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Brand Assessment & Shopping Research Paper

At the beginning of the assignment due class session, submit a summary of your research compared to your experience in physically visiting and shopping in a retail business.

Discuss the business’s strengths and weaknesses in the branding factors you have learned in this course-to-date (class lectures and reading through Chapter 7) vis-à-vis what you see, feel, and experience in the business.

Summarize the brand’s strengths and weaknesses, along with how you would improve the business’s branding and customer experience.

Strategic Brand Management

Building, Measuring, and Managing Brand Equity

Global Edition

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Strategic Brand Management

Building, Measuring, and Managing Brand Equity

Global Edition

Kevin Lane Keller Tuck School of Business

Dartmouth College

4e

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PART I Opening Perspectives 29 Chapter 1 Brands and Brand Management 29

PART II Developing a Brand Strategy 67 Chapter 2 Customer-Based Brand Equity and Brand Positioning 67 Chapter 3 Brand Resonance and the Brand Value Chain 106

PART III Designing and Implementing Brand Marketing Programs 141 Chapter 4 Choosing Brand Elements to Build Brand Equity 141 Chapter 5 Designing Marketing Programs to Build Brand Equity 177 Chapter 6 Integrating Marketing Communications to Build Brand Equity 217 Chapter 7 Leveraging Secondary Brand Associations to Build Brand Equity 259

PART IV Measuring and Interpreting Brand Performance 291 Chapter 8 Developing a Brand Equity Measurement and Management System 291 Chapter 9 Measuring Sources of Brand Equity: Capturing Customer Mind-Set 324 Chapter 10 Measuring Outcomes of Brand Equity: Capturing Market Performance 362

PART V Growing and Sustaining Brand Equity 385 Chapter 11 Designing and Implementing Branding Architecture Strategies 385 Chapter 12 Introducing and Naming New Products and Brand Extensions 431 Chapter 13 Managing Brands Over Time 477 Chapter 14 Managing Brands Over Geographic Boundaries and Market Segments 509

PART VI Closing Perspectives 547 Chapter 15 Closing Observations 547

Brief Contents

7

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Contents

Prologue: Branding Is Not Rocket Science 19

Preface 21

Acknowledgments 26

About the Author 28

PART I Opening Perspectives 29 Chapter 1 Brands and Brand Management 29

Preview 30

What Is a Brand? 30 Brand Elements 30 Brands versus Products 31

BRANDING BRIEF 1-1: Coca-Cola’s Branding Lesson 32

Why Do Brands Matter? 34 Consumers 34 Firms 35

Can Anything Be Branded? 36 Physical Goods 37

BRANDING BRIEF 1-2: Branding Commodities 38

THE SCIENCE OF BRANDING 1-1: Understanding Business-to-Business Branding 40

THE SCIENCE OF BRANDING 1-2: Understanding High-Tech Branding 41 Services 42 Retailers and Distributors 43 Online Products and Services 43 People and Organizations 45 Sports, Arts, and Entertainment 46

BRANDING BRIEF 1-3: Place Branding 48 Geographic Locations 48 Ideas and Causes 48

What Are the Strongest Brands? 48

THE SCIENCE OF BRANDING 1-3: Understanding Market Leadership 50

Branding Challenges and Opportunities 52 Savvy Customers 52 Economic Downturns 54 Brand Proliferation 54

THE SCIENCE OF BRANDING 1-4: Marketing Brands in a Recession 55 Media Transformation 55 Increased Competition 56 Increased Costs 56 Greater Accountability 56

The Brand Equity Concept 57

9

10 CONTENTS

Strategic Brand Management Process 58 Identifying and Developing Brand Plans 58 Designing and Implementing Brand Marketing Programs 58 Measuring and Interpreting Brand Performance 60 Growing and Sustaining Brand Equity 60

Review 61

Discussion Questions 61

BRAND FOCUS 1.0: History of Branding 61

Notes 64

PART II Developing a Brand Strategy 67 Chapter 2 Customer-Based Brand Equity and Brand Positioning 67

Preview 68

Customer-Based Brand Equity 68 Defining Customer-Based Brand Equity 68 Brand Equity as a Bridge 70

Making a Brand Strong: Brand Knowledge 71

THE SCIENCE OF BRANDING 2-1: Brand Critics 72

Sources of Brand Equity 73 Brand Awareness 73 Brand Image 76

Identifying and Establishing Brand Positioning 79 Basic Concepts 79 Target Market 79 Nature of Competition 81 Points-of-Parity and Points-of-Difference 82

Positioning Guidelines 85 Defining and Communicating the Competitive Frame of Reference 85 Choosing Points-of-Difference 87 Establishing Points-of-Parity and Points-of-Difference 88

BRANDING BRIEF 2-1: Positioning Politicians 89 Straddle Positions 90 Updating Positioning over Time 91 Developing a Good Positioning 93

Defining a Brand Mantra 93 Brand Mantras 93

BRANDING BRIEF 2-2: Nike Brand Mantra 94

BRANDING BRIEF 2-3: Disney Brand Mantra 95

THE SCIENCE OF BRANDING 2-2: Branding Inside the Organization 97

Review 97

Discussion Questions 98

BRAND FOCUS 2.0: The Marketing Advantages of Strong Brands 98

Notes 100

Chapter 3 Brand Resonance and the Brand Value Chain 106 Preview 107

Building a Strong Brand: The Four Steps of Brand Building 107 Brand Salience 107 Brand Performance 111 Brand Imagery 113

CONTENTS 11

THE SCIENCE OF BRANDING 3-1: Luxury Branding 114 Brand Judgments 117 Brand Feelings 118 Brand Resonance 120 BRANDING BRIEF 3-1: Building Brand Communities 122 Brand-Building Implications 122

THE SCIENCE OF BRANDING 3-2: Putting Customers First 126

The Brand Value Chain 128 Value Stages 129 Implications 131

Review 132

Discussion Questions 134

BRAND FOCUS 3.0: Creating Customer Value 134 Customer Equity 134

Notes 138

PART III Designing and Implementing Brand Marketing Programs 141 Chapter 4 Choosing Brand Elements to Build Brand Equity 141

Preview 142

Criteria for Choosing Brand Elements 142 Memorability 143 Meaningfulness 143 Likability 143 Transferability 144 Adaptability 144

THE SCIENCE OF BRANDING 4-1: Counterfeit Business Is Booming 146 Protectability 147

Options and Tactics for Brand Elements 147 Brand Names 147 URLs 155 Logos and Symbols 155 Characters 156 Slogans 158

BRANDING BRIEF 4-1: Updating the Disneyland Castle 159

THE SCIENCE OF BRANDING 4-2: Balance Creative and Strategic Thinking to Create Great Characters 160

BRANDING BRIEF 4-2: Benetton’s Brand Equity Management 162 Jingles 164 Packaging 164

Putting It All Together 167

BRANDING BRIEF 4-3: Do-Overs with Brand Makeovers 168

THE SCIENCE OF BRANDING 4-3: The Psychology of Packaging 169

Review 170

Discussion Questions 171

BRAND FOCUS 4.0: Legal Branding Considerations 171

Notes 173

Chapter 5 Designing Marketing Programs to Build Brand Equity 177 Preview 178

New Perspectives on Marketing 178

12 CONTENTS

Integrating Marketing 179 Personalizing Marketing 181

THE SCIENCE OF BRANDING 5-1: Making Sense Out of Brand Scents 183 Reconciling the Different Marketing Approaches 186

Product Strategy 187 Perceived Quality 187 Aftermarketing 187 Summary 190

Pricing Strategy 191 Consumer Price Perceptions 191

THE SCIENCE OF BRANDING 5-2: Understanding Consumer Price Perceptions 192 Setting Prices to Build Brand Equity 193

BRANDING BRIEF 5-1: Marlboro’s Price Drop 193 Summary 199

Channel Strategy 199 Channel Design 199 Indirect Channels 201 Direct Channels 205

BRANDING BRIEF 5-2: Goodyear’s Partnering Lessons 206 Online Strategies 208 Summary 208

Review 209

Discussion Questions 209

BRAND FOCUS 5.0: Private-Label Strategies and Responses 210

Notes 212

Chapter 6 Integrating Marketing Communications to Build Brand Equity 217 Preview 218

The New Media Environment 219 Challenges in Designing Brand-Building Communications 219 Role of Multiple Communications 221

Four Major Marketing Communication Options 221 Advertising 221

THE SCIENCE OF BRANDING 6-1: The Importance of Database Marketing 229 Promotion 232 Online Marketing Communications 236 Events and Experiences 239

BRANDING BRIEF 6-1: Tough Mudder: The Toughest Event on the Planet 242 Mobile Marketing 244

Brand Amplifiers 246 Public Relations and Publicity 246 Word-of-Mouth 246

Developing Integrated Marketing Communication Programs 247 Criteria for IMC Programs 248 Using IMC Choice Criteria 250

THE SCIENCE OF BRANDING 6-2: Coordinating Media to Build Brand Equity 251

Review 252

Discussion Questions 253

BRAND FOCUS 6.0: Empirical Generalizations in Advertising 254

Notes 255

CONTENTS 13

Chapter 7 Leveraging Secondary Brand Associations to Build Brand Equity 259 Preview 260

Conceptualizing the Leveraging Process 261 Creation of New Brand Associations 261 Effects on Existing Brand Knowledge 261 Guidelines 262

Company 263

BRANDING BRIEF 7-1: IBM Promotes a Smarter Planet 264

Country of Origin and Other Geographic Areas 266

BRANDING BRIEF 7-2: Selling Brands the New Zealand Way 268

Channels of Distribution 269

Co-Branding 269

THE SCIENCE OF BRANDING 7-1: Understanding Retailers’ Brand Images 270 Guidelines 271 Ingredient Branding 272

THE SCIENCE OF BRANDING 7-2: Understanding Brand Alliances 273

Licensing 275

BRANDING BRIEF 7-3: Ingredient Branding the DuPont Way 276 Guidelines 278

Celebrity Endorsement 278 Potential Problems 279 Guidelines 281

Sporting, Cultural, or Other Events 282

BRANDING BRIEF 7-4: Managing a Person Brand 283

Third-Party Sources 284

Review 285

Discussion Questions 286

BRAND FOCUS 7.0: Going for Corporate Gold at the Olympics 286

Notes 288

PART IV Measuring and Interpreting Brand Performance 291 Chapter 8 Developing a Brand Equity Measurement and

Management System 291 Preview 292

The New Accountability 292

Conducting Brand Audits 293 Brand Inventory 294 Brand Exploratory 295 Brand Positioning and the Supporting Marketing Program 298

THE SCIENCE OF BRANDING 8-1: The Role of Brand Personas 299

Designing Brand Tracking Studies 300 What to Track 300

BRANDING BRIEF 8-1: Sample Brand Tracking Survey 301 How to Conduct Tracking Studies 303 How to Interpret Tracking Studies 305

14 CONTENTS

Establishing a Brand Equity Management System 305

BRANDING BRIEF 8-2: Understanding and Managing the Mayo Clinic Brand 306 Brand Charter 307 Brand Equity Report 308 Brand Equity Responsibilities 309

THE SCIENCE OF BRANDING 8-2: Maximizing Internal Branding 310

BRANDING BRIEF 8-3: How Good Is Your Marketing? Rating a Firm’s Marketing Assessment System 312

Review 314

Discussion Questions 315

BRAND FOCUS 8.0: Rolex Brand Audit 315

Notes 322

Chapter 9 Measuring Sources of Brand Equity: Capturing Customer Mind-Set 324 Preview 325

Qualitative Research Techniques 325

BRANDING BRIEF 9-1: Digging Beneath the Surface to Understand Consumer Behavior 326 Free Association 326 Projective Techniques 328

BRANDING BRIEF 9-2: Once Upon a Time . . . You Were What You Cooked 329 Zaltman Metaphor Elicitation Technique 330

BRANDING BRIEF 9-3: Gordon Ramsay 331 Neural Research Methods 332 Brand Personality and Values 333 Ethnographic and Experiential Methods 334

BRANDING BRIEF 9-4: Making the Most of Consumer Insights 335 Summary 338

Quantitative Research Techniques 338 Brand Awareness 339 Brand Image 342

THE SCIENCE OF BRANDING 9-1: Understanding Categorical Brand Recall 343 Brand Responses 344 Brand Relationships 346

THE SCIENCE OF BRANDING 9-2: Understanding Brand Engagement 349

Comprehensive Models of Consumer-Based Brand Equity 351 BrandDynamics 351 Relationship to the CBBE Model 352

Review 352

Discussion Questions 353

BRAND FOCUS 9.0: Young & Rubicam’s BrandAsset Valuator 353

Notes 359

Chapter 10 Measuring Outcomes of Brand Equity: Capturing Market Performance 362 Preview 363

Comparative Methods 364 Brand-Based Comparative Approaches 364

CONTENTS 15

Marketing-Based Comparative Approaches 365 Conjoint Analysis 367

Holistic Methods 368 Residual Approaches 369 Valuation Approaches 371

THE SCIENCE OF BRANDING 10-1: The Prophet Brand Valuation Methodology 375

BRANDING BRIEF 10-1: Beauty Is in the Eye of the Beholder 378

Review 379

Discussion Questions 380

BRAND FOCUS 10.0: Branding and Finance 380

Notes 382

PART V Growing and Sustaining Brand Equity 385 Chapter 11 Designing and Implementing Brand Architecture Strategies 385

Preview 386

Developing a Brand Architecture Strategy 386 Step 1: Defining Brand Potential 386

THE SCIENCE OF BRANDING 11-1: The Brand–Product Matrix 387

THE SCIENCE OF BRANDING 11-2: Capitalizing on Brand Potential 390 Step 2: Identifying Brand Extension Opportunities 392 Step 3: Branding New Products and Services 392 Summary 393

Brand Portfolios 393

BRANDING BRIEF 11-1: Expanding the Marriott Brand 396

Brand Hierarchies 398 Levels of a Brand Hierarchy 398 Designing a Brand Hierarchy 400

BRANDING BRIEF 11-2: Netflix Branding Stumbles 401

Corporate Branding 408

THE SCIENCE OF BRANDING 11-3: Corporate Brand Personality 409 Corporate Image Dimensions 409

BRANDING BRIEF 11-3: Corporate Reputations: The Most Admired U.S. Companies 410

BRANDING BRIEF 11-4: Corporate Innovation at 31M 412 Managing the Corporate Brand 414

Brand Architecture Guidelines 421

Review 422

Discussion Questions 423

BRAND FOCUS 11.0: Cause Marketing 423

Notes 426

Chapter 12 Introducing and Naming New Products and Brand Extensions 431 Preview 432

New Products and Brand Extensions 432

BRANDING BRIEF 12-1: Growing the McDonald’s Brand 434

Advantages of Extensions 435 Facilitate New-Product Acceptance 436 Provide Feedback Benefits to the Parent Brand 438

16 CONTENTS

Disadvantages of Brand Extensions 441 Can Confuse or Frustrate Consumers 441 Can Encounter Retailer Resistance 442 Can Fail and Hurt Parent Brand Image 442

THE SCIENCE OF BRANDING 12-1: When Is Variety a Bad Thing? 443 Can Succeed but Cannibalize Sales of Parent Brand 444 Can Succeed but Diminish Identification with Any One Category 444

BRANDING BRIEF 12-2: Are There Any Boundaries to the Virgin Brand Name? 445 Can Succeed but Hurt the Image of the Parent Brand 446 Can Dilute Brand Meaning 446 Can Cause the Company to Forgo the Chance to Develop a New Brand 446

Understanding How Consumers Evaluate Brand Extensions 447 Managerial Assumptions 448 Brand Extensions and Brand Equity 448 Vertical Brand Extensions 451

Evaluating Brand Extension Opportunities 452 Define Actual and Desired Consumer Knowledge about the Brand 452

BRANDING BRIEF 12-3: Mambo Extends Its Brand 453 Identify Possible Extension Candidates 454 Evaluate the Potential of the Extension Candidate 454 Design Marketing Programs to Launch Extension 457 Evaluate Extension Success and Effects on Parent Brand Equity 458

Extension Guidelines Based on Academic Research 459

Review 469

Discussion Questions 469

BRAND FOCUS 12.0: Scoring Brand Extensions 470

Notes 471

Chapter 13 Managing Brands Over Time 477 Preview 478

Reinforcing Brands 479 Maintaining Brand Consistency 480

THE SCIENCE OF BRANDING 13-1: Brand Flashbacks 482 Protecting Sources of Brand Equity 482 Fortifying versus Leveraging 484 Fine-Tuning the Supporting Marketing Program 484

BRANDING BRIEF 13-1: Razor-Sharp Branding at Gillette 487

Revitalizing Brands 490

BRANDING BRIEF 13-2: Remaking Burberry’s Image 492

BRANDING BRIEF 13-3: Harley-Davidson Motor Company 493

BRANDING BRIEF 13-4: A New Morning for Mountain Dew 494 Expanding Brand Awareness 495 Improving Brand Image 497

Adjustments to the Brand Portfolio 499 Migration Strategies 499 Acquiring New Customers 499 Retiring Brands 500

Review 502

Discussion Questions 504

BRAND FOCUS 13.0: Responding to a Brand Crisis 504

Notes 507

CONTENTS 17

Chapter 14 Managing Brands Over Geographic Boundaries and Market Segments 509 Preview 510

Regional Market Segments 510

Other Demographic and Cultural Segments 511

Rationale for Going International 512

BRANDING BRIEF 14-1: Marketing to African Americans 513

Advantages of Global Marketing Programs 514 Economies of Scale in Production and Distribution 514 Lower Marketing Costs 515 Power and Scope 515 Consistency in Brand Image 515 Ability to Leverage Good Ideas Quickly and Efficiently 515 Uniformity of Marketing Practices 515

Disadvantages of Global Marketing Programs 516 Differences in Consumer Needs, Wants, and Usage Patterns for Products 516 Differences in Consumer Response to Branding Elements 516 Differences in Consumer Responses to Marketing Mix Elements 517 Differences in Brand and Product Development and the Competitive Environment 518 Differences in the Legal Environment 518 Differences in Marketing Institutions 518 Differences in Administrative Procedures 518

Global Brand Strategy 519 Global Brand Equity 519 Global Brand Positioning 520

Standardization versus Customization 521 Standardization and Customization 521

BRANDING BRIEF 14-2: Coca-Cola Becomes the Quintessential Global Brand 522

BRANDING BRIEF 14-3: UPS’s European Express 524

Developing versus Developed Markets 528

Building Global Customer-Based Brand Equity 529 1. Understand Similarities and Differences in the Global Branding Landscape 529 2. Don’t Take Shortcuts in Brand Building 530 3. Establish Marketing Infrastructure 531 4. Embrace Integrated Marketing Communications 532 5. Cultivate Brand Partnerships 532 6. Balance Standardization and Customization 533

BRANDING BRIEF 14-4: Managing Global Nestlé Brands 534 7. Balance Global and Local Control 535 8. Establish Operable Guidelines 536 8. Implement a Global Brand Equity Measurement System 537

10. Leverage Brand Elements 537

THE SCIENCE OF BRANDING 14-1: Brand Recall and Language 538

Review 539

Discussion Questions 541

BRAND FOCUS 14.0: China Global Brand Ambitions 541

Notes 543

PART VI Closing Perspectives 547 Chapter 15 Closing Observations 547

Preview 548

Strategic Brand Management Guidelines 548 Summary of Customer-Based Brand Equity Framework 548 Tactical Guidelines 550

What Makes a Strong Brand? 554

BRANDING BRIEF 15-1: The Brand Report Card 555

Future Brand Priorities 556 1. Fully and Accurately Factor the Consumer into the Branding Equation 556

BRANDING BRIEF 15-2: Reinvigorating Branding at Procter & Gamble 558 2. Go Beyond Product Performance and Rational Benefits 560 3. Make the Whole of the Marketing Program Greater Than the Sum of the Parts 561 4. Understand Where You Can Take a Brand (and How) 563 5. Do the “Right Thing” with Brands 565 6. Take a Big Picture View of Branding Effects. Know What Is Working (and Why) 566 Finding the Branding Sweet Spot 566

Review 567

Discussion Questions 568

BRAND FOCUS 15.0: Special Applications 568

Notes 573

Epilogue 575

Index 577

18 CONTENTS

Prologue: Branding Is Not Rocket Science

Although the challenges in branding can be immense and difficult, branding is not necessarily rocket science. I should know. I am not a rocket scientist—but my dad was. He was a physicist in the Air Force for 20 years, working on various rocket fuels. Always interested in what I did, he once asked what the book was all about. I explained the concept of brand equity and how the book addressed how to build, measure, and manage it. He listened, paused, and remarked, “That’s very interesting but, uh, that’s not exactly rocket science.”

He’s right. Branding is not rocket science. In fact, it is an art and a science. There’s always a creativity and originality component involved with marketing. Even if someone were to fol- low all the guidelines in this book—and all the guidelines were properly specified—the success or failure of a brand strategy would still depend largely on how, exactly, this strategy would be implemented.

Nevertheless, good marketing is all about improving the odds for success. My hope is that this book adds to the scientific aspect of branding, illuminating the subject and providing guid- ance to those who make brand-related decisions.

19

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Preface

Let me answer a few questions as to what this book is about, how it’s different from other books about branding, what’s new with this fourth edition, who should read it, how it’s organized, and how you can get the most out of it.

WHAT IS THE BOOK ABOUT? This book deals with brands—why they are important, what they represent to consumers, and what firms should do to manage them properly. As many business executives correctly recog- nize, perhaps one of the most valuable assets a firm has are the brands it has invested in and developed over time. Although competitors can often duplicate manufacturing processes and factory designs, it’s not so easy to reproduce strongly held beliefs and attitudes established in the minds of consumers. The difficulty and expense of introducing new products, however, puts more pressure than ever on firms to skillfully launch their new products as well as manage their existing brands.

Although brands may represent invaluable intangible assets, creating and nurturing a strong brand poses considerable challenges. Fortunately, the concept of brand equity—the main focus of this book—can provide marketers with valuable perspective and a common denominator to interpret the potential effects and trade-offs of various strategies and tactics for their brands. Think of brand equity as the marketing effects uniquely attributable to the brand. In a practical sense, brand equity is the added value a product accrues as a result of past investments in the marketing activity for the brand. It’s the bridge between what happened to the brand in the past and what should happen to it in the future.

The chief purpose of this book is to provide a comprehensive and up-to-date treatment of the subjects of brands, brand equity, and strategic brand management—the design and implementa- tion of marketing programs and activities to build, measure, and manage brand equity. One of the book’s important goals is to provide managers with concepts and techniques to improve the long- term profitability of their brand strategies. We’ll incorporate current thinking and developments on these topics from both academics and industry participants, and combine a comprehensive theoretical foundation with enough practical insights to assist managers in their day-to-day and long-term brand decisions. And we’ll draw on illustrative examples and case studies of brands marketed in the United States and all over the world.

Specifically, we’ll provide insights into how to create profitable brand strategies by building, measuring, and managing brand equity. We address three important questions:

1. How can we create brand equity? 2. How can we measure brand equity? 3. How can we sustain brand equity to expand business opportunities?

Readers will learn:

• The role of brands, the concept of brand equity, and the advantages of creating strong brands • The three main ways to build brand equity by properly choosing brand elements, designing

marketing programs and activities, and leveraging secondary associations • Different approaches to measuring brand equity, and how to implement a brand equity mea-

surement system • Alternative branding strategies and how to design a brand architecture strategy and devise

brand hierarchies and brand portfolios

21

22 PREFACE

• The role of corporate brands, family brands, individual brands, modifiers, and how to combine them into sub-brands

• How to adjust branding strategies over time and across geographic boundaries to maximize brand equity

WHAT’S DIFFERENT ABOUT THIS BOOK? My objective in writing this book was to satisfy three key criteria by which any marketing text should be judged:

• Depth: The material in the book had to be presented in the context of conceptual frameworks that were comprehensive, internally consistent and cohesive, and well grounded in the aca- demic and practitioner literature.

• Breadth: The book had to cover all those topics that practicing managers and students of brand management found intriguing and/or important.

• Relevance: Finally, the book had to be well grounded in practice and easily related to past and present marketing activities, events, and case studies.

Although a number of excellent books have been written about brands, no book has really maxi- mized those three dimensions to the greatest possible extent. This book sets out to fill that gap by accomplishing three things.

First, we develop our main framework that provides a definition of brand equity, identifies sources and outcomes of brand equity, and provides tactical guidelines about how to build, mea- sure, and manage brand equity. Recognizing the general importance of consumers and customers to marketing—understanding and satisfying their needs and wants—this broad framework approaches branding from the perspective of the consumer; it is called customer-based brand equity. We then introduce a number of more specific frameworks to provide more detailed guidance.

Second, besides these broad, fundamentally important branding topics, for completeness, numerous Science of Branding boxes provide in-depth treatment of cutting-edge ideas and concepts, and each chapter contains a Brand Focus appendix that delves into detail on specific, related branding topics, such as brand audits, legal issues, brand crises, and private labels.

Finally, to maximize relevance, numerous in-text examples illuminate the discussion of virtually every topic, and a series of Branding Brief boxes provide more in-depth examinations of selected topics or brands.

Thus, this book can help readers understand the important issues in planning and evaluat- ing brand strategies, as well as providing appropriate concepts, theories, and other tools to make better branding decisions. We identify successful and unsuccessful brand marketers—and why they have been so—to offer readers a greater appreciation of the range of issues in branding, as well as a means to organize their own thoughts about those issues.

WHO SHOULD READ THE BOOK? A wide range of people can benefit from reading this book:

• Students interested in increasing both their understanding of basic branding principles and their exposure to classic and contemporary branding applications and case studies

• Managers and analysts concerned with the effects of their day-to-day marketing decisions on brand performance

• Senior executives concerned with the longer-term prosperity of their brand franchises and product or service portfolios

• All marketers interested in new ideas with implications for marketing strategies and tactics

The perspective we adopt is relevant to any type of organization (public or private, large or small), and the examples cover a wide range of industries and geographies. To illuminate brand- ing concepts across different settings, we review specific applications to online, industrial, high-tech, service, retailer, and small business in Chapters 1 and 15.

PREFACE 23

HOW IS THE BOOK ORGANIZED? The book is divided into six major parts, adhering to the “three-exposure opportunity” approach to learning new material. Part I introduces branding concepts; Parts II, III, IV, and V provide all the specific details of those concepts; and Part VI summarizes and applies the concepts in various contexts. The specific chapters for each part and their contents are as follows.

Part I sets the stage by providing the “big picture” of what strategic brand management is all about and provides a blueprint for the rest of the book. The goal is to provide a sense for the content and context of strategic brand management by identifying key branding decisions and suggesting some of the important considerations for those decisions. Specifically, Chapter 1 introduces some basic notions about brands, and the role they’ve played and continue to play in marketing strategies. It defines what a brand is, why brands matter, and how anything can be branded, and provides an overview of the strategic brand management process.

Part II addresses the topic of brand equity and introduces three models critical for brand planning. Chapter 2 introduces the concept of customer-based brand equity, outlines the customer-based brand equity framework, and provides detailed guidelines for the critically important topic of brand positioning. Chapter 3 describes the brand resonance and brand value chain models that assist marketers in developing profitable marketing programs for their brand and creating much customer loyalty.

Part III examines the three major ways to build customer-based brand equity, taking a sin- gle product–single brand perspective. Chapter 4 addresses the first way to build customer-based brand equity and how to choose brand elements (brand names, logos, symbols, slogans), and the role they play in contributing to brand equity. Chapters 5 and 6 outline the second way to build brand equity and how to optimize the marketing mix to create customer-based brand equity. Chapter 5 covers product, pricing, and distribution strategies; Chapter 6 is devoted to creating integrated marketing communication programs to build brand equity. Although most readers are probably familiar with these “4 P’s” of marketing, it’s illuminating to consider them from the standpoint of brand equity and the effects of brand knowledge on consumer response to market- ing mix activity and vice versa. Finally, Chapter 7 examines the third major way to build brand equity—by leveraging secondary associations from other entities like a company, geographical region, person, or other brand.

Part IV looks at how to measure customer-based brand equity. These chapters take a detailed look at what consumers know about brands, what marketers want them to know, and how market- ers can develop measurement procedures to assess how well they’re doing. Chapter 8 provides a big-picture perspective of these topics, specifically examining how to develop and implement an efficient and effective brand equity measurement system. Chapter 9 examines approaches to measuring customers’ brand knowledge structures, in order to identify and quantify potential sources of brand equity. Chapter 10 looks at measuring potential outcomes of brand equity in terms of the major benefits a firm accrues from these sources of brand equity as well as how to measure the overall value of a brand.

Part V addresses how to manage brand equity, taking a broader, multiple product–multiple brand perspective as well as a longer-term, multiple-market view of brands. Chapter 11 consid- ers issues related to brand architecture strategies—which brand elements a firm chooses to apply across its various products—and how to maximize brand equity across all the different brands and products that a firm might sell. It also describes two important tools to help formulate brand- ing strategies—brand portfolios and the brand hierarchies. Chapter 12 outlines the pros and cons of brand extensions and develops guidelines for introducing and naming new products and brand extensions. Chapter 13 considers how to reinforce, revitalize, and retire brands, examining a number of specific topics in managing brands over time. Chapter 14 examines the implications of differences in consumer behavior and different types of market segments for managing brand equity. We pay particular attention to international issues and global branding strategies.

Finally, Part VI considers some implications and applications of the customer-based brand equity framework. Chapter 15 highlights managerial guidelines and key themes that emerged in earlier chapters of the book. This chapter also summarizes success factors for branding and applies the customer-based brand equity framework to address specific strategic brand manage- ment issues for different types of products (online, industrial goods, high-tech products, services, retailers, and small businesses).

24 PREFACE

REVISION STRATEGY FOR FOURTH EDITION The overarching goal of the revision of Strategic Brand Management was to preserve the aspects of the text that worked well, but to improve it as much as possible by updating and adding new material as needed. We deliberately avoided change for change’s sake. Our driving concern was to create the best possible textbook for readers willing to invest their time and energy at mastering the subject of branding.

We retained the customer-based brand equity framework that was the centerpiece of the third edition, and the three dimensions of depth, breadth, and relevance. Given all the academic research progress that has been made in recent years, however, as well as all the new market developments and events, the book required—and got—some important updates.

1. New and updated Branding Briefs and in-text examples: Many new Branding Briefs and numerous in-text examples have been added. The goal was to blend classic and contempo- rary examples, so many still-relevant and illuminating examples remain.

2. Additional academic references: As noted, the branding area continues to receive concerted academic research attention. Accordingly, each chapter incorporates new references and sources for additional study.

3. Tighter chapters: Chapters have been trimmed and large boxed material carefully screened to provide a snappier, more concise read.

4. Stronger visuals: The text includes numerous engaging photos and graphics. These visuals highlight many of the important and interesting concepts and examples from the chapters.

5. Updated and new original cases: To provide broader, more relevant coverage, new cases have been added to the Best Practices in Branding casebook including PRODUCT (RED), King Arthur Flour, and Target. Each of the remaining cases has been significantly updated. All of the cases are considerably shorter and tighter. Collectively, these cases provide insights into the thinking and activities of some of the world’s best marketers while also highlighting the many challenges they still face.

In terms of content, the book continues to incorporate material to address the changing techno- logical, cultural, global, and economic environment that brands face. Some of the specific new topics reviewed in depth in the fourth edition include:

• Marketing in a recession • Brand communities

• Luxury branding • Brand characters

• Brand personas • Brand makeovers

• Shopper marketing • Person branding

• Social currency • Brand potential

• Brand extension scorecard • Culture and branding

• Brand flashbacks • Future brand priorities

Some of the many brands and companies receiving greater attention include:

• Converse • L’Oréal • Tough Mudder

• Etisalat • Michelin • Liz Claiborne

• W Hotels • MTV • Prada

• HBO • Macy’s • TOMS

• Tupperware • Johnnie Walker • Chobani

• Groupon • Lions Gate • Kindle

• Louis Vuitton • Gannett • Coldplay

• Netflix • Subway • Febreze

• Uniqlo • M&M’s • Oreo

• Boloco • Hyundai • DHL

PREFACE 25

Some of the more major chapter changes from the third edition include the following:

• Chapters 2 and 3 have been reorganized and updated to show how the brand positioning, brand resonance, and brand value chain models are linked, providing a comprehensive set of tools to help readers understand how brand equity can be created and tracked.

• Chapter 6 has been reorganized and updated around four major marketing communication options: (1) Advertising and promotion; (2) Interactive marketing; (3) Events and experi- ences; and (4) Mobile marketing. Guidelines and examples are provided for each of the four options. Special attention is paid to the role of social media.

• Chapters 9 and 10 have been updated to include much new material on industry models of brand equity and financial and valuation perspectives on branding.

• Chapters 11 and 12 have been reorganized and updated to provide an in-depth three-step model of how to develop a brand architecture strategy. As part of these changes, a detailed brand extension scorecard is presented.

• Chapter 14 has been updated to include much new material on developing markets. • Chapter 15 has been updated to include much new material on future brand priorities.

HOW CAN YOU GET THE MOST OUT OF THE BOOK? Branding is a fascinating topic that receives much attention in the popular press. The ideas pre- sented in the book will help you interpret current branding developments. One good way to better understand branding and the customer-based brand equity framework is to apply the con- cepts and ideas presented in the book to current events, or to any of the more detailed branding issues or case studies presented in the Branding Briefs. The Discussion Questions at the end of the chapters often ask you to pick a brand and apply one or more concepts from that chapter. Focusing on one brand across all the questions—perhaps as part of a class project—permits some cumulative and integrated learning and is an excellent way to become more comfortable with and fluent in the material in the book.

This book truly belongs to you, the reader. Like most marketing, branding doesn’t offer “right” or “wrong” answers, and you should question things you don’t understand or don’t be- lieve. The book is designed to facilitate your understanding of strategic brand management and present some “best practice” guidelines. At the end of the day, however, what you get out of it will be what you put into it, and how you blend the ideas contained in these pages with what you already know or believe.

FACULTY RESOURCES Instructors can access a variety of print, media, and presentation resources through www .pearsonglobaleditions.com/keller.

Acknowledgments

I have been gratified by the acceptance of the first three editions of Strategic Brand Management. It has been translated and adapted in numerous languages and countries, adopted by many top universities, and used by scores of marketing executives around the world. The success of the text is in large part due to the help and support of others whom I would like to acknowledge and thank.

The Pearson team on the fourth edition was a huge help in the revision—many thanks to Stephanie Wall, Erin Gardner, Kierra Bloom, Ann Pulido, and Stacy Greene. Elisa Adams superbly edited the text with a very keen and helpful eye. Keri Miksza tracked down permissions and pro- vided an impressive array of ads and photos from which to choose. Katie Dougherty, Duncan Hall, and Alex Tarnoff offered much research assistance and support for the text. Lowey Sichol has joined me as co-author of the Best Practices in Branding casebook and has applied her marketing experience and wisdom to craft a set of informative, intriguing cases. John Lin has been a steady long-time contributor about what is happening in the tech world. Alison Pearson provided her usual superb administrative assistance in a number of areas.

I have learned much about branding in my work with industry participants, who have unique perspectives on what is working and not working (and why) in the marketplace. Our discussions have enriched my appreciation for the challenges in building, measuring, and managing brand equity and the factors affecting the success and failure of brand strategies.

I have benefited from the wisdom of my colleagues at the institutions where I have held aca- demic positions: Dartmouth College, Duke University, the University of California at Berkeley, Stanford University, the Australian Graduate School of Management, and the University of North Carolina at Chapel Hill.

Over the years, the doctoral students I advised have helped in my branding pursuits in a vari- ety of useful ways, including Sheri Bridges, Christie Brown, Jennifer Aaker, Meg Campbell, and Sanjay Sood. I have also learned much from my research partners and from the marketing field as a whole that has recognized the importance of branding in their research studies and programs. Their work provides much insight and inspiration.

Finally, special thanks go to my wife, Punam Anand Keller, and two daughters, Carolyn and Allison, for their never-ending patience, understanding, and support.

Pearson would like to thank and acknowledge the following people for their work on the Global Edition:

Contributors

Dr. Chris Baumann, Department of Marketing & Management, Macquarie University, Australia. Visiting Professor, Seoul National University, South Korea, and Aarhus University, Denmark.

Dr. Colin Campbell, Department of Marketing, Kent State University, USA.

Dr. Mike Cheong, School of Business Management, Nanyang Polytechnic, Singapore.

Prof. Wujin Chu, Associate Dean MBA Programs and Professor of Marketing, Seoul National University, South Korea.

Dr. Noha El-Bassiouny, Department of Marketing, the German University in Cairo, Egypt. Dr. Noor Hasmini Abd Ghani, School of Business Management, College of Business, Universiti Utara Malaysia, Malaysia.

26

Prof. Dr. Michael A. Grund, Head of Center for Marketing, HWZ University of Applied Sciences in Business Administration Zurich, Switzerland.

Phillip Morgan, UTS Business School, University of Technology, Sydney, Australia. Arabella Pasquette, Freelance Lecturer and Consultant, Singapore and UK.

Alicia Perkins, Department of Marketing, University of Newcastle, Australia.

Professor Michael Jay Polonsky, School of Management and Marketing, Deakin University, Australia.

Reviewers

Dr. Nalia Aaijaz, PhD, University Malaysia Kelantan, Malaysia.

Dr. Yoosuf A Cader, Zayed University, Abu Dhabi, United Arab Emirates.

Dr. E. Constantinides, School of Management and Governance, University of Twente, The Netherlands.

Dr. Dalia Abdelrahman Farrag, The Arab Academy for Science, Technology & Maritime Transport, Egypt.

Susan Scoffield, Senior Lecturer in Marketing, Department of Business & Management, Manchester Metropolitan University, UK.

Dr. Margaret NF Tang, The School of Business, Macao Polytechnic Institute, China.

Venkata Yanamandram, School of Management & Marketing, University of Wollongong, Australia.

Graham Robert Young, University of Southern Queensland, Australia.

ACKNOWLEDGMENTS 27

About the Author

Kevin Lane Keller is the E. B. Osborn Professor of Marketing at the Tuck School of Business at Dartmouth College. Professor Keller has degrees from Cornell, Carnegie-Mellon, and Duke uni- versities. At Dartmouth, he teaches MBA courses on marketing management and strategic brand management and lectures in executive programs on those topics.

Previously, Professor Keller was on the faculty at Stanford University, where he also served as the head of the marketing group. Additionally, he has been on the faculty at the University of California at Berkeley and the University of North Carolina at Chapel Hill, been a visiting profes- sor at Duke University and the Australian Graduate School of Management, and has two years of industry experience as Marketing Consultant for Bank of America.

Professor Keller’s general area of expertise lies in marketing strategy and planning, and branding. His specific research interest is in how understanding theories and concepts related to consumer behavior can improve marketing and branding strategies. His research has been published in three of the major marketing journals—the Journal of Marketing, the Journal of Marketing Research, and the Journal of Consumer Research. He also has served on the Editorial Review Boards of those journals. With over 90 published papers, his research has been widely cited and has received numerous awards.

Actively involved with industry, he has worked on a host of different types of marketing projects. He has served as a consultant and advisor to marketers for some of the world’s most successful brands, including Accenture, American Express, Disney, Ford, Intel, Levi Strauss, Procter & Gamble, and Samsung. Additional brand consulting activities have been with other top companies such as Allstate, Beiersdorf (Nivea), BlueCross BlueShield, Campbell, Colgate, Eli Lilly, ExxonMobil, General Mills, GfK, Goodyear, Hasbro, Intuit, Johnson & Johnson, Kodak, L.L. Bean, Mayo Clinic, MTV, Nordstrom, Ocean Spray, Red Hat, SAB Miller, Shell Oil, Starbucks, Unilever, and Young & Rubicam. He has also served as an academic trustee for the Marketing Science Institute.

A popular and highly sought-after speaker, he has made speeches and conducted marketing seminars to top executives in a variety of forums. Some of his senior management and market- ing training clients include such diverse business organizations as Cisco, Coca-Cola, Deutsche Telekom, GE, Google, IBM, Macy’s, Microsoft, Nestlé, Novartis, Pepsico, and Wyeth. He has lectured all over the world, from Seoul to Johannesburg, from Sydney to Stockholm, and from Sao Paulo to Mumbai. He has served as keynote speaker at conferences with hundreds to thousands of participants.

Professor Keller is currently conducting a variety of studies that address strategies to build, measure, and manage brand equity. In addition to Strategic Brand Management, in its 3rd edition, which has been heralded as the “bible of branding,” he is also the co-author with Philip Kotler of the all-time best-selling introductory marketing textbook, Marketing Management, now in its 14th edition.

An avid sports, music, and film enthusiast, in his so-called spare time, he has helped to manage and market, as well as serve as executive producer, for one of Australia’s great rock and roll treasures, The Church, as well as American power-pop legends Tommy Keene and Dwight Twilley. Additionally, he is the Principal Investor and Marketing Advisor for Second Motion Records. He also serves on the Board of Directors for The Doug Flutie, Jr. Foundation for Autism and the Montshire Museum of Science. Professor Keller lives in Etna, NH with his wife, Punam (also a Tuck marketing professor), and his two daughters, Carolyn and Allison.

28

29

PA RT I O P E N I N G P E R S P E C T I V E S

Learning Objectives After reading this chapter, you should be able to

1. Define “brand,” state how brand differs 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.

Brands and Brand Management 1

A brand can be a person, place, firm, or organization Sources: Pictorial Press Ltd / Alamy; Damian P. Gadal/Alamy; somchaij/Shutterstock; Jason Lindsey/Alamy

30 PART I • OPENING PERSPECTIVES

Preview

Ever more firms and other organizations have come to the realization that one of their most valuable assets is the brand names associated with their products or services. In our increasingly complex world, all of us, as individuals and as business managers, face more choices with less time to make them. Thus a strong brand’s ability to simplify decision making, reduce risk, and set expectations is invaluable. Creating strong brands that deliver on that promise, and maintain- ing and enhancing the strength of those brands over time, is a management imperative.

This text will help you reach a deeper understanding of how to achieve those branding goals. Its basic objectives are

1. To explore the important issues in planning, implementing, and evaluating brand strategies. 2. To provide appropriate concepts, theories, models, and other tools to make better branding

decisions.

We place particular emphasis on understanding psychological principles at the individual or organizational level in order to make better decisions about brands. Our objective is to be relevant for any type of organization regardless of its size, nature of business, or profit orientation.1

With these goals in mind, this first chapter defines what a brand is. We consider the func- tions of a brand from the perspective of both consumers and firms and discuss why brands are important to both. We look at what can and cannot be branded and identify some strong brands. The chapter concludes with an introduction to the concept of brand equity and the strategic brand management process. Brand Focus 1.0 at the end of the chapter traces some of the histori- cal origins of branding.

WHAT IS A BRAND? Branding has been around for centuries as a means to distinguish the goods of one producer from those of another. In fact, the word brand is derived from the Old Norse word brandr, which means “to burn,” as brands were and still are the means by which owners of livestock mark their animals to identify them.2

According to the American Marketing Association (AMA), 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 differentiate them from those of competition.” Technically speaking, then, whenever a marketer creates a new name, logo, or symbol for a new product, he or she has created a brand.

In fact, however, many practicing managers refer to a brand as more than that—as some- thing that has actually created a certain amount of awareness, reputation, prominence, and so on in the marketplace. Thus we can make a distinction between the AMA definition of a “brand” with a small b and the industry’s concept of a “Brand” with a big B. The difference is important for us because disagreements about branding principles or guidelines often revolve around what we mean by the term.

Brand Elements Thus, the key to creating a brand, according to the AMA definition, is to be able to choose a name, logo, symbol, package design, or other characteristic that identifies a product and distin- guishes it from others. These different components of a brand that identify and differentiate it are brand elements. We’ll see in Chapter 4 that brand elements come in many different forms.

For example, consider the variety of brand name strategies. Some companies, like General Electric and Samsung, use their names for essentially all their products. Other manufacturers as- sign new products individual brand names that are unrelated to the company name, like Procter & Gamble’s Tide, Pampers, and Pantene product brands. Retailers create their own brands based on their store name or some other means; for example, Macy’s has its own Alfani, INC, Charter Club, and Club Room brands.

Brand names themselves come in many different forms.3 There are brand names based on people’s names, like Estée Lauder cosmetics, Porsche automobiles, and Orville Reden- bacher popcorn; names based on places, like Sante Fe cologne, Chevrolet Tahoe SUV, and

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 31

British Airways; and names based on animals or birds, like Mustang automobiles, Dove soap, and Greyhound buses. In the category of “other,” we find Apple computers, Shell gasoline, and Carnation evaporated milk.

Some brand names use words with inherent product meaning, like Lean Cuisine, Ocean Spray 100% Juice Blends, and Ticketron, or suggesting important attributes or benefits, like DieHard auto batteries, Mop & Glo floor cleaner, and Beautyrest mattresses. Other names are made up and include prefixes and suffixes that sound scientific, natural, or prestigious, like Lexus automobiles, Pentium microprocessors, and Visteon auto supplies.

Not just names but other brand elements like logos and symbols also can be based on people, places, things, and abstract images. In creating a brand, marketers have many choices about the number and nature of the brand elements they use to identify their products.

Brands versus Products How do we contrast a brand and a product? A product is anything we can offer to a market for attention, acquisition, use, or consumption that might satisfy a need or want. Thus, a product may be a physical good like a cereal, tennis racquet, or automobile; a service such as an airline, bank, or insurance company; a retail outlet like a department store, specialty store, or supermar- ket; a person such as a political figure, entertainer, or professional athlete; an organization like a nonprofit, trade organization, or arts group; a place including a city, state, or country; or even an idea like a political or social cause. This very broad definition of product is the one we adopt in the book. We’ll discuss the role of brands in some of these different categories in more detail later in this chapter and in Chapter 15.

We can define five levels of meaning for a product:4

1. The core benefit level is the fundamental need or want that consumers satisfy by consuming the product or service.

2. The generic product level is a basic version of the product containing only those attributes or characteristics absolutely necessary for its functioning but with no distinguishing fea- tures. This is basically a stripped-down, no-frills version of the product that adequately per- forms the product function.

3. The expected product level is a set of attributes or characteristics that buyers normally expect and agree to when they purchase a product.

4. The augmented product level includes additional product attributes, benefits, or related ser- vices that distinguish the product from competitors.

5. The potential product level includes all the augmentations and transformations that a prod- uct might ultimately undergo in the future.

Figure 1-1 illustrates these different levels in the context of an air conditioner. In many markets most competition takes place at the product augmentation level, because most firms can successfully build satisfactory products at the expected product level. Harvard’s Ted Levitt argued that “the new competition is not between what companies produce in their fac- tories but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.”5

A brand is therefore more than a product, because it can have dimensions that differenti- ate it in some way from other products designed to satisfy the same need. These differences may be rational and tangible—related to product performance of the brand—or more symbolic, emotional, and intangible—related to what the brand represents.

Extending our previous example, a branded product may be a physical good like Kellogg’s Corn Flakes cereal, Prince tennis racquets, or Ford Mustang automobiles; a service such as Delta Airlines, Bank of America, or Allstate insurance; a store like Bloomingdale’s depart- ment store, Body Shop specialty store, or Safeway supermarket; a person such as Warren Buffett, Mariah Carey, or George Clooney; a place like the city of London, state of California, or country of Australia; an organization such as the Red Cross, American Automobile Asso- ciation, or the Rolling Stones; or an idea like corporate responsibility, free trade, or freedom of speech.

Some brands create competitive advantages with product performance. For example, brands such as Gillette, Merck, and others have been leaders in their product categories for decades,

32 PART I • OPENING PERSPECTIVES

due, in part, to continual innovation. Steady investments in research and development have pro- duced leading-edge products, and sophisticated mass marketing practices have ensured rapid adoption of new technologies in the consumer market. A number of media organizations rank firms on their ability to innovate. Figure 1-2 lists 10 innovative companies that showed up on many of those lists in 2011.

Other brands create competitive advantages through non-product-related means. For ex- ample, Coca-Cola, Chanel No. 5, and others have been leaders in their product categories for decades by understanding consumer motivations and desires and creating relevant and appealing images surrounding their products. Often these intangible image associations may be the only way to distinguish different brands in a product category.

Brands, especially strong ones, carry a number of different types of associations, and marketers must account for all of them in making marketing decisions. The marketers behind some brands have learned this lesson the hard way. Branding Brief 1-1 describes the problems

One of the classic marketing mistakes occurred in April 1985 when Coca-Cola replaced its flagship cola brand with a new formula. The motivation behind the change was primarily a competitive one. Pepsi-Cola’s “Pepsi Challenge” promotion had posed a strong challenge to Coke’s supremacy over the cola market. Starting initially just in Texas, the 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 na- tionally, could take a big bite out of Coca-Cola’s sales, especially among younger cola drinkers, 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 an astounding number of consumers—190,000! The find- ings from this research clearly indicated that consumers “over- whelmingly” preferred the taste of the new formulation to the old one. Brimming with confidence, Coca-Cola announced the formulation change with much fanfare.

Consumer reaction was swift but, unfortunately for Coca- Cola, negative. In Seattle, retired real estate investor Gay Mul- lins founded the “Old Cola Drinkers of America” and set up a hotline for angry consumers. A Beverly Hills wine merchant bought 500 cases of “Vintage Coke” and sold them at a pre- mium. Meanwhile, back at Coca-Cola headquarters, roughly 1,500 calls a day and literally truckloads of mail poured in, vir- tually all condemning the company’s actions. Finally, after sev- eral months of slumping sales, Coca-Cola announced that the old formulation would return as “Coca-Cola Classic” and join “New” Coke in the marketplace (see the accompanying photo).

The New Coke debacle taught Coca-Cola a very important, albeit painful and public, lesson about its brand. Coke clearly is not just seen as a beverage or thirst-quenching refreshment by consumers. Rather, it seems to be viewed as more of an Ameri- can icon, and much of its appeal lies not only in its ingredients but also in what it represents in terms of Americana, nostalgia, and its heritage and relationship with consumers. Coke’s brand image certainly has emotional components, and consumers have a great deal of strong feelings for the brand.

Although Coca-Cola made a number of other mistakes in introducing New Coke (both its advertising and its packaging probably failed to clearly differentiate the brand and communi- cate its sweeter quality), its 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. At the same time, American consum- ers also learned a lesson—just how much the Coke brand really meant to them. As a result of Coke’s marketing fiasco, it is doubt- ful that either side will take the other for granted from now on.

Sources: Patricia Winters, “For New Coke, ‘What Price Success?’” Advertising Age, 20 March 1989, S1–S2; Jeremiah McWilliams, “Twenty-Five Years Since Coca-Cola’s Big Blunder,” Atlanta Business News, 26 April 2010; Abbey Klaassen, “New Coke: One of Marketing’s Biggest Blunders Turns 25,” 23 April 2010, www.adage.com.

BRANDING BRIEF 1-1

Coca-Cola’s Branding Lesson

The epic failure of New Coke taught Coca-Cola a valuable lesson about branding.

Source: Al Freni/Time & Life Pictures/Getty Images

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 33

Coca-Cola encountered in the introduction of “New Coke” when it failed to account for all the different aspects of the Coca-Cola brand image.

Not only are there many different types of associations to link to the brand, but there are many different means to create them—the entire marketing program can contribute to consumers’ under- standing of the brand and how they value it as well as other factors outside the control of the marketer.

By creating perceived differences among products through branding and by developing a loyal consumer franchise, marketers create value that can translate to financial profits for the firm. The reality is that the most valuable assets many firms have may not be tangible ones, such as plants, equipment, and real estate, but intangible assets such as management skills, marketing, financial and operations expertise, and, most important, the brands themselves. This value was recognized

FIGURE 1-2 Ten Firms Rated Highly on Innovation

Sources: Based on “The 50 Most Innovative Companies,” Bloomberg BusinessWeek, 25 April 2010; “The World’s Most Innovative Companies,” Forbes, 4 March 2011; “The World’s 50 Most Innovative Companies,” Fast Company, March 2011; “The 50 Most Innovative Companies 2011,” Technology Review, March 2011.

Apple1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Amazon

Facebook

General Electric

Google

Groupon

Intel

Microsoft

Twitter

Zynga

FIGURE 1-1 Examples of Different Product Levels

Level Air Conditioner

1. Core Benefit

2. Generic Product

3. Expected Product

4. Augmented Product

5. Potential Product

Cooling and comfort.

Sufficient cooling capacity (Btu per hour), an acceptable energy efficiency rating, adequate air intakes and exhausts, and so on.

Consumer Reports states that for a typical large air conditioner, consumers should expect at least two cooling speeds, expandable plastic side panels, adjustable louvers, removable air filter, vent for exhausting air, environmentally friendly R-410A refrigerant, power cord at least 60 inches long, one year parts-and-labor warranty on the entire unit, and a five-year parts-and-labor warranty on the refrigeration system.

Optional features might include electric touch-pad controls, a display to show indoor and outdoor temperatures and the thermostat setting, an automatic mode to adjust fan speed based on the thermostat setting and room temperature, a toll-free 800 number for customer service, and so on.

Silently running, completely balanced throughout the room, and completely energy self-sufficient.

34 PART I • OPENING PERSPECTIVES

by John Stuart, CEO of Quaker Oats from 1922 to 1956, who famously said, “If this company were to split up I would give you the property, plant and equipment and I would take the brands and the trademarks and I would fare better than you.”6 Let’s see why brands are so valuable.

WHY DO BRANDS MATTER? An obvious question is, why are brands important? What functions do they perform that make them so valuable to marketers? We can take a couple of perspectives to uncover the value of brands to both customers and firms themselves. Figure 1-3 provides an overview of the different roles that brands play for these two parties. We’ll talk about consumers first.

Consumers As with the term product, this book uses the term consumer broadly to encompass all types of customers, including individuals as well as organizations. To consumers, brands provide impor- tant functions. Brands identify the source or maker of a product and allow consumers to assign responsibility to a particular manufacturer or distributor. Most important, brands take on special meaning to consumers. Because of past experiences with the product and its marketing program over the years, consumers find out which brands satisfy their needs and which ones do not. As a result, brands provide a shorthand device or means of simplification for their product decisions.7

If consumers recognize a brand and have some knowledge about it, then they do not have to engage in a lot of additional thought or processing of information to make a product decision. Thus, from an economic perspective, brands allow consumers to lower the search costs for prod- ucts both internally (in terms of how much they have to think) and externally (in terms of how much they have to look around). Based on what they already know about the brand—its quality, product characteristics, and so forth—consumers can make assumptions and form reasonable expectations about what they may not know about the brand.

The meaning imbued in brands can be quite profound, allowing us to think of the relation- ship between a brand and the consumer as a type of bond or pact. Consumers offer 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. To the extent that consumers realize advantages and benefits from purchasing the brand, and as long as they derive satisfaction from product consumption, they are likely to continue to buy it.

These benefits may not be purely functional in nature. Brands can serve as symbolic devices, al- lowing consumers to project their self-image. Certain brands are associated with certain types of peo- ple and thus reflect different values or traits. Consuming such products is a means by which consumers can communicate to others—or even to themselves—the type of person they are or would like to be.8

Some branding experts believe that for some people, certain brands even play a religious role of sorts and substitute for religious practices and help reinforce self-worth.9 The cultural influence of brands is profound and much interest has been generated in recent years in under- standing the interplay between consumer culture and brands.10

FIGURE 1-3 Roles That Brands Play

Consumers Identification of source of product Assignment of responsibility to product maker Risk reducer Search cost reducer Promise, bond, or pact with maker of product Symbolic device Signal of quality

Manufacturers Means of identification to simplify handling or tracing Means of legally protecting unique features Signal of quality level to satisfied customers Means of endowing products with unique associations Source of competitive advantage Source of financial returns

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 35

Brands can also play a significant role in signaling certain product characteristics to con- sumers. Researchers have classified products and their associated attributes or benefits into three major categories: search goods, experience goods, and credence goods.11

• For search goods like grocery produce, consumers can evaluate product attributes like stur- diness, size, color, style, design, weight, and ingredient composition by visual inspection.

• For experience goods like automobile tires, consumers cannot assess product attributes like durability, service quality, safety, and ease of handling or use so easily by inspection, and actual product trial and experience is necessary.

• For credence goods like insurance coverage, consumers may rarely learn product attributes.

Given the difficulty of assessing and interpreting product attributes and benefits for expe- rience and credence goods, brands may be particularly important signals of quality and other characteristics to consumers for these types of products.12

Brands can reduce the risks in product decisions. Consumers may perceive many different types of risks in buying and consuming a product:13

• Functional risk: The product does not perform up to expectations. • Physical risk: The product poses a threat to the physical well-being or health of the user or

others. • Financial risk: The product is not worth the price paid. • Social risk: The product results in embarrassment from others. • Psychological risk: The product affects the mental well-being of the user. • Time risk: The failure of the product results in an opportunity cost of finding another satis-

factory product.

Consumers can certainly handle these risks in a number of ways, but one way is obviously to buy well-known brands, especially those with which consumers have had favorable past ex- periences. Thus, brands can be a very important risk-handling device, especially in business-to- business settings where risks can sometimes have quite profound implications.

In summary, to consumers, the special meaning that brands take on can change their percep- tions and experiences with a product. The identical product may be evaluated differently depend- ing on the brand identification or attribution it carries. Brands take on unique, personal meanings to consumers that facilitate their day-to-day activities and enrich their lives. As consumers’ lives become more complicated, rushed, and time starved, the ability of a brand to simplify decision making and reduce risk is invaluable.

Firms Brands also provide a number of valuable functions to their firms.14 Fundamentally, they serve an identification purpose, to simplify product handling or tracing. Operationally, brands help or- ganize inventory and accounting records. A brand also offers the firm legal protection for unique features or aspects of the product. A brand can retain intellectual property rights, giving legal title to the brand owner.15 The brand name can be protected through registered trademarks; man- ufacturing processes can be protected through patents; and packaging can be protected through copyrights and designs. These intellectual property rights ensure that the firm can safely invest in the brand and reap the benefits of a valuable asset.

We’ve seen that these investments in the brand can endow a product with unique associa- tions and meanings that differentiate it from other products. Brands can signal a certain level of quality so that satisfied buyers can easily choose the product again.16 This brand loyalty pro- vides predictability and security of demand for the firm and creates barriers of entry that make it difficult for other firms to enter the market.

Although manufacturing processes and product designs may be easily duplicated, lasting impressions in the minds of individuals and organizations from years of marketing activity and product experience may not be so easily reproduced. One advantage that brands such as Colgate toothpaste, Cheerios cereal, and Levi’s jeans have is that consumers have literally grown up with them. In this sense, branding can be seen as a powerful means to secure a competitive advantage.

In short, to firms, brands represent enormously valuable pieces of legal property, capable of influencing consumer behavior, being bought and sold, and providing the security of sustained future revenues.17 For these reasons, huge sums, often representing large multiples of a brand’s earnings, have been paid for brands in mergers or acquisitions, starting with the boom years of

36 PART I • OPENING PERSPECTIVES

the mid-1980s. The merger and acquisition frenzy during this time led Wall Street financiers to seek out undervalued companies from which to make investment or takeover profits. One of the primary undervalued assets of such firms was their brands, given that they were off-balance-sheet items. Implicit in Wall Street’s interest was a belief that strong brands result in better earnings and profit performance for firms, which, in turn, creates greater value for shareholders.

The price premium paid for many companies is clearly justified by the opportunity to earn and sustain extra profits from their brands, as well as by the tremendous difficulty and expense of creating similar brands from scratch. For a typical fast-moving consumer goods company, net tangible assets may be as little as 10 percent of the total value (see Figure 1-4). Most of the value lies in intangible assets and goodwill, and as much as 70 percent of intangible assets can be supplied by brands.

CAN ANYTHING BE BRANDED? Brands clearly provide important benefits to both consumers and firms. An obvious question, then, is, how are brands created? How do you “brand” a product? Although firms provide the impetus for brand creation through their marketing programs and other activities, ultimately a brand is something that resides in the minds of consumers. A brand is a perceptual entity rooted in reality, but it is more than that—it reflects the perceptions and perhaps even the idiosyncrasies of consumers.

To brand a product it is necessary to teach consumers “who” the product is—by giving it a name and using other brand elements to help identify it—as well as what the product does and why con- sumers should care. In other words, marketers must give consumers a label for the product (“here’s how you can identify the product”) and provide meaning for the brand (“here’s what this particular product can do for you, and why it’s special and different from other brand name products”).

Branding creates mental structures and helps 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. The key to branding is that consumers perceive differences among brands in a product category. These differences can be related to attributes or benefits of the product or service itself, or they may be related to more intangible image considerations.

Whenever and wherever consumers are deciding between alternatives, brands can play an important decision-making role. Accordingly, marketers can benefit from branding whenever consumers are in a choice situation. Given the myriad choices consumers make each and every day—commercial and otherwise—it is no surprise how pervasive branding has become. Consider these two very diverse applications of branding:18

1. Bonnaroo Music and Arts Festival (Bonnaroo means “good times” in Creole), a 100-band jamboree with an eclectic mix of A-list musical stars, has been the top-grossing music

FIGURE 1-4 Brand Value as a Percentage of Market Capitalization (2010)

Sources: Based on Interbrand. “Best Global Brands 2010.” Yahoo! Finance, February, 2011.

Brand Brand Value ($MM) Market Cap ($MM) % of Market Cap

Coca-Cola 70,452 146,730 48%

IBM 64,727 200,290 32%

Microsoft 60,895 226,530 27%

Google 43,557 199,690 22%

General Electric 42,808 228,250 19%

McDonald's 33,578 80,450 42%

Intel 32,015 119,130 27%

Nokia 29,495 33,640 88%

Disney 28,731 81,590 35%

Hewlett-Packard 26,867 105,120 26%

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 37

festival in North America for years. Multiple revenue sources are generated through ticket sales (from $250 general admission to $18,500 luxury packages), 16 profit centers on-site (from concessions and merchandise to paid showers), licensing, media deals, and the Web. With all its success, festival organizers are exploring expanding the brand’s “curatorial voice” to nonfestival settings such as television programming and mobile phone apps.

2. Halloween night in Madison, Wisconsin, home of the University of Wisconsin–Madison, had become frightening—literally—for local businesses due to out-of-control partying. As one par- ticipant put it, “The main objective on Halloween in Madison was not to get blackout drunk . . . it was to incite enough of a ruckus that riot police had to show up on horseback with tear gas and pepper spray.” The success of that strategy was evident in 2005 when more than 450 people were arrested and $350,000 was spent by the town government on enforcement. The next year, the mayor of Madison tried a marketing solution instead. He branded the event “Freakfest,” install- ing floodlights in a gated stretch of a main street and providing concert entertainment for 50,000 partygoers. The number of arrests and the amount of vandalism were dramatically lower. One town official observed, “Since we rebranded the event, it’s become something we are proud of.”

As another example, Branding Brief 1-2 considers how even one-time commodities have been branded.

We can recognize the universality of branding by looking at some different product appli- cations in the categories we defined previously—physical goods, services, retail stores, online businesses, people, organizations, places, and ideas. For each of these different types of prod- ucts, we will review some basic considerations and look at examples. (We consider some of these special cases in more detail in Chapter 15.)

Physical Goods Physical goods are what are traditionally associated with brands and include many of the best- known and highly regarded consumer products, like Mercedes-Benz, Nescafé, and Sony. More and more companies selling industrial products or durable goods to other companies are recog- nizing the benefits of developing strong brands. Brands have begun to emerge among certain types of physical goods that never supported brands before. Let us consider the role of branding in industrial “business-to-business” products and technologically intensive “high-tech” products.

Business-to-business products. The business-to-business (B2B) market makes up a huge percentage of the global economy. Some of the world’s most accomplished and respected brands belong to business marketers, such as ABB, Caterpillar, DuPont, FedEx, GE, Hewlett-Packard, IBM, Intel, Microsoft, Oracle, SAP, and Siemens.

Business-to-business branding creates a positive image and reputation for the company as a whole. Creating such goodwill with business customers is thought to lead to greater selling

Bonnaroo Music and Arts Festival has become a strong brand by creating a unique musical experience with broad appeal. Source: ZUMA Press/ Newscom

38 PART I • OPENING PERSPECTIVES

opportunities and more profitable relationships. A strong brand can provide valuable reassur- ance and clarity to business customers who may be putting their company’s fate—and perhaps their own careers!—on the line. A strong business-to-business brand can thus provide a strong competitive advantage.

Some B2B firms, however, carry the attitude that purchasers of their products are so well- informed and professional that brands don’t matter. Savvy business marketers reject that rea- soning and are recognizing the importance of their brand and how they must execute well in a number of areas to gain marketplace success.

Boeing, which makes everything from commercial airplanes to satellites, implemented the “One Firm” brand strategy to unify all its different operations with a one-brand culture. The strategy was based in part on a “triple helix” representation: 1) Enterprising Spirit (why Boeing does what it does), 2) Precision Performance (how Boeing gets things done), and 3) Defining the Future (what Boeing achieves as a firm).19 The Science of Branding 1-1 describes some particu- larly important guidelines for business-to-business branding. Here is how Infosys approaches brand differentiation to persuade businesses to select it as their partner of choice.

INFOSYS

Infosys is an Indian IT services company that exploited the outsourcing trend of companies to outsource its IT functions to specialist providers. It increased its drive-up sales from $100 million in 1999 to over $2 billion by 2006. Over a 25-year period, 93 percent of Infosys’s projects were delivered on time and on budget, against an industry average of 30 percent. Having taken 23 years to achieve the first $1 billion sales, it took just 23 months to reach $2 billion in sales.

Once it achieved $2 billion in sales, Infosys rebranded itself to other businesses as a company that could help them improve their business models. By selling itself as a business process transformation partner rather than just an outsourcing firm, Infosys successfully differentiated itself from the competi- tion. It communicated the change in strategy to 50,000 of its employees and then formally launched it to

A commodity is a product so basic that it cannot be physi- cally differentiated from competitors in the minds of consum- ers. Over the years, a number of products that at one time were seen as essentially commodities have become highly dif- ferentiated as strong brands have emerged in the category. Some notable examples are coffee (Maxwell House), bath soap (Ivory), flour (Gold Medal), beer (Budweiser), salt (Morton), oat- meal (Quaker), pickles (Vlasic), bananas (Chiquita), chickens (Perdue), pineapples (Dole), and even water (Perrier).

These products became branded in various ways. The key success factor in each case, however, was that consumers be- came convinced that all the product offerings in the category were not the same and that meaningful differences existed. In some instances, such as with produce, marketers convinced consumers that a product was not a commodity and could ac- tually vary appreciably in quality. In these cases, the brand was seen as ensuring uniformly high quality in the product category on which consumers could depend. In other cases, like Perrier bottled mineral water, because product differences were virtu- ally nonexistent, brands have been created by image or other non-product-related considerations.

One of the best examples of branding a commodity in this fashion is diamonds. De Beers Group added the phrase

“A Diamond Is Forever” as the tagline in its ongoing ad cam- paign in 1948. The diamond supplier, which was founded in 1888 and sells about 60 percent of the world’s rough dia- monds, wanted to attach more emotion and symbolic meaning to the purchase of diamond jewelry. “A Diamond Is Forever” became one of the most recognized slogans in advertising and helped fuel a diamond jewelry industry that’s now worth nearly $25 billion per year in the United States alone.

After years of successful campaigns that helped generate buzz for the overall diamond industry, De Beers began to fo- cus on its proprietary brands. Its 2009 campaign highlighted its new Everlon line. Partly in reaction to the recession, De Beers’s marketing also began to focus on the long-term value and stay- ing power of diamonds; new campaigns included the slogans “Fewer Better Things” and “Here Today, Here Tomorrow.”

Sources: Theodore Levitt, “Marketing Success Through Differentiation— of Anything,” Harvard Business Review (January–February 1980): 83–91; Sandra O’Loughlin, “Sparkler on the Other Hand,” Brandweek, 19 April 2004; Blythe Yee, “Ads Remind Women They Have Two Hands,” Wall Street Journal, 14 August 2003; Lauren Weber, “De Beers to Open First U.S. Retail Store,” Newsday, 22 June 2005; “De Beers Will Double Ad Spending,” MediaPost, 17 November 2008.

BRANDING BRIEF 1-2

Branding Commodities

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 39

targeted businesses, communicating to C level employees, business line managers, sourcing executives, and IT staff members. The Infosys “think flat” campaign proposed that Infosys could enable clients to shift from:

• Managing information to making money from it; • Achieving customer satisfaction to creating customer loyalty; • Withstanding turbulence to getting ahead during industry cycles; and • Growing passively to driving growth by becoming global producers.

Infosys’s sales rose from $2 billion to $3 billion in just 12 months. Infosys became the first Indian company to be added to a major global index when it joined the NASDAQ-100 in December 2006.

Infosys announced its March 2013 revenue forecast at approximately $7.5 billion. It continues to evolve the brand to appeal to more businesses as a reliable and effective partner.20

High-tech Products. Many technology companies have struggled with branding. Managed by technologists, these firms often lack any kind of brand strategy and sometimes see branding as simply naming their products. In many of their markets, however, financial success is no lon- ger driven by product innovation alone, or by the latest and greatest product specifications and features. Marketing skills are playing an increasingly important role in the adoption and success of high-tech products.

CREATIVE TECHNOLOGY

Famous for its Sound Blaster series of PC soundcards that became the gold standard for Windows-based multimedia PCs in the 1990s, Creative Technology and its subsidiary ZiiLABS announced the launch of the Creative HanZpad tablet computer in February 2012.

What sets Creative apart from other tablet manufacturers is that the HanZpad has Chinese language content developed specifically for it, including textbooks for mathematics, science, and other subjects. Sim Wong Hoo, CEO of Creative Technology believes that it is this that will give them the competitive advan- tage over competitors such as Apple that do not have Chinese content.

For a start, Creative is targeting China’s vast education market. Instead of going it alone, it has formed the HanZpad Alliance, a collaborative network of more than 20 Chinese and Taiwanese companies that manufacture, market, and distribute the new product. This alliance allows Creative to tap into its partners’ local knowledge and competencies to provide fully integrated solutions and supply chain management for the design, development, and marketing of tablet computers based on the HanZpad platform. To create awareness and establish its presence in the education segment, Creative is also working with a number of Chinese schools in a Creative-led e-learning pilot project with HanZpad tablets. CEO Sim’s dream is that every single Chinese student will be able to use a HanZpad for his or her education.21

Creative Technologies aims to tap into the Chinese market by creating Chinese language content for their tablet - HanZpad.

Source: Mihai Simonia/Fotolia.com

40 PART I • OPENING PERSPECTIVES

Because business-to-business purchase decisions are com- plex and often high risk, branding plays an important role in B2B markets. Six specific guidelines—developed in greater detail in later chapters—can be defined for marketers of B2B brands.

1. 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; personal selling is often the profit driver of a business-to-business organization. The sales force must be properly aligned so that the department can more effectively leverage and reinforce the brand promise. If branding is done right, the sales force can en- sure that target customers recognize the brand’s benefits sufficiently to pay a price commensurate with the brand’s potential value.

2. Adopt a corporate branding strategy if possible and create a well-defined 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 (such as Hewlett-Packard, ABB, or BASF). Ideally, they will also create straightfor- ward sub-brands that combine the corporate brand name with descriptive product modifiers, such as with EMC or GE. If a company has a distinctive line of business, how- ever, a more clearly differentiated sub-brand may need to be developed, like Praxair’s Medipure brand of medi- cal oxygen, DuPont’s Teflon coating, and Intel’s Centrino mobile technology.

3. Frame value perceptions. Given the highly competitive nature of business-to-business markets, marketers must ensure that customers fully appreciate how their offerings are different. 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 mak- ing sure customers realize all the benefits or cost savings offered by the brand, or becoming more active in shaping how customers view the economics of purchasing, own- ing, using and disposing of the brand in a different 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.

4. Link relevant non-product-related brand associations. In a business-to-business setting, a brand may be differen- tiated on the basis of factors beyond product performance, such as having superior customer service or well-respected

customers or clients. Other relevant brand imagery might relate to the size or type of firm. For example, Microsoft and Oracle might be seen as “aggressive” companies, whereas 3M and Apple might be seen as “innovative.” Im- agery may also be a function of the other organizations to which the firm sells. For example, customers may believe that a company with many customers is established and a market leader.

5. Find relevant emotional associations for the brand. B2B marketers too often overlook the power of emo- tions in their branding. 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. That is, reducing risk to improve customers’ sense of security can be a powerful driver of many decisions and thus an important source of brand equity; being seen as someone who works with other top firms may inspire peer approval and personal recog- nition within the organization; and, beyond respect and admiration from others, a business decision-maker may just feel more satisfied by working with top organiza- tions and brands.

6. Segment customers carefully both within and across companies. Finally, in a business-to-business setting, dif- ferent customer segments may exist both within and across organizations. Within organizations, different people may assume the various roles in the purchase decision process: Initiator, user, influencer, decider, approver, buyer and gate- keeper. Across organizations, businesses can vary according to industry and company size, technologies used and other capabilities, purchasing policies, and even risk and loyalty profiles. Brand building must take these different segmen- tation perspectives in mind in building tailored marketing programs.

Sources: James C. Anderson and James A. Narus, Business Mar- ket Management: Understanding, Creating, and Delivering Value, 3rd ed. (Upper Saddle River, NJ: Prentice Hall, 2009); Kevin Lane Keller and Frederick E. Webster, Jr., “A Roadmap for Branding in Industrial Markets,” Journal of Brand Management, 11 (May 2004): 388–40; Philip Kotler and Waldemar Pfoertsch, B2B Brand Management (Berlin- Heidelberg, Germany: Springer, 2006); Kevin Lane Keller, “Building a Strong Business-to-Business Brand,” in Business-to-Business Brand Management: Theory, Research, and Executive Case Study Exercises, in Advances in Business Market- ing & Purchasing series, Volume 15, ed. Arch Woodside (Bingley, UK: Emerald Group Publishing Limited, 2009), 11-31; Kevin Lane Keller and Philip Kotler, “Branding in Business-to-Business Firms,” in Business to Business Marketing Handbook, eds. Gary L. Lilien and Rajdeep Grewal (Northampton, MA: Edward Elgar Publishing, 2012).

THE SCIENCE OF BRANDING 1-1

Understanding Business-to-Business Branding

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 41

The speed and brevity of technology product life cycles create unique branding challenges. Trust is critical, and customers often buy into companies as much as products. Marketing bud- gets may be small, although high-tech firms’ adoption of classic consumer marketing techniques has increased expenditures on marketing communications. The Science of Branding 1-2 pro- vides a set of guidelines for marketing managers at high-tech companies.

Marketers operating in technologically intensive markets face a number of unique challenges. Here are 10 guidelines that managers for high-tech companies can use to improve their company’s brand strategy.

1. 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. As the market failure of the Sony Betamax illustrates, the company with the best technology does not always win.

2. Understand your brand hierarchy and manage it ap- propriately over time. A strong corporate brand is vital in the technology industry to provide stability and help establish a presence on Wall Street. Since product innova- tions provide the growth drivers for technology companies, however, brand equity is sometimes built in the product name to the detriment of corporate brand equity.

3. 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.

4. Realize that building brand equity and selling products are two different exercises. Too often, the emphasis on developing products leads to an overemphasis on branding them. When a company applies distinct brand names to too many products in rapid succession, the brand portfolio be- comes cluttered and consumers may lose perspective on the brand hierarchy. Rather than branding each new innovation separately, a better approach is to plan for future innovations by developing an extendable branding strategy.

5. Brands are owned by customers, not engineers. In many high-tech firms, CEOs work their way up the lad- der through the engineering divisions. Although engineers have an intimate knowledge of products and technology, they may lack the big-picture brand view. Compounding this problem is the fact that technology companies typically spend less on consumer research compared with other types of companies. As a result of these factors, tech com- panies often do not invest in building strong brands.

6. 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, es- pecially compared with other industries. Some notable high-tech CEOs with prominent public personas include Oracle’s Larry Ellison, Cisco’s John Chambers, Dell’s Michael Dell, and (until 2011), Apple’s Steve Jobs. In each case, the CEO’s identity and persona are inextricably woven into the fabric of the brand.

7. Brand building on a small budget necessitates lever- aging every possible positive association. Technology companies typically prioritize their marketing mix as fol- lows (in order from most important to least important): industry analyst relations, public relations, trade shows, seminars, direct mail, and advertising. Often, direct mail and advertising are discretionary items in a company’s marketing budget and may in fact receive no outlay.

8. Technology categories are created by customers and external forces, not by companies themselves. In their quest for product differentiation, new technology compa- nies have a tendency to reinvent the wheel and claim they have created a new category. Yet 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.

9. The rapidly changing environment demands that you stay in tune with your internal and external environ- ment. The rapid pace of innovation in the technology sector dictates that marketers closely observe the market condi- tions in which their brands do business. Trends in brand strategy change almost as rapidly as the technology.

10. Invest the time to understand the technology and value proposition and do not be afraid to ask ques- tions. It is important for technology marketers to ask ques- tions in order to educate themselves and build credibility with the company’s engineering corps and with customers. To build trust among engineers and customers, marketers must strive to learn as much as they can about the technology.

Sources: Patrick Tickle, Kevin Lane Keller, and Keith Richey, “Brand- ing in High-Technology Markets,” Market Leader 22 (Autumn 2003): 21–26; Jakki Mohr, Sanjit Sengupta, and Stanley Slater, Marketing of High-Technology Products and Innovations, 3rd ed. (Upper Sad- dle River, NJ: Pearson Prentice Hall, 2010); Eloise Coupey, Digital Business: Concepts and Strategies, 2nd ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2005).

THE SCIENCE OF BRANDING 1-2

Understanding High-Tech Branding

42 PART I • OPENING PERSPECTIVES

Services Although strong service brands like American Express, British Airways, Ritz-Carlton, Merrill Lynch, and Federal Express have existed for years, the pervasiveness of service branding and its sophistication have accelerated in the past decade.

Role of Branding with Services. One of the challenges in marketing services is that they are less tangible than products and more likely to vary in quality, depending on the particular person or people providing them. For that reason, branding can be particularly important to service firms as a way to address intangibility and variability problems. Brand symbols may also be es- pecially important, because they help make the abstract nature of services more concrete. Brands can help identify and provide meaning to the different services provided by a firm. For example, branding has become especially important in financial services to help organize and label the myriad new offerings in a manner that consumers can understand.

Branding a service can also be an effective way to signal to consumers that the firm has designed a particular service offering that is special and deserving of its name. For example, British Airways not only brands its premium business class service as “Club World”; it also brands its regular coach service as “World Traveler,” a clever way to communicate to the air- line’s regular passengers that they are also special in some way and that their patronage is not taken for granted. Branding has clearly become a competitive weapon for services.

Professional Services. Professional services firm such as Accenture (consulting), Goldman Sachs (investment banking), Ernst & Young (accounting), and Baker Botts (law) offer specialized expertise and support to other businesses and organizations. Professional services branding is an interesting combination of B2B branding and traditional consumer services branding.

Corporate credibility is key in terms of expertise, trustworthiness, and likability. Variability is more of an issue with professional services because it is harder to standardize the services of a consulting firm than those of a typical consumer services firm (like Mayflower movers or Orkin pest control). Long-term relationships are crucial too; losing one customer can be disastrous if it is a big enough account.

One big difference in professional services is that individual employees have a lot more of their own equity in the firm and are often brands in their own right! The challenge is there- fore to ensure that their words and actions help build the corporate brand and not just their

For a service firm like Mayflower, dependable, high-quality service is critical. Source: Mayflower Transit, LLC

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 43

own. Ensuring that the organization retain at least some of the equity that employees (especially senior ones) build is thus crucial in case any of them leave.

Referrals and testimonials can be powerful when the services offered are highly intangible and subjective. Emotions also play a big role in terms of sense of security and social approval. Switching costs can be significant and pose barriers to entry for competitors, but clients do have the opportunity to bargain and will often do so to acquire more customized solutions.

Retailers and Distributors To retailers and other channel members distributing products, brands provide a number of im- portant functions. Brands can generate consumer interest, patronage, and loyalty in a store, as consumers learn to expect certain brands and products. To the extent “you are what you sell,” brands help retailers create an image and establish positioning. Retailers can also create their own brand image by attaching unique associations to the quality of their service, their product assortment and merchandising, and their pricing and credit policy. Finally, the appeal and at- traction of brands, whether manufacturers’ brands or the retailers’ own brands, can yield higher price margins, increased sales volumes, and greater profits.

Retailers can introduce their own brands by using their store name, creating new names, or some combination of the two. Many distributors, especially in Europe, have actually introduced their own brands, which they sell in addition to—or sometimes even instead of—manufacturers’ brands. Products bearing these store brands or private label brands offer another way for retailers to increase customer loyalty and generate higher margins and profits.

By mid-July 2009, private labels accounted for 17 percent of grocery purchases in food, drug, and mass merchandisers in North America.22 In Britain, five or six grocery chains selling their own brands account for roughly half the country’s food and packaged-goods sales, led by Sainsbury and Tesco. Another top British retailer, Marks & Spencer, sells only its own-brand goods, under the label of St. Michael. Several U.S. retailers also emphasize their own brands. (Chapter 5 considers store brands and private labels in greater detail.)

The Internet has transformed retailing in recent years as retailers have adopted a “bricks and clicks” approach to their business or, in many cases, become pure-play online retailers, operating only on the Web. Regardless of the exact form, to be competitive online, many retailers have had to improve their online service by making customer service agents avail- able in real time, shipping products promptly, providing tracking updates, and adopting liberal return policies.

Online Products and Services Some of the strongest brands in recent years have been born online. Google, Facebook, and Twitter are three notable examples. That wasn’t always the case. At the onset of the Internet, many online marketers made serious—and sometimes fatal—mistakes. Some oversimplified the branding process, equating flashy or unusual advertising with building a brand. Although such marketing efforts sometimes caught consumers’ attention, more often than not they failed to create awareness of what products or services the brand represented, why those products or services were unique or different, and most important, why consumers should visit their Web site.

Online marketers now realize the realities of brand building. First, as for any brand, it is critical to create unique aspects of the brand on some dimension that is important to consumers, such as convenience, price, or variety. At the same time, the brand needs to perform satisfac- torily in other areas, such as customer service, credibility, and personality. For instance, cus- tomers increasingly began to demand higher levels of service both during and after their Web site visits.

Successful online brands have been well positioned and have found unique ways to satisfy consumers’ unmet needs. By offering unique features and services to consumers, the best online brands are able to avoid extensive advertising or lavish marketing campaigns, relying more on word-of-mouth and publicity.

• Hulu enables consumers to watch videos of their past and present favorite TV programs at their own convenience.

44 PART I • OPENING PERSPECTIVES

• Pandora allows customers to customize online radio stations with bands and genres they enjoy, while learning about other music they might also like.

• Online encyclopedia Wikipedia provides consumers with extensive, constantly updated, user-generated information about practically everything.

Google is perhaps the classic example of how to build a successful online brand.

GOOGLE

Founded in 1998 by two Stanford University Ph.D. students, Google takes its name from a play on the word googol—the number 1 followed by 100 zeroes—a reference to the huge amount of data online. Google’s stated mission is “To organize the world’s information and make it universally accessible and useful.” The company has become the market leader in the search engine industry through its business focus and constant innovation. Its home page focuses on searches but also allows users to employ many other Google services. By focusing on plain text, avoiding pop-up ads, and using sophisticated search algo- rithms, Google provides fast and reliable service. Google’s revenue traditionally was driven by search ads, text-based boxes that advertisers pay for only when users click on them. Increasingly, Google is seeking additional sources of revenue from new services and acquisitions.23

Online brands also learned the importance of off-line activities to draw customers to Web sites. Home page Web addresses, or URLs, began to appear on all collateral and marketing mate- rial. Partnerships became critical as online brands developed networks of online partners and links. They also began to target specific customer groups—often geographically widely dispersed—for which the brand could offer unique value propositions. As we will describe more in Chapter 6, Web site designs have finally begun to maximize the benefits of interactivity, customization, and timeliness and the advantages of being able to inform, persuade, and sell all at the same time.

Google’s classic application of branding principles has helped to make it an industry powerhouse. Source: TassPhotos/Newscom

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 45

People and Organizations When the product category is people or organizations, the naming aspect of branding, at least, is generally straightforward. These often have well-defined images that are easily understood and liked (or disliked) by others. That’s particularly true for public figures such as politicians, entertainers, and professional athletes. All these compete in some sense for public approval and acceptance, and all benefit from conveying a strong and desirable image.

NIGELLA LAWSON

Nigella Lawson is not a typical celebrity chef. She has no formal training, has never operated a restau- rant, and is self-admittedly lazy. In fact, her first cookbook opens with the warning that she isn’t a chef, she has never been trained as one, and her only license comes from a love of eating. Yet Lawson has been able to transform characteristics otherwise regarded as limitations into a brand spanning a series of award-winning books, a string of popular BBC television series, a cookware line, and even an iPhone app. Lawson’s connection with consumers stems from sharing their frustrations and anxieties about cooking. A former food critic, Lawson was inspired to write her first book when she witnessed the host of a dinner party bursting into tears over a spoiled crème caramel. Instead of challenging her fans to create ever more complicated recipes, Lawson strives to offer pragmatic but tasty recipes that reduce rather than add stress. Whether deliberate or not, her perceived sense of empathy with the common cook has earned her a loyal following.24

That’s not to say that only the well-known or famous can be thought of as a brand. Certainly, one key for a successful career in almost any area is that co-workers, superiors, or even important people outside your company or organization know who you are and rec- ognize your skills, talents, attitude, and so forth. By building up a name and reputation in a business context, you are essentially creating your own brand.25 The right awareness and im- age can be invaluable in shaping the way people treat you and interpret your words, actions, and deeds.26

Similarly, organizations often take on meanings through their programs, activities, and products. Nonprofit organizations such as the Sierra Club, the American Red Cross, and Amnesty International have increasingly emphasized marketing. The children’s advocate non- profit UNICEF has initiated a number of marketing activities and programs through the years.

Nigella Lawson connects with consumers by empathizing with the common cook. Her books offer simple but tasty recipes that reduce stress rather than add to it. Source: AlamyCelebrity/Alamy

46 PART I • OPENING PERSPECTIVES

UNICEF

UNICEF launched its “Tap Project” campaign in 2007, which asked diners to pay $1 for a glass of New York City tap water in restaurants, with the funds going to support the organization’s clean water pro- grams. That was the first time UNICEF had run a consumer campaign in over 50 years. The UNICEF logo was featured on the Barcelona soccer team’s jersey from 2006 to 2011 under an arrangement in which the team donated $2 million annually to the organization. UNICEF launched another consumer campaign in the UK in February 2010. This five-year “Put it Right” campaign features celebrity ambassadors for the organization and aims to protect the rights of children. One of UNICEF’s most successful corporate rela- tionships has been with IKEA. The partnership, which also emphasizes children’s rights, was established in 2000 and encompasses direct donations from IKEA and an annual toy campaign, the sales from which directly benefit UNICEF programs.27

Sports, Arts, and Entertainment A special case of marketing people and organizations as brands exists in the sports, arts, and entertainment industries. Sports marketing has become highly sophisticated in recent years, em- ploying traditional packaged-goods techniques. No longer content to allow win–loss records to dictate attendance levels and financial fortunes, many sports teams are marketing themselves through a creative combination of advertising, promotions, sponsorship, direct mail, digital, and other forms of communication. By building awareness, image, and loyalty, these sports franchises are able to meet ticket sales targets regardless of what their team’s actual performance might turn out to be. Brand symbols and logos in particular have become an important financial contributor to professional sports through licensing agreements.

Branding plays an especially valuable function in the arts and entertainment industries that bring us movies, television, music, and books. These offerings are good examples of experience goods: prospective buyers cannot judge quality by inspection and must use cues such as the particular people involved, the concept or rationale behind the project, and word-of-mouth and critical reviews.

Think of a movie as a product whose “ingredients” are the plot, actors, and director.28 Certain movie franchises such as Spider Man, James Bond, and Twilight have established themselves as strong brands by combining all these ingredients into a formula that appeals to consumers and allows the studios to release sequels (essentially brand extensions) that rely on the title’s initial popularity. For years, some of the most valuable movie franchises have featured recurring characters or ongoing stories, and many successful recent films have

Nonprofit organizations like UNICEF need strong brands and modern marketing practices to help them fundraise and satisfy their organizational goals and mission. Source: Picture Contact BV/Alamy

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 47

been sequels. Their success is due to the fact that moviegoers know from the title and the actors, producers, directors, and other contributors that they can expect a certain experience— a classic application of branding.

HARRY POTTER

With its ability to transcend its original format—books—the Harry Potter film series has been likened to the Star Wars franchise. All seven of the popular novels have been turned into blockbuster movies, gener- ating over $7.7 billion worldwide by the end of 2011. In the first year it launched Harry Potter toys, Mattel saw $160 million in sales. And in 2010, Universal Studios opened a Florida theme park based on the Harry Potter stories. The Harry Potter empire has been praised for its attention to core marketing techniques—a good product, emotional involvement of its consumers, word-of-mouth promotion, “tease” marketing, and brand consistency. Several estimates have pegged the Harry Potter brand to be worth $15 billion, which, beyond the movies and the books, included more than $1 billion in DVD sales, nearly $12 million in licensing, and $13 million in music sales related to the films.29

A strong brand is valuable in the entertainment industry because of the fervent feelings that names generate as a result of pleasurable past experiences. A new album release from Neil Finn would probably not cause much of a ripple in the marketplace, even if it were marketed as com- ing from a founding member of the band Crowded House. If it were to actually be released and marketed under the Crowded House name, however, greater media attention and higher sales would be virtually guaranteed.

Few brands have generated as much worldwide consumer loyalty—and profits—as Harry Potter. Source: WARNER BROS. PICTURES/Album/Newscom

48 PART I • OPENING PERSPECTIVES

Geographic Locations Increased mobility of both people and businesses and growth in the tourism industry have con- tributed to the rise of place marketing. Cities, states, regions, and countries are now actively promoted through advertising, direct mail, and other communication tools. These campaigns aim to create awareness and a favorable image of a location that will entice temporary visits or permanent moves from individuals and businesses alike. Although the brand name is usually preordained by the name of the location, there are a number of different considerations in build- ing a place brand, some of which are considered in Branding Brief 1-3.

Ideas and Causes Finally, numerous ideas and causes have been branded, especially by nonprofit organiza- tions. They may be captured in a phrase or slogan and even be represented by a symbol, such as AIDS ribbons. By making ideas and causes more visible and concrete, branding can provide much value. As Chapter 11 describes, cause marketing increasingly relies on sophisticated marketing practices to inform or persuade consumers about the issues sur- rounding a cause.

WHAT ARE THE STRONGEST BRANDS? It’s clear from these examples that virtually anything can be and has been branded. Which brands are the strongest, that is, the best known or most highly regarded? Figure 1-5 reveals Interbrand’s ranking of the world’s 25 most valuable brands in 2011 based on its brand valuation methodology (see Chapter 10), as published in its annual “Best Global Brands” report.30

We can easily find some of the best-known brands by simply walking down a supermarket aisle. It’s also easy to identify a number of other brands with amazing staying power that have been market leaders in their categories for decades. According to research by marketing con- sultant Jack Trout, in 25 popular product categories, 20 of the leading brands in 1923 were still leading brands over 80 years later—only five have lost their leadership position.31

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 relo- cation. Some notable early examples of place branding include “Virginia Is for Lovers” and “Shrimp on the Barbie” (Australia). Now virtually every physical location, area, or region considers place branding. More recent examples include Santa Rosa’s new slogan “Place of Plenty” and the “Cleveland Plus” cam- paign. The San Diego Convention and Visitors Bureau ran an integrated campaign, titled “Happy Happens,” in 2009.

Las Vegas ran its hugely successful “What Happens Here, Stays Here” campaign beginning in 2003. The ads were meant to sell Las Vegas as an experience. In 2008, the city took a differ- ent route, selling Vegas differently and in more practical terms in light of the economy. The “What Happens Here” ads returned in 2009, however, when marketing research showed that consum- ers missed them. In 2010, the Las Vegas Convention and Visi- tors Authority had an $86 million advertising campaign budget, larger than the city’s top competitors’ budgets combined.

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. Some other tourist slogans include “No Artificial Ingredients” for Costa Rica and “Mother Nature’s Best-Kept Secret” for Be- lize. Future Brand, a brand consultancy and research company, ranks countries on the strengths of their respective brands. In 2010, it deemed the top five country brands to be Canada, Australia, New Zealand, the United States, and Switzerland.

Sources: Roger Yu, “Cities Use Destination Branding to Lure Tour- ists,” USA Today, 12 February 2010; Yana Polikarpov, “Visitors Bureau Lures Tourists to ‘Happy’ San Diego,” Brandweek, 23 April 2009; Liz Benston, “Will Vegas Advertising That Worked Before, Work Again?,” Las Vegas Sun, 27 September 2009; Sean O’Neill, “Careful with Those Tourist Slogans,” Budget Travel, 24 September 2009; John Cook, “Packaging a Nation,” Travel + Leisure, January 2007.

BRANDING BRIEF 1-3

Place Branding

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 49

Similarly, many brands that were number one in the United Kingdom in 1933 remain strong today: Hovis bread, Stork margarine, Kellogg’s Corn Flakes, Cadbury’s chocolates, Gillette ra- zors, Schweppes mixers, Brooke Bond tea, Colgate toothpaste, and Hoover vacuum cleaners. Many of these brands have evolved over the years, however, and made a number of changes. Most of them barely resemble their original forms.

At the same time, some seemingly invincible brands, including Levi-Strauss, General Motors, Montgomery Ward, Polaroid, and Xerox, have run into difficulties and seen their mar- ket preeminence challenged or even lost. Although some of these failures are related to factors beyond the control of the firm, such as technological advances or shifting consumer pref- erences, in other cases the blame could probably be placed on the action or inaction of the marketers behind the brands. Some failed to account for changing market conditions and continued to operate with a “business as usual” attitude or, perhaps even worse, rec- ognized that changes were necessary but reacted inadequately or inappropriately. The Science of Branding 1-3 provides some academic insights into factors affecting market leadership.

The bottom line is that any brand—no matter how strong at one point in time—is vulnerable and susceptible to poor brand management. The next section discusses why it is so difficult to

2011 Rank

2011 Brand Value

Brand 2010 Brand Value

2011–2010 Percent Change

Country of Ownership

1 71,861 70,452

2 69,905 64,727

3 59,087 60,895

4 55,317 43,557

5 42,808 42,808

6 35,593 33,578

7 35,217 32,015

8 33,492 21,143

9 29,018 28,731

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Coca-Cola

IBM

Microsoft

Google

GE

McDonald's

Intel

Apple

Disney

Hewlett-Packard 28,479 26,867

27,764 26,192

27,445 25,179

25,309 23,219

25,071 29,495

24,554 22,322

23,997 23,298

23,430 19,491

23,172 21,860

19,431 18,506

Toyota

Mercedes-Benz

Cisco

Nokia

BMW

Gillette

Samsung

Louis Vuitton

Honda

Oracle 17,262 14,881

16,459 16,136

14,590 14,061

14,572 13,944

14,542 12,756

H&M

Pepsi

American Express

SAP

Nike

United States

United States

United States

United States

United States

United States

United States

United States

United States

United States

Japan

Germany

United States

Finland

Germany

United States

South Korea

France

Japan

United States

Sweden

United States

United States

Germany

United States14,528 13,706

2%

8%

23%

27%

0%

6%

10%

58%

1%

6%

6%

9%

9%

215%

10%

3%

20%

6%

5%

16%

2%

4%

5%

14%

6%

FIGURE 1-5 Twenty-Five Most Valuable Global Brands

Sources: Based on Interbrand. “The 100 Most Valuable Global Brands 2011,” pp. 17–43. Interbrand. “Best Global Brands 2010,” p. 14.

50 PART I • OPENING PERSPECTIVES

The extent of the enduring nature of market leader- ship has been the source of much debate. According to a study by Dartmouth’s Tuck School of Business Profes- sor Peter Golder, leading brands are more likely to lose their

leadership position over time than retain it. Golder evalu- ated more than 650 products in 100 categories and compared the category leaders from 1923 with the cat- egory leaders in 1997 (see Figure 1-6). His study found that

THE SCIENCE OF BRANDING 1-3

Understanding Market Leadership

FIGURE 1-6 Brands Then and Now

Source: Reprinted with permission from Journal of Marketing Research, published by the American Marketing Association, May 2000, pp. 156–172.

Category 1923 Leaders 1997 Leaders

Cleansers Old Dutch Comet Soft Scrub Ajax

Chewing gum Wrigley Wrigley’s Adams Bubble Yum Bubblicious

Motorcycles Indian Harley-Davidson Harley-Davidson Honda Kawasaki

Five cent Life Savers Breath-Savers mint candies Tic Tac Certs

Peanut butter Beech-Nut Jif Heinz Skippy Peter Pan

Razors Gillette Gillette Gem Bic Ever ready Schick

Soft drinks Coca-Cola Coca-Cola Cliquot Club Pepsi Bevo Dr. Pepper/Cadbury

Coffee Arbuckle’s Yuban Folger’s White House Maxwell House Hotel Astor Hills Bros.

Laundry soap Fels Naptha Tide Octagon Cheer Kirkman Wisk

Cigarettes Camel Marlboro Fatima Winston Pall Mall Newport

Shoes Douglas Nike Walkover Reebok

Candy Huyler’s Hershey Loft M&M/Mars Page & Shaw Nestlé

Jelly or jam Heinz Smucker’s Welch’s Kraft

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 51

only 23 of the top brands in the 100 cat- egories remained market leaders in 1997, and 28 percent of the leading brands had failed by 1997. The clothing and fash- ion category experienced the greatest percentage of failures (67 percent) and had no brands that remained leaders in 1997. Leaders in the food and beverage category fared better, with 39 percent of brands maintaining leadership while only 21 percent failed.

One 1923 leader that did not main- tain leadership was Underwood typewrit- ers. Underwood’s primary mistake was lack of innovation. Rather than invest in research and development, Under- wood followed a harvesting strategy that sought the highest margin possible for its products. By 1950, several competitors had already invested in computer tech- nology, whereas Underwood acquired a small computer firm only in 1952. Sub- sequent developments in the market further damaged Underwood’s position. Between 1956 and 1961, lower-priced foreign competitors more than doubled their share of manual typewriter sales. Sales of electric typewrit- ers, which Underwood did not make, overtook sales of manual typewriters in the early 1960s. Olivetti acquired Underwood in the mid-1960s, and the brand name was dropped in the 1980s.

Golder uses Wrigley, which has dominated the chewing gum market for nine decades, as an example of a long-term leader. According to Golder, Wrigley’s success 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.” Wrigley has consistently marketed its brand with high- profile sponsorship and advertising. It also used subsidiaries to extend into new product categories like sugarless gum and bubblegum, so as not to dilute the brand. Wrigley’s sole focus on chewing gum enables the company to achieve maximum re- sults in what is considered a mature category. During the 1990s, sales of Wrigley’s products grew almost 10 percent annually. Finally, the chewing gum market is historically stable and un- complicated. Still, Wrigley’s makes considerable investments in product and packaging improvement to maintain its edge.

Golder and his co-author Gerard Tellis argue that dedication to the brand is vital for sustained brand leadership, elucidat- ing five factors for enduring market leadership (see Figure 1-7). They comment:

The real causes of enduring market leadership are vision and will. Enduring market leaders have a revolutionary and inspiring vision of the mass market, and they exhibit an in- domitable will to realize that vision. They persist under ad- versity, innovate relentlessly, commit financial resources and leverage assets to realize their vision.

Follow-up research by Golder and his colleagues of brand leaders in 126 categories over a span from 1921 to 2005 found the following:

• Leading brands are more likely to persist during economic slowdowns and when inflation is high, and less likely to per- sist during economic expansion and when inflation is low.

• Half the leading brands in the sample lost their leadership over periods ranging from 12 to 39 years.

• The rate of brand leadership persistence has been substan- tially lower in recent eras than in earlier eras.

• Once brand leadership is lost, it is rarely regained.

• Category types with above-average rates of brand leader- ship persistence are food and household supplies; category types with below-average rates of brand leadership persis- tence are durables and clothing.

Sources: Peter N. Golder, Julie R. Irwin, Debanjan Mitra, “Will You Still Try Me, Will You Still Buy Me, When I’m 64? How Economic Conditions Affect Long-Term Brand Leadership Persistence,” work- ing paper, Tuck School of Business at Dartmouth College, 2011; Peter N. Golder, “Historical Method in Marketing Research with New Evidence on Long-Term Market Share Stability,” Journal of Marketing Research, 37 (May 2000): 156–172; Peter N. Golder and Gerard J. Tellis, “Growing, Growing, Gone: Cascades, Diffusion, and Turning Points in the Product Life Cycle,” Marketing Science, 23 (Spring 2004): 207–218; Laurie Freeman, “Study: Leading Brands Aren’t Always Enduring,” Advertising Age, 28 February 2000; Gerald J. Tellis and Peter N. Golder, “First to Market, First to Fail? Real Causes of Enduring Market Leadership,” MIT Sloan Management Review, 1 January 1996.

By failing to innovate beyond manual typewriters, Underwood was left behind when consumers moved on to electric typewriters. Source: Peter Carroll/Alamy

52 PART I • OPENING PERSPECTIVES

manage brands in today’s environment. Figure 1-8 displays an analysis of fast-growing “break- away brands” by leading marketing consultant firm Landor. Brand Focus 1.0 at the end of the chapter describes some of the historical origins of branding and brand management.

BRANDING CHALLENGES AND OPPORTUNITIES Although brands may be as important as ever to consumers, in reality brand management may be more difficult than ever. Let’s look at some recent developments that have significantly com- plicated marketing practices and pose challenges for brand managers (see Figure 1-9).32

Savvy Customers Increasingly, consumers and businesses have become more experienced with marketing, more knowledgeable about how it works, and more demanding. A well-developed media market pays increased attention to companies’ marketing actions and motivations. Consumer information and support exists in the form of consumer guides (Consumer Reports), Web sites (Epinions .com), influential blogs, and so on.

Tellis and Golder identify the following five factors and rationale as the keys to enduring brand 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. Although Pampers was not the market leader in the disposable diaper category during its first several years, it spent significantly on research and development in order to design an affordable and effective disposable diaper. Pampers quickly became the market leader.

Managerial Persistence The “breakthrough” technology that can drive market leadership often requires the commitment of company resources over long periods of time. For example, JVC spent 21 years researching the VHS video recorder before launching it in 1976 and becoming a market leader.

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 profitability rather than long-term leadership, as Rheingold Brewery did when it curtailed support of its Gablinger’s light beer a year after the 1967 introduction of the product, are unlikely to enjoy enduring leadership.

Relentless Innovation Due to changes in consumer tastes and competition from other firms, companies that wish to maintain leadership positions must continually innovate. Gillette, both a long-term leader and historically an innovator, typically has at least 20 shaving products on the drawing board at any given time.

Asset Leverage Companies can become leaders in some categories if they hold a leadership position in a related category. For instance, Coca-Cola leveraged its success and experience with cola (Coke) and diet cola (Tab) to introduce Diet Coke in 1982. Within one year of its introduction, Diet Coke became the market leader.

FIGURE 1-7 Factors Determining Enduring Leadership Source: Gerard J. Tellis and Peter N. Golder, “First to Market, First to Fail? Real Causes of Enduring Market Leadership,” MIT Sloan Management Review, 1 January 1996. Used by permission of the publisher. Copyright © 2007 by Massachusetts Institute of Technology. All rights reserved.

THE SCIENCE OF BRANDING 1-3 (continued)

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 53

Savvy customers More complex brand families and portfolios Maturing markets More sophisticated and increasing competition Difficulty in differentiating Decreasing brand loyalty in many categories Growth of private labels Increasing trade power Fragmenting media coverage Eroding traditional media effectiveness Emerging new communication options Increasing promotional expenditures Decreasing advertising expenditures Increasing cost of product introduction and support Short-term performance orientation Increasing job turnover Pronounced economic cycles

FIGURE 1-9 Challenges to Brand Builders

Facebook

Skype

YouTube

Netflix

Samsung

Apple

iTunes

Amazon.com

Reese’s

National Guard

195%

79%

78%

72%

66%

51%

50%

44%

42%

35%

Brand Growth in Brand

Strength 2007–2010

FIGURE 1-8 Landor Breakaway Brands (2011)

The Breakaway Brands survey, conducted by Landor Associates using Young & Rubicam’s BrandAsset Valuator database, identifies those brands that exhibited the greatest increases in Brand Strength from 2007–2010. Growth in brand strength indicates how much the brand’s raw strength score has risen over the past three years, expressed in percentage terms (www .landor.com).

Friends/peers

Fashion magazines

Ads

Company Web sites

Consumer Reviews

Celebrities

Parents/adults

Bloggers

81%

68%

58%

44%

36%

33%

25%

14%

FIGURE 1-10 Example of Multiple Consumer Information Sources (Percentage of teen girls, ages 13–18, who identify a source of information they typically use when trying to learn about the latest trends)

Source: Varsity Brands/ Ketchum Global Research Network, as cited in “Teen Girls as Avid Shoppers,” ADWEEK MEDIA, 15 November 2010.

One of the key challenges in today’s marketing environment is the vast number of sources of information consumers may consult. Figure 1-10 displays some of the ways teenage girls col- lect information. For these and other reasons, many believe that it is more difficult to persuade consumers with traditional communications than it used to be. An empowered consumer may play a more active role in a brand’s fortune, as has been the case with Converse.

54 PART I • OPENING PERSPECTIVES

CONVERSE

CMO Geoff Cottrill maintains that an important priority at Converse is “to shut up and listen.” With a small budget, marketing for the brand has focused on digital and social media. The Web site is chock full of consumer-generated content. On Facebook, the brand went from 6 to 9 million fans as consumers chose to take pictures of their shoes, draw on them, and post about them. Cottrill notes that although there are places where the company tells stories about its shoes—in stores and on the Web site—“for the most part we let the conversation go … it’s those creative people that are really pushing the brand.” The brand has also functioned as a curator of sorts for new music, art, and entertainment. Converse has built a studio called Rubber Tracks in New York City to support new, emerging bands by allowing them to record there for free.33

Economic Downturns A severe recession that commenced in 2008 threatened the fortunes of many brands. One research study of consumers at the end of 2009 found the following sobering facts:34

• 18 percent of consumers reported that they had bought lower-priced brands of consumer packaged goods in the past two years.

• 46 percent of the switchers to less expensive products said “they found better performance than they expected,” with the vast majority saying performance was actually much better than expected.

• 34 percent of the switchers said “they no longer preferred higher-priced products.”

As the economy appeared to move out of the recession, the question was whether attitudes and behaviors that did change would revert back to their pre-recession norms. Regardless, there will always be economic cycles and ups and downs, and The Science of Branding 1-4 offers some guidelines for marketing brands during economic downturns.

Brand Proliferation Another important change in the branding environment is the proliferation of new brands and products, in part spurred by the rise in line and brand extensions. As a result, a brand name may now be identified with a number of different products with varying degrees of similarity. Mar- keters of brands such as Coke, Nivea, Dove, and Virgin have added a host of new products under their brand umbrellas in recent years. There are few single (or “mono”) product brands around, which complicates the decisions that marketers have to make.

Converse has reinvigorated its brand by getting consumers actively involved in its marketing. Source: Kristoffer Tripplaar/Alamy

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 55

With so many brands engaged in expansion, channels of distribution have become clogged, and many brand battles are waged just to get products on the shelf. The average supermarket now holds 30,000 different brands, three times the number 30 years ago.35

Media Transformation Another important change in the marketing environment is the erosion or fragmentation of tradi- tional advertising media and the emergence of interactive and nontraditional media, promotion, and other communication alternatives. For several reasons related to media cost, clutter, and fragmentation—as outlined in Chapter 6—marketers have become disenchanted with traditional advertising media, especially network television.

Thus the percentage of the communication budget devoted to advertising has shrunk over the years. In its place, marketers are spending more on nontraditional forms of communication and on new and emerging forms of communication such as interactive digital media; sports and event sponsorship; in-store advertising; mini-billboards in transit vehicles, parking meters, and other locations; and product placement in movies.

Consider how the movie industry has dramatically changed its marketing communica- tions in recent years. Movie studios collectively spent $2.9 billion in 2011 to advertise their movies on television. Lions Gate spent just $50 million to market The Hunger Games and

Tough times present opportunities as well as challenges, as was the case with the most recent recession. Although many marketers face reduced funding and intense pressure to justify marketing programs as cost-effective, there are tactics that can help marketers survive—or even thrive—in a recession, both in the short run and over the long haul. Here are five guidelines to improve the odds for success during this time.

Explore the Upside of Actually Increasing Investment Does it pay to invest during a recession? Forty years of evidence from past recessions suggest that firms willing to capitalize on a marketing opportunity by investing during a recession have, on average, improved their fortunes compared with firms that chose to cut back.

Now, More Than Ever, Get Closer to Your Consumer In tough times, consumers may change what they want and can afford, where and how they shop, even what they want to see and hear from a firm. A downturn is an opportunity for marketers to learn even more about what consumers are think- ing, feeling, and doing, especially the loyal customer base that is the source of so much of a brand’s profitability. Any changes must be identified and characterized as temporary adjustments versus permanent shifts.

Rethink How You Spend Your Money Budget allocations can be sticky and not change enough to re- flect a fluid marketing environment. 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 elimi- nate sacred-cow approaches that no longer provide sufficient revenue benefits.

Put Forth the Most Compelling Value Proposition It’s a mistake in a recession to be overly focused on price re- ductions and discounts that can harm long-term brand equity and price integrity. Marketers should focus on increasing— and clearly communicating—the value their brands offer consumers, making sure consumers appreciate all the finan- cial, logistical, and psychological benefits compared with the competition.

Fine-Tune Your Brand and Product Offerings Marketers must make sure they have the right products to sell to the right consumers in the right places and times. They should carefully review their product portfolios and brand ar- chitecture to ensure that brands and sub-brands are clearly differentiated and targeted, and that optimal support is given to brands and sub-brands based on their prospects. Because certain brands or sub-brands appeal to different economic seg- ments, 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.

THE SCIENCE OF BRANDING 1-4

Marketing Brands in a Recession

56 PART I • OPENING PERSPECTIVES

generated $213 million in its opening weekend alone. Lions Gate used social media to get consumers engaged, with tight targeting, planning, and execution. The campaign hinged on fan-based communication.

The marketing campaign was an extension to the movie, rather than a marketing overlay. Games, chat room sessions, media downloads, podcasts, and other interactive links made consumers feel they were just reading up on a compelling movie. Even the casting announcement was done online.

THE HUNGER GAMES

Lions Gate successfully deployed social media to merge the movie brand with its consumers’ individual identities. The Hunger Games is set in a place called Panem, comprising 12 districts, run by The Capitol. Following an uprising 70 years earlier, the Capitol organizes the Hunger Games, in which one boy and one girl chosen from each District (aged 12 to 18 years) battle to the death, until one child is left standing and is rewarded with food and supplies for a lifetime.

Lions Gate built up interest in the plot using YouTube and Facebook. The trailer was released online and achieved 8 million views within 24 hours. During the launch week, Yahoo!Movies delivered over 8 million streams of the movie, with over 30 million page views. The Hunger Games achieved 3.6 million likes on Facebook, and 400,000 followers on Twitter.36

Increased Competition One reason marketers have been forced to use so many financial incentives or discounts is that the marketplace has become more competitive. Both demand-side and supply-side factors have contributed to the increase in competitive intensity. On the demand side, consumption for many products and services has flattened and hit the maturity stage, or even the decline stage, of the product life cycle. As a result, marketers can achieve sales growth for brands only by taking away competitors’ market share. On the supply side, new competitors have emerged due to a number of factors, such as the following:

• Globalization: Although firms have embraced globalization as a means to open new mar- kets and potential sources of revenue, it has also increased the number of competitors in existing markets, threatening current sources of revenue.

• Low-priced competitors: Market penetration by generics, private labels, and low-priced “clones” imitating product leaders has increased on a worldwide-basis. Retailers have gained power and often dictate what happens within the store. Their chief marketing weapon is price, and they have introduced and pushed their own brands and demanded greater com- pensation from trade promotions to stock and display national brands.

• Brand extensions: We’ve noted that many companies have taken their existing brands and launched products with the same name into new categories. Many of these brands provide formidable opposition to market leaders.

• Deregulation: Certain industries like telecommunications, financial services, health care, and transportation have become deregulated, leading to increased competition from outside traditionally defined product-market boundaries.

Increased Costs At the same time that competition is increasing, the cost of introducing a new product or sup- porting an existing product has increased rapidly, making it difficult to match the investment and level of support that brands were able to receive in previous years. In 2008, about 123,000 new consumer products were introduced in the United States, but with a failure rate estimated at over 90 percent. Given the millions of dollars spent on developing and marketing a new product, the total failure cost was conservatively estimated by one group to exceed billions of dollars.37

Greater Accountability Finally, marketers often find themselves responsible for meeting ambitious short-term profit tar- gets because of financial market pressures and senior management imperatives. Stock analysts value strong and consistent earnings reports as an indication of the long-term financial health of a firm. As a result, marketing managers may find themselves in the dilemma of having to make decisions with short-term benefits but long-term costs (such as cutting advertising expenditures). Moreover, many of these same managers have experienced rapid job turnover and promotions

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 57

and may not anticipate being in their current positions for very long. One study found that the average tenure of a CMO is about three and a half years, suggesting they have little time to make an impact.38 These different organizational pressures may encourage quick-fix solutions with perhaps adverse long-run consequences.

THE BRAND EQUITY CONCEPT Marketers clearly face a number of competitive challenges, and some critics feel the response of many has been ineffective or, worse, has further aggravated the problem. In the rest of this book, we’ll present theories, models, and frameworks that accommodate and reflect marketing’s new challenges in order to provide useful managerial guidelines and suggest promising new directions for future thought and research. We’ll introduce a “common denominator” or unified conceptual framework, based on the concept of brand equity, as a tool to interpret the potential effects of various brand strategies.

One of the most popular and potentially important marketing concepts to arise in the 1980s was brand equity. Its emergence, however, has meant both good news and bad news to marketers. The good news is that brand equity has elevated the importance of the brand in marketing strategy and provided focus for managerial interest and research activity. The bad news is that, confusingly, the concept has been defined a number of different ways for a num- ber of different purposes. No common viewpoint has emerged about how to conceptualize and measure brand equity.

Fundamentally, branding is all about endowing products and services with the power of brand equity. Despite the many different views, most observers agree that brand equity consists of the marketing effects uniquely attributable to a brand. That is, brand equity explains why different outcomes result from the marketing of a branded product or service than if it were not branded. That is the view we take in this book. As a stark example of the transformational power of branding, consider the auctions sales in Figure 1-11. Without such celebrity associations, it is doubtful that any of these items would cost more than a few hundred dollars at a flea market.39

Branding is all about creating differences. Most marketing observers also agree with the fol- lowing basic principles of branding and brand equity:

• Differences in outcomes arise from the “added value” endowed to a product as a result of past marketing activity for the brand.

• This value can be created for a brand in many different ways. • Brand equity provides a common denominator for interpreting marketing strategies and

assessing the value of a brand. • There are many different ways in which the value of a brand can be manifested or exploited

to benefit the firm (in terms of greater proceeds or lower costs or both).

Fundamentally, the brand equity concept reinforces how important the brand is in market- ing strategies. Chapters 2 and 3 in Part II of the book provide an overview of brand equity and a blueprint for the rest of the book. The remainder of the book addresses in much greater depth

• A glove Michael Jackson wore on tour sold for $330,000 in 2010.

• A ’29 Duesenberg Model J Dual Cowl Phaeton driven by Elvis Presley in the 1966 movie Spinout sold for $1.2 million in 2011.

• A dog collar owned by Charles Dickens sold for nearly $12,000 in 2009.

• The Supergirl costume made for the movie in 1984 sold for over $11,000 in a Christie's 2010 auction.

• A T-shirt worn by The Who's Keith Moon sold for $3,550 at another Christie's auction in 2010.

• A dress worn by Audrey Hepburn in Funny Face sold for $56,250, a sweater worn by Marilyn Monroe sold for $11,875, and a pair of earrings worn by Kate Winslet in Titanic fetched $25,000 at an auction in 2010.

FIGURE 1-11 Notable Recent Auction Sales

58 PART I • OPENING PERSPECTIVES

how to build brand equity (Chapters 4–7 in Part III), measure brand equity (Chapters 8–10 in Part IV), and manage brand equity (Chapters 11–14 in Part V). The concluding Chapter 15 in Part VI provides some additional applications and perspective.

The remainder of this chapter provides an overview of the strategic brand management process that helps pull all these various concepts together.

STRATEGIC BRAND MANAGEMENT PROCESS Strategic brand management involves the design and implementation of marketing programs and activities to build, measure, and manage brand equity. In this text, we define the strategic brand management process as having four main steps (see Figure 1-12):

1. Identifying and developing brand plans 2. Designing and implementing brand marketing programs 3. Measuring and interpreting brand performance 4. Growing and sustaining brand equity

Let’s briefly highlight each of these four steps.40

Identifying and Developing Brand Plans The strategic brand management process starts with a clear understanding of what the brand is to represent and how it should be positioned with respect to competitors.41 Brand planning, as described in Chapters 2 and 3, uses the following three interlocking models.

• The brand positioning model describes how to guide integrated marketing to maximize competitive advantages.

• The brand resonance model describes how to create intense, activity loyalty relationships with customers.

• The brand value chain is a means to trace the value creation process for brands, to better understand the financial impact of brand marketing expenditures and investments.

Designing and Implementing Brand Marketing Programs As Chapter 2 outlines, building brand equity requires properly positioning the brand in the minds of customers and achieving as much brand resonance as possible. In general, this knowledge- building process will depend on three factors:

1. The initial choices of the brand elements making up the brand and how they are mixed and matched;

A sweater is just a sweater, unless it was worn or owned by Marilyn Monroe, in which case it could be worth thousands of dollars. Source: Album/Newscom

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 59

2. The marketing activities and supporting marketing programs and the way the brand is inte- grated into them; and

3. Other associations indirectly transferred to or leveraged by the brand as a result of linking it to some other entity (such as the company, country of origin, channel of distribution, or another brand).

Some important considerations of each of these three factors are as follows.

Choosing Brand Elements. The most common brand elements are brand names, URLs, logos, symbols, characters, packaging, and slogans. The best test of the brand-building contribu- tion of a brand element is what consumers would think about the product or service if they knew only its brand name or its associated logo or other element. Because different elements have different advantages, marketing managers often use a subset of all the possible brand elements or even all of them. Chapter 4 examines in detail the means by which the choice and design of brand elements can help to build brand equity.

Integrating the Brand into Marketing Activities and the Supporting Marketing Program. Although the judicious choice of brand elements can make some contribution to building brand equity, the biggest contribution comes from marketing activities related to the brand. This text highlights only some particularly important marketing program considerations for building brand equity. Chapter 5 addresses new developments in designing marketing pro- grams as well as issues in product strategy, pricing strategy, and channels strategy. Chapter 6 ad- dresses issues in communications strategy.

Leveraging Secondary Associations. The third and final way to build brand equity is to le- verage secondary associations. Brand associations may themselves be linked to other entities that have their own associations, creating these secondary associations. For example, the brand may be linked to certain source factors, such as the company (through branding strategies), countries or other geographical regions (through identification of product origin), and channels of distribu- tion (through channel strategy), as well as to other brands (through ingredients or co-branding), characters (through licensing), spokespeople (through endorsements), sporting or cultural events (through sponsorship), or some other third-party sources (through awards or reviews).

Because the brand becomes identified with another entity, even though this entity may not directly relate to the product or service performance, consumers may infer that the brand shares associations with that entity, thus producing indirect or secondary associations for the brand.

Identify and Establish Brand Positioning and Values

STEPS KEY CONCEPTS

Mental maps Competitive frame of reference Points-of-parity and points-of- difference Core brand associations Brand mantra

Plan and Implement Brand Marketing Programs

Mixing and matching of brand elements Integrating brand marketing activities Leveraging secondary association

Measure and Interpret Brand Performance

Brand value chain Brand audits Brand tracking Brand equity management system

Grow and Sustain Brand Equity

Brand architecture Brand portfolios and hierarchies Brand expansion strategies Brand reinforcement and revitalization

FIGURE 1-12 Strategic Brand Management Process

60 PART I • OPENING PERSPECTIVES

In essence, the marketer is borrowing or leveraging some other associations for the brand to create some associations of the brand’s own and thus help build its brand equity. Chapter 7 describes the means of leveraging brand equity.

Measuring and Interpreting Brand Performance To manage their brands profitably, managers must successfully design and implement a brand equity measurement system. A brand equity measurement system is a set of research proce- dures designed to provide timely, accurate, and actionable information for marketers so that they can make the best possible tactical decisions in the short run and the best strategic decisions in the long run. As described in Chapter 8, implementing such a system involves three key steps— conducting brand audits, designing brand tracking studies, and establishing a brand equity management system.

The task of determining or evaluating a brand’s positioning often benefits from a brand audit. A brand audit is a comprehensive examination of a brand to assess its health, uncover its sources of equity, and suggest ways to improve and leverage that equity. A brand audit requires understanding sources of brand equity from the perspective of both the firm and the consumer.

Once marketers have determined the brand positioning strategy, they are ready to put into place the actual marketing program to create, strengthen, or maintain brand associations. Brand tracking studies collect information from consumers on a routine basis over time, typically through quanti- tative measures of brand performance on a number of key dimensions marketers can identify in the brand audit or other means.Chapters 9 and 10 describe a number of measures to operationalize it.

A brand equity management system is a set of organizational processes designed to im- prove the understanding and use of the brand equity concept within a firm. Three major steps help implement a brand equity management system: creating brand equity charters, assembling brand equity reports, and defining brand equity responsibilities.

Growing and Sustaining Brand Equity Maintaining and expanding on brand equity can be quite challenging. Brand equity management activities take a broader and more diverse perspective of the brand’s equity—understanding how branding strategies should reflect corporate concerns and be adjusted, if at all, over time or over geographical boundaries or multiple market segments.

Defining Brand Architecture. The firm’s brand architecture provides general guidelines about its branding strategy and which brand elements to apply across all the different products sold by the firm. Two key concepts in defining brand architecture are brand portfolios and the brand hierarchy. The brand portfolio is the set of different brands that a particular firm offers for sale to buyers in a particular category. The brand hierarchy displays the number and nature of common and distinctive brand components across the firm’s set of brands. Chapter 11 reviews a three-step approach to brand architecture and how to devise brand portfolios and hierarchies. Chapter 12 concentrates on the topic of brand extensions in which an existing brand is used to launch a product into a different category or sub-category.

Managing Brand Equity over Time. Effective brand management also requires tak- ing a long-term view of marketing decisions. A long-term perspective of brand management recognizes that any changes in the supporting marketing program for a brand may, by chang- ing consumer knowledge, affect the success of future marketing programs. A long-term view also produces proactive strategies designed to maintain and enhance customer-based brand equity over time and reactive strategies to revitalize a brand that encounters some difficulties or problems. Chapter 13 outlines issues related to managing brand equity over time.

Managing Brand Equity over Geographic Boundaries, Cultures, and Market Segments. Another important consideration in managing brand equity is recognizing and accounting for different types of consumers in developing branding and marketing programs. International factors and global branding strategies are particularly important in these decisions. In expanding a brand overseas, managers need to build equity by relying on specific knowl- edge about the experience and behaviors of those market segments. Chapter 14 examines issues related to broadening of brand equity across market segments.

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 61

REVIEW This chapter began by defining a brand as a name, term, sign, symbol, or design, or some com- bination 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 forth) are brand elements. Brand ele- ments come in many different forms. A brand is distinguished from a product, which is defined as anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want. A product may be a physical good, service, retail store, person, organiza- tion, place, or idea.

A brand is a product, but one that adds other dimensions that differentiate it in some way from other products designed to satisfy the same need. These differences may be rational and tangible—related to product performance of the brand—or more symbolic, emotional, or intangible—related to what the brand represents. Brands themselves are valuable intangible assets that need to be managed carefully. Brands offer a number of benefits to customers and the firms.

The key to branding is that consumers perceive differences among brands in a product cat- egory. Marketers can brand virtually any type of product by giving the product a name and attaching meaning to it in terms of what it has to offer and how it differs from competitors. A number of branding challenges and opportunities faced by present-day marketing managers were outlined related to changes in customer attitudes and behavior, competitive forces, market- ing efficiency and effectiveness, and internal company dynamics.

The strategic brand management process has four steps:

1. Identifying and developing brand plans 2. Designing and implementing brand marketing programs 3. Measuring and interpreting brand performance 4. Growing and sustaining brand equity

The remainder of the book outlines these steps in detail.

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 differ from those of others. 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? 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 and organiza- tions; sports, arts, and entertainment) and describe how each is a brand.

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?

This appendix traces the history of branding and brand man- agement, dividing the development into six distinct phases.

Early Origins: Before 1860 Branding, in one form or another, has been around for centuries. The original motivation for branding was for craftsmen and oth- ers 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.

Pottery and clay lamps were sometimes sold far from the shops where they were made, and buyers looked for the stamps of reliable potters as a guide to quality. Marks have been found on early Chinese porcelain, on pottery jars from ancient Greece and Rome, and on goods from India dating back to about 1300 B.C.

In medieval times, potters’ marks were joined by printers’ marks, watermarks on paper, bread marks, and the marks of various craft guilds. In some cases, these were used to attract buyers loyal to particular makers, but the marks were also used to police infringers of the guild monopolies and to single out

BRAND FOCUS 1.0

History of Branding42

62 PART I • OPENING PERSPECTIVES

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 signa- ture or personal symbol and with a sign of the quality of the metal. In 1597, two goldsmiths convicted of putting false marks on their wares were nailed to the pillory by their ears. Similarly harsh punishments were decreed for those who counterfeited other artisans’ marks.

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. Medicine potions such as Swaim’s Panacea, Fahnestock’s Vermifuge, and Perry Davis’ Vegetable Pain Killer became well known to the public prior to the Ameri- can Civil War. Patent medicines were packaged in small bottles and, because they were not seen as a necessity, were vigorously promoted. To further influence consumer choices in stores, man- ufacturers of these medicines printed elaborate and distinctive labels, often with their own portrait featured in the center.

Tobacco manufacturers had been exporting their crop since the early 1600s. By the early 1800s, manufacturers had packed bales of tobacco under labels such as Smith’s Plug and Brown and Black’s Twist. During the 1850s, many tobacco manufactur- ers recognized that more creative names—such as Cantaloupe, Rock Candy, Wedding Cake, and Lone Jack—were helpful in selling their tobacco products. In the 1860s, tobacco manufactur- ers began to sell their wares in small bags directly to consumers. Attractive-looking packages were seen as important, and picture labels, decorations, and symbols were designed as a result.

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 profitable venture:

• Improvements in transportation (e.g., railroads) and commu- nication (e.g., telegraph and telephone) made regional and even national distribution increasingly easy.

• Improvements in production processes made it pos- sible to produce large quantities of high-quality products inexpensively.

• Improvements in packaging made individual (as opposed to bulk) packages that could be identified with the manufac- turer’s trademark increasingly viable.

• Changes in U.S. trademark law in 1879, the 1880s, and 1906 made it easier to protect brand identities.

• Advertising became perceived as a more credible option, and newspapers and magazines eagerly sought out advertising revenues.

• Retail institutions such as department and variety stores and national mail order houses served as effective middlemen and encouraged consumer spending.

• The population increased due to liberal immigration policies.

• Increasing industrialization and urbanization raised the stan- dard of living and aspirations of Americans, although many products on the market still were of uneven quality.

• Literacy rose as the percentage of illiterate Americans dropped from 20 percent in 1870 to 10 percent in 1900.

All these factors facilitated the development of consistent- quality consumer products that could be efficiently sold to con- sumers through mass market advertising campaigns. In this fertile branding environment, mass-produced merchandise in packages largely replaced locally produced merchandise sold from bulk containers. This change brought about the wide- spread use of trademarks. For example, Procter & Gamble made candles in Cincinnati and shipped them to merchants in other cities along the Ohio and Mississippi rivers. In 1851, wharf hands began to brand crates of Procter & Gamble candles with a crude star. The firm soon noticed that buyers downriver relied on the star as a mark of quality, and merchants refused the can- dles if the crates arrived without the mark. As a result, the can- dles were marked with a more formal star label on all packages, branded as “Star,” and began to develop a loyal following.

The development and management of these brands was largely driven by the owners of the firm and their top-level man- agement. For example, the first president of National Biscuit was involved heavily in the introduction in 1898 of Uneeda Biscuits, the first nationally branded biscuit. One of their first decisions was to create a pictorial symbol for the brand, the Uneeda biscuit slicker boy, who appeared in the supporting ad campaigns. H. J. Heinz built up the Heinz brand name through production in- novations and spectacular promotions. Coca-Cola became a national powerhouse due to the efforts of Asa Candler, who ac- tively oversaw the growth of the extensive distribution channel.

National manufacturers sometimes had to overcome re- sistance from consumers, retailers, wholesalers, and even employees from within their own company. To do so, these firms employed sustained “push” and “pull” efforts 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 pro- grams and shelf maintenance assistance.

As the use of brand names and trademarks spread, so did the practice of imitation and counterfeiting. Although the laws were somewhat unclear, more and more firms sought protection by sending their trademarks and labels to district courts for regis- tration. Congress finally separated the registration of trademarks and labels in 1870 with the enactment of the country’s first fed- eral trademark law. Under the law, registrants were required to send a facsimile of their mark with a description of the type of goods on which it was used to the Patent Office in Washing- ton along with a $25 fee. One of the first marks submitted to the Patent Office under the new law was the Underwood Devil, which was registered to William Underwood & Company of Bos- ton on November 29, 1870 for use on “Deviled Entremets.” 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 ex- perts in charge of production, promotion, personal selling, and other areas. This greater specialization led to more advanced marketing techniques. Design professionals were enlisted to as- sist in the process of trademark selection. Personal selling be- came more sophisticated as salesmen were carefully selected

CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 63

and trained to systematically handle accounts and seek out new businesses. Advertising combined more powerful creativity with more persuasive copy and slogans. Government and indus- try regulation came into place to reduce deceptive advertising. Marketing research became more important and influential in supporting marketing decisions.

Although functional management of brands had these vir- tues, 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. For example, the introduction of Wheaties cereal by General Mills was nearly sabotaged by the company’s salesmen, who were reluctant to take on new duties to sup- port the brand. Three years after the cereal’s introduction and on the verge of its being dropped, a manager from the advertis- ing department at General Mills decided to become a product champion for Wheaties, and the brand went on to great success in the following decades.

Challenges to Manufacturer Brands: 1930 to 1945 The onset of the Great Depression in 1929 posed new challenges to manufacturer brands. Greater price sensitivity swung the pen- dulum of power in the favor of retailers who pushed their own brands and dropped nonperforming manufacturer brands. Ad- vertising came under fire as manipulative, deceptive, and taste- less 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. In response to these trends, manufacturers’ advertis- ing went beyond slogans and jingles to give consumers specific reasons why they should buy advertised products.

There were few dramatic changes in marketing of brands during this time. As a notable exception, Procter & Gamble put the first brand management system into place, whereby each of their brands had a manager assigned only to that brand who was responsible for its financial success. Other firms were slow to follow, however, and relied more on their long-standing reputation for good quality—and a lack of com- petition—to sustain sales. During World War II, manufacturer brands became relatively scarce as resources were diverted to the war effort. Nevertheless, many brands continued to advertise and helped bolster consumer demand during these tough times.

The Lanham Act of 1946 permitted federal registration of service marks (marks used to designate services rather than products) and collective marks such as union labels and club emblems.

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 off, and market demand intensified 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 firm during this time period ad- opted the brand management system.

In the brand management system, a brand manager took “ownership” of a brand. A brand manager was responsible for developing and implementing the annual marketing plan for his or her brand, as well as identifying new business opportunities.

The brand manager might be assisted, internally, by representa- tives from manufacturing, the sales force, marketing research, fi- nancial planning, research and development, personnel, legal, and public relations and, externally, by representatives from advertising agencies, research suppliers, and public relations agencies.

Then, as now, a successful brand manager had to be a ver- satile jack-of-all-trades. The skills that began to be required then have only become more important now, including:

• Marketing fundamentals

• Cultural insights to understand the diversity of consumers

• IT and Web skills to guide digital activities

• Technical sophistication to appreciate new research methods and models

• Design fluency to work with design techniques and designers

• Creativity to devise holistic solutions

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 financial value of brands. With this realization came an appre- ciation of the importance of managing brands as valuable in- tangible assets. At the same time, more different types of firms began to see the advantages of having a strong brand and the corresponding disadvantages of having a weak brand.

The last 25 years have seen an explosion in the interest and application of branding as more firms have embraced the con- cept. As more and more different kinds of products are sold or promoted directly to consumers, the adoption of modern mar- keting practices and branding has spread further. Consider the pharmaceutical industry.

THE PHARMACEUTICAL INDUSTRY In the United States, prescription drugs are increasingly be- ing branded and sold to consumers with traditional mar- keting tactics such as advertising and promotion. Direct- to-consumer advertising for prescription drugs also grew from $242 million in 1994 to $4.2 billion in 2010. In 2009, Pfizer spent over $1 billion in direct-to-consumer adver- tising. Much of this effort is focused on what we might call “disease branding,” in which marketers shape public impressions of a medical malady to make treating it more attractive to potential patients. Panic disorder, reflux dis- ease, erectile dysfunction, and restless legs syndrome were all relatively obscure to the public until they were given a specific name and meaning by drug companies. By high- lighting and destigmatizing medical conditions, disease branding increases demand for the drugs being sold for treatment. When Pharmacia launched Detrol, it labeled what physicians had been calling “urge incontinence” as an “overactive bladder,” a much more vigorous-sounding condition. Millions of prescriptions followed. Some phar- maceutical companies, however, are cutting back on direct- to-consumer advertising in light of the lower number of new-drug introductions and increasing government scru- tiny of the practice. They are selective in deciding which brands to market directly to consumers; of over 2,000 drugs recently studied, only 100 were targeted via advertis- ing to consumers.43

64 PART I • OPENING PERSPECTIVES

always seem to understand how branding works or apply branding concepts correctly. For branding success, an apprecia- tion of and aptitude for using appropriate branding concepts— a focus of this book—is critical.