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Strategic Brand Management

Building, Measuring, and Managing Brand Equity

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Strategic Brand Management

Building, Measuring, and Managing Brand Equity

Kevin Lane Keller Tuck School of Business

Dartmouth College

4e

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Library of Congress Cataloging-in-Publication Data

Keller, Kevin Lane, 1956- Strategic brand management : building, measuring, and managing brand equity / Kevin Lane Keller.—4th ed. p. cm. ISBN 978-0-13-266425-7 (hbk.) 1. Brand name products—Management. I. Title.

HD69.B7K45 2013 658.8'27—dc23

2012024141 10 9 8 7 6 5 4 3 2 1

ISBN 10: 0-13-266425-9

ISBN 13: 978-0-13-266425-7

Dedication This book is dedicated to

my mother and the memory of my father with much love, respect, and admiration.

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

PART II Developing a Brand Strategy 39 Chapter 2 Customer-Based Brand Equity and Brand Positioning 39 Chapter 3 Brand Resonance and the Brand Value Chain 78

PART III Designing and Implementing Brand Marketing Programs 113 Chapter 4 Choosing Brand Elements to Build Brand Equity 113 Chapter 5 Designing Marketing Programs to Build Brand Equity 149 Chapter 6 Integrating Marketing Communications to Build Brand Equity 189 Chapter 7 Leveraging Secondary Brand Associations to Build Brand Equity 231

PART IV Measuring and Interpreting Brand Performance 263 Chapter 8 Developing a Brand Equity Measurement and Management System 263 Chapter 9 Measuring Sources of Brand Equity: Capturing Customer Mind-Set 296 Chapter 10 Measuring Outcomes of Brand Equity: Capturing Market Performance 334

PART V Growing and Sustaining Brand Equity 357 Chapter 11 Designing and Implementing Branding Architecture Strategies 357 Chapter 12 Introducing and Naming New Products and Brand Extensions 403 Chapter 13 Managing Brands Over Time 449 Chapter 14 Managing Brands Over Geographic Boundaries and Market Segments 481

PART VI Closing Perspectives 519 Chapter 15 Closing Observations 519

Brief Contents

VII

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Contents

Prologue: Branding Is Not Rocket Science xix

Preface xxi

Acknowledgments xxvii

About the Author xxviii

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

Preview 2

What Is a Brand? 2 Brand Elements 2 Brands versus Products 3

BRANDING BRIEF 1-1: Coca-Cola’s Branding Lesson 4

Why Do Brands Matter? 6 Consumers 6 Firms 7

Can Anything Be Branded? 8 Physical Goods 9

BRANDING BRIEF 1-2: Branding Commodities 10

THE SCIENCE OF BRANDING 1-1: Understanding Business-to-Business Branding 12

THE SCIENCE OF BRANDING 1-2: Understanding High-Tech Branding 13 Services 14 Retailers and Distributors 15 Online Products and Services 15 People and Organizations 17 Sports, Arts, and Entertainment 18

BRANDING BRIEF 1-3: Place Branding 20 Geographic Locations 20 Ideas and Causes 20

What Are the Strongest Brands? 20

THE SCIENCE OF BRANDING 1-3: Understanding Market Leadership 22

Branding Challenges and Opportunities 24 Savvy Customers 24 Economic Downturns 26 Brand Proliferation 26

THE SCIENCE OF BRANDING 1-4: Marketing Brands in a Recession 27 Media Transformation 27 Increased Competition 28 Increased Costs 28 Greater Accountability 28

The Brand Equity Concept 29

IX

X CONTENTS

Strategic Brand Management Process 30 Identifying and Developing Brand Plans 30 Designing and Implementing Brand Marketing Programs 30 Measuring and Interpreting Brand Performance 32 Growing and Sustaining Brand Equity 32

Review 33

Discussion Questions 33

BRAND FOCUS 1.0: History of Branding 33

Notes 36

PART II Developing a Brand Strategy 39 Chapter 2 Customer-Based Brand Equity and Brand Positioning 39

Preview 40

Customer-Based Brand Equity 40 Defining Customer-Based Brand Equity 40 Brand Equity as a Bridge 42

Making a Brand Strong: Brand Knowledge 43

THE SCIENCE OF BRANDING 2-1: Brand Critics 44

Sources of Brand Equity 45 Brand Awareness 45 Brand Image 48

Identifying and Establishing Brand Positioning 51 Basic Concepts 51 Target Market 51 Nature of Competition 53 Points-of-Parity and Points-of-Difference 54

Positioning Guidelines 57 Defining and Communicating the Competitive Frame of Reference 57 Choosing Points-of-Difference 59 Establishing Points-of-Parity and Points-of-Difference 60

BRANDING BRIEF 2-1: Positioning Politicians 61 Straddle Positions 62 Updating Positioning over Time 63 Developing a Good Positioning 65

Defining a Brand Mantra 65 Brand Mantras 65

BRANDING BRIEF 2-2: Nike Brand Mantra 66

BRANDING BRIEF 2-3: Disney Brand Mantra 67

THE SCIENCE OF BRANDING 2-2: Branding Inside the Organization 69

Review 69

Discussion Questions 70

BRAND FOCUS 2.0: The Marketing Advantages of Strong Brands 70

Notes 72

Chapter 3 Brand Resonance and the Brand Value Chain 78 Preview 79

Building a Strong Brand: The Four Steps of Brand Building 79 Brand Salience 79 Brand Performance 83 Brand Imagery 85

CONTENTS XI

THE SCIENCE OF BRANDING 3-1: Luxury Branding 86 Brand Judgments 89 Brand Feelings 90 Brand Resonance 92 BRANDING BRIEF 3-1: Building Brand Communities 94 Brand-Building Implications 94

THE SCIENCE OF BRANDING 3-2: Putting Customers First 98

The Brand Value Chain 100 Value Stages 101 Implications 103

Review 104

Discussion Questions 106

BRAND FOCUS 3.0: Creating Customer Value 106 Customer Equity 106

Notes 110

PART III Designing and Implementing Brand Marketing Programs 113 Chapter 4 Choosing Brand Elements to Build Brand Equity 113

Preview 114

Criteria for Choosing Brand Elements 114 Memorability 115 Meaningfulness 115 Likability 115 Transferability 116 Adaptability 116

THE SCIENCE OF BRANDING 4-1: Counterfeit Business Is Booming 118 Protectability 119

Options and Tactics for Brand Elements 119 Brand Names 119 URLs 127 Logos and Symbols 127 Characters 128 Slogans 130

BRANDING BRIEF 4-1: Updating Betty Crocker 131

THE SCIENCE OF BRANDING 4-2: Balance Creative and Strategic Thinking to Create Great Characters 132

BRANDING BRIEF 4-2: Benetton’s Brand Equity Management 134 Jingles 136 Packaging 136

Putting It All Together 139

BRANDING BRIEF 4-3: Do-Overs with Brand Makeovers 140

THE SCIENCE OF BRANDING 4-3: The Psychology of Packaging 141

Review 142

Discussion Questions 143

BRAND FOCUS 4.0: Legal Branding Considerations 143

Notes 145

Chapter 5 Designing Marketing Programs to Build Brand Equity 149 Preview 150

New Perspectives on Marketing 150

XII CONTENTS

Integrating Marketing 151 Personalizing Marketing 153

THE SCIENCE OF BRANDING 5-1: Making Sense Out of Brand Scents 155 Reconciling the Different Marketing Approaches 158

Product Strategy 159 Perceived Quality 159 Aftermarketing 159 Summary 162

Pricing Strategy 163 Consumer Price Perceptions 163

THE SCIENCE OF BRANDING 5-2: Understanding Consumer Price Perceptions 164 Setting Prices to Build Brand Equity 165

BRANDING BRIEF 5-1: Marlboro’s Price Drop 165 Summary 171

Channel Strategy 171 Channel Design 171 Indirect Channels 173 Direct Channels 177

BRANDING BRIEF 5-2: Goodyear’s Partnering Lessons 178 Online Strategies 180 Summary 180

Review 181

Discussion Questions 181

BRAND FOCUS 5.0: Private-Label Strategies and Responses 182

Notes 184

Chapter 6 Integrating Marketing Communications to Build Brand Equity 189 Preview 190

The New Media Environment 191 Challenges in Designing Brand-Building Communications 191 Role of Multiple Communications 193

Four Major Marketing Communication Options 193 Advertising 193

THE SCIENCE OF BRANDING 6-1: The Importance of Database Marketing 201 Promotion 204 Online Marketing Communications 208 Events and Experiences 211

BRANDING BRIEF 6-1: Brand Building via the X Games 214 Mobile Marketing 216

Brand Amplifiers 218 Public Relations and Publicity 218 Word-of-Mouth 218

Developing Integrated Marketing Communication Programs 219 Criteria for IMC Programs 220 Using IMC Choice Criteria 222

THE SCIENCE OF BRANDING 6-2: Coordinating Media to Build Brand Equity 223

Review 224

Discussion Questions 225

BRAND FOCUS 6.0: Empirical Generalizations in Advertising 226

Notes 227

CONTENTS XIII

Chapter 7 Leveraging Secondary Brand Associations to Build Brand Equity 231 Preview 232

Conceptualizing the Leveraging Process 233 Creation of New Brand Associations 233 Effects on Existing Brand Knowledge 233 Guidelines 234

Company 235

BRANDING BRIEF 7-1: IBM Promotes a Smarter Planet 236

Country of Origin and Other Geographic Areas 238

BRANDING BRIEF 7-2: Selling Brands the New Zealand Way 240

Channels of Distribution 241

Co-Branding 241

THE SCIENCE OF BRANDING 7-1: Understanding Retailers’ Brand Images 242 Guidelines 243 Ingredient Branding 244

THE SCIENCE OF BRANDING 7-2: Understanding Brand Alliances 245

Licensing 247

BRANDING BRIEF 7-3: Ingredient Branding the DuPont Way 248 Guidelines 250

Celebrity Endorsement 250 Potential Problems 251 Guidelines 253

Sporting, Cultural, or Other Events 254

BRANDING BRIEF 7-4: Managing a Person Brand 255

Third-Party Sources 256

Review 257

Discussion Questions 258

BRAND FOCUS 7.0: Going for Corporate Gold at the Olympics 258

Notes 260

PART IV Measuring and Interpreting Brand Performance 263 Chapter 8 Developing a Brand Equity Measurement and

Management System 263 Preview 264

The New Accountability 264

Conducting Brand Audits 265 Brand Inventory 266 Brand Exploratory 267 Brand Positioning and the Supporting Marketing Program 270

THE SCIENCE OF BRANDING 8-1: The Role of Brand Personas 271

Designing Brand Tracking Studies 272 What to Track 272

BRANDING BRIEF 8-1: Sample Brand Tracking Survey 273 How to Conduct Tracking Studies 275 How to Interpret Tracking Studies 277

XIV CONTENTS

Establishing a Brand Equity Management System 277

BRANDING BRIEF 8-2: Understanding and Managing the Mayo Clinic Brand 278 Brand Charter 279 Brand Equity Report 280 Brand Equity Responsibilities 281

THE SCIENCE OF BRANDING 8-2: Maximizing Internal Branding 282

BRANDING BRIEF 8-3: How Good Is Your Marketing? Rating a Firm’s Marketing Assessment System 284

Review 286

Discussion Questions 287

BRAND FOCUS 8.0: Rolex Brand Audit 287

Notes 294

Chapter 9 Measuring Sources of Brand Equity: Capturing Customer Mind-Set 296 Preview 297

Qualitative Research Techniques 297

BRANDING BRIEF 9-1: Digging Beneath the Surface to Understand Consumer Behavior 298 Free Association 298 Projective Techniques 300

BRANDING BRIEF 9-2: Once Upon a Time . . . You Were What You Cooked 301 Zaltman Metaphor Elicitation Technique 302

BRANDING BRIEF 9-3: Brand Imagery at Joie de Vivre 303 Neural Research Methods 304 Brand Personality and Values 305 Ethnographic and Experiential Methods 306

BRANDING BRIEF 9-4: Making the Most of Consumer Insights 307 Summary 310

Quantitative Research Techniques 310 Brand Awareness 311 Brand Image 314

THE SCIENCE OF BRANDING 9-1: Understanding Categorical Brand Recall 315 Brand Responses 316 Brand Relationships 318

THE SCIENCE OF BRANDING 9-2: Understanding Brand Engagement 321

Comprehensive Models of Consumer-Based Brand Equity 323 BrandDynamics 323 Relationship to the CBBE Model 324

Review 324

Discussion Questions 325

BRAND FOCUS 9.0: Young & Rubicam’s BrandAsset Valuator 325

Notes 331

Chapter 10 Measuring Outcomes of Brand Equity: Capturing Market Performance 334 Preview 335

Comparative Methods 336 Brand-Based Comparative Approaches 336

CONTENTS XV

Marketing-Based Comparative Approaches 337 Conjoint Analysis 339

Holistic Methods 340 Residual Approaches 341 Valuation Approaches 343

THE SCIENCE OF BRANDING 10-1: The Prophet Brand Valuation Methodology 347

BRANDING BRIEF 10-1: Beauty Is in the Eye of the Beholder 350

Review 351

Discussion Questions 352

BRAND FOCUS 10.0: Branding and Finance 352

Notes 354

PART V Growing and Sustaining Brand Equity 357 Chapter 11 Designing and Implementing Brand Architecture Strategies 357

Preview 358

Developing a Brand Architecture Strategy 358 Step 1: Defining Brand Potential 358

THE SCIENCE OF BRANDING 11-1: The Brand–Product Matrix 359

THE SCIENCE OF BRANDING 11-2: Capitalizing on Brand Potential 362 Step 2: Identifying Brand Extension Opportunities 364 Step 3: Branding New Products and Services 364 Summary 365

Brand Portfolios 365

BRANDING BRIEF 11-1: Expanding the Marriott Brand 368

Brand Hierarchies 370 Levels of a Brand Hierarchy 370 Designing a Brand Hierarchy 372

BRANDING BRIEF 11-2: Netflix Branding Stumbles 373

Corporate Branding 380

THE SCIENCE OF BRANDING 11-3: Corporate Brand Personality 381 Corporate Image Dimensions 381

BRANDING BRIEF 11-3: Corporate Reputations: The Most Admired U.S. Companies 382

BRANDING BRIEF 11-4: Corporate Innovation at 3M 384 Managing the Corporate Brand 386

Brand Architecture Guidelines 393

Review 394

Discussion Questions 395

BRAND FOCUS 11.0: Cause Marketing 395

Notes 398

Chapter 12 Introducing and Naming New Products and Brand Extensions 403 Preview 404

New Products and Brand Extensions 404

BRANDING BRIEF 12-1: Growing the McDonald’s Brand 406

Advantages of Extensions 407 Facilitate New-Product Acceptance 408 Provide Feedback Benefits to the Parent Brand 410

XVI CONTENTS

Disadvantages of Brand Extensions 413 Can Confuse or Frustrate Consumers 413 Can Encounter Retailer Resistance 414 Can Fail and Hurt Parent Brand Image 414

THE SCIENCE OF BRANDING 12-1: When Is Variety a Bad Thing? 415 Can Succeed but Cannibalize Sales of Parent Brand 416 Can Succeed but Diminish Identification with Any One Category 416

BRANDING BRIEF 12-2: Are There Any Boundaries to the Virgin Brand Name? 417 Can Succeed but Hurt the Image of the Parent Brand 418 Can Dilute Brand Meaning 418 Can Cause the Company to Forgo the Chance to Develop a New Brand 418

Understanding How Consumers Evaluate Brand Extensions 419 Managerial Assumptions 420 Brand Extensions and Brand Equity 420 Vertical Brand Extensions 423

Evaluating Brand Extension Opportunities 424 Define Actual and Desired Consumer Knowledge about the Brand 424

BRANDING BRIEF 12-3: Levi Extends Its Brand 425 Identify Possible Extension Candidates 426 Evaluate the Potential of the Extension Candidate 426 Design Marketing Programs to Launch Extension 429 Evaluate Extension Success and Effects on Parent Brand Equity 430

Extension Guidelines Based on Academic Research 431

Review 441

Discussion Questions 441

BRAND FOCUS 12.0: Scoring Brand Extensions 442

Notes 443

Chapter 13 Managing Brands Over Time 449 Preview 450

Reinforcing Brands 451 Maintaining Brand Consistency 452

THE SCIENCE OF BRANDING 13-1: Brand Flashbacks 454 Protecting Sources of Brand Equity 454 Fortifying versus Leveraging 456 Fine-Tuning the Supporting Marketing Program 456

BRANDING BRIEF 13-1: Razor-Sharp Branding at Gillette 459

Revitalizing Brands 462

BRANDING BRIEF 13-2: Remaking Burberry’s Image 464

BRANDING BRIEF 13-3: Harley-Davidson Motor Company 465

BRANDING BRIEF 13-4: A New Morning for Mountain Dew 466 Expanding Brand Awareness 467 Improving Brand Image 469

Adjustments to the Brand Portfolio 471 Migration Strategies 471 Acquiring New Customers 471 Retiring Brands 472

Review 474

Discussion Questions 476

BRAND FOCUS 13.0: Responding to a Brand Crisis 476

Notes 479

CONTENTS XVII

Chapter 14 Managing Brands Over Geographic Boundaries and Market Segments 481 Preview 482

Regional Market Segments 482

Other Demographic and Cultural Segments 483

Rationale for Going International 484

BRANDING BRIEF 14-1: Marketing to African Americans 485

Advantages of Global Marketing Programs 486 Economies of Scale in Production and Distribution 486 Lower Marketing Costs 487 Power and Scope 487 Consistency in Brand Image 487 Ability to Leverage Good Ideas Quickly and Efficiently 487 Uniformity of Marketing Practices 487

Disadvantages of Global Marketing Programs 488 Differences in Consumer Needs, Wants, and Usage Patterns for Products 488 Differences in Consumer Response to Branding Elements 488 Differences in Consumer Responses to Marketing Mix Elements 489 Differences in Brand and Product Development and the Competitive Environment 490 Differences in the Legal Environment 490 Differences in Marketing Institutions 490 Differences in Administrative Procedures 490

Global Brand Strategy 491 Global Brand Equity 491 Global Brand Positioning 492

Standardization versus Customization 493 Standardization and Customization 493

BRANDING BRIEF 14-2: Coca-Cola Becomes the Quintessential Global Brand 494

BRANDING BRIEF 14-3: UPS’s European Express 496

Developing versus Developed Markets 500

Building Global Customer-Based Brand Equity 501 1. Understand Similarities and Differences in the Global Branding Landscape 501 2. Don’t Take Shortcuts in Brand Building 502 3. Establish Marketing Infrastructure 503 4. Embrace Integrated Marketing Communications 504 5. Cultivate Brand Partnerships 504 6. Balance Standardization and Customization 505

BRANDING BRIEF 14-4: Managing Global Nestlé Brands 506 7. Balance Global and Local Control 507 8. Establish Operable Guidelines 508 9. Implement a Global Brand Equity Measurement System 509

10. Leverage Brand Elements 509

THE SCIENCE OF BRANDING 14-1: Brand Recall and Language 510

Review 511

Discussion Questions 513

BRAND FOCUS 14.0: China Global Brand Ambitions 513

Notes 515

PART VI Closing Perspectives 519 Chapter 15 Closing Observations 519

Preview 520

Strategic Brand Management Guidelines 520 Summary of Customer-Based Brand Equity Framework 520 Tactical Guidelines 522

What Makes a Strong Brand? 526

BRANDING BRIEF 15-1: The Brand Report Card 527

Future Brand Priorities 528 1. Fully and Accurately Factor the Consumer into the Branding Equation 528

BRANDING BRIEF 15-2: Reinvigorating Branding at Procter & Gamble 530 2. Go Beyond Product Performance and Rational Benefits 532 3. Make the Whole of the Marketing Program Greater Than the Sum of the Parts 533 4. Understand Where You Can Take a Brand (and How) 535 5. Do the “Right Thing” with Brands 537 6. Take a Big Picture View of Branding Effects. Know What Is Working (and Why) 538 Finding the Branding Sweet Spot 538

Review 539

Discussion Questions 540

BRAND FOCUS 15.0: Special Applications 540

Notes 545

Epilogue 547

Index 549

XVIII 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.

XIX

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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

XXI

XXII 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 XXIII

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).

XXIV 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, four new cases have been added to the Best Practices in Branding casebook—PRODUCT (RED), King Arthur Flour, ESPN X Games, and Target. Each of the 14 other cases has been signifi- cantly 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 • X Games

• SNICKERS • Michelin • Liz Claiborne

• W Hotels • MTV • Gatorade

• HBO • Macy’s • TOMS

• Tupperware • Johnnie Walker • Chobani

• Groupon • Old Spice • Kindle

• Blue Moon • Gannett • Coldplay

• Netflix • Subway • Febreze

• L.L. Bean • M&M’s • Oreo

• Boloco • Ford Fiesta • DHL

PREFACE XXV

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. pearsonhighered.com/kevinlanekeller.

www.pearsonhighered.com/kevinlanekeller
www.pearsonhighered.com/kevinlanekeller
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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 Prentice Hall 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 provided 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.

XXVII

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, Nestle, 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.

XXVIII

1

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

2 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 3

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,

4 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

www.adage.com
CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 5

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.

6 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 7

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

8 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 9

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.