Brand Performance and Branding strategies

The brand value chain

The majority of companies that still follow the main principles

of the industrial economy will face great difficulties in the value

economy of the future. When the company defines itself by its

products, far too many resources will be tied up in the product

system.

Alarm bells should ring when investment in products,

services, divisions and departments are inflated when

compared to a company’s actual market access. Fortunes are

spent on developing new products without taking a critical

view on their relevance in the market.

At the same time companies will find it increasingly difficult

to push their new products through the value chain to the

people who are expected to buy them. It is becoming still

more difficult to penetrate the communication flow – and the

more products that are fighting for the same resources, the

less these resources will suffice.

Brand Value Chain is a model that illustrates the fact that the

company must change its focus to win the optimal value

position.

In contrast to the traditionally thinking company that optimises

itself according to its products, the mantra in Brand Value Chain

is the concept that in the future, the company must optimise

itself according to its value position.

Internally, the employees must be made to understand the value

position and its importance for the company’s existence. The

value position must be made relevant and present so that the

employees understand how they, through their daily work, can

contribute to the company achieving the desired value position.

Externally, the company must send a clear signal through its

collective behaviour about which value it offers to the market.

This can be effectuated through the product programme, its

customer relations and through all its marketing and

communication.

To win a strong market position the company must pull in the

same direction in everything that it does. The company’s

strategy and actions must be optimised according to how the

company can achieve the desired value position.

The Brand Value Chain way of thinking works with 8 focus

points:

To successfully enter the value economy, the core of

corporate strategy must be the optimization of the brand value

chain. Only then can it win the best value position in the

market. The entire company must be built and shaped

according to the brand. The brand value chain mindset:

1. Defining the value position you want in the market,

depicted as a circle to the very right of the figure, is key.

2. At the far left link in the brand value chain it is important

to appear as one company. Only a single, centralized

company is in a position to be unique. It has a soul and is a

living organism.

3. The company must be built into a brand because the brand

mindset is good at gathering and communicating a set of

values and attitudes externally and internally.

4. You must develop a brand culture that can hold the brand

together globally.

5. It is important to define the product programme on which

you focus when building a brand position in the market.

6. You must define the most important target groups for the

brand, both those who buy the brand directly and any indirect

decisionmakers, who are often the most important carriers of

value. Direct connection to these decision makers must be

made via a brand relation management system.

7. You need to build a consistent and value-accumulating

brand communication that focuses on the brand and not on a

lot of different product launches.

8. The brand communication must deliver the brand position

in the market, which should equal the value position you wish

to capture.

The Brand Value Chain way of thinking leads to a strategy in

which the company must focus on becoming brand oriented

instead of product oriented. Use the model as a checklist when

preparing a status of the company’s branding strategy.

In addition to this the company can use the model to take a

critical look at the way resources are being spent.

It would be utterly incorrect to think that branding is all about

spending more money on marketing. It is about reallocating the

company’s resources so that more is spent in the customer

system and less in the product and distribution system. It is

about organisational changes, creating an efficient marketing

system etc.

To illustrate this you could look in your warehouse and note

how many brochures for the last products you introduced are

still there. If you expand your survey to include subsidiaries and

distribution system, you are guaranteed to become depressed.

Or you could check out the company’s investments in new

machinery and product development costs. What would it mean

to the strength of the company’s brand and market position if

these were cut down by 10-20%? Could this money be better

spent somewhere else?

. THE CONCEPT OF BRAND EQUITY

2.1 Literature review

The concept of brand equity emerged in the early 1990s. It was

not defined precisely, but in

practical terms it meant that brands are financial assets and

should be recognised as such by

top management and the financial markets. Brand equity

includes not only the value of the

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brand, but also implicitly the value of proprietary technologies,

patents, trademarks, and other

intangibles such as manufacturing know-how. Although a

company’s stock price represents

more than brand equity, when one of a company’s brands gets

into trouble, a change in brand

equity can significantly affect the stock price. (Aaker 1996;

Keegan – Moriarty – Duncan 1995,

325; Kerin – Sethuraman 1998; 260–261) The financial value of

a brand depends on its brand

strength. It can be strengthened by investing in product quality

and in advertising. In contrast,

price promotions produce short-term increases in sales but do

nothing to build long-term brand

equity. (Barwise 1993, 94–95)

In a general sense, brand equity is defined in terms of the

marketing effects uniquely at-

tributable to the brand. That is, brand equity relates to the fact

that different outcomes result

from the marketing of a product or service because of its brand

element, as compared to out-

comes if that same product or service did not have hat brand

identification. Although a number

of different views of brand equity have been expressed, they all

are generally consistent with

the basic notion that brand equity represents the ”added value”

endowed to a product or a

service as a result of past investments in the marketing for the

brand. Researchers studying

brand equity at least implicitly acknowledge that there exist

many different ways that value

can be created for a brand; that brand equity provides a common

denominator for interpreting

marketing strategies and assessing the value of a brand; and that

there exists many different

ways in which the value of a brand can be manifested or

exploited to benefit the firm. (Keller

1993, 1; Keller 1998, 42–44)

A brand is a name or symbol used to identify the source of a

product. When developing a new product, branding is an

important decision. The brand can add significant value when it

is well recognized and has positive associations in the mind of

the consumer. This concept is referred to as brand equity.

What is Brand Equity?

Brand equity is an intangible asset that depends on associations

made by the consumer. There are at least three perspectives

from which to view brand equity:

Financial - One way to measure brand equity is to

determine the price premium that a brand commands over

a generic product. For example, if consumers are willing to

pay $100 more for a branded television over the same

unbranded television, this premium provides important

information about the value of the brand. However,

expenses such as promotional costs must be taken into

account when using this method to measure brand equity.

Brand extensions - A successful brand can be used as a

platform to launch related products. The benefits of brand

extensions are the leveraging of existing brand awareness

thus reducing advertising expenditures, and a lower risk

from the perspective of the consumer. Furthermore,

appropriate brand extensions can enhance the core brand.

However, the value of brand extensions is more difficult to

quantify than are direct financial measures of brand equity.

Consumer-based - A strong brand increases the

consumer's attitude strength toward the product associated

with the brand. Attitude strength is built by experience

with a product. This importance of actual experience by

the customer implies that trial samples are more effective

than advertising in the early stages of building a strong

brand. The consumer's awareness and associations lead to

perceived quality, inferred attributes, and eventually, brand

loyalty.

Strong brand equity provides the following benefits:

Facilitates a more predictable income stream.

Increases cash flow by increasing market share, reducing

promotional costs, and allowing premium pricing.

Brand equity is an asset that can be sold or leased.

However, brand equity is not always positive in value. Some

brands acquire a bad reputation that results in negative brand

equity. Negative brand equity can be measured by surveys in

which consumers indicate that a discount is needed to purchase

the brand over a generic product.

Building and Managing Brand Equity

In his 1989 paper, Managing Brand Equity, Peter H. Farquhar

outlined the following three stages that are required in order to

build a strong brand:

1. Introduction - introduce a quality product with the

strategy of using the brand as a platform from which to

launch future products. A positive evaluation by the

consumer is important.

2. Elaboration - make the brand easy to remember and

develop repeat usage. There should be accessible brand

attitude, that is, the consumer should easily remember his

or her positive evaluation of the brand.

3. Fortification - the brand should carry a consistent image

over time to reinforce its place in the consumer's mind and

develop a special relationship with the consumer. Brand

extensions can further fortify the brand, but only with

related products having a perceived fit in the mind of the

consumer.

Alternative Means to Brand Equity

Building brand equity requires a significant effort, and some

companies use alternative means of achieving the benefits of a

strong brand. For example, brand equity can be borrowed by

extending the brand name to a line of products in the same

product category or even to other categories. In some cases,

especially when there is a perceptual connection between the

products, such extensions are successful. In other cases, the

extensions are unsuccessful and can dilute the original brand

equity.

Brand equity also can be "bought" by licensing the use of a

strong brand for a new product. As in line extensions by the

same company, the success of brand licensing is not guaranteed

and must be analyzed carefully for appropriateness.

Managing Multiple Brands

Different companies have opted for different brand strategies for

multiple products. These strategies are:

Single brand identity - a separate brand for each product.

For example, in laundry detergents Procter & Gamble

offers uniquely positioned brands such as Tide, Cheer,

Bold, etc.

Umbrella - all products under the same brand. For

example, Sony offers many different product categories

under its brand.

Multi-brand categories - Different brands for different

product categories. Campbell Soup Company uses

Campbell's for soups, Pepperidge Farm for baked goods,

and V8 for juices.

Family of names - Different brands having a common

name stem. Nestle uses Nescafe, Nesquik, and Nestea for

beverages.

Brand equity is an important factor in multi-product branding

strategies.

Protecting Brand Equity

The marketing mix should focus on building and protecting

brand equity. For example, if the brand is positioned as a

premium product, the product quality should be consistent with

what consumers expect of the brand, low sale prices should not

be used compete, the distribution channels should be consistent

with what is expected of a premium brand, and the promotional

campaign should build consistent associations.

Finally, potentially dilutive extensions that are inconsistent with

the consumer's perception of the brand should be avoided.

Extensions also should be avoided if the core brand is not yet

sufficiently strong.

A brand hierarchy is a means of summarizing the branding

strategy by displaying the number and nature of common and

distinctive brand elements across the firm’s products, revealing

the explicit ordering of brand elements. By capturing the

potential branding relationships among the different products

sold by the firm, a brand hierarchy is a useful means of

graphically portraying a firm’s branding strategy. Specifically, a

brand hierarchy is based on the realization that a product can

be branded in different ways depending on how many new and

existing brand elements are used and how they are combined for

any one product. Because certain brand elements are used to

make more than one brand, a hierarchy can be constructed to

represent how (if at all) products are nested with other products

because of their common brand elements. Some brand elements

may be shared by many products (e.g., Ford); other brand

elements may be unique to certain products (e.g., F-series

trucks).

As with any hierarchy, moving from the top level to the bottom

level typically involves more entries at each succeeding level—

in this case, more brands. There are different ways to define

brand elements and levels of the hierarchy. Perhaps the simplest

representation of possible brand elements and thus potential

levels of a brand hierarchy—from top to bottom—might be as

follows:

1. Corporate (or company) brand (e.g., General Motors)

2. Range brand (e.g., Chevrolet)

3. Individual brand (e.g.. Lumina)

4. Modifier (designating item or model) (e.g., Ultra)

The highest level of the brand hierarchy technically always

involves one brand—the corporate or company brand. For legal

reasons, the company or corporate brand is almost always

present somewhere on the product or package, although it may

be the case that the name of a company subsidiary may appear

instead of the corporate name. For example, Fortune Brands

owns many different companies, such as Titleist, Footjoy, Jim

Beam, Master Lock, and Moen, but does not use its corporate

name in any of its lines of business. For some firms, the

corporate brand is virtually the only brand used (e.g., as with

General Electric and Hewlett-Packard). Some other firms

combine their corporate brand name with family brands or

individual brands (e.g., conglomerate Siemens varied electrical

engineering and electronics business units are branded with

descriptive modifiers, such as Siemens Transportation Systems).

Finally, in some other cases, the company name is virtually

invisible and, although technically part of the hierarchy, receives

virtually no attention in the marketing program (e.g., Black &

Decker does not use its name on its high-end DeWalt

professional power tools, and Hewlett-Packard created a wholly

owned subsidiary for its low-priced Apollo ink-jet printers).

At the next-lower level, a range / family brand is defined as a

brand that is used in more than one product category but is not

necessarily the name of the company or corporation itself. For

example, ConAgra’s Healthy Choice family brand is used to sell

a wide spectrum of food products, including frozen microwave

entrees, packaged cheeses, packaged meats, sauces, and ice

cream. Other examples of family brands boasting over a billion

dollars in annual sales include PepsiCo’s Tropicana juices and

Gatorade thirst quencher, and Anheuser-Busch’s Budweiser

beer. Most firms typically only support a handful of family

brands. If the corporate brand is applied to a range of products,

then it functions as a family brand too, and the two levels

collapse to one for those products.

An individual/ product line brand is defined as a brand that has

been restricted to essentially one product category, although it

may be used for several different product types within the

category. For example, in the “salty snack” product class, Frito-

Lay offers Fritos corn chips, Doritos tortilla chips, Lays and

Ruffles potato chips, and Rold Gold pretzels. Each brand has a

dominant position in its respective product category within the

broader salty snack product class. Basic product brands can be

refined through sub-branding.

A modifier is a means to designate a specific item or model type

or a particular version or configuration of the product. Thus,

many of Frito-Lay’s snacks come in both full-flavor or low-fat

“Better For You” forms. Similarly, Land O’Lakes offers

“whipped,” “unsalted,” and “regular” versions of its butter.

Yoplait yogurt comes as “light,” “custard style,” or “original”

flavors.

Different levels of the hierarchy may receive different emphasis

in developing a branding strategy. For example. General

Motors traditionally chose to downplay its corporate name in

branding its cars, although the name recently has played a more

important role in its supporting marketing activities. Such shifts

in emphasis are an attempt by the firm to harness the positive

associations and mitigate against the negative associations of

different brands in different contexts, and there are a number of

ways to place more or less emphasis on the different elements

that combine to make up the brand.

The strategic role of brand extension has long been

recognized by firms in the corporate world. Many

firms capitalize on brand equity through a brand

tension strategy. Brand extension involves the use of

a brand name established in one product class to enter

another product class (Aaker 1991; Tauber 1988). For

example, Ivory shampoo, Jello frozen pudding pops, Bic

disposable lighters, NCR photocopiers are successful

extensions of familiar brands to new product categories.

Brand extension as a marketing strategy has become even

more attractive in today's environment where developing

a new product costs a lot of money and can be time

consuming. This study uses the categorization theory to

examine the proposition that brand extensions would be

favorably evaluated if they are perceived as being

consistent with the overall brand concept. The research

constructs and hypotheses are as follows.

BRAND CONCEPT

Park, Millberg and Lawson (1991) regard brand concept as

"brand unique abstract meanings ... that typically originate

from a particular configuration of product features ....

and a firm's efforts to create meanings from these

arrangements (pg. 186). Thus, from a marketer's perspective

the image that a brand conveys is an important component

of the brand concept, because the meaning derived by

consumers

is a reflection of the brand image. The brand concept can

be based on the consumer needs that a brand can satisfy.

Park, Jaworski and MacInnis (1986) have identified three

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consumer needs--functional, symbolic and experiential.

A firm can decide on the type of need that it wants to

fulfill. Then through effective positioning and

communications, it can convey to the consumers the brand

concept (functional, symbolic or experiential) based on the

needs that are being catered to. Each of these three concepts

are briefly discussed.

A brand with a functional concept is valued primarily for

its functional performance. Park, et al. (1986) define

a brand with a functional concept as one designed to solve

externally generated consumption needs. Consumers will

be motivated to buy and use functional brands in situations

where the product is viewed as addressing utilitarian needs.

A brand with a symbolic concept is designed to associate

the individual with a desired group, role, or self-image

(Park, et al., 1986). It also stands to reason that social

risk would be more important for symbolic brands. An

individual would be concerned about identification with

a peer or reference group. A wrong product choice may be

ridiculed. Park, et al. (1986) define a brand with an

experiential concept as one designed to fulfill internally

generated need for stimulation and/or variety. The

primary motivation for selecting certain products is the

enjoyment that is derived from consumption of these

products. Holbrook and Hirschman (1982) recognize the

fact that "fantasies, feelings and fun" are also vital

consumption phenomena which they call the "experiential

view". Thus, the hedonic aspect of consumption becomes

predominant for these brand. Consumers regard

consumption of these products as an opportunity for

deriving sensory pleasure.

BRAND CONCEPT CONSISTENCY

According to categorization theory the world of objects

are put into different categories by individuals for

a better understanding and processing of the environment

around them (Smith and Medin 1981). A person can

transfer the effect associated with a category to a new

object, if the object can be classified as member of that

category (Cohen 1982). Many different objects can

belong to a category. There are common taxonomic

categories such as "animals," "fruits," and "vegetables"

(Barsalou 1983). In addition, there can be goal-derived

categories that are formed adhoc in order to attain a

desired goal. Barsalou (1983) cites "things to take on a

camping trip" and "things to take from one's home during

a fire" as examples of goal derived ad hoc categories.

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Brand extensions that are seen as being consistent with

the brand concept -- functional, symbolic or experiential

--can be said to constitute a category. Theunderlying

commonality between products belonging to the brand-category

would be that they address the same set of consumer needs

--functional, symbolic or experiential. It also follows

that if the original brand signifies a particular concept,

i.e., it fulfills a need, extensions from that brand can

also be regarded as primarily addressing the same set of

needs. Consumers will consider the extension as well as

the core brand as belonging to the same category and

therefore, evaluations of extensions will be enhanced.

On the other hand, if the extensions are not consistent

with the core brand, i.e., the core brand fulfills one

set of needs and the extension attempts to address a

different set of needs, consumers will have difficulty

in classifying the core brand and the extension in the

same category. Hence,

H1: Consumers will evaluate a brand extension with a

functional concept more favorably when the original

brand denotes a functional rather than experiential

or symbolic concept.

H2: Consumers will evaluate a brand extension with a

symbolic concept more favorably when the original

brand denotes a symbolic rather than a functional

or experiential concept.

H3: Consumers will evaluate a brand extension with an

experiential concept more favorably when the original

brand denotes an experiential rather than a functional

or symbolic concept.

METHODOLOGY

Stimuli

The stimuli consisted of three brands and six extension

products. The selection was based on the foll owing criteria:

(1) being relevant to subjects (2) generally perceived as high

quality and (3) not broadly extended previously. In order to

develop stimulus materials pretesting was carried out in the

following two stages:

Stage 1 pretesting: The purpose of stage 1 pretesting was to

identify brand names that are associated with functional,

symbolic and experiential concepts. Subjects were provided

brief descriptions of these concepts and were given a list

of brands. They were asked to pick out brands that in their

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opinion were associated with one of the three concepts.

A simple frequency count was used to determine representative

brands for the three concepts. Results of pretesting

indicated that Energizer was classified by the subjects as

having a functional concept, Nike as having a symbolic

concept and Haagen Dazs as having an experiential

concept.

Stage 2 pretesting: The purpose of this pretesting was to

ask subjects to generate extension ideas for each of the

three brands selected in stage 1. The most common extension

products associated with each of the three brands identified

above were used for subsequent experiments. Extensions from

functional brand were considered to be consistent with the

functional concept, extensions from the symbolic brand were

considered to be consistent with the symbolic concept, and

extensions from the experiential brand were considered to be

consistent with the experiential concept. Extensions that

were considered to be consistent with one particular

concept were considered as being inconsistent with the

other two concepts.

Pretesting indicated that for Energizer brand the

extension products were spark plugs and flashlights; for

Nike the extension products were jeans and sunglasses;

and for Haagen Dazs the extension products were

pastries and cakes, and frozen yogurt. Thus Energizer

spark plugs were regarded as being consistent with the

functional concept whereas Nike spark plugs were

inconsistent with the symbolic concept and so on

Evaluating Brand Extension Opportunities

Define Actual and desired Consumer knowledge about the

Brand

It is critical to fully understand the depth and breadth of

awareness of the parent brand and the strength, favorability, and

uniqueness of its associations. Moreover, before any extension

decision are contemplated, it is important that the desired

knowledge structures have been fully articulated.

Identify Possible Extension Candidates

Consumer factors when identifying potential brand extensions,

marketers should consider parent brand association – especially

as they related to the brand positioning and core benefits – and

product categories that might seem to fit with that brand image

in the minds of consumers.

Evaluate the Potential of the Extension Candidate

In forecasting the success of the proposed brand extension, it is

necessary to assess – through judgment and research – the likely

hood that the extension would realize the advantages and avoid

the disadvantages of brand extension.

Design Marketing Program to Launch Extension

Too often extension are used as a shortcut means of introducing

a new product, and insufficient attention is paid to developing a

branding and marketing strategy that will maximize the equity

of the brand extension as well as enhance the equity of the

parent brand.

Evaluate Extension Success and Effects of Parent Brand

Equity

The final step in evaluating brand extension opportunities

involves assessing the extent to which an extension is able to

achieve its own equity as well as contribute to the equity of the

parent brand. A number of decisions have to be made

concerning the introduction of a brand extension, and a number

of factors will affect the brand’s success.