978-0132664257 Chapter 1 Solution Manual

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Chapter 1

Brands & Brand Management

Chapter Objectives

1. Dene “brand,” state how brand diers from a product, and explain

what brand equity is.

2. Summarize why brands are important.

3. Explain how branding applies to virtually everything.

4. Describe the main branding challenges and opportunities.

5. Identify the steps in the strategic brand management process.

Overview

This chapter sets up the rationale for the book. Because brands are so

valuable to the rms that manufacture them and the consumers who

purchase them, and because the marketplace has become increasingly

complex and competitive, brand management is more important and

challenging now than it ever has been. Brand managers face a

seemingly unlimited number of options and opportunities with respect

to product, price, place, and promotion strategies. But they also face

increased risk as they strive to deal with sea changes in the marketing

environment, including the rise of private labels, media fragmentation,

pressure for short-term results, shifting consumer preferences, and

technological advancements that level the product feature playing

eld, to name just a few.

Despite these pressures, many brands continue to grow and /ourish,

as evidenced by the global successes of such mega-names as Nike,

Disney, Mercedes, and others. Moreover, even categories that

heretofore had been thought of as consisting of mundane commodity

products now contain brands, including Campbell’s mushrooms, Blue

Rhino propane gas, and Perdue chickens.

Chapter 1 also indicates that by focusing specically on brands, this

book enables students to gain valuable knowledge, broader

perspectives, and more strategic insights than in a more general

marketing text. The chapter introduces the concept of a brand as an

identiable and dierentiated good or service. Brands oer tangible

and intangible benets to the companies who manufacture them, the

retailers who sell them, and the consumers who buy them. Examples of

strong brands given in the text include not only products and services,

but also people, places, and sports, art, and entertainment industries.

The chapter describes some of the past and present challenges faced

by brands (such as those noted above), and states that the purpose of

the book is to set forth principles, models and frameworks that will

help guide managers through these challenges as they plan and

execute brand strategies.

The chapter details the three main factors that contribute to brand

equity: the initial choices for the brand elements or identities making

up the brand; the way the brand is integrated into the supporting

marketing program; and the associations indirectly transferred to the

brand by linking the brand to some other entity (e.g., the company,

country of origin, channel of distribution, or another brand). Several

strategic imperatives for eective brand equity management are

introduced in the chapter.

In this chapter, the strategic brand management process is described.

The strategic brand management process involves four main steps:

identifying and establishing brand positioning and values, planning and

implementing brand marketing programs, measuring and interpreting

brand performance, and growing and sustaining brand equity.

Brand Focus 1.0 discusses the history of branding. It traces the

development of brands from marks of identication on stone age

pottery to national manufacturer brands in the Industrial Revolution to

mass marketed brands.

Science of Branding

THE SCIENCE OF BRANDING 1-1

UNDERSTANDING BUSINESS-TO-BUSINESS BRANDING

Due to the complexity and high risk involved in business-to-business

purchase decisions, branding plays an important role in B2B markets.

Six specic guidelines are dened for marketers of B2B brands:

Ensure the entire organization understands and supports

branding and brand management—Employees at all levels and in

all departments must have a complete, up-to-date understanding

of the vision for the brand and their role in supporting it. A

particularly crucial area is the sales force, where personal selling

is often the prot driver of a business-to-business organization.

Adopt a corporate branding strategy if possible and create a

well-dened brand hierarchy—Because of the breadth and

complexity of the product or service mix, companies selling

business-to-business are more likely to emphasize corporate

brands. Ideally, they will also create straightforward sub-brands

that combine the corporate brand name with descriptive product

modiers.

Frame value perceptions—Framing occurs when customers are

given a perspective or point of view that allows the brand to “put

its best foot forward.” Framing can be as simple as making sure

customers realize all the benets or cost savings oered by the

brand, or becoming more active in shaping how customers view

the economics of purchasing, owning, using and disposing of the

brand in a dierent way. Framing requires understanding how

customers currently think of brands and choose among products

and services, and then determining how they should ideally think

and choose.

Link relevant non-product-related brand associations—Brand

imagery might relate to the size or type of rm is considered

relevant. Imagery may also be a function of the other

organizations to which the rm sells.

Find relevant emotional associations for the brand—Emotional

associations related to a sense of security, social or peer

approval, and self-respect can also be linked to the brand and

serve as key sources of brand equity.

Segment customers carefully both within and across companies

—In a business-to-business setting, dierent customer segments

may exist both within and across organizations. Within

organizations, dierent people may assume the various roles in

the purchase decision process: Initiator, user, in/uencer, decider,

approver, buyer and gatekeeper. Across organizations,

businesses can vary according to industry and company size,

technologies used and other capabilities, purchasing policies,

and even risk and loyalty proles. Brand building must take these

dierent segmentation perspectives in mind in building tailored

marketing programs.

THE SCIENCE OF BRANDING 1-2

UNDERSTANDING HIGH-TECH BRANDING

Marketers operating in technologically intensive markets face a

number of unique challenges. Ten guidelines that managers for

high-tech companies can use to improve their company’s brand

strategy:

It is important to have a brand strategy that provides a roadmap

for the future—Technology companies too often rely on the faulty

assumption that the best product based on the best technology

will sell itself.

Understand your brand hierarchy and manage it appropriately

over time—A strong corporate brand is vital in the technology

industry to provide stability and help establish a presence. Since

product innovations provide the growth drivers for technology

companies, however, brand equity is sometimes built in the

product name to the detriment of corporate brand equity.

Know who your customer is and build an appropriate brand

strategy—Many technology companies understand that when

corporate customers purchase business-to-business products or

services, they are typically committing to a long-term

relationship. For this reason, it is advisable for technology

companies to establish a strong corporate brand that will endure

over time.

Realize that building brand equity and selling products are two

dierent exercises—Too often, the emphasis on developing

products leads to an overemphasis on branding them. Rather

than branding each new innovation separately, a better approach

is to plan for future innovations by developing an extendable

branding strategy.

Brands are owned by customers, not engineers—Technology

companies typically spend less on consumer research compared

with other types of companies. As a result of these factors, tech

companies often do not invest in building strong brands.

Brand strategies need to account for the attributes of the CEO

and adjust accordingly—Many of the world’s top technology

companies have highly visible CEOs, especially compared with

other industries. In most cases, the CEO’s identity and persona

are inextricably woven into the fabric of the brand.

Brand building on a small budget necessitates leveraging every

possible positive association—Technology companies typically

prioritize their marketing mix as: industry analyst relations,

public relations, trade shows, seminars, direct mail, and

advertising.

Technology categories are created by customers and external

forces, not by companies themselves—Only two groups can truly

create categories: analysts and customers. For this reason, it is

important for technology companies to manage their

relationships with analysts in order to attract consumers.

The rapidly changing environment demands that you stay in tune

with your internal and external environment—The rapid pace of

innovation in the technology sector dictates that marketers

closely observe the market conditions in which their brands do

business. Trends in brand strategy change almost as rapidly as

the technology.

Invest the time to understand the technology and value

proposition and do not be afraid to ask questions—To build trust

among engineers and customers, marketers must strive to learn

as much as they can about the technology.

THE SCIENCE OF BRANDING 1-3

UNDERSTANDING MARKET LEADERSHIP

According to a study by Dartmouth’s Tuck School of Business Professor

Peter Golder, leading brands are more likely to lose their leadership

position over time than retain it. One 1923 leader that did not maintain

leadership was Underwood typewriters. Underwood’s primary mistake

was lack of innovation. According to Golder, Wrigley’s success as a

long-term leader is based on three factors: “maintaining and building

strong brands, focusing on a single product, and being in a category

that has not changed much.”

Golder and his co-author Gerard Tellis argue that dedication to the

brand is vital for sustained brand leadership, elucidating ve factors for

enduring market leadership:

Vision of the Mass Market—Companies with a keen eye for mass

market tastes are more likely to build a broad and sustainable

customer base.

Managerial Persistence—The “breakthrough” technology that can

drive market leadership often requires the commitment of

company resources over long periods of time.

Financial Commitment—The cost of maintaining leadership is

high because of the demands for research and development and

marketing. Companies that aim for short-term protability rather

than long-term leadership are unlikely to enjoy enduring

leadership.

Relentless Innovation—Due to changes in consumer tastes and

competition from other rms, companies that wish to maintain

leadership positions must continually innovate.

Asset Leverage—Companies can become leaders in some

categories if they hold a leadership position in a related category.

THE SCIENCE OF BRANDING 1-4

MARKETING BRANDS IN A RECESSION

There are tactics that can help marketers survive—or even thrive—in a

recession, both in the short run and over the long haul:

Explore the Upside of Actually Increasing Investment—Firms

willing to capitalize on a marketing opportunity by investing

during a recession have, on average, improved their fortunes

compared with rms that chose to cut back.

Now, More Than Ever, Get Closer to Your Consumer—A downturn

is an opportunity for marketers to learn even more about what

consumers are thinking, feeling, and doing, especially the loyal

customer base that is the source of so much of a brand’s

protability. Any changes must be identied and characterized as

temporary adjustments versus permanent shifts.

Rethink How You Spend Your Money—A recession provides an

opportunity for marketers to closely review how much and in

what ways they are spending their money. Budget reallocations

can allow marketers to try new, promising options and eliminate

sacred-cow approaches that no longer provide suGcient revenue

benets.

Put Forth the Most Compelling Value Proposition—Rather than

overly focusing on price reductions and discounts, marketers

should focus on increasing—and clearly communicating—the

value their brands oer consumers, making sure consumers

appreciate all the nancial, logistical, and psychological benets

compared with the competition.

Fine-Tune Your Brand and Product Oerings—Because certain

brands or sub-brands appeal to dierent economic segments,

those that target the lower end of the socioeconomic spectrum

may be particularly important during a recession. Bad times also

are an opportunity to prune brands or products that have

diminished prospects.

Branding Briefs

BRANDING BRIEF 1-1

COCA-COLA’S BRANDING LESSON

One of the classic marketing mistakes occurred in April 1985 when

Coca-Cola replaced its /agship cola brand with a new formula.

Pepsi-Cola’s “Pepsi Challenge” promotion involved advertising and

in-store sampling showcasing consumer blind taste tests between

Coca-Cola and Pepsi-Cola. Invariably, Pepsi won these tests. Fearful

that the promotion, if expanded nationally, could take a big bite out of

Coca-Cola’s sales, Coca-Cola felt compelled to act.

Coca-Cola’s strategy was to change the formulation of Coke to more

closely match the slightly sweeter taste of Pepsi. To arrive at a new

formulation, Coke conducted taste tests with 190,000 consumers. The

ndings indicated that consumers preferred the taste of the new

formulation to the old one and thus, Coca-Cola announced the

formulation change. Consumer reaction was swift but, unfortunately for

Coca-Cola, negative. After several months of slumping sales, Coca-Cola

announced that the old formulation would return as “Coca-Cola

Classic” and join “new” Coke in the marketplace.

The new Coke debacle taught Coca-Cola a very important, albeit

painful and public, lesson about its brand. Coke’s brand image

certainly has emotional components, and consumers have a great deal

of strong feelings for the brand. Coca-Cola’s biggest slip was losing

sight of what the brand meant to consumers in its totality. The

psychological response to a brand can be as important as the

physiological response to the product.

BRANDING BRIEF 1-2

BRANDING COMMODITIES

A commodity is a product so basic that it cannot be physically

dierentiated from competitors in the minds of consumers. Over the

years, a number of products that at one time were seen as essentially

commodities have become highly dierentiated as strong brands have

emerged in the category. These products became branded in various

ways. Consumers became convinced that all the product oerings in

the category were not the same and that meaningful dierences

existed.

Some notable examples are coee (Maxwell House), bath soap (Ivory),

/our (Gold Medal), beer (Budweiser), salt (Morton), oatmeal (Quaker),

pickles (Vlasic), bananas (Chiquita), chickens (Perdue), pineapples

(Dole), and even water (Perrier).

BRANDING BRIEF 1-3

PLACE BRANDING

Branding is not limited to vacation destinations. Countries, states, and

cities large and small are beginning to brand their respective images

as they try to draw visitors or encourage relocation. Some notable

early examples of place branding include “Virginia Is for Lovers” and

“Shrimp on the Barbie” (Australia). Branding countries to increase

appeal to tourists is also a growing phenomenon. Some recent success

stories include Spain’s use of a logo designed by Spanish artist Joan

Miró, the “Incredible India” campaign, and New Zealand’s marketing of

itself in relation to the Lord of the Rings movie franchise.

Brand Focus

BRAND FOCUS 1.0

HISTORY OF BRANDING

The development of branding and brand management has been

divided into six distinct phases:

Early Origins: Before 1860

The original motivation for branding was for craftsmen and

others to identify the fruits of their labors so that customers

could easily recognize them. Branding, or at least trademarks,

can be traced back to ancient pottery and stonemason’s marks,

which were applied to handcrafted goods to identify their source.

Marks were used to attract buyers loyal to particular makers, but

also to police infringers of the guild monopolies and to single out

the makers of inferior goods.

An English law passed in 1266 required bakers to put their mark

on every loaf of bread sold, “to the end that if any bread bu

faultie in weight, it may bee then knowne in whom the fault is.”

Goldsmiths and silversmiths were also required to mark their

goods, both with their signature or personal symbol and with a

sign of the quality of the metal. When Europeans began to settle

in North America, they brought the convention and practice of

branding with them. The makers of patent medicines and

tobacco manufacturers were early U.S. branding pioneers.

Attractive-looking packages were seen as important, and picture

labels, decorations, and symbols were designed as a result. This

was applied even by the tobacco manufacturers.

Emergence of National Manufacturer Brands: 1860 to 1914

In the United States after the American Civil War, a number of

forces combined to make widely distributed,

manufacturer-branded products a protable venture through

improvements in transportation, production processes, and

packaging. Advertising became perceived as a more credible

option and retail institutions served as eective middlemen.

Increasing industrialization and urbanization raised the standard

of living.

Mass-produced merchandise in packages largely replaced locally

produced merchandise sold from bulk containers, which brought

about the widespread use of trademarks. The development and

management of brands was largely driven by the owners of the

rm and their top-level management.

National manufacturers employed sustained “push” and “pull”

eorts to keep both consumers and retailers happy and

accepting of national brands. Consumers were attracted through

the use of sampling, premiums, product education brochures,

and heavy advertising. Retailers were lured by in-store sampling

and promotional programs and shelf maintenance assistance.

As the practice of imitation and counterfeiting spread, rms

sought protection by sending their trademarks and labels to

district courts for registration. By 1890, most countries had

trademark acts, establishing brand names, labels, and designs as

legally protectable assets.

Dominance of Mass Marketed Brands: 1915 to 1929

By 1915, manufacturer brands had become well established in

the United States on both a regional and national basis. The next

15 years saw increasing acceptance and even admiration of

manufacturer brands by consumers. The marketing of brands

became more specialized under the guidance of functional

experts in charge of production, promotion, personal selling, and

other areas, which led to more advanced marketing techniques.

Although functional management of brands had these virtues, it

also presented problems. Because responsibility for any one

brand was divided among two or more functional managers—as

well as advertising specialists—poor coordination was always a

potential problem.

Challenges to Manufacturer Brands: 1930 to 1945

The onset of the Great Depression in 1929 posed new challenges

to manufacturer brands. Greater price sensitivity led retailers to

push their own brands and dropped nonperforming manufacturer

brands. Advertising came under re as manipulative, deceptive,

and tasteless and was increasingly being ignored by certain

segments of the population. In 1938, the Wheeler Amendment

gave power to the Federal Trade Commission (FTC) to regulate

advertising practices.

Procter & Gamble put the rst brand management system into

place, whereby each of their brands had a manager assigned

only to that brand who was responsible for its nancial success.

Other rms were slow to follow. During World War II,

manufacturer brands became relatively scarce as resources were

diverted to the war eort. The Lanham Act of 1946 permitted

federal registration of service marks and collective marks.

Establishment of Brand Management Standards: 1946 to 1985

After World War II, the pent-up demand for high-quality brands

led to an explosion of sales. Personal income grew as the

economy took o, and market demand intensied as the rate of

population growth exploded. Demand for national brands soared,

fueled by a burst of new products and a receptive and growing

middle class. Firm after rm during this time period adopted the

brand management system.

Branding Becomes More Pervasive: 1986 to Now

The merger and acquisitions boom of the mid-1980s raised the

interest of top executives and other board members as to the

nancial value of brands. This appreciated the importance of

managing brands as valuable intangible assets. The last 25 years

have seen an explosion in the interest and application of

branding as more rms have embraced the concept.

Discussion questions

1. What do brands mean to you? What are your favorite brands and

why? Check to see how your perceptions of brands might dier from

those of others.

Page: 6

Learning Objective: Dene “brand,” state how brand diers from a

product, and explain what brand equity is.

AACSB: Analytic Skills

2. Who do you think has the strongest brands? Why? What do you think

of the Interbrand list of the 25 strongest brands in Figure 1-5? Do

you agree with the rankings? Why or why not?

Page: 8

Learning Objective: Explain how branding applies to virtually

everything.

AACSB: Re/ective Thinking

3. Can you think of anything that cannot be branded? Pick an example

that was not discussed in each of the categories provided (services;

retailers and distributors; people & organizations; sports, arts, &

entertainment) and describe how each is a brand.

Page: 8

Learning Objective: Explain how branding applies to virtually

everything.

AACSB: Re/ective Thinking

4. Can you think of yourself as a brand? What do you do to “brand”

yourself?

5. What do you think of the new branding challenges and opportunities

that were listed in the chapter? Can you think of any other issues?

Exercises and assignments

1. Ask students to poll 10 or so consumers about their brand loyalty in

various product categories (e.g., toothpaste, dishwashing soap,

shampoo, deodorant, toilet tissue, soda, salsa, ice cream, cereal,

potato chips, jeans, running shoes, and socks). Are there brands or

categories for which consumer loyalty is relatively high? How do

consumers explain their loyalty or lack thereof? How are marketing

strategies aected by consumer attitude and behavior patterns (or,

alternatively, how should they be aected)? (Can be related to

Branding Brief 1-1: Coca-Cola’s Branding Lesson.)

2. Have students identify three brands that are on the endangered

species list and: 1) analyze reasons for the problems, and 2)

suggest prescriptive marketing measures. Appropriate brands might

include Wise potato chips, Oldsmobile cars, Tang drink, LifeSavers

roll candy, J.C. Penney.

3. Tell students to survey consumers about their buying behavior with

respect to private label or store brands. In which product categories

do such products pose the largest competitive threat to premium

brands? Which retail stores have the strongest private labels?

4. Give a prize to the student who comes up with the best list (as

voted upon by other students) of “weird” brands – products that

don’t seem to lend themselves to branding but yet are very

successful in the marketplace. Candidates might include Blue Rhino

propane gas, Banker’s Box boxes, Rent-A-Husband home handyman

service, Campbell’s mushrooms, and Merry Maids housecleaning

service.

Key take-away points

1. A brand is a “name, term, sign, symbol, or design, or a combination

of them, intended to identify the goods and services of one seller or

group of sellers and to dierentiate them from those of

competition.”

2. Brand elements can be based on people, places, things, and

abstract images.

3. A product is anything that is oered to a market for attention,

acquisition, use, or consumption that might satisfy a need or want.

4. A brand can have dimensions that dierentiate it in some way from

other products designed to satisfy the same need.

5. By creating perceived dierences among products through branding

and by developing a loyal consumer franchise, marketers create

value that can translate to nancial prots for the rm.

6. Consumers oer their trust and loyalty with the implicit

understanding that the brand will behave in certain ways and

provide them utility through consistent product performance and

appropriate pricing, promotion, and distribution programs and

actions.

7. Firms see branding as a powerful means to secure a competitive

advantage.

8. Retailers can introduce their own brands by using their store name,

creating new names, or some combination of the two.

9. Successful online brands have been well positioned and have found

unique ways to satisfy consumers’ unmet needs.

10. A company’s management of a brand is typically the determining

factor in the ultimate success or failure of the brand.

11. Brands have dierentiating features that distinguish them from

competitors and add value for consumers.

12. Strategic brand management involves the design and

implementation of marketing programs and activities to build,

measure, and manage brand equity.

13. Consumers often don’t buy products; they buy the images

associated with products.