www.jagooindia.

com

Executive Summary

The thrust of marketing and of branding strategies for products and services has shifted from
being 'market-driven' to 'market-driving'. However, this is not a new phenomenon and the
companies that have been able to capture this through their marketing strategies have set
examples for a lot more to follow.

Marketing theory suggests the routes to success for firms within the framework of the
marketing mix or 4 P's. However, this has been extended to 7 P's to incorporate the other
important aspects that went beyond product, price, place and promotion. We have explored the
branding strategies of some of the most successful brands in the marketing world, who have risen
to the top by providing value to their customers by following the path 'less traveled'. Brands such
as Starbucks, IKEA, Sony, Dell and others have identified innate and unexpressed customer
needs to enhance the value provided and in return garner commitment from their loyal customers.

We have realized that although differentiation is the difference between life and death of brands,
this differentiation has to stem from forces that do not always have a theoretical explanation. At
times it is wiser to rely on non-text-book ideologies such as intuition, gut-feeling, and vision.
Legendary brands such as Virgin & Dell were built on the strong gut-feeling and the conviction
they had in their belief and offerings.

Such brands have breakthrough success as a result of radical innovation, a strong business
system and a leap in their value propositions. Dell broke the traditional value chain to sell PCs to
the consumer via direct channels. Avis, the car rental company communicated its No. 2 position
in its advertising copies, again a non-traditional practice.

There are many successful firms that have found success in moving beyond the thinkable into the
realm of creativity, innovation and prudent marketing insights. An emerging paradigm - the Four
A's has the potential for explaining success of these maverick brands.

Strategies That Have Re-written Marketing Books

The fundamental principle in marketing is "know your consumer and cater to his needs by
aligning the elements of the marketing mix - product, pricing, distribution and promotion in a
profitable manner". Such a principle is restrictive as it is founded on the assumption that the
consumer is able to discern and articulate his needs in a manner that is useful to the marketer.

A consumer, one must remember, is a person or representative of an actionable

aggregate (target segment). As he is the origin and destination of all marketing actions,
brands get locked into a "comfort zone" and innovation gets reduced to "incremental changes".
Such a position, however, is characteristic of brands that lack innovation, brands that lack that
extra, the disruption which is vital to escape the ills of this stagnating cycle, the ability to break out
of the mould and create a splash in today's ocean of brands.

However, few brands have had the wherewithal to re-define marketing principles. We will
examine them in light of a few traditional principles of marketing literature that are depicted in the
figure below. These are arranged in a rough sequence of marketing activities to be performed for
any brand.
 Traditional Marketing Activities

Target New Customers

Marketing theory has taught managers to increase the customer base to the maximum possible.
However, some brands have chosen to focus on existing customers. Harley-Davidson is one of
them. On the brink of bankruptcy in 1985, Harley pulled out to become one of the world's most
admired companies.

The secret of this success was the strong passion attached to the product and the
company began promoting its dedication to individualism, adventure and fulfillment to its
employees, dealers and customers around the world. It re-invigorated the HOG's (Harley Owner
Groups) and used those beliefs as the basis for extending its products and services beyond the
bike. The creation of the Harley community made the owners fiercely proud of owning the brand
and they wanted to be associated with it for life, and even paid an annual fee for that. So whereas
competition churned out new models and engines yearly in a bid to gain new customers, Harley
celebrated their anniversaries, raised money for charity and differentiated by going to the extent
of not showing their motorcycles in their advertisements. THE HOG's are bound by a common
passion of "Making the Harley-Davidson dream a way of life". The philosophy was that of
including people in the family and growing the family more by word-of-mouth and sharing a
common consciousness for the passion of owning a Harley. In effect, Harley didn't have to select
target consumers, they chose themselves.

Use Market Research for Decision Making

Marketing theory lays emphasis on market research to identify consumer needs, perceptions,
beliefs and preferences. These are considered necessary inputs to key marketing decisions
related to product planning, targeting, positioning, brand extensions, promotion and channel
planning among others. In theory, the idea has a sound logical base. On the flipside, market
research does not help in a firm's efforts to challenge status quo. Also when all firms in an
industry rely on research, they end up with very similar data and this collective wisdom rarely
serves as a basis for competitive advantage. We have numerous instances in which the absence
of market research has led to brand success or its presence has led to a failure.

Sony has been a powerhouse in developing and launching innovative products, which have
created new markets and businesses, such as the transistor, radio, walkman, 3.5 inch diskette,
and audio compact attest. 'New products create new markets' is a guiding credo at Sony. This is
in contrast with the concept of tailoring products for markets. Sony believes that a great product
has the potential to sell itself. Therefore, market research is superfluous as consumers would
never be able to come up with the product themselves.

Sony's product development process is unique in the terms of the faith it puts in its
employees to generate breakthroughs, and at the same time tolerate their failures. Sony
has become a strong mega corporate brand with a dream delivery concept since the eighties that
says, "You dreamt it, Sony made it."

Market Research is useful for incremental innovations, yet radical business ideas are seldom
borne out of research. The vision of Richard Branson can never be attributed to market research.
If Branson had seen his business through the blinkers of his consumers, he would have never
been able to build the empire he owns today. Would the idea of using the Virgin Brand in diverse
sectors from airlines to music ever occur to consumers? The ability to see things differently and
the importance of gut feel are concepts that are still alien to marketing textbooks.

Market research is often looked upon as a problem-solving device. One only needs to take a look
at the New Coke example to realize how market research could be a problem creating tool. Blind
taste tests favored the new formula, but post-launch it turned out to be one of the biggest
marketing disasters ever. An intuitive judgment could have perhaps averted this mishap.

Improve on Existing Product Platforms

The first P of the marketing mix - Product - is the physical product or service delivered to the
consumer. It also includes decisions such as packaging, function, appearance, servicing,
warranty, etc. Usually, products have been conceived in terms of altering products that already
exist in the product category. But some brands have made it big treading on the path of radical
product changes that led to concepts that satisfied a consumer need that no one knew of in a
manner which defies conventional marketing theories.

Starbucks is a brand that has created a sub-culture on the basis of its product, that of simple
coffee Americans have always loved. All it did was present the traditional coffee in a way that
consumers had not experienced before - Cold and Iced - and also at a fairly cheap price. The
unassuming beverage was turned into an icon of sophistication and taste and the product
became trendy, fashionable and universally appealing.

Starbucks created a place for itself in people's minds by filling an inert need of
experiencing the environment while sipping great coffee. The leap from "coffee" to "coffee
experience" revolutionized marketer's perspective of the product category.

IKEA is another brand that re-defined the entire concept of purchasing furniture. IKEA's strategy
is to offer basic, relatively inexpensive home furnishings to consumers around the world, which
represent quality and value for little money. IKEA consumers know exactly what they're getting as
part of the IKEA brand experience - self-service, good quality, KD furniture, good prices. This was
a dramatically different value proposition from the traditional, full-service, expensive, high street
furniture store.

Body Shop of UK has looked at the product not only in terms of the physical output but the
product development process itself. This has provided it with a USP of cosmetic products
developed without testing them on animals. These along with other values have been the pillars
on which their success rests today.

Set Price Based on Industry Standard

There is a general tendency among firms to look at pricing in terms of industry standard. They
more often then not stick to the norm with minor variations. The profit margin is fixed based on
financial estimates and assumptions.

Wal-Mart changed that. Wal-Mart aimed to provide goods at prices that the consumer was willing
to buy them. Thus, the consumer became the price setter instead of the price getter. It pioneered
the concept of everyday low pricing and focused on generating volumes. The discount store
concept was borne out of such radical thinking.

Another brand that is synonymous with low pricing is Southwest Airlines which sets prices that
are 60-75% below its closest rival when it enters a new city. On the other end of the spectrum are
brands like Starbucks and FedEx which charges consumers prices that are higher than industry
standard.

Choose Relevant Brand Names

One of the basic tenets of brand management is for companies to develop the most 'appropriate'
and 'relevant' brand name that provides a platform for the customer to connect with the company
and the product. Conventionally, a brand name is supposed to indicate the product's benefits, be
memorable and help in reinforcing the belief in the consumer's psyche. The name has to be
unique to rise above the clutter. However, when unique names become run-of-the-mill, then a
simple name immediately grabs your attention. We know of companies that have carried out
extensive surveys, consumer panel tests to be absolutely sure before christening their product
creation. But we also know of products that have gone beyond rationality to strike an emotional
chord that make them successful brands rather than products.

An Apple Computer with its simple brand name and logo, which is totally unrepresentative of its
high technology product offering, has managed to create a strong band of loyal consumers, which
is fondly referred to as "Mac Village". Writer Naomi Klein, a leading critic of branding and author
of No Logo, argues that companies like Apple are no longer selling products, they are selling
brands, which evoke a subtle mix of people's hopes, dreams and aspirations. The company has a
unique visual and verbal vocabulary, expressed in product design, advertising and the logo itself.

Another prominent example is that of Kodak, a brand name that means nothing literally but over
the years has built such strong associations with its product range that now has become generic
to photography and digital imaging products. The concept of "building a brand from scratch" can
be attributed to Kodak.

Role of Distribution - Increasing Availability Through Outlet Penetration

The traditional approach to distribution has used the market reach concept where presence in
outlets is the key. Having a wide network of distributors and ensuring product availability is seen
as a great way to generate sales. This approach assumes that individual channel units operate
within a well delineated boundary, and hence each additional unit provides incremental sales.

The success of Dell lampoons the above-mentioned approach. Dell's direct distribution
approach in contrast with the linear approach of its competitors, IBM and Compaq, is a
case in point for a new approach to distribution. The idea of using a limitless channel - the
Internet - as opposed to traditional outlets worked in favor of Dell by giving it a strategic
advantage. Thus, availability was gained without actual product placement.

Most marketers look at distribution solely in terms of product availability. HLL went a step further.
It recognized distribution not just as a means to gain reach, but as a key customer contact point.
This approach laid emphasis on touching consumers with a 3-way convergence of product
availability, brand communication and brand experience. The Lifebuoy Swastha Chetna Yojana
(which involved channel partners like Star Sellers) and the concept of Lakme Salons were
borne out of such thinking. By re-inventing distribution, HLL inspired other companies to re-
examine their approaches and also expanded the scope of activities for any brand manager.

Gross Rating Points as Basis for Communication Strategy

The fourth P of marketing - Promotion - has for generations been synonymous with mass media
advertising. Marketers have poured tonnes of money into print and television to achieve
objectives like brand awareness, trial, attitude change, preference and intention to buy. The
traditional measures for evaluating options have been in terms of reach - frequency / GRPs. The
adherence to the 'Share of Voice - Share of Market' approach is indeed widespread.

Starbucks sticks out like a sore thumb. The company has spent little money on advertising,
preferring instead to build the brand cup by cup with customers, and depends on word-of-mouth
and the appeal of its store-fronts. Starbucks management looked upon each store as a billboard
for the company and as a contributor to building the company's brand and image. Each detail was
scrutinized to enhance the mood and ambience of the store, to make sure everything signaled
"best of class", and that it reflected the personality of the community and the neighborhood.

The thesis was 'Everything matters'. Indian coffee bars like Coffee Day and Barista have
latched onto Starbucks strategy.

"Buzz marketing" is the new mantra and it involves getting the trend-setters in any community to
carry the brand's message, thus creating interest in and demand for the brand with no overt
advertising. When Virgin's eccentric CEO Richard Branson takes off on his hot air balloon trips,
he generates publicity equivalent to a few 1000 GRPs. Even controversial messages can help
create the "buzz" with Benetton (See Exhibit 1) being a classic example. In the Indian context,
the Tuff Shoes (Milind Soman) campaign seems to ring a bell as it generated a fair deal of
awareness for the brand at that time. However, sustaining the "buzz" is as important as creating
it.

Ad Execution Extolling Product Virtues

Creative copy, however innovative, has mainly focused on extolling product virtues either in terms
of benefits or attributes using metaphors, symbols, visuals and words. Every client wants his
agency to produce advertisements that portray his brand as the most desirable in the
marketplace.
Or so it was until Volkswagen unleashed its 1960 path breaking campaign (See Exhibit 2) that
actually made fun of the product by calling it names like "Lemon" and "Ugly". The blunt honesty in
the ad made it irreverent, and Volkswagen was smiling at itself alright, but was doing so all the
way to the bank.

Ads proclaiming leadership are commonplace and many brands follow this strategy to
demonstrate superiority and create preference. Avis, a car rental service chose the road less
traveled. Its ads (See Exhibit 3) contained a simple, no-frills, honest message "We are No 2, but
we try harder". The ad was given a green signal despite poor ratings in consumer panel testing.
In two years, Avis increased its share of the market by 28 percent.

The New Paradigm

The success stories mentioned in this paper provide support for a re-look at existing marketing
theory. This is not to say that they are wrong but there is a strong case for a change in
perspective. Some of these brands have re-written marketing books, but what we need is a
comprehensive framework that can explain their success.

The traditional 4 P's approach needs to be overthrown, and there have been many contenders. In
our search for a better theory, we came across the Four A's approach by Jagdish Sheth. The
elements - Acceptance, Affordability, Accessibility and Awareness have the wherewithal to
partially address the success of these brands.

Acceptance is more than just the product as it looks at it from the consumer's eyes. Starbucks,
IKEA, Body Shop and Sony were intuitively practicing this concept while designing their offerings.

Affordability accounts for Wal-Mart, Southwest, Starbuck and Ikea's pricing strategy by focusing
on what the consumer is willing to pay.

Accessibility is a broader term than mere product availability and best describes Dell's innovation
in distribution.

The term Awareness, unlike its predecessor Promotion, does not carry a mass media connotation
and encompasses concepts like buzz marketing (followed by Starbucks, Benetton and Virgin).

But there is one additional 'A' that is common to all these brands and is the single most important
reason for their success - Affect. The brands mentioned have all been able to strike an emotional
chord in the heart of the consumer. That has been their single guiding light and bear testimony to
the fact that 'Man is more emotional than rational'. In the words of Nirmalya Kumar, these brands
were market drivers not market driven.
Exhibit 1: Benetton's Controversial Advertising
Exhibit 2: Volkswagen's Memorable Ad
Exhibit 3: Avis "No. 2" Ad