution channels.

Disadvantages:
- The competition is unknown to the first-mover.
- The costs of opening a market are high.
- Early competition is costly, but big competitors that enter later is a big threat.
- Technological progress can make early investments obsolete and allows late entrants
the advantage of having the newest products and processes.

Synergy:
The principle of synergy is that the whole becomes greater than the sum of its parts.

The following are advantages and disadvantages when considering synergy,

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Advantages:

- Increased customer value and sales if synergy is properly applied.

- Decreased operating costs through economies of scale.
- Reduced investment and higher resource productivity.

Disadvantages:

- Defining synergies incorrectly: management often under- or overestimate the degree

of synergy.
- Missing the window of opportunity: synergies are time sensitive.
- High-pressure deals: mergers rushed under pressure tend to be riskier and achieve less
synergy.
- Lack of sameness: synergy is harder to achieve in mergers between companies from
different industries.
- Revenue increase is less likely than cost reduction: often, mergers achieve cost
savings more easily than they achieve revenue growth.

The following is reasons/types of synergy:

1. Shared know-how: Sharing knowledge and skills between different business units
can create synergy.

2. Shared tangible resources: Pooling physical assets, like manufacturing capacity, can
reduce costs and avoid duplication.

3. Pooled negotiation power: Combining purchasing power among businesses

increases leverage in the supply chain, leading to cost savings.

4. Coordinated strategies: Aligning strategies across units reduces internal competition

and allows a unified approach to market threats.

5. Vertical integration: When companies control both the production and distribution of
their products, it can lower costs and improve market access.

6. Combined business creation: Combining facilities and know-how in a new

organisation.
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Innovation:
Innovation as a competitive strategy is inherently part of all the strategies discussed.

Innovation can be described as the process whereby an idea or invention can be transformed
into a product or service that creates value for the customer to such an extent that the
customer will be eager to buy it.

The 4 zones of innovation:

- Breakthrough innovations are those that move the business ahead of its competitors.

- Incremental innovation refers to small changes to existing products and services to keep
the business competitive.

- Game changer innovation is out-of-the-box changes that transform markets, countries

and societies.

- Disruptive innovation focuses on underserviced markets with an initial product entry at a

lower price to get the market acquainted with the product.

An efficient innovation programme should provide a balance between the four innovation
zones.
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Chapter 11 – Brand-based Strategies:

Learning uutcomes:
- Consider the importance of brands in your organisation’s overall business strategy.
- Execute a brand strategy based on the four key aspects related hereto.
- Define brand values for an organisation and formulate a brand essence statement.
- Discuss the development of a competitive brand positioning.
- Explain the positioning of a brand.
- Develop a brand personality.
- Finalise brand architecture and manage your organisation’s brand portfolio.
- Understand the nature of intangible assets.
- Define the concepts of brand equity and customer equity.
- Understand how to manage and measure brand value.
- Explain the strategies available to build brand equity.
- Explain the criteria for choosing brand elements.
- Differentiate the brand through supporting marketing programmes.

Overall brand strategy:

A brand strategy is a long-term plan for the development of a successful brand to achieve
specific goals, as included in the marketing plan. A brand strategy defines how the
organisation will present the offering.

A well-defined and executed brand strategy is built on four key aspects:

1. Brand identity (including brand values and brand essence)
2. Competitive brand positioning
3. Brand personality and brand architecture
4. Brand portfolio management

1. Brand identity – defining brand values and establishing brand essence:

Brand identity: the promise that a company makes to consumers, based on the brand values
and essence - everything the company wants to be seen as.
Corporate identity: characteristics that makes an organisation unique, which includes an
organisation’s communication, design, culture, behaviour and strategy.

Brand values:
Brand values can serve as the basis of brand positioning by creating points of differentiation.
It can also be seen as the attributes and benefits of an organisation.
- For example, Nike’s brand values are performance, authenticity, innovation and
sustainability.
- Porsche’s brand values are exclusivity, performance, design and functionality.
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Brand essence:
To ensure everyone within an organisation really appreciates what the brand stands for, the
brand values need to be synthesised into a short statement, the brand essence.
- It is sometimes referred to as the brand promise or brand mantra, which captures the
heart and soul of the brand in a short, three- to five-word phrase.
- It signals its meaning and importance to the organisation, as well as the crucial role of
employees and marketing partners in its management.

A brand essence statement is composed of three terms:

1. Brand function: the nature of the product and type of experiences/benefits the brand
provides.
2. Descriptive modifier: to further clarify the brand function.
3. Emotional modifier: to express how the brand delivers its benefits.

Typical examples of brand essence statements, using the above three terms, are:
- Nike: performance (brand function), athletic (descriptive modifier) and authentic
(emotional modifier).
- Disney: entertainment (brand function), family (descriptive modifier) and fun
(emotional modifier).
- MTN: convenient (brand function), communication (descriptive modifier) and
everywhere (emotional modifier).

2. Optimal competitive brand positioning:

Brand positioning is concerned with registering the brand’s functional capabilities on several
attributes that differentiate the brand. It describes how a brand can effectively compete
against a specified set of competitors in a particular market.

To arrive at optimal competitive brand positioning, there are two requirements:

1. Define the competitive frame of reference.
2. Choose and establish points of parity and points of difference (POPs and PODs).

A good positioning statement has four elements or components:

1. Target customer: it provides a summary of the attitudinal and demographic
description of the target group.

2. Market definition: it must clearly indicate the category an organisation’s brand is

competing in and how their brand relates to the customers.

3. Brand promise: it must state the most compelling and motivating benefits of the
brand relative to the competition.

4. Reason to believe: it must provide proof of how the brand delivers what it promises.
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Choosing points of difference (PODs):

PODs may be performance attributes or benefits that customers strongly associate with a
brand and value positively, and which they believe competitive brands don’t offer to the same
extent.

The two most important considerations in choosing PODs are that the customers must find
the POD desirable and must believe the organisation can deliver it.

Desirability Criteria:
Desirability must be determined from the customers’ perspective and include the following,
- Relevance: Target customers must find the POD personally relevant and important.
- Distinctiveness: Consumers must find the POD distinctive and superior.
- Believability: A brand must offer a compelling and credible reason for choosing it
over the other options. The simplest approach is to point out a unique attribute of the
product.

Deliverable Criteria:
Must be based on an organisation’s inherent capabilities,
- Feasibility: The product and marketing must be designed to support the desired
association.
- Communicability: Giving a compelling reason why the brand will deliver the desired
benefit to the consumer.
- Sustainability: Can the favourability of a brand association be reinforced and
strengthened over time?

Choosing points of parity (POP):

Points of parity are generally features shared with other brands, in other words, points on
which a brand can at least match the benefits of competitor brands.
While POPs are not usually a reason to choose a brand, their absence can certainly be a
reason to drop a brand. For example, in the car market, electric windows and air conditioning
are POPs.
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We can distinguish between two types of POP:

1. Category points of parity: minimum features or benefits a brand needs to offer to be
a legitimate and credible competitor in that category.

2. Competitive points of parity: associations designed to negate a competitor’s points

of difference, a feature or quality a company develops to match a competitor’s unique
quality.

Several possible positioning strategies exists that an organisation can use:

- Attribute positioning: emphasises one or more outstanding attributes.
- For example, Benson & Hedges positions its cigarettes in terms of their
lightness and taste.

- Benefit positioning: stresses unique benefits.

- For example, Gillette blades promise an even closer shave.

- Use/Application positioning: based on how the product or service can be used or

applied.
- For example, Graça wine is positioned as a wine to be enjoyed at all fun
occasions.

- User positioning: focuses on its users.

- For example, marketers who offer bungee jumping may appeal to the thrill-
seekers or adrenaline junkies.

- Competitor positioning: sets the offering up against those of its competitors.

- For example, BMW may position its cars directly against Mercedes-Benz.

- Product or service category positioning: may emphasize a category not traditionally

associated with it to expand its business opportunities.
- For example, a museum may position itself as a tourist attraction rather than
an educational institution.

- Quality/Price positioning: may claim exceptional quality or the lowest price.

- For example, Woolworths is known for its high-quality garments, whereas
PEP Stores are known for unbeatable prices.

3. Brand personality and Brand architecture:

Brand personality concentrates on what the brand says about consumers and how they feel
being associated with it.
- Brand personality also acts as a symbolic or self-expressive function. People buy a
Mercedes not just for its performance, but also for the status and lifestyle it represents.
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Interview questions can be used to understand customer perceptions of a brand’s personality:

- If the brand were to come to life, what sort of person would it be?
- If the brand were a politician/sports person/movie star, who would it be?
- If the brand were a person, what type of house would that person live in?

Brand architecture: refers to the optimal organisation of the brands in the organisation’s
portfolio. It seeks to create the best view of the organisation’s brands from the perspective of
the marketplace.

Brand architecture provides a structure for branding decisions at different levels of the
organisation and explains which brands should be emphasised at which level in the
organisation.

4. Brand portfolio management:

Two models can be used to explain the various portfolio roles:
1. Riezebos, Kist and Kootstra brand portfolio roles
2. Aaker’s brand portfolio roles

Riezebos, Kist and Kootstra brand portfolio roles:

A distinction can be made between four types of brand portfolio roles,
1. Bastion Brand: Refers to the organisation’s most profitable brand.
- For example, Apple’s iPad.

2. Flanker Brand: Have the same price-profit ratio as the bastion brand but cater for
different needs and desires of consumers.
- For example, the iPad Air sold at a slightly higher price and offers a different
set of functional attributes.

3. Fighter Brand: A bastion brand can be protected from competitive discounted brands
by introducing fighter brands. It protects it by competing on price and usually
positions itself between the bastion brand and its competitor.
- For example, the iPad Mini.

4. Prestige Brand: Aimed at a small purchasing public, with the objective of protecting
the bastion brand of a company, since these cater for customers with a need for high
quality and luxury.
- For example, the iPad Pro.

Aaker’s brand portfolio roles:

1. Strategic Brand: Being of strategic importance to the organisation, this type of brand
needs to succeed and therefore should receive whatever resources are needed. The
three general types of strategic brands are:
- Current power brand: megabrand that generates significant sales and profits.
- Future power brand: is projected to generate significant sales and profit in the
future, even though it is currently a small or emerging brand.
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- Linchpin brand: indirectly influence (as opposed to generate) significant sales

and market position in the future. (For example, Spar Rewards is such a brand
for Spar).

2. Branded energiser: A branded energiser is any branded product, promotion,

sponsorship, symbol, programme, or other entity that by association significantly
enhances and energises a target brand.
- For example, Red Bull’s sports sponsorships, by sponsoring these events they
energize their brand image.

3. Silver bullet brand: Branded energisers can be sorted into high, medium and low
priorities in terms of their impact on the target brand and cost involved. The most
important are considered silver bullet brands – the brands that can play a strategically
significant role to positively change or support the image of another brand.
- For example, Apple’s iPod played a significant role in changing Apple’s image
from a struggling computer company to a leading electronic brand.

4. Flanker brand: If a brand is attacked by a competitor with a value offer or unique

position, any response can risk its image and brand equity. The solution is to use a
flanker or fighting brand to fight a competitor.
- For example, when Pepsi launched a clear cola, Coke did not want to risk its
name, but neither could it leave Pepsi to distort the cola market. The solution
was to come out with a flanker brand, Tab Clear.

5. Cash cow brand: The role of a cash cow brand is to generate margin resources that
can be invested in strategic, silver bullet or flanker brands that will be the basis for the
future growth and vitality of the brand portfolio.
- For example, Gillette’s blades generate significant revenue, which can be
invested elsewhere.

Building brand equity:

Brand equity: the set of intangible assets and liabilities inherent in a band that add or
subtract value to a firm and its customers.

Customer equity: the sum of the customer lifetime values of the organisation.

The two most commonly used models to build brand reputation:

1. Aaker’s model of brand equity

2. Keller’s model of brand equity
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Aaker’s model of brand equity:

This model identifies five major asset categories that make up brand equity,

1. Brand awareness: It represents the strength of a brand’s presence in the consumer’s

mind. Any brand that achieves high levels of awareness is more likely to be chosen
over its competitors.

2. Brand loyalty: This refers to the willingness of customers to repurchase the same
brand and is a key consideration in building the value of a brand, as a highly loyal
customer base generates future sales and profit streams.

3. Perceived quality: Often used to differentiate or position brands against others.

Brands that are perceived as being high quality are more profitable because they can
demand and receive premium pricing.

4. Brand association: This reflects the mental links consumers make between a brand
and its key product attributes. Brand associations help create positive attitudes and
feelings towards a brand, and hence build its brand equity.

5. Other propriety assets: Assets such as channel relationships and patents attached to
the brand, which can build competitive advantage.

Keller’s model of brand equity:

This model focuses on customer-based brand equity (CBBE), where the power of the brand
lies in the minds of customers, as a result of their experiences over time.

Brand equity is created from brand knowledge and has two components:

1. Brand awareness: The strength of the brand in memory, as reflected by the consumer
ability to identify the brand under different conditions.

2. Brand image: Perceptions about the brand as reflected by the brand associations held
in consumer memory.

Brand equity can be measured in the following three categories:

1. Consumer-based measures: Brand value is derived in the marketplace from the

mindsets and actions of consumers. These measures rely on brand knowledge
structures in the minds of consumers, and this brand equity can be largely
captured by a hierarchy of aspects.

The following are consumer metrics of brand equity:

- Familiarity: measured by salience, or awareness levels.
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- Penetration: measured by the number of customers as a percentage of the

target market.
- What they think about the brand: brand preferences relative to other brands.
- What they feel about the brand: measured by customer satisfaction.
- Loyalty: measured, for example, by repeat buying.
- Availability: measured by distribution intensity.

2. Product-market level outcomes: These include measures of price premiums,

increased advertising elasticity or effectiveness, and decreased sensitivity to
competitors’ prices.

3. Financial-market level outcomes: Brand equity is measured based on the

financial market performance.

The following are brand equity building strategies (Keller’s):

1. Brand identity: (who are you?) Achieved by creating deep, broad-brand awareness or
brand salience in the target market.
- For example, the 99% awareness of Harley-Davidson among bike owners.

2. Brand meaning: (what are you?) Achieved through brand performance and brand
imagery, by meeting customers functional, psychological or social needs).
- For example, Harley-Davidson creates strong brand performance and an image
of freedom and independence from the ownership of the bike.

3. Brand response: (what about you, what do I feel about you?) Determined through
brand judgements, customer evaluation of the brand, such as quality or credibility, and
brand feelings, emotional responses to the brand.
- For example, Harley owners view ownership of the bike as an expression of
success and status.

4. Brand relationships: (what about you and me?) Determined by brand resonance, the
nature, intensity and extent to which customers engage or bond with the brand.
- For example, the intense bond of Harley-Davidson owners with the brand.
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Brand elements to build brand equity:

Brand elements, sometimes also called brand identities, are devices that can be trademarked
and serve to identify and differentiate the brand. (Like, brand names, URLs, logos, etc.)

There are six criteria for choosing brand elements:

1. Memorability: To achieve a high level of brand awareness, brand elements can be
chosen that are highly memorable and therefore make recall and recognition easier for
consumers when buying or consuming.

2. Meaningfulness: Brand elements may take on all kinds of meanings.

- For example, Kulula.com where ‘kulula’ means easy, which creates the
message that it is easy to fly.

3. Likeability: Brand elements can be chosen that are rich in visual and verbal imagery,
inherently fun and interesting, and aesthetically pleasing.
- For example, Coca-Cola advertisements always portray fun while enjoying a
refreshing drink.

4. Transferability: In general, the less specific the name, the more easily it can be
transferred across categories.
- For example, the company name Amazon suggests a variety of different types
of products, whereas ToysRus does not permit the same flexibility.

5. Adaptability: This refers to the adaptability of the brand name over time, due to
changes in consumer values and opinions, or simply because of a need to remain
contemporary.
- For example, the PicknPay logo and characters were given a new look in
2007.

6. Protectability: This refers to the extent to which the brand element is protectable in
both a legal and competitive sense.

Differentiating brand through the 7 P’s:

1. Product programme: If the product is poorly designed, the long-term effect on the
brand will be negative. Organisations must continuously improve the brand to keep
customers interested and support its position.

2. Price programme: Consumer perception of a brand is affected by various aspects of

the pricing programmes. Consumers think that quality and price are related.
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3. Promotion (marketing communication) programme: It is important that messages

be reinforced over time across all forms of communication. It is also important to note
that customers share their brand associations with other customers, which has a direct
impact on the effectiveness of promotions.

4. Place (distribution) programme: The channels used to distribute a product can have
a significant effect of brand equity and sales success. Each type of channel
intermediary offers a different value configuration to consumers.

5. Physical evidence programme: Physical evidence is the environment in which the

service is delivered and where the organisation and customers interact. It is used to
communicate a message of quality, positioning and differentiation to customers. It
also plays a role in setting and meeting customer expectations.

6. Processes programme: Processes in service delivery, must be carefully managed,

and viewed from perspectives of both the operations and marketing managers.
Management must be aware of various service processes that can help ensure
customer satisfaction.

7. People programme: The role of people (for example, employees and customers) in
the service environment is vital for the success of the entire service experience.
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Chapter 13 – Customer-based Strategies

Learning outcomes:
- Motivate how an organisation can create customer experiences.
- Comment on how the various phases in the customer journey and various
organisational actions that can be considered in them.
- Analyse touchpoint architecture and how organisations develop touchpoints.
- Contrast the various types of customer engagement.
- Comment on the strategies used to develop customer engagement.
- Evaluate the various strategies used to provide excellent service to customers.

Introduction:
Customers want more than just a product or service; something that appeals to their emotions
and creates experiences.
Increased importance of experience as customers are more involved in determining their
needs and how to satisfy these needs.

Customer experience management (CEM):

Today many organisations and products are increasingly similar. The area where
organisations are able to differentiate themselves is in the area of customer experiences.

Customer experience: a multi-dimensional interaction that a customer has with an

organisation (including its brands, products and services) throughout the customer journey.

It comes about through interactions with the organisation at specific points (called
touchpoints). Customers interact with touchpoints throughout the customer journey.

Customer experiences involves, cognitive, emotional, behavioural, sensory and social

components.

- Cognitive components: The knowledge and perceptions that people have about the
specific item, reflected in what they believe about it.
o For example, this would include advertisements you have seen or
recommendations of friends.

- Emotional components: It appeals to people’s emotions and feelings towards an item

and indicate whether a person is positive or negative towards the item.
o For example, whether your like or dislike Bank A, there does not have to be a
specific reason for your choice.
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- Behavioural components: The actions that are exhibited by a person, like purchasing
or browsing in a store.
o For example, entering bank branches and opening an account.

- Sensory components: Include strategies to appeal to human senses, such as sounds,

smells, sights taste and the information that is gathered through touch.
o For example, the bank’s colours used in their logo, the design of their website
and the environment in the bank branch visited.

- Social components: Reflect the need for interaction with other people and includes
the interaction with a broad group of other people such as personnel. Peers, such as
family and friends are also part of this touchpoint and influence the experience.
o For example, the personnel and the opinion of friends and family.

The implication of experiences becoming important for the organisation, they should think
about the following:

- If experiences are to be individual, they will need to be customised.

- There is a need for the organisation to provide authentic experiences.
- Should provide a meaningful experience.
- Memories are part of creating an experience.
- Must provide value for the customers.
- The experience must be profitable for the organisation.

The future is transformational experiences, which refers to experiences that change the
customer in some way that it is regarded as a life-changing experience.

Managing customer experiences: This is the process of strategically managing a customer’s

entire experience with a company and its offerings.

- Personalisation and customisation are two strategies that can be used to manage a
customer experience.

The customer journey:

Customer journey: We are introduced to a product, over time, we use the product more
often, becoming loyal to a brand.

It is the range of interactions between the customer and organisation that takes place via a
number of touchpoints. It starts with them discovering the product, learning about it, selecting
it and then using it. If they are satisfied, they will continue using the service.

The customer journey involves a number of different stages over a period of time. The length
of this depends on the number of touchpoints and the nature of the product.
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- This journey is dynamic, which means it undergoes continual change.

- Customers do not always move along the journey in a linear way, from stage 1 to 2.
- This journey is managed through customer journey mapping.

Pre-stage: Previous experiences

This refers to the previous interactions that the customer has had with the organisation and its
brands. Customers evaluate their experiences in terms of their perceptions.

Stage 1: Pre-purchase stage

This stage refers to anything that takes place prior to the purchase of the product and includes
awareness and learning about the product, which takes place in a number of different ways,
including through the use of advertising.

Stage 2: Purchase stage

At this stage, customers will have decided on the product to be purchased, but they will still
need to decide when the purchase will take place and whether to purchase from an online or
offline supplier. The organisation needs to pay attention to the aspects that drive the actual
purchase, e.g., ease, convenience and the servicescape.

Stage 3: Post-purchase stage

After the purchase has been mad, the customer will use and evaluate the product as well as
the experience, to determine whether their expectations have been met. This also means the
organisation can provide opportunities for customers to provide feedback on their
experiences and the product. (The outcome of this impacts future customer journeys).

Touchpoints:
If customers are to interact with the organisation, this is done at various touchpoints, namely:

- Brand touchpoints: developed by the organisation to reflect the brand values, as they
are under the control of the organisation. They would include all the marketing
communication (such as advertising, banners, websites), the marketing mix
(packaging, customer service, price) as well as loyalty programmes used to develop
the brand.

- Partner touchpoints: those that are developed together with partners, such as
retailers, distributors and communication channel partners.

- Customer-owned touchpoints: those that are part of the customer experience but
over which the organisation and its partners do not have control.
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- Social (or external) touchpoints: they come about when people influence each other
during the shopping process.

These touchpoints are also connected to the phases in the customer journey,

Each touchpoint is important, but generally customers are not put off by one single
touchpoint but with failures over a number of touchpoints.

Each organisation needs to develop touchpoints that are appropriate to each customer
experience, but some examples of touchpoints that the organisation can use include:

1. Inbound call centres: These are facilities that provide customer service
telephonically, either using human or digital assistants.
2. Websites and apps: Having websites and apps that are easy to use and navigate
securely provides the customer with satisfaction and a positive experience.
3. Artificial intelligence (AI) assistants: These digital assistants can interact with
customers at all stages of the customer journey.

Analysing the customer journey:

It is important to understand the customer journey and the various touchpoints.

The customer journey can be analysed using a range of techniques, including:

1. Service blueprinting: A way to examine the various ways a customer interacts with
an organisation.

2. Understanding the multi-channel and customer behaviour: Organisations

increasingly have less control over how customers behave and how they decide to
interact with the organisation. It is important that the organisation understand how
customers use the various channels in the stages of the journey.
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Customer engagement:
Customer engagement: refers to the interaction that takes place between the organisation
and the customer to create a common outcome for both parties. Which can be viewed as an
emotional connection and as an ‘interactive, co-creative experience’.

Having customers with a high level of engagement has a number of benefits for the
organisation, namely:

1. Increase in sales.

2. An increased customer lifetime value (CLV): It has been suggested that customers
who are highly engaged with the organisation contribute 23% more revenue than the
average customer.

3. Customer referral value to attract new customers to the organisation: Customers

who are highly engaged share their experience of the organisation and so introduce
the organisation to others.

4. Customer influence value: Customers who are highly engaged are also more likely
to communicate with others, influencing the behaviour of others. Word-of-mouth is
very important.

5. Customer knowledge value: Highly engaged customers provide feedback to the

organisation about the touchpoints and other issues, which enables the organisation to
improve its offerings.

The dimensions that make up customer engagement:

- Cognitive engagement: The mental processing that the customer exercises, which
means that the customer pays attention to the product or starts thinking about the
product. Previous experiences with the organisation also form part of this.

- Emotional engagement: The emotions, such as enjoyment, affection, enthusiasm, a

customer feels towards the organisation and its offerings. This reflects in how the
customer behaves and how they interact with other about the product, which is
critical.

- Behaviour engagement: Reflected in the participation and activities that the

customer shows.
- Social engagement: Includes socialising and participating in interactions and this
includes interaction online.
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There are a number of strategies that organisations can consider when exploring ways to
increase customer engagement:

- Excellent customer service

- Loyalty programmes
- Technology (VR)

Employee engagement:
It is the employees who are the face of the organisation and who interact with the customers,
helping to create excellent experiences for the customer.

Employee engagement means that employees are passionate about their jobs and have a
connection with their employer. Due to their engagement, they are willing to put in the extra
effort when it is required.

The Service-Profit Chain suggests that the key to customer satisfaction and loyalty is the
provision of service value by employees.
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Chapter 14 – Strategy Implementation, Control and Evaluation

Learning outcomes:

- Discuss the different approaches to implementing the marketing strategy.

- Explain the role of internal marketing in marketing strategy implementation.
- Explain the importance of strategy-organisation fit in the implementation of
marketing strategies.
- Discuss the influence of organisational culture on strategy.
- Identify the various types of marketing strategy controls.
- Identify the tools used for measuring marketing strategy performance.
- Evaluate the nature of the performance-gap analysis process.
- Discuss the contingency plan.

Implementing the marketing strategy:

The implementation of marketing strategy is the ‘doing’ stage after the planning process of
the marketing strategy.

Marketing strategy implementation is influence by both organisational design

(organisation’s structure and organisational policies) and behavioural factors (skills,
knowledge and behaviour of the personnel) that affect an organisation.

To ensure that the marketing strategy is implemented effectively, it is important for it to be

perceived in a holistic manner in which all separate functions are seen as contributing to the
overall performance.

Approaches to implementing the marketing strategy:

Management can apply different approaches to implementing the marketing strategy.

1. Implementation through top down: This approach involves marketing strategies

being developed and articulated by top management, thereafter they cascade down to
frontline managers and employees to implement them.
o Advantages: makes process of decision-making easier and quicker and
reduces uncertainty in what needs to be done by the different members of the
organisation.
o Disadvantage: can divide the organisation.

2. Implementation through organisational design: This approach achieves a good

balance between command and collaboration. Top management still articulates the
marketing strategy. However, the implementation is adaptable to the demands of the
marketing strategy.
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o Advantage: the implementation process is flexible process is flexible and

adaptable to any changes in the internal and external environment.
o Disadvantage: it still maintains the separation of planning and
implementation, and the changes can take a long time to be designed and
realised.

3. Implementation through organisational culture: The underlying principle of this

approach is that the marketing strategy and its implementation become extensions of
the organisation’s mission, vision, values and culture. Employees can independently
design their own work procedures, as long as they are in line with the organisation.
o Advantage: self-motivated employees who seek to successfully implement
the organisation’s marketing strategy.
o Disadvantage: it can take time and resources to socialise and train the
employees.

4. Implementation through collaboration: Under this approach, top management and

lower-level frontline managers work together to formulate the marketing strategy and
how it will be implemented.
o Advantage: allows lower-level frontline managers to participate in the
decision-making process.
o Disadvantage: this approach can be quite onerous and laborious.

Internal marketing:
In order to effectively implement the marketing strategy, you need personnel within the
organisation who understand and subscribe to it.

Internal marketing entails winning the buy-in of all the organisation’s personnel in the market
strategy. It is underpinned by the assumption that the organisation’s first marketplace includes
the personnel.

The object of internal marketing is to achieve organisational personnel who at every level are
motivated, customer-conscious and driven by the strategy.

To facilitate internal marketing, personnel policies and training programmes need to be

introduced by the organisation that guide and improve the behaviour of all personnel towards
realising the strategy of the organisation.

The internal marketing programmes need to complement the external marketing programmes.
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Strategy-organisation fit:
In order for management to ensure that the strategy is effectively implemented, they need to
ensure that there is a fit between the strategy and the structures and systems of the
organisation.

There are three main dimensions that define organisational structure:

1. Degree of formalisation: This refers to the degree to which formal rules and
procedures guide decisions and working relationships.
o Firms with highly formal procedures are ‘mechanistic’.
o Whereas those with fewer formal procedures are ‘organic’.

2. Degree of centralisation: This refers to the degree to which top management have
the authority to make decisions or delegate authority to other employees.
o The lines of communication and responsibilities are clearly highlighted in
centralised organisation.
o Decentralised organisations are characterised by a variety of views and
decision-makers.

3. Degree of specialisation: This refers to the degree to which tasks and activities in an
organisation are divided.
o Highly specialised organisations have a higher level of ‘specialists’ who direct
and perform their work.
o On the other hand, organisations with few marketing experts have more
‘generalists’.

Organisational culture and strategy:

Organisational culture represents the set of shared values, norms and practices held by staff
in an organisation.

The implementation of a well-articulated marketing strategy can be impeded by the culture of

the organisation.

In order to ensure successful implementation of the marketing strategy, it is essential for

marketers to be mindful of the various factors that influence organisational culture:

- Business environment: Societal values and practices at large will influence

perceptions, and they are brought into the workplace.

- Leadership: The leaders and founders of an organisation play a key role in creating
and sustaining the culture of an organisation.
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- Socialisation process: Through the socialisation of staff in an organisation, the

culture of the organisation is created and sustained.
o Formal socialisation occurs when the management of the organisation guides
the expected behaviour of staff through formal policies and procedures.
(Induction, training and development)
o Informal socialisations occur through informal interactions by staff in an
organisation.

Marketing strategy evaluation and control:

The business environment tends to be quite dynamic and turbulent.

The control and evaluation process of the marketing strategy can be described as the
continuous process of measuring and evaluating the effectiveness of the marketing strategy.

Through evaluation and control an organisation may seek to:

- Find new opportunities or avoid threats.
- Keep performance in line with expectations by management.
- Solve specific problems that may exist in the implementation of the marketing
strategy.

There are two types of marketing controls that can be adopted by an organisation:

1. Input controls: Actions taken prior to the implementation of the marketing strategy.
The underlying premise of input controls is that the marketing strategy cannot be
implemented correctly unless appropriate tools and resources are in place for it to
succeed.
o Examples include, recruitment and selection, training, compensation and
financial resources.

2. Output controls: Actions that are taken during and after the implementation of the
marketing strategy. Output controls ensure that marketing outcomes remain in line
with anticipated results.
o Examples include, assessment of sales, profits, expenses, number of customer
complaints and on-time delivery.

Marketing audit:
Marketing evaluation can be performed through a marketing audit.

A marketing audit entails a thorough, systematic, comprehensive, analysis and evaluation of

an organisation’s marketing goals, objectives and strategies.
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- Through a marketing audit, organisations are able to examine the effectiveness of the
marketing plan as operationalised through the marketing strategy.

There are four elements of a marketing audit, namely:

1. Comprehensive: It evaluates all the marketing related activities of an organisation.

2. Systematic: It involves an orderly diagnostic analysis and evaluation of an

organisation’s environment, marketing objectives, activities and strategies that
directly and indirectly influence the organisation’s marketing objectives.

3. Independent: It needs to be conducted by objective individuals who were not part of

the development and implementation of the strategic marketing plan.

4. Periodic: It needs to be conducted after a consistent period of time. A good period of

time might be yearly or after every two years.

There are five main types of marketing audits, namely:

1. Marketing environment audit: Examine both the macro-environment (the external

forces that influence the performance and sustainability of the organisation)
surrounding the industry and the task environment of the organisation.

The following questions can be asked in the audit:

o What opportunities/threats derive from the organisation’s present and future
environment, that is, what technological, political and social trends are
significant?
o How will these trends affect the organisation’s target markets, competitors and
intermediaries?
o Which opportunities/threats emerge from within the organisation?

2. Marketing strategy audit: Seeks to ascertain whether the company’s marketing

strategy is well positioned in the environment. It commences by examining the
corporate goals and objectives, followed by the marketing objectives.

The following questions can be asked in the audit:

o How logical are the company’s objectives, given the more significant
opportunities/threats?
o How logical is the organisation’s strategy, given the volatility of the
environment and the actions of the competitors?

3. Marketing systems audit: Examines the effectiveness of various systems being used
by marketing management to gather information, plan and control all marketing
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related activities. Some of the marketing related information that is collected includes
sales forecasting, marketing planning, inventory control, etc.

The following questions can be asked in the audit:

o Does the organisation have adequate and timely information about customers’
satisfaction with its products?
o Does the organisation collect timely information about the market, competitors
and intermediaries?

4. Marketing productivity audit: Examination of key accounting data to determine the

sources of an organisation’s profits and what, if any, marketing costs can be reduced.

The following questions can be asked in the audit:

o How profitable is each of the organisation’s products/brands?
o How effective is each of its major marketing activities?

5. Marketing function audit: Evaluates extensively the key marketing functions such
as product, pricing, distribution and communication.

The following questions can be asked in the audit:

o How well does the product line meet the line’s objectives?
o How well does the products/brands meet the needs of the target market?
o Does pricing reflect cross elasticities, experience effects and relative costs?
o Is the product readily available?
o What is the level of retail stockouts?
o What percentage of large stores has in-store displays?
o Is the size of the sales force appropriate? Is the organisation spending enough
on advertising?

Marketing performance measurement:

As marketing strategy is implemented, appropriate performance measures need to be selected
to measure and monitor the performance of the strategy realising the articulated marketing
objectives.

Appropriate performance criteria need to be selected for the overall marketing strategy and
their key components in the competitive environment. These performance criteria can be used
to gauge the overall performance of the organisation, and includes, profits, sales, market
share, costs and customer loyalty.

Additionally, brand positioning maps can also be used to ascertain the positioning of the
organisation’s brand relative to competitors.
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Many organisations have adopted marketing metrics to substantially evaluate the

performance of the implementation of the marketing strategy. Marketing metrics represents
marketing systems that use both internal and external information sources to monitor the
effectiveness of marketing strategies.

Balanced scorecard: In order to comprehensively measure the performance of the marketing

strategy in the competitive environment, management need to adopt a balanced approach
with both financial and non-financial measures. The balanced scorecard allows management
to evaluate internal and external perspectives in the implementation of the strategy.

The four perspectives of the balanced scorecard include:

1. The financial perspective: How the organisations wish to be viewed by shareholders.
o Examples of measures include return on equity, net profits, cash flow and
operating income.

2. Customer perspective: How the organisation wishes to be viewed by customers.

o Examples of measures include on-time deliveries, percentage of sales from
new products and customer satisfaction.

3. The internal business process perspective: Which processes must the organisation
excel in to satisfy shareholders and customers.
o Examples of measures include cycle time and unit costs.

4. The organisational learning and growth perspective: Which changes and

improvements must the organisation learn in order to realise its vision.
o Examples of measures include time to introduce new products and process
time to maturity.

Performance gap analysis:

Performance gap analysis involves identifying the gap between actual performance and
desired performance.

Gap analysis involves the process of problem identification to ascertain the sources of
performance-related problems.

Gap analysis allows organisations to identify gaps in the market, operations and strategy
pursued. From the performance gap analysis, organisations can articulate a plan of action in
order to ensure that the performance gap is filled.

Contingency plan:

In most cases, the assumptions made when articulating marketing strategies are held as facts,
and little attention is paid creating contingency plans if these assumptions turn out to be
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incorrect. These assumptions can vary from market-related assumptions (customers,

economy, competitions, demand and supply) to operational-related assumptions (staff
capacity, motivation and finances).

When articulated assumptions are violated it can cause a crisis for the organisation.
Therefore, managers need to draw up contingency plans to control and improve the
implementation of the marketing strategy.

Contingency plans indicate the steps to be followed in the case of a crisis, which manifests as
a violation of a held assumption. Essentially, contingency plans outline the corrective actions
that need to be followed as a form of crisis management when the assumptions are violated.
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Chapter 15 – Marketing Metrics:

Learning uutcomes:
- Understand the nature and role of marketing metrics.
- Define suitable marketing metrics for an organisation.
- Calculate basic marketing metrics.
- Develop a marketing dashboard for an organisation to monitor their marketing
performance.
- Analyse an organisation’s marketing performance against metrics and make
appropriate recommendations for improvement.

Marketing metrics:
Marketing metrics is the set of measures that helps marketers to quantify, compare, and
interpret their marketing performance.

Marketing performance measures have moved in three consistent directions over the years:

1. From financial to non-financial output measures: These non-financial measures

include market share, customer satisfaction, customer loyalty and brand equity.

2. From output to input measures: Assess the effectiveness of the marketing inputs, by
conducting marketing audits, and assessing the efficiency of marketing
implementation, analysing the degree of marketing orientation in the organisation.

3. From uni-dimensional to multi-dimensional measures: As an integrated marketing

campaign is by definition a multi-dimensional construct, it follows that researchers
have been investigating multi-dimensional measures to assess market efficiency and
effectiveness, like multi-variate data analysis.

Marketing measures can be classified into three different perspectives, which can be
overlapping:

1. External vs. Internal metrics:

- External metrics would include monitoring data from outside the company,
such as market share, customer satisfaction, and brand awareness. These
metrics typically assess the organisation’s external performance in the
marketplace relative to its competitors.
- Internal metrics utilise data from inside the company to measure its
performance. These could include customer retention rate, number of
complaints. (easier to obtain but not as efficient)
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2. Short-term vs. Long-term metrics:

- Short-term metrics measure the results of tactical marketing campaigns, such
as sales conversion ratios of leads generate, awareness of a new advertising
campaign. These are important metrics for the current operating period.
- However, and organisation also needs to build for the future, and hence the
effectiveness of long-term planning activities should be measured. Like,
customer lifetime value and brand equity.

3. Customer vs. Financial metrics:

- Financial metrics are those that are most commonly used, as they are easiest to
generate, and are typically spoken about in boardroom situations. These
include gross margins, sales growth, advertising and promotion.
- Customer metrics are measurements of customer behaviours, attitudes and
intents, which are potential indicators of successful marketing performance.
They can be split into observable measures (purchasing activity, customer
retention, etc.) and unobservable measures (customer satisfaction, customer
experience, etc.).

Traditional metrics:
These metrics are those most commonly used by organisations, and they include:

Financial Metrics:

These are commonly reported marketing metrics, as the data is typically readily available
since it is used for drawing up financial statements.

- Sales metrics: They track performance in terms of a monetary (rand) value, or as

volume (unit).
- Sales growth: measures the growth in sales volume and monetary items over
time.
- Sales targets: Compares actual sales against target set for a period.
- Breakeven sales: Determines the sales volume needed to cover all costs.

- Profitability metrics: They assess how much profit the company makes relative to
cost of sales.
- Contribution margin: Shows the profit margin per product by comparing sales
revenue with variable costs.
- Gross margin percentage: Measures the percentage of sales revenue remaining
after covering production costs. A declining percentage might indicate that
price increases are not keeping up with production costs.
- Gross margin value: The absolute value of gross margin, showing if profit
margins are increasing or decreasing.

- Marketing budget metrics: This metric looks at the company’s marketing spending
relative to total sales or industry standards.
- Percentage of turnover: Compares marketing expenses as a percentage of sales
turnover.
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- Industry benchmark comparison: Measures whether the company’s marketing

spending aligns with, exceeds or falls below industry norms.

Marketing activities:

These metrics monitor the effectiveness of the different tools utilised by marketers in their
marketing campaigns.

- Market share metrics: Shows a company’s share of the market compared to its
competitors. It indicates how well the firm is performing in the industry.
- Revenue market share: Compares a company’s sales revenue to the total
market revenue.
- Relative market share: Compares a brand’s market share to that of the largest
competitor.

- Response rate metrics: It measures the effectiveness of a marketing campaign based

on the number of responses received from the target audience. (Higher response rates
indicate more effective engagement).

- Quality of customer service: It measures the customer service quality, often

indicated by the number of complaints received.

- Sales force productivity: It measures the productivity and effectiveness of the sales
team in driving revenue and customer engagement.
- Sales force effectiveness: Metrics like sales per call or sales expenses help
measure the team’s efforts and results.
- The performance of sales staff: Assesses how well staff meet sales targets,
often using customer feedback.
- Sales pipeline: Tracks potential customers through stages to forecast sales and
evaluate sales force workload and productivity.

- Advertising effectiveness: The impact and reach of advertising campaigns.

- Gross rating points: Measures the reach and frequency of ad exposure in the
target market.
- Cost per thousand impressions: Indicates the cost of generating 1000 ad views,
showing cost-efficiency.
- Net reach: Measures the number or percentage of target customers exposed to
the ad at least once.

- Product innovation: It measures the success of innovation efforts, tracking new

product development and R&D investments.
- Number of new products: Counts the number of products launched as a result
of R&D.
- R&D investments: Measures the percentage of revenue spent on innovation.
- Success rates: Tracks product success from concept to launch, showing the
effectiveness of the innovation process.
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- Brand tracking: It measures the brand strength and health by monitoring customer
perceptions and brand attributes.
- Awareness and loyalty: Tracks customer recognition and loyalty towards the
brand.
- Image and relevance: Assesses the brand’s position and appeal in the market.
- Brand health: Measures overall brand equity.

Customer metrics:

- Customer satisfaction: Customer satisfaction indicates how well a company meets

customer expectations, serving as a predictor of future purchase intentions and
loyalty.
- Customer satisfaction rating: Percentage of customers reporting customer
satisfaction levels above a set threshold.
- Willingness to recommend: Percentage of customers who would recommend
the brand to others.

- Awareness: This shows the level of recognition a brand has among potential
customers, tracking early stages of buyer readiness.
- Top of mind awareness: The first brand that comes to mind in a product
category.
- Prompted awareness: Recognition when shown a list of brands.
- Ad awareness: Awareness generated by advertising campaigns.

- Loyalty: Customer loyalty reflects the likelihood of repeat purchases, indicating

customer retention and brand equity.
- Repurchase intent: Percentage of customers intending to buy the same brand
again.
- Net promoter score: Measures loyalty by calculating the difference between
the promoters (would recommend) and the detractors (would not recommend).

Advanced metrics:
These more advanced metrics are designed to provide strategic direction to the organisation,
so that it can build up a competitive advantage and increase the value of the organisation.

Advanced financial metrics:

- Demand forecasts: It predicts future sales based on both internal and external factors
affecting the business.

- Brand equity: It represents the value of a brand as an intangible asset, reflecting

customer associations, perceptions and the price premium it commands.

- Customer lifetime value (CLTV): Calculates the total profit a customer is expected
to generate for a company over their entire relationship.
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- Customer equity: The combined CLTV of all current and future customers.

Digital marketing metrics:

- Visits/Visitors: Visits track the number of times users come to a website, while
visitors refer to the count of unique users.

- Clickthrough rate: The percentage of people who click on an ad after seeing it,
calculated as clicks divided by impressions.

- Cost per click (CPC): The cost of each click generated through ads, calculated by
dividing total ad costs by the number of clicks.

- Conversion rate: The percentage of website visitors who make a purchase, calculated
as the number of purchases divided by the number of visitors.

- Friends/Followers: The number of people who follow a brand on social media

platforms.

- Downloads: Counts the times a file or app is downloaded from the website or app
store.

- PAR and BAR: PAR (Purchase Action Ratio) measures how effectively awareness
converts into purchases. BAR (Brand Advocacy Ratio) measures how well awareness
converts into brand advocacy or recommendations.

- Sentiment Analysis: Analyses customer attitudes toward a brand on social media,

showing positive, neutral, or negative sentiments.

Customer metrics:

- Customer margin: The profit generated from a customer over a specific period,
calculated by subtracting the costs of serving the customer from the total revenue
generated from them.

- Customer acquisition: The effectiveness of efforts to attract new customers to

replace those lost over time.
- Customer acquisition costs: Total marketing spend on acquisition divided by
the number of new customers acquired.
- Customer acquisition rate: Percentage of prospective customers contacted who
become new customers.

- Customer retention: The ability to keep existing customers over time, which is
crucial for maintaining CLTV and reducing acquisition costs.
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- Customer retention cost: Total marketing spend on retention divided by the

number of customers retained.
- Customer retention rate: Percentage of customers retained out of the total
contacted in a period.

Marketing dashboard:
Includes a set of different metrics that are concurrently used to measure or monitor the
performance of the marketing strategy.

- It aids in managing current and long-term activities.

- It includes a reduced set of vital measures in a form that is easy for the user to
interpret and use.