CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Branding has been around for centuries as a means to distinguish the goods of one producer from those of another producer. To firms, brands represent enormously valuable pieces of legal property that can influence consumer behaviour, be bought and sold as well as provide the security of sustained future revenues of their owner. Well- recognized brands make shopping easier. Brand promotion has advantages for branders as well as customers. A good brand reduces the marketer’s selling time and effort and sometimes a firm’s brand name is the only element in its marketing mix that a competitor cannot copy. Also good brands can improve the company’s image- speeding acceptance of new products marketed under the same name. Thus branding can be seen as a powerful means to secure a competitive advantage. Beyond deciding which segments of the market it will target, the company must decide on a value proposition, that is, how it will create differentiated value for targeted segments and what positions it wants to occupy in those segments. Companies must pursue relevant differentiation and positioning, each company and its product must represent a distinctive big idea in the mind of the target market.
Given the many brands available in the market place, a company must carefully consider both the strengths and the weaknesses of competitors when developing marketing strategy; this is to aid the product positioning task. The differentiation and positioning task consists of three steps: Identifying a set of possible differentiations that create competitive advantage, choosing the right competitive advantages and selecting an overall positioning strategy. In essence, product positioning extends market segmentation by defining the market target that management intends the firm to penetrate. It establishes the segments at which the firm intends to focus its marketing efforts; this is the segments where the firm is most likely to have a competitive advantage. Consumers are overloaded with information about products and services, to simplify the buying process, consumers organize products, services and companies into categories and “position” them in their minds. But marketers do not want to leave their product’s position to chance, therefore, they must plan positions that will give their products the greatest advantage in selected target markets and they must design marketing strategies to create these planned positions. The key to superior performance is to gain and hold a competitive advantage. Firms can gain a competitive advantage through differentiation of their product offering which provides superior customer value or by managing for lowest delivered cost. These two means of competitive advantage when combined with the competitive scope of activities (broad or narrow), result in four generic strategies: differentiation cost leadership, differentiation and cost focus.
Differentiation strategy involves the selection of one or more choice criteria that are used by many buyers in an industry. The firm then uniquely positions itself to meet these criteria. Differentiation gives customers a reason to prefer one product over another. In order to create a differentiated position, a firm needs to understand the nature and location of the potential sources of competitive advantage. The nature of these sources are the superior skills- distinctive capabilities of key personnel that set them apart from the personnel of competing firms and the superior resources of a firm- tangible requirements for advantages that enable a firm to exercise its skills, it includes the number of sales people in the market, expenditure on advertising and sales promotion, distribution coverage, expenditure on research and development, financial resources, brand equity and knowledge. These skills and resources are translated into a differential advantage when the customer perceives that the firm is providing value above that of the competition.
The objective of positioning is to create and maintain a distinctive place in the market for a company and its products, but to compete successfully in a target market involves providing the customer with a differential advantage. This differential advantage can be created using the marketing mix; Product: brands were differentiated based on product performance in areas of speed, comfort and safety levels, capacity and ease of use or improving taste or smell. Product development was a cornerstone of corporate activity, and continual product improvement was an acknowledged objective for any brand marketer. However, while companies still invest heavily in research and development and still seek a product performance edge wherever it can be found, it is a marketing maxim that differences in performance now are often minimal at best. Distribution: Lacking meaningful product performance differences, marketers have traditionally emphasized another marketing resources; wide distribution coverage and or careful selection of distributor location to provide convenient purchasing for customers.
In other words, products that are conveniently available will all other things being equal be chosen most often. Promotion: The most commonly pursued marketing solution lies in the area of brand communications, advertising and promotions. At a time when products perform in similar ways when availability differences are often minimal and when price differentiation may be only temporary, powerful advertising messages, creatively carving a sustainable and unique position in the minds of a receptive audience. Price: Pricing has been another marketing tool often used to establish differentiation. The challenge, however, is how to “own” a real (or perceived) long-term price advantage. Short-term offers, deals, and price promotions can provide a brand an apparent price advantage and the appearance of differentiation. However, as the acknowledged goal of brand marketing is to build customer loyalty (i.e. not just trial, but repeat business), a short-term advantages or a temporary point of differentiation is simply not sufficient. Sustainable differentiation is required. If the sustainable differentiation is to be based on price, and is to be owned over time, the marketer must occupy the “low-cost provide” position. Thus, price as wellas product performance is not what differentiates these brands. So, price is what keeps customers coming back or keeps them from leaving. The end result of differentiation and positioning is however, the successful creation of a market focused valued position.
1.2 STATEMENT OF THE PROBLEM
A wide variety of brands that are similar in performance can make a company to find its brand in a difficult position in the market place. For companies, differentiation and positioning are seen as major methods of gaining competitive advantage over competitors. The purpose of this research is to identify the various strategies employed by a company in the differentiation and positioning of its product that gives it a competitive advantage over competitors.
1.3 OBJECTIVE OF THE STUDY
The study will address the following;
Þ To identify the effect of brand differentiation on a company and its product.
Þ To identify the effect of positioning on a company’s product.
Þ To identify how a company differentiates and positions its brand against competition.
Þ To identify the differentiation and positioning strategies that gives the greatest competitive advantage.
Þ To identify how differentiation and positioning affect sales of a firm.
1.4 RESEARCH QUESTIONS
Þ Does differentiation and positioning increases a company’s sales revenue?
Þ Does competition affect brand preference of consumers of noodles?
Þ Which of the differentiation strategy gives a company the greatest competitive advantage?
Þ How does a firm differentiate it product from that of competitors?
Þ Does brand differentiation affect a company’s image?
1.5 RESEARCH HYPOTHESES
H0 : A company’s sales revenue is not affected by its differentiation and positioning strategies.
H1 : A company’s sales revenue is affected by its differentiation and positioning strategies.
H0 : Competition does not affect consumer’s brand preference.
H1 : Competition affects consumer’s brand preference.
H0 : Brand differentiation has no impact on a company’s image
H1 : Brand differentiation has an impact on a company’s image.
1.6 SIGNIFICANCE OF THE STUDY
A number of significant changes have occurred over the past several years to identify the impact of brand differentiation and positioning in the market place. Brand differentiation and positioning today, has aided companies effectively enjoying maximum competitive advantage against its competitors in the market place. The significance of this study is to benefit both the consumers and companies in identifying effective differentiation and positioning strategies that will lead to increase in sales revenue.
1.7 SCOPE AND LIMITATION OF THE STUDY
This research is focused on brand differentiation and positioning for maximum competitive advantage in the market place. This research is limited to Dangote Noodles Limited, Ebute Ikorodu a subsidiary of Dangote Group.
1.8 DEFINITION OF TERMS
BRAND: This is a name, term, sign, symbol or design or a combination of these that identifies the goods or services of one seller or group of sellers and differentiates them from those of competitors. DIFFERENTIATION: This is defined as the act of designing a sort of meaningful differences to distinguish the company’s product from products of competitors. It involves actually differentiating the product to create superior customer value.
POSITIONING: Is defined as the act of designing the company’s product and image so that it occupies a meaningful and distinct competitive position in the target customers mind. A product’s position is the way the product is defined by consumers on important attributes; the place the product occupies in consumers mind relative to competing products.
COMPETITIVE ADVANTAGE: This refers to a company’s ability to perform in one or more ways that competitors cannot or will not match. It can also be defined as an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices.