Brand Equity

MARKETING MANAGEMENT 12TH EDITION BY KOTLER AND KELLER

LECTURE NOTES
CHAPTER 9
Prof. dr. Teoman Duman
Student: Irfan Djedović
CREATING BRAND EQUITY

Every business has a brand! Why? Because your brand is your business™!

In this chapter we will address the following questions:

1. What is a brand and how does branding working?
2. What is brand equity?
3. How is brand equity built, measured managed?
4. What are the important decisions in developing a branding strategy?

What Is Brand Equity?

Brand - a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.
A brand is thus a product or service that adds dimensions that differentiate it in some way from other products or services designed to satisfy the same need.
Branding has been around for centuries as a means to distinguish the goods of one producer from those of another.
Functional, rational, or tangible—related to product performance
Symbolic, emotional or intangible—related to what the brand represents

The Role of Brands  

• The ability of a brand to simplify decision making and reduce risk is invaluable;
• Brands also perform valuable functions for firms;
• Simplify product handling or tracing;
• Help to organize inventory and accounting records;  
• Offers the firm legal protection for unique features or aspects of the product;
• Intelectual property;
• Brands can signal a certain level of quality so that satisfied buyers can easily choose the product again;
• Brand loyalty provides predictability and security of demand;
• Loyalty also can translate into a willingness to pay a higher price—often 20 to 25 percent more;
• Competitive advantage;
• Sustained future revenues to their owner.

 

The Scope of Branding

How do you „brand“ a product?
Branding is endowing products and services with the power of a brand. 
Marketers need to teach consumers:
"who" the product is;
"what" the product does; and 
"why" consumers should care.
It is all about making differences between products.

Defining Brand Equity

Brand equity is the added value endowed to products and services.
Customer-basedbrand equitycan be defined as the differential effect that brand knowledge has on consumer response to the marketing of that brand.
Positive customer-based brand equity - when consumers react more favorably to a product and the way it is marketed when the brand is identified as compared to when it is not
Negative customer-based brand equity - if consumers react less favorably to marketing activity for the brand under the same circumstances.
Brand knowledgeconsists of all the thoughts, feelings, images, experiences, beliefs, and so on that become associated with the brand.
In particular, brands must create strong, favorable, and unique brand associations with customers, as has been the case with Volvo (safety), Hallmark {caring), and Harley-Davidson {adventure).

List that summarizes some of these key benefits of brand equity:

• Improved Perceptions of Product Performance
• Greater Loyalty
• Less Vulnerability to Competitive Marketing Actions
• Less Vulnerability to Marketing Crises
• Larger Margins
• More Inelastic Consumer Response to Price Increases
• More Elastic Consumer Response to Price Decreases
• Greater Trade Cooperation and Support
• Increased Marketing Communications Effectiveness
• Possible Licensing Opportunities
• Additional Brand Extension Opportunities

Brand Equity as a Bridge

The quality of the investment in brand building is the critical factor, not necessarily the quantity.
Brand promise is the marketer's vision of what the brand must be and do for consumers.
ex: Burger King
Brand Equity Models:

• Brand asset valuator
• Aaker model
• Brandz
• Brand resonance

Building Brand Equity

Marketers build brand equity by creating the right brand knowledge structures with the right consumers.
There are three main sets of brand equity drivers:

• The initial choices for the brand elements or identities making up the brand (e.g., brand names, URLs, logos, symbols, characters, spokespeople, slogans, jingles, packages, and signage).
• The product and service and all accompanying marketing activities and supporting marketing programs.

• Other associations indirectly transferred to the brand by linking it to some other entity (e.g., a person, place, or thing)

 

Choosing Brand Elements

Brand elements are those trademarkable devices that serve to identify and differentiate the brand.
The test of the brand-building ability of these elements is what consumers would think or feel about the product if they only knew about the brand element.
ex: Nike
Brand element choice criteria:

• Memorable
• Meaningful
• Likeability.
• Transferable.
• Adaptable

• Protectible

Designing Holistic Marketing Activities

A brand contact can be defined as any information-bearing experience a customer or prospect has with the brand, the product category, or the market that relates to the marketer's product or service.
Activities

• Personalization
• Integration
• Internalization

Leveraging Secondary Associations
Measuring Brand Equity

An indirect approach - assesses potential sources of brand equity by identifying and tracking consumer brand knowledge structures. 
A direct approach - assesses the actual impact of brand knowledge on consumer response to different aspects of the marketing.
A brand audit is a consumer-focused exercise that involves a series of procedures to assess the health of the brand, uncover its sources of brand equity, and suggest ways to improve and leverage its equity.
Brand-tracking studies are a means of understanding where, how much, and in what ways brand value is being created.

Brand Valuation

Brand equity is not same as brand valuation.
Brand valuation is estimating the total financial value of the brand.
John Stuart, co-founder of Quaker Oats, said: "If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trade marks, and I would fare better than you."

1.         Coca-cola                    67,00
2.         Microsoft                    56,93
3.         IBM                            56,20
4.         GE                              48,91
5.         Intel                            38,32
6.         Nokia                          30,13
7.         Toyota                         27,94
8.         Disney                         27,85
9.         McDonald's                27,50
10.       Mercedes-Benz          22,13

Managing Brand Equity

Brand Reinforcement

Brand equity is reinforced by marketing actions that consistently convey the meaning of the brand to consumers in terms of:
(1) What products the brand represents; what core benefits it supplies; and what needs it satisfies; as well as 
(2) How the brand makes those products superior and which strong, favorable, and unique brand associations should exist in the minds of consumers.

Brand Revitalization

Changes in consumer tastes and preferences, the emergence of new competitors or new technology, or any new development in the marketing environment could potentially affect the fortunes of a brand.

The first thing to do in turning around the fortunes of a brand is to understand what the sources of brand equity were to begin with.

• Positive associations
• Negative associations

ex: Harley Davidson

Devising a Branding Strategy

The branding strategy for a firm reflects the number and nature of common and distinctive brand elements applied to the different products sold by the firm.
Devising a branding strategy involves deciding the nature of new and existing brand elements to be applied to new and existing products.

When a firm introduces a new product, it has three main choices:
1. It can develop new brand elements for the new product. 
2. It can apply some of its existing brand elements. 
3. It can use a combination of new and existing brand elements.

When a firm uses an established brand to introduce a new product, it is called a brand extension. 
When a new brand is combined with an existing brand, the brand extension can also be called a sub-brand
An existing brand that gives birth to a brand extension is referred to as the parent brand.
If the parent brand is already associated with multiple products through brand extensions, then it may also be called a family brand.
In a line extension, the parent brand is used to brand a new product that targets a new market segment within a product category currently served by the parent brand, such as through new flavors, forms, colors, added ingredients, and package sizes
In a category extension, the parent brand is used to enter a different product category from that currently served by the parent brand.
A Brand line consists of all products—original as well as line and category extensions— sold under a particular brand.
A Brand mix is the set of all brand lines that a particular seller makes available to buyers
Branded variants are specific brand lines supplied to specific retailers or distribution channels.
A licensed product is one whose brand name has been licensed to other manufacturers who actually make the product.

Branding Decisions

To Brand or Not to Brand?
Four general strategies are often used:

• Individual names;
• Blanket family names;
• Separate family names for all products;
• Corporate name combined with individual product names.

Brand Extensions

Recognizing that one of their most valuable assets is their brands, many firms have decided to leverage that asset by introducing a host of new products under some of their strongest brand names.
Most new products are in fact line extensions—typically 80 to 90% in any one year.
ex:
Advantages of brand extensions:

• New-Product Success
• Positive Feedback Effects

Disadvantages of brand extensions
Brand dilution 

Brand Portfolios

All brands have boundaries—a brand can only be stretched so far. Multiple brands are often necessary to pursue multiple market segments.
Other reasons for introducing multiple brands in a category include:

• To increase shelf presence and retailer dependence in the store;
• To attract consumers seeking variety who may otherwise have switched to another brand;
• To increase internal competition within the firm; and

• To yield economies of scale in advertising, sales, merchandising, and physical distribution.

The brand portfolio is the set of all brands and brand lines a particular firm offers for sale to buyers in a particular category.

Customer equity

We can relate brand equity to one other important marketing concept, Customer equity.
Customer equity - „ The sum of lifetime values of all customers“.

Strongest brends in 2010 on the former Yugoslavia teritory (22 million people):

• Coca-cola
• Milka
• Argeta