...it's the key to what we do at First Avenue Production Consulting. On these pages you will find our thoughts, opinions, and approaches to the most important pieces of the marketing game. Additional articles will appear continuously. We invite you to visit this place frequently, as it will keep you up-to-date on our thinking.

Broader Emphasis

Marketing professionals have appreciated the power of brands for generations. In recent years, however, brands have gained the attention of board-level executives and the investors they seek to attract. These new "brand audiences" have developed an appreciation for the value of brands. They understand that brands are both business assets and business tools. Increasingly, they want to shape their companies as "branding organizations".

Changing Models

Companies are changing the way they way the approach brand management. Traditionally, the focus has been on image and communications. Brand management was delegated, at least to some extent, to advertising agencies and design firms. This model continues to work for some companies, but brand leaders are looking for more. They appreciate that customers and consumers receive brand impressions from a variety of sources inside the organization and beyond. When these sources are in alignment with communications, powerful and cost-efficient brand-building occurs. When alignment breaks down, the result is customer confusion and wasted resources. Such inefficiencies cannot be tolerated in today's business environment. A new, more holistic model of brand management has emerged. The new model seeks brand-building contributions from every area that is significant to brand audiences. Branding is everybody's business.

Management Challenges

This new, broad-based model of brand development is a complex proposition for management. It expands the number of brand-building variables and the number of brand-delivery agents inside and outside the company. It poses the issue of "who's in charge?", and offers large potential rewards to managers who overcome the challenges. One of the key issues in holistic brand management is finding capable outside partners who are objective and unbiased. Traditional providers such as advertising agencies will understandably favor the solutions they offer. In addition, these providers may have limited experience and capabilities in important brand-delivery areas such as customer support, product/service design, pricing, and distribution channels.

Role of Brand Strategy

When companies embrace holistic branding as a management tool, brand strategy assumes a new role. It not only has to be right, it has to be a guide to practical actions and behaviors in diverse areas of the business. Brand strategy has to function in the customer service department just as well as it does in the marketing department. In developing holistic brand strategies, it is important to avoid old-model assumptions and the pursuit of creative "silver bullets". The strategy process should be open-minded and inclusive, and it should understand that brand strategy is a long-term commitment. The best processes concentrate on gaining a deep understanding of how target customers make brand choices in the category. They seek out the facts. To get implemented, brand strategy must be endorsed by top management, and it must be do-able in the "real world" of company resources and capabilities. In our experience, the best way to develop such strategies is to involve the people who will implement them.

Where We Fit In

First Avenue Production Consulting works with clients as a specialist partner in the area of holistic brand strategy and brand implementation action. Because we do not offer creative services such as advertising or graphics materials, our advice and support is open-minded, objective, and unbiased. We support clients on limited issues as well as broad, strategic initiatives. We offer a proven brand management consulting process and the tools that make it work. In particular, we provide sophisticated brand analysis tools that support key strategy decisions with reliable, quantitative information. First Avenue Production Consulting approaches each assignment with the mindset of learning which brand strategies will be most effective and which brand-building actions will provide the greatest return on investment. Our consulting methods help clients produce branding action by promoting involvement, teamwork, and consensus-building across the organization.

Pricing Importance

From a strategic perspective, pricing has more impact on positioning and ultimate profitability than any other item in the overall marketing mix. Depending on market sensitivities and current profit margins, a 1% increase in price could increase profitability by up to 10%. In most companies, prices are tactically derived based on internal costs and gut reaction to competitive moves. The key to effective strategic pricing is to leverage market based understanding of how customer's value new and existing offerings in a competitive marketplace.

Key questions addressed in strategic pricing

How do I insure that my pricing decisions will support the overall long term positioning of my product? For a specific offering in a category, at what price will I maximize the overall profitability for the entire company share in the category?
When introducing a new product, or a extension, what will be the impact on existing products?
How can I develop and price package offerings to enhance overall profitability?
How do I tailor pricing and package offerings to meet the unique needs of my most valuable customers?
For branded products, how can I effectively compete with value/generic offerings?
How do I determine the specific benefits that customers are willing to pay more for?
What will the impact of competitive responses be to my new offerings and how would that change my optimal offering/price?
If market constraints force development of short term strategies, how do I minimize the impact on overall positioning?

Approach to Strategic Pricing

First Avenue Production's approach to strategic pricing is to effectively understand the customer's willingness to pay in a competitive marketplace. As detailed in all of our approaches, First Avenue Production uses customer input to develop models of marketplace behavior. The key to these models are that they carefully parallel customer's purchasing decisions and are not limited by any artifacts of a particular research technique. While First Avenue Production employs knowledge gained from prior studies, it approaches each new engagement as a custom study designed to address all relevant issues. Study design is critically important. Working with you, First Avenue Production develops an in-depth understanding of all key issues that potentially impact the strategic direction for the product/service offering to insure that all strategic outcomes can be properly explored. Many companies use historical data, either internal databases or scanner type data sources, to determine the impact that price has on volume. While these databases produce very accurate share numbers, their ability to isolate the impact of price on sales is limited for a couple of reasons. Problems arise in being able to control items such as availability, consistent pricing in all locations, and competitive pricing and promotions. In addition, it is not a good idea to use the marketplace to test changes to prices and you can only test currently available products. In First Avenue Production's approach, historical data is used to calibrate the models in order that they reflect current market conditions, but then use primary customer information to model changes to price and acceptance of new product/service offerings. First Avenue Production further enhances it's approach by separately modeling the customers in the primary research by their choice behavior. Since customers exhibit different behavior, some tend to be price sensitive, others more brand loyal and still others who have specific feature affinities, First Avenue Production first groups all respondents into these behavioral segments and then develops a model for each of these segments. These models lead to more targeted strategies designed to meet the unique needs of the most valuable customers. In order for management to fully understand the implications of recommended pricing strategies, First Avenue Production reports the findings of a study in bottom line profitability numbers. In most cases, information from other pricing studies are reported in simple percentages indicating the percent of customers willing to purchase a product/service at a particular price. Obviously, changes to price will cause some change in volume, and this change comes from a determination of a customer's willingness to pay for a particular product/service. However, optimizing price based on profitability rather than sales will lead to strategies that will be more stable over time and provide a focus on profitability rather than sales. The following chart shows how dramatic an optimization based on profit can differ from a volumetric one.