CH-9-11 Measuring Sources of Brand Equity: Capturing Customer Mind-Set – Strategic Brand Management: Building, Measuring, and Managing Brand Equity : Chapter Notes

This Document Contains Chapters 9 to 11 Chapter 9 Measuring Sources of Brand Equity: Capturing Customer Mind-Set Chapter Objectives 1. Describe effective qualitative research techniques for tapping into consumer brand knowledge. 2. Identify effective quantitative research techniques for measuring brand awareness, image, responses, and relationships. 3. Profile and contrast some popular brand equity models. Overview To measure sources of brand equity, brand managers must understand two key areas: how consumers shop for and use products and services, and what consumers know, think, and feel about various brands. One of the potential complications of pursuing this knowledge is that many times consumers are unable or unwilling to access and report to researchers their true beliefs and feelings about a brand. Qualitative methods allow marketers to probe consumers either through direct questions or through tasks that indirectly reveal perceptions and attitudes. Such methods, which permit a relatively unlimited range of verbal consumer responses, include free association tasks, projective techniques, and descriptions of a brand’s personality and values, among others. Data gathered through qualitative research generally must be coded and aggregated before it is useful. Quantitative methods, which typically use numerical rating scales or rankings, include measures of recognition, aided and unaided recall, beliefs, attitudes, intentions, and behaviors toward the brand. Image measures, brand response measures such as purchase intentions, brand relationship measures such as behavioral loyalty, and brand sustainability can also be employed to measure consumer attitudes. Data gathered through quantitative research can be entered directly into files and analyzed using a variety of statistical techniques. Ultimately, the two types of research techniques enable marketers to construct “mental maps” that model consumers’ feelings, beliefs, and attitudes regarding a brand. Marketers can then employ the mental maps to make decisions about their brands and develop strategies for building brand equity. Qualitative measures are best used to provide in-depth insight into what specific brands, products, and services mean to consumers. Quantitative measures, on the other hand, are particularly useful to obtain general information about consumers. Finally, this chapter concludes by presenting other customer-based brand equity models designed by researchers and consultants, such as the Millward Brown’s Brand Dynamics model. Brand Focus 9.0 discusses Young & Rubicam’s Brand Asset Valuator (BAV). The BAV is the world’s largest database of consumer-derived information on brands. The BAV evaluates brands on four key measures, called the “Four Pillars”: differentiation, relevance, esteem, and knowledge. Also employed are a number of measures across a broad array of perceptual dimensions. The BAV provides a brand landscape by which marketers can see where their brands are located relative to other prominent brands or with respect to different markets. Science of Branding THE SCIENCE OF BRANDING 9-1 UNDERSTANDING CATEGORICAL BRAND RECALL A classic experiment by Prakash Nedungadi provides a compelling demonstration of the importance of understanding the category structure that exists in consumer memory as well as the value of strategies for increasing the recallability or accessibility of brands during choice situations. As a preliminary step in his research study, Nedungadi first examined the category structure for fast-food restaurants that existed in consumers’ minds. He found that a “major subcategory” was “hamburger chains” and a “minor subcategory” was “sandwich shops.” In an unaided recall and choice task, consumers were more likely to remember and select a brand from a major subcategory than from a minor subcategory and, within a subcategory, a major brand rather than a minor brand. Nedungadi next looked at the effects of different brand “primes” on subsequent choices among four fast-food restaurants. Two key findings emerged. Merely making the brand more accessible in memory increased the likelihood that it would be chosen independent of any differences in brand attitude. Priming a minor brand in a minor subcategory actually benefited the major brand in that subcategory more. The implications of Nedungadi’s research are that marketers must understand how consumers’ memory is organized and, as much as possible, ensure that the proper cues and primes are evident to prompt brand recall. In sum, brand recall provides insight into category structure and brand positioning in consumers’ minds. Brands tend to be recalled in categorical clusters when consumers are given a general probe. Certain brands are grouped together in memory because they share certain associations and are thus likely to cue and remind consumers of each other if one is recalled. THE SCIENCE OF BRANDING 9-2 UNDERSTANDING BRAND ENGAGEMENT There are several different ways to think of brand engagement: • Actual brand engagement is the activities with which the consumer currently is engaged with the brand and is typically what is measured with the brand resonance model. • Ideal brand engagement is the activities the brand consumer wishes they could do with the brand. • Market brand engagement is the activities the consumer believes other consumers are doing with the brand. Market brand engagement will be closely related to measures of brand momentum—how much progress the brand appears to be making with consumers in the marketplace. Both sets of measures deal with consumer perceptions of how other consumers are connecting to a brand. Measures of actual brand engagement can take two forms—more general, macro measures or more specific, micro measures. Micro sets of measures focus on specific categories of brand-related activities. These activities fall into three categories depending on whether they relate to: 1) collecting brand information, 2) participating in brand marketing activities, or 3) interacting with other people and having a sense of community. Branding Briefs BRANDING BRIEF 9-1 DIGGING BENEATH THE SURFACE TO UNDERSTAND CONSUMER BEHAVIOR Useful marketing insights sometimes emerge from unobtrusively observing consumers rather than talking to them. DuPont commissioned marketing studies to uncover personal pillow behavior for its Dacron polyester unit, which supplies filling to pillow makers and sells its own Comforel brand (now part of INVISTA). The researchers found that people fell into distinct groups in terms of pillow behavior: stackers (23 percent), plumpers (20 percent), rollers or folders (16 percent), cuddlers (16 percent), and smashers, who pound their pillows into a more comfy shape (10 percent). The prevalence of stackers led the company to sell more pillows packaged as pairs, as well as to market different levels of softness or firmness. Much of this type of research has its roots in ethnography, the anthropological term for the study of cultures in their natural surroundings. The intent behind these in-depth, observational studies is for consumers to drop their guard and provide a more realistic portrayal of who they are rather than who they would like to be. BRANDING BRIEF 9-2 ONCE UPON A TIME . . . YOU WERE WHAT YOU COOKED One of the most famous applications of psychographic techniques was made by Mason Haire in the 1940s. The purpose of the experiment was to uncover consumers’ true beliefs and feelings toward Nescafé instant coffee. On the basis of consumer taste tests, however, Nescafé’s management knew consumers found the taste of instant coffee acceptable when they didn’t know what type of coffee they were drinking. Suspecting that consumers were not expressing their true feelings, Haire designed a clever experiment to discover what was really going on. Haire set up two shopping lists containing the same six items. Shopping List 1 specified Maxwell House drip ground coffee, whereas Shopping List 2 specified Nescafé instant coffee. Two groups of matched subjects were each given one of the lists and asked to “Read the shopping list. . . . Try to project yourself into the situation as far as possible until you can more or less characterize the woman who bought the groceries.” Subjects then wrote a brief description of the personality and character of that person. After coding the responses into frequently mentioned categories, Haire found that two starkly different profiles emerged. Haire interpreted these results as indicating that instant coffee represented a departure from homemade coffee and traditions with respect to caring for one’s family. In other words, at that time, the “labor-saving” aspect of instant coffee, rather than being an asset, was a liability in that it violated consumer traditions. Consumers were evidently reluctant to admit this fact when asked directly but were better able to express their true feelings when asked to project to another person. Based on the projective test findings, it was obvious that there also needed to be a point-of-parity on the basis of user imagery. As a result, a successful ad campaign was launched that promoted Nescafé coffee as a way for housewives to free up time so they could devote additional time to more important household activities. BRANDING BRIEF 9-3 BRAND IMAGERY AT JOIE DE VIVRE Joie de Vivre Hospitality LLC operates a chain of boutique hotels, restaurants, and resorts in California, Arizona, and Chicago. Chip Conley founded the company in 1987 when he purchased a rundown motel in a seedy area of San Francisco and converted it into the Phoenix, a fashionable destination popular among entertainment celebrities. In establishing Joie de Vivre, Conley’s goal was “to create a company with hip hotel concepts that appealed to a younger consumer base.” Since launching the Phoenix, the company has grown to a total of 34 hotels, the largest group of boutique hotels in California, and is now going national. Each property’s unique décor, quirky amenities, and thematic style are loosely based on a popular magazine. Joie de Vivre hotels strive to combine style and flavor with comfort and service. In addition to providing comfort considerations, Joie de Vivre creates loyalty among its customers with a dedication to customer service. The company condenses all pertinent service information onto a small laminated card that all employees carry with them while they work. The personal touches and unique personality offered by Joie de Vivre hotels have helped the company build a loyal customer base. BRANDING BRIEF 9-4 MAKING THE MOST OF CONSUMER INSIGHTS Consumer research plays a significant role in uncovering information valuable to consumer-focused companies. David Taylor, founder of the Brand Gym consultancy, defines an insight as “a penetrating, discerning understanding that unlocks an opportunity.” Taylor developed a set of criteria to evaluate insights: • Fresh: An insight might be obvious and, in fact, be overlooked or forgotten as a result. Check again. • Relevant: An insight when played back to other target consumers should strike a chord. • Enduring: By building on a deep understanding of consumers’ beliefs and needs, a true consumer insight should have potential to remain relevant over time. • Inspiring: All of the team should be excited by the insight and see different but consistent applications. Insights can come from consumer research such as focus groups, but also from using what Taylor describes as the “core insight drills.” A sample of these drills follows: • How could the brand/category do more to help improve people’s lives? • What do people really value in the category? What would they not miss? • What conflicting needs do people have? How can these tradeoffs be solved? • What bigger market is the brand really competing in from a consumer viewpoint? What could the brand do more of to better meet these “higher-order” needs? • What assumptions do people make about the market that could be challenged? • How do people think the product works, and how does it work in reality? • How is the product used in reality? What other products are used instead of the brand, where the brand could do a better job? These “drills” can help companies unearth consumer insights that lead to better products and services, and ultimately to stronger brands. Brand Focus BRAND FOCUS 9.0 YOUNG & RUBICAM’S BRANDASSET VALUATOR Brand Asset® Valuator (BAV), originally developed by Young & Rubicam, is the world’s largest database of consumer-derived information on brands. The BAV model is developmental in that it explains how brands grow, how they get into trouble, and how they recover. BAV measures brands on four fundamental measures of equity value plus a broad array of perceptual dimensions. It provides comparative measures of the equity value of thousands of brands across hundreds of different categories, as well as a set of strategic brand management tools for planning: brand positioning, brand extensions, joint branding ventures, and other strategies designed to assess and direct brands and their growth. BAV is also linked to financial metrics and is used to determine a brand’s contribution to a company’s valuation. BAV represents a unique brand equity research tool. Respondents evaluate brands in a category-agnostic context. Brands are percentile ranked against all brands in the study for each brand metric. Thus, by comparing brands across as well as within categories, BAV is able to draw the broadest possible conclusions about how consumer-level brand equity is created and built—or lost. Four Pillars There are four key components of brand health in BAV, namely, energized differentiation, relevance, esteem, and knowledge. Each pillar is derived from various measures that relate to different aspects of consumers’ brand perceptions. Taken together, the four pillars trace the progression of a brand’s development. Relationship among the Pillars—Examining the relationships between these four dimensions—a brand’s “pillar patterns”—reveals much about a brand’s current and future status. Brands often strive to build awareness, but if the brand’s pillars are not in the proper alignment, then consumer knowledge of a brand becomes an obstacle that may need to be surmounted before the brand can continue to build healthy momentum. The PowerGrid Brand Asset® Valuator has integrated the two macro dimensions of Brand Strength (Energized Differentiation and Relevance) and Brand Stature (Esteem and Knowledge) into a visual analytical representation known as the PowerGrid. The PowerGrid depicts the stages in the cycle of brand development—each with its characteristic pillar patterns—in successive quadrants. Brands generally begin their life in the lower left quadrant, where they first need to develop Relevant Differentiation and establish their reason for being. Most often, the movement from there is “up” into the top left quadrant. Increased Differentiation, followed by Relevance, initiates growth in Brand Strength. The upper right quadrant, the Leadership Quadrant, is populated by brand leaders—those that have high levels of both Brand Strength and Brand Stature. Brands that fail to maintain their Brand Strength—their Relevant Differentiation—begin to fade and move “down” into the bottom right quadrant. Applying BAV to Google Google is a dramatic example. Google achieved leadership status faster than any other brand measured in BAV. Google built each brand pillar, beginning with Energized Differentiation, both quickly and strongly. After rapidly establishing Energized Differentiation, Google built the other three pillars. It took only three years for Google’s percentile-ranking on all four pillars to reach the high 90s. From the BAV perspective, there are three main contributing factors: 1) consistently strong brand attributes that translate into competitive advantages; 2) successful brand extensions into new categories; and 3) successful expansion into global markets and the fast establishment of brand leadership. Competitive Advantages on Brand Attributes—Google’s leadership is supported by competitive advantages on the factors that contribute to the strength of the key pillars. Google is stronger than the competitive average on the Cutting Edge (innovation) factor and the Bold personality factor. Both of these factors build Google’s Energized Differentiation. Google’s advantage on the Dependability (trust) factor helps keep the Relevance pillar strong, and Google’s strength on the Superiority (best brand) factor supports both the Relevance and the Esteem pillars. Successful Category Extensions—Google has done a masterful job of entering new categories with sub-brands. Most of the sub-brands also have very high Brand Strength, which helps replenish the Brand Strength of the Google corporate brand. In this way, the leadership of the sub-brands helps support the parent brand, a common theme among strong parent brands with sub-brands. The significant strength of Google’s image profile has made entrance into new categories easier. Successful Global Expansion—BAV shows global brands must build consistently strong Brand Strength, Brand Stature, and power on key factors that drive brand pillars and meaning in each market. Google has achieved leadership status in global markets the same way it achieved leadership status in the USA—by quickly “maxing out” on Brand Strength and Brand Stature. In all countries recently surveyed, Google is a super-leadership brand on the PowerGrid. Summary There is a lot of commonality between the basic BAV model and the brand resonance model. The brand resonance framework maintains that brand salience and breadth and depth of awareness is a necessary first step in building brand equity. The BAV model treats familiarity in a more effective manner—almost in a warm feeling or friendship sense—and thus sees it as the last step in building brand equity, more akin to the resonance component itself. The main advantage of the BAV model is that it provides rich category-agnostic descriptions and profiles across a large number of brands. It also provides focus on four key branding dimensions. It provides a brand landscape in which marketers can see where their brands stand relative to other prominent brands in many different markets. The descriptive nature of the BAV model does mean that there is potentially less insight as to exactly how a brand could rate highly on those factors. Nevertheless, the BAV model represents a landmark study in terms of its ability to enhance marketers’ understanding of what drives top brands and where their brands fit in a vast brands cape. Discussion questions 1. Pick a brand. Employ projective techniques to attempt to identify sources of its brand equity. Which measures work best? Why? Answer: Answers will vary. Students may be divided into groups and asked to employ projective techniques to identify sources of brand equity for a brand of their choice. Brand: Nike Projective Techniques Used: 1. Word Association: Ask respondents to list words they associate with Nike. Common responses include "innovation," "performance," "athleticism," and "inspiration." 2. Storytelling: Ask respondents to create a story involving a Nike product. Themes often include overcoming challenges and achieving personal goals. 3. Picture Elicitation: Show images related to Nike and ask respondents to describe their feelings or thoughts. Responses may focus on empowerment, success, and aspiration. Best Measures: 1. Word Association: This technique effectively captures the core attributes and emotional associations consumers have with Nike, highlighting its focus on innovation and performance. 2. Storytelling: Provides deep insights into the brand’s impact on personal identity and motivation, revealing how Nike's branding influences consumer behavior and brand attachment. Why These Measures Work Best: • Word Association reveals immediate, instinctive brand perceptions and associations. • Storytelling uncovers deeper, emotional connections and how the brand is integrated into personal narratives and aspirations, providing a holistic view of brand equity. 2. Run an experiment to see if you can replicate the Mason Haire instant coffee experiment (see Branding Brief 9-2). Do the same attributions still hold? If not, can you replace coffee with one brand combination from another product category that would produce pronounced differences? Answer: Answers will vary. One possible category that might produce the differences of the Mason Haire experiment is over-the-counter children’s cold remedies. There may be major perceptual differences regarding parents that buy name-brand remedies, versus parents that by store brand or generic products. Experiment Replication: Brands Chosen: Apple vs. a budget smartphone brand. Procedure: Conduct a performance and design evaluation without revealing brand names. Results: Differences in perceptions (e.g., Apple seen as more premium) replicate the original experiment's findings. Alternative Category: Luxury vs. budget perfumes (e.g., Chanel vs. a drugstore brand) could also show pronounced differences in consumer perceptions. 3. Pick a product category. Can you profile the brand personalities of the leading brands in the category using Aaker’s brand personality inventory? Answer: Answers will vary. The truck category is one in which many of the brands might possess high ratings in many of the above indices and have distinct personalities. Product Category: Soft Drinks Leading Brands: Coca-Cola, Pepsi, Sprite Brand Personalities Using Aaker’s Inventory: 1. Coca-Cola: • Sincerity: Honest, genuine, and friendly. • Excitement: Fun-loving, spirited, and adventurous. 2. Pepsi: • Excitement: Trendy, youthful, and energetic. • Competence: Reliable, successful, and intelligent. 3. Sprite: • Excitement: Refreshing, playful, and lively. • Sincerity: Authentic, down-to-earth, and approachable. 4. Pick a brand. How would you best profile consumers' brand knowledge structures? How would you use quantitative measures? Answer: Answers will vary. Quantitative research typically employs various types of scale questions from which researchers can draw numerical representations and summaries. Brand: Nike Profiling Consumers' Brand Knowledge Structures: 1. Brand Associations: Use qualitative techniques like focus groups and in-depth interviews to identify key associations (e.g., performance, innovation, and athleticism). 2. Brand Attributes: Conduct surveys to gather data on how consumers perceive Nike’s attributes compared to competitors. Quantitative Measures: 1. Brand Awareness: Measure through survey questions assessing recognition and recall of the Nike brand. 2. Brand Perception: Use Likert scales in surveys to quantify consumer attitudes towards Nike’s attributes. 3. Brand Loyalty: Track repeat purchase rates and customer retention through sales data and loyalty programs. These measures provide a comprehensive view of Nike's brand knowledge structures, including consumer awareness, perceptions, and loyalty. 5. Think of your brand relationships. Can you find examples of brands that fit into Fournier’s different categories? Answer: Answers will vary. Students may be divided into groups where each group may choose one category and come up with examples of brands that fit their category. They may then be asked to compare their list of brand examples to assess whether the same brand has fallen into different categories. Brand Relationships (Fournier’s Categories): 1. Strangers: • Example: Generic store brands (e.g., generic supermarket brand). Consumers have minimal or no emotional connection. 2. Acquaintances: • Example: Lesser-known tech brands (e.g., a mid-tier smartphone brand). Consumers are aware of the brand but have limited interactions. 3. Friends: • Example: Apple. Consumers feel a personal connection and regularly engage with the brand through products and services. 4. Lovers: • Example: Nike. Consumers have a deep, passionate connection and strong brand loyalty, often incorporating the brand into their identity. 5. Partners: • Example: Coca-Cola. Consumers view the brand as a trusted and integral part of their lifestyle, often sharing significant moments with it. 6. Enemies: • Example: Fast-food chains with strong negative perceptions (e.g., a brand known for controversies). Consumers actively avoid or criticize the brand. Exercises and assignments 1. Ask students to conduct a modern-day version of the shopping cart experiment described in Branding Brief 9-2: Once Upon a Time . . . You Were What You Cooked. Update the list and choose a focal product to vary across two versions. For example: 1 whole roasting chicken 1 whole roasting chicken 1 package Thomas English muffins 1 package Thomas English muffins 4 ears fresh corn 4 ears fresh corn Jar of Grey Poupon mustard Jar of Kraft mustard Breyer’s vanilla bean ice cream Breyer’s vanilla bean ice cream 2 onions 2 onions How could the managers of the focal brands use the results in their marketing planning? Answer: To update the shopping cart experiment, choose a focal product like a particular brand of cereal. For instance: Original Version: • 1 box Kellogg’s Corn Flakes • 1 gallon milk • 1 loaf of whole wheat bread • 1 jar of Jif peanut butter • 1 bag of apples Modified Version: • 1 box General Mills Cheerios • 1 gallon milk • 1 loaf of whole wheat bread • 1 jar of Skippy peanut butter • 1 bag of oranges By comparing consumer choices in each version, managers can assess how brand preferences shift based on the presence of different brands in the cart. They can use this information to understand brand impact on purchase decisions and adjust marketing strategies to better position their brand against competitors. For example, if consumers consistently choose Kellogg’s over General Mills when paired with specific products, Kellogg’s might focus on reinforcing brand loyalty through targeted promotions or partnerships. 2. Tell students to conduct a focus group, using other students as participants, to gain insights about attitudes, feelings, and behaviors toward the school or program in which they all are currently enrolled. What implications do the findings have for marketing strategy? Answer: To conduct a focus group with fellow students about attitudes, feelings, and behaviors towards the school or program, follow these steps: 1. Prepare Discussion Guide: Create questions to explore perceptions, satisfaction levels, and suggestions for improvement. 2. Conduct Focus Group: Facilitate the discussion, ensuring that all participants share their views on aspects such as academic quality, campus facilities, and student services. 3. Analyze Findings: Identify common themes and sentiments, such as areas of strong satisfaction or dissatisfaction. Implications for Marketing Strategy: The findings can help the school or program refine its marketing strategy by highlighting strengths to promote and addressing weaknesses to improve. For instance, if students express a strong appreciation for specific programs or faculty, these aspects can be emphasized in promotional materials. Conversely, if there are common concerns, such as issues with facilities or support services, the institution can address these areas to enhance overall student experience and satisfaction. 3. Have students pick brands of their choice and conduct quantitative research by employing various types of scale questions to draw numerical representations and summaries. This activity will help them assess the depth and breadth of brand awareness; the strength, favorability, and uniqueness of brand associations; the positivity of brand judgments and feelings; and the extent and nature of brand relationships. Answer: To conduct quantitative research on chosen brands, students should: 1. Select Brands: Choose a set of brands to analyze. 2. Design Scale Questions: • Brand Awareness: Use questions like "On a scale of 1 to 5, how familiar are you with Brand X?" • Brand Associations: Ask "How strongly do you associate Brand X with quality? (1 = Not at all, 5 = Very strongly)" • Brand Judgments: Use scales like "Rate your satisfaction with Brand X from 1 to 5." • Brand Feelings: Ask "How positive are your feelings towards Brand X? (1 = Very negative, 5 = Very positive)" • Brand Relationships: Question "How likely are you to recommend Brand X to others? (1 = Not likely, 5 = Very likely)" 3. Collect Data: Administer the survey to a sample of respondents. 4. Analyze Results: Summarize numerical data to assess brand awareness, associations, judgments, feelings, and relationships. Implications: The analysis provides insights into brand equity dimensions, helping brands understand their market position, strengthen their positive associations, and address any weaknesses in their branding strategy. 4. Assign the same sets of brands to the students and have them adopt the Brand Dynamics model to determine the strength of relationship each student has with each brand. Students may place themselves into one of the five levels depending on their brand responses. By comparing the pattern across brands, this activity will help them uncover relative strengths and weaknesses and see where brands can focus their efforts to improve their loyalty relationships. Answer: To use the Brand Dynamics model, have students: 1. Assign Brands: Provide a set of brands for analysis. 2. Apply the Brand Dynamics Model: Students assess their relationship with each brand based on the five levels: Presence, Relevance, Performance, Advantage, and Bonding. They place themselves in one of these levels depending on their responses and experiences with each brand. 3. Evaluate Results: Students categorize their relationship with each brand into these levels and compare patterns across different brands. Implications: Comparing the patterns helps identify brands with strong loyalty relationships and those needing improvement. Brands with higher bonding levels indicate stronger customer relationships, while those at lower levels may require enhanced marketing strategies to build relevance, performance, or emotional connection. Key take-away points 1. In general, measuring sources of brand equity requires knowing how consumers shop for and use products and services, and what consumers know, think, and feel about brands. 2. Since the sources of equity reside in the consumers’ associations, attitudes, etc. toward the brand, measuring equity requires consumer-focused research. 3. Consumer knowledge toward a brand may be uncovered using either quantitative or qualitative methods, often in combination. 4. Qualitative measures are best for capturing specific consumer insights about brands, products, and services, while quantitative insights can be employed for more generalizable information. 5. The simplest and often the most powerful way to profile brand associations is free association tasks. 6. Projective techniques are diagnostic tools to uncover the true opinions and feelings of consumers when they are unwilling or otherwise unable to express themselves on these matters. 7. The Zaltman Metaphor Elicitation Technique is a technique for eliciting interconnected constructs that influence thought and behavior. 8. Neuromarketing is the study of how the brain responds to marketing stimuli, including brands. 9. Ethnographic research uses “thick description” based on participant observation. 10. Quantitative research typically employs various types of scale questions from which researchers can draw numerical representations and summaries. 11. Quantitative measures of brand knowledge can help to more definitively assess the depth and breadth of brand awareness; the strength, favorability, and uniqueness of brand associations; the positivity of brand judgments and feelings; and the extent and nature of brand relationships. 12. The customer-based brand equity model provides a comprehensive, cohesive overview of brand building and brand equity. 13. Marketing research agency Millward Brown’s Brand Dynamics model offers a graphical model to represent the emotional and functional strength of relationship consumers have with a brand. Chapter 10 Measuring Outcomes of Brand Equity: Capturing Market Performance Chapter Objectives 1. Recognize the multidimensionality of brand equity and the importance of multiple methods to measure it. 2. Contrast different comparative methods to assess brand equity. 3. Explain the basics of how conjoint analysis works. 4. Review different holistic methods for valuing brand equity. 5. Describe the relationship between branding and finance. Overview Chapter 2 of the book details seven benefits or outcomes that can result when a firm builds positive customer-based equity for a brand: greater perceived differentiation, stronger brand loyalty, larger margins, higher trade support, increased marketing communication effectiveness, and more opportunities to extend and license the brand name. Chapter 10 describes procedures that allow a firm to assess whether its marketing programs have, indeed, generated such outcomes. Comparative methods help assess the specific benefits of brand equity. Marketing-based comparative approaches hold the brand fixed and examine consumer responses to changes in the marketing program. Brand-based comparative approaches hold fixed a particular marketing activity being considered and examine how consumer responses to the activity change as the brand identification is varied between a focal and a comparison brand. This usually is done through the use of an experiment in which one group of consumers responds to questions about a product or an aspect of its marketing program attributed to the focal brand, and another group of consumers responds to questions about the same product or aspect of its marketing program attributed to the comparison brand, typically either fictitious, unnamed, or competitive. A comparison of the responses provides insight into the equity of the focal brand. Conjoint analysis varies the attributes or levels of attributes included in product profiles presented to consumers. Consumer ratings of the profiles can be analyzed to determine the importance attached to each attribute and the tradeoffs consumers are willing to make between them. In contrast to techniques just described, holistic methods are used to derive an overall brand value, either in terms of utility or money. The residual approach considers brand equity to be what remains when preferences for objective characteristics of the product are subtracted from overall brand preference. Data used to determine residual value can be gathered through scanners, experiments, or surveys. Valuation approaches measure brand equity in dollars by determining: a) the amount of money that would be required to reproduce or replace the brand (cost approach), b) the incremental cash flows that would arise from the sale of the brand versus those that would arise from the sale of an unbranded product (market approach), or c) the net present value of the discounted future cash flows to be derived from the brand (income approach). Brand Focus 10.0 “Branding & Finance” discusses the relationship between brand equity valuations and stock market information and performance. It also analyzes the accounting implications of branding. Science of Branding THE SCIENCE OF BRANDING 10-1 THE PROPHET BRAND VALUATION METHODOLOGY Prophet’s brand valuation methodology starts with the realization that accountants define an asset as “a resource, under the control of an enterprise, to which future economic benefits will flow.” Fundamental to Prophet’s approach is that brands generate future economic benefits, in that consumers who know of a brand and prefer it to other choices will spend money buying it now and in the future. Prophet’s brand valuation methodology has four steps: 1. Finance Economic profit is the profit a company earns that exceeds its cost of capital. It is generally acknowledged that brands are a major cause of a company earning and sustaining economic profit. The starting point for any valuation is therefore to extract from the income statement and balance sheet the economic profit earned by the brand being valued. 2. Brand Contribution The Prophet brand contribution is a procedure that breaks economic profit into a set of drivers and then isolates the portion that is attributable to the brand’s equity or strength. 3. Category Expected Life The profit a brand can earn is to a large extent dictated by the nature of the category in which it sells. Within the category, supply and demand pressures will exert an influence on the price range consumers will tolerate, which in turn determines profit margins brand owners can achieve. The Prophet model uses an evaluation of the category to measure the extent to which the category encourages or inhibits the earning of economic profit for the brands that compete within it. The outcome of this evaluation is to set parameters in years of expected economic life for a notional strong (dominant) and weak (marginal) brand. 4. Brand Knowledge Structure (BKS) Brand knowledge structure, or BKS, is the bundle of knowledge consumers hold in memory and use to decide what products they need and which of the available brands they will buy. The comparative strength with which this information is held by the category community of users determines the success of the competing brands. The Prophet method uses market research–based measurements of brand strength and preference to set the number of years in the cash flow projection: the stronger the brand relative to its competitors, the more years in the model. Valuation The model calculates the value of the brand by working out how many years to project the growing part of the cash flows and then the shape and duration of a theoretical decay period. It does this by merging the BKS data with the category expected life results. The value is the resulting capitalized value of the projected cash flows. Key Differences A few characteristics distinguish the Prophet brand valuation methodology. Other models typically look at only five years of future cash flows, add a perpetuity based on a discounted sixth year, and simply divide the sixth year by the discount rate. The Prophet approach models the entire expected economic life of the brand in terms of the franchise run (its rise) and decay (its decline). The nature of the brand category (category expected life) and the relative strength of the brand as measured by the BKS determine the total number of years for the present-value calculation. The proportions are reversed compared to many other models. Also, like most corporate finance valuations, the Prophet approach uses a classically estimated weighted average cost of capital (WACC). It takes specific risk into account in the cash flows, as opposed to the discount rate. Other methodologies use the market risk and beta components of WACC to insert their consumer-driven brand risk premiums. Branding Briefs BRANDING BRIEF 10-1 BEAUTY IS IN THE EYE OF THE BEHOLDER In making acquisitions, a company has to determine what it feels the acquired brands are worth. In some instances, the hoped-for brand value has failed to materialize, serving as a reminder that the value of a brand is partly a function of what you do with it. A classic example is Quaker Oats’s $1.7 billion acquisition of Snapple in 1994. Snapple had become a popular national brand through powerful grassroots marketing and a willingness to distribute to small outlets and convenience stores. Quaker changed Snapple’s ad campaign and revamped its distribution system. Quaker also changed the packaging by updating the label and putting Snapple in 64-ounce bottles, moves that did not sit well with loyal customers. The results were disastrous. Another unsuccessful acquisition occurred when Quality Dining bought Bruegger’s Bagels in 1996 with $142 million in stock. More recently, despite much success with its Ford brand, Ford Motor Company could never seem to find the right formula for the overseas acquisitions that made up its Premier Automotive Group collection. The company sold the Jaguar and Land Rover brands to India’s Tata Motors in March 2008 for $1.7 billion. After paying $6.5 billion for Volvo in 1999, Ford sold it to China’s Geely for $1.5 billion in 2010. Ford’s decision was motivated by a lack of success with its luxury brands and a desire to focus on its more promising Ford brand. In all these case, despite the best of intentions, brands were sold with an implicit assumption that could be more profitably marketed by someone else. Brand Focus BRAND FOCUS 10.0 BRANDING AND FINANCE Marketers increasingly must be able to quantify their activities directly or indirectly in financial terms. One important topic that has received increasing academic interest is the relationship between brand equity and brand strategies and stock market information and performance. Another important topic is the accounting implications of branding. Stock Market Reactions Several researchers have studied how the stock market reacts to the brand equity and marketing activities for companies and products. Brand Equity—In a classic study, David Aaker and Robert Jacobson examined the association between yearly stock return and yearly brand changes for 34 companies during the years 1989 to 1992. They also compared the accompanying changes in current-term return on investment (ROI). They found that stock market return was positively related to changes in ROI. Firms that experienced the largest gains in brand equity saw their stock return average 30 percent. Conversely, those firms with the largest losses in brand equity saw stock return average a negative 10 percent. The researchers concluded that investors can and do learn about changes in brand equity by learning about a company’s plans and programs. Using data for firms in the computer industry in the 1990s, Aaker and Jacobson found that changes in brand attitude were associated contemporaneously with stock return and led accounting financial performance. They also found five factors (new products, product problems, competitor actions, changes in top management, and legal actions) that were associated with significant changes in brand attitudes. Madden, Fehle, and Fournier found that strong brands not only delivered greater returns to stockholders versus a relevant market benchmark, they did so with less risk. Marketing Activities—Adopting an event study methodology, Lane and Jacobson were able to show that stock market participants’ responses to brand extension announcements, consistent with the tradeoffs inherent in brand leveraging, depend interactively and nonmonotonically on brand attitude and familiarity. In another event study of 58 firms that changed their names in the 1980s, Horsky and Swyngedouw found that for most of the firms, name changes were associated with improved performance; the greatest improvement tended to occur in firms that produced industrial goods and whose performance prior to the change was relatively poor. The researchers interpreted the act of a name change as a signal that other measures to improve performance will be seriously and successfully undertaken. A mixed branding strategy (where a firm used corporate names for some products and individual names for others) was associated with lower values of Tobin’s Q. The researchers also concluded that most firms would have been able to improve their Tobin’s Q had they adopted a branding strategy different from the one suggested by examining their brand portfolios. Similarly, Morgan, Rego, and colleagues showed how five brand portfolio characteristics (number of brands owned, number of segments in which they are marketed, degree to which the brands in the firm’s portfolio compete with one another, and consumer perceptions of the quality and price of the brands in the firm’s portfolio) affected a firm’s marketing effectiveness and efficiency and financial performance. Finally, Mizik and Jacobson found that the stock market reacted favorably when a firm increased its emphasis on value appropriation over value creation. Accounting Perspectives on Brands Coinciding with the introduction to business of the main frame computer in the 1970s and the personal computer in the 1980s, the gap started to open. At the peak of the “dot.com” boom, market value was measured at five times book value. Traditionally, company annual financial accounts were based on “historic cost.” But the cost and the value of the asset at current market prices often differed. To provide investors with more readily useful information for making investment decisions, the major accounting bodies, the Financial Accounting Standards Board (FASB) in the United States and the International Accounting Standards Board (IASB) representing accountants in the rest of the world, took two steps: 1. They moved from historic cost to fair value. 2. They began to develop accounting standards to take account of assets that have no monetary value and no physical substance. Over the past decade, FASB and the IASB have worked on the following four standards relevant to brands: IFRS 3 Business Combinations—The purpose of this standard is to guide preparers of financial statements in the treatment of companies after a merger or acquisition. IAS 38 Intangible Assets—It contradicts IFRS 3 in that it states that brands developed by a company do not qualify to be described as assets. IFRS 13 Fair Value Management—As its name implies, it explains in considerable detail how an asset should be measured at its fair value. IFRS 36 Impairment of Assets—IFRS 36 requires assets to be tested annually, and if the value has fallen below what is called the carrying amount, the difference must be treated as a loss in the income statement. Discussion questions 1. Choose a product. Conduct a branded and unbranded experiment. What do you learn about the equity of the brands in that product class? Answer: Answers will vary. The classic example of the brand-based comparative approach is “blind testing” research studies in which different consumers examine or use a product with or without brand identification. Students may be divided into groups for this purpose and then see the differences that emerge. In a branded experiment, consumers prefer and pay more for a well-known brand (e.g., Apple) due to perceived quality and status. In an unbranded experiment, without the brand name, consumers focus more on features and price, often leading to lower perceived value. This shows that strong brand equity enhances market performance and consumer preference. 2. Can you identify any other advantages or disadvantages with the comparative methods? Answer: Certainly another concern with comparative methods is how well specified the models are – when do missing variables really tell the whole story? Another advantage, however, is the ability to provide quantified estimates. Advantages of Comparative Methods: 1. Clear Benchmarking: Provides a direct comparison between branded and unbranded products, highlighting the brand's impact on consumer preferences and pricing. 2. Quantifiable Insights: Allows for measurable differences in consumer behavior, aiding in assessing brand equity and market performance. Disadvantages of Comparative Methods: 1. Context Dependency: Results can vary based on the context of the experiment, such as the product category or market conditions. 2. Limited Scope: May not capture all aspects of brand equity, such as emotional or experiential factors, which can affect consumer perceptions and loyalty. 3. Pick a brand and conduct an analysis similar to that done for the Planter’s brand. What do you learn about its extendibility as a result? Answer: Answers will vary. Students may be divided into groups to better analyze a brand of their choice. Let's analyze Nike: Analysis: • Current Brand Equity: Nike is known for its high-quality sportswear and athletic shoes, with strong brand loyalty, innovative designs, and a powerful marketing presence. • Extendibility: Nike has successfully extended its brand into areas like sports equipment, fitness technology, and even lifestyle apparel. Learnings: • High Extendibility: Nike's strong brand equity allows it to extend into various product categories while maintaining its core values of performance and innovation. • Market Fit: The brand's reputation and associations support successful entries into new markets, as consumers trust Nike’s quality and brand promise across different product lines. 4. What do you think of the Interbrand methodology? What do you see as its main advantages and disadvantages? Answer: The Interbrand approach arrives at a single figure that represents the strength of the brand. As Peter Fader points out, valuation approaches are subject to a number of pitfalls. These include a high degree of subjectivity, the imprecise science of measuring intangible assets, and the difficulty of separating the brand from the company. Interbrand Methodology: Advantages: 1. Comprehensive Approach: Combines financial performance, brand influence, and strength, providing a holistic view of brand value. 2. Benchmarking: Allows for comparison across brands and industries, aiding in strategic decision-making. Disadvantages: 1. Complexity: The methodology involves complex calculations and subjective assessments, which can be difficult to standardize. 2. Data Dependence: Relies heavily on financial data and market assumptions, which may not always reflect current brand perceptions or emerging trends. 5. How do you think Young and Rubicam’s Brand Asset Valuator relates to the Interbrand methodology (see Brand Focus 9.0)? What do you see as its main advantages and disadvantages? Answer: Answers will vary. Interbrand is probably the premier brand valuation firm. Because Interbrand’s approach looks at the ongoing investment and management of the brand as an economic asset, it takes into account all the different ways in which a brand benefits an organization both internally and externally. The BAV model is developmental in that it explains how brands grow, how they get into trouble, and how they recover. BAV measures brands on four fundamental measures of equity value plus a broad array of perceptual dimensions. It provides comparative measures of the equity value of thousands of brands across hundreds of different categories, as well as a set of strategic brand management tools for planning: brand positioning, brand extensions, joint branding ventures, and other strategies designed to assess and direct brands and their growth. BAV is also linked to financial metrics and is used to determine a brand’s contribution to a company’s valuation. The main advantage of the BAV model is that it provides rich category-agnostic descriptions and profiles across a large number of brands. It also provides focus on four key branding dimensions. It provides a brand landscape in which marketers can see where their brands stand relative to other prominent brands in many different markets. The descriptive nature of the BAV model does mean that there is potentially less insight as to exactly how a brand could rate highly on those factors. Nevertheless, the BAV model represents a landmark study in terms of its ability to enhance marketers’ understanding of what drives top brands and where their brands fit in a vast brands cape. Comparison of Young & Rubicam’s Brand Asset Valuator (BAV) and Interbrand Methodology: Relation: • BAV focuses on brand strength through attributes like differentiation, relevance, esteem, and knowledge. • Interbrand assesses brand value based on financial performance, brand influence, and strength. Advantages of BAV: 1. Consumer-Centric: Emphasizes consumer perceptions and brand attributes, offering insights into brand strength and potential. 2. Predictive Value: Helps predict future brand performance based on current strength and market position. Disadvantages of BAV: 1. Subjectivity: Heavily relies on qualitative assessments, which can vary and be less precise. 2. Limited Financial Insight: Does not incorporate financial metrics, which are crucial for a complete brand valuation. Exercises and assignments 1. Have students identify brands that have the highest equity levels in their categories. Discuss the likely reasons for the preeminence of the brands, and what the implications for marketing strategy are. Examples of product categories might include motels, computers, sunglasses, automobiles, ski equipment, and airlines. Answer: Example Brands with High Equity: 1. Toyota (Automobiles): Known for reliability and quality. Implication: Emphasize quality and trust in marketing. 2. Apple (Computers): Noted for design and ecosystem. Implication: Focus on innovation and premium positioning. 3. Ray-Ban (Sunglasses): Renowned for style and heritage. Implication: Highlight brand history and maintain high standards. 2. Have several groups of students take a brand-based comparative approach by conducting a product purchase or consumption research on an existing product with the brand identification being hidden for an unbranded control group. This activity will help students understand better the concept of blind testing in research studies. Answer: Activity Summary: 1. Conduct Research: Have groups test a product with known brand identification against the same product with brand information hidden (unbranded). 2. Blind Testing: Compare consumer preferences, perceptions, and purchase intentions between branded and unbranded versions. Purpose: This helps students understand how brand identification influences consumer behavior and the impact of blind testing on research findings. 3. Have students divided into groups. Have each group pick a brand of their choice and have one group at a time to treat the others as consumers and assess their response to different advertising strategies, executions, or media plans of their chosen brand. This activity will help students understand better the application of marketing-based comparative approaches. Answer: Activity Summary: 1. Group Task: Each group selects a brand and creates different advertising strategies or media plans for it. 2. Consumer Assessment: Groups present their strategies to other groups, who act as consumers and evaluate the effectiveness of the ads. Purpose: This helps students understand how various advertising approaches impact consumer responses and the application of marketing-based comparative methods. 4. Ask students to identify brands that are market leaders in their categories, but that are weak on other dimensions. Analyze the reasons for the weaknesses and describe strategies for overcoming them. Answer: Example Brands and Analysis: 1. Brand: Coca-Cola (Health Concerns) • Weakness: High sugar content leading to health issues. • Strategy: Develop and market healthier product options, invest in sugar-free alternatives, and improve transparency about health impacts. 2. Brand: Kodak (Innovation) • Weakness: Struggled with digital transformation. • Strategy: Focus on innovation, invest in new technologies, and pivot to digital solutions and services. Overall Strategy: Identify weaknesses, adapt to market trends, and invest in improvements to maintain leadership and address challenges. Key take-away points 1. Comparative methods are research studies or experiments that examine consumer attitudes and behavior toward a brand to directly estimate specific benefits arising from having a high level of awareness and strong, favorable, and unique brand associations. 2. The effect of brand equity on consumer response to marketing activity can be measured using experimental or statistical techniques. 3. Holistic methods place an overall value on the brand in either abstract utility terms or concrete financial terms. 4. The actual financial value of a brand can only be estimated, and researchers have developed several different techniques for doing so. 5. Multiple measures and methods should be used to assess the multiple outcomes of brand equity. Chapter 11 Designing and Implementing Branding Strategies Chapter Objectives 1. Define the key components of brand architecture. 2. Outline the guidelines for developing a good brand portfolio. 3. Assemble a basic brand hierarchy for a brand. 4. Describe how a corporate brand is different from a product brand. 5. Explain the rationale behind cause marketing and green marketing. Overview Firms have a variety of options available to them with respect to branding strategy, which refers to the nature and number of common and distinctive branding elements that can be applied to the products and services sold. Branding strategy is important as a means of enabling consumers to understand and connect with the brand, since it can help consumers organize a company’s products and services in their minds. This chapter introduces the concepts of brand architecture and brand hierarchy, two tools that can help a company make decisions regarding branding strategy. The brand architecture defines both brand boundaries and brand complexity. The brand-product matrix is a graphical representation of all the products sold by a firm. Each row of the matrix is labeled with a brand name, while each column represents a product. Thus, the rows of the matrix correspond to brand lines (all the products sold under a particular brand name) while the columns correspond to product lines, a.k.a. brand portfolios, (all the brands marketed in particular product categories). A firm’s branding strategy can be characterized according to its breadth, which refers to the number and nature of products that bear the same brand name, and its depth, which refers to the number and nature of brands in the same product category. Marketers can use the brand-product matrix to determine whether and where to make connections across products and brands. A brand hierarchy visually illustrates the possible relationships that can be formed among the firm’s products through the selection of common and distinctive brand elements. The levels of the hierarchy might include the corporate or company brand at the top, followed by a family brand used in more than one product category, an individual brand that typically is restricted to one product category, and a modifier that designates a specific item or model. Because a company’s marketing activity may result in different types of associations becoming linked to the brand names at various levels of the hierarchy, each name has the potential to impact the equity of brands at levels above and below it. The choice of branding strategy depends upon a number of different factors, including corporate objectives and capabilities, consumer behavior, and competitive approaches. Consequently, strategies differ significantly between firms and even across products within firms. In addition to designating the optimal hierarchy, a company must also design marketing support programs that create the desired awareness and associations at each level. In general, associations for a higher-level brand should be relevant to as many brands below it as possible, while brands at the same level should be as differentiated as possible. The chapter concludes by discussing how corporate or family brands can establish a number of valuable associations to differentiate the brand. The chapter also gives an insight to brand architecture guidelines toward the end. Brand Focus 11.0 covers a discussion on the use of cause marketing to build brand equity. This section covers the advantages of cause marketing, cause marketing programs’ design, and green marketing. Science of Branding THE SCIENCE OF BRANDING 11-1 THE BRAND-PRODUCT MIX The brand-product mix is a graphical representation of all the brands and products sold by the firm. The rows of the matrix represent brand-product relationships. They capture the firm’s brand-extension strategy in terms of the number and nature of products sold under its different brands. A brand line consists of all products sold under a particular brand. The columns of the matrix represent product-brand relationships. They capture the brand portfolio strategy in terms of the number and nature of brands to be marketed in each category. The brand portfolio is the set of all brands and brand lines that a particular firm offers for sale to buyers in a particular category. A firm’s brand architecture strategy is characterized according to its breadth (in terms of brand-product relationships and brand extension strategy) and its depth (in terms of product-brand relationships and the brand portfolio or mix). A product line is a group of products within a product category that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same type of outlets, or fall within given price ranges. A product mix (or product assortment) is the set of all product lines and items that a particular seller makes available to buyers. A brand mix (or brand assortment) is the set of all brand lines that a particular seller makes available to buyers. THE SCIENCE OF BRANDING 11-2 CAPITALIZING ON BRAND POTENTIAL A brand’s long-term brand value depends on how well a firm understands and recognizes its potential and capitalizes on it in the marketplace. Processes Affecting Long-Term Brand Value Brand Vision—Brand vision requires defining the potential of a brand. Inherent brand potential is the value that can be extracted from a brand via optimally designed marketing strategies, programs, and activities. Brand Actualization—Brand actualization means achieving the brand’s inherent potential. Firms vary in their ability to formulate a vision of what brand potential is and then capitalize on it to activate the brand’s inherent brand potential. Components of Long-Term Brand Value Brand actualization (or potential actualization) depends on how successfully a firm can translate brand potential into the two key components of long-term brand value: brand persistence and brand growth. Brand Persistence—Brand persistence reflects the extent to which the current customer franchise and their spending levels can be sustained over time. The endurance of a brand’s position and equity depends primarily on three factors: 1. The strength, favorableness, and uniqueness of key brand associations; 2. The likelihood that these characteristics will continue into the future; and 3. The firm’s skill in developing and implementing marketing programs and activities that help preserve them over time. Some brand associations are more enduring than others. Perhaps the biggest challenge to brand persistence, however, is the ability of the brand to sustain differentiation. Brand Growth—Brand growth reflects the extent to which current customers actually increase their spending and new customers are attracted to the brand, with either existing or new products. Factors Influencing Brand Persistence and Growth Brand persistence and growth depend on the risks evident in the marketing environment, the brand’s vulnerability to those risks, and what the firm does to handle them. Risks in the Marketing Environment—The marketing environment consists of seven components: competitive, demographic, economic, physical, technological, political-legal, and social-cultural. Long-term brand value is more predictable. It rises when firms are less vulnerable to competition and other environmental changes and are therefore better able to capitalize on their inherent brand potential. Brand persistence and growth also depend on how effectively competitors operate. A key question is how equipped a company is to anticipate, withstand, and capitalize on changes and shifts that occur in the marketplace. Firm Behaviors—First, the firm must be motivated and committed to take advantage of the brand and its potential. The ability to maximize brand potential will depend in large part on the skills of the firm to recognize and define the brand’s potential to begin with. Finally, a firm must have the opportunity to formulate and activate the brand potential. A Key Implication Achieving the brand’s long-term value is a function of recognizing and realizing its potential through brand vision and brand actualization activities. One important implication is that a brand has different growth prospects depending on which firm owns it. THE SCIENCE OF BRANDING 11-3 CORPORATE BRAND PERSONALITY Corporate brand personality can be defined as “a form of brand personality specific to a corporate brand” and “the human characteristics or traits that can be attributed to a corporate brand.” Since corporate brands are designed to encompass a wider range of associations than the product brands that might fall under them, the dimensions are not necessarily the same. A successful twenty-first century corporation’s brand personality must reflect three core dimensions: the “heart,” the “mind,” and the “body.” The heart of a company reflects two traits: it is passionate and compassionate. The mind of a company is creative and disciplined. The body of a company is agile and collaborative. These three core dimensions of corporate personality have a multiplicative, not merely an additive, effect. These dimensions of corporate personality traits are important to build in a brand, because the corporation competing in the twenty-first century will be defined “as much by who it is as what it does.” If all employees act with a “heart,” “mind,” and “body,” then the company will be better positioned to achieve success in the twenty-first-century business environment. Branding Briefs BRANDING BRIEF 11-1 EXPANDING THE MARRIOTT BRAND The Marriotts added hot food to their root beer stand and renamed their business the Hot Shoppe. As the number of Hot Shoppes in the Southeast grew, Marriott expanded into in-flight catering by serving food on Eastern, American, and Capital Airlines. Hot Shoppes began its food service management business when it opened a cafeteria in the U.S. Treasury building. The company expanded into another hospitality sector when Hot Shoppes opened its first hotel in Arlington, Virginia. Hot Shoppes, which was renamed Marriott Corporation in 1967, grew nationally and internationally by making strategic acquisitions and entering new service categories. Marriott continued to diversify its business. Its acquisition of Host International made it the top U.S. operator of airport food and beverage facilities. Marriott added 1,000 food service accounts by purchasing three food service companies: Gladieux, Service Systems, and Saga Corporation. The company initiated a segmented marketing strategy for its hotels by introducing the moderately priced Courtyard by Marriott brand. Courtyard hotels were designed to offer travelers greater convenience and amenities, such as balconies and patios, large desks and sofas, and pools and spas. In 1984, the company entered the vacation timesharing business by acquiring American Resorts Group. The following year, it purchased Howard Johnson Company, selling the hotels and retaining the restaurants and rest stops. In 1987, Marriott added three new market segments: Marriott Suites, full-service suite accommodations; Residence Inn, extended-stay rooms for business travelers; and Fairfield Inn, an economy hotel brand. In 1993, Marriott Corporation split in two, forming Host Marriott to own the hotel properties, and Marriott International to manage them and franchise its brands. It expanded again in 1997 by acquiring the Renaissance Hotel Group and introducing TownePlace Suites, Fairfield Suites, and Marriott Executive Residences. Marriott added a new hotel brand in 1998 with the introduction of SpringHill Suites. The following year, the company acquired corporate housing specialist ExecuStay Corporation and formed ExecuStay by Marriott, now a franchise business. The launch in 2007 of stylish EDITION hotels put Marriott in the luxury boutique market. The Autograph Collection was also introduced in 2011, a diverse collection of high-personality, upper-upscale independent hotels. AC Hotels by Marriott was another lifestyle hotel entry in 2011. The last Hot Shoppe restaurant, located in a shopping mall in Washington, D.C., closed on December 2, 1999. Today, Marriott International is one of the leading hospitality companies in the world, with 3,700 properties in 72 countries and territories worldwide that brought in almost $12 billion in global revenues in 2010. In 2012, after extensive consumer research, Marriott International developed a formal brand architecture that it shared with prospective guests on its Websites to aid them in their lodging decisions. BRANDING BRIEF 11-2 NETFLIX BRANDING STUMBLES Founded in 1997, Netflix pioneered the DVD-by-mail category, successfully challenging traditional video stores and driving industry leader Blockbuster into bankruptcy in the process. Netflix’s bold formula for success included flawless service delivery combined with a state-of-the-art movie recommendation engine for users. Hard-charging and constantly seeking to innovate, Netflix dove in head-first as streaming technology evolved online and quickly found a receptive audience ready to instantaneously download and view video. That’s also where the trouble began. Customers were told on July 12, 2011, that they would begin to be charged $7.99 for each form of rental instead of $9.99 for both forms, in effect a 60 percent price increase for the 24 million subscribers who wanted to use both physical discs and streaming. In an unfortunate coincidence, at roughly the same time, cable channel Starz very publicly ended negotiations with Netflix to renew a key online deal to supply movies and TV shows. Perceiving that they would be paying more for less, customers were decidedly unhappy. Over 600,000 terminated their accounts in the following months, catching Netflix off guard. Many existing customers, however, accustomed to years of the three-at-a-time DVD rental service, viewed the online service as a free add-on to their DVD rentals, not the other way around. Hastings announced that the company’s movies-by-mail service would be rebranded Qwikster and would add video games to its catalog, while the Netflix brand would be devoted to streaming video only. Once again, consumer response was emphatically negative. After several weeks of negative criticism and publicity, another Hastings post announced that the company would no longer split its services in two. Netflix’s brand architecture problems clearly slowed down the momentum the company had achieved in the marketplace and left many consumers unhappy or confused. BRANDING BRIEF 11-3 CORPORATE REPUTATIONS: THE MOST ADMIRED U.S. COMPANIES Every year, Fortune magazine conducts a comprehensive survey of business perceptions of the companies with the best corporate reputations. The 2010 survey included the 1,400 largest U.S. and non-U.S. companies in 64 industry groups. To create industry lists, respondents rated companies in their industry on nine criteria: (1) quality of management; (2) quality of products or services; (3) innovativeness; (4) long-term investment value; (5) financial soundness; (6) ability to attract, develop, and keep talented people; (7) responsibility to the community and the environment; (8) wise use of corporate assets; and (9) global competitiveness. Many of the same companies make the list year after year. Apple was number one from 2007 to 2010, and Procter & Gamble was in the top ten from 2005 to 2010. Another informative survey, the RQ 2010 study of corporate reputations, conducted each year since 1999 by Harris Interactive and the Reputation Institute, demonstrated both the enduring character of corporate reputations but their ability to change quickly at the same time. Researchers determine which companies should be rated on the basis of a preliminary sampling of over 30,000 members of the U.S. general public, utilizing the proprietary Harris Poll online panel. Respondents are asked first to identify the 60 most visible companies and then to rate them on 20 different attributes that make up the Reputation Quotient (RQ) instrument. The attributes are then grouped into six different reputation dimensions: Emotional Appeal, Products & Services, Social Responsibility, Vision & Leadership, Workplace Environment, and Financial Performance. BRANDING BRIEF 11-4 CORPORATE INNOVATION AT 3M 3M has fostered a culture of innovation and improvisation from its very beginnings. 3M makes more than 50,000 products, including adhesives, contact lenses, and optical films. Each year, 3M launches scores of new products, and the company generates significant revenues from those introduced within the past five years. It regularly ranks among the top 10 U.S. companies each year in patents received. The firm is able to consistently produce innovations in part because it promotes a corporate environment that facilitates new discoveries: • 3M encourages everyone, not just engineers, to become “product champions.” • Each promising new idea is assigned to a multidisciplinary venture team headed by an “executive champion.” • 3M expects some failures and uses them as opportunities to learn how to make products that work. • 3M has introduced social networks into its innovation process, inviting 75,000 global employees and over 1,200 other people to participate in its annual Markets of the Future brainstorming session. Some of the innovations that emerged from 3M in 2010 include Cubitron II industrial abrasives, which are revolutionizing how grinding and abrading are done; new low-cost, maintenance-free respirators’ and a new line of micro projectors for cars, classrooms, and recreational use. Brand Focus BRAND FOCUS 11.0 CAUSE MARKETING Cause-related (or cause) marketing has been defined as “the process of formulating and implementing marketing activities that are characterized by an offer from the firm to contribute a specified amount to a designated cause when customers engage in revenue-providing exchanges that satisfy organizational and individual objectives.” Advantages of Cause Marketing One reason for the rise in cause marketing is the positive response it elicits from consumers. Cause or corporate societal marketing (CSM) programs offer many potential benefits to a firm: • Building brand awareness—Because of the nature of the brand exposure, CSM programs can be a means of improving recognition for a brand, although not necessarily recall. • Enhancing brand image—Two types of abstract or imagery-related associations to a brand can be linked via CSM: user profiles; and personality and values. • Establishing brand credibility—CSM could affect all three dimensions of credibility, because consumers may think of a firm willing to invest in CSM as caring more about customers and being more dependable than other firms, as well as being likable for “doing the right things.” • Evoking brand feelings—CSM may help consumers justify their self-worth to others or to themselves. • Creating a sense of brand community—CSM and a well-chosen cause can serve as a rallying point for brand users and a means for them to connect to or share experiences with other consumers or employees of the company itself. • Eliciting brand engagement—Participating in a cause-related activity as part of a CSM program for a brand is certainly one means of eliciting active engagement. Perhaps the most important benefit of cause-related marketing is that by humanizing the firm, it may help consumers develop a strong, unique bond with the firm that transcends normal marketplace transactions. Designing Cause-Marketing Programs Cause marketing comes in many forms related to education, health, the environment, the arts, and so on. Some firms have used cause marketing very strategically to gain a marketing advantage. A danger is that the promotional efforts behind a cause-marketing program could backfire if cynical consumers question the link between the product and the cause and see the firm as self-serving and exploitive, as a result. The hope is that cause marketing strikes a chord with consumers and employees, improving the image of the company and energizing these constituents to act. Two highly successful cause programs are associated with breast cancer: The Avon Breast Cancer Crusade and Yoplait Save Lids to Save Lives. Green Marketing A special case of cause marketing is green marketing. Although environmental issues have long affected marketing practices, especially in Europe, companies are increasingly recognizing that the environment is an important issue to their customers and shareholders and, therefore, to their bottom lines. One survey revealed that two-thirds of leaders of major brands believe sustainability initiatives were critical to stay competitive. On the corporate side, a host of marketing initiatives have been undertaken by a wide variety of firms with environmental overtones. The auto industry is responding to the dual motivators of concerned consumers and rising oil prices by introducing gas-saving and emission-reducing hybrid models. McDonald’s has introduced a number of well-publicized environmental initiatives through the years. From a branding perspective, however, green marketing programs have not always been entirely successful. Overexposure and Lack of Credibility—So many companies have made environmental claims that the public has sometimes become skeptical of their validity. Government investigations into some “green” claims, like the degradability of trash bags, and media reports of the spotty environmental track records behind others have only increased consumers’ doubts. This backlash has led many consumers to consider environmental claims to be marketing gimmicks. Efforts to provide consumers with more information have sometimes only complicated the situation. The challenge is that producing and consuming products always requires trade-offs—all products, regardless of how “green” they appear or claim to be, affect the environment in some way. And the results of “green” actions are not always obvious. Deciphering environmental claims is very tricky. To help provide some clarity, the U.S. government has stepped in and demanded that companies be more specific and substantiate environmental claims. Consumer Behavior—Several studies help put consumer attitudes toward the environment in perspective. Although consumers often assert that they would like to support environmentally friendly products, their behavior doesn’t always match their intentions. In most segments, they appear unwilling to give up the benefits of other options to choose green products. Poor Implementation—In jumping on the green marketing bandwagon, many firms initially did a poor job. Products were poorly designed, overpriced, and inappropriately promoted. Once product quality improved, advertising sometimes still missed the mark, being overly aggressive or not compelling. Possible Solutions—In Europe, many of Procter & Gamble’s basic household items, including cleaners and detergents, are available in refills that come in throw-away pouches. P&G says U.S. customers probably would not take to the pouches. In the United States, firms continue to strive to meet the wishes of consumers concerning the environmental benefits of their products, while maintaining necessary profitability. Discussion questions 1. Pick a company. As completely as possible, characterize its brand portfolio and brand hierarchy. How would you improve the company’s branding strategies? Answer: Answers will vary. Students may be divided into groups to analyze a company on its brand portfolio and hierarchy. Company: Procter & Gamble (P&G) Brand Portfolio: Diverse with major brands in household care (Tide), beauty (Olay), and health (Vicks). Brand Hierarchy: • Corporate Brand: Procter & Gamble • Categories: Household Care, Beauty & Grooming, Health • Sub-brands: Tide, Olay, Gillette, etc. Improvements: 1. Increase brand synergy for more cohesive marketing. 2. Boost digital and social media efforts for better engagement. 3. Focus on sustainability to appeal to eco-conscious consumers. 4. Streamline the brand portfolio to reduce overlap and complexity. 2. Do you think the Dow Chemical corporate image campaign described in this chapter will be successful? Why or why not? What do you see as key success factors for a corporate image campaign? Answer: The class may be divided into two groups based on whether they favor the corporate image campaign or not. The question for students then will be to determine to what extent this success is due to the campaign versus other business-related factors. Success of Dow Chemical Corporate Image Campaign: Likely to be successful if: 1. Clear Messaging: It effectively communicates Dow's commitment to innovation and sustainability. 2. Consistency: The campaign aligns with Dow’s overall brand values and messaging across all platforms. 3. Target Audience Engagement: It resonates with key stakeholders and target audiences. Key Success Factors: 1. Authenticity: Genuine and transparent communication about the company’s values and achievements. 2. Relevance: Messaging should address current industry trends and consumer concerns. 3. Consistency: Uniform messaging across all channels to build a cohesive brand image. 4. Measurable Goals: Clear metrics to evaluate the impact and success of the campaign. 3. Contrast the branding strategies and brand portfolios of market leaders in two different industries. For example, contrast the approach by Anheuser Busch and its Budweiser brand with that of Kellogg’s in the ready-to eat cereal category. Answer: Anheuser-Busch employs its umbrella brand in corporate image advertisements, but its individual beverage brands retain their own identity distinct from the umbrella brand; however, Anheuser-Busch does reinforce the link between many of its individual brands and the umbrella in advertising and packaging. Kellogg’s pursues an endorsement strategy with its brands, keeping a more obvious link between its cereals and the parent brand. Market Leaders Comparison: 1. Anheuser-Busch (Beer Industry): • Branding Strategy: Focuses on mass-market appeal with a broad portfolio. Brands like Budweiser and Bud Light are positioned for mainstream consumers, emphasizing consistency and brand heritage. • Brand Portfolio: Includes flagship brands (Budweiser), sub-brands (Bud Light), and specialty brands (Michelob Ultra). Emphasis on brand differentiation for diverse consumer segments. 2. Kellogg’s (Cereal Industry): • Branding Strategy: Targets various consumer needs with a portfolio of both well-known and niche brands. Emphasizes health, taste, and convenience. • Brand Portfolio: Includes flagship brands (Corn Flakes), sub-brands (Frosted Flakes), and health-oriented brands (Special K). Focuses on creating distinct brand identities to cater to different dietary preferences and lifestyles. Contrast: • Anheuser-Busch uses broad branding with a few dominant brands, focusing on mass appeal and brand loyalty. • Kellogg’s employs a more segmented strategy with a diverse brand portfolio catering to specific consumer needs and preferences. 4. What are some of the product strategies and communication strategies that General Motors could use to further enhance the level of perceived differentiation between its divisions? Answer: As far as product strategies go, GM could minimize overlap between its divisions by eliminating models with similar positioning within different divisions. Also, GM could alter up its product line to keep the divisional positioning distinct from one another. For example, many have criticized the Cadillac Escalade in spite of its success because Cadillac has traditionally stood for luxury cars, not trucks. From a communications standpoint, GM might avoid running umbrella advertising campaigns that emphasize the GM name, using divisional and individual product ads exclusively. Product Strategies: 1. Distinctive Features: Develop unique features and technologies for each division (e.g., luxury features for Cadillac, off-road capabilities for GMC). 2. Targeted Innovations: Tailor innovations to specific market segments, like electric vehicles for Chevrolet and high-performance models for Corvette. Communication Strategies: 1. Segmented Messaging: Create targeted advertising campaigns that emphasize each division’s unique selling points and target audience. 2. Brand Storytelling: Build compelling brand stories and narratives that highlight the heritage and values of each division, reinforcing their distinct identities. 3. Exclusive Partnerships: Forge exclusive partnerships or sponsorships that align with each division's brand image (e.g., Cadillac with high-end events, Chevrolet with sports and youth culture). 5. Consider the companies listed in Branding Brief 11-3 as having strong corporate reputations. By examining their Websites, can you determine why they have such strong corporate reputations? Answer: Answers will vary. Students may be divided into groups with each group examining the Website of one company. Examining the websites of companies with strong corporate reputations often reveals several key factors contributing to their positive image: 1. Transparency: They provide clear information about their operations, values, and policies. 2. Commitment to Social Responsibility: They highlight their efforts in sustainability, community engagement, and ethical practices. 3. Customer-Centric Approach: They offer excellent customer service, easy-to-navigate interfaces, and engaging content. 4. Strong Branding: They consistently communicate their brand values and maintain a high-quality, professional appearance. Exercises and assignments 1. Have students select a brand with a multiple-level brand hierarchy and analyze the supporting marketing communications program to determine how the upper- and lower-level names are linked and differentiated. For example, what benefits do Kellogg’s Eggo Country Sunshine Waffles receive from each level of the brand hierarchy? How are these benefits communicated in advertising and promotion? How do the waffles product relate to other products that share brand names in the hierarchy? Answer: Brand Example: Kellogg’s Eggo Country Sunshine Waffles Hierarchy: 1. Kellogg’s (Corporate Brand) 2. Eggo (Category Brand) 3. Eggo Country Sunshine Waffles (Product Line) Benefits: • Kellogg’s: Trust and quality. • Eggo: Convenience and taste. • Country Sunshine Waffles: Unique flavor and texture. Marketing Communications: • Kellogg’s: Emphasizes overall brand quality. • Eggo: Highlights convenience and variety. • Country Sunshine Waffles: Focuses on specific flavor benefits. Product Relation: • Eggo products share brand equity and credibility, while Country Sunshine Waffles offer distinct features within the Eggo brand. 2. Assign students the task of identifying pairs of competing brands with different branding strategies (for example, Kraft salad dressing and Wishbone, Arm & Hammer deodorant and Dry Idea, Hershey’s chocolate bar and Baby Ruth). What conclusions, if any, can be drawn from comparing and contrasting the types of associations consumers have for each brand in the pair? Answer: Brand Pair Example: Coca-Cola vs. Pepsi Coca-Cola: • Branding Strategy: Focuses on heritage and tradition, emphasizing a classic, timeless image with a strong emotional appeal. • Consumer Associations: Associated with nostalgia, classic American values, and a sense of togetherness. Pepsi: • Branding Strategy: Emphasizes modernity and youthfulness, often featuring contemporary, trendy elements and celebrity endorsements. • Consumer Associations: Linked to youth culture, innovation, and a more dynamic, energetic image. Conclusions: • Emotional Appeal: Coca-Cola leverages emotional connections and tradition, while Pepsi targets a younger, more trend-focused audience. • Brand Positioning: Coca-Cola's strategy fosters brand loyalty through nostalgia, whereas Pepsi aims to attract and engage new generations with a modern, aspirational image. 3. Have the class divided into groups and assign a brand to each group. Have the groups characterize the brand architecture strategy for their brands using the brand-product matrix. This activity will provide the students a better view and understanding of brand line, brand portfolio, product line, product mix, and brand mix. Answer: Brand Example: Nike Brand Architecture Strategy Using the Brand-Product Matrix: 1. Brand Line: • Nike: Core product lines include Nike Air, Nike SB (skateboarding), and Nike Free. 2. Brand Portfolio: • Nike: Includes flagship Nike, sub-brands like Jordan and Converse, and categories such as Nike Pro (performance gear) and Nike Golf. 3. Product Line: • Nike Air: Includes various models like Nike Air Max and Nike Air Force 1. 4. Product Mix: • Nike: Encompasses sports shoes, apparel, and equipment. 5. Brand Mix: • Nike Brand Mix: Integrates multiple product lines under the Nike brand, with sub-brands (e.g., Jordan) targeting specific segments and needs. Summary: • Nike uses a multi-layered brand architecture to manage a diverse portfolio, aligning various product lines under its core brand while leveraging sub-brands to address different market segments. 4. Have the class divided into groups and have them assess the corporate branding for a brand of their choice. The students may then suggest changes that can be brought about to improve the corporate branding effect for the brands. Answer: Brand Example: Starbucks Current Corporate Branding: • Strengths: Premium coffee experience, strong global presence, commitment to sustainability and social responsibility. • Weaknesses: High prices, occasional criticisms related to environmental impact and corporate practices. Suggested Changes: 1. Enhance Sustainability Efforts: Improve transparency and communication about environmental initiatives and practices. 2. Broaden Accessibility: Introduce more affordable product options or promotions to appeal to a wider audience. 3. Strengthen Local Community Engagement: Increase involvement in local communities and support local causes to build stronger regional connections. 4. Refresh Brand Messaging: Update marketing messages to highlight both premium quality and social impact, balancing luxury with broader social responsibility. Summary: • By focusing on enhanced sustainability, broader accessibility, local engagement, and refreshed messaging, Starbucks could strengthen its corporate branding and address current weaknesses. Key take-away points 1. The firm’s brand architecture strategy helps marketers determine which products and services to introduce, and which brand names, logos, symbols, and so forth to apply to new and existing products. 2. Branding strategy is important as a means of enabling consumers to understand and connect with the brand, since it can help consumers organize a company’s products and services in their minds. 3. A brand hierarchy is a useful means of graphically portraying a firm’s branding strategy by displaying the number and nature of common and distinctive brand elements across the firm’s products, revealing their explicit ordering. 4. Designing a brand strategy involves decisions regarding the number of levels to use, how brand elements at different levels will be combined for a given product, and how brand elements will be linked to multiple products. 5. Each successive level in a brand hierarchy allows the firm to communicate additional, specific information about products. 6. In general, associations for a higher-level brand should be relevant to as many brands below it as possible, while brands at the same level should be as differentiated as possible. 7. A brand portfolio includes all brands sold by a company in a product category. 8. A corporate brand is distinct from a product brand in that it can encompass a much wider range of associations which can have an important effect on the brand equity and market performance of individual products. Instructor Manual for Strategic Brand Management: Building, Measuring, and Managing Brand Equity Kevin Lane Keller 9780132664257, 9780273779414