This series takes concepts learned in an MBA program and adapts them for easy comprehension by scientists without a management background. This is currently the XVth part of the series and the eighth in an introduction to marketing.
When we introduced marketing several months ago, we discussed the four most important facets of marketing: Product, Promotion, Pricing, and Distribution. These famous "four p's" of marketing (the "p" in distribution is hidden) intertwine and form the basis for a successful strategy for selling your product.
The last few essays in this series went into each in depth and described how each is a key part of any marketing strategy. Today we're going to discuss how these four elements interrelate. The theory is that each product has a unique association in the mind of the consumer, based almost entirely on the marketing mix you've chosen for it. This association, in the language of marketing, is referred to as "brand equity," and although we've discussed it a little in the essays to date, the concept is so important it deserves a column of its own.
You might remember the word equity from our finance discussions several months back. Shareholders' equity, we learned then, is the difference between what the company has on paper (its assets) and what it owes (its liabilities)--in other words, what the company is worth to its shareholders and the amount the shareholders have invested in it. The term equity is used in a very similar way here: It refers to what the brand itself, minus all assets, is worth. Or, in another, less accurate but more interesting way of thinking about it, it is what the brand is worth to its shareholders--the shareholders, in this case, being not necessarily the owners of the company, but the consumers who use the brand.
Take, for example, Coca-Cola company. If you took away all of their assets--all their bottling plants, all their factories, and everything else, what you'd be left with would still be worth something. This is because, for more than 100 years, the Coca-Cola brand has been well managed. The name "Coke" would still be worth quite a lot to the company, but, more importantly, it would still be worth a lot to the consumer--the end user of Coke. They would still recognize the name, still want the product, and still pay a premium for it if any of it was available.
The same thing goes for scientific supplies: Does anyone really think tubes made by Eppendorf are better than those made by the competition? Then why are people willing to pay a premium for them? The name "Eppendorf" has become synonymous with the little tube that company created and marketed. And they'll be able to capitalize on that brand equity for years to come, and are often able to sell their tubes at a premium simply because of the brand equity associated with the product.
I'm sure that you can think of a number of other examples. It seems that, even in laboratory supplies, where you have a well-educated, no-nonsense consumer, certain brands have been able to develop equity. Sometimes, such as in the case of PCR licensed thermal cyclers, it is because of a patented technological advance. Other times, it is because the product is clearly better, or of a better quality. But in most cases, it is because the companies making those products have developed equity for their brand, by consistently giving out the same (or similar) message in their marketing mix.
OK, big deal. Now I understand what brand equity means, and how the term is used. It's all very clever, and theoretical, but it's not really all that different from what I've learned in the last few sections of this column. So the question is, what's the big deal? Or, more importantly, how will that help me market my product?
What the concept of brand equity tries to capture is that, no matter how much you spend on marketing, you don't really own your brand. The consumers of your product do. And, if you think about it, that's a pretty revolutionary thought. Although the name Eppendorf is owned by that company, its brand equity is owned by you and me and all the other people who instantly remember that name when we think of little plastic tubes.
It's this insight that makes marketing an art, and makes deciding on your marketing mix a lot more difficult than simply throwing a whole bunch of money at it. The reason is that your marketing mix is almost never starting from scratch. Your product already has brand equity of some kind (or, if it's a completely new product, your competitors have a brand equity, owned by the public). So your marketing tactics have to be focused on either reinforcing that brand equity (if you like the associations your product has in the minds of the consumers), subtly trying to change that brand equity (if you don't like your brand equity), or fitting your brand within a complex group of associations your competitors may have. If Eppendorf suddenly started making high pressure liquid chromatography machines, the consumer would likely reject them--after all, what does a plastic tube maker know about HPLC? It doesn't fit with the brand equity they already have. But if they started making m! icrocentrifuges, well, that'd be easier to swallow. After all, you associate them with the tubes already, why not associate them with the machines that spin them? It's an easy leap to make in the minds of the consumer--even though making a plastic tube is about as different from making a centrifuge as it is from making an HPLC.
Learning to strategically manage your marketing mix (your "four p's," as discussed in previous columns) involves one very basic set of questions. What is your current brand equity? Where do you want it to be? And what changes in your marketing mix will do that for you? It's as simple as that. But, then again, we've always said the only thing you need to do in marketing is understand your customer and give them what they want.
Next week, we'll be applying the things we've learned about marketing a product, including the concept of brand equity, and applying it to marketing yourself. After all, when you're looking for a job, you're really a product, aren't you? And your customer is the person or company that's hiring.