 Assalamu alaikum khawatheena khusrat. Waseem Ahsan welcomes you to the virtual University of Pakistan. We are getting into lecture number 28 of the brand management, MKT 624. In the previous lecture we talked about branding policies and the brand architecture which different companies employ in order to brand their products. We were almost done with the concept but there are a couple of classifications which need to be discussed further in order to complete our understanding of what the concept is. Just to give you a recap, we talked about the relationships that the companies develop between their brands and different products of the sell on the market. Brands get into relationships with different products in order to draw a distinction between them and among them. The distinctions which are drawn to the help of the relationship that a brand has with its product helps consumers and customers to make their decisions easily because they know one product from the other and therefore they become fully aware of the properties of the attributes, the benefits and values which different brands offer. This kind of relationship between a brand and a product also helps companies to organize their production systems and marketing systems around those products. You can well imagine the hassles which companies would be running into if different products did not have different names. It would be hard to organize their production systems and also selling those products in the marketplace. There would be no distinction. These relationships are basically classified into six different branding policies and that is what we learned in the previous lecture. We completed our understanding on four branding policies with the meaning four different kinds of relationships which brands develop with the products. Product brand strategy, the line brand strategy, the range brand strategy and umbrella brand strategy. Those are the four strategies that we discussed in the previous lecture. Before we move on to the source brand strategy, let us make one thing very clear that these are the systems which really allow us to look into why companies develop different kinds of relationships with the products. Meaning why is it that a company gets into umbrella branding and why is it that a company gets into range branding or for that matter why is it that a company gets into source branding strategies. We are now getting on to classification number five which is source brand strategy. Source brand strategy is very close to the umbrella brand strategy. The difference is that you have different sub-brands under one source name. If we draw a distinction between the two strategies, you will recall that umbrella is just one brand name and that name is given to all the sub-brands or all the brands which form the total range or which form the total extension of the same brand. Under the source you have one source name and under that name you have different sub-brands and all those sub-brands have different names. In other words, this is kind of a two tier or a double level branding strategy in which you have a very strong source name and you also have very strong sub-brand names. Why? The reason is that every sub-brand within this strategy fulfills one promise and every brand comes into being with a rationale which means that it fulfills a very distinct need and which in turn means that it carries one set of promises and those promises get translated into a very distinct kind of a contract and that contract is upheld by the company under this branding strategy. To give you an example of this strategy, I would draw your attention toward the Japanese cars. You think of the most of the major car manufacturers from Japan. You may look at the manufacturer T or manufacturer S or manufacturer H with all those companies have the one source brand name which is a very strong brand name and under those different names you have so many different sub-brands. What happens is when a company starts doing business it starts doing business with one brand name. In the process when that brand becomes very strong it automatically as a process of evolution gets subdivided into sub-species and those sub-species are defined as different for the sub-brands and again in the process what happens is that those sub-brands they become so strong because they offer a very distinct set of promises and also they have the support of the source brand so when these two strengths come together what happens is that the sub-species or for that matter all the individual brands under the source get strength meaning the cumulative strength and they become very strong in their own right. They become so strong that in the words of the marketing expert they become heroes in themselves and when that happens the source brand name takes a backseat and the sub-brand name comes to the surface and that is the brand name which is promoted by the company and there is a whole set of communication strategies which we should be talking about later in one of the lectures which are implied in order to promote that particular brand but don't forget that in the process the source brand also gets promoted because everybody knows in the market that the parent brand or the source brand which is behind that the sub-brand happens to be a very major brand and which of course is the case with most of the Japanese car models. Let us take a look at the graphical illustration in order to have a very clear understanding of this concept. As you can see from this illustration we have four different sub-brands under the source brand and what is interesting is that each brand is catering to the needs of one particular segment. This is where it has a lot of similarities with the umbrella brand strategy but the only difference is that the brand name here is different and we have a different brand name for each segment that different brands are catering to the needs of. We have a very clear set of the promises which are compatible with the different segments in which all these four brands are operating and we also have a specific set of communications for these brands and these brands essentially are four different products. To go back to the example of the cars just look at four different models of a source brand which are meant for four different target markets. I think it is very clear to all of us that one of the models is meant for a very high segment. It is a high-priced car whereas the other one is for the upper middle class and yet another one for the middle class and yet another one for those who just want to go for something for the functional purpose meaning no frails. This strategy basically has a lot of depth and it offers companies a double level of not only branding but a double level of differentiation and depth because when you look at the source brand or for that matter whenever you realize the presence of the source brand you relate that with the sub-brand which in itself is a very strong brand so that is where this strategy brings about double strength in terms of branding. It is a strategy in which the family spirit and the name of the source dominates. Despite the fact that the source name is reduced only to a logo if you take a look at these Japanese cars you might not find the source name anywhere in the car but you still know what the source is because there is a logo in front of the car and it is very recognizable. That's the beauty of this strategy that the source is so strong that it lends a lot of strength to the sub-brand and the sub-brand in its own right being very strong gains double strength. So that is what it meant by a double level of strength a double level of differentiation and a double level of depth. That's all for the source brand strategy. Let us now talk about the sixth classification and these classifications let me clarify are very general and because most of the companies operate within these six different sets of branding policies if a company comes up with something which is different from these six classifications it has every right to do so but generally companies do operate within these frameworks. The sixth one is endorsing brand strategy. The endorsing brand is generally the company name which takes on the overtones of a brand name. Again I would give you examples from the car industry there are companies in the global market which have become a kind of brand names although they do have sub-brand names at the same time. The sub-brands are the real brands people talk about in terms of differentiation and in terms of distinctions meaning in terms of the relationships which those brands have with the products which people buy. For example car A is car A although it is being manufactured by one of the manufacturers whose name also has become kind of a brand name but that brand name is the one which endorses the brand which carries the promise meaning the product which carries the promise under one particular brand name. If I give you examples to buy a name the concept is going to be very very clear but I think without having to go into naming different companies and brands the concept should be clear in terms of the discussion which we are having. There are companies in the food sector also which imply this kind of strategy. I can give you example of the biscuits and you don't really have to go across the national borders to look at this kind of strategy biscuit companies in our country are employing the strategy and the company name is a very strong endorsing name and this kind of a setup are under these circumstances whereas every different brand of biscuits carries a different promise. This branding strategy covers a range of the different products which are offered in the shape of product brands, in the shape of the line brands and in the shape of range brands. We have products we have brand names, we have segments and we have the same markets. The only question is what is the naming strategy that we should employ so that we can go for the right most brand architecture when it comes to drawing distinctions between different products. So please do not be confused among the different strategies which you are going to employ in the field. We are dealing with the same market and the same products like I said earlier it only is a question of being very careful about your strategic intent and being very careful about the segments which you are trying to target and being very careful about the product promise which you are going to deliver. The strategy which you think is the most suitable one under the circumstances of the marketplace and under the circumstances of consumer behavior and under the circumstances of the competitive situation that you have to employ. The six models that we have discussed are the typical cases of branding strategies or branding policies which are employed by different companies as the brand architecture. The most important question here is which is the strategy which we should employ and like I talked about that earlier there is no particular set of strategies or one particular strategy which you should be employing under one set of circumstances meaning there is no one answer to this question. This question has so many different answers and answers relate to the set of circumstances you are surrounded by in terms of your competitive situation, in terms of consumer behavior and in terms of your product characteristics. There is no list of the do's and don'ts that do this and you'll be successful don't do that and you'll be successful. It is not a question of that. There is no one fixed it is something very serious, it is something very strategic and it has to be viewed in relation to the situation which I just talked about. The meaning three elements of the market are extremely important while making decisions about brand architecture and those are the consumer, the product and the competitive position. The consumer you have to know who the consumer is and that brings you back into the area of segmentation that also brings you back into the area of consumer behavior and from there you get on to the set of promises that you have to create and the set of promises that you have to deliver, a competitive situation because it is here that you have to determine where your brand is in the marketplace meaning how it stacks up against competition and it is a situation where you really have to be very very accurate about your product benefits which are to be delivered. It is because of the totality of circumstances and the totality of the factors the strategic factors which I just talked about that the companies decide about their brand architecture. In most of the cases the companies have one particular branding policy to which that company follows. There also are cases where companies go for a hybrid model which is the combination of more than one branding policy and why that company does that, it again is in response to the set of strategic circumstances which the company finds itself surrounded by. So therefore the brand architecture is a reflection of the marketing strategy of a company under one particular set of circumstances. It is not something whimsical, it is something which is highly thought through and it is something that has a very deep background and based on that background you move from step to step and from one phase to another and by the time you are involved into the architecture you have all the considerations meaning the strategic considerations before you in order to make the right most decision. With this our learning about brand projects, brand portfolios and strategic branding policy meaning the brand architecture stand concluded and which means that we have covered one more step within phase three of what the brand management process as is clear from this graphical illustration which explains the whole thing very clearly. From here we will get on to another topic which is about channels meaning the marketing channels which companies use in order to reach its consumers or its customers. We have been talking about these two terminologies meaning consumers and customers interchangeably but here in the context of channels let me clarify before I proceed that we should be using the terminology of customers for intermediaries meaning your dealers, your distributors, retailers and the terminology of consumer for the ultimate consumer meaning the one who buys your product for ultimate use. Whereas the brand architecture has been all about brand product relationship. Channels is all about brand market relationship. In order to be able to get to the ultimate consumer we have to have so many different channels to pass through before we reach the ultimate consumer. There are situations in which we get to the consumer pretty quickly meaning in quite a very direct fashion but there are situations and mostly there are situations in which we get to the ultimate consumer through so many different layers and those are the layers that we call channels. This is one of the very basic concepts that you must have learned in your basic marketing course and I have no intention here to go back and start scratching the concept and it's a very basic nature. Assuming that you know what channels are I basically am going to talk about how to leverage your brand with the help of the right most channels meaning one of the kind of channels that we must have in order to be very effective in the marketplace in reaching our consumers and customers of course and how to make the whole process cost efficient because there's a cost to everything we reach our consumers with the help of intermediaries we have to give the margins we have to incur money on transportation meaning logistics that we have to spend money on warehousing and we have to spend a lot of money on overall inventory management developing different models that really allow us to leverage our brand and that's what the whole discussion is all about and you know very well that leveraging basically is gaining advantage for one particular situation so what it means is how to gain advantage of the channel members that you end up giving power to your brand let us now talk about that in a little detail unless we have means of reaching the ultimate consumer which I have talked about we just cannot be successful in the marketplace in any of our marketing efforts every member of the channels has a specific role to play so in other words it is the multiplicity of roles or the functions which are to be performed between the point of production and the point of consumption that there is no one company which really can specialize in all those roles even if a company can specialize the cost is going to be astronomical and the complexity of the function is going to be quite very difficult to handle and therefore there are different people meaning there are different channel members who specialize in different roles meaning different functions and all those functions put together help us in marketing of a brand and bringing of a brand close to the customers and really getting a brand into the hands of the final consumer in most of the cases as you know very well it is the retailer who performs the final function meaning where the brand finally gets into the hands of the ultimate consumer so from that point of view retailers have become very important and retailers have been very important this is an area which relates power of the different channel members and I should be talking about that in one of my later lectures just what is to be remembered and what is not to be lost sight of is the fact that there are certain channel members who are at times a little more important than the others meaning that they have a little more power than the others so the strategy here for us meaning brand managers is how to use that power and how to capitalize on that very function that the whole channel ends up gaining advantage out of that power and gaining profitability out of that power which basically should be diluted and which should be distributed among different members of the channel so our discussion is going to be focused on how to use channels in order to leverage of a brand so that our brand ends up being powerful now the question is if we have distributors, we have wholesalers and we have retailers or in certain cases we have dealers with the meaning we have in so many different hands our products and our brands go through and at every stage and phase the ownership is changed and it keeps changing until the time the brand gets into the hands of ultimate consumer the way it is consumed so the question here is again a very strategic question how many hands should be there to make sure that our brand is going to be leveraged and the brand is going to gain the right amount of power which it deserves and which it should get in the marketplace the answer to this question is again not fixed as we all know there are not many many absolute answers when it comes to the marketing strategies it is the set of circumstances and it is a set of so many different strategic options and considerations that we must look into before we make a final decision about many of our marketing actions in this particular case we have to be very clear about the product-market relationship because while looking into channels what we are doing is we are studying the brand-market relationship so the nature of the product-market relationship is very important in terms of consumer products in terms of specialized products and in terms of the special applications of which those specialized products carry so in other words we have got to be clear about the kind of product that we are dealing in before we can make the decision about the channels that we think we should be having for our brand and these of course are all very strategic options I talked about consumers and consumer products we are dealing in consumer products it means we are dealing in something which basically offers convenience and which has to be available in a very widespread fashion so when you talk about consumer consumables it goes without saying that the structure of the channels is going to be pretty much comprehensive and there are going to be so many different members because the function is pretty much complex and it is huge in its scope but you have to have a lot of distributors covering all the population pockets all over the market and the market is not only original it is national and in many cases it is not only national so if it is a question of consumer consumables you are going to have one particular set of channels if it is a question of specialized products for example the medical supplies or the scientific equipment of that matter a very highly specialized construction equipment the kind of equipment you see while the roads are being constructed and bridges are being made and those are the kind of equipments which need very different kinds of channels those channels may not be as comprehensive in terms of layers as you have channels for consumer consumables but those channels have their own significance if you have specialized products like the construction equipment or the medical equipment the scientific equipment so many different things which really must be flashing into your minds you have to have somebody who really can impart training and knowledge about those products that you are selling and it is there that you have the importance of the function of CRM customer relationship management so if you are dealing in kind of a product which involves CRM and which involves imparting of knowledge and training to your customers you are going to have different channels not only you are going to have different channels but you also are going to have different kind of an organization structure like you have a CRM manager who is going to be in contact in continuous contact with your customers who are going to use that equipment and that manager is going to make sure that there is no communication gap and there is no meaning there is no gap between you and who is selling the product and the one who is using that product so we have seen that there are so many different kinds of product market relationships that really lead us into deciding about the kind of channels that we should have. Another option or consideration for that matter is the make up of the segment in terms of volume constituents of that name. What it means is if you are selling kind of a product which is subject to that 80-20 rule meaning 80% of the volume is being bought by 20% of the customers then that is where you must decide very accurately what should be the channels of distribution and the chances are you would like to go for a very direct channel meaning you may like to sell to that product through the company sales force directly to your customers or bleak consumers to the meaning they are the people who are going to buy directly from you for their particular use. The computers for example, if you are accompanying that is really focusing on the institutional market and which doesn't really have that big a market in the consumer individual consumer sector then you might employ this kind of strategy for developing your channels that you have the one set of channel for the volume which is 80% and that may be a very direct channel and you have another channel meaning another set of channel for the remaining 20% because that is what you call the individual customer or individual consumer segment. Now that is a separate issue why your company hypothetically is doing that but it is into that kind of a situation in which it should be selling more to individuals than to institutions that might be a question popping up somewhere along the marketing scene and that has to be taken in its own strategic right but that is not the point of discussion here it wants to give you one example if you are into a segment which is constituted by that 80-20 rule then you may have two different kinds of channels in order to sell the same product that you are selling to the sub-segment constituting 80% and another set of channels which is directed at the sub-segment that constitutes 20% of the overall segment another option that you may have before deciding about the channels is the level of growth of the segment if the segment is growing very fast then you have one set of channels and in this kind of a situation you mostly follow the conventional channels which are involved in the marketplace and those are the channels which are followed by most of the players I would say by almost all the players however conversely if you are operating within a segment which is not going very fast and which is sluggish only because it has become mature or due to any given reasons it is a kind of something which is very creative and which is very ingenious meaning which is different from the rest of the crowd because you might think to yourself that this is what is being done by everybody and still the overall segment is not growing as fast as it should or not as fast as the other segment in which I have another brand under one particular branding strategy then you might start doing some creative things and to give you an example you might like to get into something very direct thinking that the intermediaries may not be as much motivated to sell the brand as the company sales force would be what is going to be the cost and what are going to be the implications in terms of margins and profitability are the things in which you really have to take into consideration because everything boils down to that when you get into a marketing effort whether you want those profits right away or you would like to be a little patient is a different strategy or a different matter in which you have to consider separately but this is one of the options in which you really take into consideration before deciding about the channels another option which is very, very important and which never escapes the attention of any marketing team and that is that decision about the channels that depends to a very large extent on the amount of power that your brand has and your company has if you are a new company offering a new brand the chances are you're going to be dependent on very strong original distributors or very strong original dealers for that matter depending on the kind of product that you are selling meaning the brand you're selling in that case that is going to provide those distributors or dealers a lot more power than the manufacturer meaning and you guys but then you have to consider this thing very pragmatically because without the help of those intermediaries that important function is not going to be performed conversely if you are a company which is very well established and which is selling a brand which is powerful the chances are that those sort of distributors or dealers will come to you to develop a very positive kind of relationship between your brands and themselves it is not to say that it is easy for the one particular member of the channel to monopolize power it is not that when I talk about strong distributors it doesn't really mean that the strong distributors monopolize power and take the whole product in the marketplace to the hinges upon them at the same time it doesn't really mean and shouldn't mean that the power is centered around the manufacturer who is going to call all the shots and who is the one who is going to define all the rules of the market and marketing no it is not that it is a set of relationships which are exercised so that different functions in different phases and at different stages are performed very pragmatically and very effectively and efficiently in order for our brands to get into the hands of the final consumers so these are a few of the options that we have to consider before we decide upon the channel structure for our brands since the decision about channels is very strategic as it goes without saying we also have to consider a few areas with channels impact what are those areas? let us talk about that the first one is the customer value channels really either enhance or reduce the customer value meaning if the structure of the channels is effective the customer value is going to be enhanced if the structure of the channels is not very practicable then the chances are that customer value is going to diminish we have to understand what customer value is customer value means that the brand has to perform meaning the set of performance that the brand carries it must be able to deliver and when I say that it doesn't really mean that this thing stops at producing high quality no if a brand carries very high quality and it cannot be delivered very effectively in the hands of the final consumers then the customer value gets compromised customer value is also fair price meaning apart from the set of promises which have got to be delivered in any case you've got to go for a price which is considered by the consumers as a fair price if you reach the final consumers by incurring costs which are forbidding and which do not really offer you a decent level of margins then the channel structure is not very effective and what's going to happen is you're going to do something with the pricing you're going to increase the price and you might increase the price to a point where it may not be considered a fair price by the customer and there again the customer value is compromised the third element of the customer value is that the brand has got to be delivered in the most effective way to the final consumer again meaning that the distribution of the brand or availability from that point of view of your brand has got to be very effective your consumers should not get into a feeling that the availability is poor and therefore we should no longer be considering this brand because a competitive brand also offers similar kinds of benefits and there may be differences here and there but it is not all that bad so that affects your customer base so in other words it is the performance of the brand it is the fair pricing and you can say it is the level of service to which you have to provide to your consumers to which form the overall customer value now what if you are dealing in consumer durables you know you have got to provide your customers and consumers with after sale service and you cannot do that unless you have right to the most kind of channel structure we are going to talk about those things in detail later also but this is what is meant by customer value and this is the one area which is very seriously impacted by the channels that you have to sell your brand so just one element in isolation cannot really make sure that customer value is very high until the time that we have all the elements that have talked about in place the customer value is going to remain compromised so before you make decision for the right most channel you have got to look into this area which is impacted by the channels because it is all about deciding who are the people or who are the companies who are the members of the channels or who comprise the supply chain and wherever you think there are missing links you are going to hurt your brand so that is what the whole thing is all about the customer value has got to be delivered and in order to do so you have got to make sure that the chain of supply of your brand is absolutely impeccable another area which is impacted by channels is sales revenue otherwise that well that goes without saying that with the prime objective of developing an effective distribution outreach the marketing channels determine the number of existing and potential customers the total number of customers is the basis of revenue now what it means is that if you are selling a consumer consumable naturally you have to go to all the markets within the country if we are talking about the national market and in order to be able to do so you have got to have so many distributors and you have got to have so many wholesalers and retailers because you would like your brand to be in so many different hands you would like to increase the number of people who are using your brand and more the number of people the more the sales and more the sales revenues so this basically relates the locations and locations have got to be created in other words the locations have got to be created by you and your company which are preferred by the customers and which are meaning by the consumers again you see this goes without saying when we talk about channels we have got to create locations where people are going to come easily and in a convenient way meaning locations which are preferred by your target market and it is because of the fulfillment of that need on part of your consumers that you go to so many different markets and it is because of that that you get into so many different hands and the more number of hands you can get your brand into the higher the sales and higher the sales revenues so this is how distribution channels impact the area of sales revenues the third area which is impacted by the channels is the profitability naturally when you try to improve the outreach because you would like to have a very effective outreach that you are incurring costs costs factor in in the shape of the margins in the shape of logistics like I pointed out earlier I think and in the shape of the warehousing and the inventory management you need to have very good staff which is handling distribution to form the distribution points and they have got to get into so many different kinds of greatest inventory models computer aided inventory models so in other words you need to have the very knowledge able people in other words knowledge workers who are working in different areas just in order to make sure that the product which you are selling gets into the hands of the final consumer in the most effective way and also in the most efficient way effective in the sense that your brand has got to get into the hands of the final consumer in the most effective way meaning it's got to be available all over and the consumer doesn't really have to walk an extra mile so to say in order to find your brand if your brand is very good and it offers very good customer value the customer might do it once the customer or the consumer might do it twice but the consumer may not do it for the third time because it is a hassle if it is not really available everywhere so you lose effectiveness and efficient in the sense that it's got to be cost efficient you've got to reach all those consumers with a cost level which is bearable by the company and which is very much in line with the contribution margins that you have worked out now this is not an area which is going to be part of the brand management because this is going to be taken care of within the financial management the ambit but then you've got to have a very clear understanding of the margins which must come to the company because that's what your marketing effort is all about so we can say that three areas meaning customer value sales revenues and profitability are important strategic areas which are impacted by your decision as to which channels you should go for and before you make that decision of course the consideration of these three areas is going to be of paramount importance these three areas could also join hands with another factor which is very important and that is the factor of historical background of course the strategic considerations are of paramount importance but then at the same time the way your company has been working over the past few years and the way developments took place also could shape up the relationships that you have with different members of the channel and the relationships that have been developing and shaping up to see over the last few decades or even you know the more than that so historical background also plays a very important role and it is in conjunction with the other strategic options and considerations which I talked about that you finally decide which should be the shape of your channels to sell your brand now all this means that to sell one product you may have two different kinds of channels I am not saying that you must always have that all I am saying is that there is a possibility you know if you go back to the rule of 80-20 if you go back to the rule of individual consumers versus institutional consumers and where your strength is depending upon the appeal that you have for one particular segment and an appeal for another segment which may not be very strong in terms of your brand and your company you make all these decisions having said that let me now take you to a graphical illustration which makes the whole concept very clear if you take a good look at the illustration you will see that we have the basic two parts the one is red and the other is blue red is company X and blue is company Y what is important about this illustration is that both the companies are trying to reach the same customers meaning they are operating within the same market I mean not only the same market but also within the same segment company X is reaching its customers in a very direct fashion and even that directness has two different methods the one is that the company is reaching through its own outlets and the other is that the company is indulging in direct sales whereas company Y is trying to reach its customers through three or rather four different ways it has direct sales as one of the selling policies or strategies it also has mixed systems meaning a combination of direct and indirect meaning it is selling direct to customers and it also is selling to the same customers through its dealers and then this company also has a channel which is very indirect meaning it is reaching its customers through distributors and then retailers why is that? all these variables have an impact on the strategy of the company when it comes to deciding what kind of channels the company should have so what is important for you to understand is that all these strategic options and considerations have got to be studied very carefully before the decision on the channels is made there are a few more very important areas that have to be learned before fully if not master understand the concept of channels which we are going to discuss in the next lecture so Allah Hafiz until that time