APPENDIX 2.
Implications: The Forming of a Set of Tools
Linn's General Theory of Marketing forms a firm foundation for a set of tools for strategical and tactical analyses and development.
1.
The Dynamics of the Evaluating Audience
One set of models is derived from the "Evaluating Audience" which graphically demonstrates and defines the eleven cases (see fig.) of the consequences of changed value, price, size of population, and supply in the interaction between the supplier and his/her audience behaviour (Linn, C.E., Brand Dynamics, Atlanta 1998).
This series of models is used as basis for systematic analyses of the consequences of changes in supplier strategies and tactics as well as buyer behaviour and values.
The interrelation between the two actors between the buyers' awareness and valuation of the products offered, and the supplier's marketing efforts is demonstrated. The prerequisites of this crucial concept is the application of the two-sided product description and the notion of the metaproduct.
The Evaluating Audience
The prerequisites
In its present form, the Evaluating Audience should be seen as a thought-provoking tool for education, analyses and discussions. The Evaluating Audience also offers, however, a scope for further research, with the apparent possibility for the analyses of specific price/demand curves for branded products.
The correct understanding of the Evaluating Audience model demands that the following conditions are observed:
The makeup of the Group represented by the area of the distribution is limited to individuals aware of, or well aware of, the product/brand, thus carrying a perceived value of the product as a basis for their decision on buying or not.
"Buyers" are individuals actually buying the product - not just uncommittedly telling that they judge the product to be worth the price asked. The decision to buy is the proof, that an individual estimates the product to offer value for (his) money at his particular state of need. The share of buyers relative to non-buyers may thus, statistically, be fairly stable for massmarketed products, while the actual buyers are incessantly changing their position between buying and non-buying.
The eleven modes of The Evaluating Audience
This comprehensive list of eleven Evaluating Audience modes assumes in the first place that the interest of the supplier is to increase his sales volume.
1. Expansion. The metavalue of a branded product is, by definition, non-existent outside of its Evaluating Audience. To increase the scope for sales of the differentiated, branded product, awareness of the product/brand may have to be increased in the market through expansion of the target group. Marketing communication may be used to accomplish this task. New members of the Evaluating Audience are supposed to accept the valuation of the product already existing in the Group.
2. Erosion. A decrease in awareness may be caused by an insufficient intensity of market communication, but also by competitors conquering a "mindshare" from our product.
3. Price Increase. At a perfectly stable metavalue a price increase reduces the number of buyers. Any deviation from this causal connection has to be referred to in terms of the change of metavalue demonstrated under Upgrading or Overpricing, respectively.
4. Price Reduction. At a perfectly stable metavalue a price reduction will result in an increase in sales. This is, in practice, generally restricted to temporary activ ties. The possible consequences of a permanent price reduction is dealt with under Regression.
5. Revaluation. Vitalization means an increase in metavalue (buyer perceived value) at an unchanged price level. Whether this is performed with a virtually unchanged total product is arguable. This is, though, the illustration of a successful marketing communication activity targeted at the enhancement of the product/brand.
6. Devaluation. Buyers are often lost due to a depreciation of the product's Metavalue (i.e., a reduction of the level of the buyers' valuation of the Product). This could be due to many factors (e.g., increased competition, an aging product, reduced quality of physical product, reduced quality of customer service, or ineffective or destructive marketing communication).
7. Regression. Regression is often the result of excessive price competition. Sales may be constant, or even increase, but the net revenue is negative. Regression is mostly seen as being forced upon by competition, but often enough it is induced by the sales organization within, or associated with, the company itself.
8. Upgrading. Upgrading is a more frequent phenomenon than commonly realized. Every product undergoing a price increase, but still managing to maintain sales levels, is in fact going through an Upgrading operation. An obvious Upgrading is characterized by a noticeable price increase connected with targeted marketing activities. The obvious risk of Upgrading is Overpricing.
9. Overpricing. The potentially fatal consequences of Overpricing will be clearly understood by this diagram. The added losses of customers through increased pricing and reduced metavalue is more than most products ever could. The impact on the product's metavalue may be disastrous, as Over-pricing makes every minor flaw of quality very noticeable.
10. Compensation. The opposite of Overpricing. A price reduction alone will only in exceptional cases save a product from the disaster of Overpricing. Heavy marketing communication will be needed, but mostly, only a product reformulation or respecification will do the work.
11. Limited Supply. All other cases of the Evaluating Audience demonstrate the consequences in situations of more or less abundant supply. In this case we, however, imagine that the limited supply of products will be sold to the individuals that want them the most. In practice this happens when potential buyers metaphorically or actually line up for buying. The choice of the supplier is between keeping the buyers waiting or raising the price. Limited Supply could thus be seen as the sign of too low a price. Raising the price will, however, always invoke the risk of Overpricing, as the metavalue of the product partly has been based on the added cost of waiting for it.
The summary of transitions
This diagram shows the complete scope of modes of transition within the Evaluating Audience for those eight modes of abundant supply which apply to a constant size of the audience.
