MITSlogan Management Review

- Yash PatelIIT Madras

What Is Marketing

Aggregation & Marketing

Disaggregation?

Disaggregation or differentiated marketing -Involves segmenting a market into distinct groups. It helps the company in marketing each product to a group that is likely to buy it, thereby increasing the company’s chances of financial success.

Aggregation or undifferentiated marketing - It

is the opposite market strategy. Instead of segmenting the market into various groups, aggregation involves treating all consumers as if they are the same.

The Key

Players

• Consumers

• Intermediaries

• Brand Managers

What Is The Present

Situation?

Analysis Of Brands-Aggregating Markets

• Promises to deliver a clearly stated benefitthat sets it apart from the competitors

• Most valuable assets for many Companies

• Establishes differentiated value proposition

• Builds relationship with Consumers

• Advertising and promotion of brands drivetraffic and sales volume

Brands have become the

focal point

of manycompany’s marketing efforts and are seenas a source of market power, competitiveleverage and higher returns.

BUT

The information revolution is making

consumer disaggregation vastly moreefficient and profitable than Aggregation

Analysis Of Disaggregating Markets

• Companies are developing means of interactingwith the consumers at the segment or evenindividual level like direct marketing, one-to-onemarketing and information based marketing

• Many of the strategic and tactical tasksentrusted to brands can be performed better, lessexpensive and more profitably at the level ofconsumer segments

Why Study This

Case?

Objectives

• What are BrandsGood For?

• How can the roleof Brands beJustified?

Examining Three Core

Areas Of Brand

Management

Consumer Relationship1

Companies employing Disaggregatemarketing are :

• Following Two Way Flow Of Communication

• Quicker to respond to Consumer Needs & Tailortheir Offerings to influence consumer buyingpattern

Consumer Relationship1

• Communication Costs are dramatically reduced

• Hit rates increased through efficient targeting

• Targeting consumers with marketing communication only after their permission and only when they are likely to buy leads to increase in consumer satisfaction

Example

Launched the magazine Food &Family, which delivers food-relatedarticles, recipes, editorials andadvertisements. It reaches the registeredconsumers’ mailbox quarterly(segmentation). It is personalized to theindividual consumer (disaggregation).

It has been launched as an effort to buildconsumer relationships

Cost Of Program

They are set against the benefits of reaching Kraft’s most loyal & profitable consumers in a targeted manner, providing opportunities to communicate directly with them outside of traditional channels. Some costs are defrayed by Third party advertisers like Ford, Tupperware, etc which are keen to tap into such targeted exposure for their brands.

Two Central Facts Of

Disaggregation

1) Locus of consumer relationship likely to shift from product brands toward a trusted and credible umbrella brand or even to the brand that is used as the platform for communications

2) Tactical activities such as competitive reactions, product-trial coupons and selective promotions are implemented with targeted consumers or segments rather than at the brand level

Key Differences

Aggregation Marketing: Brands and Brandmanagers compete which each other forscarce budget; Mass media communication

Disaggregation Marketing: Manages theconsumers & consumer segmentsprofitably; Brands become team players

Channel Relationship2

Retailers’ Power

• Due to Large Size and Power

• Transformation from Location basedapproach to adopting a relationship-based approach

• Creates store-brand awareness

• Promote Private Label

• Building Store Loyalty

Marketers spent double on retailers’ listingfees, facing fees, trade promotion andcooperative advertising

BUT

The real THREAT is that they are feedingtheir potential rivals for the consumerrelationship

To Eliminate It …

Disaggregation provides manufacturersnew medium to influence consumerdecision that is independent of the retailer.

It helps restore credibility to themanufacturer’s claims to know andunderstand the consumer better thanretailers do

BUT

Manufacturers must act quickly as

Consumers prefer few relationship to many

Manufacturers must act quickly as

Consumers prefer few relationship to many

Retailers are not sitting IDLE

Retailers used brands like Coca Cola and Tide as magnets to attract customers to the store…

Retailers used brands like Coca Cola and Tide as magnets to attract customers to the store…

But once the retailers began to use disaggregate consumer data to drive traffic, brands were seen as coarse and expensive means for achieving traffic volume

Example

Uses Loyalty Cards to personalize consumers’ shopping experience

Launched its consumer information based relationship in 2001 in UK

Example

Launched its consumer information based relationship in 2001 in UK

BUT

Its consumer data covered only a small slice of overall consumer data

SO…

Example

Launched its consumer information based relationship in 2001 in UK

BUT

Its consumer data covered only a small slice of overall consumer data

SO…

They merged their information with TESCO

Example

Organization Of Brand Management

3

Now a days, entrenched brandmanagement organizations are proving tobe an impediment to the adoption ofconsumer-level disaggregation initiatives

Example

Information based marketing program is treated as an add-on to existing channels for reaching the consumer. The brand manager, whose brands are featured in disaggregate marketing campaigns, allocates budget to fund the program. This method defines marketing as another media choice, not a different way of doing business.

The focus of Marketing efforts remains the brands, not the Consumers

Brand Management System

- Were designed for an era of mass marketing

-Not Suited to make good use of the tidal wave of valuable consumer information that is available

- Like in the case of automobile industry, it has been difficult to track consumer segment information while pulling brand information from the management system has been a much easier game

Now the focus should be on

Consumer, and not Brand

Switch to a consumer-centric organization cannot happen

overnight…

To understand the nature of thechanges required, managers must

recognize the need for threeelements in any new structure…

1) Relationship building entity and mechanism

2) Targeted communications that can exert a tactical influence on consumer behaviour

3) Obtaining expertise in new-product and brand development so that the portfolio of product brands can be continually rejuvenated

The Value

Proposition Of

Brands

The ability to communicate anidentical message to large numbers ofconsumers makes brands ideal andnatural ally of mass production

Initially Brands were confined

to packaged consumers good

Now brands are ubiquitous in

services and B2B settings

So the Question on Brands

Still Prevails…

Are the Brands good in

this new information

environment??

- Disaggregation is proving to be an efficient and profitable marketing approach

-The firms are quickly realizing that disaggregation is not just an add-on to their brand-focused organizations. It is a different way of doing business that challenges brands and brand-based organizational structures

- However, Brands are an excellent means of developing and communicating a differential value proposition in the market

So the final

decision

remains in

the hands of

the Company

To decide

On…

- Aggregation OR Disaggregation

- Find your Brand purpose

- Brand Level OR Customer Level

- To build a strong relationship with the customers

Armed with a basket of such valuepropositions, a manufacturer’s umbrellabrand might even rightfully aspire to the

ultimate prize – a relationship with

the customer

Created by- Yash Patel, IIT MadrasDuring an internship by Prof. Sameer Mathur, IIM Lucknow