Competition these days is not just about technological superiority of the product because there is not much of a difference in technology of the products of the same category .Now people are more concerned about the social environment ,atmospheric pollution and the services that are rendered to them. that is the reason why the service oriented strategy has come into existence.Whirlpool adopted a customer service oriented strategy to treat the challenges from the Electrolux through combining the core product with the relative component of packaging and support services. Fig.1 shows the customer service strategy of augmented product
The core product is the basic product shell with the functional features. In the packaging component, the aspects of quality, packaging, styling and price guarantee the basic product quality standard. Adding brand name, trademark and features, the entire nature of this product will change in the eyes of the customer. In other words, the customer will naturally differentiate Whirlpool washing machine with other brands. Whirlpool washing machine means the reliable quality, high price, good staff attitude and etc. Customer contact, staff attitudes and behaviors are equally important in the customer’s choice.
They are all clues to the specific nature of the core product, which most customers are unable to judge technically for themselves. The support services component would include after sales service, installation, delivery, warranty and ancillary services. Why? If we look at the problem from the customer’s point of view, it is fairly obvious. When the customer is considering the purchase of washing machine, there are many questions need to be answered. For example, how reliable is the washing machine? What are the service charges? How fast will the service and repair be carried out? What guarantees and maintenance contracts are available? The support services components are becoming more and more important as Whirlpool product differentiators.
Reference to the Fig.1, we know eighty per cent of the customer choice is made up from a consideration of the outer two rings, the support services component and the packaging component. This is because customers are not technically capable of assessing the core component. It is because this reason that Whirlpool acquires such strategy of augmented product to beat its rivals by attracting own customers and making people recognized the brand.
The support service is regarded as a necessary component of whirlpool product. That means Whirlpool sales any its product with a relative package of supporting service. It results the rising of product selling price directly. But those customers, who are with high income and have enough disposal capital, don’t care the price difference relatives to other equal product. They pay more attention to the features, service quality and convenience. Also because the Whirlpool’s high price decides the customer segment, brownstones customers may are willing to purchase the Whirlpool product. The brand name of Whirlpool not only means high quality also represent the social status.
Whirlpool and Electrolux have adopted very different branding strategies in their head-to-head global battle. Why? What are the relative advantage and disadvantages of the two companies’ respective approaches? First it should be known what a brand is and is not , only then we can go about the process of branding and branding strategy. First a brand is not just the logo,tagline,packaging or the look and feel of the ads and our website, these are just graphical parts of the brand identity and are often narrowly and incorrectly referred to as branding ,there is a much broader definition shared by many in the brand management community .it should be remember that a brand resides in the heart (feelings)and minds (intellect )of the customers and prospects .It is the sum total of their experiences and perceptions ,some of which you can influence and some you cannot. So let look at the how whirlpool and elctrolux want their customers to perceive them.
Whirlpool adopts the single-branding strategy in this white goods battle. Due to the high quality and high price company mainly focuses on the high market position. Also because of this reason they may lose some market share of low position. But now Whirlpool occupies the 13 per cent of the market and leadership in pan-Europe, and has a stable customer segment is high position. There is no doubt that these special customers will prepare to pay more money in better features and reliability and it would effectively increases company profit. Hence better improvement of features and service system to satisfy the demands of brownstone customers is the Whirlpool main goal.
As the main rival of Whirlpool Electrolux adopts the opposition business strategy: using multi-branding strategy to gain more market share. Electrolux, Zanussi and AEG are consisted of Electrolux family. These three brands offer a mix of price, feature, distribution and brand value ingredients. AEG occupies a high position, Zanussi focus on the low to middle value position, and Electrolux mainly gains the upper middle market position. It together provides Electrolux family with a formidable range of marketing options. Electrolux attempts to target different customer groups and differentiated branding strategies. Gaining more market segment and meeting more different customers requirements are Electrolux business goal in order to increase the profit-making opportunity as possible as well.
Whirlpool Advantage: 1. Although augmented product of customer strategy may cost more than basic customer service, it can help protect the brand name: Whirlpool and reduce problems caused by poor dealer service. a. Protect brand Reference to the above analysis for the augmented product, we know, most customers are unable to judge the product quality technically. Usually they pay more attention to customer service.
They naturally combine the customer service level and the product quality, and regard it as the critical standard of entire brand quality. Many aspects, such as the reliability of product, the attitude and technique of customer service staff, the repair cost and period and etc, reflect the consumers’ brand choice. Once these requirements couldn’t be achieved satisfactorily, the consumers will attempt to other brand product. In other words, service quality decides brand quality.
In order to enhance brand competition, Whirlpool is considered fully to accommodate the European regional and cultural differences. Whirlpool sales arm operates 19 sales teams, with 650 representatives liaising with over 4000 trade partners. In order to gaining market penetration, company builds up customer and dealer service levels. For customer aspect, Whirlpool increases service level: guarantee replacement, establishing care hotline, offering long period guarantee and offering product refund. Whirlpool also offers a range of financial services to retailers.
b. Reduce problems caused by poor dealer service. Implementation of augmented product requires extensive training of dealer repair personnel and the establishments of regional service centers run by organization. Hence Whirlpool increases the investment in dealer education, electronic data interchange, trade marketing, after sales service, and dealer and strategic trade partnerships. Whirlpool not only set up the original equipment manufactures service centres in North American, but also establishes the regional customer service centres in Germany, the UK, Belgium, Holland and Austria.
2. Repair work and after sales service can increase the profit-making opportunity. Whirlpool may offer the free repair work and after sales service to customer within warranty period. Whilst when the products owned by customers are out of warranty and require periodic repair, then the active solicitation of service work can be a lucrative business for company profit. Disadvantage: 1. High price limits the market share. For instant, and basic Whirlpool washing machine is only 100 pounds, but its selling price is 200 pounds. (Including the worth of support service). While other brand washing machine with equal quality still is 100 pound. Those customers with basic incomes likely couldn’t purchase this machine because of the extra service cost.
2. Too great reliance on service profits maybe will hamper Whirlpool product improvements and allow competitor to grow by introducing new item. Electrolux Advantage: 1. Multi-branding strategy considers the requirement of increasing segmentation of specialized customers. This strategy can generate significantly higher revenues. Electrolux’s branding strategy belongs vertical multi-branding type. Table.3 illustrates the Electrolux multi-branding strategy.