The marketing mix and brand equity in high technology companies

Marketing Mix Analysis

Analysis of the Relationship Between the Marketing Mix and Brand Equity in the High Technology Industry

Brand equity is earned over years and for many companies, decades of consistent execution and the continual exceeding of customers' expectations. The paradox of brand equity is that it is elegantly simple theoretically on the one hand and extremely difficult to consistently maintain by managing the marketing mix on the other (Aremu, Bamiduro, 2012). This makes the measurement of brand equity Return on Investment (ROI) over time a challenge for organizations who don't view their marketing mix as connected to brand awareness and equity over the long-term (Joseph, 2009). Too often the marketing mix is considered separate and not directly linked or a catalyst of brand equity. Yet as Aaker (2012) points out, the marketing mix of any business is the foundation of customer experiences delivered, and the perceptions of those experiences drive brand equity over time. Dr. Aaker mentions Cirque du Soleil as an entertainment business that successfully synchronizes its marketing mix to achieve brand awareness, generate customer loyalty, and over time earn brand equity (Aaker, 2012). In high technology companies in general and in software companies specifically, current customer experiences successfully delivered set the foundation for the next generation of products, as designers and developers seek to build on successful product designs and experiences (Ghose, 2009). Marketing mix iterations serve as the catalyst of continual gains in brand awareness and brand image reinforcement, leading greater brand equity (Aaker, 2012). This dynamic is explored in the high technology industry in this paper.

Analysis of How the Marketing Mix Drives Brand Equity

In the High Technology Industry

Known for exceptionally rapid product lifecycles and a heavy reliance on services to gain incremental revenue relative to traditionally thin revenue on hardware products, the high technology industry is increasingly becoming software-based. This transition to software-based products in high technology products continues to be accelerated by widespread adoption of cloud computing and Software-as-a-Service (SaaS), which many marketers are successfully differentiating their software applications on (Katzmarzik, 2011). Cloud computing and SaaS-based software applications are disruptive innovations in enterprise software, completely re-ordering the economics of the enterprise software landscape. Cloud computing and SaaS-based applications are also accelerating the pace of brand awareness and brand image formation, two critical factors that in turn drive brand equity (Aaker, 2012). The following is an analysis of the 4Ps of the marketing mix for Salesforce.com's best-selling SaaS-based Customer Relationship Management (CRM) application, which is used as an example for completing this analysis.

Product

The Salesforce.com CRM suite is an enterprise software application delivered entirely over the Internet, using cloud computing as its foundation and the SaaS as the delivery and user customization platform. Salesforce.com has relied extensively on their technology stack as a means to differentiate themselves against traditional enterprise software vendors, who sell the majority of their software for installation and use entirely on-premise. Salesforce.com relies on events aimed at the senior management teams of companies who have had on-premise CRM systems installed for years. To Salesforce.com, these companies are gold mines because they can successfully raise brand awareness through their events. Salesforce.com will at the same time launch product specials and bundling that seek to get these accounts to try their application. They also strive to show how all the prospect needs is an Internet connection to use the application. This example shows how critical it is for have a highly coordinated, synchronized marketing mix strategy in order to penetrate new markets (Aremu, Bamiduro, 2012). With product ease of deployment and customization anchoring the unique value proposition of their applications, Salesforce.com sets a solid foundation of trust and over time the formation for brand equity.

Price

All SaaS-based software vendors are using price today as a core part of their unique value proposition, as each can claim that their applications are pay-as-you go in addition to supporting operating expense (OPEC) payments from customers (Katzmarzik, 2011). This is in contrast to traditional enterprise software which is predicated on extensive capital expense (CAPEX) budgeting and costs which often drive sales cycles to months or years (Friedman, Friedman, 1987). Salesforce.com and the many other companies selling SaaS software are making pricing fuel brand image by directly competing against their on-premise competitors who rely on CAPEX-based pricing models that require high initial payments and up to a ten times multiple for ancillary services (Friedman, Friedman, 1987). By being so aggressive in positioning the economic advantages of SaaS pricing, Salesforce.com is driving a brand image of high quality and low price. This is the essence of the disruption they are delivering into the market, all driven by economics and flexibility of customization, including ease of use (Katzmarzik, 2011). It is important to note that this isn't the same as inciting a price war, as SaaS vendor are operating on an entirely different set of economics compared to their on-premise competitors.

Promotion

For many cloud computing and SaaS start-ups, their initial round of funding is equally divided between engineering and marketing, sales promotion and public relations (Katzmarzik, 2011). Salesforce.com is an example of a company that succeed in managing this balance of engineering and marketing-centric spending. Their model initially was to connect personally with the key decision makers in corporate accounts where on-premise CRM systems had not met expectations, were expensive due to the on-premise pricing model, and the heavy financial burden of maintenance (Katzmarzik, 2011). These factors are today driving down the brand awareness and in turn, brand equity of traditional on-premise enterprise software vendors. Salesforce.com has taken a contrarian strategy many enterprise software vendors have done, concentrating on being accountable, transparent and visible while their on-premise enterprise software competitors have been known for exactly the opposite (Friedman, Friedman, 1987). Earlier in this analysis the point was made that each of the 4Ps in the marketing mix need to be managed to varying levels of intensity (Aaker, 2012) and in SaaS-based enterprise software, promotion consistently has the highest level of intensity of all 4 Ps both form a spending and execution standpoint. It is an essential element of any successful brand equity strategy in the enterprise software industry as well (Friedman, Friedman, 1987).

Analysis of the Marketing Mix (4Ps) and Their Contribution to Brand Equity

. Dr. Aaker has observed that when all four elements of the marketing mix are synchronized to the given preferences and needs of a market, they fuel the optimal level of brand awareness, contributions to brand image that in turn delivers the greatest brand equity levels possible (Aaker, 2012). In the study an Examination of Selected Marketing Mix Elements and Brand Equity (Yoo, Donthu, Lee, 2000) the authors provide hierarchical analysis that shows the contributions of each of the 4 Ps to both brand awareness and brand image leading to brand equity. Table 1 is based on the findings of their analysis.

Table 1: How the 4Ps Can Be Used to Maximize and Build Brand Equity

Marketing Mix Variables

Contribution to Brand Awareness

Contribution to Brand Image

Contribution to Brand Equity

Product

Reliance on the SaaS model to show customizable aspects of application.

Positioned deliberately against inflexibility of on-premise application to promote brand image of speed & customization

Disruption of the status quo in enterprise software and greater adoption of CRM applications over the long-term delivers higher ROI

Price

Challenging long-held assumptions about CAPEX spending; showing value of OPEX drives up awareness.

Greater agility and speed of implementation for the price; brand image of greater customization accomplished,

Trust in the application being worth the price as it can scale across a variety use cases and scenarios; development; brand equity strengthened with ROI

Promotion

Heaviest used aspect of the 4 Ps; drive up awareness through events

Accountability, transparency and trust critical as part of promotion; success stories

Trust and transparency lead to believability; customer success stories become a part of the purchase decision process -- Brand equity becomes solidified as well

Place or Distribution

SaaS and Cloud are the delivery options -- awareness of the technology and its value overall

Brand image strengthened with responsiveness of the platform and ability to quickly customize

Always-on computing and the ability to roll out new releases within a day once up and running. Brand equity of trusted advisor for CRM application delivery.

Source: Framework based on the concepts presented in (Yoo, Donthu, Lee, 2000)