Adding value through marketing:the cases of LOreal and P&G - Essay Example

? Adding Value through Marketing A discussion on how winning brands add value to their brands: the cases of L’Oreal and P&G By Submitted to How winning brands manage to win A discussion on how winning brands add value to their brands, the case of L’Oreal and P&G By _____ Introduction What is a brand? Is it, as the American Marketing Association describes it as mere “a name, term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition” (VanAuken, 2004, p.14)? The best informal definition, however, of a brand perhaps could be that it is a real estate - that a firm, a product or a service, buys in the minds of its customer. This is not bought overnight, but earned over the years by persistent and consistent efforts through such measures as creating awareness, increasing the perceived quality, creating strong brand associations, developing strong channel relationships, trademark and even patterns (Kotler et al., 2009). It is a source of promise to the consumer – to deliver relevant differentiated benefits. Therefore, everything a company does towards brand building should be focused on enhancing value against the promise its brands make (VanAuken, 2004). “Ultimately, everything – products, services, retail environment, corporate culture, frontline employees, marketing, and so on – must come together to create the total brand experience (VanAuken, 2004, p.187). How winning brands create value Winning brands do this very well, not only their products are extraordinarily different than their competitors, but everything else add up to their superb brand experience. The subsequent paragraphs delineate cases of two such winning brands L’Oreal and P& G, to evaluate how these winning brands manage to create high street awareness, improve perceived quality, create strong brand associations and build other assets such as patents, trademarks and channel relationships. Proctor & Gamble (P&G)1 Established in the year 1837, P&G has been one of the most skilful marketing and branding its products in consumer product goods (Kotler et al., 2009). It works hard to stay in touch with the people who use its products, with external partners who help them fulfil P&G’s purpose, and with one another. Since 1937, the company has been able to touch consumers’ lives with brands that may a life a little better every day. The company is committed to being a leader and want their brands to lead their categories, in their respective industries; and in their communities. P&G always endeavours to be one of the best places to work. P&G is driven by a simple purpose that everything it does should always be about improving the everyday lives of the world’s consumers and the communities in which it operates and lives for generations to come. P&G focuses on five core strengths required to win the consumer products industry. Designing to lead them in each of these areas, the company has been able to create brand value for its brands, some of which are mentioned below. 1. Consumer Understanding – Uncovers the unarticulated needs of consumers. The company interact with five million consumers each year in nearly 100 countries. It conducts over 20,000 research studies every year, and invests more than $400 million annually in consumer understanding. The high-street awareness help the company to identify opportunities for innovation and better serve and communicate with their consumers. 2. Brand-Building – Shapes purpose-inspired benefits-driven brands. With 50 leadership brands that are among world’s best known household names, P&G’s brands make up to 90 per cent of its sales and more than 90 per cent of its profits. Of these 50 brands, 23 of them generate $1 billion in annual sales. 3. Innovation – Translates consumer desires into new products. P&G is the industry’s innovation leader and its organic sales growth id fuelled by new brands and improved products. 4. Scale – Drives efficiency and consumer value. By integrating across enterprises, P&G is able to create scale advantages. 5. Go-to-Market Capabilities – Reaches retailers and consumers at the right place and right time. P&G has been consistently ranked by leading retailers in industry surveys as a preferred supplier that supplies some of the most important brands to the retailers. Figure 1: P&G focuses on five core strengths required winning in the consumer product industry. The company has designed itself to lead in each of these areas. Source: (Proctor & Gamble, 2011). L’Oreal2 For over a century, L’Oreal has been in the business of cosmetics with a mission to make beauty universal, inventing products to meet aspirations of millions of women and me. This company with over 19.5 billion Euros in consolidated sales in 2010, and 23 global brands (annual sales superior to 50 million euros) it has been operating in 130 countries engaging 66,600 employees. As it says, “its vocation is universal: to offer everyone, all over the world, the best cosmetics in terms of quality, efficacy and safety, to give everyone access to beauty by offering products in harmony with their needs, culture and expectations” (L'OREAL, n.d.). L’Oreal is highly consistent worldwide, with impeccable workplace safety and environmental standards, while making its own products locally and innovating to mass-produce its products of tomorrow. In the year 2010 itself, L’Oreal filed 612 patents. L’Oreal consistently works on opening of emerging markets and broadening to meet the unique beauty needs of the vast diversity of populations. The entire company is focused on this mission and present a portfolio of international brands in different distribution channels. L’Oreal manages mammoth research programmes located in 49 research centres, employing 3000 research scientists, producing more than 4000 research products every year. Conclusion From the very brief discussion of these brands, it is apparent that the value of the brand is undoubtedly based on the extent to which it has awareness about its customer needs, understanding of how customers perceive about the quality, creating strong brand associations and developing strong channel partnerships, innovating constantly to meet the changing needs of the customers and presenting trademarks that endure through time. The essence of winning brands create value is presented in the figure below. Figure 2: How winning brands manage to win – the six core strengths of winning brands Defending the turf Is customer centralism is a panacea for defending competitive strategy to sustain growth and maintain profitability; a discussion on how the best and strongest firms can sustain growth and maintain profitability over longer term by maintaining high customer loyalty and retention. Introduction An industries profitability can be learned by understanding the nature of competitive forces at work in that industry, which can also provide a framework for anticipating the competitors’ moves and help influencing competition and eventually profitability over time (Michael E. Porter; Harvard Business Review, 2008). Therefore, understanding the structure of the industry along with the interplay of the competitive forces is crucial for an industry leader to defend its territory from competitors. Figure 3: The five forces that shape industry competition Source: (Michael E. Porter; Harvard Business Review, 2008) The interplay of competitive forces Porter (2008) suggests that depending upon the nature of industry, the configuration and the strongest competitive force or forces determine the profitability of an industry, and thus, it becomes the cornerstone for formulating the competitive strategy. For instance, the intensity of competitive forces displayed by these five forces operating in a B2C industry environment may be different from that of an industry catering to the B2B industry. Porter cited the cases of the commercial aircraft and movie theatre industry. In the first instance, forces such as fierce rivalry between the dominant producers and the bargaining power of the large customers are dominant forces, while, other forces such as threat of new entrants, and threat of substitutes are non-existent or at best marginal. On the other hand, in case of the movie theatre industry, growth of substitute forms of entertainment, and power of the movie producers and distributors supplying movies are important competitive forces that needs to be reckoned (Michael E. Porter; Harvard Business Review, 2008). Competitive strategies Depending upon the nature of industry, to develop an effective strategy a company need to study both competitors and actual potential customers as well. Competitors’ strategies, objectives, strengths and weaknesses are required, which would help shape the competitive strategy of the company. Kotler et al. (2009) identified four types of actors in the scenario as the leader, the challenger, follower and nicher and prescribed strategies for each category of actors. For an industry leader, which occupies the largest share of the market, Porter et al. identified three broad approaches such as (1) expanding the total market; (2) defending the market share; and (3) expanding market share. The market leader, in order to remain as a dominant player, may either look for ways to expand the total market demand, attempt to protect its current market share, or may even try to increase its market share by attacking into either the market challengers’, or followers’ territories. Figure 4: Competitive strategies for market leaders Adapted from source: Kotler et al. (2009), Pp. 234-239 Expanding the total market The industry leader, which is also the best and the strongest firm in the industry may expand the total market by expanding to new customer segments or finding more usages of its products. Defending market share Similarly, the industry leader may also defend its market share and prevent the challengers, or followers to enter into its territory, by continuous innovation. The market leader should be engaged in such measures as offering new products and services, improving distribution effectiveness, and cost cutting, which will keep add value to customer by providing competitive solutions and reinforce competitive strength (Kotler et al., 2009). Maintaining high customer loyalty and retention There are many ways to maintain high customer loyalty and retain customers. For instance, as P&G has been doing over the centuries to defend its market leadership. Therefore, the market leader may adopt some of the measures as (1) developing strong customer understanding; (2) by undertaking continuous innovation; (3) driving efficiency and consumer value by managing economies of scale; (4) developing to appropriate go-go-market capability by reaching retailers and consumers at the right time and right place; and finally, by building strong brands that shape purpose-inspired benefit driven brands (Proctor & Gamble, 2011). Figure 5: How P&G has been able to retain its market leadership through the centuries Source: (Proctor & Gamble, 2011) Conclusion The foregoing discussion delineates the relevance of the statement of Kotler et al. (2005) “In competitive markets, the best and strongest firms sustain growth and maintain profitability over the longer term through successfully developing and launching a steady stream of new products and services”. However, increasing customer loyalty to sustain may be an overstatement to generalise the entire industry spectrum. References 1. Benner, R., 2006. Detergent Can Be So Much More. Business Week, 01 May. pp.66 - 68. 2. Bolton, R.N. & Tarasi, C.O., 2006. Managing Customer Relationships. In N.K. Malhotra, ed. Review of Marketing Reserach, Volume 3. New York: M. E. Sharpe Inc. pp.3-38. 3. Boulding, W., Staelin, R., Ehret, M. & Johnston, W.J., 2005. A Customer Relationship Management Roadmap: What is Known, Potential Pitfalls, and where to Go. 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