09. Creating Brand Equity

Ch.9 BRANDING

♦ By studying this chapter, students will be

familiar with: - Brand equity - The scope of brand - Brand knowledge - Brand promise - Branding strategy - Brand line - Brand dilution - Brand portfolio

What is Brand Equity Brand as a “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers & to differentiate them from those of competitors”. A brand is thus a product or service that adds dimensions that differentiate it in some way from other products or services designed to satisfy the same need. These differences may be functional, rational, or tangible - related to product performance of the brand. They may also be more symbolic, emotional or intangible - related to what the brand represents.

Branding

Building a strong brand requires careful planning & a great deal of long-term investment. At the heart of a successful brand is a great product or service, backed by creatively designed & executed marketing. Perhaps the most distinctive skill of professional marketers is their ability to create, maintain, enhance,& protect brands. Branding has become a marketing priority. Successful brands such as Starbucks, Sony, & Nike command a price premium & elicit much loyalty.. Strategic brand management involves the design & implementation of marketing activities & programs to build, measure, & manage brands to maximize their value.

The Scope of Branding Branding is all about creating differences. To brand a product,it is necessary to teach consumers “who” the product is - by giving it a name & using other brand elements to help identify it - as well as “what” the product does & “why” consumers should care. Branding involves creating mental structures & helping consumers organize their knowledge about products & services in a way that clarifies their decision making &, in the process, provides value to the firm. For branding strategies to be successful & brand value to be created, consumers must be convinced that there are meaningful differences among brands in the product or service category.

Brand differences often are related to attributes or benefits of the product itself. Gillette, Merck, Sony, 3M, & other have been leaders in their product categories for decades due, in part, to continual innovation. Other brands create competitive advantages through non-product-related means. Coca-Cola, Calvin Klein, Gucci, Tommy Hilfiger, Marlboro, & others have become leaders in their product categories by understanding consumer motivations & desires & creating relevant & appealing images around their products.

Defining Brand Equity Brand Equity is the added value endowed to products and services. This value may be reflected in how consumers think, feel and act with respect to the brand, as well as the prices, market share, and profitability that the brand commands for the firm. Brand equity is an important intangible asset that has psychological and financial value to the firm.

Brand Knowledge Consists of all the thoughts, feelings, images, experiences, beliefs, and so on that become associated with the brand. In particular, brands must create strong, favorable, and unique brand associations with customers, as has been the case with Volvo (safety), and Harley-Davidson (adventure).

Marketing Advantages of Strong Brands          

Improved Perceptions of Product Performance Greater Loyalty Less Vulnerability to Marketing Crises Larger Margins More Inelastic Consumer Response to Price increases More Elastic Consumer Response to Price decreases Greater Trade Cooperation and Support Increased Marketing Communication Effectiveness Possible Licensing Opportunities Additional Brand Extension Opportunities

Brand Promise A brand is essentially a marketer’s promise to deliver predictable product or service performance. A brand promise is the marketer’s vision of what the brand must be and do for consumers. At the end of the day, the true value and future prospects of a brand rest with consumers, their knowledge about the brand, and their likely response to marketing activity as a result of this knowledge. Understanding consumer brand knowledge – all the different things that become linked to the brand in the minds of consumers – is thus of paramount importance because it is the foundation of brand equity.

BUILDING BRAND EQUITY - Brand elements: are those trademarkable devices that serve to identify and differentiate the brand. Most strong brands employ multiple brand elements. Nike has the distinctive “swoosh” logo, the empowering “Just Do It” slogan, and the mythological “Nike” name. Brand elements can be chosen to build as much brand equity as possible.

Brand element choice criteria: there are six criteria in choosing brand elements (as well as more specific choice considerations in each case). The first three (memorable, meaningful, and likable) can be characterized as “brand building” in terms of how brand equity can be built through the judicious choice of brand element. The latter three (protectable, adaptable, and transferable) are more “defensive” and are concerned with how the brand equity contained in a brand element can be leveraged and preserved in the face of different opportunities and constraints.

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BRAND ELEMENT CHOICE CRITERIA

Memorable. How easily is the brand element recalled? How easily recognized? Is this true at both purchase and consumption? Short brand names such as Tide, Crest, and Puffs can help. Meaningful. To what extend is the brand element credible and suggestive of the corresponding category? Does it suggest something about a product ingredient or the type of person who might use the brand? Consider the inherent meaning in names such as DieHard auto batteries, Mop & Glo floor wax, and Lean Cuisine low-calorie frozen entrees. Likeability. How aesthetically appealing do consumers find the brand element? Is it inherently likable visually, verbally, and in other ways? Concrete brand names such as Sunkist, Spic and Span, and Firebird evoke much

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Transferable. Can the brand element be used to introduce new products in the same or different categories? To what extend does the brand element add to brand equity across geographic boundaries and market segments? Volkswagen chose to name its new SUV, Touareg, after a tribe of colorful Saharan nomads? Unfortunately, historically they were also notorious slave owners, which created a negative press backlash in the united States. Adaptable. How adaptable and updatable is the brand element? Betty Crocker has received over eight makeovers through the years – although she is over 75 years old, she doesn’t look a day over 35!

6) Protectable. How legally protectable is the brand element? How competitively protectable? Can it be easily copied? It is important that names that become synonymous with product categories – such as Kleenex, Kitty, Litter, Jell-O,Scotch Tape, Xerox, and Fiberglass – retain their trademark rights and not become generic.

BUILDING BRAND EQUITY -

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Brand awareness: is consumers’ ability to identify the brand under different conditions, as reflected by their brand recognition or recall performance. Brand image: is the perceptions and beliefs held by consumers, as reflected in the associations held in consumer memory.

Measuring Brand Equity -

Measuring Brand Equity: given that the power of a brand resides in the minds of consumers and how it charges their response to marketing, there are two basic approaches to measuring brand equity. An indirect approach assesses potential sources of brand equity by identifying and tracking consumer brand knowledge structures. A direct approach assesses the actual impact of brand knowledge on consumer response to different aspects of the marketing.

BUILDING BRAND EQUITY -Brand valuation: brand equity needs to be distinguished from brand valuation, which is the job of estimating the total financial value of the brand. Certain companies base their growth on acquiring and building rich brand portfolios. Nestle has acquired Rowntree (U.K.), Carnation (U.S.), Stouffer (U.S.), Buitoni-Perugina (Italy), and Perrier (France), making it the world’s largest food company. The following table displays the world’s most valuable brands in 2004 according to one ranking. With these wellknown companies, brand value is typically over one-half of the total company market capitalization.

The World’s 10 Most Valuable Brands Rank

Brand

2004 Brand Value

1 2 3 4 5 6 7 8 9 10

Coca-Cola Microsoft IBM GE Intel Disney McDonald’s Nokia Toyota Marlboro

(Billions) $67.39 $61.37 $53.79 $44.11 $33.50 $27.11 $25.00 $24.04 $22.67 $22.13

Managing Brand Equity -

Brand Reinforcement: As a company’s major enduring asset, a brand needs to be carefully managed so that its value does not depreciate. Many brand leaders of 70 years ago are still today’s brand leaders: Kodak, Wrigley’s, Coca-Cola, Heinz, and Campbell Soup, but only by constantly striving to improve their products, services, and marketing.

Brand equity is reinforced by marketing actions that consistently convey the meaning of the brand to consumers in terms of: (1) What products the brand represents; what core benefits it supplies; and what needs it satisfies; as well as (2) how the brand makes those products superior and which strong, favorable, and unique brand associations should exist in the minds of consumers. Nivea, one of Europe’s strongest brands, has expanded its scope from a skin-cream brand to a skin-care and personal-care brand through carefully designed and implemented brand extensions reinforcing the Nivea brand promise of “mild,” “gentle,” and “caring” in a broader arena.

What is a brand worth? Interbrand Brand Strength Formula (Weights in Parentheses) 

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Leadership (25%)-The brand’s ability to influence its market and be a dominant force with a strong market share such that it can set price points, command distribution, and resist competitive invasions. A brand that leads its market or market sector is a more stable and valuable property than a brand lower down the order. Stability (15%)-The ability of the brand to survive over a long period of time based on consumer loyalty and past history. Long-established brands that have become part of the “fabric” of their markets are particularly valuable.

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Market (10%)-The brand’s trading environment in terms of growth prospects, volatility, and barriers to entry. Brands in markets such as foods, drinks, and publishing are intrinsically more valuable than brands in, for example, high-tech or clothing areas, as the latter markets are more vulnerable to technological or fashion changes. Geographic Spread (25%)-The ability of the brand to cross geographic and cultural borders. Brands that are international are inherently more valuable than national or regional brands, due in part to their economies of scale.

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Trend (10%)-The ongoing direction and ability of the brand to remain contemporary and relevant to consumers. Support (10%)-The amount and consistency of marketing and communication activity. Those brand names that have received consistent investment and focused support must be regarded as more valuable than those that have not. While the amount spent in supporting a brand is important, the quality of this support is equally significant. Protection ( 5%)-The brand owner’s legal titles. A registered trademark is a statutory monopoly in a name, device, or in a combination of these two. Other protection may exist in common law, at least in certain countries. The strength and breadth of the brand’s protection is critical in assessing its worth.

MARKETING MEMO

TWENTY-FIRST-CENTURY BRANDING

One of the most succesful marketers of the last fifteen years, Scott bedbury played a key role in the rise of both Nike and Starbucks. In his insightful book, A new Brand World, he offers the following branding principles:

4. Great brands establish enduring customer relationships - They have more to do with emotions and trust than with footwear cushioning or the way a coffee bean is roasted.

1. Relying on brand awareness has become marketing fool’s gold - Smart brands are more concerned with brand relevance and brand response.

5. Everything matters - Even your restroom.

2. You have to know it before you can grow 6. All brands need good parents it - Most brands don’t know who they are, Unfortunately, most brands come from where they’ve been, and where they’re going. troubled homes. 3. Always remember the Spandex rule of brand expansion - Just because you can doesn’t mean you should.

7. Big is no excuse for being bad - Truly great brands use their superhuman powers for good and place people and principles before profits. 8. Relevance, simplicity, and humanityRather than technology - will distinguish brands in the future.

Devising a Branding Strategy The branding strategy for a firm reflects the number and nature of common and distinctive brand elements applied to the different products sold by the firm. In other words, devising a branding strategy involves deciding the nature of new and existing brand elements to be applied to new and existing products. The decision as to how to brand new products is especially critical. When a firm introduces a new product, it has three main choices: 1. It can develop new brand elements for the new product. 2. It can apply some of its existing brand elements 3. It can use a combination of new and existing brand elements

When a firm uses an established brand to introduce a new product, it is called a brand extension. When a new brand is combined with an existing brand, the brand extension can also be called a sub-brand, as with Hershey Kisses candy, Adobe Acrobat software, Toyota Camry automobiles, and American Express Blue cards. An existing brand that gives birth to a brand extension is referred to as the parent brand. If the parent brand is already associated with multiple products through brand extensions, then it may also be called a family brand.

Brand extensions can be broadly classified into two general categories: In a line extension, the parent brand is used to brand a new product that targets a new market segment within a product category currently served by the parent brand, such as through new flavors, forms, colors, added ingredients, and package sizes. Dannon has introduced several types of Dannon yogurt line extensions through the years - Fruit on the Bottom, Natural Flavors,etc. In a category extension, the parent brand is used to enter a different product category from that currently served by the parent brand, such as Swiss Army watches. Honda has used its company name to cover such different products as automobiles, motorcycles,, lawnmovers, marine engines, and snowmobiles. This allows Honda to advertise that it can fit “six Hondas in a two-car garage.”

A brand line consists of all products - original as well as line and category extensions - sold under a particular brand. A brand mix (or brand assortment) is the set of all brand lines that a particular seller makes available to buyers. Many companies are now introducing branded variants, which are specific brand lines supplied to specific retailers or distribution channels.

Brand dilution Brand dilution occurs when consumers no longer associate a brand with a specific product or highly similar products and start thinking less of the brand.

Brand Portfolios

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All brands have boundaries - a brand can only be stretched so far. Multiple brands are often necessary to pursue multiple market segments. Any one brand is not viewed equally favorably by all the different market segments that the firm would like to target. Some other reasons for introducing multiple brands in category include: To increase shelf presence and retailer dependence in the store; To attract consumers seeking variety who may otherwise have switched to another brand; To increase internal competition within the firm; and To yield economies of scale in advertising, sales, merchandising, and physical distribution.

The Brand portfolio is the set of all brands and brand lines a particular firm offers for sale to buyers in a particular category. Different brands may be designed and marketed to appeal to different market segments. A brand portfolio must be judged by its ability to maximize brand equity.