Summary Strategic Brand Management (Keller) written in 2013-2014.

Chapter I. Measuring sources of brand equity: capturing customer mind-set

Marketers use mental maps to understand the current and desired brand knowledge structure of consumers. Knowing this information is crucial to effectively building and managing brand equity. However, it is hard to measure it because a lot of information only resides in consumers’ minds. This chapter highlights some of the important considerations critical to the measurement of brand equity. In general, measuring sources of equity requires that the brand manager fully understands how customers shop for and use products and what they know, think, and feel about and how they act toward brands.

Qualitative research techniques

Qualitative research techniques = relatively unstructured approaches used to identify possible brand associations and sources of equity. Several techniques can be used:

Free association

Subjects are asked what comes to mind when they think of the brand, without any more specific cue than perhaps the product category. This is used to identify the range of possible associations in consumers’ minds. It may also provide a rough indication of the relative strength, favorability, and uniqueness of the associations. Follow-up questions can be asked about those characteristics. Such questions can also include direct questions about who, what, when, where, why and how. Results are used to form a rough mental map. Main issues are what types of cues/probes to provide, and how to interpret the results. It is best to move from general to specific questions.

Projective techniques

In some situations, consumers may not want to express their true thoughts or feelings. Then they may find it easier to fall back on stereotypical answers they think would be acceptable. Also, they may just find it hard to express their true feelings. Projective techniques = diagnostic tools to uncover the true opinions and feelings of consumers when they are unwilling or otherwise unable to express themselves on these matters. Consumers are presented with an incomplete stimulus and asked to complete it, or are given an ambiguous stimulus and are asked to make sense of it. In the process, they will probably reveal their true feelings.

Rorschach test = respondents are presented with ink blots and asked what they remind them of. That way they may reveal certain facets of their own, subconscious, personality.

Bubble exercise = respondents are asked to fill in the empty text/thought balloons in a cartoon. This can be useful for assessing user and usage imagery for a brand.

Comparison task = respondents are asked to convey their impressions by comparing brands to people, countries, animals, etc. followed by a follow-up question (Why this comparison?). This can provide information about the psyche of the consumer with respect to the brand. It is useful in imagery associations, to assemble a rich image for the brand.

Archetype = a fundamental psychological association, shared by the members of the culture, with a given cultural object. Different cultures have very different archetypes for the same objects.

Zaltman Metaphor Elicitation Technique (ZMET)

ZMET is based on a belief that consumers often have subconscious motives for their purchasing behavior. ZMET = a technique for eliciting interconnected constructs that influence thought and behavior, where a construct is an abstraction created by the researcher to capture common ideas, concepts, or themes expressed by customers. The use of ZMET teases out hidden thoughts and feelings about a topic, which can be expressed best using metaphors.

Neural research methods

Neuromarketing = the study of how the brand responds to marketing stimuli, including brands. It has been used to measure emotional responses of consumers to products/brands. Many purchase decisions appear to be largely an unconscious habitual process instead of logical weighing of variables. This kind of research is very costly and is not universally accepted (yet).

Brand personality and values

Brand personality = the human characteristics/traits that consumers can attribute to a brand. It can be measured by soliciting open-ended responses, in which examples can serve as a guide. Other means to capture consumers’ point of view are giving them a stack of pictures or magazines (picture sorting studies). Brand personality and user imagery may not always agree and can be very different. Jennifer Aaker created a brand personality scale that reflects five factors (with underlying dimensions) of brand personality:

• Sincerity (down-to-earth, honest, wholesome, and cheerful)

• Excitement (daring, spirited, imaginative, and up-to-date)

• Competence (reliable, intelligent, and successful)

• Sophistication (upper class and charming)

• Ruggedness (outdoorsy and tough)

Ethnographic and experiential methods

No matter how good a research design, consumers may never be able to completely express their true feelings. Ethnographic research uses thick description based on participant observation. Its goal is to extract and interpret the cultural meaning of events/activities through various research techniques like consumer immersion, site visits, shop-alongs, embedded research, etc. It can vary from observing consumers in their homes to cross-functional customer visits in a B2B setting. Service companies often use mystery shoppers to learn about the experiences provided by a company.

Summary

Qualitative research techniques are a creative means of gathering consumer perceptions that may otherwise be difficult to uncover. Drawbacks are small samples from which the results cannot always be generalized for a larger population. Also, results are hard to interpret and different researchers may come to different conclusions based on the same data.

Quantitative research techniques

Qualitative research uncovers and discovers, while quantitative research aims to prove or disprove. It typically employs various types of scale questions instead of resulting in verbal, open responses. Quantitative measures of brand knowledge can help to more definitively assess the depth and breadth of brand awareness, the strength, favorability, and uniqueness of the associations, the positivity of judgments and feelings, and the extent and nature of brand relationships.

Brand awareness

Awareness is related to the strength of the brand in memory. Several measures are used to measure awareness of brand elements.

Brand recognition requires consumers to identify the brand under a variety of circumstances and can rest on the identification of any of the brand elements. Most subtle measures are used for brands that have a high level of recognition. Recognition is particularly important for packaging and the visibility of package design. One way to check whether the visibility is sufficient, is using eye-tracking techniques. By applying direct and indirect measures of brand recognition, it can be determined which brand elements exist in memory, and how strongly they are associated with the brand. However, it only provides an approximation of potential recallability. To determine whether consumers will actually recall the elements under various conditions, measures of brand recall are needed.

Brand recall is more demanding because consumers must actually retrieve the element from memory. Unaided recall on the basis of all brands; provided as a cue will only identify the strongest brands. Aided recall uses cues to help the consumer. When combined, measures of recall based on product attribute/category cues and situational/usage cues give an indication of breadth and depth of recall.

With certain types of added awareness or recognition measures, guessing may be a problem. Spurious awareness = when consumers erroneously claim they recall something they really don’t and that may not even exist. This may send misleading signals about the proper strategic direction for the brand.

Aided recall measures yield insight into how brand knowledge is organized in memory and what kind of cues may be necessary for consumers to retrieve the brand from memory. Category structure that exists in consumers’ minds can have profound implications for consumer choice and marketing strategy.

Brand image

The brand image is reflected by the associations that consumers hold for it. It is useful to make a distinction between lower-level considerations, related to perceptions of performance and imagery attributes/benefits, and higher-level considerations related to overall judgments, feelings, and relationships. Some issues in measuring lower-level performance and associations are considered:

Beliefs = descriptive thoughts that a person holds about something. Brand association beliefs = those specific attributes and benefits linked to the brand and its competitors. Qualitative research can be used to uncover the different types of associations making up the brand image. To better understand the ability of those associations to serve as a basis for the positioning of the brand, belief associations based on strength, favorability, and/or uniqueness can be assessed by using open-ended questions. The outcomes of these belief associations can be rated in order of importance (e.g. 1 = not at all unique, 7 = highly unique).

Multidimensional scaling = a procedure for determining the perceived relative images of a set of objects, such as products or brands. it transforms consumer judgments of similarity or preference into distances represented in perceptual space.

Brand responses

More general, higher-level considerations can be measured to find out how consumers combine all the lower-level considerations in their minds to form different types of brand responses/evaluations:

Purchase intentions = the likelihood of buying the brand or of switching to another brand. They are most likely to be predictive of actual purchase when there is correspondence between the two in these dimensions:

• Action (does the consumer buy for him-/herself or is it a gift?)

• Target (what is the type of product and brand?)

• Context (in what type of store is it bought, what are the prices in that store, and what are other conditions?)

• Time (within a week, month, or year)

When asking consumers about their purchase intentions, the above dimensions should be specified.

Net promoter score = the chance that a customer would recommend a product to others. Promoters are the people who indicate a 9 or 10 on a 0-10 point scale. Those who gave a 0-6 are considered detractors. People who choose a 7 or 8 are passively satisfied and not included in the analysis of the results.

Brand relationships

In chapter I, brand relationships were characterized in terms of brand resonance. Measures for behavioral loyalty, attitudinal attachment, sense of community, and active engagement (the four components of brand resonance) were provided. Now additional considerations are considered.

Behavioral loyalty: consumers could be asked direct questions or be asked about percentage of their past purchase (past purchase history) went to a certain brand in a certain category or what percentage will in the future (intended future purchases). The results can provide information about brand attitudes and usage for the brand, including gaps in the market and the names of competitors that might be in the considerations set.

Attitudinal attachment: some researchers characterize brand attachment in terms of ‘brand love’ and use various scales to measure this. One approach defines attachments in terms of two underlying constructs with sub-dimensions:

• Brand-self connection: to what extent do you feel connected & to what extent is the brand part of who you are?

• Brand prominence: to what extent are your thoughts/feelings towards the brand coming automatic & to what extent do they come naturally and instantly?

Sense of community: needs a more unstructured approach than behavioral loyalty and attachment. Social currency = the extent to which people share the brand or information about the brand as part of their everyday social lives at work or at home.

Active engagement = the extent to which consumers are willing to invest their own personal resources in the brand beyond those resources expended during purchase or consumption of the brand. In-depth measures can explore word-of-mouth and online behavior, e.g. the extent of customer-initiated versus firm-initiated interactions.

Susan Fournier argues that brands can and do serve as viable relationship partners. The everyday execution of the marketing mix decisions forms a set of behaviors enacted on the part of the brand. These actions trigger a series of inferences regarding the implicit contract that appears to guide the engagement of the consumer and brand and the type of relationship formed. Brand personality then describes the relationship role enacted by the brand in its partnership capacity. This view of brand personality provides guidance to managers who wish to create and manage their brand personalities in line with marketing actions than does the trait-based view, which indentifies general personality tendencies that might (not) be connected to marketing strategies and goals.

Brand relationship quality (BRQ) = construct measuring a brand relationship quality based on:

• Interdependence = the degree to which the brand is incorporated in the consumer’s daily course of living.

• Self-concept connection = the degree to which the brand delivers on important identity concerns, tasks, or themes, thereby expressing a significant part of the self-concept.

• Commitment = dedication to continued brand association and improvement of the relationship, despite circumstances foreseen and unforeseen.

• Love/passion = affinity toward and adoration of the brand, particularly with respect to alternatives.

• Intimacy = a sense of deep familiarity with and understanding of the essence of the brand as a partner in the relationship and the nature of the consumer-brand relationship itself.

• Partner quality = a summary judgment of the caliber of the role enactments performed by the brand in its partnership role. It includes:

  • An emphatic orientation toward the other;

  • A character of reliability, dependability, and predictability of the brand;

  • Trust or faith in the belief that the brand will adhere to established relationship rules and be held accountable for its actions.

Comprehensive models of consumer-based brand equity

Besides the CBBE, there is another influential industry branding model. BrandDynamics = a graphical model used to represent the emotional and functional strength of relationship consumers have with a brand. The five levels in ascending order of an increasingly intense relationship are presence, relevance, performance, advantage, and bonding.

The CBBE model has four descending levels: identity, meaning, responses, and relationships and specific concepts like salience, consideration, performance or quality, superiority, and resonance.

Important aspects of this model are its emphasis on brand salience and breadth and depth of brand awareness as the foundation of brand building; its recognition of the dual nature of brands and the significance of both rational and emotional considerations in brand building; and the importance it places on brand resonance as the culmination of brand building and a more meaningful way to view brand loyalty.

Chapter J. Measuring outcomes of brand equity: capturing market performance

Brand equity should be measured with multiple measures: it’s like measuring a body’s temperature: this is only one indication of how healthy a person is. As described in chapter A and B, a product with positive brand equity can enjoy the following customer-related benefits:

• Perception of better product or service performance;

• Greater loyalty and less vulnerability to competitive marketing actions and marketing crises;

• Larger margins and more inelastic responses to price increases and elastic responses to price decreases;

• Greater trade cooperation and support;

• Increased marketing communication effectiveness;

• Opportunity for successful licensing and brand extension.

The ultimate brand value depends on the underlying dimensions of brand knowledge and sources of brand equity. These dimensions/components can be measured (see chapter I). This chapter examines measurement procedures to assess the effects of brand knowledge structures on these and other measures that capture market performance for the brand by reviewing comparative and holistic methods.

Comparative methods

Comparative methods = 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. Two types are:

• Brand-based comparative approaches use experiments in which one group of consumers responds to an element of the marketing program or some marketing activity when it is attributed to the target brand, while another group responds to that same element when it is attributed to a competitive or fictitious brand.

• Marketing-based comparative approaches use experiments in which consumers respond to changes in elements of the marketing program or marketing activity for the target brand or competitive brands.

The first approach keeps the marketing program fixed and examines responses to changes in brand identification, while the second approach holds the brand fixed and examines responses based on changes in the program.

Brand-based comparative approaches

When comparing a certain product or brand to a fictitious brand, consumers may have a particular existing brand, the exemplar, in mind which may be the category leader or their most preferred brand. Because they make inferences about the examined brand based on what that brand misses compared to the exemplar, this kind of research may be useful for decisions about new ad campaigns, promotion offerings, or new products.

Blind testing research studies = different consumers examine or use a product with or without brand identification. This is useful to uncover differences between brands and to determine brand equity benefits related to price margins and premiums.

The main advantage of brand-based comparative approaches is that because they hold all aspects of the marketing program fixed for the brand, they isolate the brand value in a very real sense. It is extremely useful to know what affects consumer responses to a brand. These approaches are particularly of use when the considered marketing activity represents a change from past marketing of the brand. The realism that can be achieved in the experiment is crucial. A disadvantage is that the simulations and concept statements about the product may highlight its characteristics enough to make them more salient than they would otherwise be. This distorts the results.

Marketing-based comparative approaches

Many applications of these approaches are based on that of Pessemier who plotted the percentage of consumers who switched from their regular brand as a function of the price increases. Other ways are assessing consumer response to different advertising strategies, executions, or media plans through various test markets. Potential brand extensions can be explored by collecting consumer evaluations of a range of concept statements describing the extension candidates.

The main advantage of marketing-based comparative approaches is that they are easy to implement. Virtually any proposed set of marketing actions for a brand can be compared. The main disadvantage is that it may be difficult to discern whether consumer responses to changes in the marketing stimuli are being caused by brand knowledge or by more generic product knowledge. Therefore, it would be wise to test competitive brands in the same category as well.

Conjoint analysis

Conjoint analysis = a survey-based multivariate technique that enables marketers to profile the consumer decision process with respect to products and brands. Consumers have to choose between several product profiles including various trade-offs (like better quality, but at a higher price). Part worth = the value consumers attach to each attribute level, as statistically derived by the conjoint formula. Brand value can be measured by offering the trade off brand/price.

The main advantage of conjoint analysis is that it allows you to study different brands and different aspects of the product or marketing program at the same time. That way, consumers’ responses to both the focal brand and competing brands can be measured. A disadvantage is that marketing profiles may violate consumers’ expectations based on what they already know about brands.

Holistic methods

Holistic methods = attempt to ‘net out’ various considerations to determine the unique contribution of the brand. They place an overall value on the brand in either abstract utility terms or concrete financial terms. The residual approach examines the value of the brand by subtracting consumers’ preferences for the brand from their overall brand preferences. The valuation approach places a financial value on brand equity for account purposes, mergers and acquisitions, and other reasons.

Residual approaches

Brand equity is what remains of consumer preferences/choices after physical product effects are subtracted.

The relative valuation of brands can be inferred by observing consumer preferences/choices if as many sources of measured attribute values as possible are taken into account. So, with residual approaches, brand equity can be calculated by subtracting preferences for objective characteristics of the physical product from overall preference. Approaches can be various scanner data panels.

A second approach to measuring brand equity are choice experiments including brand names, product attributes, image, and consumer differences (usage, demographics, etc.). Equalization price = the price that equates the utility of a brand to the utilities that could be attributed to a brand in the category where no brand differentiation occurred.

Multi-attribute attitude models reveal the relative size of different bases of brand equity by dividing it into brand awareness, attribute perception biases, and non-attribute preference. Attribute-perception biased component = the difference between subjectively perceived attribute values and objectively measured attribute values. Non-attribute preference component = the difference between subjectively perceived attribute values and overall preference and reflects the consumer’s overall appraisal of a brand that goes beyond the utility of individual attributes. Attribute ratings of a brand can be divided into brand-specific associations and general brand impressions based on a more holistic view of a brand.

Residual approaches are a useful benchmark for interpreting equity. However, they are not able to distinguish between different types of non-product-related attribute associations. Therefore their value for strategic decision making is limited.

The residual approach takes a static view of consumer preferences, while the CBBE looks at the whole process. Brand- and marketing-based comparative approaches focus on consumer responses.

Valuation approaches

Much of the corporate value of many companies comes from intangible assets. Many want to put a price tag on a brand’s value, for example because of mergers and acquisitions, brand licensing, fund raising, or brand portfolio decisions. Companies’ balance sheets should be adjusted with brand assets so they better reflect the true value of their brands.

A firm’s assts can be tangible or intangible. Tangible assets = property, plant, and equipment, current assets, and investments in stocks and bonds. Intangible assets = any factors of production or specialized resources that permit the company to earn cash flows in excess of the return on tangible assets. They augment the earning power of a firm’s physical assets and can typically be found under de header ‘goodwill’ (patents, trademarks, and licensing agreements for example). They cannot be easily transferred to the balance sheet.

There are three approaches to determining the value of a brand in a merger or acquisition:

The cost approach maintains that brand equity is the amount of money that would be required to reproduce or replace the brand. This may be too historically focused and lack future perspectives. Also, it is hard to estimate the costs of intangible assets.

The market approach thinks of brand equity as the amount an active market would allow so that the asset would exchange between a buyer and seller. Problems are the lack of open market transactions for brand name assets, and the fact that the uniqueness of brands makes extrapolating from one market transaction to another problematic.

The income approach argues that brand equity is the discounted future cash flow from the future earnings stream for the brand.

Simon and Sullivan define brand equity as the incremental cash flows that accrue to branded products over and above the cash flows that would result from the sale of unbranded products. They first estimate the firm’s current market value, then extract the value of the firm’s brand equity from the value of its other assets, and then have an estimate of equity based on the financial market valuation of the firm’s future cash flows.

Interbrand assumes that brand valuation is based on an assessment of what the value is today of the earnings or cash flow the brand can be expected to generate in the future. This methodology looks at the ongoing investment and management of the brand as an economic asset and takes all the different ways in which a brand benefits an organization into account. It is very generalizable. Three key components contribute to brand value assessment:

Brand financial performance reflects an organization’s raw financial return to the investors and is analyzed as economic profit (economic value added, EVA). It is analyzed for a five-year forecast and for a terminal value which represents the brand’s expected value beyond that five years. The economic profit that is calculated is multiplied by the role of brand to determine the brand earnings that contribute to the valuation in total.

Role of brand measures the portion of the customer decision to purchase that is attributable to brand. It reflects the portion of demand for a branded product/service that exceeds what the demand would be if it were unbranded.

Brand strength measures the ability of the brand to secure the delivery of expected future earnings on a scale of 0-100.

Brand valuation and the ‘brands on the balance sheets debate’ are controversial subjects. Many experts think it is not possible to reduce the richness of a brand to a meaningful number. The disadvantage of valuation approaches is that they have to make a host of oversimplified assumptions to arrive at one measure of brand equity. Besides that, there is the issue of separability: can brand assets be separated for measuring?

Chapter K. Designing and implementing brand architecture strategies

Chapters B-D of the book examined strategies for building and measuring brand equity. The fifth part, this part, considers how to sustain, nurture, and grow brand equity under various circumstances. Launching new products successfully is vital to firm’s long-term financial prosperity. Brand equity across the whole brand portfolio must be maximized. The brand architecture strategy determines which brand elements are applied across all new and existing products and services.

Developing a brand architecture strategy

A firm’s brand architecture strategy helps marketers determine which products/services to introduce, and which brand names, logos, symbols etc. to apply to new and existing products. It defines both the brand’s breadth/boundaries and depth/complexity. Its role is to clarify brand awareness and to improve brand image. Steps for developing this kind of strategy:

1. Define the potential of a brand in terms of its ‘market footprint’;

2. Identify the product and service extensions what will allow the brand to achieve that potential;

3. Specify the brand elements and positioning association with the specific products/services for the brand.

Step 1: Defining brand potential

This potential is defined by considering the brand vision, boundaries, and positioning. Brand vision = management’s view of the brand’s long-term potential, which is influenced by how well the firm is able to recognize the current and possible future equity. Brand vision is related to the ‘higher-order purpose’ of a brand, based on a good understanding of consumer aspirations and brand truths.

Brand boundaries = the products or services the brand should offer, the benefits it should apply, and the needs it should satisfy. These are defined based on the brand vision and positioning of the brand. Spandex rule: ‘Just because you can, doesn’t mean you should!’, meaning that marketers must evaluate extending their brand carefully and launch new products selectively. Each brand should be clearly differentiated and appeal to a sizable market segment to justify its costs.

The key ingredients of brand positioning are competitive frame of reference, PODs, POPs, and brand mantra. The mantra should offer rational and emotional benefits and be robust enough to permit growth, relevant enough to drive interests, and differentiated enough to sustain longevity.

Step 2: Identifying brand extension opportunities

Step 1 helps define the brand potential and provides a clear sense of direction for the brand. This step is to identify new products/services with potential. Line extension = new product introduction within an existing category. Category extension = new product introduction outside an existing category. Equity implications of each extension in terms of POPs and PODs need to be well understood.

Step 3: Branding new products and services

Now there has to be decided on the specific brand elements that will be used for any new product/service associated with the brand. The brand’s overall clarity and understanding must be maximized.

Branded house = when a company is employing an umbrella corporate/family brand for all its products (often B2B industrial firms). House of brands = a collection of individual brands all with different names (often consumer product companies). Many firms are somewhere in the middle, employing sub-brands = when the new product carries both the parent brand name and a new name (e.g. Apple iPad). This way similarities and differences with existing brands can be emphasized. However, sub-branding should be only used when there is a distinctive, complementary benefit and when there are enough financial commitments possible.

To successfully execute the brand architecture strategy, brand portfolio analysis should be used in step 1, and brand hierarchy analysis should be used in step 2 and 3.

Brand portfolios

Brand portfolio = all brands sold by a company in a product category. It is judged by its ability to maximize brand equity. Each brand should maximize equity in combination with all other portfolio brands. The main reason for offering several products in one category, is market coverage. Multiple brands allow a firm to pursue different price segments, distribution channels, geographic boundaries, etc. The relevant consumer segments and their overlap must be defined at first. Other reasons for introducing multiple brands in a category:

• To increase shelf presence and retailer dependence in the store;

• To attract consumers seeking variety;

• To increase internal competition within the firm;

• To yield economies of scale.

The portfolio is too big when profits increase in case products are deleted and too small vice versa. So market coverage must be maximized so no potential customers are ignored, while brand overlap is minimized so there is no competition between the brands in the portfolio. Brands can play different roles in the portfolio:

Flankers, often discount brands or repositioned existing brands, create stronger POPs with competitors’ brands so that more important flagship brands can retain their desired positioning. These fighter brands must not be so attractive that they take away sales from the flagship brands, but cannot be so cheaply that they reflect poorly on the other brands.

Cash cows are kept around despite dwindling sales because they are still profitable with virtually no marketing support.

Low-end/entry-level brands may attract customers to the brand franchise. High-end/prestige brands can add prestige and credibility to the entire portfolio.

Each brand-name product must have a well-defined role to fulfill for the firm, and thus a well-defined positioning indicating the benefits/promises it offers.

Brand hierarchies

Brand hierarchy = 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. Products can be branded in different ways depending on how many new and existing brand elements are used and how they are combined.

Levels of brand hierarchy are:

• Corporate/company brand;

• Family brand;

• Individual brand;

• Modifier (designating item/model);

• Product description.

Corporate/company brand = the one brand at the highest level of the hierarchy. This brand (the company name) is almost always present somewhere on the product/package. Corporate image = the consumer associations to the company/corporation making the product/service.

Family/range/umbrella brand = used in more than one category but is not necessarily the company name. Therefore associations with the company may be less salient. When the corporate brand is applied to a range of products, it functions as a family brand too. Reasons for using family brands are products becoming more dissimilar and wanting to evoke specific associations across a group of related products. The failure of one product may hurt other products sold under the same brand.

Individual brand = restricted to essentially one product category where products may differ in packaging, model, flavor, etc. With individual branding, brands and their supporting marketing activities can be customized to meet the needs of a specific target market. If an individual brand fails, risks to other brands are minimal. Creating individual brands, is however very difficult, complex, and expensive.

Modifier = a means to designate a specific item/model type/particular version of a product. This can signal refinements/differences between brands related to factors like quality levels (e.g. Johnnie Walker red, blue, and black label), attributes (e.g. different flavors of chewing gum), function (e.g. different fits of clothes), etc. A modifier can help make products more understandable and relevant to consumers, and become a strong trademark if it can develop unique associations with the parent brand.

Product descriptor helps consumers understand what the product is and does and defines the relevant competition in their minds. Example: midsize luxury sport sedan automobile.

Designing a brand hierarchy

Steps for setting up a brand hierarchy:

1. Decide on which products are to be introduced by looking at the potential growth, survival, and synergy with the parent brand;

2. Decide on the number of levels by looking at simplicity and clarity;

3. Decide on the levels of awareness and types of associations to be created at each level by looking at relevance and differentiation;

4. Decide on how to link brands from different levels for a product by looking at the relative prominence of brand elements;

5. Decide on how to link a brand across products by looking at commonality: the more common elements shared, the stronger the linkages.

Specific products to introduce:

Principle of growth = investments in market penetration or expansion versus product development for a brand should be made according to ROI opportunities. Firms must make cost-benefit calculations for investing resources in selling more of a brand’s existing products versus launching new ones.

Principle of survival = brand extensions must achieve brand equity in their categories (‘me too’ extensions must be avoided).

Principle of synergy = brand extensions should enhance the equity of the parent brand.

Number of levels in the hierarchy: each successive branding level allows the firm to communicate additional information about its products. At lower levels this allows the firm flexibility in communicating the uniqueness, while at higher levels it is an economical way of communicating common information and providing synergy.

Principle of simplicity = based on the need to provide the right amount of branding information to consumers. The desired number of levels depends on the complexity of the product line/mix. The higher the complexity, the more levels.

Principle of clarity = When more than three levels of brand names are needed, it is better to introduce multiple family brands and expand the depth of the branding strategy in order to avoid confusing consumers.

Desired awareness and image at each hierarchy level:

Principle of relevance = based on the advantages of efficiency and economy. Associations that are relevant to as many brands nested at the level below as possible should be created, especially at the corporate or family brand level. The greater the value of an association in the firm’s marketing, the more efficient and economical it is to consolidate this meaning into one brand linked to all these products. The more abstract the association, the more likely it is to be relevant in different settings.

Principle of differentiation = based on the disadvantages of redundancy. Brands should be distinguished at the same level as much as possible. Also, not all products should receive the same emphasis at any level of the hierarchy. Flagship product = one that best represents the brand to consumers and is often the first product by which the brand gained fame, a widely accepted best seller, or a highly admired product.

Combining brand elements from different levels:

Principle of prominence = the prominence of a brand element is its relative visibility compared with other brand elements. It depends on factors like order, size, and appearance. The relative prominence of the brand elements determines which become the primary (which should convey associations such as POPs of additional PODs) and secondary ones (facilitating awareness). Marriot’s Courtyard would be seen as more of a Marriot hotel than Courtyard by Marriot. With the latter, consumers should be less likely to transfer corporate/family brand associations and the success/failure of the hotel should less likely affect the corporate/family image.

Brand endorsement strategy = a brand element (often the corporate brand name/logo) appears on the package, signage, or product in some way but is not directly included as part of the brand name. This establishes the maximum distance between the corporate/family brand and the individual brand, suggesting that it would yield the smallest transfer of associations, but minimizing the likelihood of any negative feedback effects.

Branding strategy screen if a potential new product is strongly related to the parent brand with high likelihood of equity carryover, and if there is little equity risk, a product descriptor or parent-brand-first sub-brand can be used. However, if a potential new product is more distanced from the parent brand with low likelihood of equity carryover, there is higher equity risk and a parent-brand-second sub-brand or a new brand may be more useful. This can help determine whether to use a branded house or house of brands. Also consumer brand knowledge and their wants, needs, and usage are important.

Linking brand elements to multiple products:

Principle of commonality = the more common brand elements products share, the stronger the linkages between them. E.g. McDonald’s using ‘Mc’ to name every product or brands like Donna Karan (DK) and Calvin Klein (CK) using initials to mark each product. Nike places its logo very prominent on each product, American Express uses colored cards and BMW offers 3-, 5-, and 7-series to affect consumer perceptions/preferences and to develop brand migration pathways for customers to switch among the brands offered by the company.

Corporate branding

A corporate brand differs 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. A firm needs to keep a high public profile in order to build and manage a strong corporate brand. The CEO must be willing to maintain a public profile and provide a symbol of current marketing activities. Also, the firm must be extremely transparent in its values, activities, and programs. Marketing winners in the future will be those firms that carefully build and manage corporate brand equity = the differential response by consumers, customers, employees, other firms, etc. to the words, actions, communications, products, or services provided by an identified corporate brand entity. The more favorable that response, the more positively the corporate brand equity is affected.

Corporate image dimensions

Different types of associations are likely to be linked to a corporate brand and can affect brand equity:

Common product attributes, benefits, or attitudes: a corporate brand may evoke a strong association to a product attribute, type of user, usage situation, or overall judgment in consumers. The strongest associations are intangible when the brand is linked to several categories.

A high-quality corporate image association creates consumer perceptions that a company makes products of the highest quality.

An innovative corporate image association creates consumer perceptions of a company as developing new and unique marketing programs, especially with respect to product introductions or improvements. Different image strategies can affect corporate credibility and benefit the firm by increasing the acceptance of brand extensions.

People and relationships: traits that employees exhibit will (in)directly influence consumers about the products the firm makes or the services it provides.

A customer-focused corporate image association creates consumer perceptions of a company as responsive to and caring about its customers.

Values and programs: corporate image associations may reflect company values and programs that do not always directly relate to the products.

A socially responsible corporate image association portrays the company as contributing to community programs, supporting artistic and social activities, and generally attempting to improve the welfare of society as a whole.

An environmentally concerned corporate image association projects a company whose products protect or improve the environment and make more effective use of scarce natural resources.

Corporate credibility: this measures the extent to which consumers believe a firm can design and deliver products and services that satisfy their needs and wants. It’s the reputation of the firm in the market place and depends on corporate expertise, corporate trustworthiness, and corporate likability.

Many intangible brand associations can transcend the physical characteristics of products, providing valuable sources of brand equity and serving as critical POPs and PODs. Companies have a number of (in)direct ways of creating such associations. They must communicate to consumers and back up claims with concrete, easy to understand/experience programs.

Managing the corporate brand

Three issues are considered: corporate social responsibility, corporate image campaigns, and corporate name changes:

Corporate social responsibility (CSR): consumers are increasingly using their perceptions of a firm’s role in society in their purchase decisions. Therefore, much marketing activity has been used to establish the appropriate corporate image. Some firms are even putting CSR at the core of their existence.

Corporate image campaigns: are designed to create associations to the corporate brand as a whole and tend to ignore individual products/brands. A strong campaign can provide invaluable benefits by allowing the firm to polish up the meaning of its corporate brand and associations for its individual products. To maximize the chance of success, the objective of the campaign must be clearly defined and the results carefully measured.

A corporate image campaign can enhance awareness, create a more positive image of the corporate brand and increase the equity associated with individual products. Other objectives can be to make a favorable impression to possible investors/shareholders, motivate employees, and to influence public opinion on issues.

Brand line campaigns promote a range of products associated with a brand line by showing consumers the different uses/benefits of the products. This can be very useful in building brand awareness, clarifying brand meaning, and suggesting additional usage possibilities.

Corporate name changes: a merger or acquisition is often a reason to reevaluate naming strategies. A new corporate name arising in an M&A can be a combination of two existing names. If there is an imbalance in brand equity, the name with more equity is often chosen. If neither name has the desired equity, a new name (signaling new capabilities) will be the choice.

Corporate names can also change because of divestures, leveraged buyouts, or the sale of assets. Sometimes they are changed to correct public misperceptions about the nature of the business. When the corporate strategy is significantly changed, a new name can also be part of the deal. Other reasons to change the corporate name can be that the current name cannot be legally protected, is linked to a scandal, or just shouldn’t have been chosen to begin with.

Renaming is very complicated, time-consuming, and costly. Once a new name is chosen, it must be communicated to employees, customers, suppliers, investors, and the public. The better-known the company is, the more costly the change will be. Initial reaction to rebranding will be almost always negative, but over time, if properly chosen and managed, the new name will gain acceptance and familiarity.

Brand architecture

It is important to establish rules and to be consistent, but at the same time, it is also good to be flexible and creative. ‘The best’ solution to a brand architecture challenge has not been found and hybrid strategies prevail often within firms. Problems arise because corporate objectives, consumer behavior, and competitive activity are not symmetric and may dictate significant deviations in branding strategy. Brand elements may receive more or less emphasis, or not be present at all. Guidelines:

1. Adopt a strong customer focus: recognize what customers know and want, and how they will behave.

2. Create broad, robust brand platforms: strong umbrella brands are desirable and synergies and flow should be maximized.

3. Avoid overbranding and having too many brands.

4. Selectively employ sub-brands which can communicate relatedness and distinctiveness and are a means of complementing and strengthening brands.

5. Selectively extend brands: extensions should establish new brand equity and enhance existing equity.

Chapter L. Introducing and naming new products and brand extensions

An important part of the development process of the brand architecture described in chapter K is the introduction of new products.

New products and brand extensions

Growth strategies can be based on Ansoff’s growth matrix, which considers existing/new products, and existing/new markets:

• Market penetration strategy = launching current products in current markets.

• Product development strategy = launching new products in current markets.

• Market development strategy = launching current products in new markets.

• Diversification strategy = launching new products in new markets.

When a firm introduces a new product, it can develop a new brand, chosen for the new product; it can apply one of its existing brands; or it can use a combination of a new brand and an existing one.

Brand extension = when a firm uses an established brand name to introduce a new product. Sub-brand = when a new brand is combined with an existing brand. Parent brand = an existing brand that gives birth to a brand extension. Family brand = if the parent brand is already associated with multiple products through brand extensions.

Line extension = the parent brand is applied to a new product that targets a new market segment within a product category the parent brand currently serves (often a new flavor, color, ingredient, size, etc.).

Category extension = the parent brand is applied to enter a different product category from the one it currently serves.

Advantages of extensions

Good extensions offer advantages that can be categorized as those that facilitate new-product acceptance and those that provide feedback benefits to the parent brand or company as a whole.

Facilitate new-product acceptance

The following advantages increase acceptance:

Improve brand image: a brand with a good image is expected to perform well over time, and consumers can form similar inferences about brand extensions, based on what they know about the brand.

Reduce risk perceived by consumers: extensions from well-known brands may communicate longevity and sustainability. A good reputation (e.g. concerning quality) may reduce risk for consumers.

Increase the probability of gaining distribution and trial: retailers may be convinced to stock and promote the extension as consumers demand it.

Increase efficiency of promotional expenditures: the introductory campaign does not have to create awareness of both the brand and the new product but can focus on the product. That way, the costs of the product launch, marketing activities, and development of brand elements can be considerably lower than when introducing a new brand as well.

Allow for packaging and labeling efficiencies: similar packages/labels can result in lower production cost and more prominence in a store (billboard effect when similar packages are displayed jointly on a shelve).

Permit consumer variety-seeking: consumers who need a change, can find that change within the brand portfolio and will less likely switch to a competitor.

Provide feedback benefits to the parent brand

Brand extensions can provide positive feedback to the parent brand in several ways:

Clarify brand meaning: extensions help clarify the brand meaning to consumers and define the markets in which it competes. Broader brand meaning is often necessary so that firms avoid marketing myopia and do not draw too narrow boundaries around their brand. When thinking more broadly, marketers can get inspired for different marketing programs and new products.

Enhance the parent brand image: a brand extension affects the parent brand image by helping clarify its core values and associations. Successful extensions may improve consumer perceptions of the company’s credibility.

Bring new customers into the brand franchise and increase market coverage: line extensions can expand coverage by offering a benefit whose absence may have prevented consumers from trying the brand.

Revitalize the brand: extensions can be a means to renew interest in and liking for the brand.

Permit subsequent extensions: a successful extension may function as the basis for following extensions.

Disadvantages of brand extensions

Can confuse or frustrate consumers: consumers do not know which version of the product is the right one for them and feel overwhelmed by the amount of choice. Also, retailers often haven’t got enough space on their shelves to display all versions, resulting in disappointed consumers because they cannot find their favorite product. If a firm launches extensions that are perceived as inappropriate by consumers, they may question the integrity and competence of the brand.

Can encounter retailer resistance: retailers do not have enough space to display all versions of a product and often feel that extensions are ‘me-too’ products that duplicate existing brands and should not be stocked. Retailers can even reduce 5-25% of their stock-keeping units (SKUs) without hurting sales.

Can fail and hurt parent brand image: even if an extension initially succeeds, by linking the brand to various products, the risk of an unexpected problem with one product hurting the image of other products increases. However, a failing extension is often not very famous and can therefore not really hurt other brands. An extension failing on performance hurts other brands most.

Can succeed but cannibalize sales of parent brand: success of an extension may come from consumers switching from existing offers of the parent brands, which leads to cannibalization. Preemptive cannibalization = without the introduction of the extension, consumers might have switched to a competing brand.

Can succeed but diminish identification with any one category: when linking multiple categories to a single brand, the brand may not be strongly enough identified with any one product, reducing brand awareness.

Can succeed but hurt the image of the parent brand: if customers see the extension’s attribute/benefit associations as inconsistent/conflicting with the associations for the parent brand, they may change their perceptions of the parent brand accordingly.

Can dilute brand meaning: the potential drawbacks of a brand extension’s lack of identification with any one category and a weakened image may be especially evident with high-quality/prestige brands.

Can cause the company to forgo the chance to develop a new brand: introducing a new product as an extension can have significant costs in terms of the lost opportunities of creating a new brand franchise. The positioning of the extension may be less flexible as well.

Understanding how consumers evaluate brand extensions

What determines whether a brand extension is able to capitalize on potential advantages and avoid/minimize potential disadvantages? And how do consumers evaluate extensions?

Managerial assumptions

Baseline case: consumers evaluate the extension based only on what they know about the parent brand and the extension category, and before any advertising, promotion, or product information is available. This provides the cleanest test of the extension concept and gives managers guidance about whether to proceed, and if so, what type of marketing they need. Four basic conditions must hold true in order to avoid extension problems:

• Consumers have some awareness of and positive associations about the parent brand in memory. Otherwise they are unlikely to form positive associations about the extension.

• At least some of these positive associations will be evoked by the extension. Consumers are likely to infer associations similar in strength, favorability, and uniqueness to the parent brand when they see the extension as similar.

• Negative associations are not transferred from the parent brand.

• Negative associations are not created by the brand extension. Any parent-brand associations that consumers view positively, must not be seen as negatively for the extension.

Several factors influence the validity of these assumptions:

Brand extensions and brand equity

An extension’s ultimate success will depend on its ability to both achieve some of its own brand equity and contribute to the equity of the parent brand.

To achieve its own brand equity, the extension must have a sufficient level of awareness and achieve necessary POPs and PODs. The more prominently an existing brand is used in the branding strategy of the extension, the easier it should be to create awareness and an image for the extension. The extension’s image will depend on:

• How salient parent brand associations are in consumers’ minds in the extension context (what information comes to mind about the parent brand when they think of the extension).

• How favorable any inferred associations are in the extension context (what does this information suggest about the extension and is this perceived as good or bad).

• How unique any inferred associations are (how are they compared with those about competitors).

Competitive leverage = the set of advantages that a brand conveys to an extended product in the new category. When consumers, by simply knowing the brand, can think of important ways that they perceive that the new extension would be better than competing brands  PODs.

The less similar the extension is to the parent brand, the more important it is to emphasize POPs in order to assure consumers about the associations they have with the parent brand.

To contribute to parent brand equity, an extension must strengthen and add favorable and unique associations to the parent brand and not diminish the strength, favorability, or uniqueness of any existing associations. The effects of an extension on consumer brand knowledge depend on:

• How compelling the evidence is about the corresponding attribute/benefit association in the extension context.

• How relevant the extension evidence is for the attribute/benefit for the parent brand (how much consumers see evidence on product performance or imagery in one category as predictive for that in other categories).

• How consistent the extension evidence is with the corresponding parent brand associations.

• How strongly existing associations are held in consumer memory for the parent brand (how easy they might change).

Vertical brand extensions

Vertical brand extensions = extend the brand up into more premium market segments or down into more value-conscious segments in order to appeal to consumers who otherwise would not consider the brand.

Advantages: An upward extension can improve brand image and extensions in either direction offer variety, revitalize the parent brand, and permit further extensions.

Disadvantages: An extension to a different price point can confuse/frustrate consumers, leading to them rejecting the extension, which hurts the parent brand. Prestige brands must balance between availability and scarcity and thus shouldn’t be extended too far. Downward extensions can infer ‘cheap’ associations about the parent brand, which will be linked to low-quality and bad service. Higher-quality extensions are more likely to improve evaluations of the parent brand than lower-quality extensions might harm it. Cannibalization is one of the biggest risks of vertical extensions.

Firms often adopt sub-branding strategies to distinguish their lower-priced extensions (e.g. US Airways  US Airways Shuttle). Brand modifiers are used to signal a noticeable quality improvement (e.g. Ultra Dry Pampers). To avoid potential difficulties, firms sometimes use different brand names for vertical extensions. This way they avoid a negative transfer of equity from a ‘lower’ to a more premium brand, but sacrifice some ability to transfer positive associations.

Evaluating brand extension opportunities

When forming the strategy, the following steps must be followed:

Step 1. Define actual and desired consumer knowledge about the brand

The depth and breadth of awareness of the parent brand and the strength, favorability, and uniqueness of its associations must be completely understood. The basis of positioning and the core benefits satisfied by the brand must be known. Defining actual and desired knowledge helps identify possible extensions and guide decisions that contribute to their success. A company must understand where it wants to take the brand in the long run.

Step 2. Identify possible extension candidates

Parent brand associations and product categories that might seem to fit with the brand image in consumers’ minds must be considered. It might be helpful to ask consumers about their ideas for extensions. Brainstorming and consumer research are also ways to generate extension candidates.

Step 3. Evaluate the potential of the extension candidate & Step 4. Evaluate extension candidate feedback effects according to the four-factor model & Step 5. Consider possible competitive advantages as perceived by consumers and possible reactions initiated by competitors

The likelihood that the extension will realize the advantages and avoid the disadvantages of brand extensions should be assessed. Analysis of consumer, corporate and competitive factors (3 C’s) can be useful:

Consumer factors: the extension’s ability to achieve its own brand equity and the likelihood that it affects the parent brand’s equity is assessed. The strength, favorability, and uniqueness of all associations to the extension must be forecasted. To narrow down the list of extension candidates, consumer research can be used. Mistakes during this process are failure to take all associations into account and overlooking how literal consumers can be in evaluating brand extensions.

Corporate and competitive factors: how effectively are the corporate assets leveraged in the extension setting? How relevant are existing marketing programs, perceived benefits, and target consumers to the extension? What are the competitive advantages to the extensions and how will competitors possibly react? A mistake is failing to properly account for competitors’ actions and reactions. Brand counterextension = when a competing brand in the category chooses to launch its own extension in the same category.

Category factors: there needs to be a clear understanding of the market and the cost interdependencies between products in order to determine the optimal product line strategy for the brand. Increasing the product line expands market coverage and market share, but also increases costs. Also, the consistence of the brand image may be decreased. Line extensions take half as long to develop, cost far less to market, and enjoy twice the success rate of major new brand launches.

Step 6. Design marketing campaign to maximize the likelihood of success and potential positive feedback effects

Like with a new brand, building brand equity for an extension requires choosing brand elements, designing the optimal marketing program, and leveraging secondary associations:

Choosing brand elements: Brand extensions retain one or more elements from an existing brand. In creating new elements, the guidelines of memorability, meaningfulness, likability, protectability, adaptability, and transferability (chapter D) should be followed. The relative prominence of existing parent brand associations and extension elements will dictate the strength of transfer from the parent brand to the extension and vice versa.

Designing optimal marketing program: the marketing program must consider the same guidelines in building equity as described in chapters E and F. Consumers’ value perceptions must guide pricing decisions, distribution strategies must blend push and pull considerations, and the firm must integrate marketing communications by mixing and matching communication options. The less similar the extension is to the parent brand, the more POPs should be emphasized. New associations have to be created that can serve as additional PODs to those of the parent brand.

Leveraging secondary brand associations: the extent to which other associations become linked to the extension depends on the branding strategy of the firm and how it brands the extension. The more common the brand elements and the more prominence they receive, the more likely it is that parent brand associations will transfer.

Step 7. Evaluate extension success and effects on parent brand equity

To measure the extent to which the extension is able to create its own equity and to contribute to the parent brand’s equity, brand tracking based on the CBBE model or other measures of consumer response can be used.

Extension guidelines based on academic research

Successful brand extensions occur when the parent brand has favorable associations and consumers perceive a fit between the parent brand and the extension product. Categorization research: people do not deliberately and individually evaluate each new stimulus but evaluate it in terms of whether they can classify it as a member of a previously defined category. They use their brand knowledge to simplify, structure, and interpret the marketing environment. They use two steps: first they determine whether there is a match between the parent brand and the extension, then they might transfer their attitude about the parent brand to the extension. In general, brand extensions are more likely to be favorably evaluated by consumers if they see some bases of fit between the extension and the parent brand.

There are many bases of fit: both product-related and non-product-related attributes and benefits may influence extension fit.

Consumers’ judgments of similarity are a function of salient shared associations between the parent brand and the extension product category. The more common associations, the greater the perception of overall similarity. Brand concepts = the brand-unique image associations that arise from a particular combination of attributes, benefits, and the marketing efforts used to translate these attributes into higher-order meanings. Brand-concept consistency measures how well the brand concept accommodates the extension product. Different types of brand concepts from the same original product category may extend into the same category with varying degrees of success, even when product-feature similarity is high.

Function-oriented brands’ dominant associations relate to product performance. Prestige-oriented brands’ associations relate to consumers’ expression of self-concepts or images. A brand that may not even be as well evaluated as a competing brand may be more successfully extended into certain categories, depending on the parent brand associations involved.

A perceived lack of fit between the parent brand’s product category and the proposed extension category could be overcome if key parent brand associations were salient and relevant in the extension category. Consumers need explanatory links that tie the products together and summarize their relationship in order to understand the rationale for a grouping of products in a brand line.

Depending on their knowledge of the product categories, consumers may perceive fit based on technical or manufacturing commonalities, or on surface considerations such as necessary or situational complementarity.

Perceived fit between the parent brand and the extension product could be related to the economic notions of substitutability and complementarity in product use (from a demand-side perspective) as well as to the firm’s perceived grasp of the skills and assets necessary to make the extension product (from a supply-side perspective). These perceptions of fit may depend on how much consumers know about the product categories: expert consumers are more likely to use technical/manufacturing commonalities to judge fit, while novice consumers are more likely to use superficial considerations.

High-quality brands stretch farther than average-quality brands, although both types have boundaries.

High-quality brands are seen as more credible, expert, and trustworthy and are more easily given the benefit of the doubt if an extension does not really fit with the brand. Thus, one important benefit of building a strong brand is that is can extend more easily into more diverse categories.

A brand that consumers see as prototypical for a product category can be difficult to extend outside the category.

If consumers see a brand as exemplifying a category too strongly, it may be difficult for them to think of it in any other way.

Concrete attribute associations tend to be more difficult to extend than abstract benefit associations.

The limits to market leaders’ extension boundaries may be more rigid because many market leaders have strong concrete product attribute associations. Concrete attribute associations like category-indicating names may not transfer as broadly to extension categories as more abstract associations. Parent brands’ concrete attributes can transfer to some product categories. a concrete attribute (e.g. a distinctive taste) that is highly valued in the extension category can often make the extension successful. Abstract associations may not always transfer easily, which may be due to consumers not believing that the abstract benefit would have the same meaning in the extension category. Consumers often generalize possession of an attribute from a specific category to a more general category more readily than they generalize the attribute vice versa (inclusion effect).

Consumers may transfer associations that are positive in the original product class but become negative in the extension context.

Because they have different motivations or use the product differently in the extension category, consumers may not value a brand association as highly as the original product.

Consumers may infer negative associations about an extension, perhaps even based on other inferred positive associations.

Even if consumers transfer positive associations from the parent brand to the extension, they still may infer negative ones.

It can be difficult to extend into a product class that consumers see as easy to make.

Consumers may dismiss extensions if they see the product as comparatively easy to make and brand differences hard to come by.

Then they may feel the extension is too expensive. When they see the extension category as difficult to make, the extension has a greater opportunity to differentiate itself, although consumers may be less sure what the exact level of quality will be.

A successful extension can not only contribute to the parent brand image but also enable a brand to extend even farther.

An extension can help the image of the parent brand by improving the strength, favorability, or uniqueness of its associations. If an extension changes the image and meaning of the brand, subsequent extensions that otherwise might not have seemed appropriate may make more sense. A successful extension helps a brand grow:

• By establishing a new market for the brand;

• By strengthening existing markets for the brand;

• By opening up the possibility of additional new markets for the brand to enter step by step.

Consumers evaluate far extensions from a broad brand more favorably than from a narrow brand. If the perceived quality levels of different members of a brand portfolio are more uniform, then consumers tend to make higher evaluations of a new extension. A firm that has demonstrated little variance in quality across a diverse set of categories is better able to overcome perceptions of poor extension fit. Early-entering extensions do not perform as well as early-entering new-name products or late-entering extensions.

An unsuccessful extension hurts the parent brand only when there is a strong basis of fit between the two.

Unsuccessful extensions in dissimilar categories do not affect evaluations of the parent brand. Negative feedback effects are present when consumers perceive extensions as belonging to product categories dissimilar from those associated with the family brand, and when extension attribute information is inconsistent with image beliefs that consumers associate with the family brand. Exposing consumers to brand extension information strengthens parent brand associations in memory.

Unsuccessful extension does not prevent a firm from backtracking and introducing a more similar extension.

Failure of an extension does not doom a firm never to be able to introduce any extensions. It does create a ‘perceptual boundary’, in that it reveals the limits of the brand in consumers’ minds.

Vertical extensions can be difficult and often require sub-branding strategies.

Managers wishing to maximize the equity of their brands should offer only high-quality products, although overall profit maximization can dictate a different strategy. Ownership effect = owners have more favorable responses than non-owners to brand extensions (in the context of brand line stretches). This does not occur for downward stretches of prestige brands because then the owner wants to maintain exclusivity.

The most effective advertising strategy for an extension is one that emphasizes information about the extension (rather than reminders about the parent brand).

The most effective strategy is one that recognizes the type of information already salient for the brand in consumers’ minds when they first consider the extension, and that highlights additional information they would otherwise overlook/interpret wrongly.

Individual differences can affect how consumers make an extension decision and will moderate extension effects.

Consumers vary in their short- or long-term motivation, ability, and opportunity to evaluate an extension. Analytic thinkers focus more on comparing specific attributes/benefits, while holistic thinkers focus more on comparing overall attitudes and judgments.

Incremental theorists who believe the personality of a brand is flexible, are more accepting of extensions than entity theorists who believe a brand’s traits are fixed.

A person with an independent self-construal is more concerned with the uniqueness of individuals, while a person with an interdependent self-construal is more concerned with relationships between and among individuals. The latter should be better able to uncover the possible relationships between a parent brand and an extension.

Brand-schematic consumers are more likely than others to process information according to their brand knowledge. Brand-aschematic consumers use other information like attributes as a frame of reference. The former are more likely to see the similarity in a brand extension.

Regulatory focus = deals with motivation and how people go about pursuing their goals. Prevention focus = concerned with negative outcomes and avoiding losses.
Promotion focus = concerned with positive outcomes, seeking please and avoiding missing opportunities.

Consumers focused on prevention judge dissimilar extensions less favorably than consumers focused on promotion. Promotion-focused consumers are more likely to focus abstractly on the overlap in benefits, whereas prevention-focused ones focus on sheer category similarity.

Cultural differences across markets can influence extension success.

Eastern cultures have a more holistic thinking style and perceive higher levels of fit than consumers from Western cultures, which are more analytical.

Chapter M. Managing brands over time

One challenge in managing brands is the continuous change in the environment. Besides external forces, the firm’s own focus may force adjustments in the way it markets its brands. Effective brand management requires proactive strategies designed to maintain/enhance CBBE in the face of all these forces. Any marketing action taken today can change consumers’ brand awareness and image and have an indirect effect on the success of future actions. Marketers must manage brand equity by reinforcing the brand meaning and by making necessary adjustments to the marketing program to identify new sources of equity.

Reinforcing brands

Brand equity can be reinforced by marketing actions that consistently convey the meaning of the brand to consumers in terms of awareness and image. Brand meaning in terms of products, benefits, and needs, as well as in terms of product differentiation must be considered. One rule for modern branding is that brands can never stand still and must always be moving forward.

Maintaining brand consistency

Brand consistency is the most important to maintaining strength and favorability of brand associations. Inadequate marketing support is a dangerous strategy when combined with price increases. Managing equity with consistency may require making tactical changes to the marketing program in order to maintain the strategic thrust and direction of the brand. By retaining key elements of the program and by preserving the brand meaning, the strategic positioning of many market leaders has been kept uniform over time. Sometimes, brands return to their roots to remind existing customers or to attract new ones. Marketers should make sure that these older elements are relevant for new customers.

Protecting sources of brand equity

Deviation from a successful positioning is only necessary when changes in the environment create the need for it. A top priority should be preserving and defending those sources of equity that already exist. Ideally, such sources are of enduring value. This value can be easily overlooked when the brand meaning is expanded. Various trade-offs between activities that fortify brand equity and those that leverage on existing equity exist.

Fortifying versus leveraging

The more a strategy of maximizing brand awareness and image is pursued, the easier it is to ignore/diminish the brand and its equity sources. Without these sources, the brand itself may not continue to yield such valuable benefits.

Fine-tuning the supporting marketing program

Changes in tactics and marketing should only be made when it is clear they are no longer making the desired contributions to maintaining or strengthening brand equity. The way the meaning of the brand is reinforced may depend on the nature of the brand associations:

Product-related performance associations: when the core associations of a brand are primarily product-related, innovation in design, manufacturing, and merchandising is important to maintain brand equity. For companies active in very diverse categories, constant innovation is crucial. Product innovations may include existing products, extensions, and new products. Products shouldn’t be changed too much, in particular when the brand meaning for consumers is part of the product design. Consumers must be convinced that the new product is better, not different.

Non-product-related imagery associations: when the core associations of a brand are primarily non-product-related, relevance in user and usage imagery is important. Because they are intangible, these kinds of associations are easier to change. However, too many changes in positioning can blur the brand image and confuse consumers.

Product innovation and relevance are critical in maintaining continuity and expanding the brand meaning.

Revitalizing brands

Sometimes brands have to return to their roots and capture lost equity sources to successfully turn around. In other cases the brand meaning has to change radically. Whatever the approach is, the changes used must be revolutionary rather than evolutionary. The first places to look are often the original sources of brand equity. A brand equity measurement system (see chapter H) should help reveal the current status of the sources of brand equity. It must be discovered to what extent the key brand associations are still functioning as POPs and PODs. Then it must be decided if the current positioning is retained or whether a new one has to be created, and if so, which one. If the positioning is still appropriate, the marketing program may need to be changed.

Market failures are less damaging than product failures, because in the latter case, strong, negative associations may be difficult to overcome. With market failures, a relaunch can be successful. The CBBE provides options for the best ways to refresh old sources of brand equity or to create new ones to achieve a new positioning:

1. Expand the depth or breadth of brand awareness, or both, by improving consumer recall and recognition of the brand during purchase or consumption settings.

2. Improve the strength, favorability, and uniqueness of the brand associations making up the brand image. This may require programs directed at existing or new associations.

Lost sources of equity can be revitalized and new ones can be established in the same ways as equity sources are normally created: by changing brand elements, changing the supporting marketing program, or by leveraging new secondary associations. There are, however, alternative strategies:

Expanding brand awareness

When a brand fades, depth of awareness is often not the problem because consumers can still recognize/recall the brand. However, consumers tend to think of the brand in only a few ways (breadth of awareness) and that is a problem. When there is enough awareness and a positive image, the best starting point is increasing usage. This can be done by increasing the level/quantity of consumption, or by increasing the frequency. Increasing frequency is very attractive for firms with a large market share. It requires either identifying new opportunities to use the brand in the same way or identifying completely new/different ways to use it.

Identifying additional or new usage opportunities: the marketing program should include:

• Communications about the appropriateness and advantages of using the brand more frequently in existing or new situations.

• Reminders to consumers to actually use the brand as close as possible in time to those situations for which it could be used.

Often, increasing usage may be improving top-of-mind awareness through reminder advertising. In other cases, more creative cues may be necessary. Functional fixedness = when consumers see a brand only appropriate for some occasions. Frequency can also be increased when consumers’ perceptions of their usage differ from the reality and they have to buy replacements more often. Solutions are tying the act of replacing the product to a certain event/time, and providing consumers with better information about their time of purchase and the current level of product performance. The final way to increase usage is to convince consumers of the benefits of more regular product use.

Identifying new and completely different ways to use the brand: e.g. new food recipes, baking soda that can be used for cleaning purposes, chewing gum as a substitute for smoking, etc.

Improving brand image

Changes in brand awareness are the easiest ways of creating new equity sources, but more fundamental changes are often needed, like the creation of a new marketing program. Repositioning requires a specification of the target market and the nature of the competition.

Identifying the target market: actions to do when focusing on key target market segments are:

• Retaining vulnerable customers;

• Recapturing lost customers;

• Identifying neglected segments;

• Attracting new customers.

It is often best to make sure that no more customers are lost before chasing after new ones. Marketing efforts to retain existing customers (i.e. reminding them of the virtues of the brand) can help recapture lost ones. The next most viable option is identifying neglected segments. The final option is to more or less abandon the current target group and target a new segment.

Repositioning the brand: repositioning sometimes asks for the establishment of more compelling PODs. Another option is that the brand needs to be repositioned to establish a POP on some key image dimension.

Changing brand elements: changed brand elements convey new information and can signal that the brand has taken on a new meaning. The brand name is most difficult to change because it is the most important element. Changes should be moderate and incremental and must preserve the most salient aspects of the elements.

Adjustments to the brand portfolio

Management of brand equity and the brand portfolio requires a long-term view and careful consideration of the role of different brands and their relationships over time. Sometimes a brand refresh just requires cleaning up the brand architecture.

Migration strategies

Brand migration strategy = helps consumers understand how various brands in the portfolio can satisfy their needs as they change over time, or as the products/brands do. In an ideal situation, brands are organized in consumers’ minds so they know at least implicitly how they can switch among them as their needs change.

Acquiring new customers

Companies must proactively develop strategies to attract new customers because some customers will inevitably leave the brand franchise. A challenge is that many brands seem relevant to different generations and lifestyles and that this image cannot be easily changed while consumers age. Brands try to cope with this by cutting loose from the past, upgrading their merchandise, renovating their stores, etc.

Retiring brands

Some brands are just not worth saving because their sources of equity are exhausted, or their associations are not longer relevant. Step one in retrenching a fading brand is reducing the number of product types. Another way is eliminating marketing support and milking profits. Orphan brand = a once-popular brand with diminished equity that a parent company allows to decline by withdrawing marketing support. When a brand is beyond repair, it may be consolidated into another, stronger brand. A more permanent solution is discontinuing the product completely.

Obsoleting existing products: how do you decide which brands to hold on to and revitalize and which one to discontinue? The issue is the existing and latent equity of the brand. If a brand is not creating value, it shouldn’t be continued.

Chapter N. Managing brands over geographic boundaries and market segments

Earlier chapters considered how and why marketers create brand portfolios to satisfy different market segments and why they develop brand migration strategies to attract new and retain existing customers. This chapter looks at managing brand equity in different types of segments, and focuses on international issues and global strategies.

Regional market segments

Regionalization = the opposite of globalization. One-to-one marketing becomes more and more important, so mass markets are split up. Disadvantages are a decrease in the efficiency of marketing and local producers becoming more competitive and blurring of the national identity of a brand. The main advantage is that marketing can have a stronger effect.

Other demographic and cultural segments

Any market segments can be the target of a specialized marketing program. Differences in age, income, attitudes, shopping behavior etc. can be the reason to use a customized approach for a specific segment. There is a trade-off between the costs and the benefits of a customized program versus a less targeted focus. Because of better communication options, lifestyles are becoming more similar across countries within sociodemographic segments, than they are within countries across those segments. Various ethnic, racial, or cultural groups may require different marketing programs and even different products and promotions.

Some consumers may not like to be treated as a minority with a specific campaign because they actually want to belong to the mass and this only reinforces their image of being a minority. Consumers that are not at all targeted, may feel distanced from the company and its brands.

Rationale for going international

Several forces encourage firms to go international:

• Perception of slow growth and increased competition in domestic markets;

• Belief in enhanced overseas growth and profit opportunities;

• Desire to reduce costs from economies of scale;

• Need to diversify risk;

• Recognition of global mobility of customers.

In more and more categories, the ability to operate globally has become a key to success, often because the addressable market is a relatively small percentage of the global market. A global marketing program consists of one product formulation, package design, advertising program, pricing schedule, distribution plan, etc. that would prove the most effective and efficient option for every country in which the brand is sold. This is however almost always impossible.

Advantages of global marketing programs

Economies of scale in production and distribution

The more that strong experience curve effects exist (driving down the cost of making/marketing a product with increases in production), the more economies of scale in production and distribution from a standardized global marketing program will prevail.

Lower marketing costs

The more uniform the marketing communication activities, the greater the potential savings.

Power and scope

A global brand profile can communicate credibility because consumers believe that selling in many markets is a sign that a manufacturer has gained much experience and acceptance, which leads to high quality products.

Consistency in brand image

Maintaining a common marketing platform everywhere helps maintain the consistency of brand and company image.

Ability to leverage good ideas quickly and efficiently

Globalization can increase sustainability and facilitate continued development of core competencies with the organization, thereby enhancing the firm’s ability to compete.

Uniformity of marketing practices

Coordination may be simplified and a standardized global program may provide greater control of communication in various countries. The core of the program should be kept constant, while making minor changes across markets and over time.

Disadvantages of global marketing programs

Global marketing programs frequently ignore fundamental differences across countries and cultures. Such differences include:

Differences in consumer needs, wants, and usage patterns for products

Differences in cultural values, economic development, and other factors across nationalities lead consumers to behave differently. Therefore, strategies that work in one country, may fail in another.

Differences in consumer response to branding elements

Differences in language can twist the meaning of a brand name.

Differences in consumer responses to marketing mix elements

Price sensitivity, promotion responsiveness, sponsorship support, and other activities may differ by country, and these can motivate differences in consumer behavior and decision making.

Differences in brand and product development and the competitive environment

Products may be at different stages in their lifecycle in different countries and the perceptions and positions of brands may vary across countries. The nature of competition may also differ.

Differences in the legal environment

Every country has different laws and regulations, which are constantly changing.

Differences in marketing institutions

Distribution channels, retail practices, media availability and costs may vary across countries. This variation makes it difficult to implement the same program everywhere.

Differences in administrative procedures

In practice, it may be difficult to achieve the necessary control to implement a standardized program. Not invented here syndrome = local managers resisting having their autonomy threatened and raising objections that the marketing program misses some key dimension of the local market.

Global brand strategy

In building brand equity, often different marketing programs must be created to satisfy different market segments. Therefore:

• Differences in consumer behavior must be identified in each market (how consumers purchase and use products and what they know and feel about brands);

• The branding program must be adjusted accordingly through the choice of brand elements, the nature of the marketing program and activities, and the leveraging of secondary associations.

Leveraging secondary brand associations to build global brand equity is most likely to require change across countries because the entities linked to a brand may take on very different meanings in different countries. It can be difficult to understand how consumers form their impressions of country of origin and update their brand knowledge. The design, manufacturing, assembly, distribution and marketing often take place in several countries.

Global brand equity

To build brand resonance, marketers must establish breadth and depth of awareness, create POPS and PODs, elicit positive, accessible brand responses, and forge active brand relationships (see chapter C). This requires establishing the core brand building blocks: brand salience, performance, imagery, judgments, feelings, and resonance. These steps and blocks must be considered in each market. Issues that come into play:

Creating brand salience: a product rarely rolls out in the new market exactly like in the home market, because in the latter, product introductions are sequential and stretched out over a longer period. Therefore, the breadth and depth of recall need to be examined in order to ensure that the proper brand salience and meaning exist.

Crafting brand image: if the product not varies very much across markets, basic performance associations may not vary that much as well. Brand imagery associations, may be quite different though. History may for example be rich in the domestic market, but mean nothing in the new market.

Eliciting brand responses: consumers in new markets must find the brand to be of good quality, credible, worthy of consideration, and superior. It is a challenge to create the proper balance and type of emotional responses and brand feelings. Because of cultural differences across markets, it may be difficult to blend inner (enduring/private) and outer (immediate experiential) emotions.

Cultivating resonance: consumers must be provided with sufficient possibilities to buy and use the product and to communicate with other consumers about it. They must be actively involved, which can be done with interactive, online marketing, although this should be complemented with more traditional marketing efforts.

Global brand positioning

In developing a global positioning, three sets of questions should be answered:

1. How valid is the mental map in the new market? How appropriate is the positioning? What is the current level of awareness? How valuable are the core brand associations, POPs and PODs?

2. What changes should be made to the positioning? Do extra associations need to be created? Should any existing associations not be recreated or be modified?

3. How should we create the new mental map? Can the same marketing activities be used? What changes should be made and what new activities are necessary?

First awareness and POPs must be established, then additional competitive considerations can be considered. The hierarchy of brand associations must be defined in a global context, while attuning them to different contexts and markets.

There are two fundamental contrasts in global branding: standardization versus customization, and developing versus developed markets.

Standardization versus customization

This is the most fundamental issue in global marketing because it has a deep impact on marketing structure and processes. Levitt argues that companies need to learn to operate as if the world where one large market, ignoring regional differences. In practice, pretty much all firms have been forced to tailor their products and marketing programs to different markets.

Standardization and customization

Marketers are increasingly blending global objectives with regional/national concerns. Centralized marketing strategies that preserve local traditions can be a blessing for products sold in more than one country. Firms have improved their capabilities to tailor products and programs to local conditions and because of more flexible manufacturing technology and advances in information systems, coordination has been increased. Four major elements of a marketing program are reviewed in terms of adaptation issues:

Product strategy: many companies overlook cultural differences, simply launch products and wait and see what happens. As a consequence, they become aware of consumer differences only after the launch. To avoid this, marketers need to conduct market research. Despite the trend toward globalization, there will always be opportunities for good local brands.

Communication strategy: although the brand positioning may be the same in different countries, creative strategies in advertising may have to differ to some degree. Different countries can be more or less receptive to different creative styles and each country has its own unique media challenges and opportunities. Also, increasingly sponsorships can be used on a global basis.

Distribution strategy: there are only few global retailers, and lacking those, companies often differ in their approach to distribution. Like in domestic markets, firms will often want to blend push and pull strategies internationally to build brand equity and some mistakenly adopt strategies that were critical in the brands success, but appear to erode the brand’s competitive advantage in the new market.

Pricing strategy: the value-pricing principle from chapter E still applies: marketers need to understand what consumer perceptions of brand value are, their willingness to pay, and the price elasticity in each country. Because of differences, prices can vary across countries. However, to avoid illegal imports and exports, prices should be aligned internationally. Price corridor = the HQ and country subsidiaries calculating the corridor within which the prices must be set within a country. Countries with lower prices have to raise them, countries with higher prices have to lower them. Another strategy is introducing different brands in high-income/price countries than in low-income/price countries.

Developing versus developed markets

BRICS = Brazil, Russia, India, China, and South Africa; some of the most important developing markets because they do not yet have the infrastructure, competitive frame of reference, etc. that characterize developed countries. However, because there are many differences between developing countries as well, distinct marketing programs are needed for each country. Heinz’s Three As model for its emerging markets strategy:

• Applicability: the product must suit the local culture;

• Availability: the product must be sold in channels that are relevant to the local customer;

• Affordability: the product needs to be priced within the local market’s range.

In developing markets, there are large differences between incomes. Many companies have already successfully tapped into the higher-income segments. Large parts of the population have only between 1-5$ to spend per day.

Building global customer-based brand equity – the Ten Commandments of Global Branding

1. Understand similarities and differences in the global branding landscape

It is important to recognize that international markets can vary considerably. Every top global company adjusts its marketing program in some way across some markets but holds the parameters fixed in others.

2. Don’t take shortcuts in brand building

Building a brand in new markets must be done from the bottom up. First, there must be concentrated on building awareness, then on building an image. It must be determined how to best create sources of brand equity. The basic tactics from chapter B and C still apply. The current marketing program shouldn’t just be exported because it works in the domestic market. Each consumer must be understood, it should be recognized what he or she knows and can value about the brand, and marketing programs must be tailored to his/her wants and needs.

3. Establish marketing infrastructure

A CSF for many global brands is their manufacturing, distribution, and logistical advantages. The appropriate marketing infrastructure must be created, if necessary from scratch, and adapted to fit with the existing infrastructure in other countries. Often, companies need to invest in foreign partners and adapt production and distribution operations to those of the foreign market.

4. Embrace integrated marketing communications

Foreign countries do not always have the same marketing possibilities as the domestic country. Therefore, other forms of communications may have to be embraced.

5. Cultivate brand partnerships

Most global brands cooperate with a local distributor, joint venture partner, franchisee, ad agency or other entity to gain, for example, access to distribution. Three alternative ways to enter a new global market:

1. By exporting existing brands of the firm into the new market (introducing a geographic extension);

2. By acquiring existing brands already sold in the new market but not owned by the firm;

3. By creating some form of brand alliance with another firm (JV, partnership, licensing).

Key criteria by which to judge the options above are speed, control, and investment. Geographic extensions are very slow, brand acquisitions very costly and difficult to control, while brand alliances are less costly but even harder to control. The choice of strategy depends on the company’s resources and objectives. However, in some countries, companies are legally obliged to partner with a local firm.

6. Balance standardization and customization

Local and global elements need to be blended in the right way in their marketing programs. Factors in favor of a more standardized global program are: common customer needs, global customers and channels, favorable trade policies and common regulations, compatible technical standards, and transferable marketing skills. Preferences for cleaning products and high-end products are more common across countries than preferences for foods and beverages.

Potential candidates for global campaigns are high-technology products with strong functional images; high-image products with strong associations to fashionability, sensuality, wealth, or status; services and B2B products that emphasize corporate images in their global campaigns; retailers that sell to upper-class individuals; brands positioned primarily on the basis of their country of origin; and products that do not need customization.

7. Balance global and local control

A key decision in developing a global marketing program is choosing the most appropriate organizational structure for managing global brands. Three main approaches are:

1. Centralization at home office or HQ;

2. Decentralization of decision making to local foreign markets;

3. Centralization and decentralization combined.

Firms tend to adopt a combination to balance global standardization and local adaption. In most markets the cost savings of standardization do not outweigh the revenue potential from tailoring programs. Cost and revenue should be the considerations in deciding which elements of the marketing program will be adapted for which country.

Riesenbeck and Freeling propose a mixed strategy, standardizing the core aspects that provide competitive advantages, but allowing local adaptation of secondary aspects. Branding, positioning, and product formulation should then be standardized, while advertising, pricing, and distribution can be localized. However, global companies often centralize advertising in order to save costs and increase efficiency.

8. Establish operable guidelines

Everyone within the organization must understand the brand meaning and be able to translate it to satisfy local consumers. Brand definition and communication often revolve around some document that details what the brand is (not), the brand charter; and the product line that reflects only those products consistent with the brand definition. For all the planning to work, there must be effective communication lines: training mostly occurs at the HQ, a sophisticated communication system must be in place, and global databases must be available.

9. Implement a global brand equity measurement system

Global brand equity measurement system = a set of research procedures designed to provide timely, accurate, and actionable information for marketers on brands, so they can make the best tactical and strategic decisions. The brand equity charter is defined in a global context and brand tracking can assess progress. A challenge is that the marketing research infrastructure may be less developed in other countries.

10. Leverage brand elements

Nonverbal brand elements are more likely to directly transfer than verbal ones. A good logo with meaning can be an invaluable source of global brand equity. Therefore, many firms have tried to establish uniform brand elements that can be used everywhere.

Chapter O. Closing observations

Strategic brand management guidelines

Summary of the CBBE framework

Strategic brand management = the design and implementation of marketing programs and activities to build, measure, and manage brand equity.

The idea behind the Customer-Based Brand Equity (CBBE) framework is to recognize the importance of the customer in the creation and management of brand equity. Consumers own brands, and your brand is what consumers will permit you have. Therefore, customer-based brand equity is the differential effect that consumers’ brand knowledge has on their response to the marketing of the brand. The power of a brand lies in the minds and hearts of consumers.

Brand knowledge consists of two parts:

• Brand awareness = related to the strength of the brand in memory, as reflected by consumers’ ability to recall the brand in different situations. Depth of brand awareness = the likelihood that consumers can recognize/recall the brand, while breadth = the variety of purchase/consumption situations in which the brand comes to mind.

• Brand image = consumer perceptions of and preferences for a brand, measured by the brand associations held in memory. Those associations can be product-related or performance-related versus non-product related or imagery-related. Benefits can be functional, symbolic, or experiential. Some of the attributes and benefits may be more rational/cognitive in nature, while others are more emotional/affective.

CBBE occurs when the consumer has a high level of familiarity and awareness, and holds strong, favorable, and unique associations in his/her memory. The higher-involved the purchase decision, the more associations come to play. The dimensions of associations depend on:

• Strength = a function of the quantity of processing that information initially receives, and the quality of that processing.

• Favorability = those associations desirable to customers, successfully delivered by the product, and conveyed by the supporting marketing program.

• Uniqueness = meaningful PODS that provide a competitive advantage and a ‘reason why’ consumers should buy the brand.

So, to create CBBE, you need: depth of awareness, breadth of awareness, strong brand associations, favorable brand associations, and unique brand associations. In low-involvement purchase decisions only awareness may be sufficient. Benefits of CBBE are:

• Improved perceptions of product performance;

• Greater customer loyalty;

• Less vulnerability to competitive marketing actions and marketing crises;

• Higher margins;

• More inelastic consumer response to price increases and vice versa;

Tactical guidelines

Building brand equity: this can be done in three ways:

• Through the initial choice of the brand elements making up the brand;

• Through marketing activities and the design of the marketing program;

• Through the leverage of secondary associations that link the brand to other entities.

Guidelines to building CBBE:

1. Mix and match brand elements by choosing different ones to achieve different objectives and by designing them to be as mutually reinforcing as possible.

2. Ensure a high level of perceived quality and create a rich brand image by linking (in)tangible (non-)product-related associations to the brand.

3. Adopt value-based pricing strategies to set prices and guide discount pricing policies over time that reflect consumers’ perceptions of value and willingness to pay a premium.

4. Consider a range of (in)direct distribution options and blend push strategies for channel members with pull strategies for consumers.

5. Mix marketing communication options by choosing a broad set of communication options based on their differential ability to affect brand awareness and create, maintain, or strengthen favorable and unique associations. Match mc options by ensuring consistency and directly reinforcing some options with other options.

6. Leverage secondary associations to compensate for otherwise missing dimensions of the marketing program by linking the brand to other entities like companies, other brands, and events.

Brand elements should be memorable, meaningful, appealing, transferable, adaptable, and protectable. Secondary associations should have high levels of awareness, meaningfulness, and transferability.

Ensuring complementarity means choosing different brand elements and supporting marketing activities so that the potential contribution to brand equity of one compensates for the shortcomings of others. It is important to put a varied set of brand elements into place in order to create the desired level of awareness and type of image that leads to brand equity. A high degree of consistency across the elements helps create the highest level of awareness and the strongest, most favorable associations.

Measuring brand equity:

Brand equity can be indirectly measured by measuring its potential sources like aspects of brand awareness and brand image. To directly measure brand equity, the outcomes can be measured to estimate the various benefits from creating the sources of equity.

The brand value chain considers how marketing activity affects the sources of brand equity, how the resulting outcomes influence the investment community, and how various filters/multipliers intervene between the stages. Multiple techniques and measures are needed to tap into the various sources and outcomes of equity, to help interpret the research, and to ensure timely acquisition of actionable information.

Brand equity measurement system = a set of research procedures designed to provide timely, accurate, and actionable information for marketers about their brands. The steps of implementation include conducting brand audits, designing brand tracking studies, and establishing a brand equity management system.

Guidelines to measuring CBBE:

1. Formalize the firm’s view of brand equity into a document, the brand equity charter, that provides relevant guidelines to managers.

2. Conduct brand inventories to profile how all the products sold by a company are branded/marketed and conduct brand exploratories to understand what consumers think/feel about a brand as part of periodic brand audits to assess the health of brands, understand their sources of equity, and suggest ways to improve/leverage that equity.

3. Conduct consumer tracking studies on a routine basis to provide current information as to how brands are performing with respect to the key sources and outcomes of equity as identified by the brand audit.

4. Assemble results of relevant outcome measures into a brand equity report and distribute it regularly.

5. Establish a person/department to oversee the implementation of the brand equity charter and brand equity reports to make sure that product and marketing actions are done in the right way across the whole firm.

Managing brand equity: a broad and long-term view is needed. A broad one particularly when firms are selling multiple products in multiple markets. Brand hierarchies must define common/distinct brand elements and new product- and extension strategies must make sure that the brand portfolio is optimal. Brands need to be effectively managed over different geographic areas. A long-term view is needed because changes in the current programs, activities, and the environment, can affect consumers’ brand knowledge and response to future programs and activities. Brands that lost their equity over time, can be revitalized or discontinued.

Steps in managing brand equity:

1. Define brand hierarchy:

   1. Principle of simplicity = employ as few levels as possible.

   2. Principle of clarity = logic and relationships of all elements employed must be obvious and transparent.

   3. Principle of relevance = create abstract associations relevant to as many products as possible.

   4. Principle of differentiation = differentiate individual products/brands.

   5. Principle of growth = investments in market penetration/expansion versus product development should be made based on ROI opportunities.

   6. Principle of survival = extensions must achieve equity in their categories.

   7. Principle of synergy = extensions should enhance the parent brand’s equity.

   8. Principle of prominence = adjust prominence to affect perceptions of distance.

   9. Principle of commonality = link common products through shared brand elements.

2. Define brand-product matrix:

   1. Brand extensions: establish/enhance new/existing equity.

   2. Brand portfolio: maximize coverage, minimize overlap.

3. Enhance brand equity over time:

   1. Brand reinforcement = innovation in design, manufacturing, and merchandising. Relevance in user/usage imagery.

   2. Brand revitalization = back to basics/reinvention strategy.

4. Establish brand equity over market segments:

   1. Identify differences in consumer behavior;

   2. Adjust brand program.

Guidelines:

1. Define the brand hierarchy in terms of the number of levels to use and the relative prominence that brands at different levels will receive when combined to brand any one product.

2. Create associations relevant to as many brands nested at the level below in the hierarchy as possible but sharply differentiate brands at the same level.

3. Introduce extensions that complement the current portfolio, leverage parent brand associations, and enhance parent brand’s equity.

4. Clearly establish brands’ roles in the portfolio.

5. Reinforce equity over time through marketing actions.

6. Enhance brand equity over time through innovation in design, manufacturing, merchandising and continued relevance in user/usage imagery.

7. Identify differences in consumer behavior in different segments and adjust the branding program to their needs.

It is important to maintain balance in marketing activities and to make moderate changes to the program over time. The brand should have a consistent meaning which reflects the key sources of equity and its core associations.

What makes a strong brand?

To create a strong brand and maximize equity, marketers must:

• Understand brand meaning and market appropriate products in a good way;

• Properly position the brand and provide superior delivery of desired benefits;

• Employ a full range of complementary elements, supporting marketing activities, and secondary associations;

• Embrace integrated mc and communicate consistently;

• Measure consumers’ value perceptions and develop the right pricing strategy;

• Establish credibility, appropriate brand personality and imagery;

• Maintain innovation and relevance for the brand;

• Strategically design/implement a brand architecture strategy;

• Implement a brand equity management system.

The deadly sins of brand management:

1. Failure to fully understand the brand meaning: understand what consumers think/feel.

2. Failure to live up to the brand promise: set realistic expectations.

3. Failure to adequately support the brand: be willing to invest.

4. Failure to be patient with the brand: avoid taking shortcuts.

5. Failure to adequately control the brand: all employees must understand equity.

6. Failure to properly balance consistency and change with the brand: strike a balance between continuity and keeping the brand relevant.

7. Failure to understand the complexity of brand equity measurement and management.

Future brand priorities

While the world is becoming more complex, brands can provide important meaning to consumers and allow them to reduce risk and gain greater satisfaction. The following branding imperatives help managers navigate challenges in the future:

1. Fully and accurately factor the consumer into the branding equation

A consumer voice must be part of every branding decision. Consumer research must be conducted and a sharp marketing mind-set is needed to properly interpret the results. The customers of a brand can usually be divided into several (sub-)segments. In today’s global market, a multicultural perspective and a focus on the overall relevance of the brand are needed. Brand journalism = marketers should communicate different messages to different segments.

Because of the internet, information has become more transparent and consumers can be more actively involved than ever. However, only some of the consumers want to get involved with some of the brands they use, and only some of the time. Participation marketing = companies and consumers working together to find out how the firm can best satisfy consumer goals.

2. Go beyond product performance and rational benefits

In a highly transparent world, at the heart of a great brand, is a great product/service. Developing better-designed products requires a comprehensive understanding of consumers judgments, feelings, and purchase behavior. A powerful means of competitive advantage is designing products/services that can efficiently/effectively deliver the full range of category benefits. A well-designed brand offers advantages in product performance, and in the imagery that creates significant functional and psychological benefits.

3. Make the whole of the marketing program greater than the sum of its parts

Many new ways to communicate with consumers have been developed in recent times. The challenge is to choose the right mix of channel and communication options to maximize sales in the short run and brand equity in the long run. An activity should not only directly, but also indirectly affect other activities. Social media provide an effective means to creative active engagement/involvement with consumers.

4. Understand where you can take a brand and how

Brand growth necessitates a brand architecture strategy that clarifies the potential of a brand in terms of the breadth of its market footprint; the types of extensions that would allow a brand to achieve that potential; the brand elements, positioning, and images that are associated with all the offerings of a brand.

A good architecture defines brand boundaries for the brand and extensions. Every product sharing the brand name should deliver on the unique brand promise. By combining new brand elements with existing parent elements, sub-branding can be used effectively to signal the intended fit with the parent brand.

5. Do the ‘right thing’ with brands

Many consumers believe firms should help benefit society and their environment. Social responsibility must be embraced and companies must behave ethically responsible. Besides that, the brand promise and meaning must be protected and respected. Brands must be on a well-mapped-out journey that allows them to profitably grow while preserving close bonds with consumers and benefits to society as a whole.

6. Take a big picture view of branding effects, know what is working and why

Marketers have to justify their expenditures more often and more detailed. This can be hard, because marketing activities are intended to have long-term, broad, and varied effects. Models that can be used are:

• Brand positioning model = describes how to establish competitive advantages via PODs and PODs.

• Brand resonance model = considers how intense, active loyalty relationships are created with customers. Strong brands are built through a series of steps on the branding leader, and based on brand building blocks.

• Brand value chain model = describes how to trace the value creation process to better understand the financial impact of marketing expenditures/investments.

Branding is very complex and to grasp all its dimensions, a multidisciplinary view is needed.

Finding the branding sweet spot

Achieving balance in managing brands can be done by finding the branding ‘sweet spot’. To find this, managers must reconcile trade-offs in brand management and strike the balance between simplicity and complexity in all brand decision-making and activity. Such trade-offs include short-run sales versus long-term brand equity, global control versus local customization, retaining versus acquiring customers, POPs versus PODs, etc. It is important not to oversimplify branding, but at the same time, not overcomplicating it. The optimal branding approach recognizes that many different aspects of branding matter.