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Chapter 1
Brands & Brand Management
Chapter Objectives
1. Dene “brand,” state how brand diers 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 specically 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
identiable and dierentiated good or service. Brands oer tangible
and intangible benets 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,
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 eective 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 identication 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 specic guidelines are dened 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 prot driver of a business-to-business organization.
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Adopt a corporate branding strategy if possible and create a
well-dened 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
modiers.
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 benets or cost savings oered 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 dierent 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, dierent customer segments
may exist both within and across organizations. Within
organizations, dierent 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 proles. Brand building must take these
dierent 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:
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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
dierent 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
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 protability 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:
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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
protability. Any changes must be identied 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
benets.
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 oer consumers, making sure consumers
appreciate all the nancial, logistical, and psychological benets
compared with the competition.
Fine-Tune Your Brand and Product Oerings—Because certain
brands or sub-brands appeal to dierent 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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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
dierentiated 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 dierentiated as strong brands have
emerged in the category. These products became branded in various
ways. Consumers became convinced that all the product oerings in
the category were not the same and that meaningful dierences
existed.
Some notable examples are coee (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
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 protable venture through
improvements in transportation, production processes, and
packaging. Advertising became perceived as a more credible
option and retail institutions served as eective middlemen.
Increasing industrialization and urbanization raised the standard
of living.
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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”
eorts 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
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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 eort. 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 intensied 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 dier from
those of others.
Page: 6
Learning Objective: Dene “brand,” state how brand diers 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?
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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?
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 aected by consumer attitude and behavior patterns (or,
alternatively, how should they be aected)? (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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 dierentiate them from those of
competition.”
2. Brand elements can be based on people, places, things, and
abstract images.
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3. A product is anything that is oered to a market for attention,
acquisition, use, or consumption that might satisfy a need or want.
4. A brand can have dimensions that dierentiate it in some way from
other products designed to satisfy the same need.
5. By creating perceived dierences among products through branding
and by developing a loyal consumer franchise, marketers create
value that can translate to nancial prots for the rm.
6. Consumers oer 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 dierentiating 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.
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