Summary Strategic Brand Management
In our increasingly complex world everyone faces more choices to make but has less time to make them. Therefore a brand’s ability to simplify decision making, reduce risk, and set expectations is invaluable.
What is a brand?
Brand (American Marketing Association definition) = 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. Whenever a marketer creates a new name, logo, or symbol for a new product, a new brand has been created.
A brand can also be considered something that has created a certain amount of awareness, reputation, prominence, and so on in the marketplace. This is the industry concept of a brand, called ‘Brand with a big B’, while the AMA definition is the definition with a small b. The key to creating a brand is being able to choose the right brand elements (name, logo, etc.).
Product = anything we can offer to a market for attention, acquisition, use, or consumption that might satisfy a need or want. It may be a physical good, a service, a type of store, a person, an organization, a place, or even an idea. Five levels of meaning for a product are defined:
Core benefit level = the fundamental need or want that consumers satisfy by consuming the product or service;
Generic product level = a basic version of the product containing only those attributes or characteristics absolutely necessary for its functioning but with no distinguishing features (stripped-down, no frills version);
Expected product level = a set of attributes/characteristics that buyers normally expect and agree to when they purchase a product;
Augmented product level = includes additional attributes/benefits/services that distinguish the product from those of competitors;
Potential product level = includes all the augmentations and transformations that a product might ultimately undergo in the future.
In many markets most competition takes place at the augmented product level. At that level, firms can successfully build satisfactory products at the expected product level. Levitt argued that the new competition is not between what companies produce, but between what they add to their factory output in the form of packaging, services, advertising, customer advice, and other things that people value. Therefore a brand is more than a product, because it can have dimensions that differentiate it from other products that satisfy the same need.
Some brands create competitive advantages with product performance by steadily investing in R&D and mass marketing. Other brands create competitive advantages through non-product related means, e.g. by creating appealing images surrounding their products. Especially strong brands carry various different types of associations, which marketers have to account for when making marketing decisions. There are many different ways to create such associations. By creating perceived differences among products through branding and by developing a loyal consumer franchise, marketers create value that can translate to financial products for the firm. Most valuable are intangible assets such as management skills, marketing, financial and operations expertise and of course the brand itself.
Why do brands matter?
Consumer = all types of customers, including individual citizens as well as organizations. To consumers, brands identify the source/maker of a product, thereby allowing them to assign responsibility to a particular manufacturer/distributor. Based on past experiences and marketing programs, consumers find out which brand satisfies them. They use this information to simplify their product decisions because when they already know a brand and like it, they do not necessarily have to consider all other brands available for purchase. This way, the consumer’s search costs for products both internally (how much he has to think) and externally (how much he has to look around) are lowered. Consumers trust a brand and become loyal to it 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. As long as consumers are satisfied with a product, they are likely to continue to buy it.
Brands can allow consumers to project their self-image (serve as symbolic devices) and allow consumers to communicate to others the type of person they are by reflecting different values or traits. Brands and their attributes can be classified into three categories:
Search goods = consumers can evaluate product attributes like color, size, style, design, and weight by visual inspection (e.g. groceries);
Experience goods = consumers cannot assess product attributes like durability, ease of handling, and safety easily by inspection, so have to try/experience the product (e.g. car tires);
Credence goods = consumers may rarely learn product attributes (e.g. insurance coverage).
Brands can be indicators of quality and other characteristics, and can reduce risks in product decisions. Types of risk are:
Functional risk = the product does not perform up to expectations;
Physical risk = the product poses a threat to the physical well-being of the user/others;
Financial risk = the product is not worth its price;
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 satisfactory product.
One way for consumers to handle these risks is to buy well-known brands with which they have had favorable experiences. The special meaning that brands take on can change consumers’ perceptions and experiences with a product. They may evaluate identical products differently because of the brands they carry. Brands take on personal meanings to consumers and as their lives become more complicated, they use brands in order to simplify their decision making and to reduce risk.
To firms, brands fundamentally serve an identification purpose (to simplify product handling/tracing). Operationally, they help organize inventory and accounting records. A brand also offers the firm legal protection for unique features of the product and can retain intellectual property rights, ensuring that the firm can safely invest in a brand and reap the benefits of a valuable asset. The brand name can be protected through trademarks, manufacturing processes through patents, and packaging through copyrights. Consumers’ brand loyalty provides predictability and security of demand and creates barriers of entry, because lasting impressions in the minds of individuals cannot be easily duplicated by competitors.
Can anything be branded?
Ultimately a brand is something that resides in the minds of consumers: it reflects their perceptions. Marketers must give consumers a label for the product (how you can identify it) and provide meaning for the brand (what it can do for you, and why it is special and different). The key to branding is that consumers perceive differences (related to attributes, the product/service itself, or intangible assets) among brands in a product category. Marketers can benefit from branding whenever consumers have to make a choice.
Business-to-business branding creates a positive image for the company as a whole. Goodwill with business customers is thought to lead to greater selling opportunities and more profitable relationships. A strong brand can provide valuable reassurance and clarity to business customers who may be putting their company’s fate/their own careers on the line. A strong B2B brand can thus provide a strong competitive advantage.
High-tech firms often lack any kind of brand strategy and sometimes see branding as simply naming their products. However, marketing skills, besides product innovation, play an increasingly important role in the adoption and success of high-tech products.
A challenge in marketing services is that they are intangible and more likely to vary in quality than products, depending on the particular people providing them. Brands can help identify and provide meaning to the different services provided by a firm.
Branding can effectively signal to consumers that the firm has designed a particular service offering that is special and deserving of its name. Professional service branding is a combination of B2B branding and traditional service branding. Corporate credibility is key and variability is more of an issue because it is harder to standardize the services of a consulting firm than those of a typical consumer services firm. In professional services individual employees have a lot more of their own equity in the firm and are often brands in their own right. They need to ensure that their words and actions help to build the corporate brand, and not their own because when they leave the company, they will then take their equity with them. Referrals, testimonials, emotions and switching costs can have a lot of influence when branding services.
To retailers and distributors, brands can generate consumer interest, patronage, and loyalty in a store. Retailers can create their own brand image by attaching unique associations to the quality of their service, their assortment, and their pricing policy. The more appealing the brands they offer, the higher the possible price margins, sales volumes, and profits. Store brands/private label brands = retailers/distributors creating their own brands by using their store name, to increase customer loyalty and generate higher margins and profits.
Online marketers must also create unique aspects of the brand on a dimension that is important to consumers. At the same time, the brand needs to perform satisfactorily in other areas such as customer service. By offering unique features and services to consumers, the best online brands are able to rely on word-of-mouth and publicity while avoiding extensive advertising. Online brands also need to focus on offline activities to draw consumers to their websites.
People and organizations often have well-defined images that are easily understood and (dis)liked by others. They compete in some sense for public approval and acceptance, benefiting from conveying a strong and desirable image. By building up a name and reputation in a business context, you are creating your own brand as a person.
Sports teams engage in marketing to meet ticket sales regardless of their performance and to get sponsors. In the arts and entertainment industries marketing is used to generate positive word-of-mouth and to make consumers expect a certain experience. Places like cities or countries are marketed with the aim to create awareness and a favorable image of the location that will encourage temporary visits from tourists or permanent moves from individuals and businesses. Many nonprofit organizations brand ideas and causes to inform or persuade consumers about the issues surrounding such ideas/causes.
What are the strongest brands?
Virtually anything can be and has been branded. However, any brand, no matter how strong, is vulnerable and susceptible to poor management. Factors determining enduring leadership are:
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;
Managerial persistence: the ‘breakthrough’ technology that can drive market leadership often requires the commitment of company resources of long periods of time;
Financial commitment: costs are high because of the demands for R&D and marketing;
Relentless innovation: consumer tastes change and competitors develop, so you must keep innovating to stay ahead;
Asset leverage: companies can become leaders in some categories if they hold a leadership position in a related category.
Branding challenges and opportunities
Some recent developments that have complicated marketing practices and pose challenges:
Consumers and businesses have become more experienced with marketing, more knowledgeable about how it works, and more demanding. In today’s marketing environment, there is a vast number of information sources available to consumers.
Economic downturns: consumers buy lower-priced brands instead of higher-priced products.
Many marketers have added a host of new products under their umbrella brand. By the proliferation of new brands and products, there are few single product brands around, complicating the decisions that marketers have to make.
Traditional advertising media has been fragmented and nontraditional media have emerged. Marketers are now spending more on the latter.
The marketplace has become more competitive: on the demand side, consumption for many products has hit the maturity stage, leading to a situation wherein marketers can only achieve sales growth by taking away competitors’ market share. On the supply side, new competitors have emerged due to globalization, low-priced competitors (store brands and imitators of product leaders), brand extensions, and deregulation.
The cost of new product introduction or supporting an existing product has increased rapidly.
Marketers are responsible for meeting short-term profit targets because of market pressures and senior management imperatives. On the other hand, stock analysts value the long-term financial health of a firm. Therefore marketing managers find themselves in the dilemma of having to make decisions with short-term benefits but long-term costs. Also, they cannot really make a difference because the average job turnover is rapid.
The brand equity concept
Brand equity = the marketing effects uniquely attributable to a brand. It explains why different outcomes result from the marketing of a branded product or service than if it were not branded. 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 this value can be manifested or exploited to benefit the firm. Fundamentally, the brand equity concept reinforces how important the brand is in marketing strategies.
Strategic brand management process
Strategic brand management = the design and implementation of marketing programs and activities to build, measure, and manage brand equity. The process has four steps:
Identifying and developing brand plans;
Designing and implementing brand marketing programs;
Measuring and interpreting brand performance;
Growing and sustaining brand equity.
Identifying and developing brand plans
What is the brand to represent and how should it be positioned? Use three models:
Brand positioning model = describes how to guide integrated marketing to maximize competitive advantages;
Brand resonance model = describes how to create intense, active loyalty relationships with customers;
Brand value chain = 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
Building brand equity requires properly positioning the brand in the minds of customers and achieving as much brand resonance as possible. This knowledge-building process depends on:
The initial choices of the brand elements making up the brand and how they are mixed and matched: what would consumers think about the product/service if they knew only the brand name/logo/other element?;
The marketing activities and supporting marketing programs and the way the brand is integrated into them;
Other associations indirectly transferred or leveraged by the brand as a result of linking it to some other entity: because the brand becomes identified with another entity, consumers may infer that the brand shares associations with that entity, thus producing indirect associations for the brand.
Measuring and interpreting brand performance
Brand equity measurement system = a set of research procedures 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. Key steps:
Conducting a brand audit = a comprehensive examination of a brand to assess its health, uncover its sources of equity, and suggest ways to improve and leverage its equity;
Designing brand tracking studies = information collection from consumers on a routine basis over time;
Establishing a brand equity management system = a set of organizational processes designed to improve the understanding and use of the brand equity concept within a firm. Steps: creating brand equity charters, assembling brand equity reports, and defining brand equity responsibilities.
Growing and sustaining brand equity
Brand equity management activities take a broader/more diverse perspective of the brand’s equity:
Defining brand architecture = general guidelines about the branding strategy and which brand elements to apply. Key concepts are brand portfolio = the set of different brands that a particular firm offers for sale to buyers in a particular category, and brand hierarchy = displays the number and nature of common and distinctive brand components across the firm’s set of brands.
Managing equity over time: a long-term perspective recognizes that any changes in the marketing program may affect the success of future programs. It also produces proactive strategies designed to maintain and enhance customer-based brand equity over time and reactive strategies to revitalize a brand that encounters problems.
Managing brand equity over geographic boundaries, cultures, and market segments: in expanding a brand overseas, managers need to build equity by relying on specific knowledge about the experience and behaviors of those segments.
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