LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. What is a brand, and how does branding work?
2. What is brand equity?
3. How is brand equity built?
4. How is brand equity measured?
5. How is brand equity managed?
6. What is brand architecture?
7. What is customer equity?
SUMMARY
1. A brand is a name, term, sign, symbol, design, or some combination of these elements,
intended to identify the goods and services of one seller or group of sellers and to
differentiate them from those of competitors. The different components of a brand—
brand names, logos, symbols, package designs, and so on—are called brand elements.
2. Brands are valuable intangible assets that offer a number of benefits to customers and
firms and need to be managed carefully. The key to branding is that consumers
perceive differences among brands in a product category.
3. Brand equity should be defined in terms of marketing effects uniquely attributable to a
brand. That is, different outcomes result when a product or service is marketed under
its brand than when it is not.
4. Building brand equity depends on three main factors: (1) The initial choices for the
brand elements or identities making up the brand; (2) the way the brand is integrated
into the supporting marketing program; and (3) the associations indirectly transferred
to the brand by links to some other entity (the company, country of origin, channel of
distribution, or another brand).
5. Brand audits measure “where the brand has been,” and tracking studies measure
“where the brand is now” and whether marketing programs are having the intended
effects.
6. A branding strategy identifies which brand elements a firm chooses to apply across the
various products it sells. In a brand extension, a firm uses an established brand name
to introduce a new product. Potential extensions must be judged by how effectively
they leverage existing brand equity to a new product, as well as how effectively they
contribute to the equity of the parent brand in turn.
7. Brands may expand coverage, provide protection, extend an image, or fulfill a variety
of other roles for the firm. Each brand-name product must have a well-defined
positioning to maximize coverage, minimize overlap, and thus optimize the portfolio.
C H A P T E
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CREATING BRAND EQUITY
8. Customer equity is a concept that is complementary to brand equity and reflects the
sum of lifetime values of all customers for a brand.
OPENING THOUGHT
This chapter will present some challenges to students new to marketing. The concept of a
“brand” is discussed in depth in the chapter and because that concept is much more than a
product, some students will have difficulty in understanding the total concept of a
“brand.” The instructor is urged to use a number of concrete examples gleaned from the
student’s personal experiences of what a “brand” is. The instructor is urged to spend a
considerable amount of time trying to differentiate between the symbol or package, and
the total “brand.” The instructor is cautioned to ensure that the concept of a “brand” has
been satisfactorily understood by the students before proceeding further with the chapter
material.
The second challenge presented in the chapter is the fact that “brands” represent financial
assets to a company and that they are valuable intangible assets that need to be managed
and represents perceived differences in product performances. The instructor can use and
is encouraged to use numerous examples of competing products in a category to
demonstrate to the students the differences and the perceptual differences among and
between like products. An in-class exercise could include asking students to mention
products or services that they are loyal to and the instructor could elicit their reasons for
this loyalty, compare and contrast these opinions to other students in the class to
demonstrate brand loyalty and brand switching. This chapter also contains a number of
definitions that the instructor is urged to define and differentiate clearly so that the
students understand.
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. At this point in the semester, students are to have their “branding” strategy developed
for their project. Questions to have been completed include the brand name, its equity
position, and the decisions in developing the brand strategy.
2. In small groups (five students suggested as the maximum), have them list their
favorite branded product or service (Google, Nike, or others). Based upon the
information contained in this chapter, the students are to collect information, via
on-campus research, on the brand’s brand equity based upon the Brand Asset
Valuator, developed by Young and Rubicam.
3. Sonic PDA Marketing Plan Decisions about branding are critical for any marketing
plan. During the planning process, marketers must consider issues related to brand
strategies and brand equity. Sonic’s PDA is a new brand name entering the market.
Sonic begins with zero brand equity. A brand is a complex symbol that can convey up
to six levels of meaning: attributes, benefits, values, culture, personality, and user.
Sonic begins with no meaning. Jane Melody has asked you to:
Suggest what Sonic 1000 with its distinctive yellow thunderbolt might mean for
attributes and benefits levels of meaning.
Determine what strategies and action programs should be used to build brand
equity for Sonic 1000.
Summarize your ideas in a written marketing plan or type them into the Marketing Mix
section of Marketing Plan Pro. Also indicate in the Marketing Research section what
studies you will need to support decisions about managing the brand equity for Sonic
1000.
ASSIGNMENTS
Individually, have the students visit Brandchannel (www.brandchannel.com) and a)
choose a brand listed and summarize the views regarding the brand as expressed by
brandchannel.com or b) choose the “papers” icon and read and summarize one of the
papers listed.
Either in small groups or indivually, ask the students to conduct a small research project
with students on campus regarding the student’s brand knowledge of a particular brand
(again, the students can select their “brand” for this exercise). In their research, the
students are to delineate the brands: unique brand association, the thoughts, feelings,
images, experiences, and beliefs elicited by the brand. This exercise builds on the
concepts of marketing research covered in Chapter 4 of this text. Important information
for the students to postulate is why in their research some of the respondents held such
beliefs about the brand and why others did not.
In Seth Godin’s book, Permission Marketing: Turning Strangers into Friends, and
Friends into Customers, New York: Simon & Schuster, 1999, he lists five steps in
developing effective permission marketing. After reading Mr. Godin’s book, comment on
whether or not you believe that “permission marketing” will work for all products and
services in the future. Specifically, explore whether or not the proliferation of
“permission marketing” will wear out its effectiveness, similar to the experiences of
spam, “pop-ups,” and other forms of customer specific marketing techniques.
From a reading of Scott Bedbury’s book, A New Brand World, Viking Press, 2002,
students are to comment on the appropriateness of his eight branding principles to the
future of marketing. Specifically, are Mr. Bedbury’s principles “on target,” and therefore
applicable to all brands?, Or just to emerging brands? If you were asked to implement
Mr. Bedbury’s principles to the “branding” of an existing product (say your school or
university), how and what would you change in order to follow these principles?
DETAILED CHAPTER OUTLINE
Opening vignette: Building a strong brand requires careful planning, a deep long-term
commitment, and creatively designed and executed marketing. Strategic brand
management combines the design and implementation of marketing activities and
programs to build, measure, and manage brands to maximize their value. It has four main
steps:
1. Identifying and establishing brand positioning
2. Planning and implementing brand marketing
3. Measuring and interpreting brand performance
4. Growing and sustaining brand value
I. How Does Branding Work?
A. A brand is “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.”
i. A brand is thus a product or service whose dimensions differentiate it
in some way from other products or services designed to satisfy the
same need.
ii. These differences may be functional, rational, or tangible—related to
product performance of the brand.
iii. They may also be more symbolic, emotional, or intangible—related to
what the brand represents or means in a more abstract sense.
B. The Role of Brands for consumers: identify the maker of a product and allow
consumers to assign responsibility for its performance to that maker or
distributor.
i. A brand is a promise between the firm and the consumer.
ii. It is a means to set consumers’ expectations and reduce their risk.
iii. Brands simplify decision making
iv. Brands can also take on personal meaning to consumers and become
an important part of their identity
C. The Role of Brands for firms
i. It simplifies product handling by helping organize inventory and
accounting records
ii. A brand also offers the firm legal protection for unique features or
aspects of the product
iii. Brand loyalty provides predictability and security of demand for the
firm, and it creates barriers to entry that make it difficult for other
firms to enter the market
iv. Brand loyalty can translate into customer willingness to pay a higher
price
v. Branding can be a powerful means to secure a competitive advantage
vi. To firms, brands represent enormously valuable pieces of legal
property that can influence consumer behavior, be bought and sold,
and provide their owner the security of sustained future revenues
D. The Scope of Branding: How do you “brand” a product?
i. Branding is the process of endowing products and services with the
power of a brand by creating differences between products.
1. “Who” the product is—by giving it a name and other brand
elements to identify it
2. What the product does
3. Why consumers should care
ii. Branding creates mental structures that help consumers organize their
knowledge about products and services in a way that clarifies their
decision making and, in the process, provides value to the firm.
iii. Consumers must be convinced there are meaningful differences among
brands in the product or service category.
iv. Successful brands are seen as genuine, real, and authentic in what they
sell as well as who they are.
II. Defining Brand Equity
A. Brand equity is the added value endowed to products and services with
consumers
i. Reflected in the way consumers think, feel, and act with respect to the
brand, as well as in the prices, market share, and profitability a brand
commands
ii. Customer-based approaches to brand equity view it from the
perspective of the consumer—either an individual or an organization
—and recognize that the power of a brand lies in what customers have
seen, read, heard, learned, thought, and felt about the brand over time.
iii. Customer-based brand equity is thus the differential effect brand
knowledge has on consumer response to the marketing of that brand
and has three key ingredients:
1. Brand equity arises from differences in consumer response.
2. Differences in response are a result of consumers’ brand
knowledge
3. Brand equity is reflected in perceptions, preferences, and
behavior related to all aspects of the marketing of a brand.
B. Strong brands have many marketing advantages
i. Improved perceptions of product performance
ii. Greater loyalty
iii. Less vulnerability to competitive marketing actions
iv. Less vulnerability to marketing crises
v. Larger margins
vi. More inelastic consumer response to price increases
vii. More elastic consumer response to price decreases
viii. Greater trade cooperation and support
ix. Increased marketing communications effectiveness
x. Possible licensing opportunities
xi. Additional brand extension opportunities
xii. Improved employee recruiting and retention
xiii. Greater financial market returns
C. Brand equity provides marketers with a vital strategic bridge from their past to
their future
i. Marketers should think of the marketing dollars spent on products and
services each year as investments in consumer brand knowledge
ii. The quality of that investment is the critical factor, not necessarily the
quantity (beyond some threshold amount).
iii. Consumers will decide, based on what they think and feel about the
brand, where (and how) they believe the brand should go and grant
permission (or not) to any marketing action or program.
D. A brand promise is the marketer’s vision of what the brand must be and do for
consumers.
E. Brand Equity Models
i. BrandAsset® Valuator – compares the brand equity of thousands of
brands across hundreds of different categories
1. Uses four key components—or pillars—of brand equity
a. Energized differentiation measures the degree to which
a brand is seen as different from others as well as its
pricing power.
b. Relevance measures the appropriateness and breadth of
a brand’s appeal.
c. Esteem measures perceptions of quality and loyalty, or
how well the brand is regarded and respected.
d. Knowledge measures how aware and familiar
consumers are with the brand and the depth of their
experience
2. Energized differentiation and relevance combine to determine
brand strength—a leading indicator that predicts future growth
value.
3. Esteem and knowledge together create brand stature, a “report
card” of past performance and a lagging indicator of current
operating value.
4. BAV analysis identified three factors that help define energy
and the marketplace momentum it creates:
a. Vision—A clear direction and point of view on the
world and how it can and should be changed.
b. Invention—An intention for the product or service to
change the way people think, feel, and behave.
c. Dynamism—Excitement and affinity in the way the
brand is presented.
ii. Brandz model of brand strength, at the heart of which is the
BrandDynamics pyramid with the following levels:
1. Presence. Active familiarity based on past trial, saliency, or
knowledge of brand promise
2. Relevance. Relevance to consumer’s needs, in the right price
range or in the consideration set
3. Performance. Belief that the brand delivers acceptable product
performance; it is on the consumer’s short list
4. Advantage. Belief that the brand has an emotional or rational
advantage over other brands in the category
5. Bonding. Rational and emotional attachments to the brand to
the exclusion of most other brands
iii. Brand Resonance Model also views brand building as an ascending
series of steps, from bottom to top
1. Ensuring customers identify the brand and associate it with a
specific product class or need
2. Firmly establishing the brand meaning in customers’ minds by
strategically linking a host of tangible and intangible brand
associations
3. Eliciting the proper customer responses in terms of
brand-related judgment and feelings
4. Converting customers’ brand responses to intense, active
loyalty
5. Creating significant brand equity requires reaching the top of
the brand pyramid, which occurs only if the right building
blocks are put into place.
a. Brand salience is how often and how easily customers
think of the brand under various purchase or
consumption situations—the depth and breadth of brand
awareness.
b. Brand performance is how well the product or service
meets customers’ functional needs.
c. Brand imagery describes the extrinsic properties of the
product or service, including the ways in which the
brand attempts to meet customers’ psychological or
social needs.
d. Brand judgments focus on customers’ own personal
opinions and evaluations.
e. Brand feelings are customers’ emotional responses and
reactions with respect to the brand.
f. Brand resonance describes the relationship customers
have with the brand and the extent to which they feel
they’re “in sync” with it.
III. Building Brand Equity
A. Three main sets of brand equity drivers
i. The initial choices for the brand elements or identities making up the
brand (brand names, URLs, logos, symbols, characters, spokespeople,
slogans, jingles, packages, and signage)
ii. The product and service and all accompanying marketing activities
and supporting marketing programs
iii. Other associations indirectly transferred to the brand by linking it to
some other entity (a person, place, or thing)
B. Choosing brand elements, or devices, which can be trademarked, that identify
and differentiate the brand.
i. Most strong brands employ multiple brand elements.
ii. Marketers should choose brand elements to build as much brand equity
as possible.
iii. The test is what consumers would think or feel about the product if the
brand element were all they knew.