brand performance and branding strategies
TRANSCRIPT
Brand Performance and Branding strategies
The brand value chain
The majority of companies that still follow the main principles
of the industrial economy will face great difficulties in the value
economy of the future. When the company defines itself by its
products, far too many resources will be tied up in the product
system.
Alarm bells should ring when investment in products,
services, divisions and departments are inflated when
compared to a company’s actual market access. Fortunes are
spent on developing new products without taking a critical
view on their relevance in the market.
At the same time companies will find it increasingly difficult
to push their new products through the value chain to the
people who are expected to buy them. It is becoming still
more difficult to penetrate the communication flow – and the
more products that are fighting for the same resources, the
less these resources will suffice.
Brand Value Chain is a model that illustrates the fact that the
company must change its focus to win the optimal value
position.
In contrast to the traditionally thinking company that optimises
itself according to its products, the mantra in Brand Value Chain
is the concept that in the future, the company must optimise
itself according to its value position.
Internally, the employees must be made to understand the value
position and its importance for the company’s existence. The
value position must be made relevant and present so that the
employees understand how they, through their daily work, can
contribute to the company achieving the desired value position.
Externally, the company must send a clear signal through its
collective behaviour about which value it offers to the market.
This can be effectuated through the product programme, its
customer relations and through all its marketing and
communication.
To win a strong market position the company must pull in the
same direction in everything that it does. The company’s
strategy and actions must be optimised according to how the
company can achieve the desired value position.
The Brand Value Chain way of thinking works with 8 focus
points:
To successfully enter the value economy, the core of
corporate strategy must be the optimization of the brand value
chain. Only then can it win the best value position in the
market. The entire company must be built and shaped
according to the brand. The brand value chain mindset:
1. Defining the value position you want in the market,
depicted as a circle to the very right of the figure, is key.
2. At the far left link in the brand value chain it is important
to appear as one company. Only a single, centralized
company is in a position to be unique. It has a soul and is a
living organism.
3. The company must be built into a brand because the brand
mindset is good at gathering and communicating a set of
values and attitudes externally and internally.
4. You must develop a brand culture that can hold the brand
together globally.
5. It is important to define the product programme on which
you focus when building a brand position in the market.
6. You must define the most important target groups for the
brand, both those who buy the brand directly and any indirect
decisionmakers, who are often the most important carriers of
value. Direct connection to these decision makers must be
made via a brand relation management system.
7. You need to build a consistent and value-accumulating
brand communication that focuses on the brand and not on a
lot of different product launches.
8. The brand communication must deliver the brand position
in the market, which should equal the value position you wish
to capture.
The Brand Value Chain way of thinking leads to a strategy in
which the company must focus on becoming brand oriented
instead of product oriented. Use the model as a checklist when
preparing a status of the company’s branding strategy.
In addition to this the company can use the model to take a
critical look at the way resources are being spent.
It would be utterly incorrect to think that branding is all about
spending more money on marketing. It is about reallocating the
company’s resources so that more is spent in the customer
system and less in the product and distribution system. It is
about organisational changes, creating an efficient marketing
system etc.
To illustrate this you could look in your warehouse and note
how many brochures for the last products you introduced are
still there. If you expand your survey to include subsidiaries and
distribution system, you are guaranteed to become depressed.
Or you could check out the company’s investments in new
machinery and product development costs. What would it mean
to the strength of the company’s brand and market position if
these were cut down by 10-20%? Could this money be better
spent somewhere else?
. THE CONCEPT OF BRAND EQUITY
2.1 Literature review
The concept of brand equity emerged in the early 1990s. It was
not defined precisely, but in
practical terms it meant that brands are financial assets and
should be recognised as such by
top management and the financial markets. Brand equity
includes not only the value of the
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brand, but also implicitly the value of proprietary technologies,
patents, trademarks, and other
intangibles such as manufacturing know-how. Although a
company’s stock price represents
more than brand equity, when one of a company’s brands gets
into trouble, a change in brand
equity can significantly affect the stock price. (Aaker 1996;
Keegan – Moriarty – Duncan 1995,
325; Kerin – Sethuraman 1998; 260–261) The financial value of
a brand depends on its brand
strength. It can be strengthened by investing in product quality
and in advertising. In contrast,
price promotions produce short-term increases in sales but do
nothing to build long-term brand
equity. (Barwise 1993, 94–95)
In a general sense, brand equity is defined in terms of the
marketing effects uniquely at-
tributable to the brand. That is, brand equity relates to the fact
that different outcomes result
from the marketing of a product or service because of its brand
element, as compared to out-
comes if that same product or service did not have hat brand
identification. Although a number
of different views of brand equity have been expressed, they all
are generally consistent with
the basic notion that brand equity represents the ”added value”
endowed to a product or a
service as a result of past investments in the marketing for the
brand. Researchers studying
brand equity at least implicitly acknowledge that there exist
many different ways that value
can be created for a brand; that brand equity provides a common
denominator for interpreting
marketing strategies and assessing the value of a brand; and that
there exists many different
ways in which the value of a brand can be manifested or
exploited to benefit the firm. (Keller
1993, 1; Keller 1998, 42–44)
A brand is a name or symbol used to identify the source of a
product. When developing a new product, branding is an
important decision. The brand can add significant value when it
is well recognized and has positive associations in the mind of
the consumer. This concept is referred to as brand equity.
What is Brand Equity?
Brand equity is an intangible asset that depends on associations
made by the consumer. There are at least three perspectives
from which to view brand equity:
Financial - One way to measure brand equity is to
determine the price premium that a brand commands over
a generic product. For example, if consumers are willing to
pay $100 more for a branded television over the same
unbranded television, this premium provides important
information about the value of the brand. However,
expenses such as promotional costs must be taken into
account when using this method to measure brand equity.
Brand extensions - A successful brand can be used as a
platform to launch related products. The benefits of brand
extensions are the leveraging of existing brand awareness
thus reducing advertising expenditures, and a lower risk
from the perspective of the consumer. Furthermore,
appropriate brand extensions can enhance the core brand.
However, the value of brand extensions is more difficult to
quantify than are direct financial measures of brand equity.
Consumer-based - A strong brand increases the
consumer's attitude strength toward the product associated
with the brand. Attitude strength is built by experience
with a product. This importance of actual experience by
the customer implies that trial samples are more effective
than advertising in the early stages of building a strong
brand. The consumer's awareness and associations lead to
perceived quality, inferred attributes, and eventually, brand
loyalty.
Strong brand equity provides the following benefits:
Facilitates a more predictable income stream.
Increases cash flow by increasing market share, reducing
promotional costs, and allowing premium pricing.
Brand equity is an asset that can be sold or leased.
However, brand equity is not always positive in value. Some
brands acquire a bad reputation that results in negative brand
equity. Negative brand equity can be measured by surveys in
which consumers indicate that a discount is needed to purchase
the brand over a generic product.
Building and Managing Brand Equity
In his 1989 paper, Managing Brand Equity, Peter H. Farquhar
outlined the following three stages that are required in order to
build a strong brand:
1. Introduction - introduce a quality product with the
strategy of using the brand as a platform from which to
launch future products. A positive evaluation by the
consumer is important.
2. Elaboration - make the brand easy to remember and
develop repeat usage. There should be accessible brand
attitude, that is, the consumer should easily remember his
or her positive evaluation of the brand.
3. Fortification - the brand should carry a consistent image
over time to reinforce its place in the consumer's mind and
develop a special relationship with the consumer. Brand
extensions can further fortify the brand, but only with
related products having a perceived fit in the mind of the
consumer.
Alternative Means to Brand Equity
Building brand equity requires a significant effort, and some
companies use alternative means of achieving the benefits of a
strong brand. For example, brand equity can be borrowed by
extending the brand name to a line of products in the same
product category or even to other categories. In some cases,
especially when there is a perceptual connection between the
products, such extensions are successful. In other cases, the
extensions are unsuccessful and can dilute the original brand
equity.
Brand equity also can be "bought" by licensing the use of a
strong brand for a new product. As in line extensions by the
same company, the success of brand licensing is not guaranteed
and must be analyzed carefully for appropriateness.
Managing Multiple Brands
Different companies have opted for different brand strategies for
multiple products. These strategies are:
Single brand identity - a separate brand for each product.
For example, in laundry detergents Procter & Gamble
offers uniquely positioned brands such as Tide, Cheer,
Bold, etc.
Umbrella - all products under the same brand. For
example, Sony offers many different product categories
under its brand.
Multi-brand categories - Different brands for different
product categories. Campbell Soup Company uses
Campbell's for soups, Pepperidge Farm for baked goods,
and V8 for juices.
Family of names - Different brands having a common
name stem. Nestle uses Nescafe, Nesquik, and Nestea for
beverages.
Brand equity is an important factor in multi-product branding
strategies.
Protecting Brand Equity
The marketing mix should focus on building and protecting
brand equity. For example, if the brand is positioned as a
premium product, the product quality should be consistent with
what consumers expect of the brand, low sale prices should not
be used compete, the distribution channels should be consistent
with what is expected of a premium brand, and the promotional
campaign should build consistent associations.
Finally, potentially dilutive extensions that are inconsistent with
the consumer's perception of the brand should be avoided.
Extensions also should be avoided if the core brand is not yet
sufficiently strong.
A brand hierarchy is a means of summarizing the branding
strategy by displaying the number and nature of common and
distinctive brand elements across the firm’s products, revealing
the explicit ordering of brand elements. By capturing the
potential branding relationships among the different products
sold by the firm, a brand hierarchy is a useful means of
graphically portraying a firm’s branding strategy. Specifically, a
brand hierarchy is based on the realization that a product can
be branded in different ways depending on how many new and
existing brand elements are used and how they are combined for
any one product. Because certain brand elements are used to
make more than one brand, a hierarchy can be constructed to
represent how (if at all) products are nested with other products
because of their common brand elements. Some brand elements
may be shared by many products (e.g., Ford); other brand
elements may be unique to certain products (e.g., F-series
trucks).
As with any hierarchy, moving from the top level to the bottom
level typically involves more entries at each succeeding level—
in this case, more brands. There are different ways to define
brand elements and levels of the hierarchy. Perhaps the simplest
representation of possible brand elements and thus potential
levels of a brand hierarchy—from top to bottom—might be as
follows:
1. Corporate (or company) brand (e.g., General Motors)
2. Range brand (e.g., Chevrolet)
3. Individual brand (e.g.. Lumina)
4. Modifier (designating item or model) (e.g., Ultra)
The highest level of the brand hierarchy technically always
involves one brand—the corporate or company brand. For legal
reasons, the company or corporate brand is almost always
present somewhere on the product or package, although it may
be the case that the name of a company subsidiary may appear
instead of the corporate name. For example, Fortune Brands
owns many different companies, such as Titleist, Footjoy, Jim
Beam, Master Lock, and Moen, but does not use its corporate
name in any of its lines of business. For some firms, the
corporate brand is virtually the only brand used (e.g., as with
General Electric and Hewlett-Packard). Some other firms
combine their corporate brand name with family brands or
individual brands (e.g., conglomerate Siemens varied electrical
engineering and electronics business units are branded with
descriptive modifiers, such as Siemens Transportation Systems).
Finally, in some other cases, the company name is virtually
invisible and, although technically part of the hierarchy, receives
virtually no attention in the marketing program (e.g., Black &
Decker does not use its name on its high-end DeWalt
professional power tools, and Hewlett-Packard created a wholly
owned subsidiary for its low-priced Apollo ink-jet printers).
At the next-lower level, a range / family brand is defined as a
brand that is used in more than one product category but is not
necessarily the name of the company or corporation itself. For
example, ConAgra’s Healthy Choice family brand is used to sell
a wide spectrum of food products, including frozen microwave
entrees, packaged cheeses, packaged meats, sauces, and ice
cream. Other examples of family brands boasting over a billion
dollars in annual sales include PepsiCo’s Tropicana juices and
Gatorade thirst quencher, and Anheuser-Busch’s Budweiser
beer. Most firms typically only support a handful of family
brands. If the corporate brand is applied to a range of products,
then it functions as a family brand too, and the two levels
collapse to one for those products.
An individual/ product line brand is defined as a brand that has
been restricted to essentially one product category, although it
may be used for several different product types within the
category. For example, in the “salty snack” product class, Frito-
Lay offers Fritos corn chips, Doritos tortilla chips, Lays and
Ruffles potato chips, and Rold Gold pretzels. Each brand has a
dominant position in its respective product category within the
broader salty snack product class. Basic product brands can be
refined through sub-branding.
A modifier is a means to designate a specific item or model type
or a particular version or configuration of the product. Thus,
many of Frito-Lay’s snacks come in both full-flavor or low-fat
“Better For You” forms. Similarly, Land O’Lakes offers
“whipped,” “unsalted,” and “regular” versions of its butter.
Yoplait yogurt comes as “light,” “custard style,” or “original”
flavors.
Different levels of the hierarchy may receive different emphasis
in developing a branding strategy. For example. General
Motors traditionally chose to downplay its corporate name in
branding its cars, although the name recently has played a more
important role in its supporting marketing activities. Such shifts
in emphasis are an attempt by the firm to harness the positive
associations and mitigate against the negative associations of
different brands in different contexts, and there are a number of
ways to place more or less emphasis on the different elements
that combine to make up the brand.
The strategic role of brand extension has long been
recognized by firms in the corporate world. Many
firms capitalize on brand equity through a brand
tension strategy. Brand extension involves the use of
a brand name established in one product class to enter
another product class (Aaker 1991; Tauber 1988). For
example, Ivory shampoo, Jello frozen pudding pops, Bic
disposable lighters, NCR photocopiers are successful
extensions of familiar brands to new product categories.
Brand extension as a marketing strategy has become even
more attractive in today's environment where developing
a new product costs a lot of money and can be time
consuming. This study uses the categorization theory to
examine the proposition that brand extensions would be
favorably evaluated if they are perceived as being
consistent with the overall brand concept. The research
constructs and hypotheses are as follows.
BRAND CONCEPT
Park, Millberg and Lawson (1991) regard brand concept as
"brand unique abstract meanings ... that typically originate
from a particular configuration of product features ....
and a firm's efforts to create meanings from these
arrangements (pg. 186). Thus, from a marketer's perspective
the image that a brand conveys is an important component
of the brand concept, because the meaning derived by
consumers
is a reflection of the brand image. The brand concept can
be based on the consumer needs that a brand can satisfy.
Park, Jaworski and MacInnis (1986) have identified three
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consumer needs--functional, symbolic and experiential.
A firm can decide on the type of need that it wants to
fulfill. Then through effective positioning and
communications, it can convey to the consumers the brand
concept (functional, symbolic or experiential) based on the
needs that are being catered to. Each of these three concepts
are briefly discussed.
A brand with a functional concept is valued primarily for
its functional performance. Park, et al. (1986) define
a brand with a functional concept as one designed to solve
externally generated consumption needs. Consumers will
be motivated to buy and use functional brands in situations
where the product is viewed as addressing utilitarian needs.
A brand with a symbolic concept is designed to associate
the individual with a desired group, role, or self-image
(Park, et al., 1986). It also stands to reason that social
risk would be more important for symbolic brands. An
individual would be concerned about identification with
a peer or reference group. A wrong product choice may be
ridiculed. Park, et al. (1986) define a brand with an
experiential concept as one designed to fulfill internally
generated need for stimulation and/or variety. The
primary motivation for selecting certain products is the
enjoyment that is derived from consumption of these
products. Holbrook and Hirschman (1982) recognize the
fact that "fantasies, feelings and fun" are also vital
consumption phenomena which they call the "experiential
view". Thus, the hedonic aspect of consumption becomes
predominant for these brand. Consumers regard
consumption of these products as an opportunity for
deriving sensory pleasure.
BRAND CONCEPT CONSISTENCY
According to categorization theory the world of objects
are put into different categories by individuals for
a better understanding and processing of the environment
around them (Smith and Medin 1981). A person can
transfer the effect associated with a category to a new
object, if the object can be classified as member of that
category (Cohen 1982). Many different objects can
belong to a category. There are common taxonomic
categories such as "animals," "fruits," and "vegetables"
(Barsalou 1983). In addition, there can be goal-derived
categories that are formed adhoc in order to attain a
desired goal. Barsalou (1983) cites "things to take on a
camping trip" and "things to take from one's home during
a fire" as examples of goal derived ad hoc categories.
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Brand extensions that are seen as being consistent with
the brand concept -- functional, symbolic or experiential
--can be said to constitute a category. Theunderlying
commonality between products belonging to the brand-category
would be that they address the same set of consumer needs
--functional, symbolic or experiential. It also follows
that if the original brand signifies a particular concept,
i.e., it fulfills a need, extensions from that brand can
also be regarded as primarily addressing the same set of
needs. Consumers will consider the extension as well as
the core brand as belonging to the same category and
therefore, evaluations of extensions will be enhanced.
On the other hand, if the extensions are not consistent
with the core brand, i.e., the core brand fulfills one
set of needs and the extension attempts to address a
different set of needs, consumers will have difficulty
in classifying the core brand and the extension in the
same category. Hence,
H1: Consumers will evaluate a brand extension with a
functional concept more favorably when the original
brand denotes a functional rather than experiential
or symbolic concept.
H2: Consumers will evaluate a brand extension with a
symbolic concept more favorably when the original
brand denotes a symbolic rather than a functional
or experiential concept.
H3: Consumers will evaluate a brand extension with an
experiential concept more favorably when the original
brand denotes an experiential rather than a functional
or symbolic concept.
METHODOLOGY
Stimuli
The stimuli consisted of three brands and six extension
products. The selection was based on the foll owing criteria:
(1) being relevant to subjects (2) generally perceived as high
quality and (3) not broadly extended previously. In order to
develop stimulus materials pretesting was carried out in the
following two stages:
Stage 1 pretesting: The purpose of stage 1 pretesting was to
identify brand names that are associated with functional,
symbolic and experiential concepts. Subjects were provided
brief descriptions of these concepts and were given a list
of brands. They were asked to pick out brands that in their
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opinion were associated with one of the three concepts.
A simple frequency count was used to determine representative
brands for the three concepts. Results of pretesting
indicated that Energizer was classified by the subjects as
having a functional concept, Nike as having a symbolic
concept and Haagen Dazs as having an experiential
concept.
Stage 2 pretesting: The purpose of this pretesting was to
ask subjects to generate extension ideas for each of the
three brands selected in stage 1. The most common extension
products associated with each of the three brands identified
above were used for subsequent experiments. Extensions from
functional brand were considered to be consistent with the
functional concept, extensions from the symbolic brand were
considered to be consistent with the symbolic concept, and
extensions from the experiential brand were considered to be
consistent with the experiential concept. Extensions that
were considered to be consistent with one particular
concept were considered as being inconsistent with the
other two concepts.
Pretesting indicated that for Energizer brand the
extension products were spark plugs and flashlights; for
Nike the extension products were jeans and sunglasses;
and for Haagen Dazs the extension products were
pastries and cakes, and frozen yogurt. Thus Energizer
spark plugs were regarded as being consistent with the
functional concept whereas Nike spark plugs were
inconsistent with the symbolic concept and so on
Evaluating Brand Extension Opportunities
Define Actual and desired Consumer knowledge about the
Brand
It is critical to fully understand the depth and breadth of
awareness of the parent brand and the strength, favorability, and
uniqueness of its associations. Moreover, before any extension
decision are contemplated, it is important that the desired
knowledge structures have been fully articulated.
Identify Possible Extension Candidates
Consumer factors when identifying potential brand extensions,
marketers should consider parent brand association – especially
as they related to the brand positioning and core benefits – and
product categories that might seem to fit with that brand image
in the minds of consumers.
Evaluate the Potential of the Extension Candidate
In forecasting the success of the proposed brand extension, it is
necessary to assess – through judgment and research – the likely
hood that the extension would realize the advantages and avoid
the disadvantages of brand extension.
Design Marketing Program to Launch Extension
Too often extension are used as a shortcut means of introducing
a new product, and insufficient attention is paid to developing a
branding and marketing strategy that will maximize the equity
of the brand extension as well as enhance the equity of the
parent brand.
Evaluate Extension Success and Effects of Parent Brand
Equity
The final step in evaluating brand extension opportunities
involves assessing the extent to which an extension is able to
achieve its own equity as well as contribute to the equity of the
parent brand. A number of decisions have to be made
concerning the introduction of a brand extension, and a number
of factors will affect the brand’s success.