Chapter Objectives After reading this chapter you should be able to: • Explain the concept of brand equity from both the company’s and the customer’s perspectives. • What are some of the positive outcomes that result from enhancing brand equity? • Describe the different models of brand equity from the customer’s perspective. • Understand how marcom efforts must influence behavior and achieve financial accountability.
Which Brand Is “Best”? (Measures are important!) 1. Harris Interactive Poll (2400 adults) • “Which three brands do you consider to be the best?” • [2007 – Coca-Cola, Sony, Toyota] 2. Harris Interactive Brand Equity (EquiTrend) Study(25,000 adults) • Familiarity, quality, purchase considerations, brand expectations, distinctiveness, trust • [2008 – Heinz, M&Ms, Hershey’s; 2010 – Target, Nintendo, M&Ms] 3. Interbrand’s “Best Global Brands” • Brand sales as a % of total company sales • Earnings (profits) for a brand • NPV of the brand earnings, discounted by interest rates, risk, market leadership, stability and global reach • [2007 – Coca-Cola, Microsoft, IBM; 2010 – IMB #2] 4. Young & Rubicam’s Brand Asset Valuator (200,000 adults) • Brand strength: differentiation, relevance • Brand stature: esteem, knowledge
Brand Defined Brand 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 the competition.
Definition of Brand Equity Brand Equity the goodwill (equity) that an established brand has built up over its existence.
As Brand Equity Increases… • A higher market share is achieved • Brand loyalty increases • Premium prices can be charged • The brand earns a revenue premium
Revenue Premium • The revenue differential between a branded item and a corresponding private-labeled item.
Young & Rubicam’s “Brand Asset Valuator” and Creating Strong Brands • Methodology: • Interviews with over 200,000 consumers • 40 countries • 19,000 brands • 40 measurement scales • “DREK” sequence (measures of brand equity): • differentiation -> relevance -> esteem -> knowledge • Power Grid: • brand strength (differentiation, relevance) • brand stature (esteem, knowledge) • Brand Development Cycle
The Brand Concept and Brand Concept Management • Brand concept: the specific meaning that brand managers create and communicate to the target market. • this is accomplished by appeals to functional, symbolic, and experiential needs • Brand concept management: the analysis, planning, implementation, and control of a brand concept throughout the life of a brand.
How Brand Concepts Can Be Developed • Functional needs (solving problems): products that attempt to fulfill the consumer’s consumption-related problems • Symbolic needs (associating the brand with symbolic objects): directed at consumers’ desire for self-enhancement, role position, group membership, and belongingness • Experiential needs (sensory pleasures, personal experience): products that provide sensory pleasure, variety, and/or cognitive stimulation.
Dimensions of Brand Personalities • Sincerity (e.g., Disney) • Excitement (e.g., Hummer) • Competence (e.g., Toyota) • Sophistication (e.g., Rolex, Cartier) • Ruggedness (e.g., Timberland boots)
Three General Ways Brand Equity is Enhanced • Allow brand to speak-for-itself • Create message-driven associations • Leveraging current meanings or associations
Co-branding and Ingredient Branding • Co-branding • A partnership between two brands • Ingredient branding • Inclusion of one brand within the other
What Benefits Result from Enhancing Brand Equity? • Increased consumer loyalty • Long-term growth and profitability for the brand • Maintain brand differentiation from competitive offerings • Insulate brand from price competition 23
Evaluating World-Class Brands Quality Salience Equity Measuring World-Class Brands
Measuring World-Class Brands • Quality: score ranging from 0 to 10 (unacceptable/ poor to outstanding/ extraordinary) • Salience: score ranging from 0 to 100 (percentage of people who feel sufficiently well informed about a brand to rate it) • Equity: score ranging from 0 to 100 (determined by multiplying the quality and salience scores and dividing the product by 10)
Affecting Behavior and Achieving Marcom Accountability • Creating brand awareness and boosting brand image serve little positive effect unless individuals make purchases or engage in some other form of desired behavior.
ROMI • The effect of marcom, or of its specific elements such as advertising, can be gauged in terms of whether it generates a reasonable revenue return on the marcom investment. • In marketing, return on investment is called return on marketing investment (ROMI) • (In accounting, ROI = net income/avg. O.E.)
Difficulty of Measuring Marcom Effectiveness • Choosing a Metric • Gaining Agreement • Collecting Accurate Data • Calibrating Special Effects
Choosing a Metric • Change in brand awareness • Improved consumer attitude toward the brand • Increased purchase intentions • Larger sales volume (e.g., via scanner data; marketing mix models)
Collecting Accurate Data and Calibrating Special Effects • What exact sales figures should be used to calculate sales? • How much relative effect does each program element have on sales volume compared to the effect of other elements?