Strategically Branding A Destination

1. Strategically Branding A Destination William D. Neal Senior Executive Officer SDR, Inc.

2. 2 What Values Come to Mind? Coca Cola

3. 3 What Values Come to Mind? Hewlett Packard

4. 4 What Values Come to Mind? Honda

5. 5 What Values Come to Mind? Disney

6. 6 What Values Come to Mind? Las Vegas

7. 7 Branding is a Strategy Great brands are built strategically Great Brands are a central element of strategic business planning. Great Brands dominate the market planning process.

8. 8 Strategy - integrated actions in the pursuit of competitive advantage George Day

9. 9 Strategic Market Planning A planning process to develop or improve sustainable competitive advantage.

10. “If it moves, we sponsor it, if it doesn’t move, we paint it red.” Roberto C. Goizueta, Coca Cola

11. Can we adopt strategic business planning models to the Travel & Tourism Industry?

12. 12 Think in terms of BUSINESS The location can be thought of as the ENTERPRISE. ORLANDO Individual destinations can be thought of as STRATEGIC BUSINESS UNITS dominated by Brands. Disney World Universal Studios Sea World Specific activities can be thought of as CUSTOMER REQUIREMENTS. Rides & Attractions - History Education Culture/Heritage - Nature Night Life - Educational Programs

13. 13 Think in terms of BRANDS The destination area can be thought as an AUTHORITY BRAND. ORLANDO Individual destinations can be thought of as STRATEGIC BRANDS. Disney World Universal Studios Sea World Specific activities can be thought of as INDIVIDUAL BRANDS to meet customer needs. Indiana Jones Theme Park - Theme Hotels Old Town Orlando - Nature Island

14. 14 The Brand Hierarchy

15. San Antonio What Master Brands come to mind for this Authority Brand?

16. Atlanta What Master Brands come to mind for this Authority Brand?

17. Ocracoke Island? What Master Brands come to mind for this Authority Brand?

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19. 19 The Marketing Concept The purpose of business is satisfied customers Drucker, Levitt, McKitterick The purpose of business is to deliver value Porter, Reichheld, Berry

21. 21 The Marketing Concept REALITY: Marketing Concept must also address the competition The purpose of business is to deliver higher relative value. To survive and grow, you must provide: SUSTAINABLE COMPETITIVE ADVANTAGE

22. 22 Goal of Marketing Strategy

23. 23 Strategic Market Planning A planning process to develop or improve sustainable competitive advantage. (Neal, “Introduction to Marketing Strategy”)

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25. The Major Elements of the Strategic Planning Process at the Enterprise Level

26. 26 Mission Short statement of the business you are in Used to focus and limit your purview Often the hardest step in the process Often accompanied with a VISION STATEMENT - what do I want to be in the future.

27. 27 Goals & Objectives Goals - longer term, broader outcomes you are seeking (e.g. lead the industry in sales and service) Objectives - shorter term, totally measurable outcomes (e.g. sustain a 10% increase in annual profitability for each of the next three years) Each goal should have multiple, time-phased objectives crafted so that their accomplishment will fulfill the goal.

28. 28 Growth Strategy To grow by how much over what time period. How will we measure growth - sales, profits, share, operating ratios, etc. How will we grow? Higher Demand New products Market expansion New market penetration Production efficiency Acquisition etc.

29. 29 Business Portfolio Plan What elements of my business will I put under the same management group? By brand family By product line By geographic/country location By channel By buyer benefits delivered etc.

30. Developing The Strategic Marketing Plan

31. 31 Step 1 - Assessment SWOT Analysis Strengths Weaknesses Opportunities Threats Areas to Address Internal Opns Competitors Markets Marketing Environment Core knowledge Experience

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33. 33 Step 2 - Marketing Opportunity Analysis Segment the market - What bases? Needs/preferences Values/benefits sought Occasions Demographics Align your strengths against competition’s weaknesses - BY SEGMENT Share of market, Share of preference, Channel control, Price advantage, Brand strength, Price/value perception, Production capability, etc

34. 34 Market Segmentation Firms that properly segment their market and focus their resources on deep penetration of targeted segments almost always exhibit higher profitability.

35. 35 Why is Market Segmentation usually successful? Focuses the resources of the firm on a specific target of similar customers. Limits competitive pressure. Allows the firm to develop a deep marketing-mix experience with the segment. Provides a platform for expansion into contiguous segments.

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38. 38 Step 3 - Target Market Selection Evaluate segments in terms of your perceived strengths and weaknesses vs competitions’ -develop perceptual maps for segment groups First, select segments you currently dominate and determine how to defend and improve your position Next, select segments that you could dominate and prioritize by cost of domination.

39. 39 Step 3 - Target Market Selection (cont.) Finally, find any remaining segments that represent high growth potential and look at ways you could successfully enter those segments. New product introduction New brand platform Power promotion Order segments by financial attractiveness and prioritize investments

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41. 41 Step 4 - Marketing Mix Strategy FOR EACH TARGETED MARKET… Determine how you will optimize VALUE for each target market, now and in the future Plan the product/service attributes you will emphasize Plan your advertising/promotional support program Plan your channel/delivery strategy - avoid channel conflict Plan your pricing strategy

42. 42 Step 4 - Marketing Mix Strategy (cont.) FOR EACH TARGETED MARKET… Develop contingency plans for likely competitor counter-attacks For each segment, determine how you will enhance your brand equity Use market simulation (preference or choice models) to test likely market response to your initiatives and to test competitive responses Check for incompatible brand and product positions across targeted segments

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44. 44 Step 5 - Marketing Systems Forecast the growth in each targeted segment Develop selling and delivery systems that will support the current market and can handle the forecasted growth. Market information systems Customer service operations Communications programs Develop a customer feedback system that measures plan vs. actual

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46. 46 Strategic Planning Strategic market planning is non-linear and recursive (and sometimes chaotic) The interface between the overall business strategy and the strategic marketing plan is critical - they must be fully integrated Ultimately, the strategic business plan dictates the amount of investment you can afford in your marketing plan Develop a plan to measure costs, effectiveness, and progress to objectives - ROMI

47. Winning Strategy - Maximize value which maximizes loyalty for each target market The KEY to customer LOYALTY and growth is to: Get into the consideration set Then, consistently deliver the BEST VALUE to the targeted customers. VALUE is the KEY DRIVER of choice, thus LOYALTY! Brand Equity should be a major element of the VALUE PROPOSITION.

48. Why is Brand Equity Important? Prevents commoditization of the category. Communicates added value beyond the tangible product performance characteristics, improving selling price and margins. Provides a strong defense against low price generic brands. Provides a platform for new product introductions. Gives more channel control to the manufacturer/producer. Improves stockholder value and stock price.

49. Competing Theories of Brand Equity Financial Orientation Interbrand - Premium over category avg. Accepted Accounting Procedures Farquar - New Accounting Procedure Market Orientation Total Research - Equitrend Landor Associates Aaker Young & Rubican CDB Research Vanderbilt/SDR (Srinivasan, Russell, Kamakura)

50. MARKETPLACE APPROACHTOBRAND EQUITY

51. Competing Market Theories of Brand Equity Aaker-Building Strong Brands. Views brand equity as the total value of a brand, including price premium, satisfaction, product attributes, image attributes, public opinion, and so forth. Vanderbilt Model - (MSI Series on Brand Equity.) (Srinivasan, Russell, Kamakura) Views brand equity as just the imagery that surrounds the brand name by buyers in the product category. Brand equity is separate from price and product performance attributes and may be measured as a price differential.

52. 52 Aaker’s 10 Measures Loyalty Measures Price Premium Satisfaction/Loyalty Perceived Quality/Leadership Measures Perceived Quality Leadership/Popularity Associations/Differentiation Measures Perceived value Brand Personality Organizational Associations

53. 53 Aaker’s 10 Measures (cont.) Awareness Measures Brand Awareness Market Behavior Measures Market Share Market Price & Distribution Coverage “The price premium may be the best single measure of brand equity available, because it directly captures the loyalty of customers in a most relevant way.” Aaker, pg 321.

54. 54 Aaker’s 10 Measures (cont.) Aaker model uses very disparate measures for each of the 10 criteria. Uses judgement to weight measures, depending on the product category, in order to construct a single summary measure. Does not work cross-culturally because of measurement and scaling issues. Gives no examples Ultimately, it is totally judgmental.

55. BRAND VALUEVanderbilt/SDR Model

56. The Brand Value Model Idea developed from literature of Srinivasan, Russell & Kamakura Very similar model described by Srinivasan & Park (JMR, May 94) (used expectancy-value measurement model) SDR’s approach uses tradeoff exercises combined with other measurements.

57. Brand Value Concept 1. Buyers who are considering a purchase, scan their product/service options and develop a consideration set. 2. Within the consideration set, they develop a hierarchy of brands/products based on their assessment of VALUE. 3. Typically, they choose the brand or product at the top of their value hierarchy, if available. THIS MAY BE A CONSCIENCE COGNITIVE PROCESS, OR A SUB-CONSCIENCE PROCESS WITH SOME EMOTIONAL ELEMENTS

59. 59 How Brands Get Into the Consideration Set Awareness Satisfaction in previous experience, or reputation for high satisfaction of customers Trusted Compatible image with purchaser Perceived acceptable price range Not socially irresponsible Acceptable country of origin

60. Brand Value Concept Elements of Brand Value: - A BUNDLE of tangible attributes delivered by the product/service or its channel. - A BUNDLE of intangible attributes delivered by the name of the brand or producer (brand image or brand equity.) - The price of those combined bundles.

61. Brand Value Concept Customers determine brand value Varies by customer and customer segment Varies by product/service category Any one Customer may have a different value set for different product categories

69. Brand Value Model Each buyer has a unique Value Equation The Value Equation provides the buyer with a preference structure for making a CHOICE among a competing set of products or services in a category. Rational buyers choose the best VALUE. Thus VALUE drives CHOICE.

71. Brand Value Management BRAND VALUE Varies by product/service category. Price and performance features can often be met by competitors. Brand equity is more difficult to change - long term strategy - Both offensive and defensive. When there is weak brand equity and product/ channel parity in a category, price is the only remaining marketing variable.

73. Brand Value/Equity Measurement ASSUMPTIONS Buyers optimize value within a product or service category. Buyers therefore assign utilities (weights) to price, performance attributes, and brand equity. Buyers trade off performance attributes and brand equity against price in order to optimize value. The utilities (weights) of price, performance attributes and brand equity is summative and equal to total brand value.

74. Brand Value/Equity Measurement First, we use conjoint models to estimate utilities. Respondent goes through two tradeoff tasks TASK 1 - Brand-Price tradeoff TASK 2 - Brand-Features-Price tradeoff Merge results of both tasks at the respondent subgroup level and re-scale to be comparable. Purpose is to get accurate estimate of price utility

76. Task 3 - Choice Task Respondent then goes through a CHOICE TASK that is based on their conjoint results. Respondent is asked if they would switch to, or purchase next, their highest rated conjoint profile. IF YES, we ask about another (lower) profile, and so on until they would not purchase or switch. PURPOSE: measure barriers to switching and confirm conjoint results

77. Task 4 - Brand Image Ratings Each brand in the competitive set is also rated (0-10 scale) on its imagery, for example: A brand I can trust A brand that I want seen in my home A company that will fix any problems I may have with their product etc. Ratings are then (ridge) regressed against derived brand equity from the conjoint to get the relative weight of each image driver.

78. Task 4 - Brand Image Ratings The beta coefficients from the ridge regression (or similar models) reveal the key drivers that are most associated with each brand’s utility (derived brand equity) Thus, you can reveal the key drivers of brand equity, improve your imagery on those attributes and improve brand equity

79. Brand Equity DRIVERS – Service Co. Honest in its dealings with customers Concerned about my family’s needs Progressive and innovative Respects me as a customer Is well managed Efficient in coordinating the service activities of different departments Keeps me informed of energy matters that are important to my family’s health Easy to do business with Contributes to the community

80. Average Importance of the Elements of Brand Value

81. Brand Valuation RESULTS With this type of model, you can build a market response simulator to determine how each marketing mix variable effects share of choice. Changes in BRAND EQUITY can be tracked over time. Changes are relative to other products/ brands in the category.

83. Winning Strategy - Maximize value which maximizes loyalty for each target market The KEY to customer LOYALTY and growth is to consistently deliver the BEST VALUE to the customer. VALUE is the KEY DRIVER of choice, thus LOYALTY! Brand Equity can be a major element of the VALUE PROPOSITION.

84. Market Segmentation Based on the Value Model Derive the value equation for each respondent in the survey. Each buyer’s value equation can be used as the basis for segmenting the market. Form groups of respondents who have similar value structures (e.g. price sensitives, service sensitive groups, product performance sensitive groups, etc.)

85. Brand Value Model Each buyer has a unique value equation. We use modified conjoint/choice exercises to determine that value equation for each respondent. From the derived utilities and choice information, we can determine each respondent’s switching behavior under different competitive scenarios.

86. From the Brand Value Model We can determined who switched. We can determine why they switched. We can describe the switchers. We can describe the non-switchers. FOR EACH COMPETITIVE SCENARIO

87. This led us to a discovery! There are different kinds of loyalty! Some people are loyal because they are committed to a brand or company. Some are loyal because a particular brand offers some unique benefits or performance characteristics. Some are loyal because they won’t spend the time or effort to make an evaluation. Some are loyal because they have little choice. And some are just disloyal, buying on price or convenience alone.

88. Some Parting Thoughts A label is not a Brand! Advertising and Promotion costs to support a brand is an investment, not an expense. The starting point, and the KEY to building Brand Equity, is to define what you want your brand to stand for - the implied contract you have with the consumer. Then, support that brand image in every way - in all selling materials, with distributors & retailers, in advertising, promotion, and PR.

89. Some Parting Thoughts You can stake out a brand promise in many ways: The highest quality in the category Good & Economical Available everywhere - systems, parts and repair The best designs in the business Extreme versatility/diversity Make sure your performance (and your channels’ performance) backs up your promise - walk the talk!

90. Some Parting Thoughts Strong brands mitigate channel dominance and product commoditization. Strong brands pull product through the channel. Strong brands improve profit margins. Strong brands build stockholder equity. If you do not build strong brands in your category, someone will do it to you!

91. Questions and CommentsWDNEAL@sdrnet.com