CH-1-2 Brands and Brand Management – Strategic Brand Management: Building, Measuring, and Managing Brand Equity : Chapter Notes

This Document Contains Chapters 1 to 2 Chapter 1 Brands & Brand Management Chapter Objectives 1. Define “brand,” state how brand differs from a product, and explain what brand equity is. 2. Summarize why brands are important. 3. Explain how branding applies to virtually everything. 4. Describe the main branding challenges and opportunities. 5. Identify the steps in the strategic brand management process. Overview This chapter sets up the rationale for the book. Because brands are so valuable to the firms that manufacture them and the consumers who purchase them, and because the marketplace has become increasingly complex and competitive, brand management is more important and challenging now than it ever has been. Brand managers face a seemingly unlimited number of options and opportunities with respect to product, price, place, and promotion strategies. But they also face increased risk as they strive to deal with sea changes in the marketing environment, including the rise of private labels, media fragmentation, pressure for short-term results, shifting consumer preferences, and technological advancements that level the product feature playing field, to name just a few. Despite these pressures, many brands continue to grow and flourish, as evidenced by the global successes of such mega-names as Nike, Disney, Mercedes, and others. Moreover, even categories that heretofore had been thought of as consisting of mundane commodity products now contain brands, including Campbell’s mushrooms, Blue Rhino propane gas, and Perdue chickens. Chapter 1 also indicates that by focusing specifically on brands, this book enables students to gain valuable knowledge, broader perspectives, and more strategic insights than in a more general marketing text. The chapter introduces the concept of a brand as an identifiable and differentiated good or service. Brands offer tangible and intangible benefits to the companies who manufacture them, the retailers who sell them, and the consumers who buy them. Examples of strong brands given in the text include not only products and services, but also people, places, and sports, art, and entertainment industries. The chapter describes some of the past and present challenges faced by brands (such as those noted above), and states that the purpose of the book is to set forth principles, models and frameworks that will help guide managers through these challenges as they plan and execute brand strategies. The chapter details the three main factors that contribute to brand equity: the initial choices for the brand elements or identities making up the brand; the way the brand is integrated into the supporting marketing program; and the associations indirectly transferred to the brand by linking the brand to some other entity (e.g., the company, country of origin, channel of distribution, or another brand). Several strategic imperatives for effective brand equity management are introduced in the chapter. In this chapter, the strategic brand management process is described. The strategic brand management process involves four main steps: identifying and establishing brand positioning and values, planning and implementing brand marketing programs, measuring and interpreting brand performance, and growing and sustaining brand equity. Brand Focus 1.0 discusses the history of branding. It traces the development of brands from marks of identification on stone age pottery to national manufacturer brands in the Industrial Revolution to mass marketed brands. Science of Branding THE SCIENCE OF BRANDING 1-1 UNDERSTANDING BUSINESS-TO-BUSINESS BRANDING Due to the complexity and high risk involved in business-to-business purchase decisions, branding plays an important role in B2B markets. Six specific guidelines are defined for marketers of B2B brands: • Ensure the entire organization understands and supports branding and brand management—Employees at all levels and in all departments must have a complete, up-to-date understanding of the vision for the brand and their role in supporting it. A particularly crucial area is the sales force, where personal selling is often the profit driver of a business-to-business organization. • Adopt a corporate branding strategy if possible and create a well-defined brand hierarchy—Because of the breadth and complexity of the product or service mix, companies selling business-to-business are more likely to emphasize corporate brands. Ideally, they will also create straightforward sub-brands that combine the corporate brand name with descriptive product modifiers. • Frame value perceptions—Framing occurs when customers are given a perspective or point of view that allows the brand to “put its best foot forward.” Framing can be as simple as making sure customers realize all the benefits or cost savings offered by the brand, or becoming more active in shaping how customers view the economics of purchasing, owning, using and disposing of the brand in a different way. Framing requires understanding how customers currently think of brands and choose among products and services, and then determining how they should ideally think and choose. • Link relevant non-product-related brand associations—Brand imagery might relate to the size or type of firm is considered relevant. Imagery may also be a function of the other organizations to which the firm sells. • Find relevant emotional associations for the brand—Emotional associations related to a sense of security, social or peer approval, and self-respect can also be linked to the brand and serve as key sources of brand equity. • Segment customers carefully both within and across companies—In a business-to-business setting, different customer segments may exist both within and across organizations. Within organizations, different people may assume the various roles in the purchase decision process: Initiator, user, influencer, decider, approver, buyer and gatekeeper. Across organizations, businesses can vary according to industry and company size, technologies used and other capabilities, purchasing policies, and even risk and loyalty profiles. Brand building must take these different segmentation perspectives in mind in building tailored marketing programs. THE SCIENCE OF BRANDING 1-2 UNDERSTANDING HIGH-TECH BRANDING Marketers operating in technologically intensive markets face a number of unique challenges. Ten guidelines that managers for high-tech companies can use to improve their company’s brand strategy: • It is important to have a brand strategy that provides a roadmap for the future—Technology companies too often rely on the faulty assumption that the best product based on the best technology will sell itself. • Understand your brand hierarchy and manage it appropriately over time—A strong corporate brand is vital in the technology industry to provide stability and help establish a presence. Since product innovations provide the growth drivers for technology companies, however, brand equity is sometimes built in the product name to the detriment of corporate brand equity. • Know who your customer is and build an appropriate brand strategy—Many technology companies understand that when corporate customers purchase business-to-business products or services, they are typically committing to a long-term relationship. For this reason, it is advisable for technology companies to establish a strong corporate brand that will endure over time. • Realize that building brand equity and selling products are two different exercises—Too often, the emphasis on developing products leads to an overemphasis on branding them. Rather than branding each new innovation separately, a better approach is to plan for future innovations by developing an extendable branding strategy. • Brands are owned by customers, not engineers—Technology companies typically spend less on consumer research compared with other types of companies. As a result of these factors, tech companies often do not invest in building strong brands. • Brand strategies need to account for the attributes of the CEO and adjust accordingly—Many of the world’s top technology companies have highly visible CEOs, especially compared with other industries. In most cases, the CEO’s identity and persona are inextricably woven into the fabric of the brand. • Brand building on a small budget necessitates leveraging every possible positive association—Technology companies typically prioritize their marketing mix as: industry analyst relations, public relations, trade shows, seminars, direct mail, and advertising. • Technology categories are created by customers and external forces, not by companies themselves—Only two groups can truly create categories: analysts and customers. For this reason, it is important for technology companies to manage their relationships with analysts in order to attract consumers. • The rapidly changing environment demands that you stay in tune with your internal and external environment—The rapid pace of innovation in the technology sector dictates that marketers closely observe the market conditions in which their brands do business. Trends in brand strategy change almost as rapidly as the technology. • Invest the time to understand the technology and value proposition and do not be afraid to ask questions—To build trust among engineers and customers, marketers must strive to learn as much as they can about the technology. THE SCIENCE OF BRANDING 1-3 UNDERSTANDING MARKET LEADERSHIP According to a study by Dartmouth’s Tuck School of Business Professor Peter Golder, leading brands are more likely to lose their leadership position over time than retain it. One 1923 leader that did not maintain leadership was Underwood typewriters. Underwood’s primary mistake was lack of innovation. According to Golder, Wrigley’s success as a long-term leader is based on three factors: “maintaining and building strong brands, focusing on a single product, and being in a category that has not changed much.” Golder and his co-author Gerard Tellis argue that dedication to the brand is vital for sustained brand leadership, elucidating five factors for enduring market leadership: • Vision of the Mass Market—Companies with a keen eye for mass market tastes are more likely to build a broad and sustainable customer base. • Managerial Persistence—The “breakthrough” technology that can drive market leadership often requires the commitment of company resources over long periods of time. • Financial Commitment—The cost of maintaining leadership is high because of the demands for research and development and marketing. Companies that aim for short-term profitability rather than long-term leadership are unlikely to enjoy enduring leadership. • Relentless Innovation—Due to changes in consumer tastes and competition from other firms, companies that wish to maintain leadership positions must continually innovate. • Asset Leverage—Companies can become leaders in some categories if they hold a leadership position in a related category. THE SCIENCE OF BRANDING 1-4 MARKETING BRANDS IN A RECESSION There are tactics that can help marketers survive—or even thrive—in a recession, both in the short run and over the long haul: • Explore the Upside of Actually Increasing Investment—Firms willing to capitalize on a marketing opportunity by investing during a recession have, on average, improved their fortunes compared with firms that chose to cut back. • Now, More Than Ever, Get Closer to Your Consumer—A downturn is an opportunity for marketers to learn even more about what consumers are thinking, feeling, and doing, especially the loyal customer base that is the source of so much of a brand’s profitability. Any changes must be identified and characterized as temporary adjustments versus permanent shifts. • Rethink How You Spend Your Money—A recession provides an opportunity for marketers to closely review how much and in what ways they are spending their money. Budget reallocations can allow marketers to try new, promising options and eliminate sacred-cow approaches that no longer provide sufficient revenue benefits. • Put Forth the Most Compelling Value Proposition—Rather than overly focusing on price reductions and discounts, marketers should focus on increasing—and clearly communicating—the value their brands offer consumers, making sure consumers appreciate all the financial, logistical, and psychological benefits compared with the competition. • Fine-Tune Your Brand and Product Offerings—Because certain brands or sub-brands appeal to different economic segments, those that target the lower end of the socioeconomic spectrum may be particularly important during a recession. Bad times also are an opportunity to prune brands or products that have diminished prospects. Branding Briefs BRANDING BRIEF 1-1 COCA-COLA’S BRANDING LESSON One of the classic marketing mistakes occurred in April 1985 when Coca-Cola replaced its flagship cola brand with a new formula. Pepsi-Cola’s “Pepsi Challenge” promotion involved advertising and in-store sampling showcasing consumer blind taste tests between Coca-Cola and Pepsi-Cola. Invariably, Pepsi won these tests. Fearful that the promotion, if expanded nationally, could take a big bite out of Coca-Cola’s sales, Coca-Cola felt compelled to act. Coca-Cola’s strategy was to change the formulation of Coke to more closely match the slightly sweeter taste of Pepsi. To arrive at a new formulation, Coke conducted taste tests with 190,000 consumers. The findings indicated that consumers preferred the taste of the new formulation to the old one and thus, Coca-Cola announced the formulation change. Consumer reaction was swift but, unfortunately for Coca-Cola, negative. After several months of slumping sales, Coca-Cola announced that the old formulation would return as “Coca-Cola Classic” and join “new” Coke in the marketplace. The new Coke debacle taught Coca-Cola a very important, albeit painful and public, lesson about its brand. Coke’s brand image certainly has emotional components, and consumers have a great deal of strong feelings for the brand. Coca-Cola’s biggest slip was losing sight of what the brand meant to consumers in its totality. The psychological response to a brand can be as important as the physiological response to the product. BRANDING BRIEF 1-2 BRANDING COMMODITIES A commodity is a product so basic that it cannot be physically differentiated from competitors in the minds of consumers. Over the years, a number of products that at one time were seen as essentially commodities have become highly differentiated as strong brands have emerged in the category. These products became branded in various ways. Consumers became convinced that all the product offerings in the category were not the same and that meaningful differences existed. Some notable examples are coffee (Maxwell House), bath soap (Ivory), flour (Gold Medal), beer (Budweiser), salt (Morton), oatmeal (Quaker), pickles (Vlasic), bananas (Chiquita), chickens (Perdue), pineapples (Dole), and even water (Perrier). BRANDING BRIEF 1-3 PLACE BRANDING Branding is not limited to vacation destinations. Countries, states, and cities large and small are beginning to brand their respective images as they try to draw visitors or encourage relocation. Some notable early examples of place branding include “Virginia Is for Lovers” and “Shrimp on the Barbie” (Australia). Branding countries to increase appeal to tourists is also a growing phenomenon. Some recent success stories include Spain’s use of a logo designed by Spanish artist Joan Miró, the “Incredible India” campaign, and New Zealand’s marketing of itself in relation to the Lord of the Rings movie franchise. Brand Focus BRAND FOCUS 1.0 HISTORY OF BRANDING The development of branding and brand management has been divided into six distinct phases: • Early Origins: Before 1860 The original motivation for branding was for craftsmen and others to identify the fruits of their labors so that customers could easily recognize them. Branding, or at least trademarks, can be traced back to ancient pottery and stonemason’s marks, which were applied to handcrafted goods to identify their source. Marks were used to attract buyers loyal to particular makers, but also to police infringers of the guild monopolies and to single out the makers of inferior goods. An English law passed in 1266 required bakers to put their mark on every loaf of bread sold, “to the end that if any bread but faultie in weight, it may be then known in whom the fault is.” Goldsmiths and silversmiths were also required to mark their goods, both with their signature or personal symbol and with a sign of the quality of the metal. When Europeans began to settle in North America, they brought the convention and practice of branding with them. The makers of patent medicines and tobacco manufacturers were early U.S. branding pioneers. Attractive-looking packages were seen as important, and picture labels, decorations, and symbols were designed as a result. This was applied even by the tobacco manufacturers. • Emergence of National Manufacturer Brands: 1860 to 1914 In the United States after the American Civil War, a number of forces combined to make widely distributed, manufacturer-branded products a profitable venture through improvements in transportation, production processes, and packaging. Advertising became perceived as a more credible option and retail institutions served as effective middlemen. Increasing industrialization and urbanization raised the standard of living. Mass-produced merchandise in packages largely replaced locally produced merchandise sold from bulk containers, which brought about the widespread use of trademarks. The development and management of brands was largely driven by the owners of the firm and their top-level management. National manufacturers employed sustained “push” and “pull” efforts to keep both consumers and retailers happy and accepting of national brands. Consumers were attracted through the use of sampling, premiums, product education brochures, and heavy advertising. Retailers were lured by in-store sampling and promotional programs and shelf maintenance assistance. As the practice of imitation and counterfeiting spread, firms sought protection by sending their trademarks and labels to district courts for registration. By 1890, most countries had trademark acts, establishing brand names, labels, and designs as legally protectable assets. • Dominance of Mass Marketed Brands: 1915 to 1929 By 1915, manufacturer brands had become well established in the United States on both a regional and national basis. The next 15 years saw increasing acceptance and even admiration of manufacturer brands by consumers. The marketing of brands became more specialized under the guidance of functional experts in charge of production, promotion, personal selling, and other areas, which led to more advanced marketing techniques. Although functional management of brands had these virtues, it also presented problems. Because responsibility for any one brand was divided among two or more functional managers—as well as advertising specialists—poor coordination was always a potential problem. • Challenges to Manufacturer Brands: 1930 to 1945 The onset of the Great Depression in 1929 posed new challenges to manufacturer brands. Greater price sensitivity led retailers to push their own brands and dropped nonperforming manufacturer brands. Advertising came under fire as manipulative, deceptive, and tasteless and was increasingly being ignored by certain segments of the population. In 1938, the Wheeler Amendment gave power to the Federal Trade Commission (FTC) to regulate advertising practices. Procter & Gamble put the first brand management system into place, whereby each of their brands had a manager assigned only to that brand who was responsible for its financial success. Other firms were slow to follow. During World War II, manufacturer brands became relatively scarce as resources were diverted to the war effort. The Lanham Act of 1946 permitted federal registration of service marks and collective marks. • Establishment of Brand Management Standards: 1946 to 1985 After World War II, the pent-up demand for high-quality brands led to an explosion of sales. Personal income grew as the economy took off, and market demand intensified as the rate of population growth exploded. Demand for national brands soared, fueled by a burst of new products and a receptive and growing middle class. Firm after firm during this time period adopted the brand management system. • Branding Becomes More Pervasive: 1986 to Now The merger and acquisitions boom of the mid-1980s raised the interest of top executives and other board members as to the financial value of brands. This appreciated the importance of managing brands as valuable intangible assets. The last 25 years have seen an explosion in the interest and application of branding as more firms have embraced the concept. Discussion questions 1. What do brands mean to you? What are your favorite brands and why? Check to see how your perceptions of brands might differ from those of others. Answer: Brands often symbolize more than just products; they represent values, identity, and trust. Personally, I find brands that align with ethical practices and innovation particularly compelling. For example, I appreciate Patagonia for its environmental commitment and Apple for its design excellence and user experience. My perceptions might differ from others based on individual values and experiences, like someone valuing affordability over sustainability or preferring local over global brands. 2. Who do you think has the strongest brands? Why? What do you think of the Interbrand list of the 25 strongest brands in Figure 1-5? Do you agree with the rankings? Why or why not? Answer: These two questions can be used to illustrate the similarities and differences between “favorite” brands and “strong” brands. The discussion could include evaluation of the criteria for inclusion on the Interbrand list. The strongest brands typically have strong global recognition, loyalty, and consistency in delivering value. Companies like Apple, Microsoft, and Amazon are often considered top contenders due to their innovation, customer loyalty, and market presence. Regarding the Interbrand list, it provides a well-researched ranking based on financial performance, brand influence, and future potential. While I generally agree with the rankings, opinions may vary depending on individual brand perceptions and criteria for evaluating brand strength. 3. Can you think of anything that cannot be branded? Pick an example that was not discussed in each of the categories provided (services; retailers and distributors; people & organizations; sports, arts, & entertainment) and describe how each is a brand. Answer: Discussion might involve why anything can become a brand. (Because of the way perception functions, the differential effect of when a brand is present vs. the commodity product can always be achieved.) Students will come up with many different examples of branded products, and the discussion can be used to examine what makes a brand. 1. Services: Healthcare - Hospitals like Mayo Clinic or Cleveland Clinic are branded based on their reputation for quality care and specialized services, which influences patient trust and choice. 2. Retailers and Distributors: Libraries - Public libraries can be branded by their community engagement, resources, and educational programs, shaping their image as a valuable community hub. 3. People & Organizations: Nonprofits - Organizations like the Red Cross or UNICEF are branded through their mission, impact, and public perception, which helps in fundraising and volunteer engagement. 4. Sports, Arts, & Entertainment: Cultural Festivals - Events like the Cannes Film Festival or Burning Man are branded by their unique cultural significance, exclusive experiences, and global recognition. 4. Can you think of yourself as a brand? What do you do to “brand” yourself? Answer: People resemble brands themselves in many ways – with their name, their mode of dress, their pattern of speech, their interests and activities, etc. – because each aspect of a person contributes to the differentiation of that person from other people. Yes, I can think of myself as a brand. To “brand” myself, I focus on consistency in my values, skills, and professional image. This includes showcasing expertise in communication, maintaining a strong online presence, and building a reputation for reliability and insight. I also actively engage in relevant communities and continuously improve my knowledge to align with my personal brand. 5. What do you think of the new branding challenges and opportunities that were listed in the chapter? Can you think of any other issues? Answer: Brand builders have faced forms of some of these challenges in the past, including increased competition and media fragmentation. Though the new challenges certainly make it more difficult to build a strong brand, by no means to they make it impossible. Other issues include brand backlash, which illustrates a different type of accountability. As the repeated targeting during anti-globalization protests of retail locations of multinational companies such as McDonald’s, Gap & Starbucks illustrates, a recognizable brand can also become a lightning rod for criticism & protest. The new branding challenges include adapting to rapidly changing consumer preferences, managing brand reputation in a digital world, and addressing sustainability concerns. Opportunities involve leveraging digital tools for personalized marketing, harnessing data for insights, and building stronger emotional connections with consumers. Other issues might include navigating global market differences and maintaining brand authenticity amid increasing competition and misinformation. Exercises and assignments 1. Ask students to poll 10 or so consumers about their brand loyalty in various product categories (e.g., toothpaste, dishwashing soap, shampoo, deodorant, toilet tissue, soda, salsa, ice cream, cereal, potato chips, jeans, running shoes, and socks). Are there brands or categories for which consumer loyalty is relatively high? How do consumers explain their loyalty or lack thereof? How are marketing strategies affected by consumer attitude and behavior patterns (or, alternatively, how should they be affected)? (Can be related to Branding Brief 1-1: Coca-Cola’s Branding Lesson.) Answer: 1. Poll Results: • High Loyalty Categories: Categories with high consumer loyalty often include toothpaste, shampoo, and running shoes. These products are typically seen as essentials where quality and reliability are highly valued. • Low Loyalty Categories: Products like dishwashing soap, toilet tissue, and socks might show lower loyalty. Consumers often perceive these as commoditized items where price and convenience play a larger role. 2. Consumer Explanations: • High Loyalty: Consumers often cite quality, reliability, and personal satisfaction as reasons for high loyalty. For instance, they may stick to a specific brand of toothpaste due to its perceived effectiveness or taste. • Low Loyalty: For categories with lower loyalty, consumers might prioritize price, availability, or have less emotional attachment to the brand. They might switch brands based on promotions or store brands. 3. Impact on Marketing Strategies: • High Loyalty Brands: Marketing strategies should focus on reinforcing brand values, maintaining product quality, and engaging with loyal customers through exclusive offers or loyalty programs. • Low Loyalty Brands: Strategies should emphasize differentiation, competitive pricing, and convenience. Promotional campaigns and frequent innovations can help capture and retain consumers' attention. This approach aligns with the idea of using consumer attitudes and behaviors to tailor marketing strategies, similar to Coca-Cola’s focus on maintaining its brand equity through consistent messaging and consumer engagement. 2. Have students identify three brands that are on the endangered species list and: 1) analyze reasons for the problems, and 2) suggest prescriptive marketing measures. Appropriate brands might include Wise potato chips, Oldsmobile cars, Tang drink, LifeSavers roll candy, J.C. Penney. Answer: 1. Analysis of Problems: Wise Potato Chips: • Problems: Loss of market share due to competition from larger brands, changing consumer preferences, and limited distribution. • Marketing Measures: Rejuvenate the brand by emphasizing unique qualities or heritage, expand distribution channels, and target niche markets with new flavors or healthier options. Oldsmobile Cars: • Problems: Declining sales due to market saturation, outdated brand perception, and lack of innovation compared to competitors. • Marketing Measures: Revamp the brand image with a focus on innovation and modern features, enhance product differentiation, and invest in targeted advertising to regain consumer interest. Tang Drink: • Problems: Decline in popularity due to changing consumer tastes, health trends favoring fresh beverages, and strong competition. • Marketing Measures: Reformulate the product to align with health trends, expand marketing efforts to emphasize convenience and unique benefits, and explore partnerships for brand revitalization. Prescriptive Marketing Measures involve enhancing brand perception, aligning with current consumer trends, and improving product differentiation and distribution. 3. Tell students to survey consumers about their buying behavior with respect to private label or store brands. In which product categories do such products pose the largest competitive threat to premium brands? Which retail stores have the strongest private labels? Answer: Survey Findings: 1. Product Categories with Strong Competitive Threat: • Grocery Items: Private label brands pose a significant competitive threat in categories like cereal, dairy products, and snacks, where consumers often prioritize price. • Household Essentials: Products like cleaning supplies and paper goods also face strong competition from private labels due to their commoditized nature. 2. Retail Stores with Strong Private Labels: • Costco: Known for its Kirkland Signature line, which offers a wide range of high-quality products at competitive prices. • Walmart: Great Value and Equate brands provide strong competition in various categories due to their affordability and broad availability. • Trader Joe's: Its store brands, such as Trader Joe's products, are popular for their unique offerings and perceived value. Summary: Private labels effectively compete with premium brands in cost-sensitive and commoditized product categories, and retailers like Costco, Walmart, and Trader Joe's have strong private label programs that leverage quality and value. 4. Give a prize to the student who comes up with the best list (as voted upon by other students) of “weird” brands – products that don’t seem to lend themselves to branding but yet are very successful in the marketplace. Candidates might include Blue Rhino propane gas, Banker’s Box boxes, Rent-A-Husband home handyman service, Campbell’s mushrooms, and Merry Maids housecleaning service. Answer: Best “Weird” Brands List: 1. Blue Rhino Propane: Successfully brands propane tanks with a memorable name and distinctive blue canisters, making it stand out in a commoditized market. 2. Banker’s Box: Differentiates itself in the mundane category of storage boxes through strong branding and consistent quality, becoming a go-to option for organizing and filing. 3. Rent-A-Husband: Effectively uses humor and a straightforward name to market home handyman services, creating a recognizable and memorable brand in a service sector. 4. Campbell’s Mushrooms: Uses the trusted Campbell's brand to offer a niche product (mushrooms) in a way that leverages its established reputation in canned goods. 5. Merry Maids: Brands home cleaning services with a friendly and professional image, making it stand out in the service industry and appealing to consumers seeking reliable home cleaning solutions. Summary: These brands succeed by effectively leveraging unique names and positioning to stand out in their respective markets, despite their seemingly unconventional products or services. Key take-away points 1. A brand is a “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition.” 2. Brand elements can be based on people, places, things, and abstract images. 3. A product is anything that is offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want. 4. A brand can have dimensions that differentiate it in some way from other products designed to satisfy the same need. 5. By creating perceived differences among products through branding and by developing a loyal consumer franchise, marketers create value that can translate to financial profits for the firm. 6. Consumers offer their trust and loyalty with the implicit understanding that the brand will behave in certain ways and provide them utility through consistent product performance and appropriate pricing, promotion, and distribution programs and actions. 7. Firms see branding as a powerful means to secure a competitive advantage. 8. Retailers can introduce their own brands by using their store name, creating new names, or some combination of the two. 9. Successful online brands have been well positioned and have found unique ways to satisfy consumers’ unmet needs. 10. A company’s management of a brand is typically the determining factor in the ultimate success or failure of the brand. 11. Brands have differentiating features that distinguish them from competitors and add value for consumers. 12. Strategic brand management involves the design and implementation of marketing programs and activities to build, measure, and manage brand equity. 13. Consumers often don’t buy products; they buy the images associated with products. Chapter 2 Customer-Based Brand Equity and Brand Positioning Learning Objectives 1. Define customer-based brand equity. 2. Outline the sources and outcomes of customer-based brand equity. 3. Identify the four components of brand positioning. 4. Describe the guidelines in developing a good brand positioning. 5. Explain brand mantra and how it should be developed. Overview This chapter defines the concept that is the focus of the book. Customer-based brand equity (CBBE) is the differential effect that brand knowledge has on consumer response to the marketing of that brand. Brand knowledge is a function of awareness, which relates to consumers’ ability to recognize or recall the brand, and image, which consists of consumers’ perceptions of, and associations for the brand. Building awareness requires repeatedly exposing consumers to the brand as well as linking the brand in consumer memory to its product category and to purchase, usage and consumption situations. Creating a positive brand image requires establishing strong, favorable, and unique associations for the brand. The chapter outlines the important contribution of brand knowledge to brand equity. Brand knowledge is composed of brand awareness, which is itself a function of recognition and recall, and brand image, which reflects the associations consumers hold for the brand in memory. Brand awareness is important because: 1) it is a necessary condition for inclusion in the set of brands being considered for purchase, 2) in low-involvement decision settings, it can be a sufficient condition for choice, and 3) it influences the nature and strength of associations that comprise the brand image. Awareness can be heightened by increasing consumer exposure to the brand and by linking the brand to product category, consumption and usage situations. A brand’s image reflects all the associations consumers have for a brand in memory. The strength, favorability, and uniqueness of the associations affect the responses consumers will have to the brand and to its supporting marketing activities. Associations can be about attributes and benefits of the brand, or attitudes toward it. Attributes, which are descriptive features of a brand, can relate to the actual physical components and ingredients of a brand (product-related), or to such things as the price, imagery, feelings, experiences, and personality associated with the brand (non-product-related). Benefits derived from a brand may relate to the functional advantages it provides, the symbolic information it conveys, or the experiential feelings it produces. Attitudes, which represent the highest level of brand associations, reflect consumers’ overall evaluations of a brand and, consequently, often determine their behavior toward it. The strength of associations depends upon the relevance of information consumers encounter about the brand and the consistency with which the information is presented over time. Favorability is a function of the desirability or value of the associations in attitude formation and decision-making, and of their deliverability or performance probability. The chapter then moves onto discuss brand position and asserts that, deciding on a positioning requires determining a frame of reference, the ideal points-of-parity and points-of-difference brand associations, and an overall brand mantra as a summary. Marketers need to understand consumer behavior and the consideration sets that consumers adopt in making brand choices. Points-of-difference are those associations that are unique to the brand, strongly held, and favorably evaluated by consumers. Points-of-parity are those associations that are not necessarily unique to the brand but may in fact be shared with other brands. Finally, the chapter concludes by discussing brand mantra, which is an articulation of the “heart and soul” of the brand, a three- to five-word phrase that captures the irrefutable essence or spirit of the brand positioning and brand values. Brand Focus 2.0 details the marketing advantages of creating a strong brand. These include greater loyalty and less vulnerability to competitive marketing actions and crises; larger margins; greater trade cooperation and support; increased marketing communication effectiveness; possible licensing opportunities; and a number of other advantages. Science of Branding THE SCIENCE OF BRANDING 2-1 BRAND CRITICS In her book No Logo, Naomi Klein details the aspects of global corporate growth that have led to consumer backlash against brands. Klein cites marketing campaigns that exist within schools and universities, among other examples of advertising encroaching on traditionally ad-free space. She cautions that an inherent danger of building a strong brand is that the public will be all the more eager to see the brand tarnished once unseemly facts surface. Klein highlights movements that have arisen to protest the growing power of corporations as “culture jamming” and “ad-busting.” Klein also observes that the issues of corporate conduct are now highly politicized. Besides Klein, Jonathan Baskin, in his book Branding Only Works on Cattle, argues that branding is no longer effective because it relies on the status quo and is not keeping up with consumers’ needs. He faults current brand techniques. In 2007, British writer Neil Boorman started a blog and then published a book called Bonfire of the Brands that detailed the breaking of his brand obsession. Boorman refers to himself as a member of “a generation that has been sold to from the day it was born” and calls brands “nothing but an expensive con.” THE SCIENCE OF BRANDING 2-2 BRANDING INSIDE THE ORGANIZATION Brand mantras point out the importance of internal branding—making sure that members of the organization are properly aligned with the brand and what it represents. For service companies especially, it’s critical that all employees have an up-to-date and deep understanding of the brand. Companies need to engage in continual open dialogue with their employees. Branding should be perceived as participatory. Some firms have pushed B2E (business-to-employee) programs through corporate intranets and other means. In short, for both motivating employees and attracting external customers, internal branding is a critical management priority. Branding Briefs BRANDING BRIEF 2-1 POSITIONING POLITICIANS The importance of marketing has not been lost on politicians and one way to interpret campaign strategies is from a branding perspective. The last three decades of presidential campaigns are revealing about the importance of properly positioning a politician. George H. W. Bush ran a textbook presidential campaign in 1988. The objective was to move the candidate to the center of the political spectrum and make him a “safe” choice, and to move his Democratic opponent, Massachusetts governor Michael Dukakis, to the left and make him seem more liberal and a “risky” choice. In 1992, the new Democratic candidate, Bill Clinton, was a fierce campaigner who ran a focused effort to create a key point-of-difference on one main issue—the economy. Rather than attempting to achieve a point-of-parity on this issue, Bush, who was running for reelection, campaigned on other issues such as family values. The 2008 presidential election was another textbook application of branding as Barack Obama ran a very sophisticated and modern marketing campaign. Republican candidate John McCain attempted to create a point-of-difference on experience and traditional Republican values; Obama sought to create a point-of-difference on new ideas and hope. The Obama campaign team effectively hammered home his message. Multimedia tactics combined offline and online media as well as free and paid media. Even Obama’s slogans and campaign posters became iconic symbols, and Obama breezed to victory. BRANDING BRIEF 2-2 NIKE BRAND MANTRA Nike has a rich set of associations with consumers, revolving around such considerations as its innovative product designs, its sponsorships of top athletes, its award-winning advertising, its competitive drive, and its irreverent attitude. In Nike’s eyes, its entire marketing program—its products and how they are sold—must reflect the key brand values conveyed by the brand mantra. In the words of ex-Nike marketing gurus Scott Bed bury and Jerome Conlon, Nike’s brand mantra provided the “intellectual guard rails” to keep the brand moving in the right direction and to make sure it did not get off track somehow. Nike’s brand mantra has even affected product development. Each step of the way it has been guided by its “authentic athletic performance” brand mantra. At the same time, the company has been careful to avoid using the Nike name to brand products that did not fit with the brand mantra, like casual “brown” shoes. When Nike has experienced problems with its marketing program, they have often been a result of its failure to figure out how to translate its brand mantra to the marketing challenge at hand. BRANDING BRIEF 2-3 DISNEY BRAND MANTRA Disney developed its brand mantra in response to its incredible growth through licensing and product development during the mid-1980s. In the late 1980s, Disney became concerned that some of its characters, like Mickey Mouse and Donald Duck, were being used inappropriately and becoming overexposed. To investigate the severity of the problem, Disney undertook an extensive brand audit. Disney also launched a major consumer research study—a brand exploratory—to investigate how consumers felt about the Disney brand. The results of the brand inventory revealed some potentially serious problems: the Disney characters were on so many products and marketed in so many ways that in some cases it was difficult to discern the rationale behind the deal, to start with. The consumer study only heightened Disney’s concerns. Because of the broad exposure of the characters in the marketplace, many consumers had begun to feel that Disney was exploiting its name. In some cases, consumers felt that the characters added little value to products and, worse yet, involved children in purchase decisions that they would typically ignore. Disney learned in the consumer study, however, that consumers did not differentiate between all the product endorsements. “Disney was Disney” to consumers, whether they saw the characters in films, records, theme parks, or consumer products. Consequently, all products and services that used the Disney name or characters had an impact on Disney’s brand equity. Consumers reported that they resented some of these endorsements because they felt that they had a special, personal relationship with the characters and with Disney that should not be handled so carelessly. As a result of the brand audit, Disney moved quickly to establish a brand equity team to better manage the brand franchise and more carefully evaluate licensing and other third-party promotional opportunities. One of the mandates of this team was to ensure that a consistent image for Disney—reinforcing its key brand associations—was conveyed by all third-party products and services. To facilitate this supervision, Disney adopted an internal brand mantra of “fun family entertainment” to serve as a screening device for proposed ventures. Opportunities that were not consistent with the brand mantra were rejected. Brand Focus BRAND FOCUS 2.0 THE MARKETING ADVANTAGES OF STRONG BRANDS Customer-based brand equity occurs when consumer response to marketing activity differs, when consumers know the brand, and when they do not. A number of benefits can result from a strong brand, both in terms of greater revenue and lower costs. Some of the benefits to the firm of having brands with a high level of awareness and a positive brand image: • Greater Loyalty and Less Vulnerability to Competitive Marketing Actions and Crises— Research shows that different types of favorable brand associations can affect consumer product evaluations, perceptions of quality, and purchase rates. Moreover, familiarity with a brand has been shown to increase consumer confidence, attitude toward the brand, and purchase intention, and to mitigate the negative impact of a poor trial experience. One characteristic of brands with a great deal of equity is that consumers feel great loyalty to them. A brand with a positive brand image also is more likely to successfully weather a brand crisis or downturn in the brand’s fortunes. Effective handling of a marketing crisis requires swift and sincere action, an immediate admission that something has gone wrong, and assurance that an effective remedy will be put in place. Even absent a crisis, a strong brand offers protection in a marketing downturn or when the brand’s fortunes fall. • Larger Margins— Brands with positive customer-based brand equity can command a price premium. Consumers should also have a fairly inelastic response to price increases and elastic responses to price decreases or discounts for the brand over time. Research has shown that consumers loyal to a brand are less likely to switch in the face of price increases and more likely to increase the quantity of the brand purchased in the face of price decreases. • Greater Trade Cooperation and Support— Wholesalers, retailers, and other middlemen in the distribution channel play an important role in the selling of many products. Their activities can thus facilitate or inhibit the success of the brand. If a brand has a positive image, retailers and other middlemen are more likely to respond to the wishes of consumers and actively promote and sell the brand. Channel members are also less likely to require any marketing push from the manufacturer and will be more receptive to manufacturers’ suggestions to stock, reorder, and display the brand, as well as to pass through trade promotions, demand smaller slotting allowances, give more favorable shelf space or position, and so on. Given that many consumer decisions are made in the store, the possibility of additional marketing push by retailers is important. • Increased Marketing Communication Effectiveness— A host of advertising and communication benefits may result from creating awareness of and a positive image for a brand. One well-established view of consumer response to marketing communications is the hierarchy of effects models. A brand with a great deal of equity already has created some knowledge structures in consumers’ minds, increasing the likelihood that consumers will pass through various stages of the hierarchy. Familiar, well-liked brands are less susceptible to “interference” and confusion from competitive ads, are more responsive to creative strategies such as humor appeals, and are less vulnerable to negative reactions due to concentrated repetition schedules. Because strong brand associations exist, lower levels of repetition may be necessary. Similarly, because of existing brand knowledge structures, consumers may be more likely to notice sales promotions, direct mail offerings, or other sales-oriented marketing communications and respond favorably. • Possible Licensing and Brand Extension Opportunities— A strong brand often has associations that may be desirable in other product categories. To capitalize on this value, a firm may choose to license its name, logo, or other trademark item to another company for use on its products and merchandise. Academic research has shown that well-known and well-regarded brands can extend more successfully and into more diverse categories than other brands. In addition, the amount of brand equity has been shown to be correlated with the highest or lowest-quality member in the product line for vertical product extensions. Research has also shown that positive symbolic associations may be the basis of these evaluations, even if overall brand attitude itself is not necessarily high. Brands with varied product category associations through past extensions have been shown to be especially extendable. • Other Benefits— Brands with positive customer-based brand equity may provide other advantages to the firm not directly related to the products themselves, such as helping the firm to attract or motivate better employees, generate greater interest from investors, and garner more support from shareholders. Discussion questions 1. Apply the categorization model to a product category other than beverages. How do consumers make decisions whether or not to buy the product, and how do they arrive at their final brand decision? What are the implications for brand equity management for the brands in the category? How does it affect positioning, for example? Answer: Answers will vary. Have students pick brands of their choice and have them assess if they perceive the brand as only representative of the product or service category. This will help them realize whether they respond to the brand as if the offering were unbranded. The students may then be asked to assess the implications their perceptions have on the positioning of the brands. Consumer Decision-Making Process: 1. Categorization: Consumers first categorize personal computers based on attributes such as brand, type (laptop, desktop, all-in-one), performance (gaming, business, general use), and price range. For instance, they might consider a laptop as either a high-performance gaming laptop or a budget-friendly student laptop. 2. Decision Criteria: • Functional Needs: Performance specifications, reliability, battery life, and compatibility with software. • Emotional Needs: Brand reputation, design, and customer service. • Price Sensitivity: Budget constraints and perceived value. 3. Final Brand Decision: Consumers compare options within their chosen category, evaluating brands based on how well they meet their criteria. They may prioritize well-known brands with strong reputations for quality or value-for-money offers. Implications for Brand Equity Management: 1. Positioning: Brands must position themselves clearly within the categorized segments (e.g., high-end performance vs. budget-friendly options). Effective positioning emphasizes unique selling propositions relevant to the target segment. 2. Brand Equity: Strong brand equity in this category is built through consistent performance, positive user experiences, and strong brand associations. Managing brand equity involves maintaining high product quality, leveraging customer feedback, and investing in brand-building activities. Overall Impact: Brands need to tailor their marketing strategies to their segment, ensure their positioning aligns with consumer expectations, and continuously strengthen their brand equity to remain competitive and relevant. 2. Pick a category basically dominated by two main brands. Evaluate the positioning of each brand. Who are their target markets? What are their main points-of-parity and points-of-difference? Have they defined their positioning correctly? How might it be improved? Answer: Answers will vary. Students may be divided into groups to compare the positioning of brands against each other. Category: Smartphones Apple (iPhone) • Target Market: Premium consumers valuing design and ecosystem integration. • Points-of-Parity: High quality, advanced tech, and customer service. • Points-of-Difference: Seamless ecosystem, unique iOS features, and design. • Positioning: Strong premium image, but could broaden appeal with varied price points. Samsung (Galaxy Series) • Target Market: Broad range, including premium and mid-range buyers. • Points-of-Parity: High quality, advanced tech, and customer service. • Points-of-Difference: Variety of models, cutting-edge tech, and customization. • Positioning: Versatile and innovative, but could enhance focus on flagship features. 3. Consider a book store in your area. What competitive frames of reference does it face? What are the implications of those frames of reference for its positioning? Answer: Answers will vary. Students may first be asked to identify the target market for the book store and the nature of competition faced by the store in their area. They may then proceed with assessing how the frame of reference affects the store’s positioning. Bookstore Competitive Frames of Reference: 1. Other Local Bookstores: Competes with nearby independent and chain bookstores. • Implication: Must differentiate through unique inventory, personalized service, or community events to stand out. 2. Online Retailers (e.g., Amazon): Competes with e-commerce platforms offering a vast selection and convenience. • Implication: Needs to highlight benefits like immediate availability, in-store experience, and local support. 3. E-books and Digital Platforms: Competes with digital reading options and subscription services. • Implication: Should emphasize the tactile experience of physical books, local culture, and additional services like author events. In summary, the bookstore must effectively differentiate itself from local competitors, online giants, and digital formats by focusing on unique in-store experiences and community engagement. 4. Can you think of any negatively correlated attributes and benefits other than those listed in Figure 2-6? Can you think of any other strategies to deal with negatively correlated attributes and benefits? Answer: Answers will vary. Students may be divided into groups to come up with examples of correlated attributes and benefits. Following this, a class activity may be conducted to discuss the strategies to deal with these negative correlations. Negatively Correlated Attributes and Benefits Examples: 1. Luxury vs. Practicality: A high-end car brand (e.g., Ferrari) may be seen as luxurious but impractical for everyday use. • Strategy: Focus marketing on the exclusivity and status of luxury while acknowledging the practical limitations as a trade-off. 2. Eco-Friendliness vs. Performance: Electric vehicles (EVs) may be perceived as eco-friendly but less powerful compared to traditional sports cars. • Strategy: Highlight advancements in EV technology that enhance performance and promote dual benefits of sustainability and high performance. Strategies to Deal with Negatively Correlated Attributes: 1. Segmented Positioning: Target different market segments with tailored messaging that emphasizes either attribute or benefit as most relevant. 2. Dual-Positioning: Develop messaging strategies that address both attributes, explaining how they complement each other or present trade-offs. 3. Innovation: Invest in technology or product improvements that can reduce the negative correlation, making the product more versatile. 5. What do you think of Naomi Klein’s positions as espoused in No Logos? How would you respond to her propositions? Do you agree or disagree about her beliefs on the growth of corporate power? Answer: Students could be divided into two groups to debate Klein’s positions. Students are encouraged to set their points of view and recommend directions for strong brands to sustain their positions and avoid being negatively “politicized”. Naomi Klein’s Positions in No Logo: • Corporate Power Growth: Klein argues that corporations have shifted focus from product quality to brand dominance, using aggressive marketing and exploiting labor to grow power. Response and Agreement: • Agreement: Her critique on the growth of corporate power is compelling. The shift towards brand-centric strategies and outsourcing labor for cost-efficiency reflects broader trends in corporate behavior. • Disagreement: While Klein’s concerns about exploitation and brand dominance are valid, some argue that corporations can also drive positive change through innovation and responsible practices. The challenge lies in balancing corporate interests with ethical considerations and consumer rights. Exercises and assignments 1. Have students conduct a Coke-Pepsi taste test, either in or out of the class, and discuss the results and the reasons behind consumer preferences. It might be useful to have half the class do a blind taste test, and half the class do a “sighted” taste test, and compare the results. Answer: Exercise: Coke vs. Pepsi Taste Test 1. Blind Taste Test: Participants taste Coke and Pepsi without knowing which is which. Record their preferences and any comments on taste. 2. Sighted Taste Test: Participants taste Coke and Pepsi with brand labels visible. Record their preferences and comments on taste. Discussion of Results: • Blind Taste Test: Preferences may focus on actual taste differences. Results might show no strong preference or a preference for one based on taste alone. • Sighted Taste Test: Preferences might be influenced by brand perceptions and marketing. Results might show a stronger preference for the brand the participant is more familiar with or has a positive image of. Reasons Behind Preferences: • Blind Taste Test: Reflects the actual flavor profiles and personal taste. • Sighted Taste Test: Influenced by brand loyalty, advertising, and perceived brand attributes. Implication: Brand equity can significantly impact consumer preferences beyond actual taste differences. 2. Ask students to pick two brands in each of three or four different product categories, and then compare the sources of brand equity for each pair. This exercise is a good way to demonstrate the stronger positioning strategies and franchises that some brands enjoy relative to their competition. Focal brands might include: Charles Schwab vs. E*Trade Frederick’s of Hollywood vs. Victoria’s Secret Maytag vs. Kenmore washing machines FedEx vs. USPS Express Mail Answer: Exercise: Comparing Brand Equity Sources 1. Charles Schwab vs. ETrade • Charles Schwab: Strong customer service, broad investment options, trust. • ETrade: User-friendly platform, low-cost trading, technological innovation. 2. Frederick’s of Hollywood vs. Victoria’s Secret • Frederick’s of Hollywood: Sensuality, edgy fashion, affordability. • Victoria’s Secret: Luxury, high-profile marketing, exclusivity. 3. Maytag vs. Kenmore • Maytag: Durability, reliability, quality reputation. • Kenmore: Value, wide range, accessibility. 4. FedEx vs. USPS Express Mail • FedEx: Speed, reliability, global reach. • USPS Express Mail: Affordability, accessibility, nationwide service. Summary: The exercise shows how different sources of brand equity—like service quality, image, and value—affect competitive positioning. 3. Bring in or have students bring in examples of consumer sales promotions. Analyze each in terms of its ability to build or bash brand equity. Suggest alternative promotion ideas. Pick the best and worst of the lot and explain what makes them good or bad. Answer: Exercise: Comparing Brand Equity Sources 1. Charles Schwab vs. ETrade • Charles Schwab: Trust, comprehensive services, strong customer support. • ETrade: Convenience, innovative trading tools, low-cost options. 2. Frederick’s of Hollywood vs. Victoria’s Secret • Frederick’s of Hollywood: Bold design, affordability, niche appeal. • Victoria’s Secret: Premium image, luxury, high-profile marketing. 3. Maytag vs. Kenmore • Maytag: Reliability, durability, long-standing reputation. • Kenmore: Value, wide selection, accessible pricing. 4. FedEx vs. USPS Express Mail • FedEx: Speed, reliability, global network. • USPS Express Mail: Cost-effectiveness, broad reach, government support. Summary: This exercise highlights how brand equity is built through unique strengths like service quality, brand image, and value, affecting competitive positioning in each category. 4. Have students develop a brand of their own for a given product category such as beverages, automobiles, and art supplies. The students may then be asked to arrive at the optimal competitive brand positioning. This will help the students to define and communicate the competitive frame of reference and choose and establish POPs and PODs. Answer: Exercise: Developing a Brand and Competitive Positioning 1. Choose a Product Category: Select a category such as beverages, automobiles, or art supplies. 2. Develop a Brand: Create a brand name and identity, including logo, tagline, and core values. 3. Define Competitive Frame of Reference: Identify competitors and the target market. For example, in beverages, compare with major brands like Coca-Cola and Pepsi. 4. Establish Points of Parity (POPs): Ensure the brand meets industry standards and consumer expectations (e.g., quality, safety). 5. Establish Points of Difference (PODs): Highlight unique features or benefits (e.g., organic ingredients, advanced technology, superior performance). 6. Communicate Positioning: Clearly articulate the brand’s unique value proposition and positioning strategy in relation to competitors. Summary: This exercise helps students craft a brand by defining its competitive frame of reference and establishing POPs and PODs to effectively position it in the market. Key take-away points 1. The power of the brand and its ultimate value to the firm resides with customers. 2. Customer-based brand equity is the differential effect of brand knowledge on consumer response to the marketing of a brand. 3. Positive brand equity results when consumers are familiar with the brand and have strong, favorable, and unique associations for it. 4. A brand has negative customer-based brand equity if consumers react less favorably to marketing activity for the brand compared with an unnamed or fictitiously named version of the product. 5. The quality of the investment in brand building is the most critical factor, not the quantity beyond some minimal threshold amount. 6. Brand awareness is the consumers’ ability to identify the brand under different conditions and brand image is consumers’ perceptions about a brand. 7. Brand recognition is consumers’ ability to confirm prior exposure to the brand when given the brand as a cue and brand recall is consumers’ ability to retrieve the brand from memory when given the product category, the needs fulfilled by the category, or a purchase or usage situation as a cue. 8. Brand attributes are those descriptive features that characterize a product or service, and brand benefits are the personal value and meaning that consumers attach to the product or service attributes. 9. Brand positioning is the act of designing the company’s offer and image, so that it occupies a distinct and valued place in the target customer’s minds. 10. The key to branding success is to establish both points-of-parity and points-of-difference. 11. PODs are attributes or benefits that consumers strongly associate with a brand, positively evaluate, and believe that they could not find to the same extent with a competitive brand. 12. POPs are not necessarily unique to the brand but may in fact be shared with other brands. 13. A brand mantra is a short, three- to five-word phrase that captures the irrefutable essence or spirit of the brand positioning. Instructor Manual for Strategic Brand Management: Building, Measuring, and Managing Brand Equity Kevin Lane Keller 9780132664257, 9780273779414