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,
2. Brands are valuable intangible assets that offer a number of benefits to customers and
3. Brand equity should be defined in terms of marketing effects uniquely attributable to a
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
5. Brand audits measure “where the brand has been,” and tracking studies measure
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
7. Brands may expand coverage, provide protection, extend an image, or fulfill a variety
C H A P T E R
11
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
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. At this point in the semester, students are to have their “branding” strategy developed
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
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
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
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?
END-OF-CHAPTER SUPPORT
MARKETING DEBATE—Are Brand Extensions Good or Bad?
Some critics vigorously denounce the practice of brand extensions, as they feel that too
often companies lose focus and consumers become confused. Other experts maintain that
brand extensions are a critical growth strategy and source of revenue for the firm.
Take a position: Brand extensions can endanger brands versus brand extensions are an
important brand growth strategy.
Pro: In today’s crowded world of products and services, the choices available to
consumers can sometimes be overwhelming. Marketers with strong brand identities and
positions can help consumers narrow their choices by the use of brand extensions. Brand
extensions help marketers quickly gain retailer acceptance of their new products and
provide the consumer with the “confidence and familiarity” of the parent brand. From the
MARKETING DISCUSSION
How can you relate the different models of brand equity in this chapter to each other?
How are they similar? How are they different? Can you construct a brand-equity model
that incorporates the best aspects of each model?
Suggested Response:
Brand equity depends on three main factors: the initial choice for the brand elements or
identities making up the brand, the way the brand is integrated into the supporting
marketing programs; the associations indirectly transferred to the brand by linking the
brand to some other entity. Brand equity needs to be measured and managed well.
Marketing Excellence: Procter & Gamble
1. P&G’s impressive portfolio includes some of the strongest brand names in the world.
What are some of the challenges associated with being the market leader in so many
different categories?
1. With social media becoming increasingly important and fewer people watching
traditional commercials on television, what does P&G need to do to maintain its
strong brand images?
2. What risks will Procter & Gamble face going forward?
Marketing Excellence: McDonald’s
1. What are McDonald’s core brand values? Have these changed over the years?
2. How has McDonald’s grown its brand equity over the years? Has McDonald’s
changed in different economic times or in different parts of the world? Explain.
3. What risks do you feel McDonald’s will face going forward?
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:
2. Planning and implementing brand marketing
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.
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
D. The Scope of Branding: How do you “brand” a product?
1. “Who” the product is—by giving it a name and other brand
elements to identify it
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
ii. Customer-based approaches to brand equity view it from the
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.
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
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
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
2. Energized differentiation and relevance combine to determine
3. Esteem and knowledge together create brand stature, a “report
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
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
3. Performance. Belief that the brand delivers acceptable product
performance; it is on the consumer’s short list
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
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
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
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
ii. Like brand names, slogans are an extremely efficient means to build
brand equity
E. Designing Holistic Marketing Activities
i. Customers come to know a brand through a range of contacts and touch
points: personal observation and use, word of mouth, interactions with
v. Marketing programs should be put together so the whole is greater than
the sum of the parts.
F. Leveraging Secondary Associations
i. Brand equity can be borrowed by linking the brand to other information
in memory that conveys meaning to consumers
2. Countries or other geographical regions (through identification
of product origin)
4. Other brands (through ingredient or co-branding)
6. Spokespeople (through endorsements)
8. Some other third-party sources (through awards or reviews)
G. Internal Branding consists of activities and processes that help inform and
inspire employees about brands
1. Choose the right moment.
3. Bring the brand alive for employees. Internal communications
should be informative and energizing.
4. Keep it simple.
IV. Measuring Brand Equity
A. An indirect approach assesses potential sources of brand equity by identifying
and tracking consumer brand knowledge structures.
B. A direct approach assesses the actual impact of brand knowledge on consumer
response to different aspects of the marketing.
C. The brand value chain is a structured approach to assessing the sources and
outcomes of brand equity and the way marketing activities create brand value
based on several premises.
i. Brand value creation begins when the firm targets actual or potential
customers by investing in a marketing program to develop the brand,
iv. Three multipliers increase or decrease the value that can flow from one
stage to another.
1. The program multiplier determines the marketing program’s
2. The customer multiplier determines the extent to which value
created in the minds and hearts of customers affects market
performance. This result depends on competitive superiority
3. The market multiplier determines the extent to which the value
shown by the market performance of a brand is manifested in
shareholder value. It depends, in part, on the actions of
financial analysts and investors.
D. Millward Brown maintains that a brand’s financial success depends on its
iii. Role of branding
iv. Brand strength
v. Brand value calculation
V. Managing Brand Equity
A. Marketers can reinforce brand equity by consistently conveying the brand’s
meaning in terms of (1) what products it represents, what core benefits it
supplies, and what needs it satisfies; and (2) how the brand makes products
VI. Devising a Branding Strategy
A. A firm’s branding strategy often called its brand architecture and it reflects the
number and nature of both common and distinctive brand elements
B. A firm has three main choices:
i. It can develop new brand elements for the new product.
ii. It can apply some of its existing brand elements.
iii. It can use a combination of new and existing brand elements.
C. Branding strategy terms
i. When a firm uses an established brand to introduce a new product, the
product is called a brand extension.
1. Brand extensions can be line extensions, in which the parent
2. They can also be category extensions, where marketers use the
parent brand to enter a different product category
ii. When marketers combine a new brand with an existing brand, the
brand extension can also be called a sub-brand
2. A major advantage of separate family brand names is that if a
1. Development costs are lower with umbrella names because
2. Corporate-image associations of innovativeness, expertise, and
trustworthiness have been shown to directly influence
1. The use of individual or separate family brand names has been
referred to as a “house of brands” strategy
3. A sub-brand strategy falls somewhere between, depending on
which component of the sub-brand receives more emphasis.
4. With a branded house strategy, it is often useful to have a well-
defined flagship product.
a. A flagship product is one that best represents or
embodies the brand as a whole to consumers.
b. It often is the first product by which the brand gained
E. Brand Portfolios reflect a need for multiple brands in order to pursue multiple
segments, and:
i. Increase shelf presence and retailer dependence in the store
ii. Attract consumers seeking variety who may otherwise have switched to
another brand
iii. Increase internal competition within the firm
iv. Yield economies of scale in advertising, sales, merchandising, and
physical distribution
2. Marketers walk a fine line in designing fighter brands, which
must be neither so attractive that they take sales away from
their higher-priced comparison brands nor designed so cheaply
that they reflect poorly on them.
vii. Cash Cows may be kept around despite dwindling sales because they
manage to maintain their profitability with virtually no marketing
support
viii. Low-End Entry may be to attract customers to the brand franchise and
act as “traffic builders”
ix. High-End Prestige adds prestige and credibility to the entire portfolio
F. Brand Extension Advantages
i. Most new products are in fact brand extensions
ii. Two main advantages of brand extensions
1. They can facilitate new-product acceptance
2. They provide positive feedback to the parent brand and
company.
G. Disadvantages of Brand Extensions
i. Line extensions may cause the brand name to be less strongly identified
with any one product
ii. Brand dilution occurs when consumers no longer associate a brand with
a specific or highly similar set of products and start thinking less of the
brand.
iii. If a firm launches extensions consumers deem inappropriate, they may
question the integrity of the brand or become confused or even
frustrated
iii. Will the extension have the optimal points-of-parity and points-of-
difference?
iv. How can marketing programs enhance extension equity?
v. What implications will the extension have for parent brand equity and
profitability?
vi. How should feedback effects best be managed?
VII. Customer Equity: the sum of all the lifetime values for all customers
A. Acquisition depends on the number of prospects, the acquisition probability of
a prospect, and acquisition spending per prospect.
B. Retention is influenced by the retention rate and retention spending level.
C. Add-on spending is a function of the efficiency of add-on selling, the number
of add-on selling offers given to existing customers, and the response rate to
new offers.
D. The customer equity perspective focuses on bottom-line financial value.
i. It offers limited guidance for go-to-market strategies.
ii. It largely ignores some of the important advantages of creating a strong
iii. The customer equity approach can overlook the “option value” of
brands and their potential to affect future revenues and costs.
iv. It does not always fully account for competitive moves and
countermoves or for social network effects, word of mouth, and
customer-to-customer recommendations.
E. Brand equity tends to emphasize strategic issues in managing brands and
creating and leveraging brand awareness and image with customers.
i. It provides much practical guidance for specific marketing activities.