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Some, like Colgate-Palmolive and Canada Dry, have created a management of brand equity position to be a guardian of the value of brands. There are several driving forces behind the interest in branding. First, firms have shown a willingness to pay substantial premiums for brand names because alternative development of new brand names either is not feasible or is too costly.
This phenomenon raises several questions, such as: How much is brand equity worth? On what is it based? Why should so much be paid? Second, marketing professionals sense that an increased emphasis upon price, often involving the excessive use of price promotions, is resulting in the deterioration of industries into commodity-like business areas.
They believe that more resources should be diverted into brand- building activities, to develop points of differentiation. The recognized need is to develop sustainable competitive advantages based upon non-price competition. How then are such activities justified in a world with extreme pressures for delivering short- term performance? Third, managers realize a need to fully exploit their assets in order to maximize the performance of their business.
A key asset is usually the brand name. How can it be exploited? Can it be extended to new products, or exposed to new markets? Is there an opportunity to get more out of it by strengthening it or by altering its components?
Conversely, how might it be damaged, and how can that be avoided? One objective is to define and illustrate brand equity, providing a structure that will help managers see more clearly how brand equity does provide value.
Another is to document research findings and illustrative examples which demonstrate that value has emerged or has been lost from marketing decisions or environmental events that have enhanced or damaged the brand.
A third objective is to discuss how brand equity should be managed: How should it be created, maintained, and protected? How should it be exploited? A fourth objective is to raise questions and suggest issues that should be addressed by thoughtful managers who are trying to think strategically. I have written this book for managers having either direct or indirect responsibility for brands and their equity. Such managers will represent firms that are either large or small, consumer or industrial, service- or product-focused.
They will be concerned with the need to develop and protect the equity in their core brands. In addition, they will or should be addressing such questions as the following: What is the role of the company name in the branding equation? Should we develop a subbrand name? Should the brand name be extended to other products? I hope also, however, that it will be used in schools of management where faculty and students are attempting to improve our ability to, in general, manage strategically and, in particular, manage brand equity.
The first chapter discusses the Ivory brand, provides an historical background, and both defines brand equity and suggests a variety of approaches to place a value on it. Four dimensions of brand equity are the focus of the next six chapters, which collectively define the dimensions, specify how each creates value for the customer and the firm, and discuss their measurement and management.
Chapter 2 considers the importance of the brand loyalty. Chapter 3 covers the creation, measurement, and role of brand awareness. Chapter 4 discusses perceived quality, how it can be managed, and the evidence as to its role in business performance.
Chapter 5 introduces the concept of associations and positioning. Methods to measure associations are covered in Chapter 6. Selecting, creating, and maintaining associations is the subject of Chapter 7. Clearly, the management of associations, covering three chapters, is both important and complex.
The brand is identified by the name, and often by a symbol and a slogan as well. Chapter 8 discusses these indicators and their selection.
Brand extensions the good, the bad, and the ugly is the topic of Chapter 9. Chapter 10 presents methods to revitalize a tired brand—to breathe new life into both it and its context. It also discusses the end game: how to allow a brand a graceful decline and, if needed, death. Chapter 11 provides a discussion about global branding, presents a summary model of brand equity, and concludes with a set of observations from each chapter that collectively summarize the major points presented in the book.
There is much to be learned from history. Each of these analyses provides a vivid illustration of how a wide variety of actions can affect a brand. In several cases a dollar value is placed upon a set of actions affecting a brand, even though it is impossible to know for sure what caused what.
Too, there is a host of case studies throughout, to illustrate the concepts and methods and to make them more tangible and understandable. In addition to the historical flavor—what has happened to individual brands—more systematic studies are sought out and reported.
The past 15 years have seen the development of studies about such brand constructs as market share, awareness, brand extensions, perceived quality, and others that provide significant evidence about their role. Some of these studies have been based upon large-scale data bases. Others come from controlled experiments. They all help provide substance to an area that has too long relied upon opinion. Each chapter closes with a set of questions to consider.
The goal is to provide a vehicle with which to translate the ideas in the chapter into a diagnostic and action agenda. Some questions will stimulate new ways of looking at your brand and its environment, and others will suggest a need to find out more information.
Let me offer my special thanks here to the following: Bob Wallace, my editor at The Free Press, for his enthusiasm for the project and Kevin Keller, my research colleague on the first two branding research efforts in which I was involved, for his stimulating ideas. Then there was MSI, who sponsored three branding conferences, provided inspiration and support. Finally, I would like to thank my family, who put up with yet another writing project. David A.
A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a successful brand is timeless. That ad is shown in Figure Figure shows a Ivory ad illustrating the consistency of the positioning over time.
Note the imagery created by the forest, the barefoot girl, and the clear water. Used with permission. Ivory was a remarkable product in a time in which most soaps were yellow or brown, irritated skin, and damaged clothes. The fact that it floated had practical value to those used to being frustrated by trying to find their soap in the bath water. It was thus well positioned—a soap that was pure, was mild, and floated.
From the outset, the fact that it was mild enough for babies was stressed, and babies were often featured in the advertising. The claims of purity and mildness were supported by the white color, the name Ivory, the twin slogans, and the association with babies. Ivory, now over years old, is a prime example of the value of creating and sustaining brand equity.
Brand equity will be carefully defined and detailed later in this chapter. Briefly, it is a set of assets such as name awareness, loyal customers, perceived quality, and associations e. Curiously, in a yellow soap named Sunlight, when introduced to dreary, sun-starved England, became the start of Unilever, now one of the largest firms in the world.
The loyalty and market presence that Ivory had built was challenged in by an Ivory clone called Swan from Lever Brothers. Without any clear product difference, Lever could not dislodge Ivory, and ultimately withdrew from the market.
He argued that there were not enough people caring about Camay. The marketing effort and the effort to create and maintain equity was diffused and uncoordinated, and lacked a budget commitment. The solution, creating a brand management team responsible for the marketing program and its coordination with sales and manufacturing, was a key event in the history of branding.
In the U. Most firms will focus efforts upon one brand, protecting its position by pursuing a given positioning strategy. New segments are usually therefore uncovered by competitors who are attempting to gain a position in the market. Their persistence with Pringles chips, Duncan Hines ready-to-eat soft cookies, and Citrus Hill orange juice in the face of substantial losses are examples.
In this book we shall explore brand equity. However, it can also involve an initial and ongoing investment which can be substantial and will not necessarily result in short-term profits. Payoffs, when they come, can involve decades. Thus, management of brand equity is difficult, requiring patience and vision. In the following pages we will define brand equity and suggest that it is based on a set of dimensions each of which potentially needs to be managed.
Several perspectives on how to place a value on a brand will then be detailed. First, however, several basic questions must be addressed. For example: What exactly is a brand? Have brand equities been eroding? How do price promotions affect brands? What is behind the pressures for short-run financial results? Can a focus on brand equity provide a counterpoint to the tyranny of short-term financials?
A brand thus signals to the customer the source of the product, and protects both the customer and the producer from competitors who would attempt to provide products that appear to be identical. There is evidence that even in ancient history names were put on such goods as bricks in order to identify their maker. In the early sixteenth century, whiskey distillers shipped their products in wooden barrels with the name of the producer burned into the barrel.
The name showed the consumer who the maker was and prevented the substitution of cheaper products. Although brands have long had a role in commerce, it was not until the twentieth century that branding and brand associations became so central to competitors.
In fact, a distinguishing characteristic of modern marketing has been its focus upon the creation of differentiated brands.
Market research has been used to help identify and develop bases of brand differentiation. Unique brand associations have been established using product attributes, names, packages, distribution strategies, and advertising.
The idea has been to move beyond commodities to branded products—to reduce the primacy of price upon the purchase decision, and accentuate the bases of differentiation. The power of brands, and the difficulty and expense of establishing them, is indicated by what firms are willing to pay for them. These values are far beyond the worth of any balance sheet item representing bricks and mortar. An even clearer example of the value of a brand name is licensing.
The value of an established brand is in part due to the reality that it is more difficult to build brands today than it was only a few decades ago. First, the cost of advertising and distribution is much higher: One-minute commercials and sometimes even half-minute commercials are now considered too expensive to be practical, for example. Second, the number of brands is proliferating: Approximately 3, brands are introduced each year into supermarkets.
There were at this writing nameplates of cars, over brands of lipstick, and 93 cat-food brands. It also means that a brand often is relegated to a niche market, and so will lack the sales to support expensive marketing programs.
The accompanying insert suggests a series of indicators of a lack of attention to brands which most firms will find familiar. Managers cannot identify with confidence the brand associations and the strength of those associations. Further, there islittle knowledge about how those associations differ across segments and through time. Knowledge of levels of brand awareness is lacking. There is no feel for whether a recognition problem exists among any segment.
Knowledge is lacking as to top-of-mind recall that the brand is getting, and how that has been changing. There is no systematic, reliable, sensitive, and valid measure of customer satisfaction and loyalty—nor any diagnostic modelthat guides an ongoing understanding of why such measures may be changing.
There is no person in the firm who is really charged with protecting the brand equity. Those nominally in charge of the brand,perhaps termed brand managers or product marketing managers, are in fact evaluated on the basis of short-term measures. The measures of performance associated with a brand and its managers are quarterly and yearly. There are no longer-term objectivesthat are meaningful. Further, the managers involved do not realistically expect to stay long enough to think strategically,nor does ultimate brand performance follow them.
There is no mechanism to measure and evaluate the impact of elements of the marketing program upon the brand. Sales promotions,for example, are selected without determining their associations and considering their impact upon the brand. There is no long-term strategy for the brand.
The following questions about the brand environment five or ten years into thefuture are unanswered, and may have not been addressed: What associations should the brand have?
In what product classes shouldthe brand be competing? What mental image should the brand stimulate in the future? There is evidence that loyalty levels for supermarket products have declined.
The ad agency BBDO found a surprising perception of brand parity among consumers throughout the world in 13 consumer product categories. It was noticeably higher for such products as paper towels and dry soup, which emphasize performance benefits, than for products like cigarettes, coffee, and beer, for which imagery has been the norm.
One survey of department-store shoppers involving 11 product categories such as underwear, shoes, housewares, furniture, and appliances documented the erosion of price. Interestingly, the study found a high negative correlation between media advertising in a product category and category sales at full price.
Advertising, of course, creates strong brands which can hold share in the face of discounting. Further, declines in brand equity are not obvious.
In contrast, sales promotions, whether they involve soda pop or automobiles, are effective—they affect sales in an immediate and measurable way. There has been a dramatic increase in sales promotion during the past two decades or so, both customer-directed such as couponing and rebates and trade-directed such as wholesale case discounts.
Coupon distributions grew at an annual rate of Unlike brand-building activities, most sales promotions are easily copied. In fact, competitors must retaliate or suffer unacceptable losses. The inevitable result is a great increase in the role of price. There is pressure to reduce the quality, features, and services offered. At the extreme, the product class starts to resemble a commodity, since brand associations have less importance.
At that point, promotions look even better with respect to short-term impact, but their value declines. They show that price promotions affect sales. However, they are not well suited to measure long-term results, in part because such results are difficult to detect in a noisy marketplace, and also because experiments covering multiple years are very expensive to conduct.
Because there are no easy, defensible ways to measure the long-term effects of marketing actions, short-term measures have added influence. The situation is a bit like that of the drunk who looks for car keys under a street light because the light is better than where the keys were actually lost. The visibility of the short-term success of price promotions and other potentially brand- debilitating activities is fed by the short-term orientation of many marketing organizations.
Brand managers and other key people often are rotated regularly so that they can expect to stay in any one position for only two to five years. This then becomes their time horizon. Worse, during this time they are evaluated on the basis of short-term measures such as market share movements and short-term profitability. This is in part because such measures are available and reliable while indicators of long-term success are elusive, and, too, because the organization itself is concerned with short-term performance.
A myriad of diverse spokespeople, including the chairman of Sony, a political scientist from Harvard, and the authors of the MIT Commission on Productivity, have forcefully concluded that U. A prime reason why American managers might have a short-term focus is the prominence and acceptance of the maximization of stockholder value as the prime objective of U. The problem is that shareholders are inordinately influenced by quarterly earnings. Their crude model is that future returns will be related to current performance.
The resulting need for managers to demonstrate good quarterly earnings percolates into organizational objectives and brand- management evaluation. As a result, there is intense pressure throughout the firm to deliver good short-term financials. A basic problem is that shareholders usually are incapable of understanding the strategic vision of a firm, in part because they are not privy to strategic decision-making, and also because they cannot interpret the uncertain strategic environment or the complexities of the organization.
Further, there is an absence of credible alternative indicators of long-term performance. After decades of effort, we have been markedly unsuccessful at modeling the long-term value of advertising in the absence of multiple-year field experiments.
Measure of new-product effort is similarly difficult to quantify. Firms can keep track of new product research expenditures, the number of new products, the percent of business associated with products introduced within five years, and so on, but it is difficult to generate measures that are convincing surrogates for long- term performance.
The long-term value of activities which will enhance or erode brand equity are similarly difficult to convincingly demonstrate. Without alternatives, short-term financials fill a vacuum and come to dominate performance measurement.
Managing with a long-term perspective is difficult in the face of the shareholder value emphasis, and other pressures, facing U. What is to be done? On average over half of such heavy-up tests show no significant change in sales at all during the test period. IRI examined 15 of these experiments that did achieve significant sales gains during a test year. Thus, the impact of advertising may be grossly underestimated if only a one year perspective is employed.
Of course, advertising and promotion results are more often expected in months, or even weeks. A skill is something a firm does better than its competitors do, such as advertising or efficient manufacturing. Assets and skills provide the basis of a competitive advantage that is sustainable.
What a business does the way it competes and where it chooses to do so usually is easily imitated. It is more difficult to respond to what a business is, since that involves acquiring or neutralizing specialized assets or skills. Anyone can decide to distribute cereal or detergent through supermarkets, but few have the clout to do it as effectively as, say, General Mills. The right assets and skills can provide the barriers to competitor thrusts that allow the competitive advantage to persist over time and thus lead to long-term profits.
The challenges are to identify key assets and skills on which the firm should base its competitive advantage, to build upon and maintain them, and then to use them effectively.
The concept of an asset as a generator of a profit stream is familiar, especially when that asset is capitalized and appears on the balance sheet. A government bond is the prototypical example. A factory which houses plant, equipment, and people is another example.
But of course a factory, unlike a government bond, requires active management and must be maintained. The most important assets of a firm, however such as the people in the organization and the brand names , are intangible in that they are not capitalized and thus do not appear on the balance sheet. Everyone understands that even in bad times a factory must be maintained, in part because of the depreciation term in the income statement and also because maintenance needs are visible.
For many businesses the brand name and what it represents are its most important asset—the basis of competitive advantage and of future earnings streams. Yet, the brand name is seldom managed in a coordinated, coherent manner with a view that it must be maintained and strengthened. What caused the share drop in the Northeast? Would a promotion fight off a new product challenge?
How can we combat a new entry? How can growth be sustained? Can a brand name be used to gain entry into a new product market? A focus on short-run problems facing the brand can result in an operation that performs well, sometimes over a long time-period. However, the danger is that this performance is achieved by exploiting the brand and allowing it to deteriorate.
The brand might be extended so far that its core associations are weakened. Its associations might be tarnished by expanding its market to include less-prestigious outlets and customers.
Price promotions might be used to provide a perceived bargain for customers. The brand should be thought of as an asset, such as a timber reserve. Short-term profits can be substantial if the reserve is depleted without regard to the future but the asset can be destroyed in the process. It is not enough to avoid damaging a brand—it needs to be nurtured and maintained.
The focus is on improving the efficiency of operations including purchasing, product design, manufacturing, promotions, and logistics. A problem, however, is that in such a culture the brand may not be nurtured, and thus may slowly deteriorate. Further, efficiency pressures lead to difficult compromises between cost goals on the one hand and customer satisfaction on the other.
The value of brand-building activities on future performance is not easy to demonstrate. The challenge is to understand better the links between brand assets and future performance, so that brand-building activities can be justified.
What are the assets that underlie brand equity? How do they relate to future performance? Which assets need to be developed, strengthened, or maintained? What is the value of an improvement in perceived quality or brand awareness, for example? If answers to such questions would emerge, there would be more support for brand-building and more resistance to short-term expediency. All brand-building activities require justification.
However, the need is particularly acute in advertising because of the large expenditures involved that are often vulnerable to short-term pressures. Peter A. The first step in identifying the value of brand equity is to understand what it is—what really contributes to the value of a brand.
Thus, we now turn to the definitional issue. And, finally, some issues facing those who create or manage brands will be introduced. The assets and liabilities on which brand equity is based will differ from context to context. However, they can be usefully grouped into five categories: 1. Brand loyalty 2. Name awareness 3. Perceived quality 4. Brand associations in addition to perceived quality 5. Other proprietary brand assets—patents, trademarks, channel relationships, etc.
The concept of brand equity is summarized in Figure The five categories of assets that underlie brand equity are shown as being the basis of brand equity. The figure also shows that brand equity creates value for both the customer and the firm. They can help them interpret, process, and store huge quantities of information about products and brands.
Knowing that a piece of jewelry came from Tiffany can affect the experience of wearing it: The user can actually feel different. First, it can enhance programs to attract new customers or recapture old ones.
A promotion, for example, which provides an incentive to try a new flavor or new use will be more effective if the brand is familiar, and if there is no need to combat a consumer skeptical of brand quality.
The perceived quality, the associations, and the well-known name can provide reasons to buy and can affect use satisfaction.
Even when they are not pivotal to brand choice, they can reassure, reducing the incentive to try others. Enhanced brand loyalty is especially important in buying time to respond when competitors innovate and obtain product advantages. Note that brand loyalty is both one of the dimensions of brand equity and is affected by brand equity. The potential influence on loyalty from the other dimensions is significant enough that it is explicitly listed as one of the ways that brand equity provides value to the firm.
It should be noted that there exist similar interrelationships among the other brand equity dimensions. For example, perceived quality could be influenced by awareness a visible name is likely to be well made , by associations a visible spokesperson would only endorse a quality product , and by loyalty a loyal customer would not like a poor product.
Third, brand equity will usually allow higher margins by permitting both premium pricing and reduced reliance upon promotions. In many contexts the elements of brand equity serve to support premium pricing. Further, a brand with a disadvantage in brand equity will have to invest more in promotional activity, sometimes just to maintain its position in the distribution channel.
Fourth, brand equity can provide a platform for growth via brand extensions. Ivory, as we have seen, has been extended into several cleaning products, creating business areas that would have been much more expensive to enter without the Ivory name. Fifth, brand equity can provide leverage in the distribution channel.
Like customers, the trade has less uncertainty dealing with a proven brand name that has already achieved recognition and associations. A strong brand will have an edge in gaining both shelf facings and cooperation in implementing marketing programs. Click on the order now tab. You will be directed to another page.
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